<PAGE>
As filed with the Securities and Exchange Commission on August 27, 1997
Registration No. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE GAP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-1697231
(State of Incorporation) (I.R.S. Employer Identification No.)
ONE HARRISON STREET, SAN FRANCISCO, CALIFORNIA 94105 (415) 952-4400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
ANNE B. GUST, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
THE GAP, INC.
ONE HARRISON STREET, SAN FRANCISCO, CALIFORNIA 94105
(415) 952-4400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
JOHN F. SEEGAL, ESQ. JOHN L. SAVVA, ESQ.
MARIE B. RIEHLE, ESQ. SULLIVAN & CROMWELL
ORRICK, HERRINGTON & SUTCLIFFE LLP 444 SOUTH FLOWER STREET
OLD FEDERAL RESERVE BANK BUILDING SUITE 1200
400 SANSOME STREET LOS ANGELES, CALIFORNIA 90071
SAN FRANCISCO, CALIFORNIA 94111 (213) 955-8000
(415) 392-1122
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
[_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
--------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED* PRICE PER UNIT** OFFERING PRICE** REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities....................... $500,000,000 100% $500,000,000 $151,516
=============================================================================================================
</TABLE>
* Or, if any Debt Securities are issued (i) with a principal amount denominated
in one or more foreign currencies or currency units, such principal amount as
shall result in an aggregate initial offering price equivalent to
$500,000,000 at the time of initial offering, or (ii) at an original issue
discount, such greater principal amount as shall result in proceeds to the
registrant of $500,000,000.
** Estimated solely for the purpose of calculating the registration fee.
Exclusive of accrued interest, if any.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 27, 1997
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1997
$500,000,000
[LOGO]
% NOTES DUE , 2007
-----------
Interest on the Notes is payable on and of each year, commencing
, 1998. The Notes will be redeemable, in whole or in part, at the option of
the Company at any time at a redemption price equal to the greater of (i) 100%
of the principal amount of such Notes or (ii) the sum of the present values of
the remaining scheduled payments of principal and interest discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate (as defined herein), plus,
in each case, accrued and unpaid interest thereon to the redemption date. The
Notes will not be entitled to any sinking fund. The Notes will be represented
by one or more Global Debt Securities registered in the name of the nominee of
The Depository Trust Company ("DTC"). Beneficial interest in the Global Debt
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by DTC and its participants. Except as described
herein, Notes in definitive form will not be issued. The Notes will be issued
only in denominations of $1,000 and integral multiples thereof. See
"Description of Notes."
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE (1) DISCOUNT (2) COMPANY (1)(3)
------------------ ------------ --------------
<S> <C> <C> <C>
Per Note......................... % % %
Total............................ $ $ $
</TABLE>
- -----
(1) Plus accrued interest, if any, from , 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $540,000 payable by the Company.
-----------
The Notes offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
Notes will be ready for delivery in book-entry form only through the facilities
of DTC in New York, New York, on or about , 1997, against payment therefor
in immediately available funds.
GOLDMAN, SACHS & CO. CITICORP SECURITIES, INC.
-----------
The date of this Prospectus Supplement is , 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE NOTES, AND
THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE>
THE COMPANY
GENERAL
The Gap, Inc. (the "Company") is an international specialty retailer of
casual apparel, shoes and other accessories for men, women and children under
its proprietary Gap, GapKids, babyGap, Banana Republic and Old Navy brands. As
of August 2, 1997, the Company operated 1,984 stores in the United States,
Canada, the United Kingdom, France, Germany and Japan.
Over the past ten years, the Company's net sales have grown at a 20.1%
compound annual rate, from $848 million in fiscal 1986 to $5.284 billion in
fiscal 1996. During this period, net income has grown at a 20.9% compound
annual rate, from $68.1 million in fiscal 1986 to $452.9 million in fiscal
1996.
The Company designs virtually all of its products for sale under its brands
in Company-operated stores. These brands and their corresponding store formats
collectively are positioned to address a broad consumer base. The Company
operates the following store formats:
GAP. Founded in 1969, Gap stores offer extensive selections of classicly-
styled, high quality, casual apparel at moderate price points. Products
range from wardrobe basics, such as denim, khakis and T-shirts, to
accessories and personal care products for men and women aged teen to
adult. At August 2, 1997, the Company operated 983 Gap stores, including
international locations.
GAPKIDS AND BABYGAP. The Company entered the children's apparel market
with the introduction of GapKids in 1986 and babyGap in 1990. These stores
offer casual basics, outerwear, shoes and other accessories in the
tradition of Gap style and quality for children aged newborn to teen. At
August 2, 1997, the Company operated a total of 536 GapKids and babyGap
stores, including international locations.
BANANA REPUBLIC. Acquired in 1983 with two stores, Banana Republic now
offers sophisticated, fashionable collections of dress-casual and tailored
clothing and accessories for men and women at upscale price points. At
August 2, 1997, the Company operated 240 Banana Republic stores, including
9 in Canada.
OLD NAVY. The Company launched Old Navy in 1993 to address the market for
value-priced family apparel. Old Navy offers broad selections of apparel,
shoes and accessories for adults, children and infants in an innovative,
exciting shopping environment. At August 2, 1997, the Company operated 225
Old Navy stores.
KEY STRATEGIC INITIATIVES
In combination with its core brand, merchandising and operating strategies,
the Company is currently implementing the following four key strategic
initiatives:
REINFORCE BRAND IDENTITIES. The Company believes that its brands are among
its most important assets and is taking action to maintain and strengthen
brand loyalty. To that end, during 1996 and the first half of 1997, the
Company increased its investment in advertising and marketing as a percentage
of sales. The Company is also exploring private label credit cards, additional
flagship stores and further television advertising to complement its in-store
customer service focus. The Company's goal is to expand the reach and
effectiveness of its advertising in order to build its market share and
strengthen its competitive position. The Company also invested in the
development of brand extensions through new product offerings, such as home
accessories and personal care items.
EXPAND DISTRIBUTION. The Company continues to invest in store expansion and
development of new distribution channels to address changing market
requirements. During fiscal 1994, 1995 and 1996, the Company added 483 stores,
net of store closings, and expanded 179 stores. The Company
S-3
<PAGE>
has also added new store formats, including Gap and GapKids combined stores,
large flagship stores, men's/women's-only stores, baby-only stores and airport
locations. The Company is exploring new channels of distribution including
development of catalog and electronic retailing capabilities.
CREATE OPERATIONAL EXCELLENCE. The Company has recently increased its
emphasis on enhancing operational efficiencies and reducing costs in order to
fund incremental growth and brand investment. Initiatives include process
reengineering, vendor partnering and capitalizing on total company size and
business scope.
EXPAND INTERNATIONALLY. The Company believes that foreign markets provide
additional growth opportunities. Gap opened its first foreign store in the
United Kingdom in 1987. Since then, the Company has added 232 stores in five
international markets. At August 2, 1997, the Company operated 113 stores in
Canada, 78 in the United Kingdom, 21 in France, 10 in Germany and 11 in Japan.
In addition, the Company is party to a wholesaling arrangement under which Gap
products are sold in duty-free stores in Hong Kong, Guam, Singapore and New
Zealand.
SOURCING
The Company sources products from over 1,200 suppliers located domestically
and overseas. Of the Company's merchandise sold worldwide during fiscal 1996,
approximately 30% was produced domestically while the remaining 70% was made
outside the United States. Approximately 10% of the Company's total
merchandise was from Hong Kong, with the remainder coming from 47 other
countries.
ADDITIONAL INFORMATION
For additional information regarding the Company, including certain risks,
see "Management's Discussion and Analysis of Financial Condition and Results
of Operations" below, and Item 1 of the Company's Annual Report on Form 10-K
for the fiscal year ended February 1, 1997.
S-4
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Company's % Notes due , 2007
(the "Notes") will be used for general corporate purposes, including store
expansion, brand investment, development of additional distribution channels
and repurchases of the Company's common stock pursuant to its ongoing share
repurchase program. Pending such uses, the Company will invest the net
proceeds in investment-grade, interest-bearing securities.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of August 2, 1997, and as adjusted to give effect to the sale by
the Company of the Notes offered hereby and the application of the estimated
net proceeds therefrom, as described under "Use of Proceeds":
<TABLE>
<CAPTION>
AS OF AUGUST 2, 1997
------------------------
AS ADJUSTED
ACTUAL FOR OFFERING*
---------- -------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Short-term debt..................................... $ 90,245 $ 90,245
========== ==========
Long-term debt-
% Notes due , 2007........................... $ -- $ 500,000
---------- ----------
Total stockholders' equity.......................... 1,559,961 1,559,961
---------- ----------
Total capitalization............................ $1,559,961 $2,059,961
========== ==========
</TABLE>
- --------
* Since the Company has no specific plans as to the timing or amount of stock
repurchases pursuant to its stock repurchase program, no amount has been
allocated to any changes in capitalization from any such stock repurchases.
S-5
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below under the captions
"Operating Results" and "Balance Sheet Data" for, and as of the end of, each
of the years in the five-year period ended February 1, 1997 have been derived
from the audited consolidated financial statements of the Company. The
selected consolidated financial data presented below under the captions
"Operating Results" and "Balance Sheet Data" as of and for the 26 weeks ended
August 2, 1997 and August 3, 1996 have been derived from unaudited interim
condensed consolidated financial information of the Company. In the opinion of
management, the unaudited interim condensed consolidated financial information
has been prepared on the same basis as the audited consolidated financial
statements and includes all adjustments, consisting only of normal recurring
adjustments, necessary to fairly state the information set forth therein. The
results of operations for the 26 weeks ended August 2, 1997 are not
necessarily indicative of the results to be expected for the full fiscal year
or for any future period. This data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" set forth herein and the more detailed information and
consolidated financial statements and notes thereto incorporated by reference
herein and in the accompanying Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 26 WEEKS ENDED
--------------------------------------------------------------- ----------------------
JANUARY 30, JANUARY 29, JANUARY 28, FEBRUARY 3, FEBRUARY 1,
1993 1994 1995 1996 1997 AUGUST 3, AUGUST 2,
(52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) (52 WEEKS) 1996 1997
----------- ----------- ----------- ----------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT SALES PER SQUARE FOOT)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Net sales $2,960,409 $3,295,679 $3,722,940 $4,395,253 $5,284,381 $2,233,489 $2,576,407
Cost of goods sold and
occupancy expenses,
excluding depreciation
and amortization....... 1,856,102 1,996,929 2,202,133 2,645,736 3,093,709 1,325,360 1,556,991
Depreciation and
amortization(1)........ 99,451 124,860 148,863 175,719 191,457 94,119 115,221
Operating expenses...... 661,252 748,193 853,524 1,004,396 1,270,138 578,008 664,373
Net interest (income)
expense................ 3,763 809 (10,902) (15,797) (19,450) (7,574) (6,197)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before income
taxes.................. 339,841 424,888 529,322 585,199 748,527 243,576 246,019
Income taxes............ 129,140 166,464 209,082 231,160 295,668 96,213 92,257
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings............ $ 210,701 $ 258,424 $ 320,240 $ 354,039 $ 452,859 $ 147,363 $ 153,762
========== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA:
Total assets............ $1,379,248 $1,763,117 $2,004,244 $2,343,068 $2,626,927 $2,459,300 $2,576,749
Working capital......... 355,649 494,194 555,827 728,301 554,359 662,407 418,574
Total debt (including
short-term notes
payable)............... 75,000 82,603 2,478 21,815 40,050 67,196 90,245
Stockholders' equity.... 887,839 1,126,475 1,375,232 1,640,473 1,654,470 1,651,409 1,559,961
OTHER DATA:
Comparable store sales
growth (2)............. 5% 1% 1% 0% 5% 9% 0%
Sales per square foot
(3).................... $ 489 $ 463 $ 444 $ 425 $ 441 $ 194 $ 194
Square footage of gross
store space (in
thousands)............. 6,509 7,546 9,166 11,100 12,645 11,805 13,750
Number of:
New stores............. 117 108 172 225 203 90 141
Expanded stores........ 94 130 82 55 42 21 36
Closed stores.......... 26 45 34 53 30 14 11
Stores open at period
end (4)............... 1,307 1,370 1,508 1,680 1,854 1,756 1,984
Capital expenditures
(5)..................... $ 213,659 $ 215,856 $ 236,616 $ 309,599 $ 375,838 $ 151,887 $ 222,159
</TABLE>
- -------
(1) Excludes amortization of restricted stock.
(2) Computed on a 52-week basis for fiscal year ended February 3, 1996.
(3) Based on weighted average gross square footage. Computed on a 52-week
basis for fiscal year ended February 3, 1996.
(4) Includes the conversion of Gapkids departments within Gap stores to their
own separate stores. Converted stores are not classified as new stores.
(5) Represents purchases of gross property and equipment, without construction
allowances, and acquisition of lease rights.
S-6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Prospectus Supplement, the accompanying Prospectus and the information
incorporated therein by reference contain certain forward-looking statements
which reflect the Company's current view with respect to future events and
financial performance. Wherever used, the words "expect," "plan,"
"anticipate," "believe" and similar expressions identify forward-looking
statements.
Any such forward-looking statements are subject to risks and uncertainties
that could cause the Company's actual results of operations to differ
materially from historical results or current expectations. Some of these
risks include, without limitation, ongoing competitive pressures in the
apparel industry, a continuation or exacerbation of the current over-capacity
problem affecting the industry, and/or changes in the level of consumer
spending or preferences in apparel, and other factors that may be described in
the Company's filings with the Securities and Exchange Commission. Future
economic and industry trends that could potentially impact revenue and
profitability remain difficult to predict.
The Company does not undertake to publicly update or revise its forward-
looking statements even if experience or future changes make it clear that any
projected results expressed or implied therein will not be realized.
The following discussion and analysis should be read in conjunction with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the Company's Quarterly Report on Form 10-Q for the
quarter ended August 2, 1997 and the Company's Annual Report on Form 10-K for
the year ended February 1, 1997, each of which is incorporated by reference in
the accompanying Prospectus.
RESULTS OF OPERATIONS
FIRST HALF OF FISCAL 1997 AND 1996
NET SALES. The increase in first half of 1997 net sales over the same period
of the prior year was attributable to the increase in retail selling space,
both through the opening of new stores (net of stores closed) and the
expansion of existing stores.
COST OF GOODS SOLD AND OCCUPANCY EXPENSES. For the first half of 1997, cost
of goods sold and occupancy expenses (including depreciation and amortization)
as a percentage of net sales increased to 64.9% from 63.5% for the same period
in 1996. The 1.4 percentage point decrease in gross margin net of occupancy
expenses was attributable to a 1.6 percentage point decrease in merchandise
margins as a percentage of net sales offset by a 0.2 percentage point decrease
in occupancy expenses as a percentage of net sales. The decrease in
merchandise margins as a percentage of net sales resulted from a smaller
percentage of merchandise sold at regular prices compared to the same period
of the prior year. Margin achieved on marked-down goods was also lower in the
first half of 1997 compared to the same period of the prior year. The growth
of the Old Navy division, with lower occupancy expenses when compared to other
divisions, primarily caused the decrease in occupancy expenses as a percentage
of net sales.
The Company reviews its inventory levels in order to identify slow-moving
merchandise and broken assortments (items no longer in stock in a sufficient
range of sizes) and uses markdowns to clear merchandise. Such markdowns may
have an adverse impact on earnings depending upon the extent of the markdowns
and amount of inventory affected.
S-7
<PAGE>
OPERATING EXPENSES. For the first half of 1997, operating expenses as a
percentage of net sales were essentially flat at 25.8% when compared to the
same period in 1996. A 0.7 percentage point increase in advertising/marketing
costs offset a 0.5 percentage point decrease in incentive bonus accruals and
stock-based compensation, and a 0.3 percentage point decrease in charitable
contributions expense. Incentive bonus is accrued quarterly based on year-to-
date performance measured against established targets. The rate of accrual in
the first half of 1997 was lower than that in the same period in 1996. The
decrease in charitable contributions expense represents a beneficial
comparison between 1997 and 1996, as the Company, in 1996, made an additional
contribution to the Gap Foundation.
NET INTEREST INCOME/EXPENSE. Net interest income was approximately $6.2
million for the first half of 1997 compared to net interest income of $7.6
million for the same period in 1996. The change in 1997 from 1996 was due to a
decrease in average investments for the year-to-date period.
INCOME TAXES. The effective tax rate was 37.5% for the first half of 1997
compared to 39.5% for the first half of 1996. The decrease in the effective
tax rate was a result of the impact from tax planning initiatives to support
changing business needs.
FISCAL 1996, 1995 AND 1994
NET SALES. The total net sales growth for 1996, 1995 and 1994 was
attributable to the opening of new stores (net of stores closed), the
expansion of existing stores, and in 1996, an increase in comparable store
sales. During 1995, an additional week of operations compared to 1994
contributed 1% to sales growth.
Net sales per average square foot were $441 in 1996, $425 in 1995, and $444
in 1994. The increase in net sales per average square foot in 1996 compared to
1995 was primarily attributable to increases in comparable store sales aided
by the smaller size of new stores. The decline in net sales per average square
foot in 1995 compared to 1994 was primarily attributable to continued store
growth in the Old Navy division, with lower-priced merchandise and
significantly larger stores, and to increases in the average size of new
stores in other divisions in connection with the Company's store expansion
program. During 1995, the Company increased the average size of its new stores
and expanded existing stores as a long-term investment.
COST OF GOODS SOLD AND OCCUPANCY EXPENSES. Cost of goods sold and occupancy
expenses (including depreciation and amortization) as a percentage of net
sales were 62.2% in 1996, 64.2% in 1995 and 63.2% in 1994.
The 2.0 percentage point increase in gross margin net of occupancy expenses
in 1996 from 1995 was attributable to a 1.2 percentage point increase in
merchandise margin as a percentage of net sales combined with a 0.8 percentage
point decrease in occupancy expenses as a percentage of net sales. The
increase in merchandise margin in 1996 from 1995 was driven by increases in
initial merchandise margin and in the percentage of merchandise sold at
regular price.
The 1.0 percentage point decrease in gross margin net of occupancy expenses
in 1995 from 1994 was attributable to a 1.2 percentage point decrease in
merchandise margin as a percentage of net sales offset by a 0.2 percentage
point decrease in occupancy expenses as a percentage of net sales. The
decrease in merchandise margin in 1995 from 1994 was driven by a decline in
initial merchandise margin in the first three quarters partially offset by
better regular-priced selling in the second half.
The decrease in occupancy expenses as a percentage of net sales between 1996
and 1995 was primarily attributable to the effect of the growth of the Old
Navy division, which carries lower occupancy expenses as a percentage of net
sales when compared to other divisions, and leverage achieved through
comparable store sales growth.
S-8
<PAGE>
The decrease in occupancy expenses as a percentage of net sales between 1995
and 1994 was attributable to leverage obtained from the 53rd week of sales.
Without this extra week, occupancy expenses as a percentage of net sales would
have been essentially flat.
OPERATING EXPENSES. Operating expenses as a percentage of net sales were
24.0% for 1996 and 22.9% for 1995 and 1994.
During 1996, the 1.1 percentage point increase was primarily attributable to
a planned 0.3 percentage point increase in advertising/marketing costs to
support the Company's brands and a 0.5 percentage point increase in incentive
bonus expense. The Company awarded bonuses for 1996 due to strong earnings
performance measured against annual targets.
During 1995, a 0.3 percentage point increase in advertising costs as a
percentage of net sales was offset by a 0.4 percentage point decrease in bonus
expense as a percentage of net sales. Advertising costs increased to support
the Company's brands and included marketing expense related to the opening of
stores in Germany and Japan, and opening of the Old Navy store in Manhattan.
Due to the Company's performance relative to financial targets, less bonus
expense was recognized in 1995 as compared to 1994.
NET INTEREST INCOME. Net interest income was $19.5, $15.8, and $10.9 million
for 1996, 1995 and 1994, respectively. The change in 1996 from 1995 was
primarily attributable to an increase in gross average investments. The change
in 1995 from 1994 was attributable to an increase in income from higher
average interest rates.
INCOME TAXES. The effective tax rate was 39.5% in 1996, 1995 and 1994.
LIQUIDITY AND CAPITAL RESOURCES
The following sets forth certain measures of the Company's liquidity.
<TABLE>
<CAPTION>
26 WEEKS ENDED
-------------------
AUGUST 3, AUGUST 2,
1996 1997
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Cash provided by operating activities.................... $250,007 $ 48,767
Working capital.......................................... $662,407 $418,574
Current ratio............................................ 2.0:1 1.5:1
</TABLE>
For the 26 weeks ended August 2, 1997, the decrease in cash flows provided
by operating activities was primarily attributable to an increased investment
in inventory and the timing of certain payables and accrued expenses,
including income taxes.
The Company funds inventory expenditures during normal and peak periods
through a combination of cash flows provided by operations and normal trade
credit arrangements. The Company's business follows a seasonal pattern,
peaking over a total of about 10 to 12 weeks during the late summer and
holiday periods.
The Company has committed credit facilities totaling $950 million,
consisting of an $800 million, 364-day revolving credit facility, and a $150
million, 5-year revolving credit facility through June 30, 2002. These
facilities provide for the issuance of up to $450 million in letters of
credit. The Company has additional uncommitted credit of $300 million for the
issuance of letters of credit. At August 2, 1997, the Company had outstanding
letters of credit of approximately $593 million.
S-9
<PAGE>
For the 26 weeks ended August 2, 1997, capital expenditures net of
construction allowances and dispositions, totaled approximately $209 million.
These expenditures included the addition of 141 new stores, the expansion of
36 stores and the remodeling of certain stores, resulting in a net increase in
store space of approximately 1.1 million square feet or 9% since February 1,
1997.
For 1997, the Company expects capital expenditures to total at least $450
million, net of construction allowances, representing the addition of at least
275 new stores, the expansion of at least 75 stores, and the remodeling of
certain stores. Planned expenditures also include amounts for corporate
offices, distribution centers, and equipment. The Company expects to fund such
capital expenditures through a combination of cash flow from operations and
other sources of financing, including the net proceeds from the sale of the
Notes offered hereby. Square footage growth is expected to be approximately
18% before store closings. New stores are generally expected to be leased.
The Company is nearing completion on corporate offices in San Bruno,
California. The cost of completion is included above in the capital
expenditures projected for 1997. The Company continues to explore alternatives
for additional corporate offices in San Francisco and San Bruno, California.
In October 1996, the Board of Directors approved a program under which the
Company may repurchase up to 30 million shares of its outstanding common stock
in the open market over a three-year period. During the second quarter, the
Company acquired 3.5 million shares for approximately $131 million. To date
under this program, 12.0 million shares have been repurchased for
approximately $392 million.
