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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 1997.
REGISTRATION NO. 333
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GENERAL DATACOMM INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 06-0853856
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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1579 STRAITS TURNPIKE
MIDDLEBURY, CONNECTICUT 06762-1299
(203) 574-1118
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
HOWARD S. MODLIN, ESQ.
WEISMAN CELLER SPETT & MODLIN, P.C.
445 PARK AVENUE, NEW YORK, NEW YORK 10022
(212) 371-5400
(NAME, ADDRESS AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE).
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TO BE OFFERING PRICE AGGREGATE REGISTRATION
TITLE OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
<S> <C> <C> <C> <C>
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9% Cumulative Convertible Exchangeable
Preferred Stock, par value, $1.00 per
share.................................. 800,000 $25(1) $20,000,000 $6,060.61
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9% Convertible Subordinated Debentures
due 2006............................... $20,000,000 NA NA NA(2)
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Common Stock, par value, $.10 per
share.................................. 1,465,201 NA NA NA(3)
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(1) Estimated pursuant to Rule 457(c) solely for the purpose of calculating the
registration fee based upon the $25 initial sale price of the 9% Cumulative
Convertible Exchangeable Preferred Stock, par value, $1.00 per share (the
"9% Preferred Stock").
(2) No additional consideration will be received by the Registrant for the
issuance of the 9% Convertible Subordinated Debentures due 2006 upon
exchange of the 9% Preferred Stock. Accordingly, no additional registration
fee is required in respect of the Debentures pursuant to Rule 457(i) under
the Securities Act.
(3) No additional consideration will be received by the registrant for the
issuance of shares of the Registrant's Common Stock, par value $.10 per
share (the "Common Stock") upon conversion of the 9% Preferred Stock or the
Debentures. Accordingly, no additional registration fee is required in
respect of such shares of Common Stock.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED JANUARY 28, 1997
PROSPECTUS
GENERAL DATACOMM INDUSTRIES, INC.
800,000 SHARES OF 9% CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
(PAR VALUE, $1.00 PER SHARE)
$20,000,000 PRINCIPAL AMOUNT OF 9% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2006
1,465,201 SHARES OF COMMON STOCK (PAR VALUE, $.10 PER SHARE)
This Prospectus relates to the 800,000 shares of 9% Cumulative Convertible
Exchangeable Preferred Stock, par value $1.00 per share, (the "9% Preferred
Stock") of General DataComm Industries, Inc., a Delaware corporation ("GDC" or
the "Company"), the $20,000,000 aggregate principal amount of 9% Convertible
Subordinated Debentures due 2006 (the "Debentures") issuable upon exchange of
the 9% Preferred Stock and the 1,465,201 shares of Common Stock, par value $.10
per share, issuable upon conversion of the 9% Preferred Stock or the Debentures,
subject to adjustment under certain circumstances.
The Preferred Stock was initially issued and sold on September 30, 1996 in
transactions exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), to persons reasonably believed by the
Company to be "qualified institutional buyers" (as defined by Rule 144A under
the Securities Act) ("Rule 144A"), or an "Accredited Investor" (as defined in
Rule 501 (a)(1),(2),(3), (5) or (7) under the Securities Act). The 9% Preferred
Stock, along with the Debentures issuable upon exchange of the 9% Preferred
Stock and the Common Stock issuable upon conversion of the 9% Preferred Stock or
the Debentures, may be offered and sold from time to time by the holders named
herein (see "Plan of Distribution") (collectively, the "Selling Holders")
pursuant to this Prospectus. If required, the names of any agents or
underwriters involved in the sale of the securities in respect of which this
Prospectus is being delivered, along with any applicable agent's commission,
dealer's purchase price or underwriter's discount, will be set forth in any
accompanying supplement to this Prospectus (the "Prospectus Supplement").
Furthermore, information concerning Selling Holders set forth herein may change
from time to time, and the changes will be set forth in such a Prospectus
Supplement. The Registration Statement on Form S-3 of which this Prospectus is a
part has been filed with the Securities and Exchange Commission (the "SEC" or
the "Commission") pursuant to the Company's obligations under a registration
rights agreement dated as of September 30, 1996 (the "Registration Rights
Agreement") among the Company and the Selling Holders. (Continued on next page)
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER MATTERS DISCUSSED UNDER THE
CAPTION "RISK FACTORS" ON PAGES 6 TO 9.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus , 1997.
<PAGE> 3
Dividends on the 9% Preferred Stock are cumulative from the date of
original issuance and payable quarterly in arrears commencing December 31, 1996
at an annual rate of 9% (equivalent to $2.25 per share per annum). The 9%
Preferred Stock has a liquidation preference of $25.00 per share, plus accrued
and unpaid dividends.
Each share of the 9% Preferred Stock may be converted at any time on or
after November 29, 1996 at the option of the holder, unless previously redeemed
or exchanged, into shares of the Common Stock, at a conversion price of $13.65
per share (equivalent to a conversion rate of approximately 1.8315 shares of
Common Stock for each share of the 9% Preferred Stock), subject to adjustment in
certain circumstances. On January 24, 1997 the closing price of the Common Stock
(symbol "GDC") as reported on the New York Stock Exchange was $9.75 per share.
The 9% Preferred Stock may not be redeemed prior to September 30, 1999. The
9% Preferred Stock is redeemable in whole or in part, at the sole option of the
Company, at the redemption price of $25.00 per share at any time on or after
September 30, 1999, plus accumulated and unpaid dividends to the date fixed for
redemption, provided, however, that the shares of 9% Preferred Stock are not
redeemable on and after September 30, 1999 and prior to September 30, 2000
unless the closing price (as defined) of the Common Stock has equaled or
exceeded 150% 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.
The 9% Preferred Stock, unless previously converted, may be exchanged, in
whole but not in part, at the option of the Company, for the Debentures on any
dividend payment date beginning on September 30, 1998 at the rate of $25.00
principal amount of Debentures for each share of 9% Preferred Stock outstanding
at the time of exchange; provided that all accrued and unpaid dividends, whether
or not declared, on the 9% Preferred Stock to the date of exchange have been
paid or set aside for payment and certain other conditions are met. The
Debentures, if issued, will bear interest payable semiannually and will have the
terms and conditions set forth elsewhere in this Prospectus.
If at any time there occurs a Change in Control (as defined herein), each
holder of the 9% Preferred Stock or the Debentures if issued in exchange
therefor, shall have the right for a limited period to require the Company to
repurchase such 9% Preferred Stock, or Debentures, as the case may be, at a
repurchase price for the 9% Preferred Stock of 100% of the redemption price of
the 9% Preferred Stock, plus accrued and unpaid dividends, and at a repurchase
price for the Debentures of the principal amount of the Debentures, plus accrued
and unpaid interest. The Company may satisfy its repurchase obligations upon a
Change in Control through the issuance of shares of Common Stock (valued at the
Market Price as defined herein).
Application has previously been made for the 9% Preferred Stock and the
Debentures issuable upon exchange thereof to be designated as eligible for
trading in the National Association of Securities Dealers, Inc. Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market.
The Selling Holders will receive all of the net proceeds from the sale of
the 9% Preferred Stock, the Debentures and the shares of Common Stock issuable
upon conversion of the 9% Preferred Stock or Debentures and will pay any and all
underwriting discounts and selling commissions applicable to the sale of such
securities. The Company is responsible for payment of all other expenses
incident to the registration of the securities registered hereunder (excluding
personal legal and accounting fees of the Selling Holders).
The Selling Holders and any broker-dealers, agents or underwriters which
participate in the distributions of the securities offered hereby may be deemed
to be "underwriters" within the meaning of the Securities Act, and any
commission received by them or purchases by them of such securities at a price
less than the initial price to the public may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company has also agreed to pay certain fees and expenses incident to
the registration of the 9% Preferred Stock, the Debentures and the shares of
Common Stock issuable upon conversion of the 9% Preferred Stock or Debentures
pursuant to the Registration Rights Agreement. It is estimated that the
aggregate amount of fees and expenses payable by the Company in connection with
the registration of the securities offered hereby will be approximately $80,000.
The Company intends to keep the Registration Statement effective for a period of
three years following the initial issuance of shares of 9% Preferred Stock on
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September 30, 1996, unless the three-year holding period required by Rule 144(k)
under the Securities Act ("Rule 144") is shortened, in which case the
Registration Statement will be kept effective for such shorter period.
THIS PROSPECTUS INCLUDES CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO
THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY. SUCH
STATEMENTS REFLECT SIGNIFICANT ASSUMPTIONS AND SUBJECTIVE JUDGMENTS BY THE
COMPANY'S MANAGEMENT CONCERNING ANTICIPATED RESULTS. THESE ASSUMPTIONS AND
JUDGMENTS MAY OR MAY NOT PROVE TO BE CORRECT. MOREOVER, SUCH FORWARD-LOOKING
STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT MAY CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED IN SUCH FORWARD-LOOKING STATEMENTS.
FOR A DISCUSSION OF SUCH RISKS, SEE "RISK FACTORS." INVESTORS ARE CAUTIONED NOT
TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS
OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO RELEASE PUBLICLY ANY
REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OCCURRING OR
CIRCUMSTANCES ARISING AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
AVAILABLE INFORMATION
GDC is subject to the informational requirements of the Securities Exchange
Act of 1934 ("Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the Commission. Reports, proxy statements
and other information filed by the Company with the Commission may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549 and at
the Commission's regional offices located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Suite 1400, Northwestern Atrium Center, 500
West Madison Street, Chicago, Illinois 6066l-25ll. Copies of such materials may
be obtained from the Public Reference Section of the Commission at Room 1024,
450 Fifth Street, NW, Washington, D.C. 20549 at prescribed rates. The Commission
also maintains a web site that contains reports, proxy statements and
information statements and other information regarding registrants that file
electronically with the Commission, including the Company, at http://
www.sec.gov. The Company's Common Stock is listed on the New York Stock Exchange
and such reports, proxy statements and other information regarding the Company
can also be inspected at the offices of such Exchange. In addition, the Company
has agreed, for so long as any of the 9% Preferred Stock or Debentures or Common
Stock issuable upon conversion thereof remain outstanding, to make available to
any prospective purchaser of the 9% Preferred Stock, Debentures or Common Stock
issuable upon conversion thereof or beneficial holder of the 9% Preferred Stock,
Debentures or Common Stock issuable upon conversion thereof in connection with
any sale thereof, the information required by Rule 144A(d)(4) until three years
(or shorter period if the holding period under Rule 144 is shortened) after the
issuance of such 9% Preferred Stock.
This Prospectus forms a part of a registration statement on Form S-3
(herein, together with all exhibits thereto referred to as the "Registration
Statement"), filed by the Company with the Commission under the Securities Act
with respect to the securities offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which have been omitted in accordance with the rules and regulations of the
Commission. Statements contained herein concerning the provisions of certain
documents are not necessarily complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference. The Registration Statement and the exhibits thereto
can be inspected and copied at the public reference facilities and regional
offices referred to above.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996 and proxy statement on Schedule 14A dated December 10, 1996,
which have been filed by the Company with the Commission pursuant to the
Exchange Act, are hereby incorporated by reference in and made a part of this
Prospectus.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the securities
offered hereby shall be deemed to be incorporated by reference in this
Prospectus and to be a part of this Prospectus from the date of filing of such
documents.
Any statement contained in this Prospectus shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained in any subsequently filed document which is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each prospective purchaser to
whom a copy of this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the documents incorporated by reference in
this Prospectus (not including exhibits to such documents unless such exhibits
are specifically incorporated by reference into such documents) and any other
information requested thereby as described above under "Available Information".
Such written or oral request should be directed to General DataComm Industries,
Inc. at its principal executive office, 1579 Straits Turnpike, Middlebury,
Connecticut, 06762-1299, Attention: Vice President, Business Development
(telephone number 203-574-1118).
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PROSPECTUS SUMMARY
This summary does not purport to be complete and is qualified in its
entirety by reference to the detailed information and consolidated financial
information appearing elsewhere in this Prospectus, or incorporated by reference
herein. Terms not defined in this Summary are defined elsewhere herein.
THE COMPANY
GDC is a leading worldwide provider of wide area networking and
telecommunications products incorporated in 1969 under the laws of Delaware. The
Company sells and leases its products through its own worldwide sales and
service organizations, as well as through distributors, value-added resellers
and system integrators.
GDC's customer base includes: Local Exchange Carriers including all seven
Regional Bell Operating Companies, Bell Canada and GTE; Competitive Access
Providers including MFS Datanet; Interexchange Carriers including AT&T, MCI and
Sprint; corporate end users such as American Airlines, Citicorp, EDS, Chrysler,
Amoco, Hitachi and Hong Kong & Shanghai Bank; government entities including the
British Ministry of Defense, the French Ministry of State, NASA, the U.S. State
Department and many state and local governments; and international communication
carriers such as Impsat (Argentina and Colombia), Telefonos de Mexico, France
Telecom and Deutsche Telekom (of Germany), and suppliers of central office
switching equipment such as Lucent Technologies, LM Ericsson and DSC
Communications Corporation.
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RISK FACTORS
CONTINUING LOSSES
The Company has sustained net losses for the past nine quarters ending
December 31, 1996. There can be no assurance as to when the Company will achieve
net income.
FUTURE SALES DEPENDENT ON SHIFT IN PRODUCT MIX
The Company's product mix is still shifting from its traditional analog
modem and digital data set product lines, to high-speed network-managed digital
data sets, advanced network access products and ATM cell switches. In the
Company's Advanced Network Access product line, sales of analog modems and non-
managed digital data sets are declining while sales of high-speed,
network-managed digital data sets and access multiplexers are increasing. The
markets for the Company's traditional analog products are mature and generally
declining and have corresponding decreasing prices. For fiscal 1996, Advanced
Network Access product sales accounted for approximately 46% of net product
sales, as compared to approximately 49% in fiscal 1995. Sales of Networking
Multiplexer equipment declined from approximately 35% of total product sales in
fiscal 1995 to 30% in the fiscal 1996, due primarily to changes in networking
technology being used in enterprise networks. Revenues from ATM switches and
related products accounted for approximately 15% of net product sales in fiscal
1995 and grew to 24% of sales in fiscal 1996. The ability of the Company to
maintain or increase revenues during the next several years may be dependent
upon sales of its ATM cell switches and expansion of its access multiplexer
product line.
