SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-8086
GENERAL DATACOMM INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0853856
State or other jurisdiction of (I.R.S. Employer Identification No.)
Middlebury, Connecticut 06762-1299
(Address of principal executive offices (Zip Code)
Registrant's phone number, including area code: (203) 574-1118
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Number of Shares Outstanding
Title of Each Class at June 30, 1997
Common Stock, $.10 par value 19,020,693
Class B Stock, $.10 par value 2,136,933
Total Number of Pages in this Document is 21.
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GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Consolidated Balance Sheets -
June 30, 1997 and September 30, 1996 3
Consolidated Statements of Operations
and Accumulated Deficit - For the Three and
Nine Months Ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows - For the 5
Nine Months Ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis
of Financial Condition and Results of Operations 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 19
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PART I. FINANCIAL INFORMATION
GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, September 30,
In thousands except shares 1997 1996
- -------------------------------------------------------------------------------
ASSETS: (Unaudited)
Current assets:
Cash and cash equivalents $2,405 $26,264
Accounts receivable, less allowance
for doubtful receivables of $1,713
in June and $1,768 in September 30,245 39,828
Inventories 45,382 44,588
Deferred income taxes 2,871 4,457
Other current assets 8,369 7,054
- -------------------------------------------------------------------------------
Total current assets 89,272 122,191
- -------------------------------------------------------------------------------
Property, plant and equipment, net 48,052 48,838
Capitalized software development costs, net 23,500 23,393
Other assets 10,549 10,632
- -------------------------------------------------------------------------------
$171,373 $205,054
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current portion of long-term debt $7,606 $6,533
Accounts payable, trade 14,981 14,917
Accrued payroll and payroll-related costs 7,717 6,592
Deferred income 6,771 7,305
Other current liabilities 17,693 19,211
- -------------------------------------------------------------------------------
Total current liabilities 54,768 54,558
- -------------------------------------------------------------------------------
Long-term debt, less current portion 21,448 22,781
Deferred income taxes 3,455 4,962
Other liabilities 423 567
- -------------------------------------------------------------------------------
Total liabilities 80,094 82,868
- -------------------------------------------------------------------------------
Commitments and contingent liabilities - -
Stockholders' equity:
Preferred stock, par value $1.00 per share,
3,000,000 shares authorized; issued and
outstanding: 800,000 shares of 9% cumulative
convertible exchangeable preferred stock with
a $20 million liquidation preference 800 800
Class B stock, par value $.10 per share,
35,000,000 shares authorized;
issued and outstanding: 2,136,933 in
June and 2,137,443 in September 214 214
Common stock, par value $.10 per share,
35,000,000 shares authorized; issued and
outstanding: 19,440,622 in June and
19,249,987 in September 1,944 1,925
Capital in excess of par value 149,421 148,208
Accumulated deficit (55,885) (23,323)
Cumulative foreign currency translation
adjustment (2,106) (2,510)
Common stock held in treasury, at cost:
419,929 shares in June and 422,429 shares
in September (3,109) (3,128)
- -------------------------------------------------------------------------------
Total stockholders' equity 91,279 122,186
- -------------------------------------------------------------------------------
$171,373 $205,054
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
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GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
ACCUMULATED DEFICIT
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
- -------------------------------------------------------------------------------
In thousands, except per share data 1997 1996 1997 1996
- -------------------------------------------------------------------------------
Revenues:
Net product sales $35,262 $45,332 $123,500 $140,948
Service revenue 10,046 9,541 28,967 29,081
Lease revenue 1,278 1,696 3,933 5,509
- ------------------------------------------------------------------------------
46,586 56,569 156,400 175,538
- ------------------------------------------------------------------------------
Costs and expenses:
Cost of product sales 17,693 22,771 59,702 67,690
Amortization of capitalized
software development costs 3,000 3,000 9,000 8,600
Cost of services 6,519 6,473 20,131 19,731
Cost of lease revenue 152 174 481 670
Selling, general and administrative 21,518 22,308 64,654 65,395
Research and product development 10,582 8,738 30,897 24,258
- -------------------------------------------------------------------------------
59,464 63,464 184,865 186,344
- ------------------------------------------------------------------------------
Operating loss (12,878) (6,895) (28,465) (10,806)
- -------------------------------------------------------------------------------
Other income (expense):
Interest (637) (473) (1,475) (1,360)
Other, net (205) (99) (972) 752
- -------------------------------------------------------------------------------
(842) (572) (2,447) (608)
- -------------------------------------------------------------------------------
Loss before income taxes (13,720) (7,467) (30,912) (11,414)
Income tax provision 100 300 300 900
- -------------------------------------------------------------------------------
Net loss ($13,820) ($7,767) ($31,212) ($12,314)
===============================================================================
Loss per share ($0.67) ($0.37) ($1.55) ($0.60)
===============================================================================
Weighted average number of common and
common equivalent shares outstanding 21,148 20,797 21,063 20,656
===============================================================================
Accumulated deficit at beginning of
period ($41,615)($10,700) ($23,323) ($6,153)
Net loss (13,820) (7,767) (31,212) (12,314)
Payment of preferred stock dividends (450) - (1,350) -
- -------------------------------------------------------------------------------
Accumulated deficit at end of period ($55,885)($18,467) ($55,885) ($18,467)
===============================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
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GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash
and Cash Equivalents
----------------------------
Nine Months Ended
June 30,
----------------------------
In thousands 1997 1996
- -----------------------------------------------------------------------------
Cash flows from operating activities:
Net(loss) ($31,212) ($12,314)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 20,413 18,978
Gain on sale of real estate - (1,000)
Decrease in accounts receivable 8,881 2,829
(Increase) in inventories (1,061) (2,247)
Increase (decrease) in accounts payable
and accrued expenses (460) 7,629
(Increase) in other net current assets (259) (1,175)
(Increase) in other net long-term assets (1,729) (301)
- -------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (5,427) 12,399
- -------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of property, plant, and equipment (8,661) (10,666)
Capitalized software development costs (9,107) (8,586)
Proceeds from sale of real estate - 1,000
- -------------------------------------------------------------------------------
Net cash used in investing activities (17,768) (18,252)
- -------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from notes and mortgages 5,584 4,740
Principal payments on notes and mortgages (5,830) (11,445)
Proceeds from issuing common stock 1,133 2,556
Payment of preferred stock dividends (1,350) -
------------------------------------------------------------------------------
Net cash used in financing activities (463) (4,149)
------------------------------------------------------------------------------
Effect of exchange rates on cash (201) (84)
- -------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (23,859) (10,086)
Cash and cash equivalents at beginning of
period - (1) 26,264 18,443
- -------------------------------------------------------------------------------
Cash and cash equivalents at end of period - (1) $2,405 $8,357
===============================================================================
(1) - The Corporation considers all highly liquid investments purchased with
a maturity of three months or less to be cash equivalents.
The accompanying notes are an integral part of these consolidated financial
statements.
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GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to fairly present the consolidated
financial position of General DataComm Industries, Inc. and subsidiaries (the
"Corporation" or "Company") as of June 30, 1997, the consolidated results of
their operations for the three and nine months ended June 30, 1997 and 1996, and
their cash flows for the nine months ended June 30, 1997 and 1996. Such
adjustments are generally of a normal recurring nature and include adjustments
to certain accruals and asset reserves to appropriate levels.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods
presented. Actual results could differ from those estimates. The markets for the
Company's products are characterized by intense competition, rapid technological
development, and frequent new product introductions, all of which could impact
the future value of the Company's inventory, capitalized software, and certain
other assets.
The consolidated financial statements contained herein should be read in
conjunction with the consolidated financial statements and related notes thereto
filed with Form 10-K for the year ended September 30, 1996.
NOTE 2. INVENTORIES
Inventories consist of (in thousands):
June 30, 1997 September 30, 1996
------------- ------------------
Raw materials $15,783 $16,627
Work-in-process 5,163 6,726
Finished goods 24,436 21,235
------- -------
Total $45,382 $44,588
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GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
NOTE 3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of (in thousands):
June 30, 1997 September 30, 1996
------------- ------------------
Land $ 1,778 $ 1,764
Buildings and improvement 29,740 29,050
Test equipment, fixtures and
field spares 54,788 52,537
Machinery and equipment 55,784 50,482
------- -------
142,090 133,833
Less: accumulated depreciation
and amortization 94,038 84,995
------- -------
$48,052 $48,838
NOTE 4. CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Capitalized software development costs consist of (in thousands):
June 30, 1997 September 30, 1996
------------- ------------------
Original Cost $38,504 $33,998
Less: accumulated amortization 15,004 10,605
------- -------
$23,500 $23,393
NOTE 5. LONG-TERM DEBT
Long-term debt consists of (in thousands):
June 30, 1997 September 30, 1996
------------- ------------------
Notes payable $16,908 $16,421
Mortgages payable 11,883 12,359
Capital lease obligations 263 534
------- -------
29,054 29,314
Less: current portion 7,606 6,533
------- -------
$21,448 $22,781
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GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
Long-Term Debt -- continued
Revolving Credit Facility
- -------------------------
The Company has an amended agreement with the BNY Financial Corporation (as
successor in interest to The Bank of New York Commercial Corporation) whereby
the Corporation has been provided a revolving credit facility in the maximum
amount of $25.0 million, subject to a borrowing base formula. The facility,
which matures in November 1998, provides for a sub-limit of $5.0 million for
letters of credit. Certain assets of the Corporation, including most accounts
receivable and inventories, are pledged as collateral. The amount of borrowing
is predicated on satisfying a borrowing base formula related to levels of
certain accounts receivable and inventories, which may limit available
borrowings to less than $25.0 million. At June 30, 1997, the total amount
available for borrowings and letters of credit was $22.4 million.
The recently amended agreement requires conformity with various financial
covenants including, among others, restricted net loss performance. The
amendment also increases the borrowing rate by 1% and requires the Company to
raise at least $10.0 million from proceeds of an equity offering by September
30, 1997 and an additional $10.0 million before January 1, 1998 on terms
satisfactory to BNY Financial Corporation.
No borrowings were outstanding as of June 30, 1997. There were, however,
$780,000 of letters of credit outstanding as of June 30, 1997. The Company
commenced utilizing the credit facility subsequent to June 30, 1997. Borrowings
outstanding on the credit facility amounted to $7.3 million at August 7, 1997.
NOTE 6. FOREIGN CURRENCY TRANSLATION FOR MEXICAN OPERATIONS
As a result of high inflation in Mexico, the Company was required to change its
method of translating the financial statements of its Mexican subsidiary to
reflect the designation of the U.S. dollar as the functional currency.
Therefore, effective January 1, 1997, non-monetary assets such as inventories
and property, plant and equipment, along with expenses related thereto, are
being translated at historical rates of exchange, and adjustments resulting from
translation are reflected in results of operations. Previously, such amounts
were stated at current rates of exchange, and translation adjustments were
reported as a separate component of stockholders' equity. The impact of this
change was not material to the Company's reported financial results for the
three or nine months ended June 30, 1997.
- 8 -
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GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
NOTE 7. OTHER INCOME (EXPENSE)
Other income (expense) for the quarter and nine months ended June 30, 1997
includes foreign currency exchange losses of $(198,000) and $(907,000),
respectively. The year-to-date exchange losses are principally attributable to
the strengthening U.S. dollar as compared to the French franc and German mark,
and its impact on liabilities of our French and German subsidiaries which are
payable in U.S. dollars. Such amounts compare to exchange losses of $(183,000)
and $(369,000) for the three and nine months ended June 30, 1996, respectively.
Separately, other income for the nine months ended June 30, 1996 includes a $1.0
million gain from a real estate transaction.
NOTE 8. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.128,"EARNINGS PER SHARE"
In February 1997, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS 128" or the
"Statement"). The Company will adopt FAS 128 in the first quarter of fiscal 1998
(quarter to end on December 31, 1997).
The most significant computational change resulting from adoption of the
Statement involves replacing primary EPS with basic EPS, the principal
difference being that common stock equivalents will not be considered in basic
EPS calculations. Since under current accounting standards common stock
equivalents are not factored into EPS calculations for companies reporting net
losses, the Company does not expect the new pronouncement to have a material
impact on reported EPS in the near term.
- 9 -
<PAGE>
GENERAL DATACOMM INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General Summary Discussion
- --------------------------
The Company reported losses for both the quarter and nine months ended June 30,
1997, reflecting the combined impact of reduced product revenue levels and
continued heavy investment in its Asynchronous Transfer Mode ("ATM") and
Advanced Network Access ("Access") product lines and technologies. Year-to-date
total revenues are down $19.1 million, or 10.9%, from one year ago.
Concurrently, research and development spending is up in accordance with plan by
$7.2 million, or 21.8%, on a year-to-date basis. The combined impact of lower
revenues and higher research and development spending account for most of the
increase in reported net losses for the three and nine months ended June 30,
1997, as compared to the corresponding periods one year ago.
Approximately 57% of the Company's research and development spending was
attributable to ATM technology and products in the quarter ended June 30, 1997
(54% on a year-to-date basis). ATM revenues in fiscal 1997 have not achieved
earlier anticipated levels. ATM revenues amounted to $8.3 million and $28.5
million for the three and nine months ended June 30, 1997, as compared to $9.4
million and $33.2 million in the corresponding periods of fiscal 1996,
representing declines of 11.9% and 14.2%, respectively. The revenue shortfall is
discussed under the "Revenues" caption which follows.
The Company's overall order input rate exceeded the shipment rate by $7.1
million during the quarter, resulting in an improved order backlog position
entering the final fiscal quarter.
Total revenues for the third fiscal quarter ended June 30, 1997 were $46.6
million, down $10.0 million, or 17.6%, from the same quarter one year ago.
Year-to-date revenues for the nine months ended June 30, 1997 and 1996 were
$156.4 million and $175.5 million, respectively, down $19.1 million, or 10.9%.
The net loss for the quarter ended June 30, 1997 amounted to $13.8 million, as
compared to a net loss of $7.8 million for the corresponding quarter one year
ago. The net loss for the nine months ended June 30, 1997 and 1996 amounted to
$31.2 million and $12.3 million, respectively.
Regarding cash flows, operating activities consumed $5.4 million in cash for the
nine months ended June 30, 1997. After investing and financing activities, cash
balances were reduced by $23.9 million for the same period to $2.4 million at
June 30, 1997, as compared to $26.3 million at September 30, 1996.
To help support future cash requirements, the Corporation has in place an
amended $25.0 million (maximum value) revolving credit facility, of which $22.4
million was available for borrowings and letters of credit at June 30, 1997. No
borrowings were outstanding on this credit facility at June 30, 1997. There
were, however, $780,000 of letters of credit outstanding at June 30, 1997.
Certain assets of the Corporation, including most accounts receivable and
inventories, are pledged as collateral. The amount of borrowing is predicated on
satisfying a borrowing base formula related to levels of certain accounts
receivable and inventories, which may limit available borrowings to less than
$25.0 million. The borrowing base under the formula tends to decline at interim
points of a quarter (i.e., the borrowing base dropped to a low point of
approximately $16.2 million in the quarter ended June 30, 1997).
- 10 -
<PAGE>
General Summary Discussion - continued
- --------------------------------------
The recently amended agreement requires conformity with various financial
covenants including, among others, restricted net loss performance. The
amendment also increases the borrowing rate by 1% and requires the Company to
raise at least $10.0 million from proceeds of an equity offering by September
30, 1997, and an additional $10.0 million before January 1, 1998 on terms
satisfactory to BNY Financial Corporation.
While no borrowings were outstanding at June 30, 1997, the Company did commence
utilizing the credit facility subsequent to June 30, 1997. Borrowings
outstanding on the credit facility amounted to $7.3 million at August 7, 1997.
Company management recognizes a need to raise additional capital in the near
term to support cash requirements in fiscal 1998. As a result, it is actively
pursuing alternative sources of funding, such as the sale of equity securities,
debentures, and/or assets.
Management also recognizes the need to improve operational performance in
anticipation that revenue growth opportunities will take time to develop. A
managed cost reduction effort has been implemented with the objective of
reducing the Corporation's breakeven point. It is important to note, however,
that significant revenue growth will also be required to achieve profitability.
The cost reduction efforts include restrictions on hiring and reductions in
discretionary and capital spending. Reallocation of resources to prioritized
projects is also under review to maximize the productivity of the Corporation's
existing workforce.
The Company has continued to invest heavily in research and development
activities based on the belief that its ATM and Access products and their
related technologies have the potential to deliver substantially higher
revenues, and ultimately, shareholder value, on a longer term basis.
Results of Operations
- ---------------------
The following table sets forth selected consolidated financial data stated as a
percentage of total revenues (unaudited):
Three months ended Nine months ended
June 30, June 30,
1997 1996 1997 1996
------------------ ----------------
Revenues:
Net product sales 75.7% 80.1% 79.0% 80.3%
Service revenue 21.6 16.9 18.5 16.6
Leasing revenue 2.7 3.0 2.5 3.1
---- ---- ---- ----
100.0 100.0 100.0 100.0
Costs and expenses:
Costs of revenues 52.3 52.0 51.3 50.2
Amortization of capitalized
software development costs 6.4 5.3 5.8 4.9
Selling, general and administrative 46.2 39.5 41.3 37.3
Research and product development 22.7 15.4 19.8 13.8
---- ---- ---- ----
Operating loss (27.6) (12.2) (18.2) (6.2)
---- ---- ---- ----
Net (loss) (29.7)% (13.7)% (20.0)% (7.0)%
==== ==== ==== ====
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Results of Operations - continued
- ---------------------------------
Percentages for the quarter ended June 30, 1997 are affected by the
lower-than-expected product revenue base. Noteworthy observations from the
year-to-date numbers include: service revenues have remained level despite
decreased product revenues and as a result comprise 18.5% of total revenue
(versus 16.6% in fiscal 1996); fiscal 1997 total operating expenses, including
research and development, amount to 61.1% of revenue, as compared to 51.1% for
the nine months ended June 30, 1996; research and product development related
expenses when combined with capitalized software amortization amounted to 25.6%
and 18.7% of revenue for the nine-month periods ended June 30, 1997 and 1996,
respectively, an increase of 6.8%. This increase reflects the Company's
continued significant investment in its ATM and Access product development.
Revenues
- --------
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
Total Revenues $46,586 $56,569 $156,400 $175,538
Percent Change (17.6)% (10.9)%
Quarter: The $10.0 million, or 17.6%, revenue decline is principally
attributable to product revenues with both domestic and international markets
contributing to the decline. From a product line perspective, Access,
Internetworking, and ATM revenues were down $5.8 million (26.1%), $3.4 million
(27.5%) and $1.1 million (11.9%), respectively. Access products are in
transition as older technologies are in decline while newer products are in
acceptance cycles. Internetworking products were affected by a $4.0 million
international order where the schedule for shipment slipped to the following
quarter. The Corporation attributes the lower-than-expected level of its ATM
business to longer sales cycle times required as a result of product complexity
and new technologies involved in ATM systems. Individual ATM orders are also
often larger in size than orders for other products, and the timing of such
orders and shipments can generate large quarter-to-quarter fluctuations.
Separately, the Company's service operations achieved revenue growth of
$505,000, or 5.3%, over the same quarter one year ago. International operations
accounted for all of the Service operation's revenue growth. Geographically,
international revenues accounted for 51% of total consolidated revenues, as
compared to 50% in the corresponding quarter of the previous fiscal year.
Year-to-Date: The year-to-date total revenue decline of $19.1 million, or 10.9%,
is attributable to a $17.4 million reduction in product revenue and a $1.6
million reduction in leasing revenues. Access, Internetworking, and ATM product
revenues were down $9.2 million (14.3%), $4.0 million (10.0%), and $4.7 million
(14.2%) respectively, partially offset with increased licensing revenues of the
Company's V.34 technology. Such licensing revenues amounted to $3.9 million
through the nine months ended June 30, 1997, an increase of $1.2 million, or
43.9% over the prior year. The explanations for the product revenue declines
discussed above for the quarter also apply to the year-to-date numbers. Service
revenue is relatively unchanged from the prior year, with a 10.3% increase in
international service business offsetting a 6.7% decline in domestic service
business. The leasing revenue decline
- 12 -
<PAGE>
Revenues - continued
- --------------------
resulted from an unusually high level of revenue in the prior year, attributable
to lease renewals and sale of off-lease inventory. Geographically, international
revenues accounted for 49% of total consolidated revenues, up from 47% for the
same nine-month period one year ago.
Cost of Revenue and Gross Margin
- --------------------------------
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
Gross margin, before capitalized
software amortization $22,222 $27,151 $76,086 $87,447
Percent of revenue 47.7% 48.0% 48.7% 49.8%
Capitalized software amortization $3,000 $3,000 $9,000 $8,600
Percent of revenue 6.4% 5.3% 5.8% 4.9%
- -------------------------------------------------------------------------------
Gross margin, after capitalized
software amortization $19,222 $24,151 $67,086 $78,847
Percent of revenue 41.3% 42.7% 42.9% 44.9%
Quarter: Gross margin as a percent of revenues (excluding the amortization of
capitalized software development costs) was down 0.3 percentage points from the
same quarter one year ago, representing the net impact of: (1) the absorption of
fixed production costs over a reduced revenue base, partially offset with
improved margins realized on product sales; (2) service margins up 3.0
percentage points reflecting the impact of revenue growth and recently
implemented cost containment measures; and (3) leasing margin deterioration of
1.6 percentage points due to an unusually high revenue level achieved in the
prior fiscal year.
Year-to-Date: Year-to-date gross margins (excluding the amortization of
capitalized software development costs) were down 1.1 points from the prior
year, reflecting the combined impact of a minor reduction in margins realized on
product sold, the absorption of fixed production costs over a reduced revenue
base, and reduced service margins partially offset with an increased level of
high-margin V.34 licensing revenue. The reduced service margins (down 1.6
points) are attributable to the increase in international service business which
relies more heavily on the use of outside service contracts which produce lower
margins.
Separately, amortization of capitalized software development cost amounted to
$3.0 million in the quarters ended June 30, 1997 and 1996, and $9.0 million and
$8.6 million in the nine-month periods ended June 30, 1997 and 1996,
respectively.
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<PAGE>
Selling, General and Administrative Expenses
- --------------------------------------------
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
Selling, General and
Administrative Expenses $21,518 $22,308 $64,654 $65,395
Percent Change (3.5)% - (1.1)% -
As Percent of Revenue 46.2% 39.4% 41.3% 37.3%
Due to cost containment efforts, selling, general, and administrative expenses
were down from the prior year in both the three and nine months ended June 30,
1997. The reduction for this quarter, representing the first quarter of our
recently implemented cost containment program, amounted to $790,000, or 3.5%,
from the same quarter one year ago. However, reduced revenue levels for both the
quarter and nine months ended June 30, 1997 resulted in an increased level of
selling, general, and administrative costs as compared to the prior fiscal year
when measured as a percent of revenue.
Research and Product Development Costs
- --------------------------------------
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
Gross Expenditures $13,582 $11,738 $40,004 $32,844
Percent Change 15.7% - 21.8% -
As Percent of Revenue 29.2% 20.7% 25.6% 18.7%
---------------------------------------------------------------------
Costs capitalized $3,000 $ 3,000 $ 9,107 $ 8,586
As Percent Gross Spend 22.1% 25.6% 22.8% 26.1%
____________________________________________________________________
Net R&D Expense $10,582 $8,738 $30,897 $24,258
Percent Change 21.1% - 27.4% -
As Percent of Revenue 22.7% 15.4% 19.8% 13.8%
---------------------------------------------------------------------
Quarter: The Company continues to invest heavily in research and product
development. Gross research and product development spending, before deduction
for capitalized software development costs, increased to $13.6 million in the
third quarter of fiscal 1997, up $1.8 million or 15.7% from the $11.7 million
spending level in the corresponding quarter one year ago. This spending increase
is attributable to increased headcount (up 35 persons), related support costs,
and an increased utilization of outsourced product development services. Most of
the increase is associated with an ATM product development
- 14 -
<PAGE>
Research and Product Development Costs - continued
- --------------------------------------------------
activity, including development of our Strobos ATM product line. The combination
of a spending increase and a reduced revenue base caused gross research and
development spending to increase to 29.2% of revenue, as compared to 20.7% in
the same quarter one year ago. Capitalized software development costs were $3.0
million in both of the quarters ended June 30, 1997 and 1996.
Year-to-Date: Year-to-date research and development spending follows similar
trends, with gross spending for the nine months ended June 30, 1997 up $7.2
million, or 21.8%, from the corresponding period of fiscal 1996. The causes of
the spending increase are consistent with those discussed above. Capitalized
software development costs for the nine months ended June 30, 1997 were $9.1
million as compared to $8.6 million for the corresponding period of fiscal 1996.
The complexity of the ATM technology has and will continue to demand significant
research and product development investment. To retain an effective pool of
available engineering talent, the Corporation operates research and development
facilities in four locations including the United States (Middlebury,
Connecticut and Boston, Massachusetts), Canada, and the United Kingdom.
Other Income and Expense
- ------------------------
Please reference Note 7 on page 9 for a detailed discussion of other income and
expense.