During the second quarter the Company entered into various put option
contracts to repurchase up to 2,000,000 shares of Company stock. The contracts
have exercise prices ranging from $36.77 to $42.67, with expiration dates
ranging from September 1997 through November 1997.
The Company enters into foreign exchange contracts to reduce exposure to
foreign currency exchange risk. These contracts are primarily designated and
effective as hedges of commitments to purchase merchandise. During the second
quarter, the Company entered into interest rate swaps in order to reduce
interest rate risk on a substantial portion of its intended issuance of the
Notes offered hereby.
S-10
<PAGE>
DESCRIPTION OF NOTES
The following information concerning the Notes offered hereby supplements
and should be read in conjunction with the statements in the accompanying
Prospectus under the caption "Description of Debt Securities." Capitalized
terms not otherwise defined herein shall have the meanings given to them in
the accompanying Prospectus.
GENERAL
The Notes will be issued as a series of Debt Securities under the Indenture
dated as of , 1997 (the "Indenture"), between the Company and Harris
Trust Company of California, as Trustee, which is more fully described in the
accompanying Prospectus.
The Notes will be issued as unsecured obligations of the Company in an
aggregate principal amount of $500,000,000 and will mature on ,
2007.
The Notes will bear interest from , 1997, payable semi-annually
in arrears on each and , commencing , 1998, at the
rate set forth on the cover page of this Prospectus Supplement, to the persons
in whose names the Notes are registered on the preceding and
, respectively.
The principal of and interest and premium (if any) on the Notes will be
payable, the transfer of Notes will be registrable and the Notes may be
presented for exchange, at the office of the Trustee, Harris Trust Company of
California, located at 601 South Figueroa Street, Suite 4900, Los Angeles,
California 90017, attention: Corporate Trust Department. So long as the Notes
are represented by Global Debt Securities, the interest payable on the Notes
will be paid to Cede & Co., the nominee of DTC, or its registered assigns as
the registered owner of the Global Debt Securities, by wire transfer of
immediately available funds on each of the applicable interest payment dates,
not later than 2:30 p.m. Eastern Standard Time. If the Notes are no longer
represented by Global Debt Securities, payment of interest may, at the option
of the Company, be made by check mailed to the address of the Person entitled
thereto. No service charge will be made for any transfer or exchange of Notes,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
The Notes will be subject to defeasance and covenant defeasance as described
in the accompanying Prospectus under the caption "Description of Debt
Securities--Defeasance of Offered Debt Securities or Certain Covenants in
Certain Circumstances."
No sinking fund is provided for the Notes.
OPTIONAL REDEMPTION
The Notes will be redeemable, in whole or in part, at the option of the
Company at any time at a redemption price equal to the greater of (i) 100% of
the principal amount of such Notes or (ii) the sum of the present values of
the remaining scheduled payments of principal and interest thereon discounted
to the redemption date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate (determined
on the third Business Day preceding such redemption date), plus, in each case,
accrued and unpaid interest thereon to the redemption date.
"Adjusted Treasury Rate" means (i) the arithmetic mean of the yields under
the heading "Week Ending" published in the Statistical Release most recently
published prior to the date of determination under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the redemption date, of
the principal being
S-11
<PAGE>
redeemed plus (ii) 0.10%. If no maturity set forth under such heading exactly
corresponds to the maturity of such principal, yields for the two published
maturities most closely corresponding to the maturity of such principal shall
be calculated pursuant to the immediately preceding sentence, and the Adjusted
Treasury Rate shall be interpolated or extrapolated from such yields on a
straight-line basis, rounding in each of the relevant periods to the nearest
month.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively-traded United States
government securities adjusted to constant maturities, or, if such statistical
release is not published at the time of any determination under the terms of
the Notes, then such other reasonably comparable index which shall be
designated by the Company.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, on and after
the redemption date, interest will cease to accrue on the Notes or portions
thereof called for redemption.
BOOK-ENTRY, DELIVERY AND FORM
The Notes will be represented by Global Debt Securities that will be
deposited with, or on behalf of, DTC, as Depositary, and registered in the
name of Cede & Co., the nominee of DTC.
DTC has advised the Company and the Underwriters as follows: DTC is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities of its participating organizations
("participants") and to facilitate the clearance and settlement of securities
transactions, such as transfers and pledges, among its participants in such
securities through electronic computerized book-entry changes in accounts of
the participants, thereby eliminating the need for physical movement of
securities certificates. Participants include securities brokers and dealers
(including the Underwriters), banks, trust companies, clearing corporations
and certain other organizations, some of whom (and/or their representatives)
own DTC. Access to DTC's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a participant, either directly or indirectly.
Persons who are not participants may beneficially own securities held by DTC
only through participants.
Unless and until they are exchanged in whole or in part for certificated
notes, in definitive form, the Global Debt Securities may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC or by DTC or any such nominee to a successor depository
or a nominee of such successor depository.
A further description of DTC's procedures with respect to the Notes is set
forth in the accompanying Prospectus under the heading "Description of Debt
Securities--Global Debt Securities."
S-12
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
and the Pricing Agreement, the Company has agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Goldman,
Sachs & Co. and Citicorp Securities, Inc. are acting as representatives, has
severally agreed to purchase, the principal amount of the Notes set forth
opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
----------- ------------
<S> <C>
Goldman, Sachs & Co............................................. $
Citicorp Securities, Inc........................................
------------
Total....................................................... $500,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement and the Pricing
Agreement, the Underwriters are committed to take and pay for all of the
Notes, if any are taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of % of the principal amount of the Notes. The Underwriters
may allow, and such dealers may reallow, a concession not to exceed % of the
principal amount of the Notes to certain brokers and dealers. After the Notes
are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the representatives.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the representatives of the Underwriters that
the representatives intend to make a market in the Notes but are not obligated
to do so and may discontinue market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the
Notes.
In connection with the offering, the Underwriters may purchase and sell the
Notes in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Notes; and syndicate short positions involve the
sale by the Underwriters of a greater number of Notes than they are required
to purchase from the Company in the offering. The Underwriters also may impose
a penalty bid, whereby selling concessions allowed to syndicate members or
other broker-dealers in respect of the Notes sold in the offering for their
account may be reclaimed by the syndicate if such Notes are repurchased by the
syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Notes, which
may be higher than the price that might otherwise prevail in the open market;
and these activities, if commenced, may be discontinued at any time. These
transactions may be effected in the over-the-counter market or otherwise. In
the ordinary course of business, Goldman, Sachs & Co. and certain syndicate
members have in the past performed, and may in the future perform, investment
banking services for the Company for which they have received, and may in the
future receive, fees or other compensation. Citicorp Securities, Inc. and its
affiliates have engaged and may engage in the future in transactions with, and
perform services for, including commercial banking and investment banking
transactions, the Company and its affiliates in the ordinary course of
business.
S-13
<PAGE>
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
VALIDITY OF THE NOTES
The validity of the Notes offered hereby and certain other legal matters
will be passed upon for the Company by Orrick, Herrington & Sutcliffe LLP, San
Francisco, California. The validity of the Notes offered hereby will be passed
upon for the Underwriters by Sullivan & Cromwell, Los Angeles, California.
S-14
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 27, 1997
$500,000,000
[LOGO]
DEBT SECURITIES
------------
The Gap, Inc. (the "Company") from time to time may offer its debt securities
consisting of debentures, notes and/or other unsecured evidences of
indebtedness (the "Debt Securities") in one or more series and in amounts, at
prices and on terms to be determined at the time of the offering. The principal
amount of the Debt Securities offered hereby will not exceed $500,000,000.
The terms of the Debt Securities, including, where applicable, the specific
designation, aggregate principal amount, denominations, which may include
securities denominated in U.S. dollars, in any other currency or in composite
currencies such as the European Currency Unit, date or dates on which principal
is payable, interest rate or rates (which may be fixed or variable) and time of
payment of interest, if any, terms for redemption at the option of the Company,
terms for any repayment of principal amount at the option of the holder (which
option may be conditional), terms for any sinking fund payments, the initial
public offering price, purchase price and net proceeds to the Company are set
forth in the accompanying Prospectus Supplement. This Prospectus may not be
used to consummate the sale of Debt Securities unless accompanied by a
Prospectus Supplement.
The Company may sell Debt Securities to or through one or more underwriters
for public offering and sale by them or may sell Debt Securities to investors
directly or through agents. The accompanying Prospectus Supplement sets forth
the names of any underwriters or agents involved in the sale of the Debt
Securities in respect of which this Prospectus is being delivered, the
principal amounts, if any, to be purchased by such underwriters and the
compensation, if any, of such underwriters or agents. See "Plan of
Distribution."
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------
The date of this Prospectus is , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith file reports, proxy material and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
material and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C., as well as 500 West Madison Street, Suite 1400,
Chicago, Illinois, and 7 World Trade Center, Suite 1300, New York, New York,
and copies can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a World Wide Web site that contains reports,
proxy and information statements and other information that are filed through
the Commission's Electronic Data Gathering, Analysis and Retrieval System.
This Web site can be accessed at http://www.sec.gov. Reports, proxy material
and other information concerning the Company can also be inspected at the
offices of the New York and Pacific Stock Exchanges.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
and any Prospectus Supplement do not contain all of the information set forth
in such Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Reference is made
to such Registration Statement and to the exhibits relating thereto for
further information with respect to the Company and the Debt Securities. Any
statements contained herein concerning the provisions of any document filed as
an exhibit to the Registration Statement or otherwise filed with the
Commission or incorporated by reference herein are not necessarily complete,
and, in each instance, reference is made to the copy of such document so filed
for a more complete description of the matter involved. Each such statement is
qualified in its entirety by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, which have been filed with the Commission pursuant
to the Exchange Act, are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
February 1, 1997; and
(b) The Company's Quarterly Reports on Form 10-Q for the fiscal quarters ended
May 3, 1997 and August 2, 1997.
All other documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the Debt Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in any
Prospectus Supplement or in a document incorporated or deemed to be
incorporated by reference herein or therein shall be deemed to be modified or
superseded for purposes of this Prospectus and any Prospectus Supplement to
the extent that a statement contained herein or in any other subsequently
filed document which is incorporated or deemed to be incorporated by reference
herein or in any Prospectus Supplement modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or any
Prospectus Supplement.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the written or oral
request of such person, a copy of any or all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should
be directed to the Company at One Harrison Street, San Francisco, CA 94105,
Attn: Investor Relations; telephone: 1-800-GAP-NEWS.
2
<PAGE>
THE COMPANY
The Company is an international specialty retailer of casual apparel, shoes
and other accessories for men, women and children under its proprietary Gap,
GapKids, babyGap, Banana Republic and Old Navy brands. As of August 2, 1997,
the Company operated 1,984 stores in the United States, Canada, the United
Kingdom, France, Germany and Japan.
Over the past ten years, the Company's net sales have grown at a 20.1%
compound annual rate, from $848 million in fiscal 1986 to $5.284 billion in
fiscal 1996. During this period, net income has grown at a 20.9% compound
annual rate, from $68.1 million in fiscal 1986 to $452.9 million in fiscal
1996.
The Company designs virtually all of its products for sale under its brands
in Company-operated stores. These brands and their corresponding store formats
collectively are positioned to address a broad consumer base. The Company
operates the following store formats:
GAP. Founded in 1969, Gap stores offer extensive selections of classicly-
styled, high quality, casual apparel at moderate price points. Products
range from wardrobe basics, such as denim, khakis and T-shirts, to
accessories and personal care products for men and women aged teen to
adult. At August 2, 1997, the Company operated 983 Gap stores, including
international locations.
GAPKIDS AND BABYGAP. The Company entered the children's apparel market
with the introduction of GapKids in 1986 and babyGap in 1990. These stores
offer casual basics, outerwear, shoes and other accessories in the
tradition of Gap style and quality for children aged newborn to teen. At
August 2, 1997, the Company operated a total of 536 GapKids and babyGap
stores, including international locations.
BANANA REPUBLIC. Acquired in 1983 with two stores, Banana Republic now
offers sophisticated, fashionable collections of dress-casual and tailored
clothing and accessories for men and women at upscale price points. At
August 2, 1997, the Company operated 240 Banana Republic stores, including
9 in Canada.
OLD NAVY. The Company launched Old Navy in 1993 to address the market for
value-priced family apparel. Old Navy offers broad selections of apparel,
shoes and accessories for adults, children and infants in an innovative,
exciting shopping environment. At August 2, 1997, the Company operated 225
Old Navy stores.
The Company's executive offices are located at One Harrison Street, San
Francisco, California 94105, and its telephone number is (415) 952-4400.
USE OF PROCEEDS
The net proceeds from the sale of the Debt Securities offered hereby will be
used by the Company as set forth in a Prospectus Supplement relating to such
Debt Securities.
3
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 26 WEEKS ENDED
---------------------------------------------------------------------------------
JANUARY 30, JANUARY 29, JANUARY 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2,
1993 1994 1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
3.69 3.81 4.07 3.92 4.18 3.24 2.96
</TABLE>
For purposes of computing the ratios of earnings to fixed charges, earnings
consist of income before taxes plus fixed charges (less capitalized interest),
and fixed charges consist of interest expense, capitalized interest and the
portion of rental expense under operating leases representative of an interest
factor.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture (as amended or
supplemented from time to time, the "Indenture") between the Company and
Harris Trust Company of California, as Trustee (the "Trustee"), a copy of
which is filed as an exhibit to the Registration Statement. The statements
herein relating to the Debt Securities and the following summaries of certain
provisions of the Indenture do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all the provisions of the
Indenture, including the definitions therein of certain terms, and the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Wherever
particular sections or defined terms of the Indenture are referred to in this
Prospectus or in a Prospectus Supplement, such sections or defined terms are
incorporated herein or therein by reference.
The following sets forth certain general terms and provisions of the Debt
Securities offered hereby. The particular terms of the Debt Securities offered
by any Prospectus Supplement (the "Offered Debt Securities") and the extent,
if any, to which such general terms and provisions may not apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating
to such Offered Debt Securities (the "Applicable Prospectus Supplement").
GENERAL
The Indenture does not limit the amount of Debt Securities that may be
issued thereunder and Debt Securities may be issued thereunder from time to
time in one or more series. The Debt Securities will be unsecured and
unsubordinated obligations of the Company and will rank equally and ratably
with other unsecured and unsubordinated obligations of the Company.
Unless otherwise indicated in the Applicable Prospectus Supplement,
principal of, premium, if any, and interest on the Debt Securities will be
payable, and the transfer of Debt Securities will be registrable, at the
office or agency to be maintained by the Company in The City of New York and
at any other office or agency maintained by the Company for such purpose.
(Sections 301, 305 and 1002) The Debt Securities will be issued only in fully
registered form without coupons and, unless otherwise indicated in the
Applicable Prospectus Supplement, in denominations of $1,000 or integral
multiples thereof. (Section 302) No service charge will be made for any
registration of transfer or exchange of the Debt Securities, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith. (Section 305)
4
<PAGE>
The Applicable Prospectus Supplement will describe the terms of the Offered
Debt Securities, including: (1) the title of the Offered Debt Securities; (2)
any limit on the aggregate principal amount of the Offered Debt Securities;
(3) the person or entity to whom any interest on the Offered Debt Securities
shall be payable, if other than the person or entity in whose name that
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest; (4) the date or dates
on which the principal of and premium, if any, on the Offered Debt Securities
is payable or the method of determination thereof; (5) the rate or rates at
which the Offered Debt Securities shall bear interest, if any, or the method
of calculating such rate or rates of interest, the date or dates from which
any such interest shall accrue or the method by which such date or dates shall
be determined, the Interest Payment Dates on which any such interest shall be
payable and the Regular Record Date for interest payable on any Interest
Payment Date; (6) the place or places where the principal of, premium, if any,
and interest on the Offered Debt Securities shall be payable; (7) the period
or periods within which, the price or prices at which, the currency or
currencies (including currency units) in which and the other terms and
conditions upon which the Offered Debt Securities may be redeemed, in whole or
in part, at the option of the Company; (8) the obligation, if any, of the
Company to redeem or purchase the Offered Debt Securities pursuant to any
sinking fund or analogous provisions or at the option of a holder thereof and
the period or periods within which, the price or prices at which and the other
terms and conditions upon which the Offered Debt Securities shall be redeemed
or purchased, in whole or in part, pursuant to such obligation; (9) if other
than denominations of $1,000 and any integral multiple thereof, the
denominations in which the Offered Debt Securities shall be issuable; (10) the
currency, currencies or currency units in which payment of the principal of
and any premium and interest on any Offered Debt Securities shall be payable
if other than the currency of the United States of America and the manner of
determining the equivalent thereof in the currency of the United States of
America; (11) if the amount of payments of principal of or any premium or
interest on any Offered Debt Securities may be determined with reference to an
index, formula or other method, the index, formula or other method by which
such amounts shall be determined; (12) if the principal of or any premium or
interest on any Offered Debt Securities is to be payable, at the election of
the Company or a holder thereof, in one or more currencies or currency units
other than that or those in which the Debt Securities are stated to be
payable, the currency, currencies or currency units in which payment of the
principal of and any premium and interest on the Offered Debt Securities as to
which such election is made shall be payable, and the periods within which and
the other terms and conditions upon which such election is to be made; (13) if
other than the principal amount thereof, the portion of the principal amount
of the Offered Debt Securities which shall be payable upon declaration of
acceleration of the maturity thereof or the method by which such portion may
be determined; (14) the applicability of the provisions described under "--
Defeasance of Offered Debt Securities or Certain Covenants in Certain
Circumstances"; (15) if the Offered Debt Securities will be issuable only in
the form of one or more Global Debt Securities as described under " --Global
Debt Securities", the Depositary or its nominee with respect to the Offered
Debt Securities and the circumstances under which the Global Debt Security may
be registered for transfer or exchange or authenticated and delivered in the
name of a person or entity other than the Depositary or its nominee; and (16)
any other terms of the Offered Debt Securities. (Section 301)
Debt Securities may be issued under the Indenture as Original Issue Discount
Debt Securities to be offered and sold at a substantial discount below their
stated principal amount. Special Federal income tax, accounting and other
considerations applicable thereto will be described in the Prospectus
Supplement relating thereto. "Original Issue Discount Debt Security" means any
Debt Security which provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of the
maturity thereof upon the occurrence and continuance of an Event of Default.
(Section 101)
5
<PAGE>
If the purchase price of any of the Debt Securities is payable in one or
more foreign currencies or currency units, if any Debt Securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any Debt Securities is
payable in one or more foreign currencies or currency units, the restrictions,
elections, material U.S. Federal income tax considerations and other
information with respect to such issue of Debt Securities and such foreign
currency or currency units will be set forth in the Applicable Prospectus
Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest, if any, on any series of Debt Securities,
material U.S. Federal income tax, accounting and other considerations
applicable thereto will be described in the Applicable Prospectus Supplement.
GLOBAL DEBT SECURITIES
The following description of Global Debt Securities will apply to any series
of Debt Securities except as otherwise provided in the Applicable Prospectus
Supplement.
The Debt Securities of a series may be issued in the form of one or more
Global Debt Securities that will be deposited with or on behalf of a
Depositary, which will be a clearing agent registered under the Exchange Act.
Global Debt Securities will be registered in the name of the Depositary or a
nominee of the Depositary, will be deposited with such Depositary or nominee
or a custodian therefor and will bear a legend regarding the restrictions on
exchanges and registration of transfer thereof and any such other matters as
may be provided for pursuant to the Indenture. Unless and until it is
exchanged in whole or in part for Debt Securities in definitive certificated
form, a Global Debt Security may not be transferred or exchanged except as a
whole by the Depositary for such Global Debt Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor Depositary for such series or a nominee of such successor
Depositary, or except in the circumstances described in the Applicable
Prospectus Supplement. (Section 305)
Upon the issuance of any Global Debt Security, and the deposit of such
Global Debt Security with or on behalf of the Depositary for such Global Debt
Security, the Depositary will credit on its book-entry registration and
transfer system the respective principal amounts of the Debt Securities
represented by such Global Debt Security to the accounts of institutions
("participants") that have accounts with the Depositary. The accounts to be
credited will be designated by the underwriters or agents engaging in the
distribution of such Debt Securities or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of
beneficial interests in a Global Debt Security will be limited to participants
or persons that may hold interests through participants. Ownership of
beneficial interests in a Global Debt Security will be shown on, and the
transfer of that ownership will be effected only through, records maintained
by the Depositary for such Global Debt Security or by its nominee. Ownership
of beneficial interests in such Global Debt Security by persons who hold
through participants will be shown on, and the transfer of such beneficial
interests within such participants will be effected only through, records
maintained by such participants. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such laws may impair the ability to transfer beneficial
interests in such a Global Debt Security.
So long as the Depositary for a Global Debt Security, or its nominee, is the
owner of such Global Debt Security, such Depositary or such nominee, as the
case may be, will be considered the sole owner or holder of the Debt Security
represented by such Global Debt Security for all purposes under the Indenture.
Accordingly, each person owning a beneficial interest in such Global Debt
Security must rely on the procedures of the Depositary and, if such person is
not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a holder under such
Indenture. The Company understands that under existing industry practices, if
it requests any action of holders or if an owner of a beneficial interest in a
Global Debt Security desires to give or take
6
<PAGE>
any instruction or action which a holder is entitled to give or take under the
Indenture, the Depositary would authorize the participants holding the
relevant beneficial interests to give or take such instruction or action, and
such participants would authorize beneficial owners owning through such
participants to give or take such instruction or action or would otherwise act
upon the instructions of beneficial owners holding through them.
Unless otherwise specified in the Applicable Prospectus Supplement, payments
with respect to principal, premium, if any, and interest, if any, on the Debt
Securities represented by a Global Debt Security registered in the name of the
Depositary or its nominee will be made to such Depositary or its nominee, as
the case may be, as the registered owner of such Global Debt Security. The
Company expects that the Depositary for any Debt Securities represented by a
Global Debt Security, upon receipt of any payment of principal or interest in
respect of such Global Debt Security, will credit immediately participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the Global Debt Security as shown on the records of the
Depositary. The Company also expects that payments by participants to owners
of beneficial interests in such Global Debt Security held through such
participants will be governed by standing instructions and customary
practices, as is now the case with securities in bearer form held for the
accounts of customers or registered in "street name", and will be the
responsibility of such participants. None of the Company, the Trustee or any
agent of the Company or the Trustee shall have any responsibility or liability
for any aspect of the records relating to, or payments made on account of,
beneficial interests in any Global Debt Security, or for maintaining,
supervising or reviewing any records relating to such beneficial interests.