IMMATURITY OF ATM MARKET AND ATM PRODUCTS
Although many network equipment suppliers have introduced ATM-based
products, the ATM market is still in the "early adopter" phase of its
development. There are two distinct market segments: Wide Area Network (WAN) ATM
products and Local Area Network (LAN) ATM products. The Company's ATM products
are more oriented to WAN applications, while the majority of revenue recognized
by the industry to date has been in LAN products. While ATM technology is being
deployed, the timing and extent of any broad deployment cannot be predicted.
Certain other large-scale telecommunications technology "breakthroughs", such as
ISDN, have taken longer to be deployed than originally anticipated.
Even with general market acceptance of ATM technology, the Company's ATM
cell switches may not be accepted. Although a number of telecommunications
carriers and corporations are implementing the Company's ATM switches, these
entities are not obligated to continue to purchase any of GDC's switches.
Moreover, there already is intense competition among ATM switch manufacturers,
and the ATM market will be subject to both rapid advances in technology and
greater demand for more flexible, cost-effective solutions. In addition, the
success of the Company's ATM switching technology is dependent on the adequacy
of the Company's manufacturing and support services capabilities.
COMPETITION
Each of the segments of the telecommunications and networking industries is
intensely competitive. Many of GDC's current and prospective competitors have
greater name recognition, a larger installed base of networking products, more
extensive engineering, manufacturing, marketing, distribution and support
capabilities and greater financial, technological and personnel resources.
Many of the participants in the networking industry, including, among
others, ADC Telecommunications, Bay Networks, Cascade Communications, Cisco, ECI
Telecom, FORE Systems and Newbridge Networks, and certain participants in the
computer industry, including, among others, DEC and IBM, have introduced, or
have announced their intention to develop, ATM networking products. Other
companies are expected to follow. In addition, traditional suppliers of central
office switching equipment, such as Alcatel, Lucent Technologies, DSC
Communications Corporation, Fujitsu, Hitachi, LM Ericsson, Northern Telecom and
Siemens, are expected to offer ATM-based switches for central offices. Companies
may also develop
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alternative network solutions to ATM. Even though certain of these ATM
competitors currently offer or plan to offer ATM products in markets in which
the Company does not plan to compete, it is possible that such competitors will
develop ATM technology that does compete with the Company's products. This
competition could result in the same intense price competition that is present
in the broader networking market.
RAPID TECHNOLOGY CHANGES
The markets for the Company's products are characterized by rapid
technological development, evolving industry standards, emerging network
architectures and frequent new product introductions. Rapid technological
development substantially shortens product life cycles and may lead to
technological obsolescence. The Company's success will depend, in part, upon its
ability to influence the development of industry standards, to enhance and
expand existing products and to select, develop, manufacture and market, in a
timely, cost-effective manner, new products that achieve market acceptance.
Moreover, announcements of product enhancements or new product offerings may
cause customers to defer purchasing existing GDC products.
In the ATM market, the development of comprehensive industry standards is
evolving. The Company believes that its ability to compete successfully in the
ATM market is also dependent upon the compatibility and interoperability of its
products with products and architectures of other vendors. The Company
anticipates adding various features to its ATM cell switches in the future but
there can be no assurances that GDC will be able to effect such product
enhancements or that it will be able to do so on a timely and cost-effective
basis. In the past, the Company has on occasion experienced delays in its
introductions of product enhancements and new products.
MANUFACTURING AND SUPPORT SERVICES CAPABILITY
Any delay or interruption in the manufacturing or customer service and
support of GDC products could adversely affect market acceptance of the
Company's products. As features and/or enhancements are added to the Company's
ATM switches software errors, functional limitations and manufacturing problems
may arise. If such issues are not resolved in a timely and adequate manner upon
occurrence, customer acceptance of GDC's ATM switches may be adversely affected.
RELIANCE ON KEY COMPONENTS
The Company's products use certain components, such as microprocessors,
memory chips and preformed enclosures, that are acquired or available from one
or a limited number of sources. The Company has generally been able to procure
adequate supplies of these components in a timely manner from existing sources.
However, the Company's inability to obtain a sufficient quantity of these
components as required, to obtain components with the requisite technical
capabilities, or to develop alternative sources at acceptable prices and within
a reasonable time, could result in delays or reductions in product shipments
which could materially affect the Company's operating results.
QUARTERLY EARNINGS FLUCTUATIONS
The Company's quarterly operating results may vary significantly depending
on various factors, some of which are not within the control of the Company.
Additionally, as is the case with many high technology companies, a significant
portion of the Company's shipments typically occurs in the last few weeks of a
quarter. As a result, the Company's revenues may shift from one quarter to the
next, having a significant effect on reported results.
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. In addition, the
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volatility of the stock markets in recent years has caused wide fluctuations in
trading prices of stock of high technology companies independent of their
individual operating results.
INTERNATIONAL OPERATIONS
Approximately 46% of the Company's revenues in fiscal 1996 were from
international operations and the Company is seeking to expand its international
presence. Sales by the Company's foreign subsidiaries are denominated in foreign
currencies. All other international sales are denominated in U.S. dollars. In
addition, a number of the Company's products, or components thereof, are
manufactured abroad. Economic, political, business and military conditions in
certain countries present operational risks that are greater than those in the
United States. Revenues generated in foreign currencies also present currency
exchange and repatriation risks. The Company currently does not use any type of
derivatives to minimize such risks. From time to time, the Company's financial
results have been affected unfavorably by fluctuations in currency exchange
rates. The Company experienced a loss of $325,000 in fiscal 1996 due to currency
exchange fluctuations and future unfavorable fluctuations in currency exchange
rates may have an adverse impact on the Company's revenues and operating
results.
HOLDING COMPANY STRUCTURE; RANKING
The Company is a holding company that conducts substantially all of its
operations through subsidiaries, and its ability to make debt service payments
is dependent on the operations of its subsidiaries. The 9% Preferred Stock is
effectively subordinated to all existing and future secured indebtedness of the
Company and to all existing and future indebtedness and other liabilities of the
Company's subsidiaries.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon the retention
and attraction of executive officers and key management employees and technical
personnel, including Charles P. Johnson, Chairman of the Board and Chief
Executive Officer and Ross Belson, President and Chief Operating Officer. Mr.
Johnson is a founder of the Company. Neither of these executives has an
employment agreement with the Company.
EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's Restated Certificate of Incorporation contains certain
provisions that could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire,
control of the Company. Such provisions could limit the price that certain
investors might be willing to pay in the future for shares of the Company's
Common Stock, thus making it less likely that a shareholder will receive a
premium in any sale of shares. Certain of such provisions allow the Company to
issue preferred stock with rights senior to those of the Common Stock and impose
various procedural and other requirements which could make it more difficult for
stockholders to effect certain corporate actions. Moreover, the Company's Board
of Directors is divided into three classes, each of which serves for a staggered
three-year term, making it more difficult for a third party to gain control of
GDC's Board. In addition, the holders of the Company's Class B Stock have, under
certain circumstances, greater voting power in the election of directors. As of
December 10, 1996, Mr. Charles P. Johnson, Chairman of the Board and Chief
Executive Officer of GDC, who owns 20,000 Shares of the 9% Preferred Stock, and
all directors and executive officers of GDC as a group, beneficially own,
directly or indirectly, 67.1% and 9l.7%, respectively, of the Company's Class B
Stock. Since the holders of Common Stock and Class B Stock vote separately as a
class on all matters requiring an amendment to the Company's Restated
Certificate of Incorporation, as well as on mergers, consolidations and certain
other significant transactions for which stockholder approval is required under
Delaware law, Mr. Johnson individually and the executive officers and directors
as a group could veto any such transactions. See "Description of Capital Stock".
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RESTRICTIONS ON PAYMENT OF DIVIDENDS
The Company has never declared or paid any cash dividends on its Common and
Class B Stock. In addition, the terms of the Company's revolving credit and
security agreement prohibit the Company from paying cash dividends on its Common
Stock, Class B Stock or any class of Preferred Stock. However, pursuant to an
amendment to such credit and security agreement and the relevant covenants
included therein, the Company is permitted to pay cash dividends with respect to
the 9% Preferred Stock so long as the Company is not in default under such
agreement. As a result, it is not anticipated that cash dividends, other than
those payable on the 9% Preferred Stock, will be paid in the foreseeable future.
See "Description of Capital Stock".
USE OF PROCEEDS
The Selling Holders will receive all of the net proceeds from any sale of
the 9% Preferred Stock, the Debentures and the shares of Common Stock issuable
upon conversion of the 9% Preferred Stock or Debentures, and accordingly, the
Company will receive none of the proceeds from the sales thereof.
9
<PAGE> 11
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SEPTEMBER 30,
-------------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Net product sales..................................... $169,958 $178,092 $189,019
Service revenue....................................... 34,245 37,110 39,022
Lease revenue......................................... 6,787 5,991 7,088
-------- -------- --------
210,990 221,193 235,129
COSTS AND EXPENSES:
Cost of product sales................................. 76,854 85,406 90,194
Inventory write-down and other items.................. -- 7,600 --
Amortization of capitalized software development
costs.............................................. 9,735 11,500 11,600
Cost of services...................................... 22,861 23,993 26,350
Cost of lease revenue................................. 882 836 856
Selling, general and administrative................... 79,921 88,232 86,734
Research and product development...................... 20,076 28,244 34,121
-------- -------- --------
210,329 245,811 249,855
Operating income (loss)................................. 661 (24,618) (14,726)
Other income (expense):
Interest, net......................................... (3,780) (2,355) (2,051)
Other, net............................................ 249 493 807(3)
-------- -------- --------
(3,531) (1,862) (1,244)
(Loss) before income taxes and cumulative effect of
accounting changes.................................... (2,870) (26,480) (15,970)
Income tax provision (benefit).......................... (975)(1) 1,150 1,200
-------- -------- --------
(Loss) before cumulative effective of accounting
changes............................................... (1,895) (27,630) (17,170)
Cumulative effect of changes in accounting for
post-retirement and post-employment benefits.......... (433)(2) -- --
-------- -------- --------
Net (Loss).............................................. $ (2,328) $(27,630) $(17,170)
======== ======== ========
(LOSS) PER SHARE:
(Loss) before cumulative effect of accounting
changes............................................ $ (0.11)(1) $ (1.40) $ (0.83)(3)
Cumulative effect of changes in accounting for
post-retirement and post-employment benefits....... (0.03)(2) -- --
-------- -------- --------
(Loss) per share........................................ $ (0.14) $ (1.40) $ (0.83)(3)
======== ======== ========
</TABLE>
Furthermore, the Company on January 22, 1997 announced results for the
first fiscal quarter of 1997, reporting revenues of $59.0 million as compared to
the $59.8 million reported in the first fiscal quarter of 1996. There was a net
loss for the period of $(5.7) million, or $(0.29) per share, compared to a loss
of $(2.9) million, or $(0.14) per share, in the same period one year ago. A
detailed discussion of reported results will be contained in the "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Company's Form 10-Q for the quarterly period ended December 31, 1996 to be filed
on or before February 14, 1997.
10
<PAGE> 12
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
-------------------
1995 1996
------- -------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................ $18,443 $26,264
Receivables.......................................................... 43,033 39,828
Inventories.......................................................... 44,958 44,588
Total assets......................................................... 198,388 205,054
Long-term debt, including current portion............................ 36,033 29,314
Stockholders' equity................................................. l17,085 122,186
</TABLE>
- ---------------
(1) Includes an income tax benefit of $1,700, or $0.10 per share, resulting from
the resolution of a foreign tax issue.
(2) Represents after-tax charges of $(433), or $(0.03) per share, as a result of
the adoption of Statements of Financial Accounting Standards Nos. 106 and
112 relating to post-retirement and post-employment benefits, respectively.
(3) Includes a $1.0 million, or $0.05 per share, gain from the sale of real
estate.
11
<PAGE> 13
SELLING HOLDERS
The 9% Preferred Stock was issued and sold September 30, 1996 pursuant to
the Original Offering in transactions exempt from the registration requirements
of the Securities Act to persons reasonably believed by the Company to be
"qualified institutional buyers" (as defined by Rule 144A) or an Accredited
Investor as defined in Rule 501(a)1)(2)(3)(5) or (7) under the Securities Act.
The 9% Preferred Stock, along with the Debentures issuable upon exchange of the
9% Preferred Stock and the shares of Common Stock issuable upon conversions of
the Preferred Stock or the Debentures, may be offered and sold from time to time
by the Selling Holders pursuant to this Prospectus. The Registration Statement
of which this Prospectus is a part has been filed with the SEC pursuant to the
Registration Rights Agreement.
The Registration Statement has been filed pursuant to Rule 415 under the
Securities Act to afford the holders of the securities offered hereby the
opportunity to sell such securities in a public transaction rather than pursuant
to an exemption from the registration and prospectus delivery requirements of
the Securities Act.
The following are the current Holders and Selling Holders:
<TABLE>
<CAPTION>
AMOUNT
NUMBER OF SHARES REMAINING
OF PREFERRED STOCK AFTER
NAME AND ADDRESS HELD OFFERED OFFERING
- ----------------------------------------------------- ------------------ ------- -----------
<S> <C> <C> <C>
Catholic Mutual Relief Society....................... 7,000 7,000 -0-
4223 Center Street
Omaha, NE 68105
Catholic Mutual Relief Society of.................... 8,000 8,000 -0-
America Pension Plan
4223 Center Street
Omaha, NE 68105
Cincinnati Insurance Company......................... 40,000 40,000 -0-
6200 South Gilmore Road
Fairfield, OH 45014
Connor Clarke & Company Ltd.......................... 39,950 39,950 -0-
40 King Street West
Toronto, Ontario M5H3Y2
Dean Witter Convertible Securities Trust............. 70,000 70,000 -0-
2 World Trade Center
New York, NY 10048
Dean Witter Income Builder Fund...................... 50,000 50,000 -0-
2 World Trade Center
New York, NY 10048
D.E. Shaw Investments, L.P........................... 120,000 120,000 -0-
120 West 45th Street
New York, NY 10036
1st Delta Securities, Inc............................ 29,000 29,000 -0-
20 Queen Street West
West Toronto, Ontario M5H 3R3
Highbridge Capital Corp.............................. 20,000 20,000 -0-
P.O. Box 30554
Seven Mile Beach
Grand Cayman Islands
British West Indies
Charles P. Johnson................................... 20,000 -0- 20,000
General DataComm Industries, Inc.