Income Tax Provisions
- ---------------------
Tax provisions recorded by the Corporation, principally for foreign income and
domestic state taxes, amounted to $100,000 and $300,000 in the quarters ended
June 30, 1997 and 1996, respectively. Year-to-date tax provisions amounted to
$300,000 and $900,000 for fiscal 1997 and 1996, respectively. As noted in the
Corporation's Form 10-K filed for the year ended September 30, 1996, the
Corporation has significant federal net operating loss carryforwards available.
However, based on the Corporation's past financial performance and the
uncertainty of ultimate realization of such carryforwards, no deferred tax asset
(or related deferred tax benefit) has been recorded in the Corporation's
financial statements.
Foreign Currency Risk
- ---------------------
Foreign currency fluctuations did not have a material impact on trends reflected
in the Corporation's financial statements. No individual foreign subsidiary
operation represents a material percentage of consolidated revenue or net worth.
However, if international subsidiary operations (i.e., Canada, Germany, France,
and Mexico) experience strong revenue growth in the future, the likelihood of
foreign currency fluctuations impacting trends reflected in the Corporation's
financial statements could increase, especially if the U.S. dollar continues to
strengthen against the respective currencies. Separately, subsidiaries have some
U.S. dollar denominated liabilities. The impact of foreign currency fluctuations
on such amounts are recorded as a component of "Other Income and Expense" in the
Corporation's statements of operations. Please reference Notes 6 and 7 on pages
8 and 9, respectively, for further discussion.
- 15 -
LIQUIDITY AND CAPITAL RESOURCES
- ------------------------------
The Corporation's cash and cash equivalents amounted to $2.4 million at June 30,
1997 as compared to $26.3 million at September 30, 1996. To help support future
cash requirements, the Corporation has in place an amended $25.0 million
(maximum value) revolving credit facility, of which $22.4 million was available
for borrowings and letters of credit at June 30, 1997. No borrowings were
outstanding on this credit facility at June 30, 1997. There were, however,
$780,000 of letters of credit outstanding at June 30, 1997. Certain assets of
the Corporation, including most accounts receivable and inventories, are pledged
as collateral. The amount of borrowing is predicated on satisfying a borrowing
base formula related to levels of certain accounts receivable and inventories,
which may limit available borrowings to less than $25.0 million. The borrowing
base under the formula tends to decline at interim points of a quarter (i.e.,
the borrowing base dropped to a low point of approximately $16.2 million in the
quarter ended June 30, 1997).
The recently amended agreement requires conformity with various financial
covenants including, among others, restricted net loss performance. The
amendment also increases the borrowing rate by 1% and requires the Company to
raise at least $10.0 million from proceeds of an equity offering by September
30, 1997 and an additional $10.0 million before January 1, 1998 on terms
satisfactory to BNY Financial Corporation.
While no borrowings were outstanding at June 30, 1997, the Company did commence
utilizing the credit facility subsequent to June 30, 1997. Borrowings
outstanding on the credit facility amounted to $7.3 million at August 7, 1997.
Company management recognizes a need to raise additional capital in the near
term to support cash requirements in fiscal 1998. As a result, it is actively
pursuing alternative sources of funding such as the sale of equity securities,
debentures, and/or assets. Also, please reference "Certain Risk Factors"
discussed on page 17.
Other bank debt was relatively unchanged from the prior year-end amounting to
$29.1 million and $29.3 million at June 30, 1997 and September 30, 1996,
respectively.
Operating
- ---------
During the nine months ended June 30, 1997, the Corporation's operating
activities generated negative cash flow of $5.4 million, as compared to a
positive cash flow of $12.4 million for the same period one year ago. The $17.8
million variance is principally comprised of a larger reported net loss ($18.9
million), fluctuations in the level of accounts payable and accrued expenses
($8.1 million), a decline in accounts receivable ($6.1 million source of funds)
attributable to reduced sales volume, and an improved days sales outstanding
position. The $8.1 million variance in accounts payable and accrued expenses is
primarily attributable to trade accounts payable, which were at an abnormally
low level as of September 30, 1995. (Inventories showed strong growth in the
first half of fiscal 1995 and were subsequently reduced by $8.8 million in the
six months ended September 30, 1995. The inventory reduction resulted in an
unusually low level of cash expenditure for inventory purchases in early fiscal
1996).
Non-debt working capital excluding cash and cash equivalents decreased $8.2
million to $39.7 million at June 30, 1997 as compared to $47.9 million at
September 30, 1996. The reduction is principally comprised of a $9.6 million
decrease in accounts receivable attributable to a reduced level of product
- 16 -
<PAGE>
shipments in the quarter ended June 30, 1997, and improved collection activities
(days sales outstanding were reduced to 59 days at June 30, 1997 from 61 days at
September 30, 1996).
Investing
- ---------
Net investments in property, plant, and equipment for the nine months ended June
30, 1997 amounted to $8.7 million, as compared to $10.7 million for the
corresponding period of fiscal 1996. The Company continues to closely monitor
all requests for capital spending in an effort to preserve cash and limit such
investment to instances which appear to offer the greatest return on investment.
Separately, investments in capitalized software amounted to $9.1 million and
$8.6 million for the nine months ended June 30, 1997 and 1996, respectively.
Total investments amounted to $17.8 million and $19.3 million in the nine months
ended June 30, 1997 and 1996, respectively. Cash investments in fiscal 1996 were
partially offset with $1.0 million in proceeds from the sale of real estate.
Financing
- ---------
Financing activities during the nine-month period ended June 30, 1997 required
the use of $463,000 in cash representing the net effect of $246,000 in debt
reduction, payment of $1,350,000 in preferred stock dividends, and receipt of
$1.1 million in cash proceeds from the sale of stock through the Company's
Employee Stock Purchase Plan and exercise of stock options.
Please reference the discussion under "Liquidity and Capital Resources" above
and Note 5 on page 7 regarding on-hand cash balances, a $25.0 million revolving
credit facility available to the Company, the terms thereof and amendments
thereto, and forward-looking projections which display a need for the
Corporation to raise additional capital in the near term to effectively support
its cash requirements. The Corporation considers its ability to offer for sale
its common stock, preferred stock, warrants, and/or other assets as viable
alternative sources of financing, some form of which management expects to
execute within the next three months. Execution of such action(s), however,
cannot be assured.
CERTAIN RISK FACTORS
- --------------------
Continuing Losses: The Company has sustained net losses for the past eleven
quarters ending June 30, 1997. There can be no assurance as to when the Company
will achieve net income.
Credit Availability: As noted above, the Company's revolving credit facility
agreement includes provisions whereby covenant compliance including, among
others, restricted net loss performance and obligations to raise additional
capital, is required. If the Company fails to comply with the required covenants
and a waiver or amendment is not obtained, the Company may be unable to borrow
funds under such agreement. In such case the Company will be required to seek
other financing to fund its operations, and there can be no assurance the
Company will be able to obtain such financing or if obtained, on terms deemed
favorable by the Company. Furthermore, in the event the Company does default on
its BNY Financial Corporation obligation, such default may result in payment of
other outstanding indebtedness to be accelerated.
- 17 -
<PAGE>
Risk Factors in Future Operating Results - continued
- -----------------------------------------------------
Volatility of Stock Price: The trading price of the Common Stock has fluctuated
widely in response to quarter-to-quarter operating results, industry conditions,
awards of orders to the Company or its competitors, new product or product
development announcements by the Company or its competitors, and changes in
earnings estimates by analysts. Any shortfall in revenue or earnings from
expected levels could have an immediate and significant adverse effect on the
trading price of the Company's Common Stock in any given period.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Portions of the foregoing discussion include descriptions of the Company's
expectations regarding future trends affecting its business. The forward-looking
statements made in this document, as well as all other forward-looking
statements or information provided by the Company or its employees, whether
written or oral, are made in reliance upon the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements and
future results are subject to, and should be considered in light of risks,
uncertainties, and other factors which may affect future results including, but
not limited to: competition, rapid changing technology, regulatory requirements,
and uncertainties of international trade.
- 18 -
<PAGE>
GENERAL DATACOMM INDUSTRIES, INC.
AND SUBSIDIARIES
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Index of Exhibits
4.1 Indenture dated May 1, 1997 covering presently unissued 9%
Convertible Subordinated Debentures due 2006.
11. Calculation of Earnings Per Share for the three- and
nine-month periods ended June 30, 1997 and 1996.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
- 19 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL DATACOMM INDUSTRIES, INC.
(Registrant)
/S/ WILLIAM S. LAWRENCE
--------------------------
William S. Lawrence
Senior Vice President and Principal Financial Officer
Dated: August 14, 1997
- 20 -
GENERAL DATACOMM INDUSTRIES, INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Indenture
Dated as of May 1, 1997
9% Convertible Subordinated Debentures due 2006
<PAGE>
GENERAL DATACOMM INDUSTRIES, INC.
Cross-Reference Sheet Required by Regulation S-K.
Item 601, Exhibits, Instruction 3(b)(4)(iv)
Trust Indenture Section
Act Section Indenture
310(a)(1)................................... 5.03; 8.09
(a)(2).................................. 8.09
(a)(3).................................. Not Applicable
(a)(4).................................. Not Applicable
(b)..................................... 8.08; 8.10
311(a)...................................... 8.13(a)
(b)..................................... 8.13(b)
312(a)...................................... 6.01; 6.02(a)
(b)..................................... 6.02(b)
(c)..................................... 6.02(c)
313(a)...................................... 6.04(a)
(b)..................................... 6.04(b)
(c)..................................... 6.04(c)
(d)..................................... 6.04(d)
314(a)...................................... 6.01, 5.03
(b)..................................... Not Applicable
(c)(1).................................. 16.06
(c)(2).................................. 16.06
(c)(3).................................. Not Applicable
(d)..................................... Not Applicable
(e)..................................... 16.06
315(a)...................................... 8.01
(b)..................................... 7.07
(c)..................................... 8.01
(d)..................................... 8.01
(d)(1).................................. 8.01(a)
(d)(2).................................. 8.01(b)
(d)(3).................................. 8.01(c)
(e)..................................... 7.08
316(a)..................................... 7.06
(a)(1)(A)............................... 7.06
(a)(1)(B)............................... 7.06
(a)(2).................................. Not App1icab1e
(b)..................................... 7.04
317(a)(1)................................... 7.02
(a)(2).................................. 7.02
(b)..................................... 5.04
318(a)...................................... 16.08
<PAGE>
TABLE OF CONTENTS (1)
PAGE
PARTIES............................................... l
RECITALS:
Purpose of Indenture......................... l
Form of Debenture............................ l
Compliance with legal requirements...........
Purpose of and consideration of Indenture....
ARTICLE ONE
DEFINITIONS
SECTION 1.01 Certain terms defined; other terms defined in
Trust Indenture Act of 1939 or by reference therein in
Securities Act of 1933, as amended,
to have meanings therein assigned....... 8
Board of Directors...................... 8
Business day............................ 8
Change in Control....................... 8
Closing Price........................... 8
Common Stock............................ 9
Company................................. 9
Conversion Rate; Conversion Price....... 9
Convertible Exchangeable Preferred
Stock.................................. 9
Corporate Trust Office of the Trustee... 9
Date of Conversion...................... 9
Debenture or Debentures................. 10
Debentures Registrar.................... 10
Debentureholder......................... 10
Depositary.............................. 10
Event of Default........................ 10
Execution of Debentures................. 11
Indenture............................... 11
Interest Payment Date................... 11
Interest Payment Record Date............ 11
Market Price............................ 11
Officers' Certificate................... 11
_____________________
(1) This Table of Contents does not constitute part of the Indenture or have any
bearing upon the interpretation of any of its terms or provisions.
<PAGE>
PAGE
Opinion of Counsel...................... 11
Registered Holder....................... 12
Repurchase Date......................... 12
Repurchase Right Notice................. 12
Responsible Officer..................... 12
Senior Indebtedness..................... 12
Senior Indebtedness Default............. 13
Subsidiary.............................. 13
Trading Day............................. 13
Trustee................................. 13
Trust Indenture Act of 1939............. 14
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF DEBENTURES
SECTION 2.01 Amount, Authentication and Delivery
of Debentures....................... 14
SECTION 2.02 Form of Debentures and Trustee's
Certificate......................... 14
SECTION 2.03 Date of Debentures and Denominations. 14
SECTION 2.04 Execution and Authentication of Debentures
and Use of Temporary Debentures..... 15
SECTION 2.05 Exchange, Registration and Transfer of
Debentures.......................... 16
SECTION 2.06 When Company Not Required To Make
Transfers or Exchanges.............. 17
SECTION 2.07 Mutilated, Destroyed, Lost or Stolen
Debentures.......................... 17
SECTION 2.08 Cancellation of Surrendered Debentures .. 18
SECTION 2.09 Debentureholders and Senior
Indebtedness............................ 18
SECTION 2.10 Persons Deemed Owners.................... 19
SECTION 2.11 CUSIP Numbers............................ 19
SECTION 2.12 Global Securities........................ 19
ii
<PAGE>
ARTICLE THREE
REDEMPTION OF DEBENTURES
PAGE
SECTION 3.01 Debentures Redeemable.................... 20
SECTION 3.02 Notice of Redemption..................... 21
SECTION 3.03 Debentures Called for Redemption Due
and Payable............................. 22
SECTION 3.04 Deposit of Redemption Moneys............. 22
SECTION 3.05 Redemption in Part....................... 22
SECTION 3.06 Redemption Following Change in Control... 22
ARTICLE FOUR
CONVERSION OF DEBENTURES
SECTION 4.01 Conversion Privilege and Conversion
Price................................. 24
SECTION 4.02 Manner of Exercise of Conversion
Privilege............................. 25
SECTION 4.03 Fractional Shares...................... 26
SECTION 4.04 Adjustment of Conversion Rate and
Conversion Price...................... 27
SECTION 4.05 Effect of Reclassifications, Consolidations,
Mergers or Sales on Conversion Privilege.. 30
SECTION 4.06 Cancellation of Converted Debentures....... 31
SECTION 4.07 Taxes on Conversion........................ 31
SECTION 4.08 Company to Reserve Stock................... 31
SECTION 4.09 Covenant as to Common Stock................ 31
SECTION 4.10 Notice of Certain Corporate Actions........ 31
SECTION 4.11 Disclaimer of Responsibility of Trustee, Etc.. 32
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.01 Payment of Principal of and
Interest on Debentures.................... 33
SECTION 5.02 Maintenance of Offices or Agencies......... 33
SECTION 5.03 Appointment to Fill Vacancy in Office
of Trustee................................ 34
SECTION 5.04 Appointment of Paying Agent Other
Than Trustee............................. 34
iii
<PAGE>
PAGE
SECTION 5.05 Annual Report to Trustee.................. 34
SECTION 5.06 Covenant Regarding Authorization.......... 35
SECTION 5.07 Delivery of Certain Information........... 35
SECTION 5.08 Payment of Taxes and Other Claims......... 35
ARTICLE SIX
DEBENTUREHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
SECTION 6.01 Covenant to Furnish Information............ 36
SECTION 6.02 Preservation of Information;
Communications to Debentureholders........ 36
SECTION 6.03 Reports by Company......................... 38
SECTION 6.04 Reports by Trustee......................... 38
ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND
DEBENTUREHOLDERS ON EVENT OF DEFAULT
SECTION 7.01 Events of Default Defined; Acceleration
of Maturity............................... 40
SECTION 7.02 Rescission and Annulment................... 42
SECTION 7.03 Collection of Indebtedness and
Suits For Enforcement by Trustee.......... 42
SECTION 7.04 Trustee May File Proof of Claim............ 43
SECTION 7.05 Application of Moneys Collected by
Trustee................................... 43
SECTION 7.06 Limitation on Suits by Holders of
Debentures................................ 44
SECTION 7.07 Delay or Omission in Exercise of
Rights Not Waiver of Default.............. 45
SECTION 7.08 Right of Holders of Majority in
Principal Amount of Debentures
to Direct Trustee and Waive Defaults...... 45
SECTION 7.09 Trustee to Give Notice of Defaults
Known to It, but May Withhold in
Certain Circumstances..................... 46
iv
<PAGE>
PAGE
SECTION 7.10 Requirement of Undertaking to Pay
Costs in Certain Suits under Indenture
or Against Trustee........................ 46
SECTION 7.11 Unconditional Right of Holders to
Receive Principal and Interest and
to Convert................................ 47
SECTION 7.12 Restoration of Rights and Remedies......... 47
SECTION 7.13 Rights and Remedies Cumulative............. 47
SECTION 7.14 Waiver of Stay or Extension Laws........... 47
ARTICLE EIGHT
CONCERNING THE TRUSTEE
SECTION 8.01 Duties of Trustee Prior to and After Event of
Default.................................... 48
SECTION 8.02 Certain Rights of Trustee................... 49
SECTION 8.03 Trustee not Liable for Recitals or Issuance
of Debentures.............................. 50
SECTION 8.04 Trustee or Others May Hold Debentures.. 50
SECTION 8.05 Moneys Held in Trust........................ 51
SECTION 8.06 Compensation, Reimbursement and
Indemnity.................................. 51
SECTION 8.07 Right of Trustee to Rely on Officers'
Certificates............................... 52
SECTION 8.08 Conflicting Interests....................... 52
SECTION 8.09 Notice of Default........................... 52
SECTION 8.10 Requirements for Eligibility of Trustee..... 52
SECTION 8.11 Resignation and Removal of Trustee;
Appointment of Successor................... 53
SECTION 8.12 Acceptance by Successor to Trustee.......... 54
SECTION 8.13 Successor to Trustee by Merger of
Consolidation or Succession to Business.... 54
SECTION 8.14 Authenticating Agents....................... 55
SECTION 8.15 Preferential Collection of Claims Against
Company.................................... 56
v
<PAGE>
ARTICLE NINE
CONCERNING THE DEBENTURES
PAGE
SECTION 9.01 Evidence of Action Taken by Debenture-
holders..................................... 60
SECTION 9.02 Proof of Execution of Instruments and
of Holding of Debentures.................... 61
SECTION 9.03 Registered Holders of Debentures May
be Treated as Owners........................ 61
SECTION 9.04 Debentures Owned by Company Deemed
Not Outstanding............................. 62
SECTION 9.05 Action by Debentureholders Binds Future
Holders..................................... 62
ARTICLE TEN
DEBENTUREHOLDERS' MEETINGS
SECTION 10.01 Purposes for Which Meetings May
Be Called................................... 62
SECTION 10.02 Manner of Calling Meetings................... 63
SECTION 10.03 Call of Meetings by Company or
Certain Holders............................. 63
SECTION 10.04 Persons Entitled to Vote At a Meeting........ 64
SECTION 10.05 Quorum; Action............................... 64
SECTION 10.06 Determination of Voting Rights;
Conduct and Adjournment of Meeting.......... 65
SECTION 10.07 Counting Votes and Recording Action
of Meeting.................................. 65
SECTION 10.08 No Delay..................................... 66
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
SECTION 11.01 Supplemental Indentures Authorized
by Directors................................ 66
SECTION 11.02 Supplemental Indentures with Consent
of Debentureholders......................... 67
SECTION 11.03 Effect of Supplemental Indentures............ 68
SECTION 11.04 Notation on Debentures in
Respect of Supplemental Indentures.......... 68
SECTION 11.05 Trustee May Receive Opinion of Counsel....... 68
vi
<PAGE>
ARTICLE TWELVE
CONSOLIDATION, MERGER AND SALE
PAGE
SECTION 12.01 Company May Consolidate, Etc................ 69
SECTION 12.02 Successor Corporation to be Substituted..... 69
SECTION 12.03 Opinion of Counsel as Evidence.............. 70
ARTICLE THIRTEEN
SUBORDINATION OF DEBENTURES
SECTION 13.01 Agreement to Subordinate.................... 70
SECTION 13.02 Distribution on Dissolution or
Reorganization............................. 70
SECTION 13.03 Payments Permitted; Knowledge of Trustee.... 72
SECTION 13.04 Debentureholders Authorize Trustee to
Subordinate................................ 73
SECTION 13.05 Trustee May Hold Senior Indebtedness........ 73
ARTICLE FOURTEEN
SATISFACTION AND DISCHARGE OF INDENTURE; DEPOSITED MONEYS
SECTION 14.01 Satisfaction and Discharge of Indenture...... 73
SECTION 14.02 Application by Trustee of Funds
Deposited for Payment of Debentures......... 74
SECTION 14.03 Payment of Moneys Held by
Paying Agent................................ 75
SECTION 14.04 Return of Unclaimed Money.................... 75
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND TRUSTEES OR DIRECTORS
SECTION 15.01 Personal Immunity From Liability
of Incorporators, Stockholders, Etc......... 75
vii
<PAGE>
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
PAGE
SECTION 16.01 Successors.................................... 76
SECTION 16.02 Acts by Successor Valid....................... 76
SECTION 16.03 Surrender of Powers by Company................ 76
SECTION 16.04 Notices and Demands on Company
and Trustee ................................. 76
SECTION 16.05 Laws of New York to Govern.................... 76
SECTION 16.06 Officers' Certificates and Opinions
of Counsels; Statements to be
Contained Therein............................ 77
SECTION 16.07 Payments on Non-Business Days................. 77
SECTION 16.08 Provisions Required by Trust Indenture
Act of l939 to Control....................... 78
SECTION 16.09 Effect of Invalidity of Provisions............ 78
SECTION 16.10 Indenture May Be Executed in
Counterparts; Trustee Accepts Trusts......... 78
ACCEPTANCE OF TRUST........................................... 78
TESTIMONIUM................................................... 80
viii
<PAGE>
TRUST INDENTURE
INDENTURE, dated as of the ______day of ______, in the year 1997, between
GENERAL DATACOMM INDUSTRIES, INC., a corporation duly organized and existing
under and by virtue of the laws of the State of Delaware, having its principal
office at 1579 Straits Turnpike, Middlebury, CT 06762-1299, (hereinafter called
the "Company"), party of the first part, and CONTINENTAL STOCK TRANSFER & TRUST
COMPANY a limited purpose trust company, as Trustee hereunder having its
principal office at 2 Broadway, New York, NY 10004 (hereinafter sometimes called
the "Trustee"), party of the second part.
WHEREAS, the Company is empowered to issue debentures for any of the
objects and purposes of the Company;
WHEREAS, for its lawful corporate purpose, the Company has duly authorized
an issue of debentures designated 9% Convertible Subordinated Debentures due
2006 (hereinafter referred to as the "Debentures"), in an aggregate principal
amount not to exceed Twenty Million Dollars ($20,000,000), to be issued under
and pursuant to the provisions hereof; and
WHEREAS, the definitive Debentures and the Trustee's certificate
of authentication to be borne by the Debentures are to be substantially in the
following forms, respectively:
[Form of Debenture]
[Face]
The Following legend (the "Rule 144A Legend") shall appear on
the face of each Restricted Global Security.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF GENERAL DATACOMM
INDUSTRIES, INC. THAT (A) THIS SECURITY MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (I) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN
RULE 144A, IN A TRANSACTION IN ACCORDANCE WITH RULE 144A, (II) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S
(OR ANY SUCCESSOR PROVISION THERETO, AND AS MAY BE HEREAFTER AMENDED
FROM TIME TO TIME) UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("SECURITIES ACT"), OR (III) PURSUANT TO ANY EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 (OR ANY SUCCESSOR PROVISION THERETO,
AND AS MAY BE
<PAGE>
HEREAFTER AMENDED FROM TIME TO TIME) UNDER THE SECURITIES
ACT (IF AVAILABLE), IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES, AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
OF THIS SECURITY FROM IT OF THE RESTRICTIONS REFERRED TO IN (A) ABOVE.
THIS SECURITY, ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION
AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME
TO TIME TO MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR RESALES AND
OTHER TRANSFERS OF THIS SECURITY AND ANY SUCH SHARES OF COMMON STOCK TO
REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE
INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR
TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS
SECURITY AND ANY SUCH SHARES OF COMMON STOCK REPRESENTING THE INTERESTS
HELD BY EACH BENEFICIAL OWNER HEREOF AND THEREOF, SHALL BE DEEMED BY
THE ACCEPTANCE OF THIS SECURITY AND ANY SUCH SHARES OF COMMON STOCK TO
HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.
$___________ No.___________
GENERAL DATACOMM INDUSTRIES, INC.
9% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2006
GENERAL DATACOMM INDUSTRIES, INC., a corporation duly organized and
existing under the laws of the State of Delaware (herein referred to as the
"Company"), for value received, hereby promises to pay to _____________ , or
registered assigns, at its office or agency in the Borough of Manhattan, City
and State of New York, the principal sum of ____________ Dollars on September
30, 2006, in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts, and to pay interest thereon at the rate per annum specified in the title
of this Debenture, in like coin or currency, at said office or agency of the
Company in the Borough of Manhattan, City and State of New York, payable
semi-annually on March 3l and September 30, or, if interest to any March 3l or
September 30 has been paid or duly provided for, from the March 3l or September
30, as the case may be, next preceding the date thereof to which interest has
been paid or duly provided for, unless the date thereof is a date to which
interest has been paid or duly provided for, in which case from the date
thereof, in each year until
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payment of said principal sum has been made or duly provided for. The interest
so payable on any March 3l or September 30 will, subject to certain exceptions
provided in the Indenture referred to on the reverse hereof, be paid by check to
the order of the registered holder of record at the close of business on the
March 15 or September 15, as the case may be, next preceding such March 31 or
September 30 whether or not such March 15 or September 15 is a business day.