A Global Debt Security shall be exchangeable for Debt Securities in
certificated registered form, of like tenor and of an equal aggregate
principal amount, only if (a) the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for such Global Debt Security or
if at any time the Depositary ceases to be a clearing agency registered under
the Exchange Act, (b) the Company in its sole discretion determines that such
Global Debt Security shall be exchangeable for Debt Securities in certificated
registered form or (c) there shall have occurred and be continuing an Event of
Default with respect to the Debt Securities. Any Global Debt Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for Debt
Securities registered in the name or names of such person or persons as the
Depositary shall instruct the Trustee. It is expected that such instructions
may be based upon directions received by the Depositary from its participants
with respect to ownership of beneficial interests in such Global Debt
Security.
EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default under
the Indenture with respect to Debt Securities of any series: (a) failure to
pay any interest on any Debt Security of that series when due, continued for
30 days; (b) failure to pay principal of or any premium on any Debt Security
of that series when due; (c) failure to deposit any sinking fund payment, when
due, in respect of any Debt Security of that series; (d) failure to perform,
or breach of, any covenant or warranty of the Company in the Indenture with
respect to Debt Securities of that series continued for 60 days after written
notice as provided in the Indenture; (e) a default under any indebtedness for
money borrowed by the Company or any Subsidiary if (A) such default either (1)
results from the failure to pay the principal of any such indebtedness at its
stated maturity or (2) relates to an obligation other than the obligation to
pay the principal of such indebtedness at its stated maturity and results in
such indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise become due and payable, (B) the principal amount
of such indebtedness, together with the principal amount of any other such
indebtedness in default for failure to pay principal at stated maturity or the
maturity of which has been so accelerated, aggregates $25,000,000 or more at
any one time outstanding and (C) such indebtedness is not discharged, or such
acceleration is not rescinded or annulled, within 10
7
<PAGE>
business days after written notice as provided in the Indenture; (f) certain
events of bankruptcy, insolvency or reorganization of the Company; or (g) any
other Event of Default provided with respect to Debt Securities of that
series. (Section 501)
If an Event of Default (other than an Event of Default described in clause
(f) of the preceding paragraph) with respect to the Debt Securities of any
series at the time Outstanding shall occur and be continuing, either the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Outstanding Debt Securities of that series may accelerate the maturity of all
Debt Securities of that series; provided, however, that after such
acceleration, but before a judgment or decree based on acceleration, the
Holders of a majority in aggregate principal amount of the Outstanding Debt
Securities of that series may, under certain circumstances, rescind and annul
such acceleration if all Events of Default, other than the non-payment of
accelerated principal, have been cured or waived as provided in the Indenture.
If an Event of Default described in clause (f) of the immediately preceding
paragraph occurs, the Outstanding Debt Securities will ipso facto become
immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder. (Section 502)
Reference is made to the Applicable Prospectus Supplement relating to any
series of Offered Debt Securities that are Original Issue Discount Debt
Securities for the particular provisions relating to acceleration of the
Stated Maturity of a portion of the principal amount of such series of
Original Issue Discount Debt Securities upon the occurrence of an Event of
Default and the continuation thereof.
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under
no obligation to exercise any of its rights or powers under the Indenture at
the request or direction of any of the holders of Debt Securities, unless such
holders shall have offered to the Trustee reasonable indemnity. (Section 603)
Subject to such provisions for the indemnification of the Trustee and to
certain other conditions, the holders of a majority in aggregate principal
amount of the Outstanding Debt Securities of any series will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Debt Securities of that series. (Section 512)
No holder of Debt Securities of any series will have any right to institute
any proceeding with respect to the Indenture or for any remedy thereunder,
unless such holder shall have previously given to the Trustee written notice
of a continuing Event of Default and unless the holders of at least 25% in
principal amount of the Outstanding Debt Securities of that series shall have
made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as trustee, and the Trustee shall not have received
from the holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of that series a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
(Section 507) However, such limitations do not apply to a suit instituted by a
holder of Debt Securities for enforcement of payment of the principal of and
premium, if any, or interest on such Debt Securities on or after the
respective due dates expressed in such Debt Securities. (Section 508)
The Company is required to furnish to the Trustee annually a statement as to
the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Section 1004)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee without the consent of the holders of any of the Debt Securities
in order (i) to evidence the succession of another entity to the Company and
the assumption of the covenants and obligations of the Company under the Debt
Securities and the Indenture by such successor to the Company; (ii) to add to
the
8
<PAGE>
covenants of the Company for the benefit of the holders of all or any series
of Debt Securities or to surrender any right or power conferred on the Company
by the Indenture; (iii) to add additional Events of Default with respect to
any series of Debt Securities; (iv) to add to or change any provisions to such
extent as may be necessary to permit or facilitate the issuance of Debt
Securities in bearer form or to facilitate the issuance of Global Debt
Securities; (v) to add to, change or eliminate any provision affecting only
Debt Securities not yet issued; (vi) to secure the Debt Securities; (vii) to
establish the form or terms of Debt Securities of any series; (viii) to
evidence and provide for successor Trustees or to add or change any provisions
to such extent as may be necessary to provide for or facilitate the
appointment of a separate Trustee or Trustees for specific series of Debt
Securities; (ix) to permit payment in respect of Debt Securities in bearer
form in the United States to the extent allowed by law; (x) to cure any
ambiguity, to correct or supplement any mistaken or inconsistent provisions or
to make any other provisions with respect to matters or questions arising
under the Indenture, provided that any such action (other than in respect of a
mistaken provision) does not adversely affect in any material respect the
interests of any holder of Debt Securities of any series then outstanding.
(Section 901)
Modifications and amendments of the Indenture also may be made by the
Company and the Trustee with the consent of the holders of not less than a
majority in aggregate principal amount of the Outstanding Debt Securities of
each series issued under the Indenture and affected by the modification or
amendments; provided, however, that no such modification or amendment may,
without the consent of the holders of all Debt Securities affected thereby,
(i) change the Stated Maturity of the principal amount of, or any installment
of principal of or interest on, any Debt Security; (ii) reduce the principal
amount of, or the premium, if any, or (except as otherwise provided in the
Applicable Prospectus Supplement) interest on any Debt Security (including in
the case of an Original Issue Discount Debt Security the amount payable upon
acceleration of the maturity thereof ); (iii) change the place or currency of
payment of principal of, premium, if any, or interest on any Debt Security;
(iv) impair the right to institute suit for the enforcement of any payment on
any Debt Security on or after the Stated Maturity thereof (or in the case of
redemption, on or after the Redemption Date); or (v) reduce the percentage in
principal amount of Outstanding Debt Securities of any series, the consent of
whose holders is required for modification or amendment of the Indenture or
for waiver of compliance with certain provisions of the Indenture or for
waiver of certain defaults. (Section 902)
The holders of at least a majority in aggregate principal amount of the
Outstanding Debt Securities of any series may, on behalf of all holders of
Debt Securities of that series, waive compliance by the Company with certain
restrictive provisions of the Indenture. (Section 1008) The holders of not
less than a majority in aggregate principal amount of the Outstanding Debt
Securities of any series may, on behalf of all holders of Debt Securities of
that series, waive any past default under the Indenture, except a default in
the payment of principal, premium or interest or in respect of a covenant or
provision of the Indenture that cannot be modified or amended without the
consent of the holder of each Outstanding Debt Security of such series
affected thereby. (Section 513)
NO PROTECTION IN THE EVENT OF A CHANGE OF CONTROL
Unless otherwise set forth in the Applicable Prospectus Supplement, the Debt
Securities will not contain any provisions which may afford holders of the
Debt Securities protection in the event of a change in control of the Company
or in the event of a highly leveraged transaction (whether or not such
transaction results in a change in control of the Company).
COVENANTS
Unless otherwise set forth in the Applicable Prospectus Supplement, and
except as set forth below, the Debt Securities will not contain any
restrictive covenants, including covenants restricting the Company or any of
its Subsidiaries from incurring, issuing, assuming or guaranteeing any
indebtedness or encumbering any property of the Company or any Subsidiary, or
restricting the Company or any Subsidiary from transferring assets or entering
into any sale and leaseback transaction.
9
<PAGE>
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge with or into any other entity
or transfer or lease its assets substantially as an entirety to any entity,
unless (i) either the Company is the continuing corporation, or any successor
or purchaser is a corporation, partnership or trust organized under the laws
of the United States of America, any State thereof or the District of
Columbia, and any such successor or purchaser expressly assumes the Company's
obligations on the Debt Securities under a supplemental indenture, (ii)
immediately after giving effect to the transaction, no Event of Default, and
no event which, after notice or lapse of time or both, would become an Event
of Default, shall have occurred and be continuing, and (iii) if a supplemental
indenture is to be executed in connection with such consolidation, merger,
transfer or lease, the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel stating compliance with these
provisions. (Section 801)
DEFEASANCE OF OFFERED DEBT SECURITIES OR CERTAIN COVENANTS IN CERTAIN
CIRCUMSTANCES
DEFEASANCE AND DISCHARGE
The Indenture provides that the terms of any series of Debt Securities may
provide that the Company, at the Company's option, will be discharged from any
and all obligations in respect of the Debt Securities of such series (except
for certain obligations to register the transfer or exchange of Debt
Securities of such series, to replace stolen, lost or mutilated Debt
Securities of such series, to maintain paying agencies and to hold moneys for
payment in trust) upon the deposit with the Trustee, in trust, of money and/or
U.S. Government Obligations which, through the payment of interest and
principal thereof in accordance with their terms, will provide money in an
amount sufficient to pay any installment of principal (and premium, if any)
and interest on, and any mandatory sinking fund payments in respect of, the
Debt Securities of such series on the Stated Maturity of such payments in
accordance with the terms of the Indenture and such Debt Securities. Such
discharge may only occur if, among other things, the Company has delivered to
the Trustee an opinion of counsel to the effect that the Company has received
from, or there has been published by, the United States Internal Revenue
Service a ruling, or there has been a change in tax law, in either case to the
effect that such discharge will not be deemed, or result in, a taxable event
with respect to holders of the Debt Securities of such series. (Sections 1302
and 1304)
DEFEASANCE OF CERTAIN COVENANTS
The Indenture provides that the terms of any series of Debt Securities may
provide the Company with the option to omit to comply with the restrictive
covenant described in this Prospectus under "Consolidation, Merger and Sale of
Assets" and any other covenants made applicable to any series of Debt
Securities as described in the Applicable Prospectus Supplement. The Company,
in order to exercise such option, will be required to deposit with the Trustee
money and/or U.S. Government Obligations which, through the payment of
interest and principal thereof in accordance with their terms, will provide
money in an amount sufficient to pay principal (and premium, if any) and
interest on, and any mandatory sinking fund payments in respect of, the Debt
Securities of such series on the Stated Maturity of such payments in
accordance with the terms of the Indenture and such Debt Securities. The
Company will also be required to deliver to the Trustee an opinion of counsel
to the effect that the deposit and related covenant defeasance will not cause
the holders of the Debt Securities of such series to recognize income, gain or
loss for federal income tax purposes. (Sections 1303 and 1304)
In the event the Company exercises this option and the Debt Securities of
such series are declared due and payable because of the occurrence of any
Event of Default, the amount of money and U.S. Government Obligations on
deposit with the Trustee will be sufficient to pay amounts due on the Debt
Securities of such series at the time of their Stated Maturity but may not be
sufficient to pay amounts due on the Debt Securities of such series at the
time of the acceleration resulting from such Event of Default. However, the
Company shall remain liable for such payments.
10
<PAGE>
The Applicable Prospectus Supplement will state if any defeasance provisions
will apply to the Offered Debt Securities.
CONCERNING THE TRUSTEE
Harris Trust Company of California, a California trust company, is the
Trustee under the Indenture. The Trustee may resign at any time or may be
removed by the holders of at least a majority in aggregate principal amount of
the Outstanding Debt Securities. If the Trustee resigns, is removed or becomes
incapable of acting as Trustee or if a vacancy occurs in the office of the
Trustee for any cause, a successor Trustee shall be appointed in accordance
with the provisions of the Indenture.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through one or more underwriters
or dealers and also may sell Debt Securities to other investors directly or
through agents.
The distribution of the Debt Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Company or from purchasers of Debt Securities for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on
the resale of Debt Securities by them may be deemed to be underwriting
discounts and commissions, under the Securities Act. Any such underwriter or
agent will be identified, and any such compensation received from the Company
will be described, in the Prospectus Supplement.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Debt Securities may be entitled
to indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
VALIDITY OF THE DEBT SECURITIES
The validity of the Debt Securities will be passed upon by Orrick,
Herrington & Sutcliffe LLP, San Francisco, California, and, unless otherwise
indicated in a Prospectus Supplement relating to Offered Debt Securities, by
Sullivan & Cromwell, Los Angeles, California, counsel for the underwriters or
agents.
11
<PAGE>
EXPERTS
The consolidated financial statements of the Company as of February 1, 1997
and February 4, 1996 and for each of the three fiscal years in the period
ended February 1, 1997, incorporated in this Prospectus by reference from the
Company's Annual Report on Form 10-K for the year ended February 1, 1997, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended May 3, 1997 and May 4, 1996 and August 2, 1997 and August 3, 1996 which
is incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review of
such information. However, as stated in their reports included in the
Company's Quarterly Reports on Form 10-Q for the quarters ended May 3, 1997
and August 2, 1997 and incorporated by reference herein, they did not audit
and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information
should be restricted in light of the limited nature of the review procedures
applied. Deloitte & Touche LLP are not subject to the liability provisions of
Section 11 of the Securities Act of 1933 for their reports on the unaudited
interim financial information because those reports are not "reports" or a
"part" of the registration statement prepared or certified by an accountant
within the meaning of Sections 7 and 11 of the Act.
12
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS
PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company............................................................... S-3
Use of Proceeds........................................................... S-5
Capitalization............................................................ S-5
Selected Consolidated Financial Data...................................... S-6
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... S-7
Description of Notes...................................................... S-11
Underwriting.............................................................. S-13
Validity of the Notes..................................................... S-14
PROSPECTUS
Available Information..................................................... 2
Documents Incorporated by Reference....................................... 2
The Company............................................................... 3
Use of Proceeds........................................................... 3
Ratio of Earnings to Fixed Charges........................................ 4
Description of Debt Securities............................................ 4
Plan of Distribution...................................................... 11
Validity of the Debt Securities........................................... 11
Experts................................................................... 12
</TABLE>
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$500,000,000
THE GAP, INC.
% NOTES DUE , 2007
-----------------
LOGO
-----------------
GOLDMAN, SACHS & CO.
CITICORP SECURITIES, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized statement of expenses of the Company in
connection with the issue of the Debt Securities.
<TABLE>
<S> <C>
Registration fee................................................... $151,516
Rating Agencies fees............................................... 215,000
Fees and expenses of Trustee....................................... 7,000
Printing expenses.................................................. 30,000
Blue Sky and legal investment fees and expense..................... 5,000
Accountants' fees and expenses..................................... 75,000
Counsel fees and expenses.......................................... 50,000
Miscellaneous...................................................... 6,484
--------
Total.......................................................... $540,000
========
</TABLE>
All except the first of the foregoing amounts are estimates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware Corporation Law authorizes a court to award or a
corporation's board of directors to grant indemnity to officers and directors
in terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act. The Registrant's By-laws provide for
indemnification of the Registrant's directors and officers to the maximum
extent permitted by the Delaware law.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
1.1 Form of Underwriting Agreement.
4.1 Form of Indenture, dated as of , 1997, between the Company and
Harris Trust Company of California, as Trustee.
4.2 Form of Debt Security (included in Exhibit 4.1 hereto).
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP as to the validity of
the Debt Securities.
12.1 Statement Setting Forth Computation of Ratio of Earnings to Fixed
Charges.
15.1 Letter re unaudited interim financial information.
23.1 Consent of Deloitte & Touche LLP.
23.2 The consent of Orrick, Herrington & Sutcliffe LLP is contained in the
opinion filed as Exhibit 5.1 to this Registration Statement.
24.1 Powers of Attorney of Directors and Officers of the Company (set forth
on the signature pages to this Registration Statement).
25.1 Form T-1 Statement of Eligibility and Qualification of Harris Trust
Company of California, as Trustee.
</TABLE>
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement, or
any material change to such information in the registration statement;
provided, however, that paragraphs (i) and (ii) shall not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described under Item 15 above,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted against the registrant by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this registration
statement or amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, State of California,
on the 26th day of August, 1997.
The Gap, Inc.
(Registrant)
By: /s/Millard S. Drexler
----------------------------------
Name: Millard S. Drexler
Title: Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Millard S. Drexler,
Warren R. Hashagen and Anne B. Gust, and each of them, as his or her true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement or any subsequent registration
statements pursuant to Rule 462 (including any amendments thereto), and to
file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the foregoing, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them or their substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Millard S. Drexler Chief Executive Officer and August 26, 1997
____________________________________ Director (Principal
MILLARD S. DREXLER Executive Officer)
/s/ Warren R. Hashagen Senior Vice President and August 26, 1997
____________________________________ Chief Financial Officer
WARREN R. HASHAGEN (Principal Financial and
Accounting Officer)
/s/ Donald G. Fisher Chairman and Director August 26, 1997
____________________________________
DONALD G. FISHER
/s/ Adrian D. P. Bellamy Director August 26, 1997
____________________________________
ADRIAN D. P. BELLAMY
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ John G. Bowes Director August 26, 1997
____________________________________
JOHN G. BOWES
/s/ Doris F. Fisher Director August 26, 1997
____________________________________
DORIS F. FISHER
/s/ Robert J. Fisher Director August 26, 1997
____________________________________
ROBERT J. FISHER
/s/ Lucie J. Fjeldstad Director August 26, 1997
____________________________________
LUCIE J. FJELDSTAD
/s/ William A. Hasler Director August 26, 1997
____________________________________
WILLIAM A. HASLER
/s/ John M. Lillie Director August 26, 1997
____________________________________
JOHN M. LILLIE
/s/ Charles R. Schwab Director August 26, 1997
____________________________________
CHARLES R. SCHWAB
/s/ Brooks Walker, Jr. Director August 26, 1997
____________________________________
BROOKS WALKER, JR.
/s/ Sergio Zyman Director August 26, 1997
____________________________________
SERGIO ZYMAN
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
1.1 Form of Underwriting Agreement.
4.1 Form of Indenture, dated as of , 1997, between the Company and
Harris Trust Company of California, as Trustee.
4.2 Form of Debt Security (included in Exhibit 4.1 hereto).
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP as to the validity of
the Debt Securities.
12.1 Statement Setting Forth Computation of Ratio of Earnings to Fixed
Charges.
15.1 Letter re unaudited interim financial information.
23.1 Consent of Deloitte & Touche LLP.
23.2 The consent of Orrick, Herrington & Sutcliffe LLP is contained in the
opinion filed as Exhibit 5.1 to this Registration Statement.
24.1 Powers of Attorney of Directors and Officers of the Company (set forth
on the signature pages to this Registration Statement).
25.1 Form T-1 Statement of Eligibility and Qualification of Harris Trust
Company of California, as Trustee.
</TABLE>
<PAGE>
EXHIBIT 1.1
THE GAP, INC.
DEBT SECURITIES
UNDERWRITING AGREEMENT
----------------------
, 1997
Goldman, Sachs & Co.,
Citicorp Securities, Inc.
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
From time to time, The Gap, Inc., a Delaware corporation (the "Company"),
proposes to enter into one or more Pricing Agreements (each a "Pricing
Agreement") in the form of Annex I hereto, with such additions and deletions as
the parties thereto may determine, and, subject to the terms and conditions
stated herein and therein, to issue and sell to the firms named in Schedule I to
the applicable Pricing Agreement (such firms constituting the "Underwriters"
with respect to such Pricing Agreement and the securities specified therein)
certain of its debt securities (the "Securities") specified in Schedule II to
such Pricing Agreement (with respect to such Pricing Agreement, the "Designated
Securities").
The terms and rights of any particular issuance of Designated Securities
shall be as specified in the Pricing Agreement relating thereto and in or
pursuant to the indenture (the "Indenture") identified in such Pricing
Agreement.
1. Particular sales of Designated Securities may be made from time to time
to the Underwriters of such Securities, for whom the firms designated as
representatives of the Underwriters of such Securities in the Pricing Agreement
relating thereto will act as representatives (the "Representatives"). The term
"Representatives" also refers to a single firm acting as sole
representative of the Underwriters and to an Underwriter or Underwriters who act
without any firm being designated as its or their representatives. This
Underwriting Agreement shall not be construed as an obligation of the Company to
sell any of the Securities or as an obligation of any of the Underwriters to
purchase the Securities. The obligation of the Company to issue and sell any of
the Securities and the obligation of any of the Underwriters to purchase any of
the Securities
<PAGE>
shall be evidenced by the Pricing Agreement with respect to the
Designated Securities specified therein. Each Pricing Agreement shall specify
the aggregate principal amount of such Designated Securities, the initial public
offering price of such Designated Securities, the purchase price to the
Underwriters of such Designated Securities, the names of the Underwriters of
such Designated Securities, the names of the Representatives of such
Underwriters and the principal amount of such Designated Securities to be
purchased by each Underwriter and shall set forth the date, time and manner of
delivery of such Designated Securities and payment therefor. The Pricing
Agreement shall also specify (to the extent not set forth in the Indenture and
the registration statement and prospectus with respect thereto) the terms of
such Designated Securities. A Pricing Agreement shall be in the form of an
executed writing (which may be in counterparts), and may be evidenced by an
exchange of telegraphic communications or any other rapid transmission device
designed to produce a written record of communications transmitted. The
obligations of the Underwriters under this Agreement and each Pricing Agreement
shall be several and not joint.
2. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-....)