1579 Straits Turnpike
Middlebury, CT 06762-1299
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
AMOUNT
NUMBER OF SHARES REMAINING
OF PREFERRED STOCK AFTER
NAME AND ADDRESS HELD OFFERED OFFERING
- ----------------------------------------------------- ------------------ ------- -----------
<S> <C> <C> <C>
Ohio National Fund, Inc. Equity...................... 24,000 24,000 -0-
Ohio National Fund, Inc. Omni........................ 16,000 16,000
One Financial Way
Cincinnati, Ohio 45242
Paloma Securities L.L.C.............................. 51,000 51,000 -0-
Two American Lane
Greenwich, CT 06836-2571
Tiedemann McCabe Global Telecom Ltd.................. 10,000 10,000 -0-
535 Madison Avenue
New York, NY 10022-4212
Primerica Life Insurance Company..................... 40,000 40,000 -0-
3160 Breckenridge Blvd.
Duloth, GA 30199
Smith Barney Global Horizons Select Value Fund....... 15,000 15,000 -0-
388 Greenwich Street
New York, NY 10013
Smith Barney Growth Opportunity Fund................. 40,000 40,000 -0-
388 Greenwich Street
New York, NY 10013
Smith Barney Series Fund Total Return Portfolio...... 100,000 100,000 -0-
388 Greenwich Street
New York, NY 10013
The Travelers Indemnity Company...................... 40,000 40,000 -0-
One Tower Square
Hartford, CT 06183
ValueLine Convertible Fund........................... 20,000 20,000 -0-
220 East 42nd Street
New York, NY 10017
Zazove Convertible Fund, L.P......................... 25,000 25,000 -0-
800 Southwood Boulevard
Incline Village, NV 8945l
</TABLE>
A supplement will be filed to the Prospectus at such time as Mr. Charles P.
Johnson and the holder of the remaining 15,050 shares desire to sell all of
their shares pursuant to this Prospectus. None of the holders has any
relationship to the Company except Mr. Charles P. Johnson, who is Chairman of
the Board and Chief Executive Officer.
13
<PAGE> 15
PLAN OF DISTRIBUTION
The Company will receive no proceeds from this offering. The 9% Preferred
Stock, Debentures and Common Stock (collectively "Securities") offered hereby
may be sold by the Selling Holders from time to time in transactions on PORTAL
or the over-the-counter market (or the New York Stock Exchange with respect to
the Common Stock) in negotiated transactions, or a combination of such methods
of sale, at fixed prices which may be changed, at market prices prevailing at
the time of sale, at prices related to prevailing market prices or at negotiated
prices. The Selling Holders may effect such transactions by selling the
Securities to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Holders and/or the purchasers of the Securities for which such
broker-dealers may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
In order to comply with the securities laws of certain states, if
applicable, the Securities will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Securities may not be sold unless it has been registered or qualified for sale
in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Selling Holders and any broker-dealers or agents that participate with
the Selling Holders in the distribution of the Securities may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the Securities purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Securities may not simultaneously engage in
market making activities with respect to the Securities of the Company for
specified periods prior to the commencement of such distribution. In addition
and without limiting the foregoing, each Selling Holder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Rules 10b-6 and 10b-7, which
provisions may limit the timing of purchases and sales of shares of the
Company's Securities by the Selling Holders.
The Company has agreed to indemnify the Selling Holders against certain
civil liabilities in connection with the Registration Statement, including
certain liabilities under the Securities Act.
DESCRIPTION OF THE 9% PREFERRED STOCK
Under the Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), the Company is authorized to issue up to
3,000,000 shares of preferred stock, $1.00 par value per share. Preferred stock
is issuable in one or more series, each with designations, preferences, rights,
qualifications, limitations and restrictions as the Board of Directors of the
Company may determine in resolutions providing for its issuance.
The Board of Directors has adopted resolutions creating and authorizing the
issuance of up to 800,000 shares of 9% Preferred Stock. When issued, the 9%
Preferred Stock will have a liquidation preference of $25.00 per share and will
rank as to dividends and liquidation prior to the Common Stock. Upon payment for
the 9% Preferred Stock pursuant to the terms of the Purchase Agreement, the 9%
Preferred Stock will be fully paid and nonassessable. Holders of 9% Preferred
Stock will not have any preemptive rights. The 9% Preferred Stock will not be
subject to any sinking fund or other obligation of the Company to redeem or
retire such stock. Unless converted, redeemed or exchanged, the 9% Preferred
Stock will remain outstanding indefinitely.
The following is a brief description of the 9% Preferred Stock which does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the Certificate of Incorporation, and to the Certificate of the
Powers, Designation, Preferences, Rights and Limitations of 9% Cumulative
Convertible Exchangeable Preferred Stock of General DataComm Industries, Inc.
(the "Certificate of Designation"), copies of which are available for
inspection.
14
<PAGE> 16
DIVIDEND RIGHTS
Holders of shares of 9% Preferred Stock will be entitled to receive, when,
if and as declared by the Board of Directors of the Company out of funds of the
Company legally available for payment, cash dividends at the annual rate of 9%
or $2.25 per share. Dividends are payable quarterly in arrears on March 31, June
30, September 30, and December 31 of each year, commencing December 31, 1996,
except that if any such date is not a business day in New York City then such
dividend shall be payable on the next such succeeding business day (each such
date on which a dividend is payable is a "Dividend Payment Date"). Dividends on
the 9% Preferred Stock will be cumulative from the date of original issue.
Dividends will be payable to holders of record of the 9% Preferred Stock as they
appear on the books of the transfer agent of the Company on such respective
dates as may be fixed by the Board of Directors of the Company in advance of the
payment of each particular dividend, provided that holders of shares of 9%
Preferred Stock called for redemption on a redemption date falling between a
dividend payment record date and the Dividend Payment Date shall, in lieu of
receiving such dividend payment on the Dividend Payment Date fixed therefor,
receive such dividend payment together with all other accrued and unpaid
dividends, if any, on the date fixed for redemption (unless such holders convert
such shares in accordance with the Certificate of Designations, in which case
such holders will receive such payment on the corresponding Dividend Payment
Date); see "-- Conversion Rights" below. Dividends payable on the 9% Preferred
Stock for the initial dividend period and dividends payable for any period
shorter or longer than a full dividend period will be computed on the basis of a
360-day year consisting of twelve 30-day months. Accumulations of dividends will
not bear interest.
So long as the 9% Preferred Stock is outstanding, the Company may not
declare or pay any dividend on Common Stock or other stock ranking junior to or
on a parity with the 9% Preferred Stock or acquire Common Stock or any other
stock ranking junior to or on a parity with the 9% Preferred Stock (except by
conversion into or exchange for stock of the Company ranking junior to the 9%
Preferred Stock), unless the full cumulative dividends on the 9% Preferred Stock
have been paid, or contemporaneously are declared and paid, through the last
Dividend Payment Date. Should dividends not be paid in full on the 9% Preferred
Stock, and any other preferred stock ranking on a parity as to dividends with
the 9% Preferred Stock, all dividends declared on the 9% Preferred Stock and any
other preferred stock ranking on a parity as to dividends with the 9% Preferred
Stock will be declared pro rata, so that the amount of dividends declared per
share on the 9% Preferred Stock and such other preferred stock will bear to each
other the same ratio that accumulated dividends per share on the shares of 9%
Preferred Stock and such other preferred stock bear to each other. No interest,
or sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on the 9% Preferred Stock which may be in arrears.
Under Delaware law, the Company may declare and pay dividends or make other
distributions on its capital stock only out of surplus, as defined in the
Delaware General Corporation Law or, in case there is no surplus, out of its net
profits for the fiscal year in which the dividend or distribution is declared
and/or the prior fiscal year. No dividend or distribution may be declared, paid
or made if the Company is or would be rendered insolvent by virtue of such
dividend or distribution, or if such declaration, payment or distribution would
contravene the Certificate of Incorporation.
Pursuant to an amendment to the Company's revolving credit and security
agreement and the relevant covenants therein, the Company is permitted to pay
cash dividends on the 9% Preferred Stock, so long as the Company is not in
default under such agreement.
CONVERSION RIGHTS
The holders of the 9% Preferred Stock will be entitled at any time on or
after 60 days following September 30, 1996 to convert the shares of the 9%
Preferred Stock into Common Stock at the conversion price of $13.65 per share,
subject to adjustment as set forth below, except that, with respect to shares of
the 9% Preferred Stock called for redemption or exchange, conversion rights will
expire at the close of business on the redemption or exchange date, unless the
Company defaults in the payment of the redemption price, in the issuance of
Debentures in exchange for the 9% Preferred Stock, or in the payment of the
final dividend on the exchange date.
15
<PAGE> 17
Holders of shares of the 9% Preferred Stock at the close of business on a
dividend payment record date shall be entitled to receive the dividend payable
on such shares on the corresponding Dividend Payment Date notwithstanding the
conversion thereof following the close of business on such dividend payment
record date and prior to the close of business on such Dividend Payment Date.
However, shares of the 9% Preferred Stock surrendered for conversion during the
period between the close of business on any dividend payment record date and the
close of business on the corresponding Dividend Payment Date (except shares of
the 9% Preferred Stock called for redemption or exchange on a redemption date or
exchange date) must be accompanied by payment of an amount equal to the dividend
payment to be received on such Dividend Payment Date with respect to such shares
of the 9% Preferred Stock presented for conversion; provided, however, that no
such payment need be made if, at the time of conversion, dividends payable on
the shares of the 9% Preferred Stock outstanding shall be in arrears for more
than 30 days beyond the previous Dividend Payment Date. Except as provided
above, the Company shall make no payment or allowance for unpaid dividends,
whether or not in arrears, on converted shares or for dividends on the shares of
Common Stock issued upon such conversion.
No adjustment with respect to dividends on the 9% Preferred Stock or any
dividend on the Common Stock issued upon conversion will be made upon conversion
of shares of the 9% Preferred Stock.
No fractional shares will be issued upon conversion and, in lieu thereof,
an adjustment in cash will be paid based upon the closing price (as defined) of
the Common Stock on the last trading day prior to the date of such conversion.
The conversion price is subject to adjustment upon the occurrence of
certain events, including (i) the subdivision or combination of outstanding
shares of Common Stock; (ii) the issuance of shares of Common Stock as a
dividend or distribution on the Common Stock; (iii) the issuance of rights,
options or warrants to holders of Common Stock entitling them to subscribe for
or acquire shares of Common Stock (or securities convertible into or
exchangeable for such shares) at less than the current Market Price per share
(as defined in the Certificate of Designation) of Common Stock; and (iv) the
distribution to holders of Common Stock of evidences of 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 (other than those referred to above). No adjustment of the
conversion rate will be required unless it would result in at least a 1%
increase or decrease in the conversion rate; however, an adjustment not made is
carried forward and taken into account in any subsequent adjustment. Issuances
of options and securities convertible into Common Stock are deemed to be
issuances of the underlying Common Stock for purposes of adjustments to the
conversion price. Whenever the conversion price is adjusted, the Company shall
promptly mail to holders of the 9% Preferred Stock a notice of adjustment
briefly stating the facts requiring the adjustment and the manner of computing
it.
Subject to the applicable rights of the holders of the 9% Preferred Stock
upon a Change in Control, in the case of any reclassification or change in the
Common Stock (other than a change in par value or a subdivision or combination),
any consolidation or merger of the Company with or into any other corporation
(other than a merger in which the Company is the surviving corporation), or any
sale or transfer of substantially all the assets of the Company, any holder of
such 9% Preferred Stock will be entitled, after the occurrence of any such
event, to receive on conversion the consideration that the holder would have
received had he converted immediately prior to the occurrence of the event. 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 9% Preferred Stock the right to elect to receive the securities, cash or
other assets into which the 9% Preferred Stock 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 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 above will similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
16
<PAGE> 18
The Company will reserve the right to make such adjustments in the
conversion rate in addition to those required in the foregoing provisions as it
shall determine to be advisable in order that certain stock-related
distributions which may hereafter be made by the Company to its shareholders
shall not be taxable to them.
The Company will reserve and at all times keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the 9% Preferred Stock, such number of shares of its duly authorized Common
Stock as will from time to time be sufficient to effect the conversion of all
outstanding 9% Preferred Stock.
EXCHANGE
The 9% Preferred Stock is exchangeable in whole, but not in part, at the
sole option of the Company, for Debentures on any Dividend Payment Date on or
after September 30, 1998 at a rate of $25.00 principal amount of the Debentures
for each share of the 9% Preferred Stock. See "Description of Debentures". The
Company may not exchange any shares of the 9% Preferred Stock unless full
cumulative dividends have been paid or set aside for payment on the 9% Preferred
Stock and on any preferred stock ranking as to dividends on a parity with the 9%
Preferred Stock. The Company will mail written notice of the exchange to each
holder of record of the 9% Preferred Stock not less than 30 nor more than 60
days prior to the exchange date at the address of such holder shown on the books
of the Company.
On and after the date of exchange of 9% Preferred Stock for Debentures, the
9% Preferred Stock will cease to accumulate dividends, will no longer be deemed
to be outstanding and will represent only the right to receive the Debentures
and accrued and unpaid dividends, if any, to the Exchange Date.
LIQUIDATION RIGHTS
In the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the holders of shares of the 9% Preferred Stock will
be entitled to receive, out of the assets of the Company available for
distribution to stockholders, before any distribution or payment is made to
holders of Common Stock or any other stock of the Company ranking junior upon
liquidation to the 9% Preferred Stock, liquidating distributions in the amount
of $25.00 per share plus all accumulated and unpaid dividends to the date of
liquidation. If upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the amounts payable with respect to the 9% Preferred
Stock and any other shares of stock of the Company ranking as to any such
distribution on a parity with the 9% Preferred Stock are insufficient to make
the required payment to holders of the 9% Preferred Stock and to the holders of
all other series of the then outstanding preferred stock which rank on a parity
as to distribution upon liquidation with the 9% Preferred Stock, the Company's
assets so available shall be distributed on a pro rata basis among the holders
of the respective series of the parity preferred in proportion to the amount
payable if the assets had been sufficient. After payment of the full amount of
the liquidating distribution to which they are entitled, the holders of shares
of the 9% Preferred Stock will not be entitled to any further participation in
any distribution of assets by the Company. A consolidation, merger or sale of
all or substantially all of the assets of the Company will not be considered a
liquidation, dissolution or winding-up for these purposes.
OPTIONAL REDEMPTION
The 9% Preferred Stock is redeemable in whole or in part, at the sole
option of the Company, at the redemption price of $25.00 per share at any time
on or after September 30, 1999, plus accumulated and unpaid dividends to the
date fixed for redemption, provided, however, the shares of the 9% Preferred
Stock are not redeemable on and after September 30, 1999 and prior to September
30, 2000 unless the closing price (as defined in the Certificate of Designation)
of the Common Stock has equaled or exceeded 150% 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.