Notwithstanding the foregoing, if the date hereof is after the fifteenth day of
any March or September as the case may be, and before the following March 31 or
September 30, this Debenture shall bear interest from such March 3l or September
30; provided, however, that if the Company shall default in the payment of
interest due on such March 31 or September 30, then this Debenture shall bear
interest from the next preceding March 3l or September 30 to which interest has
been paid or duly provided for, or, if no interest has been paid or duly
provided for on the Debentures, from date of authentication of this Debenture.
Reference is hereby made to the further provisions of this
Debenture set forth on the reverse hereof, and such further provisions shall for
all purposes have the same effect as though fully set forth at this place.
This Debenture shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have been signed by
the Trustee under the Indenture.
IN WITNESS WHEREOF, GENERAL DATACOMM INDUSTRIES, INC. has caused
this Debenture to be executed in its corporate name with the facsimile signature
of its Chairman of the Board and a facsimile of its corporate seal to be
imprinted hereon, attested with the facsimile signature of its Secretary.
Dated:____________
GENERAL DATACOMM INDUSTRIES, INC.
By:_____________________________
Chairman of the Board
Attest:
_______________________________
Secretary
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[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Debentures described in the within-mentioned
Indenture.
Trustee
By:______________________
Authorized Signature
[Reverse]
GENERAL DATACOMM INDUSTRIES, INC.
9% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2006
This Debenture is one of a duly authorized issue of Debentures of the
Company (herein referred to as the "Debentures"), limited to the aggregate
principal amount of twenty million dollars ($20,000,000), all issued or to be
issued under and pursuant to an indenture dated ____________, (herein referred
to as the "Indenture"), duly executed and delivered by the Company to
Continental Stock Transfer & Trust Company as Trustee (herein referred to as the
"Trustee"), to which Indenture and all indentures supplemental thereto reference
is hereby made for a description of the rights of the holders of the Debentures,
the rights, duties and immunities of the Trustee and the rights and obligations
of the Company thereunder.
The indebtedness evidenced by the Debentures is, to the extent
provided in the Indenture, subordinate and subject in right of payment to the
prior payment in full of all Senior Indebtedness, as defined in the Indenture,
and this Debenture is issued subject to such provisions, and each holder of
Debentures, by accepting the same, agrees to and shall be bound by such
provisions.
In case an Event of Default, as defined in the Indenture, shall
have occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Debentures at the time outstanding, evidenced
as in the Indenture provided, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Indenture or of any indenture supplemental thereto or modifying in any
manner the rights and obligations of the holders of the Debentures and of the
Company; provided, however, that no such
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supplemental indenture shall (i) extend the fixed maturity of any Debentures, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or change the conversion or subordination
provisions in a manner adverse to the holders, without the consent of the holder
of each Debenture so affected, or (ii) reduce the aforesaid percentage of
Debentures, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Debentures
then outstanding. It is also provided in the Indenture that under certain
circumstances the holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may on behalf of the holders of all of the
Debentures waive any past default under the Indenture and its consequences
except a default in the payment of the principal of or interest on any of the
Debentures or a default in conversion of any of the Debentures. Any such consent
or waiver by the registered holder of this Debenture shall be conclusive and
binding upon such holder and upon all future holders and owners of this
Debenture and of any Debenture issued in exchange hereof or in place hereof,
irrespective of whether or not any notation of such consent or waiver is made
upon this Debenture.
No reference herein to the Indenture and no provisions of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Debenture at the time and place and at the rate and in the coin
or currency herein prescribed or to convert this Debenture as provided in the
Indenture.
As provided in the Indenture, the Debentures may be redeemed, at
the option of the Company, as a whole or from time to time in part, at any time
on and after September 30, 1999 and prior to maturity, upon no less than 30 nor
more than 60 days' notice by mail to each holder of the Debentures, at the
general redemption price (expressed in percentage of so much of the principal
amount thereof as is to be redeemed) of 100%; together, in each case, with
accrued interest to the date fixed for redemption; provided, however, that the
Debentures may not be redeemed prior to September 30, 2000 unless the Closing
Price (as defined in the Indenture) of the Common Stock has equaled or exceeded
l50% of the Conversion Price then in effect for at least 20 trading days (as
defined in the Indenture) within 30 consecutive trading days ending within five
trading days before notice of redemption is mailed. The notice of redemption to
the holders of Debentures to be redeemed, in whole or in part which if in part
shall be $25.00 or an integral multiple of $25.00, shall be given by mailing a
notice of such redemption not later than on the thirtieth day, and not earlier
than the sixtieth day, before the date fixed for redemption to such holders at
their last addresses as they shall appear upon the registration books, all as
provided in the Indenture.
The Indenture provides that under the circumstances specified
therein funds may be deposited with the Trustee or with any paying agent in
advance of the maturity or redemption date of any of the Debentures, in trust
for the payment or redemption of such Debentures, and payment of the interest
due or to become due thereon, and that thereupon all obligations of the Company
in respect of such
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Debentures shall cease and be discharged (except any obligations to provide for
the registration of transfer or exchange of Debentures) and subject to the
provisions of Article Fourteen of the Indenture, the holders thereof shall
thereafter be restricted exclusively to such funds for any and all other claims
on their part under the Indenture or with respect to such Debentures.
The Debentures are issuable as registered debentures without
coupons in denominations of $25.00 and any integral multiple of $25.00. Upon
surrender of this Debenture for registration of transfer at the above-mentioned
office or agency of the Company, a new Debenture or Debentures, of authorized
denominations, for a like aggregate principal amount, will be issued to the
transferee as provided, and subject to the limitations, in the Indenture. No
service charge will be made for any such registration of transfer, but the
Company may require payment of a sum sufficient to reimburse it for any tax or
other governmental charge that may be imposed in relation thereto; and this
Debenture may in like manner be exchanged without service charge for one or more
new Debentures of other authorized denominations but of the same aggregate
principal amount; all subject to the terms and conditions set forth in the
Indenture.
Subject to the provisions of the Indenture, the registered
holder hereof is entitled, at his option, at any time prior to maturity (or if
this Debenture is called for redemption prior to maturity, then to and including
but not after the close of business on the date fixed for such redemption unless
the Company shall default in making the redemption payment when due, in which
case the conversion right shall terminate at the close of business on the date
such default is cured and such Debenture is redeemed) to convert the principal
hereof (or, in case this Debenture is of a denomination in excess of $25.00, any
portion hereof which is $25.00 or an integral multiple of $25.00) into fully
paid and nonassessable shares of the Common Stock of the Company, at the initial
conversion rate of 1.8315 shares of the Common Stock of the Company for each
$25.00 principal amount of Debentures, or at the adjusted Conversion Rate in
effect at the date of conversion determined as provided in the Indenture, upon
surrender of this Debenture to the Company at its office or agency maintained
for that purpose in the Borough of Manhattan, the City of New York, accompanied
(if so required by the Company) by instruments of registration of transfer, in
form satisfactory to the Company, duly executed by the registered holder or by
his duly authorized attorney. If as a result of a Change in Control the holder
exercises its option to require the Company to repurchase this Debenture, such
right to convert shall terminate upon receipt by the Company of written notice
of exercise of such option (unless the Company shall default in making the
repurchase payment when due, in which case the conversion right shall terminate
at the close of business on the date such default is cured and such Debenture is
repurchased). No adjustment is to be made on conversion for interest accrued
hereon or for dividends on Common Stock issued on conversion. However,
Debentures surrendered for conversion during the period between the close of
business on any interest payment record date and the close of business on the
corresponding interest payment date (except Debentures called for redemption on
a
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redemption date) must be accompanied by payment of an amount equal to the
interest payment to be received on such interest payment date with respect to
such Debenture presented for conversion. No fractional shares will be issued
upon any conversion but, subject to the conditions provided in the Indenture,
the Company will deliver a check for the market value of the fractional share.
Prior to due presentment for registration of transfer, the
Company, the Trustee, any paying agent and any Debenture registrar may deem and
treat the registered holder hereof as the absolute owner hereof (whether or not
this Debenture shall be overdue and notwithstanding any notice of ownership or
writing hereon made by anyone) for the purpose of receiving payment of or on
account of the principal hereof (and premium, if any) and interest due hereon,
and for all other purposes, and neither the Company nor the Trustee nor any
paying agent nor any Debenture registrar shall be affected by any notice to the
contrary.
No recourse shall be had for the payment of the principal of or
the interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture or any indenture
supplemental thereto, against any incorporator, stockholder, officer, trustee or
director, past, present or future, as such, of the Company or of any predecessor
or successor corporation, whether by virtue of any constitution, statute or rule
of law or equity, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released by every
holder or owner hereof, as more fully provided in the Indenture.
All terms used in this Debenture which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
AND WHEREAS, all acts and things necessary to make the
Debentures, when executed and delivered by the Company and authenticated by the
Trustee and delivered as in this Indenture provided, the valid, binding and
legal obligations of the Company, and to constitute these presents a valid
indenture and agreement, have been done and performed, and the execution and
delivery of this Indenture and the issue hereunder of the Debentures have in all
respects been duly authorized, and the Company, in the exercise of the legal
right and power in it vested, executes and delivers this Indenture and proposes
to make, execute, issue and deliver the Debentures;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the
Debentures are and are to be authenticated, issued and held, and in
consideration of the premises, of the purchase and acceptance of the Debentures
by the holders thereof and of the sum of one dollar to it duly paid by the
Trustee at the execution and delivery of these presents, the receipt whereof is
hereby acknowledged, the Company covenants
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and agrees with the Trustee for the equal and proportionate benefit of the
respective holders from time to time of the Debentures as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Definitions. The terms defined in this Section
1.01 (except as in this Indenture otherwise expressly provided or unless the
context otherwise requires) for all purposes of this Indenture and of any
indenture supplemental hereto shall have the respective meanings specified in
this Section 1.01. All other terms used in this Indenture which are defined in
the Trust Indenture Act of l939 or which are by reference in such act defined in
the Securities Act of l933, as amended (except as herein otherwise expressly
provided or unless the context otherwise requires), shall have the meanings
assigned to such terms in said Trust Indenture Act and in said Securities Act as
in force at the date of the execution of this Indenture.
Board of Directors:
The term "Board of Directors" shall mean the board of directors
of the Company.
Business Day:
The term "Business Day" shall mean any Monday, Tuesday,
Wednesday, Thursday or Friday which is not a day on which banking institutions
in The City of New York are authorized by law, or required by executive order,
to close.
Change in Control:
The term "Change in Control" shall be as defined in Section
3.06.
Closing Price:
The term "Closing Price" shall mean the last sale price as shown
on the Composite Tape of The New York Stock Exchange, Inc., or, in case no such
sales take place on such day, the average of the closing bid and asked prices on
the New York Stock Exchange, or, if the Common Stock is not listed or admitted
to trading on such Exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading, or, if it is not listed
or admitted to trading on any national securities exchange, the average of the
closing bid and asked prices as furnished by any New York Stock Exchange member
firm selected from time to time by the Board of
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Directors of the Company for such purpose (other than the Company or a
subsidiary thereof).
Common Stock:
The term "Common Stock" shall be as defined in Section 4.04(i).
Company:
The term "Company" shall mean General DataComm Industries, Inc. and,
subject to the provisions of Article Twelve, shall also include its successors
and assigns.
Conversion Rate; Conversion Price:
The term "Conversion Rate" shall mean the number of shares of
Common Stock for which each $25.00 principal amount of Debentures may be
converted from time to time as provided in Article Four. The relationship
between the Conversion Rate and the "Conversion Price" shall be such that the
conversion price shall equal $25.00 divided by the Conversion Rate.
Convertible Exchangeable Preferred Stock:
The term "Convertible Exchangeable Preferred Stock" shall mean
the Company's 9% Cumulative Convertible Exchangeable Preferred Stock ($l.00 par
value per share) which is convertible at the option of the holder at any time,
unless previously redeemed, into Common Stock at a rate of 1.8315 shares of
Common Stock for each share of Preferred Stock as such Conversion Rate may be
adjusted from time to time.
Corporate Trust Office of the Trustee:
The term "Corporate Trust Office of the Trustee", or any similar
term, shall mean the principal office of the Trustee at which at any particular
time its corporate trust business shall be administered, which office is, at the
date of the execution of this Indenture, located at 2 Broadway, New York, N.Y.
10004.
Date of Conversion:
The term "Date of Conversion" with respect to any Debenture
shall mean the date on which such Debenture shall be surrendered for conversion
in accordance with the provisions of Article Four.
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Debenture or Debentures:
The term "Debenture" or "Debentures" shall mean any Debenture or
Debentures, as the case may be, authenticated and delivered under this
Indenture.
The term "Outstanding", when used with reference to Debentures,
shall, subject to the provisions of Section 9.04, mean, as of any particular
time, all Debentures authenticated and delivered by the Trustee under this
Indenture, except
(a) Debentures theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Debentures or portions thereof for the payment or redemption of which
moneys in the necessary amount shall have been deposited in trust with the
Trustee, provided that if such Debentures or portions are to be redeemed prior
to the maturity thereof, notice of such redemption shall have been given as in
Article Three provided, or provision satisfactory to the Trustee shall have been
made for giving such notice; and
(c) Debentures in lieu of or in substitution for which other Debentures
shall have been authenticated and delivered pursuant to the terms of Section
2.07.
Debenture Registrar:
The term "Debenture Registrar" shall be as defined in Section
2.05.
Debentureholder:
The terms "Debentureholder", "holder of Debentures", "holders",
or other similar terms, shall mean the registered holder of any Debenture.
Depositary:
The term "Depositary" shall mean with respect to any securities
issued in whole or in part in the form of one or more Global Securities, the
clearing agency that is registered under the Securities Exchange Act of 1934 and
designated to act as Depositary for such securities, as contemplated by Section
2.12 or any successor clearing agency registered under the Securities Exchange
Act of 1934 as contemplated by Section 2.12.
Event of Default:
The term "Event of Default" shall mean any event specified in
Section 7.0l continued for the period of time, if any, therein designated.
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Execution of Debentures:
A Debenture which is signed in accordance with the provisions of
Section 2.04 of this Indenture or which bears the facsimile signatures permitted
by such provisions shall be deemed to be executed, and the time of such
execution shall be deemed to be the time that such signing occurs or such
facsimile signatures are imprinted or otherwise reproduced on such Debenture.
Indenture:
The term "Indenture" shall mean this instrument as originally
executed, or, if amended or supplemented, as so amended or supplemented.
Interest Payment Date:
The term "Interest Payment Date" shall mean each March 3l and
September 30.
Interest Payment Record Date:
The term "Interest Payment Record Date" shall be as defined in
Section 2.03.
Market Price:
The term "Market Price" shall be as defined in Section 4.04(d).
Officers' Certificate:
The term "Officers' Certificate" shall mean a certificate signed
by the Chairman of the Board, the President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the Company. Each such certificate shall include the statements provided for
in Section l6.06.
Opinion of Counsel:
The term "Opinion of Counsel" shall mean an opinion in writing
signed by legal counsel who shall be satisfactory to the Trustee, and who may be
an employee of or counsel to the Company. Each such opinion shall include the
statements provided for in Section l6.06.
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Registered Holder:
The term "Registered Holder" shall mean the person or persons in
whose name or names a particular Debenture shall be registered on the books of
the Company kept for that purpose in accordance with the terms of this
Indenture.
Repurchase Date:
The term "Repurchase Date" shall be as defined in Section 3.06.
Repurchase Right Notice:
The term "Repurchase Right Notice" shall be as defined in
Section 3.06.
Responsible Officer:
The term "Responsible Officer" when used with respect to the
Trustee shall mean the chairman of the board of directors, the president, any
vice president, the secretary, the treasurer, any trust officer, the cashier,
any second or assistant vice president, any assistant trust officer, any
assistant secretary, any assistant treasurer, any assistant cashier, or any
other officer or assistant officer of the Corporate Trust Office of the Trustee
customarily performing functions similar to those performed by the persons who
at the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of his knowledge of and familiarity with the
particular subject.
Senior Indebtedness:
The term "Senior Indebtedness" shall mean the principal of,
premium, if any, and interest on: (a) any and all other indebtedness and
obligations of the Company (including indebtedness of others guaranteed by the
Company) other than the Debentures, whether or not contingent and whether
outstanding on the date of the Indenture or thereafter created, incurred or
assumed, which (i) is for money borrowed; (ii) is evidenced by any bond, note,
debenture or similar instrument; (iii) represents the unpaid balance on the
purchase price of any property, business, or asset of any kind; (iv) is an
obligation of the Company as lessee under any and all leases of property,
equipment or other assets required to be capitalized on the balance sheet of the
lessee under generally accepted accounting principles; (v) is a reimbursement
obligation of the Company with respect to letters of credit; (vi) is an
obligation of the Company with respect to interest swap obligations and foreign
exchange agreements; or (vii) is an obligation of others secured by a lien to
which any of the properties or assets (including, without limitation, leasehold
interests and any other tangible or intangible property rights) of the Company
are subject, whether or not the obligations secured thereby shall have been
assumed by the Company or shall otherwise be the Company's legal liability, and
(b) any deferrals, amendments, renewals, extensions, modifications
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and refundings of any indebtedness or obligations of the types referred to
above; provided that Senior Indebtedness shall not include (i) the Debentures;
(ii) any indebtedness or obligation of the Company which, by its terms or the
terms of the instrument creating or evidencing it, is both subordinated to any
other indebtedness or obligations of the Company and is not superior in right of
payment to the Debentures; (iii) any indebtedness or obligation of the Company
to any of its subsidiaries; and (iv) any indebtedness or obligation which is
both incurred by the Company in connection with the purchase of assets,
materials or services in the ordinary course of business and constitutes an
unsecured trade payable.
Senior Indebtedness Default:
The term "Senior Indebtedness Default" shall mean the occurrence
of any default in the payment of principal, premium, if any, sinking fund, or
interest upon any Senior Indebtedness or any event of default, as defined
therein or in the instrument under which the same is outstanding, permitting the
holder or holders thereof, or its or their designated representatives, or any
trustee under any instrument under which the same is outstanding, to declare
such Senior Indebtedness due and payable prior to the stated maturity thereof.
Subsidiary:
The term "Subsidiary" shall mean any corporation of which more
than 50% of the outstanding stock having ordinary voting power to elect a
majority of the Board 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 any subsidiary
or subsidiaries, or by the Company and one or more subsidiaries.
Trading Day:
The term "Trading Day" shall mean a day on which the New York
Stock Exchange (or any successor to such Exchange) is open for the transaction
of business or, if the Common Stock is not listed or admitted to trading on such
Exchange, a day on which the principal national securities exchange on which the
Common Stock is listed is open for the transaction of business or, if the Common
Stock is not listed or admitted to trading on any national securities exchange,
a day on which any New York Stock Exchange member firm is open for the
transaction of business.
Trustee:
The term "Trustee" shall mean the Trustee under this Indenture
for the time being, whether original or successor.
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Trust Indenture Act of 1939:
The term "Trust Indenture Act of 1939", subject to the
provisions of Sections 11.01 and 11.02, shall mean the Trust Indenture Act of
1939 as in force at the date of execution of this Indenture.
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND
EXCHANGE OF DEBENTURES
SECTION 2.01. Amount, Authentication and Delivery of Debentures.
Debentures, for not to exceed the aggregate principal amount of twenty million
dollars ($20,000,000), except as provided in Section 2.07, may, upon the
execution of this Indenture or from time to time thereafter, be executed by the
Company and delivered to the Trustee for authentication, and the Trustee shall
thereupon authenticate and deliver said Debentures to or upon the written order
of the Company, signed by its Chairman of the Board, President or a Vice
President and by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, without further action by the Company.
SECTION 2.02. Form of Debentures and Trustee's Certificate. The
Debentures and the Trustee's certificate of authentication to be borne by the
Debentures shall be substantially of the tenor and purport as in this Indenture
above recited, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements printed,
lithographed or engraved thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Indenture, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or with
any rule or regulation of any stock exchange on which the Debentures may be
listed, or to conform to usage.
SECTION 2.03. Date of Debentures and Denominations. The
Debentures shall be issuable as registered Debentures without coupons in
denominations of Twenty-Five Dollars ($25.00) and any integral multiple thereof.
Except as provided in the next sentence, the Debentures shall be
dated the date of authentication and shall bear interest, payable semi-annually
on March 31 and September 30, from the date of authentication of the Debentures,
or, if interest to any March 31 or September 30 has been paid or duly provided
for, from the March 31 or September 30, as the case may be, next preceding the
date thereof to which interest has been paid or duly provided for, unless such
date is a date to which interest has been paid or duly provided for, in which
case they shall bear interest from the date thereof. However, so long as there
shall be no existing default in the payment of interest on the Debentures, each
Debenture authenticated after the close of business on the record date
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(as hereinafter defined) for any interest payment date and prior to such
Interest Payment Date shall bear interest from such Interest Payment Date;
provided, however, that if and to the extent the Company shall default in the
payment of the interest due on such Interest Payment Date, then all such
Debentures shall bear interest from March 31 or September 30, as the case may
be, next preceding the date of such Debentures to which interest has been paid
or duly provided for, or if no interest has been paid or duly provided for on
the Debentures, from the date of authentication of the Debentures. The term
"record date" as used with respect to a semi-annual Interest Payment Date shall
mean the March 15 or September 15, as the case may be, next preceding such
Interest Payment Date.
The person in whose name any Debenture is registered at the
close of business on the record date with respect to a semi-annual Interest
Payment Date shall be entitled to receive the interest payable on such Interest
Payment Date notwithstanding the cancellation of such Debenture upon any
registration of transfer or exchange thereof subsequent to such record date and
prior to such Interest Payment Date; provided, however, that if and to the
extent the Company shall default in the payment of the interest due on such
Interest Payment Date, such defaulted interest shall be paid to the persons in
whose names the Debentures are registered on a record date fixed by the Company
for the payment of such defaulted interest by notice given by mail by or on
behalf of the Company to the holders of Debentures not less than 15 days
preceding such record date, which record date shall be not more than 15 days nor
less than 5 business days before the date for such payment.
If any Debenture or portion thereof is called for redemption on
a redemption date after the close of business on the record date next preceding
any March 3l or September 30 and before the opening of business on such March 3l
or September 30 and notice of such redemption has been mailed and funds for such
redemption have been duly provided, interest accrued to the redemption date on
such Debenture or portion so called shall be paid only against surrender of the
Debenture for redemption in accordance with said notice.
SECTION 2.04. Execution and Authentication of Debentures and Use
of Temporary Debentures. The Debentures shall be signed on behalf of the Company
by, or bear the facsimile signature of, its Chairman of the Board, President or
a Vice President, under its corporate seal attested by the manual or facsimile
signature of its Secretary or an Assistant Secretary or the Treasurer. Such
facsimile signatures may be imprinted or otherwise reproduced on the Debenture.
The Company may adopt and use the signature or facsimile signature of any person
who shall be any such officer of the Company at the time of the execution of
Debentures, irrespective of the date as of which the same shall be executed, or
of any person who shall have been any such officer of the Company,
notwithstanding the fact that at the time the Debentures shall be authenticated
and delivered or disposed of, he shall have ceased to be such officer of the
Company. The seal of the Company may be in the form of a facsimile of the seal
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of the Company and may be impressed, affixed, imprinted or otherwise reproduced
on the Debentures.
Only such Debentures as shall bear thereon a certificate of
authentication substantially in the form hereinbefore recited, executed by the
Trustee, shall be entitled to the benefits of this Indenture or be valid or
obligatory for any purpose. Such certificate by the Trustee upon any Debenture
executed by the Company shall be conclusive evidence that the Debenture so
authenticated has been duly authenticated hereunder and that the holder is
entitled to the benefits of this Indenture.
Pending the preparation of definitive Debentures, the Company
may execute, and upon Company orders the Trustee shall authenticate and deliver,
temporary Debentures which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denominations, substantially of the
tenor of the definitive Debentures in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Debentures may determine, as evidenced by their
execution of such Debentures.
If temporary Debentures are issued, the Company will cause
definitive Debentures to be prepared without unreasonable delay. After the
preparation of definitive Debentures, the temporary Debentures shall be
exchangeable for definitive Debentures upon surrender of the temporary
Debentures at any office or agency of the Company designated pursuant to Section
5.02, without charge to the holder. Upon surrender for cancellation of any one
or more temporary Debentures the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Debentures of authorized denominations. Until so exchanged the
temporary Debentures shall in all respects be entitled to the same benefits
under this Indenture as definitive Debentures.
SECTION 2.05. Exchange, Registration and Transfer of Debentures.
The Company shall keep at the Corporate Trust Office or agency to be maintained
by the Company as provided in Section 5.02 a register in which, subject to such
reasonable regulations as it may prescribe, it will register all Debentures and
upon surrender of any Debenture for registration of transfer at such office or
agency, the Company shall execute and register and the Trustee shall
authenticate and deliver in the name of the transferee or transferees a new
Debenture or Debentures for a like aggregate principal amount of Debentures of
any authorized denominations.