(the "Initial Registration Statement") in respect of the Securities has
been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement [as amended] and any
post-effective amendment thereto, each in the form heretofore delivered
or to be delivered to the Representatives and, excluding exhibits to
such registration statement, but including all documents incorporated by
reference in the prospectus contained therein, to the Representatives
for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (the "Act"), which became effective upon filing, no
other document with respect to the Initial Registration Statement or
document incorporated by reference therein has heretofore been filed or
transmitted for filing with the Commission (other than prospectuses
filed pursuant to Rule 424(b) of the rules and regulations of the
Commission under the Act, each in the form heretofore delivered to the
Representatives); and no stop order suspending the effectiveness of the
Initial Registration Statement, any post-effective amendment thereto or
the Rule 462(b) Registration Statement, if any, has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule
424(a) under the Act, is hereinafter called a "Preliminary Prospectus";
the various parts of the Initial Registration Statement, including all
exhibits thereto and the documents incorporated by reference in the
prospectus contained in the registration statement at the time such part
of the Initial Registration Statement became effective but excluding
Form T-1, each as amended at the time such part of the Initial
Registration Statement became effective or such part of the Rule 462(b)
Registration Statement, if any, became or hereinafter becomes effective,
are hereinafter collectively called the "Registration Statement"; the
prospectus relating to the Securities, in the form in which it has most
recently been filed, or transmitted for filing, with the
2
<PAGE>
Commission on or prior to the date of this Agreement, being hereinafter
called the "Prospectus"; any reference herein to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to the applicable
form under the Act, as of the date of such Preliminary Prospectus or
Prospectus, as the case may be; any reference to any amendment or
supplement to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after the date of
such Preliminary Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated by reference in such Preliminary Prospectus or Prospectus,
as the case may be; any reference to any amendment to the Registration
Statement shall be deemed to refer to and include any annual report of
the Company filed pursuant to Sections 13(a) or 15(d) of the Exchange
Act after the effective date of the Initial Registration Statement that
is incorporated by reference in the Registration Statement; and any
reference to the Prospectus as amended or supplemented shall be deemed
to refer to the Prospectus as amended or supplemented in relation to the
applicable Designated Securities in the form in which it is filed with
the Commission pursuant to Rule 424(b) under the Act in accordance with
Section 5(a) hereof, including any documents incorporated by reference
therein as of the date of such filing);
(b) The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder, and in the case of a
registration statement which became effective under the Act, did not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading and in the case of other documents
filed under the Act or the Exchange Act with the Commission, did not
contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made when such
documents were so filed, not misleading; and any further documents so
filed and incorporated by reference in the Prospectus or any further
amendment or supplement thereto, when such documents become effective or
are filed with the Commission, as the case may be, will conform in all
material respects to the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder
and will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made when
such documents were so filed, not misleading; provided, however, that
this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter of Designated
Securities through the Representatives expressly for use in the
Prospectus as amended or supplemented relating to such Securities;
(c) The Registration Statement and the Prospectus conform, and
any further amendments or supplements to the Registration Statement or
the Prospectus will conform, in all material respects to the
requirements of the Act and the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), and the rules and regulations of the
Commission
3
<PAGE>
thereunder and do not and will not, as of the applicable effective date
as to the Registration Statement and any amendment thereto and as of the
applicable filing date as to the Prospectus and any amendment or
supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter of Designated
Securities through the Representatives expressly for use in the
Prospectus as amended or supplemented relating to such Securities;
(d) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the
capital stock or long-term debt of the Company or any of its
subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set
forth or contemplated in the Prospectus;
(e) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with corporate power and authority to
own its properties and conduct its business as described in the
Prospectus;
(f) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully
paid and non-assessable;
(g) The Securities have been duly authorized, and, when
Designated Securities are issued and delivered pursuant to this
Agreement and the Pricing Agreement with respect to such Designated
Securities, such Designated Securities will have been duly executed,
authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Company entitled to the benefits
provided by the Indenture, which will be substantially in the form filed
as an exhibit to the Registration Statement; the Indenture has been duly
authorized and duly qualified under the Trust Indenture Act and, at the
Time of Delivery for such Designated Securities (as defined in Section 4
hereof), the Indenture will constitute a valid and legally binding
instrument, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles; and the Indenture conforms, and the
Designated Securities will conform, to the descriptions thereof
contained in the Prospectus as amended or supplemented with respect to
such Designated Securities;
(h) The issue and sale of the Securities and the compliance by
the Company with all of the provisions of the Securities, the Indenture,
this Agreement and any Pricing
4
<PAGE>
Agreement, and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the Company is
bound or to which any of the property or assets of the Company is
subject, which conflict, breach or violation would (x) have a material
adverse effect on the current or future consolidated financial position,
stockholders' equity or results of operations of the Company and its
Subsidiaries or (y) adversely affect the validity of the Securities, nor
will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any statute or
any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its properties; and
no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Securities or the consummation
by the Company of the transactions contemplated by this Agreement or any
Pricing Agreement or the Indenture, except such as have been, or will
have been prior to the Time of Delivery, obtained under the Act and the
Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters;
(i) The statements set forth in the Prospectus under the
captions "Description of Debt Securities" and "Description of the
Notes", insofar as they purport to constitute a summary of the terms of
the Securities, or insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete and
fair;
(j) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound,
which violation or default would have a material adverse effect on the
current or future consolidated financial position, stockholders' equity
or results of operations of the Company and its Subsidiaries;
(k) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property of the Company or
any of its subsidiaries is the subject which, if determined adversely to
the Company or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others;
(l) The Company is not and, after giving effect to the offering
and sale of the Securities, will not be an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and
5
<PAGE>
(m) Deloitte & Touche LLP, who have certified certain financial
statements of the Company and its subsidiaries are, to the Company's
knowledge, independent public accountants as required by the Act and the
rules and regulations of the Commission thereunder.
3. Upon the execution of the Pricing Agreement applicable to any
Designated Securities and authorization by the Representatives of the release of
such Designated Securities, the several Underwriters propose to offer such
Designated Securities for sale upon the terms and conditions set forth in the
Prospectus as amended or supplemented.
4. Designated Securities to be purchased by each Underwriter pursuant to
the Pricing Agreement relating thereto, in the form specified in such Pricing
Agreement, and in such authorized denominations and registered in such names as
the Representatives may request upon at least forty-eight hours' prior notice to
the Company, shall be delivered by or on behalf of the Company to the
Representatives for the account of such Underwriter, against payment by such
Underwriter or on its behalf of the purchase price therefor by check or wire
transfer in the funds specified in such Pricing Agreement, all in the manner and
at the place and time and date specified in such Pricing Agreement or at such
other place and time and date as the Representatives and the Company may agree
upon in writing, such time and date being herein called the "Time of Delivery"
for such Securities.
5. The Company agrees with each of the Underwriters of any Designated
Securities:
(a) To prepare the Prospectus as amended or supplemented in
relation to the applicable Designated Securities in a form approved by
the Representatives and to file such Prospectus pursuant to Rule 424(b)
under the Act not later than the Commission's close of business on the
second business day following the execution and delivery of the Pricing
Agreement relating to the applicable Designated Securities or, if
applicable, such earlier time as may be required by Rule 424(b); to make
no further amendment or any supplement to the Registration Statement or
Prospectus as amended or supplemented after the date of the Pricing
Agreement relating to such Securities and prior to the Time of Delivery
for such Securities which shall be disapproved by the Representatives
for such Securities promptly after reasonable notice thereof; to advise
the Representatives promptly of any such amendment or supplement after
such Time of Delivery and furnish the Representatives with copies
thereof; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act for so long as the delivery of a prospectus is required in
connection with the offering or sale of such Securities, and during such
same period to advise the Representatives, promptly after it receives
notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed with the Commission,
of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any prospectus relating to the
Securities, of the suspension of the qualification of such Securities
for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration
Statement or
6
<PAGE>
Prospectus or for additional information; and, in the event of the
issuance of any such stop order or of any such order preventing or
suspending the use of any prospectus relating to the Securities or
suspending any such qualification, to promptly use its best efforts to
obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify such Securities for
offering and sale under the securities laws of such jurisdictions as the
Representatives may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for
as long as may be necessary to complete the distribution of such
Securities, provided that in connection therewith the Company shall not
be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the day next
succeeding the date of the Pricing Agreement for such Designated
Securities that is a Monday, Tuesday, Wednesday, Thursday or Friday on
which banking institutions in New York are not generally authorized or
obligated by law or executive order to close (each such day, a "New York
Business Day"), to furnish the Underwriters with copies of the
Prospectus in New York City as amended or supplemented in such
quantities as the Representatives may reasonably request, and, if the
delivery of a prospectus is required at any time in connection with the
offering or sale of the Securities and if at such time any event shall
have occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such same period to amend
or supplement the Prospectus or to file under the Exchange Act any
document incorporated by reference in the Prospectus in order to comply
with the Act, the Exchange Act or the Trust Indenture Act, to notify the
Representatives and upon their request to file such document and to
prepare and furnish without charge to each Underwriter and to any dealer
in securities as many copies as the Representatives may from time to
time reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a) of
the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158); and
(e) During the period beginning from the date of the Pricing
Agreement for such Designated Securities and continuing to and including
the later of (i) the termination of trading restrictions for such
Designated Securities, as notified to the Company by the Representatives
and (ii) the Time of Delivery for such Designated Securities, not to
offer, sell, contract to sell or otherwise dispose of any debt
securities of the Company which
7
<PAGE>
mature more than one year after such Time of Delivery and which are
substantially similar to such Designated Securities, without the prior
written consent of the Representatives.
(f) If the Company elects to rely upon Rule 462(b) in respect
of the offering and sale of any Designated Securities, to file a Rule
462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of the
Pricing Agreement for such Designated Securities, and, at the time of
filing, to either pay to the Commission the filing fee for the Rule
462(b) Registration Statement or give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Securities under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus and the Prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or producing any Agreement
among Underwriters, this Agreement, any Pricing Agreement, any Indenture, any
Blue Sky and Legal Investment Memoranda, closing documents and any other
documents in connection with the offering, purchase, sale and delivery of the
Securities; (iii) all expenses in connection with the qualification of the
Securities for offering and sale under state securities laws as provided in
Section 5(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky and Legal Investment Surveys; (iv) any fees charged by securities
rating services for rating the Securities;(v) the cost of preparing the
Securities; (vi) the fees and expenses of any Trustee and any agent of any
Trustee and the fees and disbursements of counsel for any Trustee in connection
with any Indenture and the Securities; and (vii) all other costs and expenses
incident to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, transfer taxes on resale of any of the Securities by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters of any Designated Securities under
the Pricing Agreement relating to such Designated Securities shall be subject,
in the discretion of the Representatives, to the condition that all
representations and warranties and other statements of the Company in or
incorporated by reference in the Pricing Agreement relating to such Designated
Securities are, at and as of the Time of Delivery for such Designated
Securities, true and correct, the condition that the Company shall have
performed all of its obligations hereunder theretofore to be performed, and the
following additional conditions:
(a) The Prospectus as amended or supplemented in relation to the
applicable Designated Securities shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time period
prescribed for such filing by the rules and regulations under the Act
and in accordance with Section 5(a) hereof; if the Company has elected
to rely upon Rule 462(b) in respect of the offering and sale of any
Designated Securities, the applicable Rule 462(b) Registration Statement
shall have become effective by 10:00 p.m.,
8
<PAGE>
Washington, D.C. time, on the date of the Pricing Agreement for such
Designated Securities; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by
the Commission; and all requests for additional information on the part
of the Commission shall have been complied with to the Representatives'
reasonable satisfaction;
(b) Sullivan & Cromwell, counsel for the Underwriters, shall
have furnished to the Representatives such opinion or opinions (a draft
of such opinion is attached as Annex II(a) hereto), dated the Time of
Delivery for such Designated Securities, with respect to the
incorporation of the Company, the Indenture, the Designated Securities,
the Registration Statement, the Prospectus, as amended or supplemented,
as well as such other related matters as the Representatives may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon
such matters;
(c) Orrick, Herrington & Sutcliffe LLP, counsel for the Company,
shall have furnished to the Representatives their written opinion (a
draft of such opinion is attached as Annex II(b) hereto), dated the Time
of Delivery for such Designated Securities, in form and substance
satisfactory to the Representatives, to the effect that:
(i) When authenticated and issued in accordance with the
Indenture, the Designated Securities will constitute valid and legally
binding obligations of the Company enforceable against the Company in
accordance with their terms, subject to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles, and will
be entitled to the benefits provided by the Indenture; and the
Designated Securities and the Indenture conform to the descriptions
thereof in the Prospectus as amended or supplemented;
(ii) The Indenture constitutes a valid and legally binding
instrument, enforceable against the Company in accordance with its
terms, subject to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights and
to general equity principles; and the Indenture has been duly qualified
under the Trust Indenture Act;
(iii) The issue and sale of the Designated Securities and the
compliance by the Company with all of the provisions of the Designated
Securities, the Indenture, this Agreement and the Pricing Agreement with
respect to the Designated Securities and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any statute, rule or regulation known
to such counsel, which conflict, breach or violation would individually
or in the aggregate have a material adverse effect on the current or
future consolidated financial position, stockholders' equity or results
of operations of the Company and its subsidiaries;
(iv) No consent, approval, authorization, order, registration
or qualification of or with any governmental agency or body is required
for the issue and sale of the Designated Securities or the consummation
by the Company of the transactions contemplated by this
9
<PAGE>
Agreement or such Pricing Agreement or the Indenture, except such as
have been obtained under the Act and the Trust Indenture Act and such
consents, approvals, authorizations, orders, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Designated
Securities by the Underwriters;
(v) The statements set forth in the Prospectus under the
captions "Description of Debt Securities", and "Description of the
Notes", insofar as they purport to constitute a summary of the terms of
the Debt Securities, and insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate
and fair in all material respects;
(vi) Based on the intended use of proceeds from the sale of
the Securities and the Company's current business operations, it is not
necessary to register the Company under the Investment Company Act;
(vii) The Registration Statement and the Prospectus as amended
or supplemented and any further amendments and supplements thereto made
by the Company prior to the Time of Delivery for the Designated
Securities (other than the financial statements and related schedules
and financial data derived from accounting records therein and the
Statement of Eligibility of the Trustee on Form T-1, as to which such
counsel need express no opinion) comply as to form in all material
respects with the requirements of the Trust Indenture Act and the rules
and regulations thereunder.
(d) Anne B. Gust, Senior Vice President and General Counsel of
the Company, shall have furnished to the Representatives her written
opinion (a draft of such opinion is attached as Annex II(c) hereto),
dated the Time of Delivery for such Designated Securities, in form and
substance satisfactory to the Representatives, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with corporate power and authority to
own its properties and conduct its business as described in the
Prospectus as amended or supplemented;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus as amended or supplemented;
(iii) To the best of such counsel's knowledge and other than
as set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is a
party or of which any property of the Company or any of its subsidiaries
is the subject, which would individually or in the aggregate have a
material adverse effect on the current or future consolidated financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries; and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(iv) This Agreement and the Pricing Agreement with respect to
the Designated Securities have been duly authorized, executed and
delivered by the Company;
10
<PAGE>
(v) The Designated Securities and the Indenture have been
duly authorized, executed, and delivered by the Company;
(vi) The issue and sale of the Designated Securities and the
compliance by the Company with all of the provisions of the Designated
Securities, the Indenture, this Agreement and the Pricing Agreement with
respect to the Designated Securities and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument known to such
counsel to which the Company is a party or by which the Company is bound
or to which any of the property or assets of the Company is subject,
which conflict, breach, violation or default would (x) have a material
adverse effect on the current or future consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries or (y) adversely affect the validity of the Designated
Securities, nor will such actions result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the Company
or any order of any court or governmental agency or body having
jurisdiction over the Company or any of its material properties;
(vii) The documents incorporated by reference in the
Prospectus as amended or supplemented (other than the financial
statements and related schedules and financial data derived from
accounting records included therein, as to which such counsel need
express no opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all material
respects with the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder;
(viii) The Registration Statement and the Prospectus as amended
or supplemented and any further amendments and supplements thereto made
by the Company prior to the Time of Delivery for the Designated
Securities (other than the financial statements and related schedules
and financial data derived from accounting records included therein and
the Statement of Eligibility of the Trustee on Form T-1, as to which
such counsel need express no opinion) comply as to form in all material
respects with the requirements of the Act and the rules and regulations
thereunder; although she does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, nothing has come to her
attention that would lead her to believe that, as of its effective date,
the Registration Statement or any further amendment thereto made by the
Company prior to the Time of Delivery (other than the financial
statements and related schedules and financial data derived from
accounting records included therein and the Statements of Eligibility of
the Trustee on Form T-1, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that, as of its date, the
Prospectus as amended or supplemented or any further amendment or
supplement thereto made by the Company prior to the Time of Delivery
(other than the financial statements and related schedules and financial
data derived from accounting records therein and the Statements of
Eligibility of the Trustee on Form T-1, as to which such counsel need
express no opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
11
<PAGE>
statements therein, in the light of the circumstances under which they
were made, not misleading or that, as of the Time of Delivery, either
the Registration Statement or the Prospectus as amended or supplemented
or any further amendment or supplement thereto made by the Company prior
to the Time of Delivery (other than the financial statements and related
schedules and financial data derived from accounting records therein and
the Statement of Eligibility of the Trustee on Form T-1, as to which
such counsel need express no opinion) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; and she does not know of any amendment to the
Registration Statement required to be filed or any contracts or other
documents of a character required to be filed as an exhibit to the
Registration Statement or required to be incorporated by reference into
the Prospectus as amended or supplemented or required to be described in
the Registration Statement or the Prospectus as amended or supplemented
which are not filed or incorporated by reference or described as
required.
(e) On the date of the Pricing Agreement for such Designated
Securities at a time prior to the execution of the Pricing Agreement
with respect to such Designated Securities and at the Time of Delivery
for such Designated Securities, the independent accountants of the
Company who have certified the financial statements of the Company and
its subsidiaries included or incorporated by reference in the
Registration Statement shall have furnished to the Representatives a
letter, dated the effective date of the Registration Statement or the
date of the most recent report filed with the Commission containing
financial statements and incorporated by reference in the Registration
Statement, if the date of such report is later than such effective date,
and a letter dated such Time of Delivery, respectively, to the effect
set forth in Annex II hereto, and with respect to such letter dated such
Time of Delivery, as to such other matters as the Representatives may
reasonably request and in form and substance satisfactory to the
Representatives;
(f) (i) Neither the Company nor any of its subsidiaries
shall have sustained since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus as
amended prior to the date of the Pricing Agreement relating to the
Designated Securities any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Prospectus as amended prior to the date of the Pricing Agreement
relating to the Designated Securities, and (ii) since the respective
dates as of which information is given in the Prospectus as amended
prior to the date of the Pricing Agreement relating to the Designated
Securities there shall not have been any change in the capital stock
(other than upon exercise of options issued pursuant to the Company's
stock option plans, the issuance of restricted stock pursuant to the
Company's restricted stock plans and the repurchase of Common Stock
pursuant to the Company's stock repurchase program) or long-term debt of
the Company or any of its subsidiaries or any change, or any development
involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set
forth or contemplated in the
12
<PAGE>
Prospectus as amended prior to the date of the Pricing Agreement
relating to the Designated Securities, the effect of which, in any such
case described in Clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Designated Securities on the terms and in the manner contemplated in the
Prospectus as first amended or supplemented relating to the Designated
Securities;
(g) On or after the date of the Pricing Agreement relating to
the Designated Securities (i) no downgrading shall have occurred in the
rating accorded the Company's debt securities or preferred stock by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act,
and (ii) no such organization shall have publicly announced that it has
under surveillance or review, with possible negative implications, its
rating of any of the Company's debt securities or preferred stock;
(h) On or after the date of the Pricing Agreement relating to
the Designated Securities there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension
or material limitation in trading in the Company's securities on the New
York Stock Exchange; (iii) a general moratorium on commercial banking
activities declared by either Federal or New York or California State
authorities; or (iv) the outbreak or escalation of hostilities involving
the United States or the declaration by the United States of a national
emergency or war, if the effect of any such event specified in this
Clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Designated Securities on the terms and in the manner
contemplated in the Prospectus as first amended or supplemented relating
to the Designated Securities;
(i) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on
the New York Business Day next succeeding the date of the applicable
Pricing Agreement; and.
(j) The Company shall have furnished or caused to be furnished
to the Representatives at the Time of Delivery for the Designated
Securities a certificate or certificates of officers of the Company
satisfactory to the Representatives as to the accuracy of the
representations and warranties of the Company herein at and as of such
Time of Delivery, as to the performance by the Company of all of its
obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in subsections (a) and (f) of this
Section and as to such other matters as the Representatives may
reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, any preliminary
prospectus supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other
13
<PAGE>
prospectus relating to the Securities, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, any preliminary prospectus
supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the Securities, or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter of Designated Securities
through the Representatives expressly for use in the Prospectus as amended or
supplemented relating to such Securities.
(b) Each Underwriter will indemnify and hold harmless the Company against
any losses, claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, any preliminary prospectus supplement, the Registration
Statement, the Prospectus as amended or supplemented and any other prospectus
relating to the Securities, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, any preliminary prospectus
supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the Securities, or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through the
Representatives expressly for use therein; and will reimburse the Company for
any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case
14
<PAGE>
subsequently incurred by such indemnified party, in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters of the Designated Securities
on the other from the offering of the Designated Securities to which such loss,
claim, damage or liability (or action in respect thereof) relates. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters of the Designated
Securities on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and such Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from such offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by such Underwriters.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or such Underwriters on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the applicable Designated Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
15
<PAGE>
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligations of the
Underwriters of Designated Securities in this subsection (d) to contribute are
several in proportion to their respective underwriting obligations with respect
to such Securities and not joint.
(e) The obligations of the Company under this Section 8 shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Designated Securities which it has agreed to purchase under the Pricing
Agreement relating to such Designated Securities, the Representatives may in
their discretion arrange for themselves or another party or other parties to
purchase such Designated Securities on the terms contained herein. If within
thirty-six hours after such default by any Underwriter the Representatives do
not arrange for the purchase of such Designated Securities, then the Company
shall be entitled to a further period of thirty-six hours within which to
procure another party or other parties satisfactory to the Representatives to
purchase such Designated Securities on such terms. In the event that, within
the respective prescribed period, the Representatives notify the Company that
they have so arranged for the purchase of such Designated Securities, or the
Company notifies the Representatives that it has so arranged for the purchase of
such Designated Securities, the Representatives or the Company shall have the
right to postpone the Time of Delivery for such Designated Securities for a
period of not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus as
amended or supplemented, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments or supplements to the
Registration Statement or the Prospectus which in the opinion of the
Representatives may thereby be made necessary. The term "Underwriter" as used
in this Agreement shall include any person substituted under this Section with
like effect as if such person had originally been a party to the Pricing
Agreement with respect to such Designated Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Designated Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company as provided in subsection (a) above, the
aggregate principal amount of such Designated Securities which remains
unpurchased does not exceed one-eleventh of the aggregate principal amount of
the Designated Securities, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the principal amount of Designated
Securities which such Underwriter agreed to purchase under the Pricing Agreement
relating to such Designated Securities and, in addition, to require each non-
defaulting Underwriter to purchase its pro rata share (based on the principal
amount of Designated Securities which such Underwriter agreed to purchase under
such Pricing Agreement) of the Designated Securities of such defaulting
Underwriter or Underwriters for which
16
<PAGE>
such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Designated Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company as provided in subsection (a) above, the
aggregate principal amount of Designated Securities which remains unpurchased
exceeds one-eleventh of the aggregate principal amount of the Designated
Securities, as referred to in subsection (b) above, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Designated Securities of a defaulting Underwriter or
Underwriters, then the Pricing Agreement relating to such Designated Securities
shall thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Securities.