Unless full cumulative dividends on all outstanding shares of 9% Preferred
Stock and any other preferred stock ranking on a parity with the 9% Preferred
Stock have been or contemporaneously are declared and paid
17
<PAGE> 19
for all past dividend periods, the 9% Preferred Stock may not be redeemed and
the Company may not purchase or otherwise acquire any shares of the 9% Preferred
Stock.
If less than all the outstanding shares of the 9% Preferred Stock are to be
redeemed, the Company will select those to be redeemed by lot or by such other
equitable method as the Board of Directors may direct.
Notice of redemption will be mailed to each holder of the 9% Preferred
Stock to be redeemed at the address of such holder shown on the books of the
Company not less than 30 days nor more than 60 days prior to the redemption
date. If the Company provides monies as specified in such notice for the payment
of the redemption price, including any accrued and unpaid dividends to and
including the date fixed for redemption, on and after the redemption date,
dividends will cease to accumulate on shares of the 9% Preferred Stock called
for redemption and all rights of the holders thereof as stockholders of the
Company (except the right to receive the redemption price without interest
thereon) will cease.
VOTING RIGHTS
Except as indicated below or as required by the Delaware General
Corporation Law, the holders of the 9% Preferred Stock will not be entitled to
vote.
If at any time dividends payable on the 9% Preferred Stock are in arrears
and unpaid in an amount equal to or exceeding the amount of dividends payable
thereon for six quarterly dividend periods, the holders of the 9% Preferred
Stock, voting separately as a class with the holders of any other series of
preferred stock of the Company so entitled as provided in the certificate of
designation of such series, will have the right to elect two (2) directors of
the Company, such directors to be in addition to the number of directors
constituting the Board of Directors of the Company immediately prior to the
accrual of that right. So long as the Company's Board of Directors is divided
into classes, the directors of the Company so elected by the holders of shares
of the 9% Preferred Stock and of such other series of preferred stock so
entitled will be elected to the classes with the longest remaining terms. Such
voting rights will continue for the 9% Preferred Stock until all dividends
accumulated and payable on that stock have been paid in full, at which time such
voting rights of the holders of the 9% Preferred Stock will terminate, subject
to revesting in the event of a subsequent similar arrearage. Upon any
termination of such voting right with respect to the 9% Preferred Stock and any
other series of preferred stock which may then have such right, subject to the
requirements of the Delaware General Corporation Law, the term of office of all
the directors so elected by preferred stockholders voting separately as a class
will terminate.
The approval of the holders of at least a majority of the shares of the 9%
Preferred Stock then outstanding will be required to amend, alter or repeal any
of the provisions of the Restated Certificate of Incorporation or the
Certificate of Designation or to authorize any reclassification of the 9%
Preferred Stock, in either case so as to affect adversely the preferences,
special rights or privileges or voting power of the 9% Preferred Stock, either
directly or indirectly. A similar majority vote of the holders of the shares of
the 9% Preferred Stock then outstanding is required (a) to authorize or create
any class of stock senior to the 9% Preferred Stock as to dividends or
distributions upon liquidation or (b) to create, issue or increase the
authorized number of shares of any series of the Company's authorized preferred
stock ranking senior to the 9% Preferred Stock as to dividends or distributions
upon liquidation.
CHANGE IN CONTROL
The 9% Preferred Stock has special rights that become effective upon the
occurrence of certain types of significant transactions affecting corporate
control or ownership of the Company.
The holders of the 9% Preferred Stock shall have the right effective for
thirty days following the mailing date of a notice disclosing a Change in
Control to require the Company to repurchase all or any part of their shares of
9% Preferred Stock on the date that is no later than 45 days after the date of
such repurchase right notice, at a repurchase price equal to $25.00 per share,
plus accrued and unpaid dividends to the repurchase date with respect to such
shares. The Company may satisfy its repurchase obligations through the issuance
of shares of Common Stock (valued at the Market Price of the Common Stock).
18
<PAGE> 20
Under the Certificate of Designation, a "Change in Control" means the
occurrence of any of the following events after the date of original issuance of
the 9% 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 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
the 9% Preferred Stock), or (iv) the date of the consummation of the merger or
consolidation of the Company with another corporation 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 corporation 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 corporation issuing cash
or securities in the merger or consolidation. See "Description of Capital
Stock--Class B Stock" for certain rights of Class B Stockholders.
As used herein, "Market Price" of a share of the Common Stock will be the
average of the Closing Prices of the Common Stock for the ten trading days
ending on the last trading day preceding the date of the Change in Control.
REGISTRAR AND TRANSFER AGENT
Chase Mellon Shareholder Services, L.L.C., is the Registrar and Transfer
Agent for the 9% Preferred Stock as well as the Common Stock.
DESCRIPTION OF DEBENTURES
If the Company elects to exchange the 9% Preferred Stock for Debentures,
the Company will issue the Debentures under an Indenture (the "Indenture") to be
entered into between the Company and Continental Stock Transfer & Trust Company
as Trustee (the "Trustee"). The Debentures will be limited to an aggregate
principal amount equal to the aggregate liquidation value of the 9% Preferred
Stock for which they have been exchanged and will be unsecured, subordinated
obligations of the Company. The Debentures will be issued only as fully
registered debentures, without coupons, in denominations of $25.00 and integral
multiples of $25.00. All Debentures must bear a certificate of authentication
executed by the Trustee. The Debentures will be transferable at the office
maintained by the Trustee for such purpose, in the Borough of Manhattan, City
and State of New York.
The following is a brief description of the Debentures, which does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the proposed Indenture, a copy of which is available for
inspection at the office of the Company.
MATURITY AND INTEREST
The Debentures will mature on September 30, 2006, and will bear interest
from date of issue at the rate of 9% per annum, payable semi-annually on March
31 and September 30 of each year commencing the first such date after the date
of issue. Interest on the Debentures will be payable to the persons in whose
names
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they are registered at the close of business on the fifteenth day of the same
month. The Debentures will be payable both as to principal and interest at an
office maintained by the Company or its paying agent under the Indenture for
such purpose, in the Borough of Manhattan, City and State of New York, provided
that, at the option of the Company, payment of interest may be made by check
mailed to the registered Debenture holders entitled thereto at their addresses
as they appear on the registry books for the Debentures.
CONVERSION RIGHTS
The holders of Debentures will be entitled at any time prior to maturity to
convert the principal amount into the Common Stock at the conversion rate of
$13.65 per share for the 9% Preferred Stock, as adjusted, except that the right
to convert Debentures which are called for redemption expires at the close of
business on the redemption date unless the Company defaults in the payment of
the redemption price, 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. In the case of redemption at the option of the holder as a result of a
Change in Control, such right will terminate upon receipt by the Company of a
written notice of the 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).
Holders of Debentures at the close of business on an interest payment
record date shall be entitled to receive the interest payable on such shares on
the corresponding interest payment date notwithstanding the conversion thereof
following the close of business on such interest payment date. 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 Debenture presented for conversion. Except as provided above, the Company
shall make no payment or allowance for unpaid interest on converted Debentures
or for dividends on the shares of Common Stock issued upon such conversion.
No adjustment with respect to interest on Debentures or any dividend on the
Common Stock issued upon conversion will be made upon conversion of Debentures.
No fractional shares will be issued upon conversion and, in lieu thereof,
an adjustment in cash will be paid based upon the closing price (as defined in
the Indenture) on the last trading day prior to the date of such conversion.
The conversion rate applicable to the Debentures is subject to adjustment
upon the occurrence of certain events, including: (i) the subdivision or
combination of outstanding shares of Common Stock; (ii) the issuance of shares
of Common Stock as a dividend or distribution on the Common Stock; (iii) the
issuance of rights, options or warrants to holders of Common Stock entitling
them to subscribe for or acquire shares of Common Stock (or securities
convertible into such shares) at less than the current Market Price per share
(as defined in the Indenture) of Common Stock; and (iv) the distribution to
holders of Common Stock of evidences of 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
(other than those referred to above). No adjustment of the conversion rate will
be required unless it would result in at least a 1% increase or decrease in the
conversion rate; however, an adjustment not made is carried forward and taken
into account in any subsequent adjustment. Issuances of options and securities
convertible into Common Stock are deemed to be issuances of the underlying
Common Stock for purposes of adjustments to the conversion price. Whenever the
conversion price is adjusted, the Company shall promptly mail to holders of the
Debentures a notice of adjustment briefly stating the facts requiring the
adjustment and the manner of computing it.
Subject to the applicable rights of the holders of the Debentures upon a
Change in Control, (which has the comparable meaning in the Indenture as in the
Certificate of Designation) and subject to the provisions of the Indenture
described below under "-- Consolidation, Merger, Conveyance or Transfer", in
case of any reclassification or change in the Common Stock (other than a change
in par value or a subdivision or combination), any consolidation or merger of
the Company with or into any other corporation (other than a
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merger in which the Company is the surviving corporation), or any sale or
transfer of substantially all the assets of the Company, any holder of
Debentures will be entitled, after the occurrence of any such event, to receive
on conversion the consideration that such holder would have received had he
converted immediately prior to the occurrence of such event. 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 above will similarly
apply to successive reclassifications, consolidations, mergers, sales, transfers
or share exchanges.
The Company will reserve the right to make such adjustments in the
conversion rate in addition to those required in the foregoing provisions as it
shall determine to be advisable in order that the certain stock-related
distributions which may hereafter be made by the Company to its stockholders
shall not be taxable to them.
The Company will reserve and at all times keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the Debentures, such number of shares of its duly authorized Common Stock as
will from time to time be sufficient to effect the conversion of all outstanding
Debentures. Pursuant to the Registration Rights Agreement, the Company will file
with the Commission, within 120 days from the date of original issuance of the
9% Preferred Stock, a registration statement (the "Shelf Registration
Statement") with respect to resales of the 9% Preferred Stock, the Debentures
and the underlying shares of Common Stock issuable upon conversion thereof. In
addition, the Company will use its reasonable best efforts to cause such Shelf
Registration Statement to become effective within 180 days from the date of
original issuance of the 9% Preferred Stock. See "-- Registration Rights."
OPTIONAL REDEMPTION BY THE COMPANY
The Debentures will be redeemable at the option of the Company, as a whole
or from time to time in part, on not less than 30 nor more than 60 days' notice
to each holder of the Debentures at the principal amount of the Debentures, on
or after September 30, 1999, together with accrued interest to the date fixed
for redemption; provided, however, the Debentures may not be redeemed on or
after September 30, 1999 and prior to September 30, 2000 unless the closing
price (as defined in the Indenture) of the Common Stock has equaled or exceeded
150% 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.
If less than all the Debentures will be redeemed, the Trustee shall by lot
or pro rata, or such other method as the Trustee shall deem to be substantially
equivalent thereto, select in such manner as it shall deem appropriate and fair
in its sole discretion the particular Debentures to be redeemed, provided that
no Debentures shall be redeemed in part in amounts other than $25.00 or integral
multiples thereof.
CHANGE IN CONTROL
The holders of Debentures have special rights that become effective upon
the occurrence of certain types of significant transactions affecting corporate
control or ownership of the Company.
Upon a Change In Control, the holders of the Debentures will have the
right, subject to certain conditions and restrictions, to require the Company to
repurchase all or any part of their Debentures at a purchase price of the
principal amount thereof, plus accrued and unpaid interest, in cash. The Company
may satisfy its repurchase obligations through the issuance of shares of Common
Stock (valued at the Market Price as above defined, of the Common Stock).
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SUBORDINATION
The indebtedness to be evidenced by the Debentures will be subordinated as
summarized below to all Senior Indebtedness. Senior Indebtedness is defined in
the Indenture as 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 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.
As of September 30, 1996, the Company had approximately $29,300,000 of
indebtedness which would have qualified as Senior Indebtedness under the
Indenture had the Indenture been executed as of such date. It is likely,
however, that the Company will incur other Senior Indebtedness from time to time
in the future. The Indenture will not prohibit or limit the incurrence of such
additional indebtedness.
No payment may be made by the Company with respect to the principal of or
premium, if any, or interest on the Debentures if (i) there shall be a failure
in the payment of principal of or premium, if any, or interest on any Senior
Indebtedness which has matured (whether by acceleration or otherwise) or (ii)
there shall be any other event of default with respect to any Senior
Indebtedness, as such event of default is defined therein, as a result of which
payment of such Senior Indebtedness has been declared to be due and payable or
required to be prepaid prior to the stated maturity thereof, unless, and until,
such event of default shall have been cured or waived or shall have ceased to
exist or such acceleration shall have been rescinded or annulled. In the event
of any payment or distribution of assets of the Company upon dissolution,
winding-up, liquidation or reorganization of the Company, the holders of all
Senior Indebtedness will be entitled to receive payment in full of all
principal, and interest before the holders of the Debentures will be entitled to
receive any payment on account of principal or interest. By reason of the
subordination provisions described herein, the holders of Senior Indebtedness
and general creditors may receive more, ratably, than the holders of Debentures.
EVENTS OF DEFAULT; RIGHTS ON DEFAULT
The following will be "Events of Default" under the Indenture: failure to
pay interest on the Debentures when due for 30 days, whether or not such payment
is prohibited by the subordination provisions of the Indenture; failure to pay
principal of, on, any Debentures when such amounts become due and payable,
whether or not such payment is prohibited by the subordination provisions of the
Indenture; failure on the part of the Company to observe any of its other
covenants under the Indenture for a period of 60 days after notice from the
Trustee or holders of at least 25% in aggregate principal amount of the
Debentures; and certain events of bankruptcy, insolvency, or reorganization of
the Company.
The Indenture will provide that the Trustee shall, within 90 days after the
occurrence of a default, give to the Debentureholders notice of all uncured
defaults known to it, provided that, except in the case of default in
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the payment of the principal of or interest on any of the Debentures the Trustee
shall be protected in withholding such notice if in good faith it determines
that the withholding of such notice is in the interests of the Debentureholders.
The Company will be required, pursuant to the terms of the Indenture, to
furnish to the Trustee within 120 days after the close of each fiscal year a
statement of certain officers of the Company to the effect that they have
reviewed the activities of the Company and its performance under the Indenture
and that, to the best of their knowledge, no default has occurred (or, if one
has occurred, specifying its nature and status).