Unless and until otherwise determined by the Company by
resolution of its Board of Directors, the register of the Company in the Borough
of Manhattan, City and State of New York, for the purpose of registration,
exchange or registration of transfer of the Debentures shall be kept at the
Corporate Trust Office of the Trustee and, for this purpose, the Trustee is
hereby initially designated "Debenture Registrar".
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The several authorized denominations of Debentures shall be
interchangeable in equal aggregate principal amounts. Debentures to be exchanged
shall be surrendered at the office or agency to be maintained by the Company for
the purpose as provided in Section 5.02 and the Company shall execute and
register the transfer thereof and the Trustee shall authenticate and deliver in
exchange therefor the Debenture or Debentures which the Debentureholder making
the exchange shall be entitled to receive, bearing numbers not contemporaneously
outstanding.
All Debentures presented or surrendered for registration of
transfer, exchange, redemption, conversion or payment shall (if so required by
the Company or the Trustee) be duly endorsed by, or be accompanied by written
instrument or instruments of transfer in form satisfactory to the Company and
the Trustee duly executed by, the registered holder or his attorney duly
authorized in writing.
For any exchange or registration of transfer or conversion or
redemption of Debentures, the Company, at its option, may require the payment of
a sum sufficient to reimburse it for any tax or other governmental charge that
may be imposed in relation thereto. No service charge shall be made for any such
transaction.
SECTION 2.06. When Company Not Required To Make Transfers or
Exchanges. The Company shall not be required to register the transfer of or
exchange Debentures for a period of l5 days next preceding any selection of
Debentures to be redeemed, nor shall it be required to register the transfer of
or exchange any Debentures or portions thereof called or being called for
redemption in whole or in part except, in the case of any Debentures to be
redeemed in part, the portion thereof not so to be redeemed.
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Debentures.
In case any Debenture shall become mutilated or be destroyed, lost or stolen,
the Company in its discretion may execute, and upon its request the Trustee
shall authenticate and deliver, a new Debenture of like tenor, bearing a number
not contemporaneously outstanding and such notation as may be required by the
rules and regulations of any national securities exchange upon which the
Debentures are, or are to be, listed, in exchange and substitution for the
mutilated Debenture or in lieu of and in substitution for the Debenture so
destroyed, lost or stolen. In every case the applicant for a substituted
Debenture shall furnish to the Company and to the Trustee such security or
indemnity or both as may be required by them to save each of them, and, if
requested, any paying agents and Debenture Registrars of the Company, harmless
from all risk, however remote, and the applicant shall also furnish to the
Company and to the Trustee evidence to their satisfaction of the mutilation,
destruction, loss or theft of the applicant's Debenture and of the ownership
thereof. Subject to its receipt of such security or indemnity or both and of
such evidence, the Trustee shall authenticate any such substituted Debenture and
deliver the same upon the written request or authorization of any officer of the
Company. Upon the issue of any substituted Debenture, the Company may require
the payment of a sum sufficient to
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cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses, including counsel fees, of the Company, the
Trustee, and any paying agent or Debenture Registrar, connected therewith. In
case any Debenture which has matured or is about to mature shall become
mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a
substitute Debenture, pay or authorize the payment of the same (without
surrender thereof except in the case of a mutilated Debenture) if the applicant
for such payment shall furnish to the Company and to the Trustee such security
or indemnity as may be required by them to save each of them harmless, and
evidence to the satisfaction of the Company and the Trustee of the mutilation,
destruction, loss or theft of such Debenture and of the ownership thereof.
Every Debenture issued pursuant to the provisions of this
Section in substitution for any Debenture which is alleged to have been
destroyed, lost or stolen shall constitute an additional contractual obligation
of the Company, whether or not the destroyed, lost or stolen Debenture shall be
found at any time, or be enforceable by anyone, and such new Debenture shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Debentures duly issued hereunder. All Debentures shall be held
and owned upon the express condition that the foregoing provisions are exclusive
with respect to the replacement, or payment of mutilated, destroyed, lost or
stolen Debentures and shall preclude any and all other rights or remedies,
notwithstanding any law or statute existing or hereinafter enacted to the
contrary with respect to the replacement, or payment of negotiable instruments
or other securities without their surrender.
SECTION 2.08. Cancellation of Surrendered Debentures. All
Debentures surrendered for the purpose of payment, redemption, conversion,
exchange or registration of transfer shall be delivered to the Trustee and shall
be canceled by it, and no Debentures shall be issued in lieu thereof except as
expressly required or permitted by any of the provisions of this Indenture.
Unless otherwise directed by the Company, the Trustee shall cremate or destroy
by shredding canceled Debentures and deliver a certificate thereof to the
Company. If the Company shall acquire any of the Debentures, such acquisition
shall not operate as a redemption or satisfaction of the indebtedness
represented by such Debentures unless and until the same are delivered to the
Trustee, or surrendered to the Trustee, for cancellation.
SECTION 2.09. Debentureholders and Senior Indebtedness. Nothing
in this Indenture or in the Debentures, expressed or implied, shall give or be
construed to give to any person, firm or corporation, other than the parties
hereto and the holders of the Debentures and, to the extent provided in Article
Thirteen, the holders of Senior Indebtedness, any legal or equitable right,
remedy or claim under or in respect of this Indenture, or under any covenant,
condition or provision herein contained, all of the covenants, conditions and
provisions herein being for the sole benefit of the parties hereto and of the
holders of the Debentures and, to the extent aforesaid, the holders of Senior
Indebtedness.
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SECTION 2.10. Persons Deemed Owners. Prior to due presentment
of Debentures for registration of transfer, the Company or the Trustee and any
agent of the Company or the Trustee may treat the person in whose name such
Debentures are registered as the owner of such Debentures for purpose of
receiving payment of principal of, and (subject to Section 2.05) interest on
such Debentures and for all other purposes whatsoever, whether or not such
Debentures are 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 2.11. CUSIP Numbers. The Company in issuing Debentures
shall use "CUSIP" numbers (if then generally in use) in addition to serial
numbers; if so, the Trustee shall use such "CUSIP" numbers in addition to serial
numbers in notice of redemption and repurchase as a convenience to holders;
provided that any such notice may state that no representation is made as to the
correctness of such CUSIP numbers either as printed on the Debentures or as
contained in any notice of a redemption or repurchase and that reliance may be
placed only on the serial or other identification numbers printed on the
Debentures, and any such redemption or repurchase shall not be affected by any
defect in or omission of such CUSIP numbers.
SECTION 2.12. Global Securities. The Debentures, unless
registered under the Securities Act of 1933, as amended ("Securities Act") shall
be issued initially in the form of a "Restricted Global Security" (or, if the
initial purchasers are Accredited Investors, Definitive Securities that are
Restricted Securities.) The Depositary or its nominee shall be the holder of the
Global Security, and owners of beneficial interests in the Security represented
by the Global Security shall hold such interests pursuant to the procedures and
practices of the Depositary. Any such owner's beneficial ownership of any such
Debentures will be shown only on, and the transfer of such ownership interest
shall be effected only through, records maintained by the Depositary or its
nominee. Transfer of interests in the Global Security shall be subject to the
provisions of Section 2.05. All interests in the Global Security may be subject
to the procedures and requirements of the Depositary.
Unless the Depositary notifies the Company that it is unwilling or
unable to continue as depositary for a Global Security or ceases to be a
"Clearing Agency" registered under the Securities Exchange Act of 1934
("Exchange Act") or announces an intention permanently to cease business or does
in fact do so and a successor Depositary is not appointed by the Company within
90 days of such notice, owners of beneficial interests in a Global Security will
not be entitled to have any portions of such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of
Securities in definitive form and will not be considered the owners or holders
of the Global Security. Any Global Security exchanged upon the occurrence of an
event described in the preceding sentence shall be so exchanged in whole and not
in part. Any Security issued in exchange for a Global Security or any portion
thereof shall be a Global Security, provided that any such Security so issued
that is registered
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in the name of a Person other than the Depositary or a nominee thereof shall not
be a Global Security.
Securities issued in exchange for a Global Security or any portion
thereof pursuant to the preceding paragraph above shall be issued in definitive,
fully registered form, without interest coupons, shall have an aggregate
principal amount equal to that of such Global Security or portion thereof to be
so exchanged, shall be registered in such names and be in such authorized
denominations as the Depositary shall designate and shall bear any legends
required hereunder. Any Global Security to be exchanged in whole shall be
surrendered by the Depositary to the Trustee, as Debenture Registrar. With
regard to any Global Security to be exchanged in part, either such Global
Security shall be so surrendered for exchange or, if the Trustee is acting as
custodian for the Depositary or its nominee with respect to such Global
Security, the principal amount thereof shall be reduced, by an amount equal to
the portion thereof to be so exchanged, by means of an appropriate adjustment
made on the records of the Trustee. Upon any such surrender or adjustment, the
Trustee shall authenticate and deliver the Security issuable on such exchange to
or upon the order of the Depositary or an authorized representative thereof. In
the event of the occurrence of any of the events specified in the preceding
paragraph, the Company will promptly make available to the Trustee a reasonable
supply of certificated Securities in definitive form.
Except as otherwise set forth in the Indenture or a Global Security,
owners of beneficial interests in the Securities evidenced by a Global Security
will not be entitled to any rights under the Indenture with respect to such
Global Security, and the Depositary or its nominee may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the owner
and Holder of such Global Security for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee or any such
agent from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or its nominee or impair, as between
the Depositary or its nominee and such owners of beneficial interests, the
operation of customary practices governing the exercise of the rights of the
Depositary or its nominee as Holder of any Security.
The Depositary shall be a clearing agency registered under the Exchange
Act. Initially, any and all Global Securities issued hereunder shall be issued
to the Depositary, registered in the name of [ ], as the nominee of the
Depositary, and deposited with the Trustee, as custodian for [ ].
ARTICLE THREE
REDEMPTION OF DEBENTURES
SECTION 3.01. Debentures Redeemable. Subject to the provisions
of Article Thirteen hereof, the Company may, at its option, redeem the
Debentures, as a
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whole or from time to time in part, at any time on and after September 30, l999,
and prior to maturity at the general redemption price of l00% of the principal
amount thereof as is to be redeemed, in each case, with accrued interest to the
date fixed for redemption (but if the date fixed for redemption is a semi-annual
interest payment date, the interest installment payable on such date shall,
subject to Section 2.03, be paid to the holder at the close of business on the
preceding record date), provided, however, that the Debentures may not be
redeemed prior to September 30, 2000 unless the Closing Price of the Common
Stock has equaled or exceeded l50% of the conversion price then in effect for at
least 20 trading days within 30 consecutive trading days ending within five
trading days before notice of redemption is mailed.
SECTION 3.02. Notice of Redemption. In case the Company shall
desire to exercise such right to redeem all or any part of the Debentures in
accordance with the right reserved so to do, it shall give notice of such
redemption to holders of the Debentures to be redeemed in whole or in part as
hereinafter in this Section provided.
Notice of redemption to the holders of Debentures to be
redeemed, in whole or in part, shall be given by mailing, first class postage
prepaid, a notice of such redemption not later than on the thirtieth day, and
not earlier than on the sixtieth day, before the date fixed for redemption to
such holders at their last addresses as they shall appear upon the registration
books. Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the registered
holder receives the notice. In any case, failure duly to give notice by mail, or
any defect in the notice to the holder of any Debentures designated for
redemption in whole or in part, shall not affect the validity of the proceedings
for the redemption of any other Debentures.
Each such notice of redemption shall specify the date fixed for
redemption and the redemption price of l00% of the principal amount at which
Debentures are to be redeemed, and shall specify where payment of the redemption
price is to be made, upon presentation and surrender of such Debentures, and
shall state that interest accrued to the date fixed for redemption will be paid
as specified in said notice, and that from and after said date interest thereon
will cease to accrue. Such notice shall also state the current Conversion Price
and the date on which the right to convert such Debentures or portions thereof
into Common Stock will terminate. In case any Debenture is to be redeemed in
part only, the notice shall state the portion of the principal amount thereof to
be redeemed (which shall be $25.00 or an integral multiple of $25.00) and shall
state that on and after the redemption date, upon surrender of such Debenture, a
new Debenture or Debentures in principal amount equal to the unredeemed portion
thereof will be issued.
If less than all the Debentures are to be redeemed, the Company
shall give the Trustee 45 days prior written notice, or such shorter notice as
may be acceptable to the Trustee, in advance of the redemption date as to the
aggregate principal amount of
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Debentures to be redeemed, and thereupon the Trustee shall select the particular
Debentures or parts thereof so to be redeemed by lot according to such method as
the Trustee shall deem proper in its discretion and shall thereafter promptly
notify the Company in writing of the numbers of the Debentures (or portions
thereof) to be redeemed. For the purpose of determining the Debentures to be
redeemed, the Trustee need not treat as outstanding any Debentures authenticated
within l5 days prior to its selection.
SECTION 3.03. Debentures Called for Redemption Due and Payable.
If the giving of notice of redemption shall have been completed as provided in
Section 3.02, the Debentures or portions of Debentures specified in such notice
shall become due and payable on the date and at the place stated in such notice
at the applicable redemption price, together with interest accrued to the date
fixed for redemption, and on and after such date of redemption (unless the
Company shall default in the payment of such Debentures or portions thereof at
the redemption price, together with interest accrued thereon to the date fixed
for redemption) interest on the Debentures or portions of Debentures so called
for redemption shall cease to accrue. On presentation and surrender of such
Debentures on or after said date at said place of payment in said notice
specified, the said Debentures shall be paid and redeemed by the Company at the
applicable redemption price, together with interest accrued thereon to the date
fixed for redemption.
SECTION 3.04. Deposit of Redemption Moneys. Anything in this
Indenture contained to the contrary notwithstanding, if the giving of the notice
of redemption shall have been completed as provided in Section 3.02, and if the
Company shall have deposited in trust with the Trustee funds (to be immediately
available for payment) sufficient to redeem the Debentures to be redeemed on the
date fixed for redemption, at the applicable redemption price, together with
interest accrued to the date fixed for redemption, then all obligations of the
Company in respect of such Debentures shall cease and be discharged and subject
to the provisions of Article Fourteen, the holders of such Debentures shall
thereafter be restricted exclusively to such funds for any and all claims of
whatsoever nature on their part under this Indenture, or in respect of such
Debentures.
SECTION 3.05. Redemption in Part. Upon presentation and
surrender of any Debenture which is to be redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the holder
thereof, at the expense of the Company, a new Debenture or Debentures of
authorized denominations in principal amount equal to the unredeemed portion of
the Debenture so presented.
SECTION 3.06. Redemption Following Change in Control. (a) Each
holder of Debentures shall have the right, as provided in this Section 3.06,
upon a Change in Control (as defined in this Section 3.06), subject to certain
conditions and restrictions, to require the Company to repurchase all or any
part (in integral multiples
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of $25.00) of their Debentures at a purchase price of 100% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the Repurchase Date
(as defined herein). The Company shall have the right to satisfy such repurchase
obligation by delivery of shares of its Common Stock valued at the Market Price
(as defined herein) in exchange for certificates evidencing the Debentures.
(b) The term "Change in Control" as used in this Section 3.06
means the occurrence of any of the following events after the date of original
issuance of the Convertible Exchangeable Preferred Stock: (i) any person
(including any entity or group deemed to be a "person" under Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) becomes the direct or indirect beneficial
owner (as determined in accordance with Rule 13d-3 under the Exchange Act) of
shares of the Company's capital stock representing greater than 50% of the total
voting power of all shares of capital stock of the Company entitled to vote in
the election of Directors under ordinary circumstances or to elect a majority of
the Board of Directors of the Company, (ii) the Company sells, transfers or
otherwise disposes of all or substantially all of the assets of the Company,
(iii) when, during any period of 12 consecutive months after the date of
original issuance of the Shares of Convertible Exchangeable Preferred Stock,
individuals who at the beginning of any such 12-month period constituted the
Board of Directors of the Company (together with any new directors whose
election by such Board or whose nomination for election by the stockholders of
the Company was approved by a vote of a majority of the directors still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved), cease for any
reason to constitute a majority of the Board of Directors of the Company then in
office (excluding from such calculation any election of directors by holders of
Convertible Exchangeable Preferred Stock), or (iv) the date of the consummation
of the merger or consolidation of the Company with another company where the
stockholders of the Company immediately prior to the merger or consolidation
would not beneficially own, immediately after the merger or consolidation,
shares entitling such stockholders to 50% or more of all votes (without
consideration of the rights of any class of stock to elect directors by a
separate class vote) to which all stockholders of the Company issuing cash or
securities in the merger or consolidation would be entitled in the election of
directors, or where members of the Board of Directors of the Company immediately
prior to the merger or consolidation, would not, immediately after the merger or
consolidation, constitute a majority of the board of directors of the Company
issuing cash or securities in the merger or consolidation.
(c) Each holder of Debentures shall have the right effective
for 30 days following the receipt of a notice disclosing such Change in Control
(the "Repurchase Right Notice") to require the Company to repurchase all or any
part (in integral multiples of $25.00) of such holder's Debentures, on the date
(the "Repurchase Date") that is no later than 45 days after the date of the
Repurchase Right Notice, at a repurchase price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest to the Repurchase Date with
respect to such Debentures. On or before
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the 30th day following any Change in Control, the Company, or at the request of
the Company, the transfer agent, shall mail the Repurchase Right Notice to each
holder of record of the Debentures stating (i) that a Change in Control has
occurred and that such holder has the right to require the Company to repurchase
such holder's Debentures, (ii) the Repurchase Date, (iii) the date by which the
right to cause repurchase must be exercised, (iv) the price at which such
repurchase is to be made, if the right to cause repurchase is exercised and (v)
a description of the procedure which such holder must follow to exercise a right
to cause repurchase and whether or not the Company presently intends to deliver
shares of its Common Stock in payment therefor. No failure of the Company to
give the foregoing notice shall limit any such holder's right to exercise a
repurchase right. To exercise the repurchase right, on or before the 30th day
after the date of the Repurchase Right Notice, holders of Debentures must
deliver written notice to the Company (or an agent designated by the Company for
such purposes) of the holder's exercise of such right, together with the
certificate for such Debentures with respect to which the right is being
exercised, duly endorsed for transfer. Such written notice shall be irrevocable
except with respect to conversions permitted prior to the Repurchase Date. If
the Repurchase Date is between a regular record date for the payment of interest
and the next succeeding Interest Payment Date, any Debentures to be repurchased
must be accompanied by payment of an amount equal to the interest, payable on
such next succeeding Interest Payment Date on the amount to be repurchased, and
interest will be paid on such next succeeding Interest Payment Date to the
registered holder of such Debentures on the immediately preceding record date.
Debentures repurchased on an Interest Payment Date need not be accompanied by
any payment, and the interest on Debentures being repurchased will be paid on
such Interest Payment Date to the registered holder of such Debentures on the
corresponding record date. The Company shall have 10 days from receipt of such
exercise to notify the holder whether the Company will redeem the Debentures
and/or deliver shares of Common Stock in satisfaction of its obligations
hereunder.
ARTICLE FOUR
CONVERSION OF DEBENTURES
SECTION 4.01. Conversion Privilege and Conversion Price. Subject
to and upon compliance with the provisions of this Article Four, at the option
of the holder, any Debenture, or any portion of the principal amount thereof
which is $25.00 or an integral multiple of $25.00, may, at any time during usual
business hours prior to September 30, 2006 (or if such Debenture or portion
thereof is called for redemption prior to September 30, 2006, then in respect of
such Debenture or portion thereof to and including but not after the close of
business on the date fixed for such redemption unless the Company shall default
in making the redemption payment when due, in which case the conversion right
shall terminate at the close of business on the date such default is cured and
such Debenture is redeemed), be converted into fully paid and
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nonassessable shares of Common Stock of the Company at the equivalent conversion
rate in effect for the Convertible Exchangeable Preferred Stock of the Company
at the date of exchange of such Convertible Exchangeable Preferred Stock for the
Debentures. If as a result of a Change in Control the holder exercises its
option to require the Company to repurchase the Debenture, such right to convert
shall terminate upon receipt by the Company of written notice of exercise of
such option unless the Company shall default in making the repurchase payment
when due, in which case the conversion right shall terminate at the close of
business on the date such default is cured and such Debenture is repurchased.
The Conversion Rate shall be adjusted in certain instances as provided in
Section 4.04. The price at which the Company's Common Stock shall be delivered
upon conversion shall be initially U.S. $13.65 per share of Common Stock. The
Conversion Price shall be adjusted in certain instances as provided in Section
4.04.
SECTION 4.02. Manner of Exercise of Conversion Privilege. In
order to exercise the conversion privilege, the holder of any Debenture to be
converted shall surrender such Debenture at any office or agency to be
maintained by the Company for that purpose pursuant to Section 5.02, and shall
give written notice to the Company at such office or agency that the holder
elects to convert such Debenture or a specified portion thereof. Such notice
shall also state the name or names (with address) in which the certificate or
certificates for shares of Common Stock which shall be issuable on such
conversion shall be issued. Each Debenture surrendered for conversion shall,
unless the shares issuable on conversion are to be issued in the same name as
the registration of such Debenture, be accompanied by instruments of transfer,
in form satisfactory to the Company and the Trustee, duly executed by the holder
or his duly authorized attorney. As promptly as practicable after the receipt of
such notice and the surrender of such Debenture as aforesaid, the Company shall
issue and shall deliver at such office or agency to such holder, or on his
written order, a certificate or certificates for the number of full shares
issuable upon the conversion of such Debenture or portion thereof in accordance
with the provisions of this Article Four and any fractional interest in respect
of a share of Common Stock arising upon such conversion shall be settled as
provided in Section 4.03. In the case of any Debenture which is converted in
part only, the Company shall execute and the Trustee shall authenticate and
deliver to the holder thereof, without service charge, a new Debenture or
Debentures as requested by such holder in an aggregate principal amount equal to
the unconverted portion of the principal of such Debenture. Each conversion
shall be deemed to have been effected on the date on which such notice shall
have been received by the Company or its conversion agent and such Debenture
shall have been surrendered as aforesaid, and the person or persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become on said date the
holder or holders of record of the shares represented thereby; provided,
however, that if the transfer books of the Company for Common Stock shall be
closed on said date, the Company shall not be required to issue any shares on
such conversion until the date on which such transfer books shall be reopened
and such person or persons shall not be deemed to have
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become the holder or holders of record of such shares until the date on which
such transfer books shall be reopened, but such conversion shall be nevertheless
be effected when such transfer books shall be reopened at the Conversion Rate in
effect on and otherwise as of the date on which such Debenture shall have been
surrendered to and such notice received by the Company as aforesaid. The Company
covenants and agrees that its books for the transfer of Common Stock shall not
be closed during any period which includes a record date for a dividend or other
distribution on Common Stock. However, Debentures surrendered for conversion
during the period between the close of business on any Interest Payment Record
Date and the close of business on the corresponding Interest Payment Date
(except Debentures called for redemption on a redemption date) must be
accompanied by payment of an amount equal to the interest payment to be received
on such Interest Payment Date with respect to such Debentures presented for
conversion. Subject to the aforesaid requirement for a payment in the event of
conversion after the close of business on the Interest Payment Record Date next
preceding an Interest Payment Date, no adjustment shall be made for interest
accrued on any Debenture that shall be converted or for dividends on any Common
Stock that shall be issued upon the conversion of such Debenture as provided in
this Article Four.
SECTION 4.03. Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversions of Debentures. If more than one Debenture
shall be surrendered for conversion at one time by the same holder, the number
of full shares which shall be issuable upon conversion shall be computed on the
basis of the aggregate principal amount of the Debentures (or specified portions
thereof to the extent permitted hereby) so surrendered. Instead of any
fractional share of Common Stock which would otherwise be issuable upon
conversion of any Debenture or Debentures, the Company shall pay a cash
adjustment (calculated to the nearest cent) in respect of such fractional
interest in an amount equal to the Closing Price of such fractional interest on
the trading day immediately preceding the date upon which such Debenture or
Debentures are surrendered for conversion. The Closing Price of the Common Stock
on any trading day shall be computed on the basis of the last sale price of the
Common Stock as shown on the Composite Tape of the New York Stock Exchange on
such trading day, or, if there be no such sale price on such day, the average of
the closing bid and asked prices per share of the Common Stock on such Exchange
on such trading day. If the Common Stock is not at the time listed or admitted
to trading on such Exchange, such Closing Price shall be the average of the
closing bid and asked prices on such trading day on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices on such
trading day as furnished by any New York Stock Exchange member firm selected
from time to time by the Board of Directors of the Company for such purpose
(other than the Company or a subsidiary thereof).