11. If any Pricing Agreement shall be terminated pursuant to Section 9
hereof, the Company shall not then be under any liability to any Underwriter
with respect to the Designated Securities covered by such Pricing Agreement
except as provided in Sections 6 and 8 hereof; but, if for any other reason
Designated Securities are not delivered by or on behalf of the Company as
provided herein, the Company will reimburse the Underwriters through the
Representatives for all out-of-pocket expenses approved in writing by the
Representatives, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of such Designated Securities, but the Company shall then be under no
further liability to any Underwriter with respect to such Designated Securities
except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, the Representatives of the Underwriters
of Designated Securities shall act on behalf of each of such Underwriters, and
the parties hereto shall be entitled to act and rely upon any statement,
request, notice or agreement on behalf of any Underwriter made or given by such
Representatives jointly or by such of the Representatives, if any, as may be
designated for such purpose in the Pricing Agreement.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Representatives as set forth in the
Pricing Agreement; and if to the Company shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in the
Registration Statement: Attention: General Counsel; provided, however, that any
notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or
sent by mail, telex or facsimile
17
<PAGE>
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by the Representatives upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement and each Pricing Agreement shall be binding upon, and
inure solely to the benefit of, the Underwriters, the Company and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and each person who controls the Company or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement or any such Pricing Agreement. No purchaser of any of the Securities
from any Underwriter shall be deemed a successor or assign by reason merely of
such purchase.
14. Time shall be of the essence of each Pricing Agreement. As used
herein, "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT AND EACH PRICING AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement and each Pricing Agreement may be executed by any one
or more of the parties hereto and thereto in any number of counterparts, each of
which shall be deemed to be an original, but all such respective counterparts
shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us five counterparts hereof.
Very truly yours,
The Gap, Inc.
By: _________________________
Name:
Title:
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
CITICORP SECURITIES, INC.
BY: ...............................
(GOLDMAN, SACHS & CO.)
18
<PAGE>
ANNEX I
PRICING AGREEMENT
-----------------
Goldman, Sachs & Co.,
Citicorp Securities, Inc.,
As Representatives of the several
Underwriters named in Schedule I hereto,
C/O GOLDMAN, SACHS & CO.,
85 Broad Street,
New York, New York 10004.
, 199_
Ladies and Gentlemen:
The Gap, Inc., a Delaware corporation (the "Company"), proposes, subject to
the terms and conditions stated herein and in the Underwriting Agreement, dated
. . . . . . . . . . . ., 1997 (the "Underwriting Agreement"), between the
Company on the one hand and Goldman, Sachs & Co. and Citicorp Securities, Inc.
on the other hand, to issue and sell to the Underwriters named in Schedule I
hereto (the "Underwriters") the Securities specified in Schedule II hereto (the
"Designated Securities"). Each of the provisions of the Underwriting Agreement
is incorporated herein by reference in its entirety, and shall be deemed to be a
part of this Agreement to the same extent as if such provisions had been set
forth in full herein; and each of the representations and warranties set forth
therein shall be deemed to have been made at and as of the date of this Pricing
Agreement, except that each representation and warranty which refers to the
Prospectus in Section 2 of the Underwriting Agreement shall be deemed to be a
representation or warranty as of the date of the Underwriting Agreement in
relation to the Prospectus (as therein defined), and also a representation and
warranty as of the date of this Pricing Agreement in relation to the Prospectus
as amended or supplemented relating to the Designated Securities which are the
subject of this Pricing Agreement. Each reference to the Representatives herein
and in the provisions of the Underwriting Agreement so incorporated by reference
shall be deemed to refer to you. Unless otherwise defined herein, terms defined
in the Underwriting Agreement are used herein as therein defined. The
Representatives designated to act on behalf of the Representatives and on behalf
of each of the Underwriters of the Designated Securities pursuant to Section 12
of the Underwriting Agreement and the address of the Representatives referred to
in such Section 12 are set forth at the end of Schedule II hereto.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
1
<PAGE>
Subject to the terms and conditions set forth herein and in the Underwriting
Agreement incorporated herein by reference, the Company agrees to issue and sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at the time and place and at the
purchase price to the Underwriters set forth in Schedule II hereto, the
principal amount of Designated Securities set forth opposite the name of such
Underwriter in Schedule I hereto.
If the foregoing is in accordance with your understanding, please sign and
return to us ______ counterparts hereof, and upon acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof,
including the provisions of the Underwriting Agreement incorporated herein by
reference, shall constitute a binding agreement between each of the Underwriters
and the Company. It is understood that your acceptance of this letter on behalf
of each of the Underwriters is or will be pursuant to the authority set forth in
a form of Agreement among Underwriters, the form of which shall be submitted to
the Company for examination upon request, but without warranty on the part of
the Representatives as to the authority of the signers thereof.
Very truly yours,
The Gap, Inc.
By:__________________________
Name:
Title:
Accepted as of the date hereof:
[GOLDMAN, SACHS & CO.
[CITICORP SECURITIES, INC.]
[BY: ].................................]
(Goldman, Sachs & Co.)
[CITICORP SECURITIES, INC.]
BY:....................................
NAME:
TITLE:
On behalf of each of the Underwriters
2
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
DESIGNATED
SECURITIES
TO BE
UNDERWRITER PURCHASED
----------- ----------
<S> <C>
[GOLDMAN, SACHS & CO.].............................. $
[CITICORP SECURITIES, INC.] ........................
[NAMES OF OTHER UNDERWRITERS] ......................
----------
Total .............................................. $
==========
</TABLE>
<PAGE>
SCHEDULE II
Title of Designated Securities:
[ %] [Floating Rate] [Zero Coupon] [Notes]
[Debentures] due ,
AGGREGATE PRINCIPAL AMOUNT:
[$]
PRICE TO PUBLIC:
% of the principal amount of the Designated Securities, plus accrued
interest[, if any,] from to [and accrued amortization[, if
any,] from to ]
PURCHASE PRICE BY UNDERWRITERS:
% of the principal amount of the Designated Securities, plus accrued
interest from to [and accrued amortization[, if
any,] from to ]
FORM OF DESIGNATED SECURITIES:
[Definitive form to be made available for checking and packaging at
least twenty-four hours prior to the Time of Delivery at the office of
[The Depository Trust Company or its designated custodian] [the
Representatives]]
[Book-entry only form represented by one or more global securities
deposited with The Depository Trust Company ("DTC") or its designated
custodian, to be made available for checking by the Representatives at
least twenty-four hours prior to the Time of Delivery at the office of
DTC.]
SPECIFIED FUNDS FOR PAYMENT OF PURCHASE PRICE:
[Same day funds]
TIME OF DELIVERY:
a.m. (New York City time), , 19
INDENTURE:
Indenture dated , 19 , between the Company
and , as Trustee
MATURITY:
INTEREST RATE:
[ %] [Zero Coupon] [See Floating Rate Provisions]
INTEREST PAYMENT DATES:
[months and dates, commencing ....................., 19..]
REDEMPTION PROVISIONS:
[No provisions for redemption]
<PAGE>
[The Designated Securities may be redeemed, otherwise than through the
sinking fund, in whole or in part at the option of the Company, in
the amount of [$ ] or an integral multiple thereof,
[on or after , at the following redemption prices (expressed
in percentages of principal amount). If [redeemed on or before
, %, and if]redeemed during 12-month period beginning ,
REDEMPTION
YEAR PRICE
---- -----
and thereafter at 100% of their principal amount, together in each case
with accrued interest to the redemption date.]
[on any interest payment date falling on or after ,
, at the election of the Company, at a redemption price equal to the
principal amount thereof, plus accrued interest to the date of
redemption.]]
[Other possible redemption provisions, such as mandatory redemption upon
occurrence of certain events or redemption for changes in tax law]
[Restriction on refunding]
SINKING FUND PROVISIONS:
[No sinking fund provisions]
[The Designated Securities are entitled to the benefit of a sinking fund
to retire [$ ] principal amount of Designated Securities on
in each of the years through at 100% of their principal amount
plus accrued interest[, together with [cumulative] [noncumulative]
redemptions at the option of the Company to retire an additional [$ ]
principal amount of Designated Securities in the years through
at 100% of their principal amount plus accrued interest.]
[If Designated Securities are extendable debt securities, insert--
---------------------------------------------------------------
EXTENDABLE PROVISIONS:
Designated Securities are repayable on , [insert
date and years], at the option of the holder, at their principal amount
with accrued interest. The initial annual interest rate will be
%, and thereafter the annual interest rate will be adjusted on
, and to a rate not less than %
of the effective annual interest rate on U.S. Treasury obligations
with -year maturities as of the [insert date 15 days prior to
maturity date] prior to such [insert maturity date].]
II-2
<PAGE>
[If Designated Securities are floating rate debt securities, insert--
------------------------------------------------------------------
FLOATING RATE PROVISIONS:
Initial annual interest rate will be % through [and
thereafter will be adjusted [monthly] [on each , ,
and ] [to an annual rate of % above the average
rate for -year [month][securities][certificates of deposit]
issued by and [insert names of banks].] [and the annual
interest rate [thereafter] [from through ] will be the
interest yield equivalent of the weekly average per annum market
discount rate for -month Treasury bills plus % of
Interest Differential (the excess, if any, of (i) the then
current weekly average per annum secondary market yield for
-month certificates of deposit over (ii) the then current
interest yield equivalent of the weekly average per annum market
discount rate for -month Treasury bills); [from and
thereafter the rate will be the then current interest yield equivalent
plus % of Interest Differential].]
DEFEASANCE PROVISIONS:
CLOSING LOCATION FOR DELIVERY OF DESIGNATED SECURITIES:
ADDITIONAL CLOSING CONDITIONS:
NAMES AND ADDRESSES OF REPRESENTATIVES:
Designated Representatives:
Address for Notices, etc.:
[OTHER TERMS] :
II-3
<PAGE>
ANNEX II
Pursuant to Section 7(e) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules audited (and, if
applicable, financial forecasts and/or pro forma financial information)
examined by them and included or incorporated by reference in the
Registration Statement or the Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Act
or the Exchange Act, as applicable, and the related published rules and
regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of
Certified Public Accountants of the consolidated interim financial
statements, selected financial data, pro forma financial information,
financial forecasts and/or condensed financial statements derived from
audited financial statements of the Company for the periods specified in
such letter, as indicated in their reports thereon, copies of which have
been [separately] furnished to the representative or representatives of
the Underwriters (the "Representatives") such term to include an
Underwriter or Underwriters who act without any firm being designated as
its or their representatives [and are attached hereto];
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus and/or included in the Company's quarterly report on Form 10-
Q incorporated by reference into the Prospectus as indicated in their
reports thereon copies of which [have been separately furnished to the
Representatives][are attached hereto]; and on the basis of specified
procedures including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to in
paragraph (vi)(A)(i) below comply as to form in all material respects
with the applicable accounting requirements of the Act and the Exchange
Act and the related published rules and regulations, nothing came to
their attention that caused them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and the Exchange Act and the related published rules and regulations;
(iv) The unaudited selected financial information with
respect to the consolidated results of operations and financial position
of the Company for the five most recent fiscal years included in the
Prospectus and included or incorporated by reference in Item 6 of the
Company's Annual Report on Form 10-K for the most recent fiscal year
agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for five
such fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus
under selected captions with the disclosure requirements of Regulation
S-K and on the basis of limited procedures
<PAGE>
specified in such letter nothing came to their attention as a result of
the foregoing procedures that caused them to believe that this
information does not conform in all material respects with the
disclosure requirements of Items 301, 302, 402 and 503(d), respectively,
of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of
the minute books of the Company and its subsidiaries since the date of
the latest audited financial statements included or incorporated by
reference in the Prospectus, inquiries of officials of the Company and
its subsidiaries responsible for financial and accounting matters and
such other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus and/or included or
incorporated by reference in the Company's Quarterly Reports on Form 10-
Q incorporated by reference in the Prospectus do not comply as to form
in all material respects with the applicable accounting requirements of
the Exchange Act and the related published rules and regulations, or
(ii) any material modifications should be made to the unaudited
condensed consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the Prospectus or
included in the Company's Quarterly Reports on Form 10-Q incorporated by
reference in the Prospectus for them to be in conformity with generally
accepted accounting principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial statements
from which such data and items were derived, and any such unaudited data
and items were not determined on a basis substantially consistent with
the basis for the corresponding amounts in the audited consolidated
financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were
not included in the Prospectus but from which were derived the unaudited
condensed financial statements referred to in clause (A) and any
unaudited income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a basis
substantially consistent with the basis for the audited financial
statements included or incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed
financial statements included or incorporated by reference in the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the published rules
and regulations thereunder or the pro forma adjustments have not
II-2
<PAGE>
been properly applied to the historical amounts in the compilation of
those statements;
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock upon
exercise of options and stock appreciation rights, upon earn-outs of
performance shares and upon conversions of convertible securities, in
each case which were outstanding on the date of the latest balance sheet
included or incorporated by reference in the Prospectus) or any increase
in the consolidated long-term debt of the Company and its subsidiaries,
or any decreases in consolidated net current assets or stockholders'
equity or other items specified by the Representatives, or any increases
in any items specified by the Representatives, in each case as compared
with amounts shown in the latest balance sheet included or incorporated
by reference in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(F) for the period from the date of the latest
financial statements included or incorporated by reference in the
Prospectus to the specified date referred to in Clause (E) there were
any decreases in consolidated net revenues or operating profit or the
total or per share amounts of consolidated net income or other items
specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with the
comparable period of the preceding year and with any other period of
corresponding length specified by the Representatives, except in each
case for increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(vii) In addition to the audit referred to in their report(s)
included or incorporated by reference in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (vi) above, they have carried out
certain specified procedures, not constituting an audit in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives which
are derived from the general accounting records of the Company and its
subsidiaries, which appear in the Prospectus (excluding documents
incorporated by reference), or in Part II of, or in exhibits and schedules
to, the Registration Statement specified by the Representatives or in
documents incorporated by reference in the Prospectus specified by the
Representatives, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
All references in this Annex II to the Prospectus shall be deemed to refer
to the Prospectus (including the documents incorporated by reference therein) as
defined in the Underwriting Agreement as of the date of the letter delivered on
the date of the Pricing Agreement for purposes of such letter and to the
Prospectus as amended or supplemented (including the documents incorporated by
reference therein) in relation to the applicable Designated Securities for
purposes of the letter delivered at the Time of Delivery for such Designated
Securities.
II-3
<PAGE>
EXHIBIT 4.1
================================================================================
THE GAP, INC.
TO
HARRIS TRUST COMPANY OF CALIFORNIA
as Trustee
__________
INDENTURE
Dated as of [___________], 1997
Providing for Issuance of
Debt Securities in Series
================================================================================
<PAGE>
THE GAP, INC.
Certain Sections of this Indenture relating to
Sections 310 through 318, inclusive, of the
Trust Indenture Act of 1939:
Trust Indenture
Act Section Indenture Section
<TABLE>
<CAPTION>
<S> <C>
(S) 310(a)(1) ............................. 609
(a)(2) ............................. 609
(a)(3) ............................. Not Applicable
(a)(4) ............................. Not Applicable
(b) ............................. 608
610
(S) 311(a) ............................. 613
(b) ............................. 613
(S) 312(a) ............................. 701
702(a)
(b) ............................. 702(b)
(c) ............................. 702(c)
(S) 313(a) ............................. 703(a)
(b) ............................. 703(a)
(c) ............................. 703(a)
(d) ............................. 703(b)
(S) 314(a) ............................. 704
(a)(4) ............................. 101
1004
(b) ............................. Not Applicable
(c)(1) ............................. 102
(c)(2) ............................. 102
(c)(3) ............................. Not Applicable
(d) ............................. Not Applicable
(e) ............................. 102
(S) 315(a) ............................. 601
(b) ............................. 602
(c) ............................. 601
(d) ............................. 601
(e) ............................. 514
(S) 316(a) ............................. 101
(a)(1)(A)............................. 502
512
(a)(1)(B)............................. 513
(a)(2) ............................. Not Applicable
(b) ............................. 508
(c) ............................. 104(c)
(S) 317(a)(1) ............................. 503
(a)(2) ............................. 504
(b) ............................. 1003
(S) 318(a) ............................. 107
- --------------------
</TABLE>
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
i
<PAGE>
TABLE OF CONTENTS
Page
<TABLE>
<CAPTION>
ARTICLE ONE
Definitions and Other Provisions
of General Application
<S> <C> <C>
Section 101. Definitions........................................ 1
Section 102. Compliance Certificates and Opinions............... 9
Section 103. Form of Documents Delivered to Trustee............. 9
Section 104. Acts of Holders; Record Dates...................... 10
Section 105. Notices, Etc., to Trustee and Company.............. 12
Section 106. Notice to Holders; Waiver.......................... 12
Section 107. Conflict with Trust Indenture Act.................. 13
Section 108. Effect of Headings and Table of Contents........... 13
Section 109. Successors and Assigns............................. 13
Section 110. Separability Clause................................ 13
Section 111. Benefits of Indenture.............................. 13
Section 112. Governing Law...................................... 14
Section 113. Legal Holidays..................................... 14
ARTICLE TWO
Security Forms
Section 201. Forms Generally.................................... 14
Section 202. Form of Face of Security........................... 15
Section 203. Form of Reverse of Security........................ 17
Section 204. Additional Provisions Required in
Book-Entry Security................................ 22
Section 205. Form of Trustee's Certificate of Authentication.... 22
ARTICLE THREE
The Securities
Section 301. Amount Unlimited; Issuable in Series............... 23
Section 302. Denominations...................................... 26
Section 303. Execution, Authentication, Delivery and Dating..... 26
Section 304. Temporary Securities............................... 29
Section 305. Registration, Registration of Transfer and Exchange 29
Section 306. Mutilated, Destroyed, Lost and Stolen Securities... 31
Section 307. Payment of Interest; Interest Rights Preserved..... 32
Section 308. Persons Deemed Owners.............................. 34
Section 309. Cancellation....................................... 34
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 310. Computation of Interest............................ 35
Section 311. CUSIP Numbers...................................... 35
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture............ 35
Section 402. Application of Trust Money......................... 37
ARTICLE FIVE
Remedies
Section 501. Events of Default.................................. 37
Section 502. Acceleration of Maturity; Rescission
and Annulment...................................... 39
Section 503. Collection of Indebtedness and Suits
for Enforcement by Trustee......................... 41
Section 504. Trustee May File Proofs of Claim................... 42
Section 505. Trustee May Enforce Claims Without
Possession of Securities........................... 42
Section 506. Application of Money Collected..................... 43
Section 507. Limitation on Suits................................ 43
Section 508. Unconditional Right of Holders to
Receive Principal, Premium and Interest............ 44
Section 509. Restoration of Rights and Remedies................. 44
Section 510. Rights and Remedies Cumulative..................... 45
Section 511. Delay or Omission Not Waiver....................... 45
Section 512. Control by Holders................................. 45
Section 513. Waiver of Past Defaults............................ 46
Section 514. Undertaking for Costs.............................. 46
Section 515. Waiver of Stay or Extension Laws................... 46
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities................ 47
Section 602. Notice of Defaults................................. 47
Section 603. Certain Rights of Trustee.......................... 48
Section 604. Not Responsible for Recitals or Issuance
of Securities...................................... 49
Section 605. May Hold Securities................................ 49
Section 606. Money Held in Trust................................ 50
Section 607. Compensation and Reimbursement..................... 50
Section 608. Disqualification; Conflicting Interests............ 51
Section 609. Corporate Trustee Required; Eligibility............ 51
Section 610. Resignation and Removal; Appointment of Successor.. 52
Section 611. Acceptance of Appointment by Successor............. 54
Section 612. Merger, Conversion, Consolidation or
Succession to Business............................. 56
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 613. Preferential Collection of Claims Against Company.. 56
Section 614. Appointment of Authenticating Agent................ 56
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names and
Addresses of Holders............................... 58
Section 702. Preservation of Information;
Communications to Holders.......................... 59
Section 703. Reports by Trustee................................. 59
Section 704. Reports by Company................................. 60
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
Section 801. Company May Consolidate, Etc., Only on
Certain Terms...................................... 60
Section 802. Successor Substituted.............................. 61
Section 803. Officers' Certificate and Opinion of Counsel...... 61
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders. 62
Section 902. Supplemental Indentures with Consent of Holders.... 63
Section 903. Execution of Supplemental Indentures............... 65
Section 904. Effect of Supplemental Indentures.................. 65
Section 905. Conformity with Trust Indenture Act................ 65
Section 906. Reference in Securities to Supplemental Indentures. 65
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest....... 66
Section 1002. Maintenance of Office or Agency................... 66
Section 1003. Money for Securities Payments to Be Held in Trust. 66
Section 1004. Statement by Officers as to Default............... 68
Section 1005. Existence......................................... 68
Section 1006. Maintenance of Properties......................... 68
Section 1007. Payment of Taxes and Other Claims................. 69
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1008. Waiver of Certain Covenants....................... 69
Section 1009. Calculation of Original Issue Discount............ 70
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article.......................... 70
Section 1102. Election to Redeem: Notice to Trustee............. 70
Section 1103. Selection by Trustee of Securities to Be Redeemed. 70
Section 1104. Notice of Redemption.............................. 71
Section 1105. Deposit of Redemption Price....................... 72
Section 1106. Securities Payable on Redemption Date............. 73
Section 1107. Securities Redeemed in Part....................... 73
ARTICLE TWELVE
Sinking Funds
Section 1201. Applicability of Article.......................... 74
Section 1202. Satisfaction of Sinking Fund Payments with
Securities........................................ 74
Section 1203. Redemption of Securities for Sinking Fund......... 74
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
Section 1301. Applicability of Article; Company's Option
to Effect Defeasance or Covenant Defeasance....... 75
Section 1302. Defeasance and Discharge.......................... 75
Section 1303. Covenant Defeasance............................... 76
Section 1304. Conditions to Defeasance or Covenant Defeasance... 77
Section 1305. Deposited Money and U.S. Government Obligations
to be Held in Trust; Other Miscellaneous
Provisions........................................ 80
Section 1306. Reinstatement..................................... 80
</TABLE>
- --------------------------
NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
v
<PAGE>
INDENTURE, dated as of [__________], 1997, between The Gap, Inc., a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), having its principal office at One Harrison, San
Francisco, California, and Harris Trust Company of California, a state trust
company duly organized and existing under the laws of the State of California,
as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
<PAGE>
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean
such accounting principles as are generally accepted at the date of such
computation; and
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the
-2-
<PAGE>
Company to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Book-Entry Security" means a Security in the form prescribed in
Section 204 evidencing all or part of a series of Securities, issued to the
Depositary for such series or its nominee, and registered in the name of such
Depositary or such nominee.