The Indenture will provide that during the continuance of any Event of
Default (other than in an Event of Default resulting from bankruptcy, insolvency
or reorganization), either the Trustee or the holders of not less than 25% of
the Debentures then outstanding may declare the principal of all the Debentures,
plus accrued interest, immediately due and payable by written notice to the
Company (and to the Trustee, if given by the Debentureholders). In case an Event
of Default resulting from certain events of bankruptcy, insolvency or
reorganization shall occur, such amounts shall be due and payable without any
declaration of any act on the part of the Trustee or the holders of the
Debentures. Such declaration and its consequences may be rescinded and annulled
in certain circumstances by the holders of a majority in aggregate principal
amount of the outstanding Debentures except a default in the payment of
principal, or interest on, any Debenture or in respect of a covenant or
provision of the Indenture which cannot be modified or amended without the
consent of the holder of each Debenture. The holders of a majority in aggregate
principal amount of the outstanding Debentures will also 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 power conferred on the
Trustee, except as otherwise provided in the Indenture.
The Indenture will provide that in case an Event of Default shall occur
(which shall not have been cured or waived) the Trustee will be required to use
the degree of care and skill of a prudent man in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any of the
Debentureholders, unless they shall have offered to the Trustee reasonable
security or indemnity. Except as specifically provided in the Indenture, nothing
therein will relieve the Trustee from liability for its own negligent action,
its own negligent failure to act or its own willful misconduct.
Except to enforce the right to receive payments when due of principal,
premium, if any, and interest, no holder of any Debenture will have the right to
institute suit to enforce the Indenture unless (1) he has given notice of the
default to the Trustee, (2) the holders of at lease 25% in aggregate principal
amount of the Debentures outstanding have requested the Trustee to institute
suit and have offered to provide the Trustee with reasonable indemnity against
liability in connection with such suit, and (3) the Trustee has failed to
institute such suit for 60 days after receipt of such request and offer of
indemnity.
The Indenture will provide that the right of each holder of the Debentures
to enforce his rights to receive payment of principal of and interest on the
Debentures held by him or to convert such Debentures in accordance with the
provisions of the Indenture will not be impaired without his consent.
SATISFACTION AND DISCHARGE
The Indenture must be fully satisfied on the final maturity date (or date
of full redemption) by the Company's deposit with the Trustee of sufficient
funds to pay the principal and interest due or to become due on the Debentures
to maturity or redemption and all other sums payable pursuant to the terms of
the Indenture, after complying with certain other procedures set forth in the
Indenture. The Indenture may be satisfied prior to maturity by the Company's
delivery to the Trustee of all of the outstanding Debentures for cancellation
and paying all sums required to be paid pursuant to the terms of the Indenture.
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
The Company may not consolidate or merge with any corporation or convey or
transfer its properties and assets substantially as an entirety to any person
unless (a)(i) the Company is the surviving corporation
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following such merger or (ii) the corporation (if other than the Company) formed
by such consolidation or into which the Company is merged or the person which
acquires by conveyance or transfer the properties and assets of the Company is
organized under the laws of the United States or any state thereof or the
District of Columbia, and assumes all obligations of the Company under the
Indenture and the Debentures; (b) immediately after giving effect to such
transaction, no Event of Default and no event which, after notice or lapse of
time, or both, would become an Event of Default, shall have happened and be
continuing; and (c) certain officer's certificates and legal opinions are
obtained.
MODIFICATION OF THE INDENTURE
With certain exceptions, the obligations of the Company and the rights of
the Debentureholders may be modified only with the consent of the Company and of
the holders of not less than a majority in principal amount of the Debentures at
the time outstanding; provided, however, that, without the consent of the holder
of each Debenture so affected no such modification shall change the stated
maturity of any Debenture, or reduce the principal amount thereof or any premium
thereon, or reduce the amount or change the time of payment of interest thereon,
or change the place or currency of payment, or impair the right of any
Debentureholder to institute suit or the enforcement of any such payment when
due, or change the conversion or subordination provisions of the Indenture in a
manner adverse to the Debentureholders, or reduce the aforesaid percentage of
Debentures the consent of the holders of which is required for any such
modification, or the consent of the holders of which is required for any waiver
(of compliance with certain provisions of the Indenture or certain defaults
thereunder and their consequences) provided for in the Indenture, or modify any
of the provisions in the Indenture relating to such modification or the waiver
of default except to increase any such percentage or to provide that certain
other provisions of the Indenture cannot be modified or waived without the
consent of the holders of each Debenture affected thereby. The Company and the
Trustee also are permitted to supplement the Indenture without the consent of
the Debentureholders for certain limited purposes.
TRANSFER AND EXCHANGE
A holder may transfer or exchange the Debentures in accordance with the
Indenture. The Company may require a holder to, among other things, furnish
appropriate endorsements and transfer documents and pay any taxes and fees
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Debenture selected for redemption. Also, the Company is
not required to transfer or exchange any Debenture for a period of 15 days
before a selection of Debentures is to be redeemed.
The registered holder of a Debenture may be treated as the owner of it for
all purposes.
DELIVERY AND FORM
The Debentures to be issued upon exchange of the 9% Preferred Stock as set
forth herein will be issued in registered form. Transfers of Debentures must be
made in accordance with the terms of the Indenture.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received in respect of any such
claim as security or otherwise. Subject to the Trust Indenture Act, the Trustee
will be permitted to engage in other transactions; however, if it acquires any
conflicting interest, as described in the Trust Indenture Act, it must eliminate
such conflict or resign.
REGISTRATION RIGHTS AGREEMENT
At the Closing, the Company and the initial investors entered into the
Registration Rights Agreement providing for the registration of the resales of
the Restricted Securities (as defined below).
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Pursuant to the Registration Rights Agreement entered into between the
Company and the initial investors, the Company is required to file with the
Commission, within 120 days after the date of original issuance of the 9%
Preferred Stock, a Shelf Registration Statement to register the resales of the
Restricted Securities by the holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement. The Company will use its reasonable best efforts to
cause the Shelf Registration Statement to become effective within 180 days from
the date of original issuance of the 9% Preferred Stock and to keep such Shelf
Registration Statement effective until the third anniversary of the date of
original issuance of the 9% Preferred Stock unless the three year holding period
under Rule 144(k) is shortened, in which case the Company shall use its
reasonable best efforts to keep such Shelf Registration Statement effective
until the expiration of such shortened holding period under Rule 144(k). For
purposes of the foregoing, "Restricted Securities" means each share of the 9%
Preferred Stock, each Debenture, or each underlying share of Common Stock, as
applicable, until the date on which such share of 9% Preferred Stock, Debenture
or underlying share of Common Stock, as applicable, has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement, the date on which such share of 9% Preferred Stock,
Debenture or underlying share of Common Stock, as applicable, is distributed to
the public pursuant to Rule 144 or the date on which such share of 9% Preferred
Stock, Debenture or underlying share of Common Stock, as applicable, may be sold
or transferred pursuant to Rule 144(k) (or any similar provisions then in
force).
Holders of the 9% Preferred Stock, Debentures and Common Stock will be
required to make certain representations to the Company (as described in the
Registration Rights Agreement) and will be required to deliver information to be
used in connection with the Shelf Registration Statement and to provide comments
on the Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their 9% Preferred Stock,
Debentures and Common Stock included in the Shelf Registration Statement. The
Company has agreed to use its reasonable best efforts to file on a timely basis
all such reports required to be filed under the Exchange Act as, and endeavor in
good faith to take such other actions as are reasonably necessary to enable any
beneficial owner of 9% Preferred Stock, Debentures or shares of Common Stock
issuable upon conversion thereof to sell Restricted Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144, as such rule may be amended from time to time, (ii)
Rule 144A, as such rule may be amended from time to time, or (iii) any similar
rules or regulations hereafter adopted by the Commission.
DESCRIPTION OF CAPITAL STOCK
The current authorized capital of the Company consists of 35,000,000 shares
of Common Stock, par value $.10 per share, 35,000,000 shares of Class B Stock,
par value $.10 per share and 3,000,000 shares of Preferred Stock, par value
$1.00 per share.
The Board of Directors is authorized, pursuant to the Company's Restated
Certificate of Incorporation, to provide for the issue of the shares of
Preferred Stock in one or more series with such rights as the Board of Directors
may determine.
COMMON STOCK
The holders of shares of Common Stock of GDC are entitled to one vote per
share on all matters submitted to stockholders. They are also entitled to vote
separately as a class (as are the holders of shares of the Class B Stock
described below) on all matters requiring an amendment to the Company's Restated
Certificate of Incorporation, as well as on mergers, consolidations and certain
other significant transactions for which stockholder approval is required under
Delaware law. Holders of the Common Stock do not have preemptive rights or
cumulative voting rights.
Dividends on the Common Stock will be paid if, and when, declared. However,
if a cash dividend is paid in respect of the Common Stock, a cash dividend must
also be paid on the Class B Stock in an amount per share of Class B Stock equal
to 90% of the amount of the cash dividends paid on each share of the Common
Stock. Otherwise, however, the Common Stock and the Class B Stock rank equally
as to dividends.
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The Company has never paid cash dividends on the Common Stock and Class B
Stock and cash dividends (except as provided for by the amendment to such
agreement allowing payment of dividends on the 9% Preferred Stock) are not
permitted by the Company's revolving credit and security agreement. Stock
dividends on and stock splits of Common Stock will only be payable or made in
shares of Common Stock.
Upon liquidation, dissolution or winding up of the affairs of the Company,
the holders of the Common Stock ratably with the holders of the Class B Stock
(which are considered for this purpose one class) are entitled to receive the
entire net assets of the Company remaining after payment of all debts and other
claims of creditors and after the holders of each series of preferred stock, if
any, have been paid the preferred liquidating distribution on their shares, if
any, as fixed by the Board of Directors of GDC. The Common Stock is not
convertible into shares of any other equity security of the Company.
The Common Stock is freely transferable.
CLASS B STOCK
The holders of shares of Class B Stock of GDC are entitled to one vote per
share on all matters submitted to stockholders except that they are entitled to
ten votes per share on the election of directors under certain circumstances.
They are also entitled to vote separately as a class (as are the holders of
shares of Common Stock) on all matters requiring an amendment to the Company's
Restated Certificate of Incorporation, as well as on mergers, consolidations and
certain other significant transactions for which stockholder approval is
required under Delaware law. Holders of the Class B Stock do not have preemptive
rights or cumulative voting rights.
Dividends on the Class B Stock will be paid only as and when dividends on
the Common Stock are declared and paid. Moreover, if a cash dividend is paid in
respect of the Common Stock, a cash dividend must also be paid on the Class B
Stock in an amount per share of Class B Stock equal to 90% of the amount of the
cash dividends paid on each share of Common Stock. Otherwise, however, the
Common Stock and the Class B Stock rank equally as to dividends. Stock dividends
on and stock splits of Class B Stock will only be payable or made in shares of
Class B Stock.
In the event of liquidation or insolvency, each share of Class B Stock will
be entitled to share ratably with the Common Stock in the assets remaining after
payment of all debts and other claims of creditors, subject to the rights of any
preferred stock issued in connection with the Offering or which may be issued in
the future.
Holders of Class B Stock may elect at any time to convert any of or all
such shares to shares of the Common Stock on a share-for-share basis. In the
event that the number of outstanding shares of Class B Stock falls below 5% of
the aggregate number of issued and outstanding shares of Common Stock and Class
B Stock, or the Board of Directors and holders of a majority of the outstanding
shares of Class B Stock approve the conversion of the Class B Stock into Common
Stock, then the Class B Stock will automatically be converted into shares of
Common Stock. In the event of such conversion, certificates formerly
representing outstanding shares of Class B Stock will thereafter be deemed to
represent the number of shares of Common Stock corresponding to the number of
shares of Class B Stock thus converted.
The Class B Stock is not transferable except to certain family members and
related entities of the holder thereof.
SPECIAL VOTING REQUIREMENTS
The Company's Restated Certificate of Incorporation contains a provision
requiring a two-thirds vote on any merger or consolidation or any sale or other
disposition of all or substantially all the Company's assets. It also contains a
"fair price" provision requiring all stockholders to receive equal treatment in
the event of a takeover which may be coercive. This "fair price" provision may
not be amended except by a four-fifths vote of the stockholders and may be
considered to have the effect of discouraging tender offers, takeover attempts,
acquisitions or business combinations involving the Company. That provision also
requires that business combinations involving the Company and certain "Acquiring
Persons" (defined to include any person or entity which directly or indirectly
owns or controls at least 5% of the voting stock of the Company) be approved by
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the holders of four-fifths of the Company's outstanding shares entitled to vote
(other than shares held by an Acquiring Person with which or by or on whose
behalf a business combination is proposed) unless such business combination
either:
(1) has been authorized by the Board of Directors of GDC prior to the
time that the Acquiring Person involved in such business combination became
an Acquiring Person; or
(2) will result in the receipt by the other stockholders of the
Company of a specified minimum amount and form of payment for their shares.
ANTI-TAKEOVER STATUTE
Section 203 of the Delaware General Corporation Law ("DGCL") is applicable
to corporate takeovers in Delaware. Subject to certain exceptions set forth
therein, Section 203 of the DGCL provides that a corporation shall not engage in
any business combination with any "interested stockholder" for a three-year
period following the date that such stockholder becomes an interested
stockholder unless (a) prior to such date, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (b) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding certain shares) or (c) on or subsequent to such date, the
business combination is approved by the board of directors of the corporation
and by the affirmative vote of at least 66 3/4% of the outstanding voting stock
which is not owned by the interested stockholder. Except as specified therein,
an interested stockholder is defined to include any person that is the owner of
15% or more of the outstanding voting stock of the corporation, or is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within three years
immediately prior to the relevant date, and the affiliates and associates of
such person. Under certain circumstances, Section 203 of the DGCL makes it more
difficult for an "interested stockholder" to effect various business
combinations with a corporation for a three-year period although the
stockholders may, by adopting an amendment to the corporation's certificate of
incorporation or by-laws, elect not to be governed by this section, effective
twelve months after adoption. The Certificate of Incorporation and the By-laws
do not exclude GDC from the restrictions imposed under Section 203 of the DGCL.
PREFERRED STOCK
Preferred stock, including the 9% Preferred Stock, may be issued in one or
more series from time to time by action of the Board of Directors of GDC. The
shares of any series of preferred stock may be convertible into Common Stock,
may have priority over the Common Stock and Class B Stock in the payment of
dividends and as to the distribution of assets in the event of liquidation,
dissolution or winding-up of the Company and may have preferential or other
voting rights, in each case, to the extent, if any, determined by the Board of
Directors of the Company at the time it creates the series of preferred stock.