26
SECTION 4.04. Adjustment of Conversion Rate and Conversion Price. The
conversion rate shall be adjusted from time to time as follows:
(a) In case the Company shall, at any time or from time to
time while any Debentures are outstanding, (i) issue shares of its
Common Stock as a dividend or distribution on the Common Stock, (ii)
subdivide its outstanding shares of Common Stock, or (iii) combine its
outstanding shares of Common Stock into a smaller number of shares, the
conversion price and the conversion rate in effect immediately prior to
such action shall be adjusted so that the holder of any Debentures
thereafter surrendered for conversion shall be entitled to receive the
number of shares of capital stock of the Company which such holder
would have owned or have been entitled to receive immediately following
such action had such Debentures been converted immediately prior
thereto. An adjustment made pursuant to this Section 4.04(a) shall
become effective retroactively to immediately after the opening of
business on the day following the record date in the case of an
issuance and shall become effective immediately after the opening of
business on the day following the effective date in the case of a
subdivision or combination. If, as a result of an adjustment made
pursuant to this Section 4.04(a), the holder of any Debentures
thereafter surrendered for conversion shall become entitled to receive
shares of two or more classes of capital stock of the Company, the
Board of Directors (whose determination shall be conclusive) shall
determine the allocation of the adjusted Conversion Price and/or
Conversion Rate between or among shares of such classes of capital
stock.
(b) In case the Company shall, at any time or from time to
time while any of the Debentures are outstanding, issue rights or
options or warrants to all holders of shares of its Common Stock
entitling them to subscribe for or acquire shares of Common Stock (or
securities convertible into or exchangeable for Common Stock) at a
price per share less than the current market price per share of Common
Stock (as defined in Section 4.04(d), at such record date, the
Conversion Rate shall be adjusted so that it shall equal the rate
determined by multiplying the Conversion Rate in effect immediately
prior to the date of issuance of such rights or warrants by a fraction,
the numerator of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights, options, or
warrants plus the number of additional shares of Common Stock offered
for subscription or purchase, and the denominator of which shall be the
number of shares of Common Stock outstanding on the date of issuance of
such rights or warrants plus the number of shares which the aggregate
offering price of the total number of shares so offered would purchase
at such current Market Price. For the purposes of this Section 4.04(b),
the issuance of rights,
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options or warrants to subscribe for or purchase securities convertible into
Common Stock shall be deemed to be the issuance of rights or warrants to
purchase the share of Common Stock into which such securities are convertible at
an aggregate offering price equal to the aggregate offering price of such
securities plus the minimum aggregate amount (if any) payable upon conversion of
such securities into shares of Common Stock; provided, however, that if all of
the shares of Common Stock subject to such rights, options or warrants have not
been issued when such rights, options or warrants expire, then the Conversion
Price shall promptly be readjusted to the Conversion Price which would then be
in effect had the adjustment upon the issuance of such rights, options or
warrants been made on the basis of the actual number of shares of Common Stock
issued upon the exercise of such rights, options or warrants. An adjustment made
pursuant to this Section 4.04(b) shall become effective retroactively
immediately after the record date for the determination of stockholders entitled
to receive such rights, options or warrants.
(c) In case the Company shall, at any time or from time to
time while any of the Debentures are outstanding, distribute to all
holders of shares of its Common Stock evidences of its indebtedness or
securities or assets (excluding cash dividends payable out of
consolidated earnings or retained earnings or dividends payable in
shares of Common Stock) or rights, options or warrants to subscribe for
securities of the Company or any of its subsidiaries (excluding those
referred to in Section 4.04(b)), then in each such case the Conversion
Rate shall be adjusted so that it shall equal the rate determined by
multiplying the Conversion Rate in effect immediately prior to the date
of such distribution by a fraction, the numerator of which shall be the
current Market Price per share (determined as provided in Section
4.04(d)) of the Common Stock on the record date referred to below, and
the denominator of which shall be such current Market Price per share
of the Common Stock less the then fair market value (as determined by
the Board of Directors of the Company, whose determination shall be
conclusive) of the portion of the assets or evidences of indebtedness
or securities or assets so distributed or of such subscription rights
or warrants applicable to one share of Common Stock. Such adjustment
shall become effective retroactively immediately after the record date
for the determination of stockholders entitled to receive such
distribution.
(d) For the purpose of any computation under Section 4.04(b),
and 4.04(c), the current Market Price of a share of Common Stock on any
date shall be the average of the daily Closing Prices for 10
consecutive Trading Days before the day in question.
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(e) The Company shall be entitled to make such additional
adjustments in the Conversion Price, in addition to those required by
subsections 4.04(a), 4.04(b), and 4.04(c), as shall be necessary in
order that any dividend or distribution in shares of stock, subdivision
or combination of shares of Common Stock, issuance of rights, options
or warrants, evidences of indebtedness or assets (other than cash
dividends payable out of consolidated earnings or retained earnings)
referred to above, shall not be taxable to the stockholders.
(f) In any case in which this Section 4.04 shall require that
an adjustment be made retroactively immediately following a record
date, the Company may elect to defer (but only for five (5) Business
Days following the filing of the statement referred to in Section
4.04(h)) issuing to the holder of any Debentures converted after such
record date (i) the shares of Common Stock and other capital stock of
the Company issuable upon such conversion over and above (ii) the
shares of Common Stock and other capital stock of the Company issuable
upon such conversion on the basis of the conversion rate prior to
adjustment.
(g) Notwithstanding any other provisions of this Section 4.04,
the Company shall not be required to make any adjustment of the
conversion rate unless such adjustment would require an increase or
decrease of at least 1% in such rate. Any lesser adjustment shall be
carried forward and shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment or
adjustments so carried forward, shall amount to an increase or decrease
of at least 1% in such rate.
(h) Whenever an adjustment in the Conversion Rate is required,
the Company shall forthwith place on file with the Trustee a statement
signed by its Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer or a Senior Vice President and by its Secretary,
Assistant Secretary or Treasurer, stating the adjusted Conversion Rate
determined as provided herein. Such statements shall set forth in
reasonable detail such facts as shall be necessary to show the reason
and the manner of computing such adjustment. Promptly after the
adjustment of the Conversion Rate, the Company or Trustee shall mail a
notice thereof to each holder of Debentures.
(i) The term "Common Stock" as used in this Indenture means
the Company's Common Stock, $.10 par value, as the same exists at the
date of original issuance of the Convertible Exchangeable Preferred
Stock or any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in
par value, or from par value to no par value, or from no par
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value to par value. In the event that at any time as a result of
an adjustment made pursuant to Section 4.04(a), the holder of any
Debenture thereafter surrendered for conversion shall become entitled
to receive any shares of the Company other than shares of its Common
Stock, the Conversion Rate of such other shares so receivable upon
conversion shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to Common Stock contained in subparagraphs (a)
through (g) of this Section 4.04, and the provisions of Section 4.01
through 4.03 and 4.05 through 4.11 with respect to the Common Stock
shall apply on like or similar terms to any such other shares.
SECTION 4.05. Effect of Reclassifications, Consolidations,
Mergers or Sales on Conversion Privilege. In case of (a) any reclassification or
change of outstanding shares of Common Stock issuable upon conversion of shares
of the Debentures (other than a change in par value or from par value to no par
value or from no par value to par value, or as a result of a subdivision or
combination), or (b) any consolidation or merger of the Company with one or more
other Company's (other than a consolidation or merger in which the Company is
the continuing company and which does not result in any reclassification or
change of outstanding shares of Common Stock issuable upon conversion of the
Debentures), or (c) any sale or conveyance to another company or other entity of
all or substantially all of the property of the Company, then, subject to the
applicable rights of the holders upon a Change in Control (as hereinbefore
defined), the Company, or such successor company or other entity, as the case
may be, shall make appropriate provision so that the holder of each Debenture
then outstanding shall have the right to convert such Debenture into the kind
and amount of shares of stock or other securities and property receivable upon
such consolidation, merger, sale, reclassification, change or conveyance by a
holder of the number of shares of Common Stock into which such Debenture might
have been converted immediately prior to such consolidation, merger, sale,
reclassification, change or conveyance, subject to adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 4.05. If in connection with any such reclassification, consolidation,
merger, sale, transfer, or share exchange each holder of shares of Common Stock
is entitled to elect to receive either securities, cash or other assets upon
completion of such transaction, the Company will provide or cause to be provided
to each holder of the Debentures the right to elect to receive the securities,
cash or other assets into which the Debentures held by such holder will be
convertible after completion of any such transaction on the same terms and
subject to the same conditions applicable to holders of the Common Stock
(including, without limitation, notice of the right to elect, limitations on the
period in which such election will be made and the effect of failing to exercise
the election). The provisions of this Section 4.05 shall apply similarly to
successive consolidations, mergers, sales or conveyances.
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SECTION 4.06. Cancellation of Converted Debentures. All
Debentures or portions thereof surrendered for conversion shall ipso facto on
the conversion thereof be extinguished and shall be canceled and disposed of as
provided in Section 2.08, and no Debentures shall be issued under the Indenture
in lieu thereof.
SECTION 4.07. Taxes on Conversion. The issue of stock
certificates on conversions of Debentures shall be made without charge to the
converting Debentureholder for any issue tax in respect of such issue. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of stock in a name
other than that of the holder of the Debenture converted, and the Company shall
not be required to issue or deliver any such stock certificate unless and until
the person or persons requesting the issuance thereof shall have paid to the
Company the amount of any such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
SECTION 4.08. Company to Reserve Stock. The Company shall at all
times reserve and keep available, free from pre-emptive rights out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the Debentures, such number of its duly authorized shares of Common Stock, as
shall from time to time be sufficient to effect the conversion of all
outstanding Debentures.
SECTION 4.09. Covenant as to Common Stock. As a condition
precedent to the taking of any action which would cause an adjustment reducing
the then prevailing Conversion Price below the then par value, if any, per share
of Common Stock, the Company will take such corporate action as may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue its Common Stock as fully paid and nonassessable stock at the
adjusted conversion price upon conversion of Debentures in accordance with the
provisions of this Article Four.
If registration with or approval of any governmental authority
under any federal or state law is required before any Common Stock may be
validly issued upon conversion, the Company covenants that it will take such
action as may be necessary to secure such registration or approval, as the case
may be.
SECTION 4.10. Notice of Certain Corporate Action. In case:
(a) the Company shall declare a dividend or any other
distribution on shares of its Common Stock payable otherwise than in cash out of
its consolidated earnings or retained earnings or in Common Stock; or
(b) the Company shall authorize the granting to all of the
holders of shares of its Common Stock of rights, options or warrants to
subscribe for or purchase any shares of capital stock of any class (or
securities convertible into or exchangeable for shares of capital stock of any
class) or of any other rights or warrants; or
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(c) of any reclassification or change of shares of Common Stock
of the Company, or of any consolidation or merger of the Company with one or
more other corporations, or of the sale or conveyance of all or substantially
all of the property of the Company;
(d) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company; or
(e) the Company or any subsidiary shall commence a tender offer
for all or a portion of any class of the Company's outstanding shares of Common
Stock that would require an adjustment of the Conversion Price pursuant to
Section 4.04;
then the Company shall cause notice thereof to be mailed to the Trustee, to the
office or agency maintained by the Company for the purpose of conversion of
Debentures and to each holder of Debentures, at his address appearing on the
registry books of the Company, at least 20 days (or l0 days in any case
specified in clause (a) or (b) above) prior to the applicable record date
hereinafter specified, a notice stating (i) the date on which a record is to be
taken for the purpose of such dividend, distribution, rights or warrants, or, if
a record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights, options or
warrants are to be determined, or (ii) the date on which such reclassification,
consolidation, merger, sale, conveyance, dissolution, liquidation winding-up or
tender offer is expected to become effective, and the date as of which it is
expected that the holders of Common Stock of record to be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation, winding-up or tender offer shall be determined. Failure to give any
such notice, or any defect therein, shall not affect the legality or validity of
any such action set forth in clause (a), (b), (c), (d) or (e) above.
SECTION 4.11. Disclaimer of Responsibility of Trustee, etc.
Neither the Trustee, subject to the provisions of Section 8.0l, nor any
conversion agent shall at any time be under any duty or responsibility to any
holder of Debentures to determine whether any facts exist which may require any
adjustment of the Conversion Rate, or with respect to the nature or extent of
any such adjustment when made, or with respect to the method employed, or herein
or in any supplemental indenture provided to be employed, in making the same.
Neither the Trustee nor any conversion agent shall be accountable with respect
to the validity or value (or the kind or amount) of any shares of Common Stock,
or of any securities or property (including cash), which may at any time be
issued or delivered upon the conversion of any Debenture; and neither the
Trustee nor any conversion agent makes any representation with respect thereto.
Neither the Trustee nor any paying agent shall be responsible for any failure of
the Company to make any cash payment or to issue, transfer or deliver any shares
of Common Stock or stock certificates or other securities or property (including
cash) upon the surrender of any Debenture for the purpose of conversion or,
subject to
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Section 4.0l, to comply with any of the covenants of the Company contained in
this Article Four.
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY
The Company covenants and agrees as follows:
SECTION 5.01. Payment of Principal of and Interest on
Debentures. The Company will duly and punctually pay or cause to be paid the
principal of and interest on each of the Debentures at the time and place and in
the manner provided in the Debenture. An installment of principal or interest
shall be considered paid on the date it is due if the payment agent holds on or
prior to that date money deposited by the Company in immediately available funds
and designated for and sufficient to pay such amount due.
SECTION 5.02. Maintenance of Offices or Agencies. As long as any
of the Debentures remain outstanding, the Company will maintain an office or
agency or offices or agencies in the Borough of Manhattan, City and State of New
York, where the Debentures may be presented for registration, transfer and
exchange as in this Indenture provided, and where the Debentures may be
surrendered for conversion as in this Indenture provided, and where notices and
demands to or upon the Company in respect of the Debentures or of this Indenture
may be served, and where the Debentures may be presented for payment. Until
otherwise designated by the Company in a notice to the Trustee, such office or
agency for all of the above purposes shall be the Corporate Trust Office of the
Trustee. The Company will give to the Trustee notice of any change of location
of any of such offices or agencies. In case the Company shall fail to maintain
such an office or agency or offices or agencies for all such purposes or shall
fail to give such notice of any change in the location thereof, presentations
and demands may be made and notices may be served at the Corporate Trust Office
of the Trustee.
The Company may at any time and from time to time vary or
terminate the appointment of any such agent or appoint any additional agents for
any or all of such purposes; provided, however, that until all of the Debentures
have been delivered to the Trustee for cancellation, or moneys sufficient to pay
the principal of and interest on the Debentures have been made available for
payment and either paid or returned to the Company pursuant to provisions of
Section 5.04, the Company will maintain in the Borough of Manhattan, the City of
New York, an office or agency where Debentures may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Debentures and this Indenture may be served.
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SECTION 5.03. Appointment to Fill Vacancy in Office of Trustee.
The Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 8.11, a Trustee, so
that there shall at all times be a Trustee hereunder.
SECTION 5.04. Appointment of Paying Agent Other Than Trustee.
(a) If the Company shall appoint a paying agent other than the Trustee, it will
cause such paying agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of this
Section,
(1) that it will hold all sums held by it as such agent for
the payment of the principal of or interest on the Debentures (whether such sums
have been paid to it by the Company or by any other obligor on the Debentures)
in trust for the benefit of the holders of the Debentures, or of the Trustee, as
the case may be, and
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Debentures) to make any payment of the
principal of or interest on the Debentures when the same shall be due and
payable.
(b) If the Company shall act as its own paying agent, it will,
on or before each due date of the principal of (and premium, if any) or interest
on the Debentures, set aside, segregate and hold in trust for the benefit of the
holders of the Debentures, a sum sufficient to pay such principal or interest so
becoming due and will notify the Trustee of any failure (by it or any other
obligor on the Debentures) to take such action.
(c) Anything in this Section to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section is subject to
the provisions of Section 14.04 hereof.
SECTION 5.05. Annual Report to Trustee. The Company will, within
120 days after the end of each fiscal year (which, at the date hereof,
terminates on September 30), file with the Trustee an Officers' Certificate
stating that a review of the activities of the Company and its Subsidiaries
during the preceding fiscal year (or, in the case of the first Officers'
Certificate filed during the period from the date of execution hereof to
September 30 of such year) has been made under the supervision of the signers of
such certificate with a view to determining whether the Company has kept,
observed, performed and fulfilled all the covenants, agreements and obligations
on its part in this Indenture contained and that to the best of their knowledge
the Company is not in default in the performance, observance or fulfillment of
any of the terms, provisions and conditions hereof, and that no default exists
or, if the Company shall be so in default or if any default exists, specifying
all such defaults, and the nature thereof, of which they may have knowledge.
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SECTION 5.06. Covenant Regarding Authorization. The Company
represents and warrants that it is duly authorized under the laws of the State
of Delaware and under all other provisions of law applicable thereto to create
and issue the Debentures and to execute this Indenture, and all corporate action
on its part for the creation and issue of such Debentures and the execution and
delivery of this Indenture has been duly and effectively taken and that the
Debentures, when issued, will be valid and binding obligations of the Company
and entitled to the benefits of this Indenture.
SECTION 5.07. Delivery of Certain Information. At any time
when the Company is not subject to Section 13 or 15(d) of the Exchange Act or
exempt from such requirements pursuant to Rule 12g3-2(b) under the Exchange Act,
upon the request of a holder of Debentures or the holder of Common Stock issued
upon conversion thereof, the Company will promptly furnish or cause to be
furnished Rule 144A Information (as defined below) to such holder of Debentures
or such holder of Common Stock issued upon conversion of Debentures, or to a
prospective purchaser of any such security designated by any such holder, to the
extent required to permit compliance by such holder with Rule 144A under the
Securities Act, as amended (or any successor provision thereto) in connection
with the resale of any such security; provided, however, that the Company shall
not be required to furnish such information in connection with any request made
on or after the date which is three years from the later of (i) the date such a
security or any such predecessor security) was last acquired from the Company or
(ii) the date such a security (or any such predecessor security) was last
acquired from an "affiliate" of the Company within the meaning of Rule 144 under
the Securities Act (or any successor provision thereto). "Rule 144A Information"
shall be such information as is specified pursuant to Rule 144A(d)(4) under the
Securities Act (or any successor provision thereto).
SECTION 5.08. Payment of Taxes and Other Claims. The Company
will pay or discharge, or cause to be paid or discharged, before the same may
become delinquent, all stamps and other duties, if any, which may be imposed by
the United States or any political subdivision thereof or therein in connection
with the issuance or conversion of any Debentures; provided, however, that, (A)
the Company shall not be required to pay or discharge or cause to be paid or
discharged any tax or duty whose amount, applicability or validity is being
contested in good faith by appropriate proceedings, and (B) except as otherwise
provided herein the Company shall not be required to pay or discharge or cause
to be paid or discharged any tax, assessment or other governmental charge
imposed by any government or any political subdivision thereof or taxing
authority thereof or therein.
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ARTICLE SIX
DEBENTUREHOLDERS' LISTS AND REPORTS BY
THE COMPANY AND THE TRUSTEE
SECTION 6.01. Covenant to Furnish Information. The Company
covenants and agrees that it will furnish or cause to be furnished to the
Trustee semi-annually, not more than 15 days after each record date for payment
of interest, and at such other times as the Trustee may request in writing,
within 30 days after receipt by the Company of any such request, a list in such
form as the Trustee may reasonably require containing all information in the
possession or control of the Company or any of its paying agents, as to the
names and addresses of the holders of the Debentures obtained since the date as
of which the next previous list, if any, was furnished; provided, however, that
as long as the Trustee shall be the Debenture Registrar such list need not be
furnished. Any such list may be dated as of a date not more than 15 days prior
to the time such information is furnished or caused to be furnished, and need
not include information received after such date.
SECTION 6.02. Preservation of Information; Communications to
Debentureholders. (a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of Debentures (1) contained in the most recent list furnished to it as
provided in Section 6.01, (2) received by it in the capacity of paying agent (if
so acting) hereunder, (3) received by it in the capacity of Debenture Registrar,
and (4) filed with it within two preceding years pursuant to the provisions of
paragraph (2) of subsection (c) of Section 6.04.
The Trustee may (1) destroy any list furnished to it as provided
in Section 6.01 upon receipt of a new list so furnished, (2) destroy any
information received by it as paying agent (if so acting) hereunder upon
delivering to itself as Trustee, not earlier than 45 days after an interest
payment date of the Debentures, a list containing the names and addresses of the
holders of Debentures obtained from such information since the delivery of the
next previous list, if any, (3) destroy any list delivered to itself as Trustee
which was compiled from information received by it as paying agent (if so
acting) hereunder upon the receipt of a new list so delivered, and (4) destroy
any information filed with it by holders of Debentures for the purpose of
receiving reports pursuant to the provisions of paragraph (2) of subsection (c)
of Section 6.04, but not until two years after such information has been filed
with it.
(b) In case three or more holders of Debentures (hereinafter
referred to as "applicants") apply in writing to the Trustee, and furnish to the
Trustee reasonable proof that each such applicant has owned a Debenture for a
period of at least six months preceding the date of such application, and such
application states that the applicants desire to communicate with other holders
of Debentures with respect to their rights under this Indenture or under the
Debentures, and is accompanied by a
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copy of the form of proxy or other communication which such applicants propose
to transmit, then the Trustee shall, within five business days after the receipt
of such application at its election, either
(1) afford to such applicants access to the information
preserved at the time by the Trustee in accordance with the provisions of
subsection (a) of this Section, or
(2) inform such applicants as to the approximate number
of holders of Debentures whose names and addresses appear in the information
preserved at the time by the Trustee, in accordance with the provisions of
subsection (a) of this Section, and as to the approximate cost of mailing to
such Debentureholders the form of proxy or other communications, if any,
specified in such application.
If the Trustee shall elect not to afford such applicants access
to such information, the Trustee shall, upon the written request of such
applicants, mail to each Debentureholder whose name and address appears in the
information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section, a copy of the form of proxy or
other communication which is specified in such request, with reasonable
promptness after a tender to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of mailing,
unless within five days after such tender, the Trustee shall mail to such
applicants and file with the Securities and Exchange Commission, together with a
copy of the material to be mailed, a written statement to the effect that, in
the opinion of the Trustee, such mailing would be contrary to the best interests
of the holders of Debentures or would be in violation of applicable law. Such
written statement shall specify the basis of such opinion. If said Commission,
after opportunity for a hearing upon the objections specified in the written
statement so filed, shall enter an order refusing to sustain any of such
objections or if, after the entry of an order sustaining one or more of such
objections, said Commission shall find, after notice and opportunity for
hearing, that all the objections so sustained have been met and shall enter an
order so declaring, the Trustee shall mail copies of such material to all such
Debentureholders with reasonable promptness after the entry of such order and
the renewal of such tender; otherwise the Trustee shall be relieved of any
obligation or duty to such applicants respecting their application.
(c) Each and every holder of the Debentures, by receiving and
holding the same, agrees with the Company and the Trustee that neither the
Company nor the Trustee nor any paying agent shall be held accountable by reason
of the disclosure of any such information as to the names and addresses of the
holders of Debentures in accordance with the provisions of subsection (b) of
this Section, regardless of the source from which such information was derived,
and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under said subsection (b).
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SECTION 6.03. Reports by Company. (a) The Company covenants and
agrees to file with the Trustee within 15 days after the Company is required to
file the same with the Securities and Exchange Commission, copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as said Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file with
said Commission pursuant to Section 13 or Section 15(d) of the Exchange Act or,
if the Company is not required to file information, documents or reports
pursuant to either of such sections, then to file with the Trustee and said
Commission, in accordance with rules and regulations prescribed from time to
time by said Commission, such of the supplementary and periodic information,
documents and reports which may be required pursuant to Section 13 of the
Exchange Act in respect of a security listed and registered on a national
securities exchange as may be prescribed from time to time in such rules and
regulations.
(b) The Company covenants and agrees to file with the Trustee
and the Securities and Exchange Commission, in accordance with the rules and
regulations prescribed from time to time by said Commission, such additional
information, documents and reports with respect to compliance by the Company
with the conditions and covenants provided for in this Indenture as may be
required from time to time by such rules and regulations.
(c) The Company covenants and agrees to transmit to the holders
of Debentures within 30 days after the filing thereof with the Trustee, in the
manner and to the extent provided in subsection (c) of Section 6.04 with respect
to reports pursuant to subsection (a) of said Section 6.04, such summaries of
any information, documents and reports required to be filed by the Company
pursuant to subsections (a) and (b) of this Section as may be required by rules
and regulations prescribed from time to time by the Securities and Exchange
Commission.
SECTION 6.04. Reports by Trustee. (a) On or before the first
April 15 following execution of this Indenture, and on or before April 15 in
every year thereafter, so long as any Debentures are outstanding hereunder, the
Trustee shall transmit to the Debentureholders as hereinafter in this Section
provided a brief report dated as of the preceding February 15, with respect to:
(1) its eligibility under Section 8.10, and its
qualifications under Section 8.08, or in lieu thereof, if to the best of
its knowledge it has continued to be eligible and qualified under such
Sections, a written statement to such effect;
(2) the character and amount of any advances (and if
the Trustee elects so to state, the circumstances surrounding the making
thereof) made by the Trustee (as such) which remain unpaid on the date
of such report, and for the reimbursement of which it claims or may
claim a
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lien or charge, prior to that of the Debentures, on any property
or funds held or collected by it as Trustee, if such advances so
remaining unpaid aggregate more than one-half of one per cent of the
principal amount of the Debentures outstanding on the date of such
report;
(3) the amount, interest rate and maturity date of
all other indebtedness owing by the Company (or by any other obligor on
the Debentures) to the Trustee in its individual capacity, on the date
of such report, with a brief description of any property held as
collateral security therefor, except an indebtedness based upon a
creditor relationship arising in any manner described in paragraphs (2),
(3), (4), or (6) of subsection (b) of Section 8.15;
(4) the property and funds, if any, physically in the
possession of the Trustee as such on the date of such report;
(5) any additional issue of Debentures which the
Trustee has not previously reported; and
(6) any action taken by the Trustee in the
performance of its duties under this Indenture which it has not
previously reported and which in its opinion materially affects the
Debentures, except action in respect of a default, notice of which has
been or is to be withheld by it in accordance with the provisions of
Section 7.09.