"Business Day", when used with respect to any Place of Payment, means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized or obligated by law
or executive order to close.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Chief
Executive Officer, its President, its Chief Financial Officer or a Vice
President, and by its Treasurer, an Assistant Treasurer, its Controller, an
Assistant Controller, its Secretary or an Assistant Secretary, and delivered to
the Trustee.
"Corporate Trust Office" means the principal corporate trust office of
the Trustee in Los Angeles, California, at which at any particular time its
corporate trust business shall be administered, which at the date hereof is 601
South Figueroa Street, Ste 4900, Los Angeles, CA 90017 Attn: Corporate Trust
Department.
"Corporation" means a corporation, association, company, joint-stock
company or business trust.
-3-
<PAGE>
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Book-Entry
Securities, the Person designated as Depositary for such series by the Company
pursuant to Section 301, which Person shall be a clearing agency registered
under the Securities Exchange Act of 1934; and if at any time there is more than
one such Person 'Depositary' as used with respect to the Securities of any
series shall mean the Depositary with respect to the Securities of such series.
"Event of Default" has the meaning specified in Section 501.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument, and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively. The term "Indenture" shall also include the forms and terms of
particular series of Securities established as contemplated by Section 301.
"Indexed Security" means any Security which provides that the
principal amount thereof payable at Stated Maturity may be more or less than the
principal face amount thereof at original issuance.
"Interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated
-4-
<PAGE>
Maturity or by declaration of acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Financial
Officer or a Vice President, and by the Treasurer, an Assistant Treasurer, the
Controller, an Assistant Controller, the Secretary or an Assistant Secretary, of
the Company, and delivered to the Trustee. One of the officers signing an
Officers' Certificate given pursuant to Section 1004 shall be the principal
executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
------
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities; provided that, if such
--------
Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to
the Trustee has been made;
(iii) Securities, except to the extent provided in Sections
1302 and 1303, with respect to which the Company has effected defeasance
or covenant defeasance as provided in Article Thirteen; and
-5-
<PAGE>
(iv) Securities which have been paid pursuant to Section 306
or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by a
bona fide purchaser in whose hands such Securities are valid obligations
of the Company;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, or whether
sufficient funds are available for redemption or for any other purpose, and for
the purpose of making the calculations required by section 313 of the Trust
Indenture Act, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be Outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination upon
acceleration of the Maturity thereof pursuant to Section 502, (ii) the principal
amount of a Security denominated in one or more foreign currencies or currency
units shall be the U.S. dollar equivalent, determined in the manner provided as
contemplated by Section 301 on the date of original issuance of such Security,
of the principal amount (or, in the case of an Original Issue Discount Security,
the U.S. dollar equivalent on the date of original issuance of such Security of
the amount determined as provided in (i) above) of such Security, (iii) the
principal amount of any Indexed Security that may be counted in making such
determination or calculation and that shall be deemed to be Outstanding for such
purpose shall be equal to the principal face amount of such Indexed Security at
original issuance, unless otherwise provided with respect to such Security
pursuant to Section 301, and (iv) Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which a Responsible Officer of the Trustee actually knows to be so
owned shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is
-6-
<PAGE>
not the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any
series, means the place or places where the principal of and any premium and
interest on the Securities of that series are payable as specified as
contemplated by Sections 301 and 1002.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 301.
"Responsible Officer", when used with respect to the Trustee, means
any vice president, any assistant secretary, any assistant treasurer, any trust
officer or assistant trust officer, or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
-7-
<PAGE>
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power for the
election of directors of such corporation (irrespective of whether or not at the
time stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned by the Company, or by one or more other
Subsidiaries, or by the Company and one or more other Subsidiaries.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
-------- -------
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"U.S. Government Obligations" has the meaning specified in Section
1304.
-8-
<PAGE>
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
Section 102. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of
an Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion
-9-
<PAGE>
with respect to some matters and one or more other such Persons as to other
matters, and any such Person may certify or give an opinion as to such matters
in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 104. Acts of Holders; Record Dates.
-----------------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
-10-
<PAGE>
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders of Securities of any series entitled to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action, or to
vote on any action, authorized or permitted to be given or taken by Holders of
Securities of such series. If not set by the Company prior to the first
solicitation of a Holder of Securities of such series made by any Person in
respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote shall be the 30th day (or, if
later, the date of the most recent list of Holders required to be provided
pursuant to Section 701) prior to such first solicitation or vote, as the case
may be. With regard to any record date for action to be taken by the Holders of
one or more series of Securities, only the Holders of Securities of such series
on such date (or their duly designated proxies) shall be entitled to give or
take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
-11-
<PAGE>
Section 105. Notices, Etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Trustee Administration, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any
other address previously furnished in writing to the Trustee by the
Company.
Section 106. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Any notice mailed to a Holder in the
manner herein prescribed shall be conclusively deemed to have been received by
such Holder, whether or not such Holder actually receives such notice. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
-12-
<PAGE>
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Section 107. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
Section 108. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 109. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 110. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 111. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
-13-
<PAGE>
Section 112. Governing Law.
-------------
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 113. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date, Stated
Maturity or Maturity of any Security shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of this Indenture or of the
Securities (other than a provision of the Securities of any series which
specifically states that such provision shall apply in lieu of this Section))
payment of interest or principal (and premium, if any) need not be made at such
Place of Payment on such date, but may be made on the next succeeding Business
Day at such Place of Payment with the same force and effect as if made on the
Interest Payment Date, the Redemption Date, or at the Stated Maturity or
Maturity.
ARTICLE TWO
Security Forms
Section 201. Forms Generally.
---------------
The Securities of each series shall be in substantially the form set
forth in this Article, or in such other form as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental hereto,
in each case with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or Depositary therefor or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution of the Securities. If the form of Securities of any series is
established by, or by action taken pursuant to, a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Company Order contemplated by Section 303 for the
authentication and delivery of such Securities.
-14-
<PAGE>
The definitive Securities shall be printed, lithographed or engraved
on steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
Section 202. Form of Face of Security.
------------------------
[insert any legend required by the Internal Revenue Code and the
------------------------------------------- --------------------
regulations thereunder.]
- ------------------------
THE GAP, INC.
............................................
No. . . . . . $. . . . . . .
CUSIP No.______________
The Gap, Inc., a corporation duly organized and existing under the
laws of Delaware (herein called the "Company", which term includes any successor
Person under the Indenture hereinafter referred to), for value received, hereby
promises to pay to
................................., or registered assigns, the principal sum of
........................... Dollars on ........................... [if the
------
Security is to bear interest prior to Maturity, insert --, and to pay interest
- ------------------------------------------------------
thereon from ........... or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually on ............. and
............ in each year, commencing ........., at the rate of .......... % per
annum, until the principal hereof is paid or made available for payment [if
--
applicable, insert -- and (to the extent that the payment of such interest
- ------------------
shall be legally enforceable) at the rate of .... % per annum on any overdue
principal and premium and on any overdue installment of interest]. The interest
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest, which shall be the
.......... or ........ (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or
-15-
<PAGE>
more Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in said Indenture].
[If the Security is not to bear interest prior to Maturity, insert -- The
------------------------------------------------ ----------------
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal of this Security shall bear
interest at the rate of ....% per annum (to the extent that the payment of such
interest shall be legally enforceable), which shall accrue from the date of such
default in payment to the date payment of such principal has been made or duly
provided for. Interest on any overdue principal shall be payable on demand.
Any such interest on any overdue principal that is not so paid on demand shall
bear interest at the rate of ......% per annum (to the extent that the payment
of such interest shall be legally enforceable), which shall accrue from the date
of such demand for payment to the date payment of such interest has been made or
duly provided for, and such interest shall also be payable on demand.]
Payment of the principal of (and premium, if any) and [if applicable,
---------------
insert -- any such] interest on this Security will be made at the office or
- ------
agency of the Company maintained for that purpose in ............., in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts [if applicable, insert -- ;
----------------------
provided, however, that at the option of the Company payment of interest may be
- -------- -------
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or by wire transfer to an account
maintained by the Person entitled thereto as specified in the Security Register,
provided that such Person shall have given the Trustee written wire
instructions.]
[If the Security is payable in a foreign currency, insert -- the
------------------------------------------------- ------
appropriate provision.]
-16-
<PAGE>
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
The Gap, Inc.
By.......................
Attest:
...........................
Section 203. Form of Reverse of Security.
---------------------------
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of [__________], 1997 (herein called the
"Indenture"), between the Company and Harris Trust Company of California, as
Trustee (herein called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered. This Security is one of the series
designated on the face hereof[, limited in aggregate principal amount to
$..........].
[If applicable, insert -- The Securities of this series are subject to
----------------------
redemption upon not less than 30 nor more than 60 days' notice by mail, [if
---
applicable, insert -- (1) on ........... in any year commencing with the
- ------------------
year...... and ending with the year .......... through
-17-
<PAGE>
operation of the sinking fund for this series at a Redemption Price equal to
100% of the principal amount, and (2)] at any time [on or after ..........
19..], as a whole or in part, at the election of the Company, [at Redemption
Prices determined as follows:] [at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [on or before
................, %, and if redeemed] during the 12-month period beginning
--
........ of the years indicated,
Redemption Redemption
Year Price Year Price
- ---- ---------- ---- ----------
and thereafter at a Redemption Price equal to ..........% of the principal
amount,] together in the case of any such redemption [if applicable, insert --
----------------------
(whether through operation of the sinking fund or otherwise)] with accrued
interest to the Redemption Date, but interest installments whose Stated Maturity
is on or prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at the close of
business on the relevant Regular Record Dates or Special Record Dates referred
to on the face hereof, all as provided in the Indenture.]
[If applicable insert -- The Securities of this series are subject
---------------------
to redemption upon not less than 30 nor more than 60 days' notice by mail, (1)
on .......... in any year commencing with the year .... and ending with the year
.... through operation of the sinking fund for this series at the Redemption
Prices for redemption through operation of the sinking fund (expressed as
percentages of the principal amount) set forth in the table below, and (2) at
any time [on or after ........], as a whole or in part, at the election of the
Company, at the Redemption Prices for redemption otherwise than through
operation of the sinking fund (expressed as percentages of the principal amount)
set forth in the table below: If redeemed during the 12-month period beginning
.......... of the years indicated,
-18-
<PAGE>
Redemption Price Redemption Price for
For Redemption Redemption Otherwise
Through Operation Than Through Operation
Year of the Sinking Fund of the Sinking Fund
- ---- ------------------- ----------------------
and thereafter at a Redemption Price equal to ........% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Regular Record Dates or Special Record Dates referred to on the face hereof, all
as provided in the Indenture.]
Notwithstanding the foregoing, the Company may not, prior to
.........., redeem any Securities of this series as contemplated by [Clause (2)
of] the preceding paragraph as a part of, or in anticipation of, any refunding
operation by the application, directly or indirectly, of moneys borrowed having
an interest cost to the Company (calculated in accordance with generally
accepted financial practice) of less than .......% per annum.]
[The sinking fund for this series provides for the redemption on
........ in each year beginning with the year ......... and ending with the year
of .......... [not less than $............ ("mandatory sinking fund") and not
more than] $......... aggregate principal amount of Securities of this series.
Securities of this series acquired or redeemed by the Company otherwise than
through [mandatory] sinking fund payments may be credited against subsequent
[mandatory] sinking fund payments otherwise required to be made [in the inverse
order in which they become due].]
[If the Security is subject to redemption, insert -- In the event of
------------------------------------------------
redemption of this Security in part only, a new Security or Securities of this
series and of like
-19-
<PAGE>
tenor for the unredeemed portion hereof will be issued in the name of the Holder
hereof upon the cancellation hereof.]
[If applicable, insert -- The Indenture contains provisions for
defeasance at any time of [the entire indebtedness of this Security] [or]
[certain restrictive covenants and Events of Default with respect to this
Security] [, in each case] upon compliance with certain conditions set forth in
this Indenture.]
[If the Security is not an Original Issue Discount Security, insert --
-------------------------------------------------- ----------------
If an Event of Default with respect to Securities of this series shall occur and
be continuing, the principal of the Securities of this series may be declared
due and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert -- If
---------------------------------------------- ----------------
an Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to--insert formula for determining the
----------------------------------
amount. Upon payment (i) of the amount of principal so declared due and
- ------
payable and (ii) of interest on any overdue principal and overdue interest (in
each case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and interest, if any, on the Securities of this series shall
terminate.]
[If the Security is an Indexed Security, insert - the appropriate
-----------------------------------------------
provision.]
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such
-20-
<PAGE>
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $....... and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate principal
amount of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue,
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and neither the Company, the Trustee nor any such agent shall be affected by
notice to the contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
Section 204. Additional Provisions Required in
Book-Entry Security.
---------------------------------
Any Book-Entry Security issued hereunder shall, in
addition to the provisions contained in Sections 202 and 203, bear a legend in
substantially the following form:
"This Security is a Book-Entry Security within the meaning of the
Indenture hereinafter referred to and is registered in the name of a Depositary
or a nominee of a Depositary. This Security is exchangeable for Securities
registered in the name of a person other than the Depositary or its nominee only
in the limited circumstances described in the Indenture and may not be
transferred except as a whole by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary."
Section 205. Form of Trustee's Certificate of
Authentication.
--------------------------------
The Trustee's certificate of authentication shall be in substantially
the following form:
Dated: ______________
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
[__________________]
As Trustee
----------
By...........................
Authorized Signatory
--------------------
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<PAGE>
ARTICLE THREE
The Securities
Section 301. Amount Unlimited; Issuable in Series.
------------------------------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued from time to time in one or more series.
There shall be established in or pursuant to a Board Resolution and, subject to
Section 303, set forth, or determined in the manner provided, in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other
series);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 304, 305, 306, 906 or 1107
and except for any Securities which, pursuant to Section 303, are deemed
never to have been authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the series
shall be payable, if other than the Person in whose name that Security
(or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest;
(4) the date or dates on which the principal of and premium, if
any, on the Securities of the series is payable or the method of
determination thereof;
(5) the rate or rates at which the Securities of the series
shall bear interest, if any, or the method of calculating such rate or
rates of interest, the date or dates from which such interest shall
accrue or the method by which such date or dates shall be determined,
the Interest Payment Dates on which any such interest
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<PAGE>
shall be payable and the Regular Record Date for any interest payable on
any Interest Payment Date;
(6) the place or places where the principal of and any premium
and interest on Securities of the series shall be payable;
(7) the period or periods within which, the price or prices at
which, the currency or currencies (including currency units) in which
and the other terms and conditions upon which Securities of the series
may be redeemed, in whole or in part, at the option of the Company;
(8) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or
periods within which, the price or prices at which and the other terms
and conditions upon which Securities of the series shall be redeemed or
purchased, in whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which Securities of the series
shall be issuable;
(10) the currency, currencies or currency units in which payment
of the principal of and any premium and interest on any Securities of
the series shall be payable if other than the currency of the United
States of America and the manner of determining the equivalent thereof
in the currency of the United States of America for purposes of the
definition of "Outstanding" in Section 101;
(11) if the amount of payments of principal of or any premium or
interest on any Securities of the series may be determined with
reference to an index, formula or other method, the index, formula or
other method by which such amounts shall be determined;
(12) if the principal of or any premium or interest on any
Securities of the series is to be payable, at the election of the
Company or a Holder thereof, in one or more currencies or currency units
other than that or those in which the Securities are stated to be
payable, the currency, currencies or currency units in which payment of
the principal of and
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<PAGE>
any premium and interest on Securities of such series as to which such
election is made shall be payable, and the periods within which and the
other terms and conditions upon which such election is to be made;
(13) if other than the principal amount thereof, the portion of
the principal amount of Securities of the series which shall be payable
upon declaration of acceleration of the Maturity thereof pursuant to
Section 502 or the method by which such portion shall be determined;
(14) the application, if any, of Section 1302 or 1303 to the
Securities of any series;
(15) whether the Securities of the series shall be issued in
whole or in part in the form of one or more Book-Entry Securities and,
in such case, the Depositary with respect to such Book-Entry Security or
Securities and the circumstances under which any Book-Entry Security may
be registered for transfer or exchange, or authenticated and delivered,
in the name of a Person other than such Depositary or its nominee, if
other than as set forth in Section 305; and
(16) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted
by Section 901(5)).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 303) set
forth, or determined in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto. All Securities
of any one series need not be issued at the same time and, unless otherwise
provided, a series may be reopened, without the consent of the Holders, for
issuances of additional Securities of such series.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth, or providing the manner for determining, the terms of
the series.
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<PAGE>
Section 302. Denominations.
-------------
The Securities of each series shall be issuable in registered form
without coupons in such denominations as shall be specified as contemplated by
Section 301. In the absence of any such provisions with respect to the
Securities of any series, the Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple thereof.
Section 303. Execution, Authentication, Delivery and
Dating.
---------------------------------------
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Chief Executive Officer, its President, its Chief
Financial Officer or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver or make available for
delivery such Securities; provided, however, that, in the case of Securities of
-------- -------
a series that are not to be originally issued at one time, the Trustee shall
authenticate and deliver or make available for delivery such Securities from
time to time in accordance with such other procedures (including, without
limitation, the receipt by the Trustee of oral or electronic instructions from
the Company or its duly authorized agents, promptly confirmed in writing)
acceptable to the Trustee as may be specified by or pursuant to a Company Order
delivered to the Trustee prior to the time of the first authentication of
Securities of such series. If the form or terms of the Securities of the series
have been established in or pursuant to one or more
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<PAGE>
Board Resolutions as permitted by Sections 201 and 301, in authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
(subject to Section 601) shall be fully protected in relying upon, an Opinion of
Counsel stating,
(a) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 201, that such form
has been established in conformity with the provisions of this
Indenture;
(b) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 301, that such
terms have been established in conformity with the provisions of this
Indenture; and
(c) that such Securities, when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and legally binding obligations of the Company enforceable in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 301 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the time
of authentication of each Security of such series if such documents, with
appropriate modifications to cover such future issuances, are delivered at or
prior to the authentication upon original issuance of the first Security of such
series to be issued.
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<PAGE>
If the Company shall establish pursuant to Section 301 that the
Securities of a series are to be issued in whole or in part in the form of one
or more Book-Entry Securities, then the Company shall execute and the Trustee
shall, in accordance with this Section and the Company Order with respect to
such series, authenticate and deliver or make available for delivery one or more
Securities in such form that (i) shall represent and shall be denominated in an
amount equal to the aggregate principal amount of the Outstanding Securities of
such series to be represented by such Book-Entry Security or Securities, (ii)
shall be registered in the name of the Depositary for such Book-Entry Security
or Securities or the nominee of such Depositary, (iii) shall be delivered by the
Trustee to such Depositary or pursuant to such Depositary's instruction and (iv)
shall bear the legend set forth in Section 204.
Unless otherwise established pursuant to Section 301, each Depositary
designated pursuant to Section 301 for a Book-Entry Security must, at the time
of its designation and at all times while it serves as Depositary, be a clearing
agency registered under the Securities Exchange Act of 1934 and any other
applicable statute or regulation. The Trustee shall have no responsibility to
determine if the Depositary is so registered. Each Depositary shall enter into
an agreement with the Trustee governing the respective duties and rights of such
Depositary and the Trustee with regard to Book-Entry Securities.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 309, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
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<PAGE>
Section 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver or make available for delivery, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities of any series the Company shall execute and the
Trustee shall authenticate and deliver or make available for delivery in
exchange therefor one or more definitive Securities of the same series, of any
authorized denominations and of a like aggregate principal amount and tenor.
Until so exchanged the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of such series and tenor.
Section 305. Registration, Registration of
Transfer and Exchange.
-----------------------------
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
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<PAGE>
Upon surrender for registration of transfer of any Security of any
series at the office or agency in a Place of Payment for that series, the
Company shall execute, and the Trustee shall authenticate and deliver or make
available for delivery, in the name of the designated transferee or transferees,
one or more new Securities of the same series, of any authorized denominations
and of a like aggregate principal amount and tenor.
At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
a like aggregate principal amount and tenor, upon surrender of the Securities to
be exchanged at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver or make available for delivery, the Securities which
the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company, the Security Registrar or
the Trustee) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company, the Security Registrar and the
Trustee duly executed, by the Holder thereof or his attorney duly authorized in
writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange Securities of any series during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities of that series selected for redemption under Section 1103 and ending
at the close of business on the day of such mailing, or (ii) to register the
transfer of
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<PAGE>
or exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part.
Notwithstanding the foregoing, any Book-Entry Security shall be
exchangeable pursuant to this Section 305 for Securities registered in the names
of Persons other than the Depositary for such Security or its nominee only if
(i) such Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for such Book-Entry Security or if at any time such
Depositary ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended, (ii) the Company executes and delivers to the
Trustee a Company Order that such Book-Entry Security shall be so exchangeable
or (iii) there shall have occurred and be continuing an Event of Default with
respect to the Securities. Any Book-Entry Security that is exchangeable
pursuant to the preceding sentence shall be exchangeable for Securities
registered in such names as such Depositary shall direct.
Notwithstanding any other provision in this Indenture, unless and
until it is exchanged in whole or in part for Securities that are not in the
form of a Book-Entry Security, a Book-Entry Security may not be transferred or
exchanged except as a whole by the Depositary with respect to such Book-Entry
Security to a nominee of such Depositary or by a nominee of such Depositary to
such Depositary or another nominee of such Depositary.
Section 306. Mutilated, Destroyed, Lost and Stolen
Securities.
-------------------------------------
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver or make available
for delivery in exchange therefor a new Security of the same series and of like
tenor and principal amount and bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen
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<PAGE>
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 307. Payment of Interest; Interest Rights
Preserved.
------------------------------------
Except as otherwise provided as contemplated by Section 301 with
respect to any series of Securities, interest on any Security which is payable,
and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest at the office or agency maintained for such purpose pursuant
to Section 1002; provided, however, that at the option of the Company, interest
-------- -------
on Securities of any series that bear interest may be paid (i) by check mailed
to the address of the Person entitled thereto as it shall appear on the Security
Register or (ii) by wire transfer to an account maintained by the Person
entitled thereto as specified in the Security Register.
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<PAGE>
Any interest on any Security of any series which is payable, but is
not punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such series (or
their respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security of such series and the date of the
proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed to
be paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder of Securities of
such series at his address as it appears in the Security Register, not
less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so mailed, such Defaulted Interest shall be paid to
the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
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(2) The Company may make payment of any Defaulted Interest on
the Securities of any series in any other lawful manner not inconsistent
with the requirements of any securities exchange on which such
Securities may be listed, and upon such notice as may be required by
such exchange, if, after notice given by the Company to the Trustee of
the proposed payment pursuant to this Clause, such manner of payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 308. Persons Deemed Owners.