There currently are no shares of preferred stock outstanding other than shares
of the 9% Preferred Stock.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material federal income tax consequences
to purchasing, acquiring and owning, the 9% Preferred Stock, the Debentures and
the Common Stock. The summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations, court decisions and rulings by the
Internal Revenue Service (the "IRS") now in effect, all of which are subject to
change. The summary assumes that 9% Preferred Stock and Debentures will be held
as "capital assets" as defined in the Code. The summary does not address: (1)
tax consequences to any holder of the 9% Preferred Stock, Debentures or Common
Stock under any federal tax laws (including, without limitation, estate and gift
tax laws) other than income tax laws or under any foreign, state or local tax
laws of any type; (2) special rules pertaining to integrated transactions of
which the ownership of the 9% Preferred Stock, Debentures or Common stock is a
part, such as hedging, conversion or straddle transactions; (3) tax consequences
to subsequent holders of 9%
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Preferred Stock, Debentures or Common Stock; or (4) tax consequences that result
from the tax status or particular circumstances of the holder. Thus, for
example, the summary does not discuss the treatment of holders that are subject
to special tax rules, such as banks, insurance companies, regulated investment
companies, personal holding companies, corporations subject to the alternative
minimum tax, and tax-exempt entities. PROSPECTIVE PURCHASERS ARE STRONGLY URGED
TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF ACQUIRING,
HOLDING OR DISPOSING OF THE 9% PREFERRED STOCK, DEBENTURES OR COMMON STOCK IN
LIGHT OF THEIR PERSONAL INVESTMENT CIRCUMSTANCES, AND THE CONSEQUENCES UNDER
FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
DIVIDENDS ON 9% PREFERRED STOCK
Distributions with respect to the 9% Preferred Stock will constitute
dividends to the extent that the Company has current or accumulated earnings and
profits for federal income tax purposes. Dividends paid to corporations will
generally be eligible for the dividends received deduction under section 243 of
the Code, subject to applicable limitations contained under the Code.
In general, the dividends received deduction is available only if the 9%
Preferred Stock in respect of which the dividends are paid is held for at least
46 days, or at least 91 days in the case of a dividend attributable to a period
or periods aggregating more than 366 days. A taxpayer's holding period for these
purposes is reduced by periods during which the taxpayer's risk of loss with
respect to the stock is considered diminished by reason of the existence of
options, contracts to sell or other similar transactions. The dividends received
deduction will also not be available if the taxpayer is under an obligation to
make related payments with respect to positions in substantially similar or
related property. The dividends received deduction will be limited to specified
percentages of the holder's taxable income and may be reduced or eliminated if
the holder has indebtedness "directly attributable to its investment" in the
stock. Prospective corporate purchasers of 9% Preferred Stock should consult
their own tax advisors to determine whether these limitations might apply to
them.
If distributions with respect to the shares of 9% Preferred Stock exceed
the Company's current and accumulated earnings and profits, the excess will be
applied against and reduce (but not below zero) the holder's tax basis in the 9%
Preferred Stock. Any amount in excess of the amount of the dividend and the
amount applied against basis will be treated as capital gain, which will be
long-term if the holder's holding period for the 9% Preferred Stock exceeds one
year.
No assurance can be given that the Company will have current earnings and
profits in any period. As a result, no assurance can be given that any
distribution on the 9% Preferred Stock will be treated as a dividend for which
the dividends received deduction will be available.
Legislation recently proposed by the Clinton administration, if enacted,
would reduce the inter-corporate dividends received deduction (currently 70
percent for corporations owning less than 20 percent of the distributing
corporation) to 50 percent. In addition, the 46 day (or 91 day) holding period
would have to be satisfied during the period beginning 45 (or 90) days before
the ex-dividend date and ending 45 (or 90) days thereafter.
EXTRAORDINARY DIVIDENDS
If a corporate holder of preferred stock receives an "extraordinary
dividend" from the Company with respect to stock which it has not held for two
years on the dividend announcement date, the basis of the preferred stock will
be reduced (but not below zero) by the portion of the dividend which is not
taxed because of the dividends received deduction. If, because of the limitation
on reducing basis below zero, any amount of the non-taxed portion of an
extraordinary dividend has not been applied to reduce basis, such amount will be
treated as gain from the sale or exchange of stock when such stock is disposed
of. An "extraordinary dividend" on the 9% Preferred Stock would include (i) a
dividend which equals or exceeds 5% of the holder's adjusted tax basis in the
stock, treating all dividends having ex-dividend dates within a period of 85
consecutive days as one dividend, or (ii) all dividends on such stock received
by such holder if the aggregate amount of such
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dividends having ex-dividend dates within a period of 365 consecutive days
exceeds 20% of the holder's adjusted tax basis in the stock. A holder may elect
to use the market value of the stock rather than its adjusted basis for purposes
of applying the 5% or 20% limitation if the holder is able to establish such
fair market value to the satisfaction of the IRS. An "extraordinary dividend"
would also include any amount treated as a dividend in the case of a redemption
of the 9% Preferred Stock that is non-pro rata as to all shareholders, without
regard to the period the holder held the stock.
Special rules apply with respect to "qualified preferred dividends." A
qualified preferred dividend is a fixed dividend payable with respect to
preferred stock which (i) provides for fixed preferred dividends payable no less
often than annually and (ii) is not in arrears as to dividends when acquired,
provided the actual rate of return on such stock, as determined under section
1059(e)(3) of the Code, does not exceed 15%. When the qualified preferred
dividend exceeds the 5% or 20% limitation described above, the extraordinary
dividend rules will not apply if the taxpayer holds the stock for more than five
years. If the taxpayer disposes of the stock before it has been held for more
than five years, the aggregate reduction in basis will not exceed the excess of
the qualified preferred dividends paid on such stock during the period held by
the taxpayer over the qualified preferred dividends which would have been paid
during such period on the basis of the stated rate of return as determined under
section 1059(e)(3) of the Code. The length of time that a taxpayer is deemed to
have held stock for this purpose is determined under principles similar to those
applicable for purposes of the dividends received deduction discussed above.
Recently proposed legislation, if enacted, would amend section 1059 of the
Code in certain respects, which would require immediate gain recognition
whenever the basis of the preferred stock with respect to which such
extraordinary dividend was received would otherwise be reduced below zero.
SALE OR REDEMPTION FOR CASH
A sale of preferred stock generally will give rise to gain or loss to the
holder measured by the difference between the amount realized on such sale and
the holder's tax basis in the shares sold. In general, a holder who sells
preferred stock after the record date for a dividend distribution will be
treated as the recipient of the dividend income.
A redemption of shares of the 9% Preferred Stock by the Company for cash
will be a taxable event. A redemption of the 9% Preferred Stock for cash will be
treated under section 302 of the Code as a distribution taxable as a dividend to
redeeming holders to the extent of the Company's current or accumulated earnings
and profits unless the redemption: (i) results in a "complete termination" of
the holder's interest in the Company (within the meaning of section 302(b)(3) of
the Code); (ii) is "substantially disproportionate" with respect to the holder
under section 302(b)(2) of the Code; or (iii) is "not essentially equivalent to
a dividend" (within the meaning of section 302(b)(1) of the Code). In
determining whether any of these tests has been met, shares considered to be
owned by the holder by reason of the constructive ownership rules set forth in
section 318 of the Code, as well as shares actually owned, will be taken into
account. If any of the foregoing tests are met, the redemption of shares of the
9% Preferred Stock for cash will result in taxable gain or loss equal to the
difference between the amount of cash received and the holder's tax basis in the
redeemed shares. Any such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if the holder's holding period for the redeemed
shares exceeds one year.
If a redemption of the 9% Preferred Stock is treated as a distribution that
is taxable as a dividend, the holder will be taxed on the payment received in
the same manner as described above under "-- Dividends on 9% Preferred Stock,"
and the holder's tax basis in the redeemed 9% Preferred Stock will be
transferred to any remaining shares held by such holder in the Company. If the
holder does not retain any stock ownership in the Company, then such holder may
lose such basis completely. Any redemption of the 9% Preferred Stock that is
treated as a dividend and that is non-pro rata as to all stockholders may be
subject to the "extraordinary dividend" provisions of section 1059 of the Code
applicable to certain corporate holders as discussed above. See "-- Dividends on
9% Preferred Stock."
Recently proposed legislation, if enacted, would require a corporate
shareholder to recognize gain immediately with respect to any redemption treated
as a dividend when the nontaxed portion of the dividend
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exceeds the basis of the shares surrendered, if the sale or redemption is
treated as a dividend due to options being counted as stock ownership.
CLASSIFICATION OF THE DEBENTURES
Although the characterization of an instrument as debt or equity must be
based on all facts and circumstances, which, in the case of the Debentures
(which will be issued no earlier than September 30, 1998), cannot presently be
known, the Company anticipates that the Debentures will be treated as debt for
federal income tax purposes. Accordingly, the remainder of this discussion
assumes that the Company will so treat the Debentures and that such treatment
will be respected.
EXCHANGE FOR DEBENTURES
An exchange of shares of the 9% Preferred Stock for Debentures would also
be subject to the rules of section 302 of the Code described above. Since a
holder of Debentures will be treated under the constructive ownership rules as
owning the Common Stock into which the Debentures are convertible, the exchange
by itself would not qualify under the "complete termination" test described
above. The "not essentially equivalent to a dividend" or "substantially
disproportionate" tests could be met only if the exchange were regarded as
resulting in a reduction in the holder's proportionate interest in the Company.
If none of these tests is met, the fair market value of the Debentures received
upon the exchange will be taxable as a dividend to the extent of the Company's
current or accumulated earnings and profits (although such treatment would be
changed for corporations under pending legislation described above). Prospective
purchasers should consult their own tax advisors regarding satisfaction of the
Code section 302 tests in their particular circumstances, including the
possibility that a sale of a part of the holder's 9% Preferred Stock or the
Debentures received might be regarded as reducing the holder's interest in the
Company, thereby satisfying one of the tests under section 302(b) of the Code.
If one of such tests is satisfied, the shareholder will recognize capital gain
or loss on the exchange (and, in addition, a holder who exchanges the 9%
Preferred Stock after the record date for a dividend distribution will be
treated as the recipient of the dividend income). For purpose of determining the
amount of gain or loss, the amount realized in the exchange attributable to the
Debenture will be the issue price of the Debenture as determined for original
issue discount purposes. See "Original Issue Discount" below. Such gain or loss
will be long-term capital gain or loss if the holder's holding period for the 9%
Preferred Stock exceeds one year. The installment method will not be available
for reporting such gain in the event that either the 9% Preferred Stock or the
Debentures are traded or readily tradable on an established securities market.
If the redemption does not satisfy the tests of section 302(b) of the Code
and the fair market value of the Debentures exceeds the Company's current and
accumulated earnings and profits, the excess will be treated as a return of
capital to the extent of the holder's tax basis in the 9% Preferred Stock. Any
amount in excess of the amount of the dividend and the return of capital will be
treated as capital gain, which will be long-term if the holding period of the 9%
Preferred Stock exceeds one year. If the holder retains any stock in the
Company, the remaining tax basis in the 9% Preferred Stock will be transferred
to the retained stock. Holders who retain no actual stock ownership in the
Company should consult their own tax advisors regarding whether their tax basis
in the 9% Preferred Stock will be preserved indirectly (for example, by being
added to the exchanging shareholder's tax basis) in the Debentures or lost
entirely. As noted above, an "extraordinary dividend" includes any redemption of
stock that is treated as a dividend and that is non-pro rata as to all
stockholders, irrespective of the holding period. Consequently, an exchange of
9% Preferred Stock for Debentures that is treated as a dividend may constitute
an extraordinary dividend.
The Debentures for which the 9% Preferred Stock may be exchanged will be
issuable only in denominations of $25.00 and integral multiples thereof. See
"Description of the 9% Preferred Stock -- Exchange Provisions." Accordingly, a
holder exchanging 9% Preferred Stock for Debentures will receive cash (rather
than Debentures) to the extent that, absent the foregoing rule, the exchange
would result in the receipt of an amount of Debentures that is not an integral
multiple of $25.00. Any 9% Preferred Stock for which cash is received in an
exchange for Debentures under this rule will be treated as redeemed for cash,
with the results described above under "-- Sale or Redemption for Cash."
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STATED INTEREST
Stated interest on the Debentures will be includable in income in
accordance with the holder's method of accounting.
ORIGINAL ISSUE DISCOUNT
If the 9% Preferred Stock is exchanged for Debentures having a stated
redemption price at maturity that exceeds their issue price by an amount equal
to or greater than one-fourth of one percent of the stated redemption price at
maturity multiplied by the number of complete years to maturity, the Debentures
will be treated as having original issue discount ("OID") equal to the entire
amount of such excess. In the event that, at any time during the 60-day period
ending 30 days after the issue date, the Debentures are traded on an established
securities market, the issue price of the Debentures will be their fair market
value as determined as of the issue date. If the Debentures are not traded on an
established securities market during the above-described 60-day period, but the
9% Preferred Stock is so traded, the issue price of the Debentures will be the
fair market value of the 9% Preferred Stock as of the issue date. In the event
that neither the 9% Preferred Stock nor the Debentures are traded on an
established securities market within the above-described 60-day period, the
issue price of the Debentures will be their stated principal amount, unless (i)
the Debentures do not bear "adequate stated interest" within the meaning of
section 1274 of the Code, in which case the issue price will be equal to their
"imputed principal amount" as determined under section 1274 of the Code or (ii)
the Debentures are issued in a so-called "potentially abusive situation," as
defined in the regulations under section 1274 of the Code (including a situation
involving a recent sales transaction), in which case the issue price of the
Debentures will be the fair market value of the 9% Preferred Stock surrendered
in exchange therefor.
If the Debentures are treated as having OID, a holder of a Debenture would
generally be required to include in gross income (irrespective of its method of
accounting) a portion of the OID for each year during which it holds the
Debenture, even though the cash to which such income is attributable would not
be received until a later period. The amount of any OID included in income for
each year would be calculated under a constant-yield-to-maturity formula that
would result in the allocation of less OID to the early years of the term of the
Debentures and more OID to later years. In determining the yield and maturity of
a debt instrument which contains a call option, such as the Debentures, the
Company would be deemed to exercise the call option in a manner that minimizes
the yield on the debt instrument.
If a Debenture is issued with a yield to maturity at least 5 percentage
points above the applicable federal rate in effect for the month in which it is
issued and with "significant original issue discount" (within the meaning of
section 163(i)(2) of the Code), the Debenture would generally be subject to the
"high yield discount obligations" rules under section 163(e)(5)(C) of the Code.
In such a case, the Company would not be entitled to a deduction with respect to
a certain portion of the original issue discount (the "Disqualified Portion"
within the meaning of section 163(e)(5)(C) of the Code) and the remainder of the
OID would not be deductible by the Company until paid. In addition, the
Disqualified Portion of the OID would be treated as a distribution with respect
to the stock of the Company and the rules applicable to distributions with
respect to the 9% Preferred Stock would apply.