(b) The Trustee shall transmit to the Debentureholders,
as hereinafter provided, a brief report with respect to the character
and amount of any advances (and if the Trustee elects so to state, the
circumstances surrounding the making thereof) made by the Trustee as
such since the date of the last report transmitted pursuant to the
provisions of subsection (a) of this Section (or if no such report has
yet been so transmitted, since the date of execution of this Indenture),
for the reimbursement of which it claims or may claim a lien or charge
prior to that of the Debentures on property or funds held or collected
by it as Trustee, and which it has not previously reported pursuant to
this subsection, if such advances remaining unpaid at any time aggregate
more than ten per cent of the principal amount of Debentures outstanding
at such time, such report to be transmitted within 90 days after such
time.
(c) Reports pursuant to this Section shall be
transmitted by mail:
(1) to all registered holders of Debentures, as the
names and addresses of such holders appear upon the registration books
of the Company;
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(2) to such holders of Debentures as have, within two
years preceding such transmission, filed their names and addresses with
the Trustee for that purpose; and
(3) except in the cases of reports pursuant to
subsection (b) of this Section, to each Debentureholder whose name and
address is preserved at the time by the Trustee, as provided in
subsection (a) of Section 6.02.
(d) A copy of each such report shall, at the time of such
transmission to Debentureholders, be filed by the Trustee with each
securities exchange upon which the Debentures are listed and also with
the Securities and Exchange Commission. The Company agrees to notify the
Trustee when and as the Debentures become listed on any securities
exchange.
ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT.
SECTION 7.01. Events of Default Defined; Acceleration of
Maturity. In case one or more of the following Events of Default shall have
occurred and be continuing, that is to say:
(a) default in the due and punctual payment of any
installment of interest upon any of the Debentures as and when the same
shall become due and payable, whether or not such payment is prohibited
by the provisions of Article Thirteen, and continuance of such default
for a period of 30 days; or
(b) default in the due and punctual payment of the
principal of any of the Debentures as and when the same shall become due
and payable, whether or not such payment is prohibited by the provisions
of Article Thirteen, either at maturity, upon redemption, by declaration
as authorized by this Indenture, or otherwise; or
(c) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the
Company in the Debentures or in this Indenture contained for a period of
60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Company
by the Trustee,
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by registered mail, or to the Company and the Trustee by the holders of
at least twenty-five per cent in principal amount of the Debentures at
the time outstanding; or
(d) a decree or order by a court having jurisdiction in
the premises shall have been entered adjudging the Company as bankrupt
or insolvent, or approving a petition seeking reorganization of the
Company under the Bankruptcy Code or any other similar applicable
Federal or State law, and such decree or order shall have continued
undischarged or unstayed for a period of 60 days; or a decree or order
of a court having jurisdiction in the premises for the appointment of a
receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of the Company or of all or substantially all of its
property, or for the winding up or liquidation of its affairs shall have
been entered, and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or
(e) the Company shall institute proceedings to be
adjudicated a voluntary bankrupt, or shall consent to the filing of a
bankruptcy proceeding against it, or shall file a petition or answer or
consent seeking reorganization under the Bankruptcy Code or any other
similar applicable Federal or State law, or shall consent to the filing
of any such petition, or shall consent to the appointment of a receiver
or liquidator or trustee or assignee in bankruptcy or insolvency of it
or of all or substantially all of its property, or shall make an
assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts generally as they become due; or failure to
purchase Debentures on the Repurchase Date following a Change in
Control.
then and in each and every such case, so long as such Event of Default shall not
have been remedied, unless the principal of all the Debentures shall have
already become due and payable, either the Trustee or the holders of not less
than twenty-five per cent in aggregate principal amount of the Debentures then
outstanding hereunder, by notice in writing to the Company (and to the Trustee
if given by the Debentureholders), may declare the principal of all the
Debentures then outstanding to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable,
anything in this Indenture or in the said Debentures contained to the contrary
notwithstanding. This provision, however, is subject to the condition that if,
at any time after the principal of the Debentures shall have been so declared
due and payable, but before the Debentures shall have become due by their terms
and before any judgment or decree for the payment of the moneys due shall have
been obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments of
interest upon all the Debentures then outstanding and the principal of any and
all Debentures then outstanding which shall have become due otherwise than by
acceleration (with interest upon such principal and, to the extent the payment
of such interest is enforceable under applicable law, upon overdue installments
of interest, at the rate per annum expressed in the Debentures to the date of
such payment or deposit) and the amount payable to the Trustee under Section
8.06, and any and all defaults under the Indenture, other than the nonpayment of
principal on Debentures then outstanding which shall not have become due by
their terms, shall have been remedied or provision shall have been made therefor
to the satisfaction of the Trustee - then and in every such case the holders of
a majority in aggregate principal amount of the Debentures then outstanding, by
written notice to the Company and to the Trustee, may waive all defaults and
rescind and annul such declaration and its consequences; but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default,
or shall impair any right consequent thereon.
SECTION 7.02. Rescission and Annulment. In case the Trustee
shall have proceeded to enforce any right under this Indenture and such
proceedings shall have been discontinued or abandoned because of such rescission
or annulment or for any other reason or shall have been determined adversely to
the Trustee, then and in every case the Company and the Trustee shall be
restored respectively to their former positions and rights hereunder, and all
rights, remedies and powers of the Company and the Trustee shall continue as
though no such proceedings had been taken.
SECTION 7.03. Collection of Indebtedness and Suits for
Enforcement by Trustee. The Company covenants that (1) in case default shall be
made in the payment of any installments of interest on any of the Debentures, as
and when the same shall become due and payable, and such default shall have
continued for a period of 30 days, or (2) in case default shall be made in the
payment of the principal of any of the Debentures when the same shall have
become due and payable, whether upon maturity of the Debentures or upon
redemption or upon declaration as authorized by this Indenture or
otherwise-then, upon demand by the Trustee, the Company will pay to the Trustee,
for the benefit of the holders of the Debentures then outstanding, the whole
amount that then shall have become due and payable on all such Debentures for
principal or interest, as the case may be, with interest upon the overdue
principal and (to the extent that payment of such interest is enforceable under
applicable law) upon overdue installments of interest at the rate per annum
expressed in the Debentures; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, and the
amount payable to the Trustee under Section 8.06.
In case the Company shall fail forthwith to pay such amounts
upon such demand, the Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any action or proceedings at
law or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceedings to judgment or final decree, and may
enforce any such judgment or final decree against the Company or other obligor
upon the Debentures and collect in the manner provided and to the extent
permitted by law out of the property of the Company or other obligor upon the
Debentures wherever situated the moneys adjudged or decreed to be payable.
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SECTION 7.04. Trustee May File Proofs of Claims. The Trustee
shall be entitled and empowered, either in its own name or as trustee of an
express trust, or as attorney-in-fact for the holders of the Debentures, or in
any one or more of such capacities, to file such proof of debt, amendment of
proof of debt, claim, petition or other document as may be necessary or
advisable in order to have the claims of the Trustee and of the holders of the
Debentures allowed in any equity receivership, insolvency, bankruptcy,
liquidation, readjustment, reorganization or other judicial proceedings relative
to the Company or any other obligor on the Debentures or their creditors, or
affecting their property. The Trustee is hereby irrevocably appointed (and the
successive respective holders of the Debentures by taking and holding the same
shall be conclusively deemed to have so appointed the Trustee) the true and
lawful attorney-in-fact of the respective holders of the Debentures, with
authority to make and file in the respective names of the holders of the
Debentures or on behalf of the holders of the Debentures as a class, subject to
deduction from any such claims of the amounts of any claims filed by any of the
holders of the Debentures themselves, any proof of debt, amendment of proof of
debt, claim, petition or other document in any such proceedings and to receipt
payment of any sums becoming distributable on account thereof, and to execute
any such other papers and documents and to do and perform any and all such acts
and things for and on behalf of such holders of the Debentures as may be
necessary or advisable in the opinion of the Trustee in order to have the
respective claims of the Trustee and of the holders of the Debentures against
the Company or its property allowed in any such proceeding, and to receive
payment of or on account of such claims; provided, however, that nothing
contained in this Indenture shall be deemed to give to the Trustee any right to
accept or consent to any plan of reorganization or otherwise by action of any
character in any such proceeding to waive or change in any way any right of any
Debentureholder.
All rights of action and of asserting claims under this
Indenture or under any of the Debentures may be enforced by the Trustee without
the possession of any of the Debentures or the production thereof at any trial
or other proceeding relative thereto, and any such suit or proceeding instituted
by the Trustee shall be brought in its own name and as trustee of an express
trust, and any recovery of judgment shall, after provision for payment of
expenses and of the reasonable compensation, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the holders of
the Debentures, subject to the provisions of this Indenture.
SECTION 7.05. Application of Moneys Collected by Trustee.
Subject to the provisions of Article Thirteen hereof, any moneys collected by
the Trustee, pursuant to Section 7.03, shall be applied in the order following,
at the date or dates fixed by the Trustee, and, in case of the distribution of
such moneys on account of principal or interest, upon presentation of the
several Debentures and stamping thereon the payment, if only partially paid, and
upon surrender thereof if fully paid:
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FIRST: To the payment of costs and expenses of collection, and
of all amounts payable to the Trustee under Section 8.06;
SECOND: In case the principal of the outstanding
Debentures shall not have become due and be unpaid, to the payment of
interest on the Debentures, in the order of the maturity of the
installments of such interest, with interest (so far as may be lawful
and if such interest has been collected by the Trustee) upon the overdue
installments of interest at the rate per annum expressed in the
Debentures, such payments to be made ratably to the persons entitled
thereto, without discrimination or preference;
THIRD: In case the principal of the outstanding
Debentures shall have become due, by declaration as authorized by this
Indenture or otherwise, to the payment of the whole amount then owing
and unpaid upon the Debentures for principal and interest, with interest
on the overdue principal and (so far as may be lawful and if such
interest has been collected by the Trustee) upon overdue installments of
interest at the rate per annum expressed in the Debentures; and in case
such moneys shall be insufficient to pay in full the whole amount so due
and unpaid upon the Debentures, then to the payment of such principal
and interest, without preference or priority of principal over interest
or of interest over principal or of any installment of interest over any
other installment of interest, or of any Debenture over any other
Debenture, ratably to the aggregate of such principal and accrued and
unpaid interest; and
FOURTH: To the payment of the remainder, if any, to the
Company, its successors or assigns, or to whomsoever may be lawfully entitled to
receive the same, or as a court of competent jurisdiction may direct.
SECTION 7.06. Limitation on Suits by Holders of Debentures.
Except as otherwise expressly provided in this Article, no holder of any
Debenture shall have any right by virtue or by availing itself of any provision
in this Indenture or otherwise to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Indenture, for the
appointment of a receiver or trustee, for the execution of any trust or power
hereof, or for any other remedy hereunder, unless:
(1) such holder previously shall have given to the
Trustee written notice of default and of the continuance thereof, as
hereinbefore provided;
(2) the holders of not less than 25% in aggregate
principal amount of the Debentures then outstanding, shall have made written
request upon the Trustee either to proceed to exercise the powers hereinbefore
granted or to institute such action, suit, or proceeding in its own name as
Trustee hereunder;
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(3) such holders shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby;
(4) the Trustee within a reasonable time (which in no
event shall be less than 60 days) after its receipt of such notice, request and
offer of indemnity, shall have failed to proceed to exercise such powers or to
institute any such action, suit or proceeding;
(5) no direction inconsistent with such written request
have been given to the Trustee during such 60-day period by the holder of a
majority in principal amount of the Debentures then outstanding, it being
understood and intended, and being expressly covenanted by the taker and holder
of every Debenture with every other taker and holder and the Trustee, that no
one or more holders of Debentures shall have any right in any manner whatever by
virtue or by availing of any provision of this Indenture to affect, disturb or
prejudice the rights of the holders of any other of such Debentures, or to
obtain or seek to obtain priority over or preference to any other such holder,
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal, ratable and common benefit of all holders of
Debentures. For the protection and enforcement of the provisions of this
Section, each and every Debentureholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
Nothing herein contained shall, however, affect or impair the
right, which is absolute and unconditional, of any Debentureholder to receive
and to institute suit to enforce, the payment of the principal of and interest
on his Debentures at and after the respective due dates (including maturity, by
call for redemption or by declaration pursuant to this Indenture which has not
been rescinded pursuant to the provisions of Section 7.01, or otherwise) of such
principal or interest, or the obligation of the Company, which is also absolute
and unconditional, to pay the principal of and interest on each of the
Debentures to the respective holders thereof at the times and places in the
Debentures expressed.
SECTION 7.07. Delay or Omission in Exercise of Rights Not Waiver
of Default. No delay or omission of the Trustee or of any holder of any of the
Debentures to exercise any right or power accruing upon any Event of Default
shall impair any such right or power or shall be construed to be a waiver of any
such default or an acquiescence therein; and, subject to the provisions of
Section 7.04, every power and remedy given by this Article Seven or by law to
the Trustee or to the Debentureholders may be exercised from time to time, and
as often as shall be deemed expedient, by the Trustee or by the
Debentureholders.
SECTION 7.08. Right of Holders of Majority in Principal Amount
of Debentures to Direct Trustee and Waive Defaults. Subject to the provisions of
Sections 8.0l and 8.02, the holders of a majority in aggregate principal amount
of the
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Debentures at the time outstanding, determined in accordance with Section
9.04, 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, provided, however, that such direction shall
not be otherwise than in accordance with law and the provisions of this
Indenture, and the Trustee shall have the right, subject to the provisions of
Section 8.01, to decline to follow any such direction if the Trustee shall,
being advised by counsel, determine that the action so directed may not be
lawfully taken, or if the Trustee in good faith shall, by a Responsible Officer
or officers of the Trustee, determine that the proceeding so directed would be
illegal or involve it in personal liability or that the action so directed would
be unduly prejudicial to the holders of Debentures not taking part in such
direction; and provided, further, that nothing in this Indenture shall impair
the right of the Trustee to take any action deemed proper by the Trustee and
which is not inconsistent with such direction by the Debentureholders. Prior to
the declaration of the maturity of the Debentures as provided in Section 7.01,
the holders of a majority in aggregate principal amount of the Debentures at the
time outstanding, determined in accordance with Section 9.04, may on behalf of
the holders of all of the Debentures waive any past default hereunder and its
consequences, except a default in the payment of the principal of or interest on
any of the Debentures. In the case of any such waiver, the Company, the Trustee
and the holders of the Debentures shall be restored to their former positions
and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 7.09. Trustee to Give Notice of Defaults Known to It,
but May Withhold in Certain Circumstances. The Trustee shall, within ninety days
after the occurrence of a default, give to the Debentureholders, in the manner
and to the extent provided in subsection (c) of Section 6.04 with respect to
reports pursuant to subsection (a) of said Section 6.04, notice of all defaults
known to the Trustee, unless such defaults shall have been cured before the
giving of such notice (the term "defaults" for the purposes of this Section
being hereby defined to be the events specified in clauses (a), (b), (c), (d)
and (e), of Section 7.0l, not including (i) any periods of grace provided for
therein and (ii) the written notice specified in clause (c) of Section 7.0l);
provided, that, except in the case of default in the payment of the principal of
or interest on any of the Debentures, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee, or a trust committee of directors and/or Responsible Officers, of the
Trustee in good faith determines that the withholding of such notice is in the
interests of the Debentureholders.
SECTION 7.10. Requirement of Undertaking to Pay Costs in Certain
Suits Under Indenture or Against Trustee. All parties to this Indenture agree,
and each holder of any Debenture by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken, suffered or omitted by it as Trustee, the
filing by any party litigant in such suit of an
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undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorney's fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; provided, that
the provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Debentureholder, or group of
Debentureholders, holding in the aggregate more than 10% in principal amount of
the Debentures outstanding, or to any suit instituted by any Debentureholder for
the enforcement of the payment of the principal of or interest on any Debenture,
on or after the due date expressed in such Debenture.
SECTION 7.11. Unconditional Right of Holders to Receive
Principal and Interest and to Convert. Notwithstanding any other provision in
this Indenture, the holder of any Debentures shall have the right, which is
absolute and unconditional, to receive payment of the principal of and interest
on such Debentures on the stated maturities expressed in such Debentures (or, in
the case of redemption or repurchase, on the Redemption Date or Repurchase Date,
as the case may be), and to convert such Debentures in accordance with Article
Four, and to institute suit for the enforcement of any such payment and right to
convert, and such rights shall not be impaired without the consent of such
holder.
SECTION 7.12. Restoration of Rights and Remedies. If the Trustee
or any holder of a Debenture 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 of Debentures shall be
restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and such holders shall
continue as though no such proceeding had been instituted.
SECTION 7.13. Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Debentures in the last paragraph of Section 2.07, no
right or remedy herein conferred upon or reserved to the Trustee or to the
holders of Debentures 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 7.14. 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
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(to the extent that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law and covenants that it will not hinder, delay or
impede the execution or 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 EIGHT
CONCERNING THE TRUSTEE
SECTION 8.01. Duty of Trustee Prior to and After Event of
Default. The Trustee, prior to the occurrence of an Event of Default and after
the curing or waiving of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture. In case an Event of Default has occurred (which has not
been cured or waived) the Trustee shall exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in
their exercise, as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs.
The Trustee upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee pursuant to any provision of this Indenture, shall examine them
to determine whether they conform to the requirements of this Indenture.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default and
after the curing or waiving of all such Events of Default which may have
occurred:
(1) the duties and obligations of the Trustee shall
be determined solely by the express provisions of this Indenture, and
the Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this Indenture,
and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(2) in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture;
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(b) the Trustee shall not be personally liable for any
error of judgment made in good faith by a Responsible Officer or
Responsible Officers of the Trustee, unless it shall be proven that the
Trustee was negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the direction of the holders of not less
than a majority in principal amount of the Debentures at the time
outstanding (determined as provided in Section 9.04) relating to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture.
SECTION 8.02. Certain Rights of Trustee:
(a) the Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution, Officers' Certificate,
certificate of a firm of independent public accountants, or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond, debenture 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, direction, order or demand by the
Company mentioned herein shall be sufficiently evidenced by an instrument signed
in the name of the Company by the Chairman of the Board, the President or a Vice
President and the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors may be
evidenced to the Trustee by a copy thereof certified by the Secretary or an
Assistant Secretary of the Company;
(c) the Trustee may consult with counsel and 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 accordance with such Opinion of Counsel;
(d) the Trustee shall be under no obligation to
exercise any of the trusts or powers vested in it by this Indenture at the
request, order or direction of any of the Debentureholders, pursuant to the
provisions of this Indenture, unless such Debentureholders shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby; nothing herein contained
shall, however, relieve the Trustee of the obligation, upon the occurrence of an
Event of Default (which has not been cured or waived) to exercise such of the
rights and powers vested in it by this Indenture, and to use the same degree
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of care and skill in their exercise as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs;
(e) the Trustee shall not be personally liable for
any action taken, suffered or omitted by it in good faith and believed by it to
be authorized or within the discretion or rights or powers conferred upon it by
this Indenture;
(f) prior to the occurrence of an Event of Default
hereunder and after the curing or waiving of all Events of Default, 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, consent, order, approval, bond, debenture, or other paper or document
unless requested in writing so to do by the holders of not less than a majority
in principal amount of the Debentures then outstanding; provided, however, that
if the payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expense or liability as a condition to so
proceeding. The reasonable expense of every such examination shall be paid by
the Company or, if paid by the Trustee, shall be repaid by the Company upon
demand;
(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
(h) none of the provisions of this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur any
personal 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.
SECTION 8.03. Trustee Not Liable for Recitals or Issuance of
Debentures. The recitals contained herein and in the Debentures (other than the
certificate of authentication on the Debentures) shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Debentures. The Trustee shall not be
accountable for the use or application by the Company of any of the Debentures
or of the proceeds of such Debentures, or for the use or application of any
moneys paid over by the Trustee in accordance with any provision of this
Indenture, or for the use or application of any moneys received by any paying
agent.
SECTION 8.04. Trustee or Others May Hold Debentures. The Trustee
or any paying agent or any Debenture Registrar, in its individual or any other
capacity,
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may become the owner or pledgee of Debentures with the same rights it would have
if it were not Trustee or any paying agent or Debenture Registrar.
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 or any paying agent or Debenture Registrar.
SECTION 8.05. Moneys Held in Trust. All moneys received by the
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but 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 moneys received by it hereunder. So long as no
Event of Default shall have occurred and be continuing, all interest allowed on
any such moneys shall be paid from time to time upon the written order of the
Company, signed by its Chairman of the Board, President or a Vice President or
its Treasurer or an Assistant Treasurer.
SECTION 8.06. Compensation, Reimbursement and Indemnity. The
Company covenants and agrees
(1) to pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
for all services rendered by it in the execution of the trusts hereby created
and in the exercise and performance of any of the powers and duties hereunder of
the Trustee;
(2) the Company will pay or reimburse the Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith;
(3) the Company will indemnify the Trustee for, and hold it
harmless against, any loss, liability or expense incurred without negligence or
bad faith on the part of the Trustee and arising out of or in connection with
the acceptance or administration of this trust, including the costs and expenses
of defending itself against any claim of liability in the premises.
The obligations of the Company under this Section to compensate
the Trustee and to pay or reimburse the Trustee for expenses, disbursements and
advances shall constitute additional indebtedness hereunder. Such additional
indebtedness shall be secured by a lien prior to that of the Debentures upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the benefit of the holders of particular Debentures.
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The provisions of this Section shall survive the termination of
this Indenture or the earlier resignation or removal of the Trustee.
SECTION 8.07. Right of Trustee to Rely on Officers'
Certificates. Except as otherwise provided in Section 8.01, whenever in the
administration of the trusts of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, such matter (unless other evidence
in respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by an Officers' Certificate, and such
certificate shall be full warrant to the Trustee for any action taken, suffered
or omitted by it under the provisions of this Indenture upon the faith thereof.
SECTION 8.08. Conflicting Interests. When this Indenture is
governed by the Trust Indenture Act, if the Trustee has or shall acquire a
conflicting interest within the meaning of Section 310(b) 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. In determining whether the Trustee has
conflicting interests as defined in Section 310(b)(1) of the Trust Indenture
Act, the provisions contained in the proviso to said Section 310(b)(1) shall be
deemed incorporated herein.
SECTION 8.09. Notice of Default. Within 90 days after the
occurrence of any default hereunder as to which the Trustee has received written
notice, the Trustee shall give to all holders of Debentures, in the manner
provided in Section 6.04(c), notice of such default, unless such default shall
have been cured or waived; provided, however, that, except in the case of a
default in the payment of the principal of, or interest on any Debentures, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee, or a trust committee of directors
or Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interest of the holders. 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. The proviso to the
first sentence of this Section 8.09 shall be in lieu of the proviso to Section
315(b) of the Trust Indenture Act, which latter proviso is hereby expressly
excluded from this Indenture.
SECTION 8.10. Requirements for Eligibility of Trustee. The
Trustee hereunder shall at all times be a corporation organized and doing
business under the laws of the United States or any State or Territory or of the
District of Columbia authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $1,000,000, subject to
supervision or examination by Federal, State, Territorial, or District of
Columbia authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its
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combined capital and surplus as set forth in its most recent report of condition
so published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall resign
immediately in the manner and with the effect specified in Section 8.11.
SECTION 8.11. Resignation and Removal of Trustee; Appointment of
Successor. (a) The Trustee, or any successor hereafter appointed, may at any
time resign and be discharged from the trust hereby created by mailing notice
thereof to the Company and to the Debentureholders whose names and addresses
appear in the information preserved at the time by the Trustee in accordance
with the provisions of Section 6.02(a). Upon receiving such notice of
resignation, the Company shall promptly appoint a successor trustee by written
instrument, in duplicate, executed by order of the Board of Directors, one copy
of which instrument shall be delivered to the resigning Trustee and one copy to
the successor trustee. If no successor trustee shall have been so appointed and
have accepted appointment within 30 days after the mailing of such notice of
resignation the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any Debentureholder
who has been a bona fide holder of a Debenture or Debentures for at least six
months may, subject to the provisions of Section 7.10, on behalf of himself and
all others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon after such notice, if any, as it may
deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the provisions
of Section 8.08 after written request therefor by the Company or by any
Debentureholder who has been a bona fide holder of a Debenture or
Debentures for at least six months;
(2) the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.10 and shall fail to resign after
written request therefor by the Company or by any such Debentureholder;
or
(3) the Trustee shall become incapable of acting, or
shall be adjudged as 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 he Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 7.10, any Debentureholder who has been a bona fide holder
of a Debenture or Debentures for at
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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 and
the appointment of a successor trustee. Such court may thereupon after such
notice, if any, as it may deem proper and prescribe, remove the Trustee and
appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of
the Debentures at the time outstanding may at any time remove the Trustee and
appoint a successor trustee.