---------------------
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and any premium
and (subject to Section 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
Section 309. Cancellation.
------------
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee.
All Securities so delivered and any Securities surrendered directly to the
Trustee for any such purpose shall be promptly cancelled by the Trustee and such
cancellation shall be noted conspicuously on each such Security. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee (or to any
other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. No
Securities shall be authen-
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<PAGE>
ticated in lieu of or in exchange for any Securities cancelled as provided in
this Section, except as expressly permitted by this Indenture. Unless the
Company directs otherwise by a Company Order, all cancelled Securities held by
the Trustee may be destroyed, but the Trustee shall not be obligated to so
destroy such Securities, and, if any such cancelled Security is destroyed, the
Trustee shall furnish to the Company a certificate with respect to such
destruction.
Section 310. Computation of Interest.
-----------------------
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
Section 311. CUSIP Numbers.
-------------
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
--------
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such CUSIP numbers. The Company will promptly
notify the Trustee of any change in the CUSIP numbers.
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of
Indenture.
-----------------------------
This Indenture shall upon Company Request cease to be of further
effect with respect to Securities of any series (except as to any surviving
rights of registration of transfer, exchange or replacement of such Securities
herein expressly provided for), and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture with respect to such Securities, when
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(1) either
(A) all such Securities theretofore authenticated and delivered
(other than (i) such Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section 306
and (ii) such Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as
provided in Section 1003) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the
expense, of the Company
and the Company, in the case of (B)(i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the purpose
an amount in the currency or currencies or currency unit or units in which such
Securities are payable sufficient to pay and discharge the entire indebtedness
on such Securities not theretofore delivered to the Trustee for cancellation,
for principal and any premium and interest to the date of such deposit (in the
case of Securities which have become due and payable) or to the Stated Maturity
or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture with respect to such Securities have been complied
with.
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<PAGE>
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Company to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
Section 402. Application of Trust Money.
--------------------------
Subject to provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee.
ARTICLE FIVE
Remedies
Section 501. Events of Default.
-----------------
"Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security of
that series when it becomes due and payable, and continuance of such
default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if
any, on) any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and
as due by the terms of a Security of that series; or
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(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture with respect to Securities of
that series (other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in this Section specifically
dealt with), and continuance of such default or breach for a period of
60 days after there has been given, by registered or certified mail, to
the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in principal amount of the Outstanding
Securities of that series a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(5) if an event of default as defined in any mortgage, indenture
or instrument under which there may be issued, or by which there may be
secured or evidenced, any indebtedness for money borrowed of the Company
or any Subsidiary, whether such indebtedness now exists or shall
hereafter be created, if (A) such default either (1) results from the
failure to pay the principal of any such indebtedness at its stated
maturity or (2) relates to an obligation other than the obligation to
pay the principal of such indebtedness at its stated maturity and
results in such indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise become due and payable,
(B) the principal amount of such indebtedness, together with the
principal amount of any other such indebtedness in default for failure
to pay principal at stated maturity or the maturity of which has been so
accelerated, aggregates $25,000,000 or more at any one time outstanding
and (C) such indebtedness is not discharged, or such acceleration is not
rescinded or annulled within a period of 10 Business Days after there
has been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25%
in principal amount of Outstanding Securities a written notice
specifying such event of default and requiring the Company to cause such
acceleration to be rescinded or annulled or to cause such indebtedness
to be discharged and stating that such notice is a "Notice of Default"
hereunder; or
(6) the entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company in an
involuntary case or
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proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging
the Company a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company under any applicable Federal or state
law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in
effect for a period of 60 consecutive days; or
(7) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding
to be adjudicated a bankrupt or insolvent, or the consent by it to the
entry of a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law, or
the consent by it to the filing of such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or of any
substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking
of corporate action by the Company in furtherance of any such action; or
(8) any other Event of Default provided with respect to
Securities of that series.
Section 502. Acceleration of Maturity; Rescission
and Annulment.
------------------------------------
If an Event of Default (other than an Event of Default described in
clause 6 or 7 of Section 501) with respect to Securities of any series at the
time Outstanding occurs and is continuing, then in every such case the
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Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
any of the Securities of that series are Original Issue Discount Securities or
Indexed Securities, such portion of the principal amount of such Securities as
may be specified in the terms thereof) of all of the Securities of that series
to be due and payable immediately, by a notice in writing to the Company (and to
the Trustee if given by Holders), and upon any such declaration such principal
amount (or, in the case of Original Issue Discount Securities or Indexed
Securities, such specified amount) shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that
series,
(B) the principal of (and premium, if any, on) any
Securities of that series which have become due otherwise than
by such declaration of acceleration and any interest thereon at
the rate or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate or rates
prescribed therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel;
and
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(2) all Events of Default with respect to Securities of that
series, other than the non-payment of the principal of Securities of
that series which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
If an Event of Default described in clause 6 or 7 of Section 501
occurs, the Outstanding Securities shall ipso facto become immediately due and
payable without need of any declaration or other act on the part of the Trustee
or any Holder.
Section 503. Collection of Indebtedness and Suits
for Enforcement by Trustee.
------------------------------------
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights,
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whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
Section 504. Trustee May File Proofs of Claim.
--------------------------------
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and may be a member of a
creditors' or other similar committee.
Section 505. Trustee May Enforce Claims Without
Possession of Securities.
----------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
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counsel, be for the ratable benefit of the Holders of the Securities in respect
of which such judgment has been recovered.
Section 506. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any premium
or interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607;
SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities in respect
of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal and any premium
and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
Section 507. Limitation on Suits.
-------------------
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities
of that series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs,
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expenses and liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee before or during such 60-day period by the Holders
of a majority in principal amount of the Outstanding Securities of that
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders, or to obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all Holders.
Section 508. Unconditional Right of Holders to
Receive Principal, Premium and Interest.
---------------------------------------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and any premium and (subject to Section 307)
any interest on such Security on the Stated Maturity or Maturities expressed in
such Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
Section 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
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Section 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
Section 512. Control by Holders.
------------------
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that
--------
(1) such direction shall not be in conflict with any rule of law
or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
(3) subject to the provisions of Section 601, the Trustee shall
have the right to decline to follow any such direction if the Trustee in
good faith shall, by a Responsible Officer or Officers of the Trustee,
determine that the proceeding so directed would involve the Trustee in
personal liability.
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Section 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of or any premium or
interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs,
including counsel fees and expenses, against any such party litigant, in the
manner and to the extent provided in the Trust Indenture Act; provided that
--------
neither this Section nor the Trust Indenture Act shall be deemed to authorize
any court to require such an undertaking or to make such an assessment in any
suit instituted by the Company, the Trustee or the Holders of more than 10% of
the aggregate principal amount of the Outstanding Securities of any series.
Section 515. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby
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expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities.
-----------------------------------
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Except during the continuance of an Event of Default,
the Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee. In case an
Event of Default has occurred and is continuing, the Trustee shall exercise its
rights and powers and use the same degree of care as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
Notwithstanding the foregoing, no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it. Whether or not therein expressly
so provided, every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
Section 602. Notice of Defaults.
------------------
If a default occurs hereunder with respect to Securities of any
series, the Trustee shall give the Holders of Securities of such series notice
of such default as and to the extent provided by the Trust Indenture Act;
provided, however, that in the case of any default of the character specified in
- -------- -------
Section 501(4) with respect to Securities of such series, no such notice to
Holders shall be given until at least 30 days after the occurrence thereof. For
the purpose of this Section, the term "default" means any event which is, or
after notice or lapse of time or both would become, an Event of Default with
respect to Securities of such series.
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Section 603. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 601:
(a) the Trustee may conclusively rely and shall be protected
in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company
Order and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders pursuant to this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with
such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document, but the
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Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and,
if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder;
(h) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this
Indenture; and
(i) The Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Responsible Officer of the
Trustee has actual knowledge thereof or unless written notice of
any event which is in fact such a default is received by the
Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Securities and this Indenture.
Section 604. Not Responsible for Recitals or
Issuance of Securities.
-------------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. Neither
the Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Company of Securities or the proceeds thereof.
Section 605. May Hold Securities.
-------------------
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the
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same rights it would have if it were not Trustee, Authenticating Agent, Paying
Agent, Security Registrar or such other agent.
Subject to the provisions of Section 608, the Trustee may become and
act as trustee under other indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding in the same manner as if it were not Trustee.
Section 606. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
Section 607. Compensation and Reimbursement.
------------------------------
The Company agrees
(1) to pay to the Trustee from time to time such compensation as
shall be agreed in writing between the Company and the Trustee for all
services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify each of the Trustee, or any predecessor
Trustee, for, and to hold it harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence or
willful misconduct on its part, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder, including
the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of
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its powers or duties hereunder and the costs and expenses of enforcing
this right of indemnification.
The Trustee shall have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 607, except with respect to funds
held in trust for the benefit of the Holders of particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(6) or Section 501(7), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination of this
Indenture and the resignation or removal of the Trustee.
Section 608. Disqualification; Conflicting
Interests.
-----------------------------
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
Section 609. Corporate Trustee Required;
Eligibility.
---------------------------
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus (or with respect to Harris Trust Company of
California, but not any successor Trustee, the parent holding company of which
has a combined capital and surplus) of at least $50,000,000 and an office (or
with respect to Harris Trust Company of California, but not any successor
Trustee, an affiliate with an office) in the Borough of Manhattan, The City of
New York at which at any particular time the Trustee's corporate trust business
may be administered. If such Person (or parent holding company thereof)
publishes reports of condition at least annually, pursuant to law or to the
requirements of any Federal or state supervising or examining authority, then
for the
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purposes of this Section, the combined capital and surplus of such Person shall
be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
Section 610. Resignation and Removal;
Appointment of Successor.
------------------------
(a) No resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition, at the expense of the
Company, any court of competent jurisdiction for the appointment of a successor
Trustee with respect to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company. If the instrument of acceptance by a successor Trustee required by
Section 611 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of removal, the Trustee being removed may petition, at
the expense of the Company, any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona
fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall
fail to resign after
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written request therefor by the Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by or pursuant to a Board Resolution may
remove the Trustee and appoint a successor Trustee with respect to all
Securities, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee with respect to all Securities and the appointment of a
successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company, by or pursuant to
a Board Resolution, shall promptly appoint a successor Trustee or Trustees with
respect to the Securities of that or those series (it being understood that any
such successor Trustee may be appointed with respect to the Securities of one or
more or all of such series and that at any time there shall be only one Trustee
with respect to the Securities of any particular series) and shall comply with
the applicable requirements of Section 611. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment in accordance with the applicable requirements of Section
611, become the successor Trustee with respect to the Securities of such series
and to that extent supersede the successor Trustee appointed by the Company. If
no successor Trustee with respect to the Securities of any series shall have
been so appointed by the Company or the Holders and accepted appointment in the
manner required by Section 611, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, on
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behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series to all
Holders of Securities of such series in the manner provided in Section 106. Each
notice shall include the name of the successor Trustee with respect to the
Securities of such series and the address of its Corporate Trust Office.
Section 611. Acceptance of Appointment by
Successor.
----------------------------
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all
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the rights, powers, trusts and duties of the retiring Trustee with respect to
the Securities of that or those series as to which the retiring Trustee is not
retiring shall continue to be vested in the retiring Trustee, and (3) shall add
to or change any of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-trustees of the same
trust and that each such Trustee shall be trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustee; and upon the execution and delivery of such supplemental indenture
the resignation or removal of the retiring Trustee shall become effective to the
extent provided therein and each such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates; but, on
request of the Company or any successor Trustee, such retiring Trustee shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder with respect to the Securities of
that or those series to which the appointment of such successor Trustee relates;
provided, however, that to the extent that such property and money is not held
by the Trustee in trust for the benefit of the Holders of particular Securities,
such retiring Trustee shall transfer and deliver to such successor Trustee such
property and money upon payment of its charges hereunder.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) and (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
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Section 612. Merger, Conversion, Consolidation
or Succession to Business.
---------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
Section 613. Preferential Collection of Claims Against
Company.
-----------------------------------------
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
Section 614. Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or Agents with respect
to one or more series of Securities which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series issued upon original
issue and upon exchange, registration of transfer or partial redemption thereof
or pursuant to Section 306, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all
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times be a corporation organized and doing business under the laws of the United
States of America, any State thereof or the District of Columbia, authorized
under such laws to act as Authenticating Agent, having a combined capital and
surplus (or with respect to Harris Trust Company of California or any of its
affiliates only, the parent holding company of which has a combined capital and
surplus) of not less than $50,000,000 and subject to supervision or examination
by Federal or state authority. If such Authenticating Agent (or parent holding
company)publishes reports of condition at least annually, pursuant to law or to
the requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all the
corporate agency or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of
Securities of the series with respect to which such Authenticating Agent will
serve, as their names and addresses appear in the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment
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hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to or in lieu of the Trustee's certificate of authentication, an
alternative certificate of authentication in the following form:
Dated: _______________
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
[__________________],
As Trustee
----------
By........................
As Authenticating Agent
-----------------------
By........................
Authorized Officer
------------------
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee
Names and Addresses of Holders.
------------------------------
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not later than January 15 and July 15 in each
year, a list, in such form as the Trustee may reasonably require, of the
names and
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addresses of the Holders as of the preceding January 1 or July 1, as the
case may be, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list in similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
- ---------
capacity as Security Registrar.
Section 702. Preservation of Information;
Communications to Holders.
----------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of the Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided by
the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of then shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
Section 703. Reports by Trustee.
------------------
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
If required by Section 313(a) of the Trust Indenture Act, the Trustee shall,
within sixty days after each May 1 following the date of the first issuance
deliver to Holders a brief report, dated as of such May 1, which complies with
the provisions of such Section 313(a).
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(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
promptly will notify the Trustee when any Securities are listed on any stock
exchange.
Section 704. Reports by Company.
------------------
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
--------
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be
filed with the Trustee within 15 days after the same is so required to be filed
with the Commission.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
Section 801. Company May Consolidate, Etc., Only
on Certain Terms.
-----------------------------------
The Company shall not consolidate with or merge with or into any other
Person or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, unless:
(1) either the Company shall be the continuing corporation, or
the successor Person or purchaser shall be a corporation, partnership or
trust organized and validly existing under the laws of the United States
of America, any State thereof or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the
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Trustee, in form satisfactory to the Trustee, the due and punctual
payment of the principal of and any premium and interest on all the
Securities and the performance or observance of every covenant of this
Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have occurred and be
continuing; and
(3) if a supplemental indenture is to be executed in connection
with such consolidation, merger, transfer or lease, the Company shall
have delivered to the Trustee (A) an Officers' Certificate and (B) an
Opinion of Counsel attesting to compliance with these provisions.
Section 802. Successor Substituted.
---------------------
Upon any consolidation of the Company with, or merger of the Company
with or into, any other Person or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 801, the successor Person formed by such consolidation or into
which the Company is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor Person shall be relieved of all obligations
and covenants under this Indenture and the Securities.
Section 803. Officers' Certificate and
Opinion of Counsel.
-------------------------
The Trustee, subject to the provisions of Sections 601 and 603, shall
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any such consolidation, merger, conveyance, transfer or lease, and
any such assumption, complies with the provisions of this Article before the
Trustee shall execute any supplemental indenture required pursuant to this
Article.
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ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without
Consent of Holders.
-------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of
the Holders of all or any series of Securities (and if such covenants
are to be for the benefit of less than all series of Securities, stating
that such covenants are expressly being included solely for the benefit
of such series) or to surrender any right or power herein conferred upon
the Company; or
(3) to add any additional Events of Default with respect to all
or any series of Securities; or
(4) to add to or change any of the provisions of this Indenture
to such extent as shall be necessary to permit or facilitate the
issuance of Securities in bearer form, registrable or not registrable as
to principal, and with or without interest coupons, or to permit or
facilitate the issuance of Securities in uncertificated form or in the
form of Book-Entry Securities; or
(5) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, provided that
--------
any such addition, change or elimination (i) shall neither (A) apply to
any Security of any series created prior to the execution of such
supplemental indenture and entitled to the benefit of such provision nor
(B) modify the rights of the Holder of any such Security with respect to
such provision or (ii) shall become effective only when there is no such
Security Outstanding; or
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(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any series
as permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 611(b); or
(9) if allowed, without penalty under applicable laws and
regulations, to permit payment in the United States (including any of
the States thereof and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction of principal,
premium, if any, or interest, if any, on securities in bearer form or
coupons, if any; or
(10) to cure any ambiguity, to correct or supplement any
provision herein which is mistaken or may be inconsistent with any other
provision herein or to make any other provisions with respect to matters
or questions arising under this Indenture, provided that such action
--------
pursuant to this clause (10), other than with respect to a mistaken
provision, shall not adversely affect the interests of the Holders of
Securities of any series in any material respect.
Section 902. Supplemental Indentures with Consent
of Holders.
------------------------------------
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series adversely affected
by such supplemental indenture, by Act of said Holders delivered to the Company
and the Trustee, the Company, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the Holders of Securities of such series under this Indenture; provided,
--------
however, that no such supplemental indenture shall, without the consent of the
- -------
Holder of each Outstanding Security affected thereby,
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(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the
principal of an Original Issue Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof
pursuant to Section 502, or change any Place of Payment where, or the
coin or currency in which, any Security or any premium or interest
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for
any such supplemental indenture, or the consent of whose Holders is
required for any waiver (of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences) provided
for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1008, except to increase any percentage set forth in such
Sections or to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the Holder of each
Outstanding Security affected thereby; provided, however, that this
-------- -------
clause shall not be deemed to require the consent of any Holder with
respect to changes in the references to "the Trustee" and concomitant
changes in this Section and Section 1008, or the deletion of this
proviso, in accordance with the requirements of Sections 611(b) and
901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any
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proposed supplemental indenture, but it shall be sufficient if such Act shall
approve the substance thereof.
Section 903. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
Section 906. Reference in Securities to
Supplemental Indentures.
--------------------------
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
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ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest.
------------------------------------------
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any premium
and interest on the Securities of that series in accordance with the terms of
such Securities and this Indenture.
Section 1002. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Securities of that series and this Indenture
may be served. The Company will give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
-------- -------
shall in any manner relieve the Company of its obligation to maintain an office
or agency in each Place of Payment for Securities of any series for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
Section 1003. Money for Securities Payments to
Be Held in Trust.
--------------------------------
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it
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will, on or before each due date of the principal of or any premium or interest
on any of the Securities of that series, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal
and any premium and interest so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of or any
premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will (i) comply with the provisions of
the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of the
Securities of that series, and upon the written request of the Trustee,
forthwith pay to the Trustee all sums held in trust by such Paying Agent for
payment in respect of the Securities of that series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest on any Security of any series and remaining unclaimed for two years
after such principal, premium or interest has become due and payable shall be
paid to the Company on Company Request, or
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(if then held by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general creditor, look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
-------- -------
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company.
Section 1004. Statement by Officers as to Default.
-----------------------------------
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, one of the signers of which shall be the principal executive
officer, principal financial officer or principal accounting officer of the
Company, stating whether or not to the best knowledge of the signers thereof the
Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
Section 1005. Existence.
---------
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence.
Section 1006. Maintenance of Properties.
-------------------------
The Company will cause all material properties used or useful in the
conduct of its business or the business of any Subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary or appropriate in connection with its business;
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provided, however, that nothing in this Section shall prevent the Company from
- -------- -------
discontinuing the operation or maintenance of, or selling, abandoning or
otherwise disposing of, any of such properties if such discontinuance or
disposal is, in the judgment of the Company, desirable in the conduct of its
business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
Section 1007. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
--------
however, that the Company shall not be required to pay or discharge or cause to
- -------
be paid or discharged (i) any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings or (ii) any such tax, assessment, charge or claim which
the failure to pay or discharge, individually or in the aggregate with all such
other failures, would not have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
Section 1008. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 1005 to 1007, inclusive, with
respect to the Securities of any series if before or after the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Securities of such series shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
term, provision or condition, but no such waiver shall extend to or affect such
term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
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Section 1009. Calculation of Original Issue Discount.
--------------------------------------
If the Trustee is requested or required to send Form 1099 (or any
successor form) to Holders of Original Issue Discount Securities, the Company
shall file with the Trustee promptly at the end of each calendar year (i) a
written notice specifying the amount of original issue discount (including daily
rates and accrual periods) accrued on Outstanding Securities as of the end of
such year and (ii) such other specific information relating to such original
issue discount as may then be relevant under the Internal Revenue Code of 1986,
as amended from time to time.
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article.
------------------------
Securities of any series which are redeemable in whole or in part
before their Stated Maturity shall be redeemable in accordance with their terms
and (except as otherwise specified as contemplated by Section 301 for Securities
of any series) in accordance with this Article.
Section 1102. Election to Redeem: Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities shall be
evidenced by or pursuant to a Board Resolution. In case of any redemption at
the election of the Company of the Securities of any series, the Company shall,
at least 60 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date, of the principal amount of Securities of such series to be
redeemed and, if applicable, of the tenor of the Securities to be redeemed. In
the case of any redemption of Securities prior to the expiration of any
restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction.
Section 1103. Selection by Trustee of Securities
to Be Redeemed.
----------------------------------
If less than all the Securities of any series are to be redeemed
(unless all of the Securities of such series
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and of a specified tenor are to be redeemed), the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities of such series not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption a portion of
the principal amount of any Security of such series, provided that the
unredeemed portion of the principal amount of any Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security. If less than all of the Securities of such
series and of a specified tenor are to be redeemed, the particular Securities to
be redeemed shall be selected not more than 60 days prior to the Redemption Date
by the Trustee, from the Outstanding Securities of such series and specified
tenor not previously called for redemption in accordance with the preceding
sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
Section 1104. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
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<PAGE>
All notices of redemption shall identify the Securities to be redeemed
(including CUSIP numbers) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series are to
be redeemed, the identification (and, in the case of partial redemption of
any Securities, the principal amounts) of the particular Securities to be
redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security, or portion thereof, to be redeemed
and, if applicable, that interest thereon will cease to accrue on and after
said date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
Section 1105. Deposit of Redemption Price.
---------------------------
Prior to 12:00 noon New York City time on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money in the currency or currencies in
which the Securities of such series are payable (except as otherwise specified
pursuant to Section 301 for the Securities of such series) sufficient to pay the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on, all the Securities or portions thereof which
are to be redeemed on that date.
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Section 1106. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that, unless otherwise specified as
-------- -------
contemplated by Section 301, installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
Section 1107. Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver or make available for delivery to the Holder of
such Security without service charge, a new Security or Securities of the same
series and of like tenor, of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
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<PAGE>
ARTICLE TWELVE
Sinking Funds
Section 1201. Applicability of Article.