BOND PREMIUM ON DEBENTURES
If the Debentures are acquired in an exchange for the 9% Preferred Stock at
a time when the issue price of the Debentures exceeds the amount payable at the
maturity (or earlier call date, if appropriate) of the Debentures, such excess
(excluding the amount thereof attributable to the conversion feature) will be
deductible by the holder of such Debentures as amortizable bond premium over the
term of the Debentures (taking into account earlier call dates, as appropriate),
under a constant-yield-to-maturity formula, if an election by the taxpayer under
section 171 of the Code is in effect or is made. Such election would apply to
all obligations owned or subsequently acquired by the taxpayer. Except as may
otherwise be provided in future regulations, the amortizable bond premium will
be treated as an offset to interest income on the Debentures rather than as a
separate deduction item.
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MARKET DISCOUNT ON RESALE OF DEBENTURES
The market discount provisions of sections 1276 through 1278 of the Code
may adversely affect a disposition (including a redemption or retirement) of the
Debentures. If a holder acquires (other than at original issue) a Debenture at a
market discount which equals or exceeds one-fourth of l% of the stated
redemption price at maturity times the number of remaining complete years to
maturity and thereafter recognizes gain upon a disposition of the Debenture, the
lesser of (i) such gain, or (ii) the portion of the market discount which
accrued while the Debenture was held by such holder, will be treated as ordinary
income (and not as capital gain) at the time of the disposition. For these
purposes, market discount equals the excess of the stated redemption price at
maturity (or, if the Debenture is issued with original issue discount, its
revised issue price as defined in the Code) over the adjusted tax basis of the
Debenture in the hands of a holder immediately after its acquisition. Market
discount would generally accrue on a straight line basis over the term of the
Debenture, except that, at the election of the holder, it will accrue on an
economic accrual basis. A holder of the Debenture may elect to include any
market discount in income currently rather than upon disposition of the
Debenture. This election is recoverable only with the consent of the Internal
Revenue Service and applies to all market discount bonds acquired by the holder
on or after the first day of the taxable year in which the holder makes the
election.
A holder of any Debenture who acquired it at a market discount may be
required to defer the deduction of all or a portion of any interest paid or
accrued on any indebtedness incurred or continued to purchase or carry the
Debenture until the market discount is recognizable upon a subsequent
disposition of the Debenture. Such deferral is not required, however, if the
holder elects to include accrued market discount in income currently.
REDEMPTION OR SALE OF DEBENTURES
Generally a redemption or sale of the Debentures will result in taxable
gain or loss equal to the difference between the amount of cash and fair market
value of other property received and the holder's adjusted tax basis in the
Debentures. To the extent that the amount received is attributable to accrued
interest, however, that amount will be taxed as ordinary income. The tax basis
of a holder who received the Debentures in exchange for shares of 9% Preferred
Stock will generally be equal to the fair market value of the Debentures at the
time of exchange. Such gain or loss will be capital gain or loss and will be
long-term gain or loss if the holder's holding period for the Debentures exceeds
one year.
CONVERSION OF THE 9% PREFERRED STOCK OR DEBENTURES INTO COMMON STOCK
No gain or loss will generally be recognized upon conversion of shares of
the 9% Preferred Stock or Debentures into shares of Common Stock, except with
respect to any cash paid in lieu of fractional shares of Common Stock. If the
conversion takes place when there is a dividend arrearage on the 9% Preferred
Stock and the fair market value of the Common Stock exceeds the issue price of
the 9% Preferred Stock, a portion of the Common Stock received might be treated
as a dividend distribution, taxable as ordinary income. Assuming the conversion
is not treated as resulting in the payment of a dividend, the tax basis of the
Common Stock received upon conversion will be equal to the tax basis of the
shares of the 9% Preferred Stock or the Debentures converted therefor (other
than the portion of the tax basis of the 9% Preferred Stock or Debentures
attributed to a fractional share of Common Stock for which cash is received by
the holder) and the holding period of the Common Stock received upon conversion
will include the holding period of the shares of the 9% Preferred Stock or the
Debentures converted. The tax basis of any Common Stock treated as a dividend
will be equal to its fair market value on the date of the distribution.
ADJUSTMENT OF CONVERSION PRICE
Holders of convertible preferred stock or convertible debentures may be
deemed to have received constructive distributions where the conversion price is
adjusted to reflect property distributions with respect to stock into which such
preferred stock or debentures are convertible. Adjustments to the conversion
price made pursuant to a bona fide reasonable adjustment formula which has the
effect of preventing the dilution of
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the interest of the holders of the 9% Preferred Stock or Debentures, however,
will generally not be considered to result in a constructive distribution of
stock. Certain of the possible adjustments provided in the 9% Preferred Stock
and the Debentures may not qualify as being pursuant to a bona fide reasonable
adjustment formula. If such adjustments were made, the holders of 9% Preferred
Stock or Debentures might be deemed to have received constructive distributions
taxable under the rules described above. Similarly, in certain circumstances,
the failure to make appropriate adjustments to the conversion price of the 9%
Preferred Stock or the Debentures may be treated as a constructive distribution.
BACKUP WITHHOLDING
Under the backup withholding provisions of the Code and applicable Treasury
regulations, a holder of the 9% Preferred Stock, Debentures or Common Stock may
be subject to backup withholding at the rate of 31% with respect to dividends or
interest paid on, or the proceeds of a sale, exchange or redemption of the 9%
Preferred Stock, Debentures or Common Stock, unless such holder (a) is a
corporation or comes within certain other exempt categories and when required
demonstrates this fact or (b) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding rules. The
amount of any backup withholding from a payment to a holder will be allowed as a
credit against the holder's federal income tax liability and may entitle such
holder to a refund, provided that the required information is furnished to the
IRS.
SPECIAL TAX RULES APPLICABLE TO FOREIGN HOLDERS
For purposes of the following discussion, a "United States Alien Holder" is
any holder who, for United States federal income tax purposes, is a foreign
corporation, a nonresident alien individual, a nonresident alien fiduciary of a
foreign estate or trust, or a foreign partnership.
Income received by a United States Alien Holder in the form of dividends on
the 9% Preferred Stock or Common Stock or interest on the Debentures will be
subject to a United States federal withholding tax at a 30% rate upon the actual
payment of the dividends or interest except as described below and except where
an applicable tax treaty provides for the reduction or elimination of such
withholding tax. However, a United States Alien Holder generally will be taxed
in the same manner as a United States corporation or resident with respect to
such income if such income is effectively connected with the conduct of a trade
or business in the United States. Such effectively connected income received by
a United States Alien Holder which is a corporation may in certain circumstances
be subject to an additional "branch profits tax" at a 30% rate, or, if
applicable, a lower treaty rate.
Payments of interest on the Debentures received by a United States Alien
Holder will not be subject to United States federal withholding tax provided
that (a) the holder does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote, (b) the holder is not a controlled foreign corporation that is related to
the Company through stock ownership, (c) the holder is not party to a conduit
financing arrangement involving a person described in (a) or (b) above, and (d)
either (1) the beneficial owner of the Debenture, under penalties of perjury,
provides the Company or its agent with its name and address and certifies that
it is not a United States person or (2) the holder is a securities clearing
organization, bank, or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and certifies to the Company or its agent, under penalties of
perjury, that such a statement has been received from the beneficial owner by it
or another financial institution and furnishes to the Company or its agent a
copy thereof.
A United States Alien Holder generally will not be subject to United States
federal income or withholding tax on gain realized on the sale or exchange of
the 9% Preferred Stock, Common Stock, or Debentures unless (i) the holder is an
individual who was present in the United States for 183 days or more during the
taxable year or (ii) the gain is effectively connected with a United States
trade or business of the holder. Upon a redemption of the 9% Preferred Stock for
cash or Debentures, the Company may be required to withhold tax on the entire
amount of the proceeds at a 30% rate or a lower treaty rate applicable to
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dividends. In the case of an exchange of the 9% Preferred Stock for Debentures,
this requirement would result in a United States Alien Holder receiving a
reduced principal amount of Debentures.
Dividends paid to United States Alien Holders outside the United States
that are subject to the withholding tax described above will generally be exempt
from United States backup withholding tax and United States information
reporting requirements, other than reporting of dividend payments for purposes
of the withholding tax noted above. Backup withholding and information reporting
generally will not apply to payments of interest outside the United States if
the certification described above is received, provided the payor does not have
actual knowledge that the holder is a United States person.
The payment of the proceeds of the sale of the 9% Preferred Stock, Common
Stock or Debentures to or through the United States office of a broker will be
subject to information reporting and possible backup withholding at a rate of
31% unless the owner certifies its non-United States status under penalties of
perjury or otherwise establishes an exemption. In the case of the payment of
proceeds from the disposition of the 9% Preferred Stock, Common Stock or
Debentures through a foreign office of a broker that is a United States person
or a "United States related person," information reporting is required on the
payment unless the broker has documentary evidence in its files that the owner
is a non-United States person and the broker has no actual knowledge to the
contrary. For this purpose, a "United States related person" is (i) a
"controlled foreign corporation" for United States federal income tax purposes,
or (ii) a foreign person 50% or more of whose gross income from all sources for
a specified period is derived from activities that are effectively connected
with the conduct of a United States trade or business. Proposed regulations
provide that no backup withholding is required with respect to reportable
payments made through foreign offices of a broker that is a United States person
or "United States related person" unless the payor has actual knowledge that the
payee is a United States person. Any amounts withheld under the backup
withholding rules from a payment to a United States Alien Holder will be allowed
as a refund or a credit against such United States Alien Holder's United States
federal income tax, provided that the required information is furnished to the
IRS.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for the
Company by Weisman Celler Spett & Modlin, P.C., New York, New York. Howard S.
Modlin, a member of Weisman Celler Spett & Modlin, P.C. is a Director and
Secretary of the Company.
EXPERTS
The consolidated financial statements of the Company as of September 30,
1996 and 1995 and for each of the periods in the three year period ended
September 30, 1996 incorporated by reference in this Prospectus have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
34
<PAGE> 36
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 3
Incorporation of Certain Documents by
Reference........................... 4
Summary............................... 5
Risk Factors.......................... 6
Use of Proceeds....................... 9
Selected Consolidated Financial and
Operating Data...................... 10
Selling Holders....................... 12
Plan of Distribution.................. 14
Description of the 9% Preferred
Stock............................... 14
Description of Debentures............. 19
Registration Rights Agreement......... 24
Description of Capital Stock.......... 25
Certain Federal Income Tax
Considerations...................... 27
Legal Matters......................... 34
Experts............................... 34
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
GENERAL DATACOMM
INDUSTRIES, INC.
800,000 SHARES OF 9% CUMULATIVE
CONVERTIBLE EXCHANGEABLE
PREFERRED STOCK
$20,000,000 PRINCIPAL AMOUNT OF
9% CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2006
1,465,201 SHARES OF COMMON STOCK
---------------------
PROSPECTUS
---------------------
1997
------------------------------------------------------
------------------------------------------------------
<PAGE> 37
FORM S-3, PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses which other than the SEC
registration fee are estimates payable by the registrant in connection with the
sale and distribution of the shares registered hereby including the original
private offering.
<TABLE>
<S> <C>
SEC registration fee............................................ $ 6,060.61
Placement agent fees and expenses............................... 653,780.00
Legal and accounting fees and expenses.......................... 150,000.00
Printing expenses............................................... 25,000.00
Miscellaneous................................................... 15,159.39
-----------
Total................................................. $850,000.00
</TABLE>
The Selling Holders will pay any sales commissions or underwriting
discounts incurred in connection with the sale of securities registered
hereunder.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Article Tenth of the registrant's Restated Certificate
of Incorporation filed as Exhibit 3.1 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1988, which is incorporated by
reference for information concerning indemnification of directors and officers.
Section 145 of the General Corporation Law of Delaware permits or requires
indemnification of officers and directors in the event that certain statutory
standards of conduct are met. However, reference is made to Item 9(d) with
respect to indemnification for liabilities arising under the Securities Act.
Under an insurance policy with The Chubb Group of Companies, the directors
and certain officers of the undersigned registrant and its subsidiaries are
indemnified against certain losses arising from certain claims which may be made
against such persons, by reason of their being such directors or officers.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
3.1 Restated Certificate of Incorporation of the Corporation
(Incorporated by reference from Form 10-Q for quarter ended June 30,
1988, Exhibit 3.1. Amendments thereto are filed as Exhibit 3.1 to
Form 10-Q for quarter ended March 3l, 1990.)
3.2 Amended and Restated By-laws of the Corporation (Incorporated by
reference from Exhibit 3.2 to Form 10-K for year ended September 30,
1987.)
4.1 Certificate of the Powers, Designation, Preferences, Rights and
Limitations of 9% Cumulative Convertible Exchangeable Preferred
Stock. (Incorporated by reference from Form 8-K dated October 8,
1996, Exhibit 4)
4.2 Form of Indenture.
5. Opinion of Weisman Celler Spett & Modlin, P.C.
10.1 Registration Rights Agreement
12. Statement of Computation of Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
24. Consent
(a) Coopers & Lybrand L.L.P.
(b) Weisman Celler Spett & Modlin, P.C. (contained in Exhibit 5)
25. Statement of Eligibility of Trustee.
</TABLE>
II-1
<PAGE> 38
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933 (ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement, provided, however, that clauses (i) and (ii) do not
apply if the information required to be included in a post-effective
amendment by those clauses is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that for the purpose of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13 or 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
undersigned registrant pursuant to the foregoing provisions, or otherwise, the
undersigned registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the undersigned registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
undersigned registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act will be governed by the final
adjudication of such issue.
II-2
<PAGE> 39
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 27th day of
January 1997.
GENERAL DATACOMM INDUSTRIES, INC.
By: /s/ CHARLES P. JOHNSON
------------------------------------
Charles P. Johnson, Chairman of the
Board and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------------ -----------------
<S> <C> <C>
/s/ CHARLES P. JOHNSON Chairman of Board and Chief January 27, 1997
- ----------------------------------- Executive Officer
Charles P. Johnson
/s/ WILLIAM S. LAWRENCE Senior Vice President-Finance and January 27, 1997
- ----------------------------------- Chief Financial Officer
William S. Lawrence
/s/ WILLIAM G. HENRY Vice President and Corporate January 27, 1997
- ----------------------------------- Controller
William G. Henry
/s/ HOWARD S. MODLIN Director January 27, 1997
- -----------------------------------
Howard S. Modlin
/s/ FREDERICK R. CRONIN Director January 27, 1997
- -----------------------------------
Frederick R. Cronin
Director January , 1997
- -----------------------------------
Lee M. Paschall
Director January , 1997
- -----------------------------------
John L. Segall
</TABLE>
II-3
<PAGE> 40
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ----------------------------------------------------------------------- ------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the Corporation (Incorporated
by reference from Form 10-Q for quarter ended June 30, 1988, Exhibit
3.1. Amendments thereto are filed as Exhibit 3.1 to Form 10-Q for
quarter ended March 3l, 1990.)