(d) Any resignation or removal of the Trustee and any
appointment of a successor trustee pursuant to any of the provisions of this
Section shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 8.12.
SECTION 8.12. Acceptance by Successor to Trustee. Any successor
trustee appointed as provided in Section 8.11 shall execute, acknowledge and
deliver to the Company and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as trustee herein. The predecessor trustee, upon
payment to it of all amounts due it under Section 8.06 shall, nevertheless, at
the written request of the successor trustee, pay over to the successor trustee
all moneys at the time held by it hereunder; and the Company and the predecessor
trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for more fully and certainly vesting and confirming
in the successor trustee all such rights, powers, duties and obligations.
No successor trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 8.08 and eligible under the
provisions of Section 8.10.
Upon acceptance of appointment by a successor trustee as
provided in this Section, the Company shall mail notice of the succession of
such trustee hereunder to all Debentureholders at their last addresses appearing
upon the registry books.
SECTION 8.13. Successor to Trustee by Merger or Consolidation or
Succession to Business. Any corporation into which the Trustee may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be qualified under the provisions of
Section 8.08 and eligible under the provisions of Section 8.10, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
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SECTION 8.14. Authenticating Agents. The Trustee may, with the consent
of the Company, appoint an additional authenticating agent or agents acceptable
to the Company with respect to the Debentures which shall be authorized to act
on behalf of the Trustee to authenticate Debentures issued upon exchange or
substitution pursuant to this Indenture. (Each such agent hereinafter called
"Authenticating Agent").
Debentures authenticated by an Authenticating Agent 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, and every reference in
this Indenture to the authentication and delivery of Debentures by the Trustee
or the Trustee's certificate of authentication 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 subject to acceptance
by the Company and shall at all times be a corporation organized and doing
business under the laws of the United States of America, any State thereof, or
the District of Columbia, authorized under such laws to act as Authenticating
Agent and subject to supervision or examination by government or other fiscal
authority. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section 8.14, such Authenticating Agent
shall resign immediately in the manner and with the effect specified in this
Section 8.14.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section 8.14, 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 8.14, the Trustee may appoint a successor
Authenticating Agent which shall be subject to acceptance by the Company. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section 8.14.
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The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section 8.14.
If an Authenticating Agent is appointed with respect to the Debentures
pursuant to this Section 8.14, the Debentures may have endorsed thereon, in
addition to or in lieu of the Trustee's certification of authentication, an
alternative certificate of authentication in the following form:
"This is one of the Debentures referred to in the within-mentioned
Indenture.
Dated: [ ]
as Trustee
By [Authenticating agent].
as Authenticating Agent
By______________________________
Authorized Signatory "
[In case any Debentures 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 Debentures so authenticated with the same effect as if such
successor trustee had itself authenticated such Debentures.]
SECTION 8.15. Preferential Collection of Claims Against Company.
(a) Subject to the provisions of subsection (b) of this Section, if the Trustee
in its individual capacity shall be or shall become a creditor, directly or
indirectly, secured or unsecured, of the Company or of any other obligor on the
Debentures within three months prior to a default, as defined in subsection (c)
of this Section, or subsequent to such a default, then, unless and until such
default shall be cured, the Trustee shall set apart and hold in a special
account for the benefit of the Trustee individually, the holders of the
Debentures and the holders of other indenture securities (as defined in
subsection (c) of this Section):
(1) an amount equal to any and all reductions in the
amount due and owing upon any claim as such creditor in respect of
principal or interest, effected after the beginning of such three
months' period and valid as against the Company and its other creditors,
except any such reduction resulting from the receipt or disposition of
any property described in paragraph (2) of this subsection, or from the
exercise of any right of set-off which the Trustee could have exercised
if a petition in bankruptcy had been filed by or against the Company
upon the date of such default; and
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(2) all property received by the Trustee in respect of
any claim as such creditor, either as security therefor, or in
satisfaction or composition thereof, or otherwise, after the beginning
of such three months' period, or an amount equal to the proceeds of any
such property, if disposed of, subject, however, to the rights, if any,
of the Company and its other creditors in such property or such
proceeds.
Nothing herein contained, however, shall affect the right of the
Trustee:
(A) to retain for its own account (i) payments
made on account of any such claim by any person (other than the
Company) who is liable thereon, and (ii) the proceeds of the
bona fide sale of any such claim by the Trustee to a third
person, and (iii) distributions made in cash, securities, or
other property in respect of claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization
pursuant to the Bankruptcy Code or applicable State law;
(B) to realize, for its own account, upon any
property held by it as security for any such claim, if such
property was so held prior to the beginning of such three
months' period;
(C) to realize, for its own account, but only to
the extent of the claim hereinafter mentioned, upon any property
held by it as security for any such claim, if such claim was
created after the beginning of such a three months' period and
such property was received as security therefor simultaneously
with the creation thereof, and if the Trustee shall sustain the
burden of proving that at the time such property was so received
the Trustee had no reasonable cause to believe that a default,
as defined in subsection (c) of this Section, would occur within
three months; or
(D) to receive payment on any claim referred to
in paragraph (B) or (C), against the release of any property
held as security for such claim as provided in such paragraph
(B) or (C), as the case may be, to the extent of the fair value
of such property.
For the purposes of paragraphs (B), (C), and (D), property
substituted after the beginning of such a three months' period for property held
as security at the time of such substitution shall, to the extent of the fair
value of the property released, have the same status as the property released,
and, to the extent that any claim referred
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to in any of such paragraphs is created in renewal of or in substitution for or
for the purpose of repaying or refunding any pre-existing claim of the Trustee
as such creditor, such claim shall have the same status as such pre-existing
claim.
If the Trustee shall be required to account, the funds and
property held in such special account and the proceeds thereof shall be
apportioned between the Trustee, the Debentureholders and the holders of other
indenture securities in such manner that the Trustee, the Debentureholders and
the holders of other indenture securities realize, as a result of payments from
such special account and payments of dividends on claims filed against the
Company in bankruptcy or receivership or in proceedings for reorganization
pursuant to the Bankruptcy Code or applicable State law, the same percentage of
their respective claims, figured before crediting to the claim of the Trustee
anything on account of the receipt by it from the Company of the funds and
property in such special account and before crediting to the respective claims
of the Trustee, the Debentureholders and the holders of other indenture
securities dividends on claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Bankruptcy
Code or applicable State law, but after crediting thereon receipts on account of
the indebtedness represented by their respective claims from all sources other
than from such dividends and from the funds and property so held in such special
account. As used in this paragraph, with respect to any claim, the term
"dividends" shall include any distribution with respect to such claim, in
bankruptcy or receivership or in proceedings for reorganization pursuant to the
Bankruptcy Code or applicable State law, whether such distribution is made in
cash, securities, or other property, but shall not include any such distribution
with respect to the secured portion, if any, of such claim. The court in which
such bankruptcy, receivership or proceeding for reorganization is pending shall
have jurisdiction (i) to apportion between the Trustee, the Debentureholders and
the holders of other indenture securities, in accordance with the provisions of
this paragraph, the funds and property held in such special account and the
proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to
give to the provisions of this paragraph due consideration in determining the
fairness of the distributions to be made to the Trustee, the Debentureholders
and the holders of other indenture securities with respect to their respective
claims, in which event it shall not be necessary to liquidate or to appraise the
value of any securities or other property held in such special account or as
security for any such claim, or to make a specific allocation of such
distributions as between the secured and unsecured portions of such claims, or
otherwise to apply the provisions of this paragraph as a mathematical formula.
Any Trustee who has resigned or been removed after the beginning
of such a three months period shall be subject to the provisions of this
subsection (a) as though such resignation or removal had not occurred. If any
Trustee has resigned or been removed prior to the beginning of such a three
months period, it shall be subject to the provisions of this subsection (a) if
and only if the following conditions exist:
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(i) the receipt of property or reduction of claim which
would have given rise to the obligation to account, if such
Trustee had continued as trustee, occurred after the beginning
of such three months period; and
(ii) such receipt of property or reduction of claim
occurred within three months after such resignation or removal.
(b) There shall be excluded from the operation of subsection (a)
of this Section a creditor relationship arising from
(1) the ownership or acquisition of securities issued
under any indenture, or any security or securities having a
maturity of one year or more at the time of acquisition by the
Trustee;
(2) advances authorized by receivership or bankruptcy
court of competent jurisdiction, or by this Indenture, for the
purpose of preserving any property which shall at any time be
subject to the lien of this Indenture or of discharging tax
liens or other prior liens or encumbrances thereon, if notice of
such advance and of the circumstances surrounding the making
thereof is given to the Debentureholders at the time and in the
manner provided in Section 6.04 of this Indenture;
(3) disbursements made in the ordinary course of
business in the capacity of trustee under an indenture, transfer
agent, registrar, custodian, paying agent, fiscal agent or
depositary, or other similar capacity;
(4) an indebtedness created as a result of services
rendered or premises rented; or an indebtedness created as a
result of goods or securities sold in a cash transaction as
defined in subsection (c) of this Section;
(5) the ownership of stock or of other securities of a
corporation organized under the provisions of Section 25(a) of
the Federal Reserve Act, as amended, which is directly or
indirectly a creditor of the Company; or
(6) the acquisition, ownership, acceptance or
negotiation of any drafts, bills of exchange, acceptances or
obligations which fall within the classification of
self-liquidating paper as defined in subsection (c) of this
Section.
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(c) As used in this Section:
(1) The term "default" shall mean any failure to make
payment in full of the principal of or interest upon any of the
Debentures or upon the other indenture securities when and as
such principal or interest becomes due and payable.
(2) The term "other indenture securities" shall mean
securities upon which the Company is an obligor (as defined in
the Trust Indenture Act of 1939) outstanding under any other
indenture (A) under which the Trustee is also trustee, (B) which
contains provisions substantially similar to the provisions of
subsection (a) of this Section, and (C) under which a default
exists at the time of the apportionment of the funds and
property held in said special account.
(3) The term "cash transaction" shall mean any
transaction in which full payment for goods or securities sold
is made within seven days after delivery of the goods or
securities in currency or in checks or other orders drawn upon
banks or bankers and payable upon demand.
(4) The term "self-liquidating paper" shall mean any
draft, bill of exchange, acceptance or obligation which is made,
drawn, negotiated or incurred by the Company for the purpose of
financing the purchase, processing, manufacture, shipment,
storage or sale of goods, wares or merchandise and which is
secured by documents evidencing title to, possession of, or a
lien upon, the goods, wares or merchandise or the receivables or
proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the
security is received by the Trustee simultaneously with the
creation of the creditor relationship with the Company arising
from the making, drawing, negotiating or incurring of the draft,
bill of exchange, acceptance or obligation.
(5) The term "Company" shall mean any obligor upon the
Debentures.
ARTICLE NINE
CONCERNING THE DEBENTUREHOLDERS
SECTION 9.01. Evidence of Action Taken by Debentureholders.
Whenever in this Indenture it is provided that the holders of a specified
percentage in
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aggregate principal amount of the Debentures may take any action (including the
making of any demand or request, the giving of any notice, consent or waiver or
the taking of any other action), the fact that at the time of taking any such
action the holders of such specified percentage have joined therein may be
evidenced (a) by any instrument or any number of instruments of similar tenor
executed by Debentureholders in person or by attorney or proxy appointed in
writing, or (b) by the record of the holders of Debentures voting in favor
thereof at any meeting of Debentureholders duly called and held in accordance
with the provisions of Article Ten, or (c) by a combination of such instrument
or instruments and any such record of such a meeting of Debentureholders.
SECTION 9.02. Proof of Execution of Instruments and of Holding
of Debentures. Subject to the provisions of Section 8.01, proof of the execution
of any instrument by a Debentureholder or his attorney or proxy and proof of the
holding by any person of any of the Debentures shall be sufficient for any
purpose of this Indenture if made in the following manner:
(a) The fact and date of the execution by any such
person of any instrument may be proven by the certificate of any
notary public or other officer of any jurisdiction of or within
the United States of America authorized to take acknowledgment
of deeds, that the person executing such instrument acknowledged
to him the execution thereof, or by an affidavit of a witness to
such execution sworn to before any such notary or other such
officer, or by any other method deemed appropriate by the
Trustee; and
(b) The ownership of Debentures shall be proven by the
registers of such Debentures or by a certificate of any duly
appointed registrar thereof.
The Trustee shall not be bound to recognize any person as a
Debentureholder unless and until his title to the Debentures held by him is
proved in the manner in this Article provided.
The record of any Debentureholders' meeting shall be proven in
the manner provided in Section 10.06.
The Trustee may require such additional proof of any matter
referred to in this Section as it shall deem necessary.
SECTION 9.03. Registered Holders of Debentures May be Treated as
Owners. Prior to due presentment for registration of transfer, the Company, the
Trustee, any paying agent and any Debenture Registrar may deem and treat the
person in whose name any Debenture shall be registered upon the books of the
Company as the absolute owner of such Debenture (whether or not such Debenture
shall be overdue
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and notwithstanding any notice of ownership or writing thereon made by anyone),
for the purpose of receiving payment of or on account of the principal of and
interest on such Debenture and for all other purposes, and neither the Company
nor the Trustee nor any paying agent nor any Debenture Registrar shall be
affected by any notice to the contrary. All such payments so made to any such
registered holder, for the time being or upon his order, shall be valid, and, to
the extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for moneys payable upon any such Debenture.
SECTION 9.04. Debentures Owned by Company Deemed Not
Outstanding. In determining whether the holders of the requisite aggregate
principal amount of Debentures have concurred in any direction, consent or
waiver under this Indenture, Debentures which are owned by the Company or any
other obligor on the Debentures or by any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the Debentures shall be disregarded and deemed
not to be outstanding for the purpose of any such determination, except that for
the purpose of determining whether the Trustee shall be protected in relying on
any such direction, consent or waiver only Debentures which the Trustee knows
are so owned shall be so disregarded. Debentures so owned which have been
pledged in good faith may be regarded as outstanding for the purposes of this
Section, if the pledgee shall establish to the satisfaction of the Trustee the
pledgee's right to vote such Debentures and that the pledgee is not a person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any such other obligor. In case of a dispute
as to such right, any decision by the Trustee taken upon the advice of counsel
shall be full protection to the Trustee.
SECTION 9.05. Action by Debentureholders Binds Future Holder.
Any demand, request, waiver, consent or vote of the holder of any Debenture
shall be conclusive and binding upon such holder and upon all future holders and
owners of such Debenture, and of any Debenture issued in exchange therefor or in
place thereof, irrespective of whether or not any notation in regard thereto is
made upon such Debenture. Any action taken by the holders of the majority or
percentage in aggregate principal amount of the Debentures specified in this
Indenture in connection with such action shall be conclusively binding upon the
Company, the Trustee and the holders of all the Debentures.
ARTICLE TEN
DEBENTUREHOLDERS' MEETINGS
SECTION 10.01. Purposes For Which Meetings May Be Called. A
meeting of Debentureholders may be called at any time and from time to time
pursuant to the provisions of this Article for any of the following purposes:
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(1) to give any notice to the Company or to the
Trustee, or to give any directions to the Trustee, or to consent
to the waiving of any default hereunder and its consequences, or
to take any other action authorized to be taken by
Debentureholders pursuant to any of the provisions of Article
Seven;
(2) to remove the Trustee and appoint a successor
trustee pursuant to the provisions of Article Eight;
(3) to consent to the execution of an indenture or
indentures supplemental hereto pursuant to the provisions of
Section 11.02; or
(4) to take any other action authorized to be taken by
or on behalf of the holders of any specified aggregate principal
amount of the Debentures under any other provision of this
Indenture, or authorized or permitted by law.
SECTION 10.02. Manner of Calling Meetings. The Trustee may at
any time call a meeting of Debentureholders to take any action specified in
Section 10.01, to be held at such time and at such place in the Borough of
Manhattan, City and State of New York, as the Trustee shall determine. Notice of
every meeting of the Debentureholders, setting forth the time and the place of
such meeting and in general terms the action proposed to be taken at such
meeting, shall be mailed not less than 15 days prior to the date fixed for the
meeting to the Debentureholders whose names and addresses appear in the
information preserved at the time by the Trustee in accordance with the
provisions of Section 6.02(a).
Any meeting of Debentureholders shall be valid without notice if
the holders of all Debentures then outstanding are present in person or by proxy
or if notice is waived before or after the meeting by the holders of all
Debentures outstanding, and if the Company and the Trustee are either present by
duly authorized representatives or have, before or after the meeting, waived
notice.
SECTION 10.03. Call of Meetings by Company or Certain Holders.
In case at any time the Company, pursuant to a resolution of its Board of
Directors, or the holders of at least 20% in aggregate principal amount of the
Debentures then outstanding, shall have requested the Trustee to call a meeting
of Debentureholders to take any action specified in Section 10.01, by written
request setting forth in reasonable detail the action proposed to be taken at
the meeting and the time and place in the Borough of Manhattan, City and State
of New York, for such meeting, the Trustee shall mail notice of such meeting as
provided in Section 10.02 within 20 days after receipt of such request if the
request is received at least 35 days before such meeting.
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SECTION 10.04. Persons Entitled to Vote At a Meeting. To be
entitled to vote at any meeting of Debentureholders a person shall (a) be a
holder of one or more Debentures or (b) be a person appointed by an instrument
in writing as proxy for the holder or holders of Debentures by a holder of one
or more Debentures. The only persons who shall be entitled to be present or to
speak at any meeting of Debentureholders shall be the persons entitled to vote
at such meeting and their counsel and any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel.
SECTION 10.05. Quorum; Action. The Persons entitled to vote a
majority in principal amount of the outstanding Debentures shall constitute a
quorum. In the absence of a quorum within 30 minutes of the time appointed for
any such meeting, the meeting shall, if convened at the request of holders of
Debentures, be dissolved. In any other case, the meeting may be adjourned for a
period of not less than 10 days as determined by the chairman of the meeting
prior to the adjournment of such meeting. In the absence of a quorum at any such
adjourned meeting, such adjourned meeting may be further adjourned for a period
not less than 10 days as determined by the chairman of the meeting prior to the
adjournment of such adjourned meeting (subject to repeated applications of this
sentence). Notice of the reconvening of any adjourned meeting shall be given as
provided in Section 10.02, except that such notice need be given only once not
less than five days prior to the date on which the meeting is scheduled to be
reconvened. Notice of the reconvening of an adjourned meeting shall state
expressly the percentage of the principal amount of the outstanding Debentures
which shall constitute a quorum.
Subject to the foregoing, at the reconvening of any meeting
adjourned for a lack of a quorum, the Persons entitled to vote 25% in principal
amount of the outstanding Debentures at the time shall constitute a quorum for
the taking of any action set forth in the notice of the original meeting.
Except as otherwise provided by the Trust Indenture Act, after
this Indenture is qualified thereunder, at a meeting or an adjourned meeting
duly reconvened and at which a quorum is present as aforesaid, any resolution
and all matters (except as limited by the provisos to Section 11.02) shall be
effectively passed and decided if passed or decided by the Persons entitled to
vote not less than a majority in principal amount of outstanding Debentures
represented and entitled to vote at such meeting.
Any resolution passed or decisions taken at any meeting of
holders of Debentures duly held in accordance with this Section shall be binding
on all the holders of Debentures, whether or not present or represented at the
meeting. The Trustee shall, in the name and at the expense of the Company,
notify all the holders of Debentures of any such resolutions or decisions
pursuant to Section 10.05.
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SECTION 10.06. Determination of Voting Rights; Conduct and
Adjournment of Meeting. Notwithstanding any other provision of this Indenture,
the Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Debentureholders, in regard to proof of the holding of Debentures
and of the appointment of proxies, and in regard to the appointment and duties
of inspectors of votes, the submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit. Except as otherwise permitted or
required by any such regulations, the holding of Debentures shall be proven in
the manner specified in Section 9.02 and the appointment of any proxy shall be
proven in the manner specified in said Section 9.02 or by having the signature
of the person executing the proxy witnessed or guaranteed by any bank, bankers,
trust company, broker or dealer deemed by the Trustee to be satisfactory.
The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Debentureholders as provided in Section 10.03, in which case
the Company or the Debentureholders calling the meeting, as the case may be,
shall in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the holders of a
majority in principal amount of the Debentures represented at the meeting and
entitled to vote.
Subject to the provisions of Section 9.04, at any meeting each
Debentureholder or proxy shall be entitled to one vote for each $25.00 principal
amount of Debentures, provided, however, that no vote shall be cast or counted
at any meeting in respect of any Debentures challenged as not outstanding and
ruled by the chairman of the meeting to be not outstanding. The chairman of the
meeting shall have no right to vote other than by virtue of Debentures held by
him or instruments in writing as aforesaid duly designating him as the person to
vote on behalf of other Debentureholders. Any meeting of Debentureholders duly
called pursuant to the provisions of Section 10.02 or 10.03 may be adjourned
from time to time, and the meeting may be held as so adjourned without further
notice except as provided in Section 10.05.
SECTION 10.07. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Debentureholders shall
be by written ballots on which shall be subscribed the signatures of the holders
of Debentures or of their representatives by proxy. The permanent chairman of
the meeting shall appoint two inspectors of votes, who shall count all votes
cast at the meeting for or against any resolution and who shall make and file
with the secretary of the meeting their verified written reports in duplicate of
all votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Debentureholders shall be prepared by the secretary of the meeting
and there shall be attached to said record the original reports of the
inspectors of votes on any vote by ballot taken thereat and affidavits by one or
more persons having knowledge of the facts, setting forth a copy of the notice
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of the meeting and showing that said notice was mailed as provided in Section
10.02. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
SECTION 10.08. No Delay. Nothing in this Article contained shall
be deemed or construed to authorize or permit, by reason of any call of a
meeting of Debentureholders or any rights expressly or impliedly conferred
hereunder to make such call, any hindrance or delay in the exercise of any right
or rights conferred upon or reserved to the Trustee or to the Debentureholders
under any of the provisions of this Indenture or of the Debentures.
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
SECTION 11.01. Supplemental Indentures Authorized By Directors.
The Company, when authorized by a resolution of its Board of Directors, and the
Trustee, subject to the conditions and restrictions in this Indenture contained,
may from time to time and at any time enter into an indenture or indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act of 1939 as then in effect) for one or more of the following
purposes:
(a) to evidence the succession of another corporation
to the Company, or successive successions, and the assumption by
the successor corporation of the covenants, agreements and
obligations of the Company pursuant to Article Twelve;
(b) to add to the covenants and agreements of the
Company in this Indenture contained such further covenants and
agreements thereafter to be observed, and to surrender any right
or power herein reserved to or conferred upon the Company;
(c) to cure any ambiguity or to correct or supplement
any defective or inconsistent provision contained in this
Indenture or in any supplemental indenture;
(d) to make such provisions with respect to matters or
questions arising under this Indenture as may be necessary or
desirable and not inconsistent with this Indenture; and
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(e) to amend or supplement the Debentures, and related
documentation to modify the restrictions on and procedures for
resale or other transfers of the Debentures and any Common Stock
to reflect any change in applicable law or regulation (or
interpretation thereof) or in practices relating to the resale
or transfer of restricted securities generally.
The Trustee is hereby authorized to join with the Company in the
execution of any supplemental indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations
which may be therein contained, but the Trustee 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.
Any supplemental indenture authorized by the provisions of this
Section may be executed by the Company and the Trustee without the consent of
the holders of any of the Debentures at the time outstanding, notwithstanding
any of the provisions of Section 11.02.
SECTION 11.02. Supplemental Indentures with Consent of
Debentureholders. With the consent (evidenced as provided in Section 9.01) of
the holders (or persons entitled to vote, or to give consents respecting the
same) of not less than a majority in aggregate principal amount of the
Debentures at the time outstanding, the Company, when authorized by a resolution
of its Board of Directors, and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act of 1939 as then in effect) for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of any supplemental indenture or of
modifying in any manner the rights and obligations of the holders of the
Debentures and of the Company; provided, however, that no such supplemental
indenture shall (i) extend the fixed maturity of any Debentures, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon, or change the conversion or subordination provisions in a
manner adverse to the holders, without the consent of the holder of each
Debenture so affected, or (ii) reduce the requirements of Section 10.05 for
quorum or voting or reduce the aforesaid percentage of Debentures the holders of
which are required to consent to any such supplemental indenture, without the
consent of the holders of all Debentures then outstanding; or (iii) modify the
obligation of the Company to maintain an office or agency in the Borough of
Manhattan City and State of New York pursuant to Section 5.02.