------------------------
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of a series except as otherwise specified as
contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment", and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "optional
sinking fund payment". If provided for by the terms of Securities of any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 1202. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series.
Section 1202. Satisfaction of Sinking Fund Payments
with Securities.
-------------------------------------
The Company (1) may deliver Outstanding Securities of a series (other
than any previously called for redemption) and (2) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series; provided that such Securities have not been previously so credited.
--------
Such Securities shall be received and credited for such purpose by the Trustee
at the Redemption Price specified in such Securities for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
Section 1203. Redemption of Securities for Sinking Fund.
-----------------------------------------
Not less than 45 days prior to each sinking fund payment date for any
series of Securities, the Company will
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deliver to the Trustee an Officers' Certificate specifying the amount of the
next ensuing sinking fund payment for that series pursuant to the terms of that
series, the portion thereof, if any, which is to be satisfied by payment of cash
and the portion thereof, if any, which is to be satisfied by delivering and
crediting Securities of that series pursuant to Section 1202 and will also
deliver to the Trustee any Securities to be so delivered. Not less than 30 days
before each such sinking fund payment date the Trustee shall select the
Securities to be redeemed upon such sinking fund payment date in the manner
specified in Section 1103 and cause notice of the redemption thereof to be given
in the name of and at the expense of the Company in the manner provided in
Section 1104. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Sections
1106 and 1107.
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
Section 1301. Applicability of Article; Company's Option to
Effect Defeasance or Covenant Defeasance.
--------------------------------------------
If pursuant to Section 301 provision is made for either or both of (a)
defeasance of the Securities of a series under Section 1302 or (b) covenant
defeasance of the Securities of a series under Section 1303, then the provisions
of such Section or Sections, as the case may be, together with the other
provisions of this Article Thirteen, with such modifications thereto as may be
specified pursuant to Section 301 with respect to any Securities, shall be
applicable to the Securities of such series, and the Company may at its option
by Board Resolution, at any time, with respect to the Securities of such series,
elect to have either Section 1302 (if applicable) or Section 1303 (if
applicable) applied to the Outstanding Securities of such series upon compliance
with the conditions set forth below in this Article Thirteen.
Section 1302. Defeasance and Discharge.
------------------------
Upon the Company's exercise of its option to have this Section applied
to any series of Securities the Company shall be deemed to have been discharged
from its obligations with respect to the Outstanding Securities of such series
on and after the date the conditions precedent set forth below are satisfied
(hereinafter, "defeasance"). For this
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<PAGE>
purpose, such defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the Outstanding Securities of
such series which shall thereafter be deemed to be "Outstanding" only for the
purposes of the Sections of this Indenture referred to in clauses (A) and (B) of
this Section, and to have satisfied all its other obligations under such
Securities and this Indenture insofar as such Securities are concerned (and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (A) the rights of Holders of
Outstanding Securities of such series to receive, solely from the trust fund
described in Section 1304 as more fully set forth in such Section, payments of
the principal of (and premium, if any) and interest on such Securities when such
payments are due, (B) the Company's obligations with respect to such Securities
under Sections 305, 306, 1002 and 1003 and such obligations as shall be
ancillary thereto, (C) the rights, powers, trusts, duties, immunities and other
provisions in respect of the Trustee hereunder and (D) this Article Thirteen.
Subject to compliance with this Article Thirteen, the Company may exercise its
option under this Section 1302 notwithstanding the prior exercise of its option
under Section 1303 with respect to the Securities of such series. Following a
defeasance, payment of such Securities may not be accelerated because of an
Event of Default.
Section 1303. Covenant Defeasance.
-------------------
Upon the Company's exercise of its option (if any) to have this
Section applied to any series of Securities the Company shall be released
from its obligations under Section 801 (and any covenant made applicable to such
Securities pursuant to Section 301) and the occurrence of an event specified in
Section 501(4) (with respect to Section 801) (and any other Event of Default
applicable to such Securities that are determined pursuant to Section 301 to be
subject to this provision) shall not be deemed to be an Event of Default with
respect to the Outstanding Securities of such series on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant defeasance"),
and such Securities shall thereafter be deemed not to be "Outstanding" for the
purposes of any direction, waiver, consent or declaration or Act of Holders (and
the consequences of any thereof) in connection with Section 801 (and any other
covenant made applicable to such Security pursuant to Section 301), but shall
continue to be deemed
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<PAGE>
"Outstanding" for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the Outstanding Securities of such
series, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such Section or
such other covenant whether directly or indirectly by reason of any reference
elsewhere herein to any such Section or such other covenant or by reason of any
reference in any such Section or such other covenant to any other provision
herein or in any other document, but the remainder of this Indenture and such
Securities shall be unaffected thereby.
Section 1304. Conditions to Defeasance or Covenant
Defeasance.
-------------------------------------
The following shall be the conditions precedent to application of
either Section 1302 or Section 1303 to the Outstanding Securities of or within
such series:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 609 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities, (A) money in an amount (in such currency,
currencies or currency units in which such Securities are then specified
as payable at Maturity), or (B) U.S. Government Obligations which
through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than one
day before the due date of any payment, money in an amount, or (C) a
combination thereof in an amount, sufficient, without reinvestment, in
the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, (i) the
principal of (and premium, if any) and interest on the Outstanding
Securities of such series on the Maturity of such principal, premium, if
any, or interest and (ii) any mandatory sinking fund payments applicable
to such Securities on the day on which such payments are due and payable
in accordance with the terms of this Indenture and such Securities.
Before such a deposit
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<PAGE>
the Company may make arrangements satisfactory to the Trustee for the
redemption of Securities at a future date or dates in accordance with
Article Eleven, which shall be given effect in applying the foregoing.
For this purpose, "U.S. Government Obligations" means securities that
are (x) direct obligations of the United States of America for the
payment of which its full faith and credit is pledged or (y) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depositary receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended) as custodian with respect to any
such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian
for the account of the holder of such depositary receipt, provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such depositary
receipt.
(2) No Event of Default or event which with notice or lapse of
time or both would become an Event of Default with respect to the
Securities of such series shall have occurred and be continuing (A) on
the date of such deposit or (B) insofar as subsections 501(6) and (7)
are concerned, at any time during the period ending on the 91st day
after the date of such deposit or, if longer, ending on the day
following the expiration of the longest preference period applicable to
the Company in respect of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period).
(3) Such defeasance or covenant defeasance shall not (A) cause
the Trustee for the Securities of such series to have a conflicting
interest as defined in Section 608 or for purposes of the Trust
Indenture Act with respect to any securities of the Company or (B)
result in the trust arising from such deposit to
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<PAGE>
constitute, unless it is qualified as, a regulated investment company
under the Investment Company Act of 1940, as amended.
(4) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which the Company is a
party or by which it is bound.
(5) In the case of an election under Section 1302, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such opinion
shall confirm that, the Holders of the Outstanding Securities of such
series will not recognize income, gain or loss for Federal income tax
purposes as a result of such defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance had not occurred.
(6) In the case of an election under Section 1303, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Securities of such series will not
recognize income, gain or loss for Federal income tax purposes as a
result of such covenant defeasance and will be subject to Federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not occurred.
(7) Such defeasance or covenant defeasance shall be effected in
compliance with any additional terms, conditions or limitations which
may be imposed on the Company in connection therewith pursuant to
Section 301.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section
1302 or the covenant defeasance under Section 1303 (as the case may be)
have been complied with.
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<PAGE>
Section 1305. Deposited Money and U.S. Government
Obligations to be Held in Trust; Other
Miscellaneous Provisions.
--------------------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee or other qualifying trustee (collectively, for purposes of this
Section 1305, the "Trustee") pursuant to Section 1304 in respect of the
Outstanding Securities of such series shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent (but not
including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the money or U.S. Government
Obligations deposited pursuant to Section 1304 or the principal and interest
received in respect thereof.
Anything herein to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon Company Request any money
or U.S. Government Obligations held by it as provided in Section 1304 which in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent defeasance or covenant defeasance.
Section 1306. Reinstatement.
-------------
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 1305 by reason of any order or judgment or any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under the Securities of such series
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article Thirteen until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 1305; provided,
--------
however, that if the Company makes any
- -------
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<PAGE>
payment of principal of (and premium, if any) or interest on any such Security
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money held by the Trustee or the Paying Agent.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
THE GAP, INC.
By.................................
Name:
Title:
HARRIS TRUST COMPANY OF CALIFORNIA
By.................................
Name:
Title:
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<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF [_______] )
On the _______day of [_________], 1997, before me personally came
______________________, to me known, who, being by me duly sworn, did depose and
say that [he/she] is _________________________ of The Gap, Inc., one of the
corporations described in and which executed the foregoing instrument; and that
[he/she] signed [his/her] name thereto by like authority of the Board of
Directors of said corporation.
.....................
Notary Public
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<PAGE>
STATE OF [__________] )
) ss.:
COUNTY OF [_________] )
On the _________ day of [_________], 1997, before me personally came
________________________, to me known, who, being by me duly sworn, did depose
and say that [he/she] is _______________________ of Harris Trust Company of
California, one of the [corporations] described in and which executed the
foregoing instrument; that it was so affixed by authority of the Board of
Directors of said corporation, and that [he/she] signed [his/her] name thereto
by like authority of the Board of Directors of said corporation.
.....................
Notary Public
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<PAGE>
Exhibit 5.1
August 27, 1997
The Gap, Inc.
One Harrison Street
San Francisco, CA 94105
Re: The Gap, Inc.
Registration Statement on Form S-3
At your request, we have examined the Registration Statement on Form S-3
(the "Registration Statement"), in the form to be filed by The Gap, Inc. (the
"Company") with the Securities and Exchange Commission (the "SEC") in connection
with the registration under the Securities Act of 1933, as amended (the "Act"),
of the Company's debt securities (the "Debt Securities"). The Debt Securities
are to be issued under an Indenture (the "Indenture"), the form of which has
been filed as an exhibit to the Registration Statement between the Company and
Harris Trust Company of California, as Trustee (the "Trustee"). The Debt
Securities are to be issued pursuant to an Underwriting Agreement (the
"Underwriting Agreement"), in the form filed as an exhibit to the Registration
Statement. The Debt Securities are to be issued in the form set forth in the
Indenture. The Debt Securities are to be sold from time to time as set forth in
the Registration Statement, the Prospectus (the "Prospectus") and the
supplements of the Prospectus (the "Prospectus Supplements").
We have examined instruments, documents and records which we deemed
relevant and necessary for the basis of our opinion hereinafter expressed. In
such examination, we have assumed the following: (a) the authenticity of
original documents and the genuineness of all signatures; (b) the conformity to
the originals of all documents submitted to us as copies; and (c) the truth,
accuracy, and completeness of the information, representations and warranties
contained in the records, documents, instruments and certificates we have
reviewed.
Based on such examination, we are of the opinion that:
1. When the Indenture has been duly authorized, executed and
delivered by the Company and the Trustee, the issuance of Debt Securities has
been duly authorized by appropriate corporate action and the Debt Securities, in
the form set forth in the Indenture, have been duly completed, executed
authenticated and delivered in accordance with the Indenture and sold pursuant
to the Underwriting Agreement and as described in the Registration Statement,
any amendment thereto, the Prospectus and any Prospectus Supplement relating
thereto, the Debt Securities will be legal, valid and binding obligations of the
Company, entitled to the benefits of such Indenture.
Our opinion that any document is legal, valid and binding is qualified
as to:
(a) limitations imposed by bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance, moratorium or other laws relating to or
affecting the rights of creditors generally; and
<PAGE>
(b) general principals of equity, including without limitation,
concepts of materiality, reasonableness, good faith and fair dealing, and the
possible unavailability of specific performance or injunctive relief, regardless
of whether such enforceability is considered in a proceeding in equity or at
law.
We hereby consent to the filing of this opinion as an exhibit to the
above-referenced Registration Statement and to the use of our name wherever it
appears in the Registration Statement, the Prospectus, the Prospectus
Supplement, and in any amendment or supplement thereto. In giving such consent,
we do not believe that we are "experts" within the meaning of such terms as used
in the Act or the rules and regulations of the SEC issued thereunder with
respect to any part of the Registration Statement, including this opinion as an
exhibit or otherwise.
Very truly yours,
/s/ ORRICK, HERRINGTON & SUTCLIFFE LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP
<PAGE>
EXHIBIT 12.1
THE GAP, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Fiscal Year Ended 26 Weeks Ended
Jan 30, 1993 Jan 29, 1994 Jan 28, 1995 Feb 3, 1996 Feb 1, 1997 August 3, 1996 August 2, 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Before Income Taxes 339,841 424,888 529,322 585,199 748,527 243,576 246,019
Add:
Interest Expense 7,639 7,624 5,795 5,490 5,529 5,276 20
Interest on Rental Expense 118,776 143,447 166,892 195,168 218,403 103,303 116,236
------- ------- ------- ------- ------- ------- -------
Earnings 466,256 575,959 702,009 785,857 972,459 352,155 362,277
======= ======= ======= ======= ======= ======= =======
Interest Expense 7,639 7,624 5,795 5,490 5,529 5,276 20
Capitalized Interest - - - - 8,564 - 6,123
Interest on Rental Expense 118,776 143,447 166,892 195,168 218,403 103,303 116,238
------- ------- ------- ------- ------- ------- -------
Fixed Charges 126,415 151,071 172,687 200,658 232,496 108,579 122,381
======= ======= ======= ======= ======= ======= =======
Ratio of Earnings to
Fixed Charges 3.69 3.81 4.07 3.92 4.18 3.24 2.96
</TABLE>
<PAGE>
EXHIBIT 15.1
August 25, 1997
The Gap, Inc.
One Harrison Street
San Francisco, California 94105
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of The Gap, Inc. and subsidiaries for the periods ended August 2,
1997, August 3, 1996, May 3, 1997, and May 4, 1996, as indicated in our reports
dated August 12, 1997, and May 14, 1997 respectively; because we did not perform
an audit, we expressed no opinion on that information.
We are aware that our reports referred to above, which were included in your
Quarterly Reports on Form 10-Q for the quarters ended August 2, 1997, and May 3,
1997, are being used in this Registration Statement on Form S-3.
We also are aware that the aforementioned reports, pursuant to Rule 436(c) under
the Securities Act of 1933, are not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
Deloitte & Touche LLP
San Francisco, California
<PAGE>
INDEPENDENT AUDITORS' CONSENT
EXHIBIT 23.1
We consent to the incorporation by reference in this Registration Statement of
The Gap, Inc. on Form S-3 of our report dated February 27, 1997, appearing in
the Annual Report on Form 10-K of The Gap, Inc. for the fiscal year ended
February 1, 1997, and to the reference to us under the heading "Experts" in
the Prospectus, which is part of this Registration Statement.
Deloitte & Touche LLP
San Francisco, California
August 25, 1997
<PAGE>
EXHIBIT 25.1
_____________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
_____________________
HARRIS TRUST COMPANY OF CALIFORNIA
(Exact name of trustee as specified in its charter)
California 94-0304530
(State of incorporation (I.R.S. employer
if not a national bank) Identification No.)
601 South Figueroa Street, 49th Floor
Los Angeles, California 90017
(Address of principal executive offices)
Esther Cervantes, Harris Trust Company of
California
601 South Figueroa Street, 49th Floor
Los Angeles, California 90017
(213) 239-0675
(Name, address and telephone number for agent for service)
_____________________
THE GAP, INC.
(Exact name of obligor as specified in its charter)
Delaware 94-1697231
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
One Harrison Street
San Francisco, California 94105
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (415) 952-4400
_____________________
DEBT SECURITIES
(Title of the indenture securities)
<PAGE>
GENERAL
Item 1. General Information.
--------------------
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervisory authority to which it
is subject.
Department of Financial Institutions Federal Reserve Bank of San Francisco
111 Pine Street 101 Market Street
Suite 1100 San Francisco, California 94105
San Francisco, California 94104
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
--------------------------
If the obligor is an affiliate of the Trustee, describe each affiliation.
None.
<PAGE>
Item 16. List of Exhibits.
-----------------
Exhibit T-1A. A copy of the articles of association of Trustee as presently
in effect: Restated Articles of Incorporation and Amendment of
February 9, 1994.
Exhibit T-1A is incorporated herein by reference to S.E.C. File
No. 33-54627 of the Registration Statement of FirstFed
Financial Corp. Exhibit T-1A.
Exhibit T-1B. A copy of the certificate of authority of the Trustee to
commence business, if not contained in the articles of
association: Certificate of Authorization to transact business.
Exhibit T-1B is incorporated herein by reference to S.E.C. File
No. 333-2688 of the Registration Statement of Western Wireless
Corporation Exhibit T-1B.
Exhibit T-1C. A copy of the authorization of the Trustee to exercise
corporate trust powers, if such authorization is not contained
in the documents specified in paragraph (1) and (2) above:
Contained in Exhibits T-1A and T-1B above.
Exhibit T-1D. Copy of the existing bylaws of the Trustee or instruments
corresponding thereto: By-Laws of Harris Trust Company of
California as of April 27, 1995, as presently in effect.
Exhibit T-1D is incorporated herein by reference to S.E.C. File
No. 333-2688 of the Registration Statement of Western Wireless
Corporation Exhibit T-1D.
Exhibit T-1E. A copy of each indenture referred to in Item 4, if obligor is
in default.
Not Applicable.
Exhibit T-1F. The consents of United States institutional trustees required
by Section 321 of the Act: Consent dated as of January, 1994.
Exhibit T-1F is incorporated herein by reference to S.E.C. File
No. 33-69382 of the Registration Statement of Pacific Gulf
Properties, Inc. Exhibit T-1F.
Exhibit T-1G. A copy of the latest report of condition of the Trustee
published pursuant to law or the requirement of its supervising
or examining authority: Trust Company Consolidated Report of
Condition provided to the Department of Financial Institutions
for the period ending June 30, 1997. (COPY ATTACHED)
Exhibit T-1H. A copy of any order pursuant to which the foreign trustee is
authorized to act as sole trustee under the indentures
qualified or to be qualified under the Act.
Not Applicable.
Exhibit T-1I. Foreign trustees are required to file a consent to service of
process on Forms F-X.
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Harris Trust Company of California, a corporation organized and
existing under the laws of California, has duly caused this Statement of
Eligibility and Qualification to the signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Los Angeles, State of California,
on August 27, 1997.
HARRIS TRUST COMPANY OF
CALIFORNIA
By /S/ ESTHER CERVANTES
------------------------------
Esther Cervantes
Assistant Vice President
<PAGE>
TRUST COMPANY CONSOLIDATED REPORT OF CONDITION
- ------------------------------------------------------------------------
Legal Title of Trust Company
HARRIS TRUST COMPANY OF CALIFORNIA
- ------------------------------------------------------------------------
City County State Zip Code
Los Angeles Los Angeles California 90017
- ------------------------------------------------------------------------
At the Close of Business on (Date) State Banking
Department Number
June 30, 1997 642
- ------------------------------------------------------------------------
Name and Title of Person to Whom Area Code & Telephone Number
inquiries may be Directed
Jim Custer, Senior Financial Analyst 312-461-6164
- ------------------------------------------------------------------------
1. Cash and due from............................................ 95 1
----
2. U.S. Treasury securities..................................... 2749 2
----
3. Obligations of other U.S.
Government agencies and corporations........................ 3
----
4. Obligations of States and
political subdivisions...................................... 3657 4
----
5. (a) Other securities......................................... 550 5
----
6. (a) Loans................................................... 6(a)
----
(b) Less: Reserve for possible
loan losses............................................. 6(b)
----
(c) Loans (net)............................................. 0 6(c)
----
7. (a) Bank premises, furniture and
fixtures and other assets
representing bank premises............................. 219 7(a)
----
(b) Capital leases included in
7(a) above............................................. 7(b)
----
8. Real estate owned other than bank
premises.................................................... 8
----
9. Investments in subsidiaries not
consolidated................................................ 9
----
10. Other assets (complete schedule on
reverse).................................................... 1245 10
----
11. TOTAL ASSETS................................................. 8515 11
- ------------------------------------------------------------------------
LIABILITIES
12. Liabilities for borrowed money............................... 12
----
13. Mortgage indebtedness........................................ 13
----
14. Other liabilities............................................ 648 14
----
15. TOTAL LIABILITIES............................................ 648 15
- ------------------------------------------------------------------------
16. Capital notes and debentures................................. 16
- ------------------------------------------------------------------------
SHAREHOLDERS EQUITY
17. Preferred stock.............................................. 17
----
(a) Number shares outstanding................................ 17(a)
----
18. Common stock................................................. 2500 18
----
(a) Number shares authorized................................. 18(a)
----
(b) Number shares outstanding................................ 18(b)
----
19. Surplus...................................................... 2500 19
----
20. TOTAL CONTRIBUTED CAPITAL.................................... 5000 20
----
<PAGE>
21. Retained earnings and other 2867 21
capital reserves...........................................
----
22. TOTAL SHAREHOLDERS EQUITY................................... 7867 22
----
23. TOTAL LIABILITIES AND CAPITAL
ACCOUNTS................................................... 8515 23
----
- ------------------------------------------------------------------------
MEMORANDA
1. Assets deposited with State
Treasurer to qualify for exercise of
fiduciary powers (market value)............................ 250 M1
---
- ------------------------------------------------------------------------
D. CERTIFICATION
The undersigned,
- ------------------------------------------------------------------------
Name Title
Steve Rothbloom President & Chairman
- ------------------------------------------------------------------------
and
- ------------------------------------------------------------------------
Name Title
M. Valoise Douglas V.P. & G.M.
- ------------------------------------------------------------------------
of the above named trust company, each declares, for himself alone and
not for the other:
I have personal knowledge of the matters contained in this report and I
believe that each statement in said report is true.
Each of the undersigned, for himself alone and not for the other,
certified under penalty of perjury that the foregoing is true and
correct.
- ------------------------------------------------------------------------
Executed on: At:
8/12/97 Los Angeles, California
- ------------------------------------------------------------------------
Signature Signature
/S/ STEVE ROTHBLOOM /S/ M. VALOISE DOUGLAS
- ------------------------------------------------------------------------
Form 502 (Rev. 12/95)
SCHEDULE OF OTHER ASSETS
========================================================================
Description Amount
- ------------------------------------------------------------------------
Receivables 734
- ------------------------------------------------------------------------
Goodwill 126
- ------------------------------------------------------------------------
Other Intangibles 281
- ------------------------------------------------------------------------
Deferred Taxes 104
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Total (Same as Item 10) 1245
========================================================================
SCHEDULE OF OTHER LIABILITIES
========================================================================
Description Amount
- ------------------------------------------------------------------------
Payables 317
- ------------------------------------------------------------------------
Accrued Expenses 331
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
Total (Same as Item 14) 648
========================================================================