Upon the request of the Company, accompanied by a copy of a
resolution of its Board of Directors certified by the Secretary or an Assistant
Secretary of the Company authorizing the execution of any such supplemental
indenture, and upon the
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filing with the Trustee of evidence of the consent of Debentureholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
It shall not be necessary for the consent of the
Debentureholders under this Section to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
Promptly after the execution by the Company and the Trustee of
any supplemental indenture pursuant to the provisions of this Section, the
Company shall mail a notice, setting forth in general terms the substance of
such supplemental indenture, to all Debentureholders at their last addresses
appearing upon the registry books. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
SECTION 11.03. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture pursuant to the provisions of this
Article, this Indenture shall be and be deemed to be modified and amended in
accordance therewith and the respective rights, limitations of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Debentures shall thereafter be determined, exercised
and enforced hereunder subject in all respects to such modifications and
amendments, and all the terms and conditions of any such supplemental indenture
shall be deemed to be part of the terms and conditions of this Indenture for any
and all purposes.
SECTION 11.04. Notation on Debentures in Respect of Supplemental
Indentures. Debentures authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article, or after any
action taken at a Debentureholders' meeting pursuant to Article Ten, may bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture or as to any action taken at any such meeting; and, in
such case, suitable notation may be made upon outstanding Debentures after
proper presentation and demand. If the Company or the Trustee shall so
determine, new Debentures so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture, or to any action taken at any such
meeting, may be prepared by the Company, authenticated by the Trustee and
delivered in exchange for the Debentures then outstanding, upon demand by, and
without cost to, the holders thereof, upon surrender of such Debentures.
SECTION 11.05. Trustee May Receive Opinion of Counsel. The
Trustee, subject to the provisions of Section 8.01, may receive an Opinion of
Counsel
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as conclusive evidence that any supplemental indenture executed pursuant to this
Article is authorized or permitted by the terms of this Indenture and that it is
not inconsistent therewith. The Trustee shall not be obliged to join in the
execution of any supplemental indenture unless it shall receive an Officers'
Certificate stating that no consent to the execution thereof is required of any
holder of Senior Indebtedness at the time outstanding or that such consents have
been obtained.
ARTICLE TWELVE
CONSOLIDATION, MERGER AND SALE
SECTION 12.01. Company May Consolidate, etc. Nothing contained
in this Indenture or in any of the Debentures shall prevent any consolidation or
merger of the Company with or into any other corporation or corporations
(whether or not affiliated with the Company), or successive consolidations or
mergers in which the Company or its successor or successors shall be a party or
parties, or shall prevent any sale or conveyance (or successive sales or
conveyances) of the property and assets of the Company (or of its successor or
successors) as an entirety or substantially as an entirety, to any other
corporation (whether or not affiliated with the Company) authorized to acquire
the same; provided, however, and the Company hereby covenants and agrees that,
upon any such consolidation, merger, sale or conveyance, the due and punctual
payment of the principal of and interest on all of the Debentures, according to
their tenor, and the due and punctual performance and observance of all the
terms, covenants and conditions of this Indenture to be kept or performed by the
Company, shall be expressly assumed, by indenture supplemental hereto,
satisfactory in form to the Trustee, executed and delivered to the Trustee by
the corporation formed by such consolidation, or into which the Company shall
have been merged, or by the corporation which shall have acquired such property
and assets. In the event of any such sale or conveyance the predecessor Company
may be dissolved, wound up and liquidated at any time thereafter.
SECTION 12.02. Successor Corporation to be Substituted. In case
of any such consolidation, merger, sale or conveyance and upon the execution by
the successor corporation of an indenture supplemental hereto, as provided in
Section 12.01, such successor corporation shall succeed to and be substituted
for the Company, with the same effect as if it had been named herein as the
party of the first part. Such successor corporation thereupon may cause to be
signed, and may issue either in its own name or in the name of the Company, with
such suitable reference, if any, to such consolidation, merger, sale or
conveyance as may be required by the Trustee, any or all of the Debentures
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the written order of such successor
corporation, instead of the Company, and subject to all the terms, conditions
and limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Debentures which previously shall have been signed and
delivered by the
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officers of the Company to the Trustee for authentication, and any Debentures
which such successor corporation thereafter shall cause to be signed in
accordance with the provisions of this Indenture and delivered to the Trustee
for that purpose. All the Debentures so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Debentures theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Debentures had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale or conveyance,
such changes in phraseology and form (but not in substance) may be made in the
Debentures thereafter to be issued as may be appropriate.
Nothing contained in this Indenture or in any of the Debentures
shall prevent the Company from consolidating or merging into itself or acquiring
by purchase or otherwise all or any part of the property of any other
corporation (whether or not affiliated with the Company).
SECTION 12.03. Opinion of Counsel as Evidence. The Trustee,
subject to the provisions of Section 8.01, may receive an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, sale or conveyance, and
any such assumption, complies with the provisions of this Article.
ARTICLE THIRTEEN
SUBORDINATION OF DEBENTURES
SECTION 13.01. Agreement to Subordinate. The Company covenants
and agrees, and each holder of Debentures, by his acceptance thereof, likewise
covenants and agrees, that the payment of the principal of and interest on each
and all of the Debentures is hereby expressly subordinated, to the extent and in
the manner hereinafter set forth, in right of payment to the prior payment in
full of all Senior Indebtedness.
SECTION 13.02. Distribution on Dissolution or Reorganization.
(a) If, upon any distribution, division or application, partial or complete,
voluntary or involuntary, by operation of law or otherwise, of all or any part
of the assets of the Company upon any dissolution, winding up, liquidation,
readjustment or reorganization of the Company or its property, whether in
bankruptcy, insolvency or receivership proceedings or at execution sale or upon
an assignment for the benefit of creditors or any other marshalling of the
assets and liabilities of the Company or otherwise, then, in any such case, the
holders of all Senior Indebtedness shall first be entitled to receive payment in
full of the principal thereof (and premium, if any) and the interest accrued and
unpaid thereon before the holders of the Debentures are entitled to receive any
payment upon the principal of or interest on indebtedness evidenced by the
Debentures;
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and upon any such application, dissolution, winding up, liquidation,
readjustment or reorganization, any payment or distribution of assets of the
Company of any kind or character whether in cash, property or securities (other
than shares of stock of the Company as reorganized or readjusted or securities
of the Company or any other corporation provided for by a plan of reorganization
or readjustment, the payment of which is subordinated to the payment of all
Senior Indebtedness which may at the time be outstanding) to which the holders
of the Debentures or the Trustee would be entitled except for the provisions of
this Article shall be paid by the Company or the liquidating trustee or agent or
other person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or whatsoever, direct to the
holders of Senior Indebtedness or their representative or representatives or to
the trustee or trustees under any indenture under which any instruments
evidencing any of such Senior Indebtedness may have been issued, ratably
according to the aggregate amounts remaining unpaid on account of the principal
of (and premium, if any) and interest on the Senior Indebtedness held or
represented by each, to the extent necessary to pay in full all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness; and in the event that,
notwithstanding the foregoing, upon any such application, dissolution, winding
up, liquidation, readjustment or reorganization, any payment or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities (other than shares of stock of the Company as reorganized or
readjusted or securities of the Company or any other corporation provided for by
a plan of reorganization or readjustment, the payment of which is subordinated
to the payment of all Senior Indebtedness which may at the time be outstanding)
shall be received by the Trustee or the holders of the Debentures before all
Senior Indebtedness is paid in full, such payment or distribution shall be paid
over to the holders of such Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under which
any instruments evidencing any of such Senior Indebtedness may have been issued,
ratably as aforesaid, for application to the payment of all Senior Indebtedness
remaining unpaid until all such Senior Indebtedness shall have been paid in
full, after giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness. Subject to the payment in full of all
Senior Indebtedness, the holders of the Debentures shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or distribution
of assets of the Company applicable to the Senior Indebtedness until the
principal of and interest on the Debentures shall be paid in full and no such
payments or distributions to the Senior Indebtedness shall, as between the
Company, its creditors other than the holders of Senior Indebtedness, and the
holders of the Debentures, be deemed to be a payment by the Company to or on
account of the Debentures, it being understood that the provisions of this
Article are and are intended solely for the purpose of defining the relative
rights of the holders of the Debentures, on the one hand, and the holders of the
Senior Indebtedness, on the other hand, and nothing contained in this Article or
elsewhere in this Indenture or in the Debentures is intended to or shall impair,
as between the Company, its creditors other than the holders of Senior
Indebtedness, and the holders of the Debentures, the obligation of the Company,
which is unconditional and absolute, to pay to the holders
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of the Debentures the principal of and interest on the Debentures as and when
the same shall become due and payable in accordance with their terms, or to
affect the relative rights of the holders of the Debentures and creditors of the
Company other than the holders of the Senior Indebtedness, nor shall anything
herein or therein prevent the Trustee or the holder of any Debenture from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article of the holders
of Senior Indebtedness in respect of cash, property or securities of the Company
received upon the exercise of any such remedy. Upon any application or
distribution of assets of the Company referred to in this Article, the Trustee,
subject to the provisions of Section 8.01 hereof, and the holders of the
Debentures shall be entitled to rely upon a certificate of a trustee in
bankruptcy, a receiver, a liquidating trustee or agent or other person making
any distribution to the Trustee or to the holders of the Debentures for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article.
(b) In the event and during the continuation of any default in
the payment of the principal of, or premium or sinking fund installments, if
any, or interest on, any Senior Indebtedness, or any default, or any event
which, with notice or lapse of time or both, would constitute a default, in any
other agreement, term or condition contained in any agreement under which any
Senior Indebtedness is issued, if the effect of such default is to cause, or
permit the holder or holders of such Senior Indebtedness (or a trustee on behalf
of such holder or holders) to cause, such Senior Indebtedness to become due
prior to its stated maturity, no payment of principal, or interest shall be made
on the Debentures unless and until such default shall have been remedied, if
written notice of such default, or of judicial proceedings pending with respect
to such default, has been given to the Trustee by the Company, or by any holder
of Senior Indebtedness, nor shall any such payment be made if after giving
effect, as if paid, to such payment, any such default would exist in the
performance or observance of any covenant or agreement of the Company contained
in any agreement under which any Senior Indebtedness shall have been issued or
pursuant to which Senior Indebtedness shall have been incurred. The Company
shall promptly notify the Trustee in writing of the existence of any such
default or event or of any judicial proceedings pending with respect to any such
default. Within 15 days after receipt of any such notice, the Trustee shall send
notification thereof to the Debentureholders in the manner and to the extent
provided in Section 6.04(c).
SECTION 13.03. Payments Permitted; Knowledge of Trustee. Nothing
contained in this Article or elsewhere in this Indenture, or in any of the
Debentures, shall prevent (a) the Company, at any time except during the
tendency of any such dissolution, winding up, liquidation, readjustment or
reorganization proceedings, from making payments at any time of principal of or
interest on the Debentures, or (b) the
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application by the Trustee of any moneys deposited with it hereunder to the
payment of or on account of the principal of or interest on the Debentures.
Notwithstanding the provisions of this Article Thirteen or any
other provision of this Indenture, or of the Debentures, but subject to the
provisions of Section 7.07 and Section 8.01 of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any Senior Indebtedness nor of
any default in the payment of principal, premium, if any, sinking funds or
interest with respect to any Senior Indebtedness, or of any other default with
respect to any Senior Indebtedness, unless and until the Trustee shall have
received written notice thereof at its corporate trust office from the Company
or the holder or holders of such Senior Indebtedness or any trustee on behalf of
such holders who shall have been certified to be such by the Company or who
shall have otherwise established to the reasonable satisfaction of the Trustee
that he is such a holder or trustee; nor shall the Trustee be charged with
knowledge of the curing or waiving of any such default unless and until the
Trustee shall have received an Officers' Certificate of the Company to such
effect. The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Indebtedness, and shall not be liable to any such holder if it shall,
in the exercise of reasonable care, mistakenly pay over or distribute to holders
of Debentures, the Company, or any other person, moneys or assets to which any
holder of Senior Indebtedness shall be entitled by virtue of this Article
Thirteen or otherwise.
Nothing in this Article shall affect the claims of or payments
to the Trustee under or pursuant to Section 8.06.
SECTION 13.04. Debentureholders Authorize Trustee to
Subordinate. Each holder of Debentures by his acceptance thereof authorizes the
Trustee in his behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article and appoints the
Trustee his attorney-in-fact for any and all such purposes.
SECTION 13.05. Trustee May Hold Senior Indebtedness. The Trustee
shall be entitled to all the rights set forth in this Article in respect of any
Senior Indebtedness at any time held by it, to the same extent as any other
holder of Senior Indebtedness, and nothing in Section 8.15 or elsewhere in this
Indenture shall be construed to deprive the Trustee of any of its rights as such
holder.
ARTICLE FOURTEEN
SATISFACTION AND DISCHARGE OF INDENTURE;
DEPOSITED MONEYS
SECTION 14.01. Satisfaction and Discharge of Indenture. If the
Company shall deliver to the Trustee for cancellation all Debentures theretofore
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authenticated (other than any Debentures which shall have been destroyed, lost
or stolen and which shall have been replaced or paid as provided in Section
2.07) and not theretofore canceled, or if all the Debentures not theretofore
canceled or delivered to the Trustee for cancellation shall have become due and
payable (the date on which such Debentures become due and payable being
hereinafter in this Section called the "maturity" date), or shall have been
called for redemption pursuant to Article Three hereof and the Company shall
have deposited in trust with the Trustee funds (to be immediately available for
payment) sufficient to pay at maturity or upon redemption all of the Debentures
(other than any Debentures which shall have been destroyed, lost or stolen and
which shall have been replaced or paid as provided in Section 2.07) not
theretofore canceled or delivered to the Trustee for cancellation, including
principal and interest due or to become due to such date of maturity or
redemption date, as the case may be, then, subject to the provisions of Article
Thirteen:
(a) this Indenture shall cease to be of further effect
except as to the then existing rights of the Debentureholders to
register the transfer of or exchange of "Debentures" in accordance
with the terms of this Indenture and the Debentures, and on or
after such maturity date or redemption date, as the case may be,
the Trustee, on demand by the Company accompanied by an Officers'
Certificate and an Opinion of Counsel and at the cost and expense
of the Company, shall execute proper instruments acknowledging
satisfaction of and discharging this Indenture; and
(b) all obligations of the Company in respect of the
Debentures shall cease and be discharged (except the obligation to
register the transfer of or exchange Debentures in accordance with
the terms of this Indenture and the Debentures), and the holders of
such Debentures shall thereafter be restricted exclusively to such
funds for any and all claims of whatsoever nature on their part
under this Indenture or with respect to such Debentures (except
with respect to any rights of registration of transfer, exchange or
as above stated).
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 8.06
shall survive.
SECTION 14.02. Application by Trustee of Funds Deposited For
Payment of Debentures. All moneys deposited with the Trustee pursuant to Section
14.01 shall be held in trust and applied by it to the payment, either directly
or through any paying agent (including the Company acting as its own paying
agent), to the holders of the particular Debentures for the payment or
redemption of which such moneys have been deposited with the Trustee, of all
sums due and to become due thereon for principal and interest.
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SECTION 14.03. Payment of Moneys Held by Paying Agent. In
connection with the satisfaction and discharge of this Indenture all moneys then
held by any paying agent under the provisions of this Indenture shall, upon
demand by the Company or Trustee, be paid to the Trustee and thereupon such
paying agent shall be released from all further liability with respect to such
moneys.
SECTION 14.04. Return of Unclaimed Money. In case the holder of
any Debenture entitled to payment hereunder at any time outstanding hereunder
shall not, within six years after the maturity date of such Debenture, or if
such Debenture shall have been called for redemption, then within six years
after the date fixed for redemption of such Debenture, claim the amount on
deposit with the Trustee or other depositary for the payment of such Debenture,
the Trustee or other depositary shall pay over, to or upon the written order of
the Company the amount so deposited, upon receipt of a request signed by the
Chairman of the Board, the President or a Vice President of the Company, and
thereupon the Trustee or other depositary shall be released from and shall be
indemnified by the Company against any and all further liability with respect to
the payment of such Debenture and the holder of said Debenture shall be entitled
(subject to any applicable statute of limitations) to look only to the Company
as an unsecured creditor for the payment thereof.
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND
TRUSTEES OR DIRECTORS
SECTION 15.01. Personal Immunity From Liability of
Incorporators, Stockholder, Etc. No recourse under or upon any obligation,
covenant or agreement of this Indenture, or of any Debenture, or for any claim
based thereon or otherwise in respect thereof, shall be had against any
incorporator, stockholder, officer, trustee or director, as such, past, present
or future, of the Company or of any predecessor or successor corporation, either
directly or through the Company or any such predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law or
equity, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that this Indenture and the obligations issued
hereunder are solely corporate obligations, and that no such personal liability
whatever shall attach to, or is or shall be incurred by, the incorporators,
stockholders, officers, trustees or directors of the Company, as such, or of any
predecessor or successor corporation, or any of them, because of the creation of
the indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Debentures
or implied therefrom; and that any and all such liability is hereby expressly
waived and released by every holder of Debentures as a condition of, and as a
consideration for, the execution and delivery of the Indenture and the issue of
such Debentures.
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ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 16.01. Successors. All the covenants, stipulations,
promises and agreements in this Indenture contained by or in behalf of the
Company shall bind its successors and assigns, whether so expressed or not.
SECTION 16.02. Acts by Successor Valid. Any act or proceeding by
any provision of this Indenture authorized or required to be done or performed
by any board, committee or officer of the Company shall and may be done and
performed with like force and effect by the like board, committee or officer of
any corporation that shall at the time be the lawful successor of the Company.
SECTION 16.03. Surrender of Powers by Company. The Company by
instrument in writing executed by authority of its Board of Directors and
delivered to the Trustee may surrender any of the powers reserved to the Company
and thereupon such power so surrendered shall terminate both as to the Company
and as to any successor corporation.
SECTION 16.04. Notices and Demands on Company and Trustee. Any
notice or demand which by any provision of this Indenture is required or
permitted to be given or served by the Trustee or by the holders of Debentures
to or on the Company may be given or served by being deposited as first class
mail, except as provided in Section 7.01(c), postage prepaid in a post-office
letterbox addressed (until another address is filed in writing by the Company
with the Trustee) as follows: General DataComm Industries, Inc., Attention:
Chairman, 1579 Straits Turnpike, Middlebury, Connecticut 06762-1299. Any notice,
election, request or demand by any Debentureholder to or upon the Trustee shall
be deemed to have been sufficiently given or made, for all purposes, if given or
made at the corporate trust office of the Trustee in the Borough of Manhattan,
City and State of New York.
In case, by reason of the suspension of or irregularities in
regular mail service, it shall be impractical to mail notice of any event to
Debentureholders when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice.
SECTION 16.05. Laws of New York to Govern. This Indenture and
each Debenture shall be deemed to be a contract made under the laws of the State
of New York, and for all purposes shall be governed by and construed in
accordance with the laws of said state.
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SECTION 16.06. Officer's Certificates and Opinions of Counsel;
Statements to be Contained Therein. Upon any application or demand by the
Company to the Trustee to take any action under any of the provisions of this
Indenture, the Company shall furnish to the Trustee an Officers' Certificate
stating that all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that in the opinion of such Counsel all such conditions
precedent have been complied with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (l) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not in the opinion of such
person, such condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the
Company may be based, in so far as it relates to legal matters, upon a
certificate or opinion of or representations by counsel, unless such officer
knows that the certificate or opinion or representations with respect to the
matters upon which his certificate, statement or opinion may be based as
aforesaid are erroneous, or in exercise of reasonable care should know that the
same are erroneous. Any certificate, statement or opinion of counsel may be
based (insofar as it relates to factual matters information with respect to
which is in the possession of the Company) upon the certificate, statement or
opinion of or representations by any officer or officers of the Company, unless
such counsel knows that the certificate, statement or opinion or representations
with respect to the matters upon which his certificate, statement or opinion may
be based as aforesaid are erroneous, or in the exercise of reasonable care
should know that the same are erroneous.
Any certificate, statement or opinion of an officer of the
Company or of counsel may be based, insofar as it relates to accounting matters,
upon a certificate or opinion of or representations by an accountant or firm of
accountants, unless such officer or counsel, as the case may be, knows that the
certificate or opinion or representations with respect to the accounting matters
upon which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous.
SECTION 16.07. Payments on Non-Business Days. In any case where
the date of maturity of interest on or principal of the Debentures or the date
of redemption of any Debenture shall not be a business day, then payment of
interest or principal may be made on the next succeeding business day with the
same force and
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effect as if made on the nominal date and no interest shall accrue for the
period after such nominal date.
SECTION 16.08. Provisions Required by Trust Indenture Act of
1939 to Control. If and to the extent that any provision of this Indenture
limits, qualifies or conflicts with another provision included in this Indenture
which is required to be included in this Indenture by any of Sections 3l0 to
317, inclusive, of the Trust Indenture Act of l939, such required provision
shall control.
SECTION l6.09. Effect of Invalidity of Provisions. In case any
one or more of the provisions contained in this Indenture or in the Debentures
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Indenture or of such Debentures, but this Indenture and
such Debentures shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein or therein.
SECTION 16.10. Indenture May Be Executed in Counterparts;
Trustee Accepts Trusts. This Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument. The party of the second
part hereby accepts the trusts in this Indenture declared and provided, upon the
terms and conditions hereinabove set forth.
IN WITNESS WHEREOF, GENERAL DATACOMM INDUSTRIES, INC., the party
of the first part, has caused this Indenture to be signed in its corporate name
by its Chairman of the Board, President or one of its Vice Presidents, and its
corporate seal to be affixed hereunto, duly attested by its Secretary or an
Assistant Secretary or the Treasurer; and CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, the party of the second part, has caused this Indenture to be signed by
one of its Vice Presidents or Assistant Vice Presidents, and its corporate seal
to be affixed hereunto, duly attested by one of its Assistant Secretaries, all
as of the day and year first above written.
GENERAL DATACOMM INDUSTRIES, INC.
(SEAL) By: ___________________________
Chairman
Attest:
- -----------------------
Secretary
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CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
(SEAL) By: _________________________________
Vice President
Attest:
- -------------------------
Assistant Secretary
79
<PAGE>
STATE OF NEW YORK )
) ss:
COUNTY OF )
On this_____ day of ___________ , 19__ before me, the subscriber,
a Notary Public within and for the County of ____________, in the State of New
York, personally appeared , to me personally known, who, being by me duly sworn,
did say that he resides in __________ , and is _____________ of GENERAL DATACOMM
INDUSTRIES, INC., one of the corporations described in and which executed the
foregoing instrument; that he knows the corporate seal of the said corporation
and that the seal affixed to said instrument is the corporate seal of said
corporation; and that said instrument was signed and sealed on behalf of said
corporation by authority of its Board of Directors and that he subscribed his
name thereto by like authority; and said officer acknowledged said instrument to
be the free act and deed of said corporation.
_____________________
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this day of ___________, 19__, before me, the subscriber, a
Notary Public within and for the County of _________ , in the State of New York,
personally appeared _________, to me personally known, who, being by me duly
sworn, did say that he resides in _____________ and is __________the of
CONTINENTAL STOCK TRANSFER & TRUST COMPANY one of the corporations described in
and which executed the foregoing instrument; that he knows the corporate seal of
the said corporation and that the seal affixed to said instrument is the
corporate seal of said corporation; and that said instrument was signed and
sealed on behalf of said corporation by authority of its Board of Directors and
that he subscribed his name thereto by like authority; and said officer
acknowledged said instrument to be the free act and deed of said corporation.
_________________________
Exhibit 11
General DataComm Industries, Inc. and Subsidiaries
Calculation of Loss per Share
(In thousands except per share data)
Three months ended Nine months ended
June 30, June 30,
1997 1996 1997 1996
- -------------------------------------------------------------------------------
Primary loss per share:
Weighted average number of common
shares outstanding 21,148 20,797 21,063 20,656
Assumed exercise of certain stock
options - - - -
- -------------------------------------------------------------------------------
21,148 20,797 21,063 20,656
- -------------------------------------------------------------------------------
Net loss ($13,820)($7,767) ($31,212) ($12,314)
Payment of preferred stock dividends (450) - (1,350) -
- -------------------------------------------------------------------------------
($14,270)($7,767) ($32,562) ($12,314)
- -------------------------------------------------------------------------------
Primary loss per share ($0.67) ($0.37) ($1.55) ($0.60)
- -------------------------------------------------------------------------------
Primary loss per share:
The fully-diluted loss per share calculation is identical to the calculation
presented above.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,405
<SECURITIES> 0
<RECEIVABLES> 30,245
<ALLOWANCES> 1,713
<INVENTORY> 45,382
<CURRENT-ASSETS> 11,240
<PP&E> 142,090
<DEPRECIATION> 94,038
<TOTAL-ASSETS> 171,373
<CURRENT-LIABILITIES> 54,768
<BONDS> 21,448
0
800
<COMMON> 2,158
<OTHER-SE> 88,321
<TOTAL-LIABILITY-AND-EQUITY> 171,373
<SALES> 123,500
<TOTAL-REVENUES> 156,400
<CGS> 68,702
<TOTAL-COSTS> 89,314
<OTHER-EXPENSES> 96,523
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,475)
<INCOME-PRETAX> (30,912)
<INCOME-TAX> 300
<INCOME-CONTINUING> (31,212)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,212)
<EPS-PRIMARY> (1.55)
<EPS-DILUTED> (1.55)
</TABLE>