3.2 Amended and Restated By-laws of the Corporation (Incorporated by
reference from Exhibit 3.2 to Form 10-K for year ended September 30,
1987.)
4.1 Certificate of the Powers, Designation, Preferences, Rights and
Limitations of 9% Cumulative Convertible Exchangeable Preferred Stock.
(Incorporated by reference from Form 8-K dated October 8, 1996, Exhibit
4)
4.2 Form of Indenture.
5. Opinion of Weisman Celler Spett & Modlin, P.C.
10.1 Registration Rights Agreement
12. Statement of Computation of Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
24. Consent
(a) Coopers & Lybrand L.L.P.
(b) Weisman Celler Spett & Modlin, P.C. (contained in Exhibit 5)
25. Statement of Eligibility of Trustee.
</TABLE>
<PAGE> 1
Exhibit 4.2
GENERAL DATACOMM INDUSTRIES, INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
Indenture
Dated as of ,___________________
9% Convertible Subordinated Debentures due 2006
<PAGE> 2
TABLE OF CONTENTS*
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 l.0l. Certain terms defined; other terms defined in Trust Indenture Act
of l939 or by reference therein in Securities Act of l933, as amended,
to have meanings therein assigned.......
Board of Directors......................
Business day............................
Change in Control.......................
Closing Price...........................
Common Stock............................
Company.................................
Conversion Rate; Conversion Price.......
Convertible Exchangeable
Preferred Stock.......................
Corporate Trust Office of the Trustee...
Date of Conversion......................
Debenture or Debentures.................
Debenture Registrar.....................
Debentureholder.........................
Depositary..............................
Event of Default........................
Execution of Debentures.................
Indenture...............................
Interest Payment Date...................
Interest Payment Record Date............
Market Price............................
Officers' Certificate...................
Opinion of Counsel......................
Registered Holder.......................
Repurchase Date.........................
Repurchase Right Notice.................
Responsible Officer.....................
Senior Indebtedness.....................
Senior Indebtedness Default.............
Subsidiary..............................
Trading Day.............................
Trustee.................................
Trust Indenture Act of l939.............
- --------
* 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> 3
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF DEBENTURES
PAGE
SECTION 2.0l. Amount, Authentication and Delivery of Debentures
SECTION 2.02. Form of Debentures and Trustee's Certificate......
SECTION 2.03. Date of Debentures and Denominations..............
SECTION 2.04. Execution and Authentication of Debentures and Use
of Temporary Debentures.........................
SECTION 2.05. Exchange, Registration and Transfer of Debentures
SECTION 2.06. When Company Not Required to Make Transfers or
Exchanges.......................................
SECTION 2.07 Multilated, Destroyed, Lost or Stolen Debentures..
SECTION 2.08. Cancellation of Surrendered Debentures............
SECTION 2.09. Debentureholders and Senior Indebtedness..........
SECTION 2.10 Persons Deemed Owners.............................
SECTION 2.11 CUSIP Numbers.....................................
SECTION 2.12 Global Securities.................................
ARTICLE THREE
REDEMPTION OF DEBENTURES
SECTION 3.0l. Debentures Redeemable.............................
SECTION 3.02. Notice of Redemption..............................
SECTION 3.03. Debentures Called for Redemption Due
and Payable.....................................
SECTION 3.04. Deposit of Redemption Moneys......................
SECTION 3.05. Redemption in Part................................
SECTION 3.06. Redemption Following Change in Control............
ii
<PAGE> 4
ARTICLE FOUR
CONVERSION OF DEBENTURES
SECTION 4.0l Conversion Privilege and Conversion Price.........
SECTION 4.02 Manner of Exercise of Conversion Privilege........
SECTION 4.03 Fractional Shares.................................
SECTION 4.04 Adjustment of Conversion Rate and
Conversion Price................................
SECTION 4.05 Effect of Reclassifications, Consolidations,......
Mergers or Sales on Conversion Privilege........
SECTION 4.06 Cancellation of Converted Debentures..............
SECTION 4.07 Taxes on Conversion...............................
SECTION 4.08 Company to Reserve Stock..........................
SECTION 4.09 Covenant as to Common Stock.......................
SECTION 4.l0 Notice of Certain Corporate Action................
SECTION 4.ll Disclaimer of Responsibility of Trustee, Etc......
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY
SECTION 5.0l. Payment of Principal of and.......................
Interest on Debentures...........................
SECTION 5.02. Maintenance of Offices or Agencies................
SECTION 5.03. Appointment to Fill Vacancy in Office of Trustee..
SECTION 5.04. Appointment of Paying Agent Other than Trustee....
SECTION 5.05 Annual Report to Trustee..........................
SECTION 5.06 Covenant Regarding Authorization..................
SECTION 5.07 Delivery of Certain Information...................
SECTION 5.08 Payment of Taxes and Other Claims.................
ARTICLE SIX
DEBENTUREHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE.
SECTION 6.0l. Covenant to Furnish Information...................
SECTION 6.02 Preservation of Information; Communications
to Debentureholders.............................
iii
<PAGE> 5
SECTION 6.03. Reports by Company.................................
SECTION 6.04. Reports by Trustee.................................
ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND
DEBENTUREHOLDERS ON EVENT OF DEFAULT
SECTION 7.01. Events of Default Defined..............................
Acceleration of Maturity...............................
SECTION 7.02. Recision and Annulment................................
SECTION 7.03. Collection of Indebtedness and Suits for
Enforcement by Trustee...............................
SECTION 7.04. Trustee May File Proofs of Claim.......................
SECTION 7.05. Application of Moneys Collected by Trustee.............
SECTION 7.06. Limitation on Suits by Holders of Debentures...........
SECTION 7.07. Delay or Omission in Exercise of Rights not Waiver
of Default...........................................
SECTION 7.08. Rights of Holders of Majority in Principal Amount
of Debentures to Direct Trustee and Waive Defaults..
SECTION 7.09. Trustee to Give Notice of Defaults Known to It, but
May Withhold in Certain Circumstances................
SECTION 7.10. Requirement of Undertaking to Pay Costs in
Certain..............................................
iv
<PAGE> 6
Suits under Indenture or Against
Trustee...........................................
SECTION 7.11. Unconditional Right of Holders to Receive
Payment of and Interest and to Convert............
SECTION 7.12. Restoration of Rights and Remedies..................
SECTION 7.13. Rights and Remedies Cumulative......................
SECTION 7.14. Waiver of Stay or Extension Laws....................
ARTICLE EIGHT
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee Prior to and After Event of
Default...........................................
SECTION 8.02. Certain Rights of Trustee...........................
SECTION 8.03. Trustee not Liable for Recitals or Issuance of
Debentures........................................
SECTION 8.04. Trustee or Others May Hold Debentures..............
SECTION 8.05. Moneys received by Trustee to be held in trust......
SECTION 8.06. Compensation, Reimbursement and Indemnity...........
SECTION 8.07. Right of Trustee to Rely on Officers' Certificates..
SECTION 8.08 Conflicting Interests...............................
SECTION 8.09. Notice of Default...................................
SECTION 8.10. Requirements for Eligibility of Trustee;
Appointment of Successor..........................
SECTION 8.11. Resignation and Removal of Trustee..................
v
<PAGE> 7
SECTION 8.l2. Acceptance by Successor to Trustee..................
SECTION 8.l3. Successor to Trustee by Merger, Consolidation or
Succession to Business............................
SECTION 8.l4. Authenticating Agents...............................
SECTION 8.15. Preferential Collection of Claims Against Company...
ARTICLE NINE
CONCERNING THE DEBENTURES
SECTION 9.0l. Evidence of Action Taken by Debentureholders........
SECTION 9.02. Proof of Execution of Instruments and of Holding of
Debentures........................................
SECTION 9.03. Registered Holders of Debentures May be Treated
as Owners..........................................
SECTION 9.04. Debentures Owned by Company Deemed not Outstanding..
SECTION 9.05. Action by Debentureholders Binds Future Holders.....
ARTICLE TEN
DEBENTUREHOLDERS' MEETINGS
SECTION l0.0l. Purposes for Which Meetings May Be Called...........
SECTION l0.02. Manner of Calling Meetings..........................
SECTION l0.03. Call of Meetings by Company or Certain Holders......
SECTION l0.04. Persons Entitled to Vote at a Meeting...............
SECTION l0.05. Quorum; Action....................................
SECTION l0.06. Determination of Voting Rights; Conduct and
Adjournment of Meeting............................
SECTION l0.07. Counting Notes and Recording Action of Meeting......
SECTION 10.08. No Delay............................................
vi
<PAGE> 8
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
SECTION ll.0l. Supplemental Indentures Authorized by
Directors.....................................
SECTION 11.02. Supplemental Indentures with Consent of
Debentureholders.............................
SECTION ll.03. Effect of Supplemental Indentures...............
SECTION ll.04. Notation on Debentures in Respect of
Supplemental Indentures.......................
SECTION ll.05. Trustee May Receive Opinion of Counsel..........
ARTICLE TWELVE
CONSOLIDATION, MERGER AND SALE
SECTION l2.0l. Company May Consolidate, Etc. ..................
SECTION l2.02. Successor Corporation to be Substituted.........
SECTION l2.03. Opinion of Counsel as Evidence..................
ARTICLE THIRTEEN
SUBORDINATION OF DEBENTURES
SECTION l3.0l. Agreement to Subordinate........................
SECTION l3.02. Distribution on Dissolution or Reorganization...
SECTION l3.03. Payments Permitted; Knowledge of Trustee.......
SECTION l3.04. Debentureholders Authorize Trustee to
Subordinate..................................
SECTION l3.05. Trustee's May Hold Senior Indebtedness
ARTICLE FOURTEEN
SATISFACTION AND DISCHARGE OF INDENTURE; DEPOSITED MONEYS
SECTION l4.0l. Satisfaction and Discharge of Indenture.........
SECTION l4.02. Application by Trustee of Funds Deposited for
vii
<PAGE> 9
Payment of Debentures.........................
SECTION l4.03. Repayment of Moneys Held by Paying Agent........
SECTION l4.04. Return of Unclaimed Money.......................
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND TRUSTEES OR DIRECTORS
SECTION l5.0l. Personal Immunity of Incorporators,
Stockholders, Etc.............................
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION l6.0l. Successors......................................
SECTION l6.02. Acts of Successor Valid.........................
SECTION l6.03. Surrender of Powers by Company..................
SECTION l6.04. Notices and Demands on Company and Trustee......
SECTION l6.05. New York Law to Govern..........................
SECTION l6.06. Officers' Certificates and Opinions of Counsel;
Statements to be Contained Therein............
SECTION l6.07. Payments on Non-Business Days...................
SECTION l6.08. Provisions required by Trust Indenture Act of
l939 to control...............................
SECTION l6.09. Effect of Invalidity of Provisions..............
SECTION l6.l0. Indenture May be Executed in Counterparts;
Trustee Accepts Trusts........................
ACCEPTANCE OF TRUST.............................................
TESTIMONIUM.....................................................
viii
<PAGE> 10
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 l579 Straits Turnpike, Middlebury, CT 06762-l299,
(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
<PAGE> 11
THERETO, AND AS MAY BE 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
2
<PAGE> 12
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 payment of said principal sum has been made or duly
provided for. The interest so payable on any March 31 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 31 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 31 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
3
<PAGE> 13
[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
4
<PAGE> 14
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 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 l00%; 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
5
<PAGE> 15
thereon, and that thereupon all obligations of the Company in respect of such
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.
6
<PAGE> 16
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 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
7
<PAGE> 17
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 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
8
<PAGE> 18
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 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
9
<PAGE> 19
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.
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:
10
<PAGE> 20
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.
11
<PAGE> 21
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.
12
<PAGE> 22
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
13
<PAGE> 23
legal liability, and (b) any deferrals, amendments, renewals, extensions,
modifications 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:
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<PAGE> 24
The term "Trustee" shall mean the Trustee under this Indenture
for the time being, whether original or successor.
Trust Indenture Act of l939:
The term "Trust Indenture Act of l939", subject to the
provisions of Sections 11.01 and 11.02, shall mean the Trust Indenture Act of
l939 as in force at the date of execution of this Indenture.
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND
EXCHANGE OF DEBENTURES
SECTION 2.0l. 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.
15
<PAGE> 25
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 3l and September 30, from the date of authentication of the Debentures,
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 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 (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 3l 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 l5
or September l5, 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 l5 days
preceding such record date, which record date shall be not more than l5 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
16
<PAGE> 26
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
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
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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".
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
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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 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.
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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.
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.
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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 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
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<PAGE> 31
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 3.0l. Debentures Redeemable. Subject to the provisions
of Article Thirteen hereof, the Company may, at its option, redeem the
Debentures, as a 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.
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<PAGE> 32
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 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
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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 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
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<PAGE> 34
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 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
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<PAGE> 35
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 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
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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 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
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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).
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
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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, 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
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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.
(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
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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 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
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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.
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. Convenant 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
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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
(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 10 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
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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 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
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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.
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
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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.
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
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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.
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)
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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 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
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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).
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.
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(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 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
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(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;
(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.
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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, 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
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(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
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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.
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
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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:
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
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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;
(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
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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 7.0l, 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 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 8.0l, 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
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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 7.0l, 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 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.
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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 (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
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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;
(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
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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 Trustees:
(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 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;
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(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. Trustees and Others May Hold Debentures. The
Trustee or any paying agent or any Debenture Registrar, in its individual or any
other capacity, 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.
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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.
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
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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 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
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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 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.
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(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.
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").
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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.
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:
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"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
(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:
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(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 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,
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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:
(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.
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(b) There shall be excluded from the operation of subsection (a)
of this Section a creditor relationship arising from
(1) the ownership or acquisition of securities issued
under any indenture, or any security or securities having a
maturity of one year or more at the time of acquisition by the
Trustee;
(2) advances authorized by 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.
(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
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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 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
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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 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.
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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 Holders.
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:
(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;
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(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.
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.
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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.
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
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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
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.
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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
(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
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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 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
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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 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
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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 officers of the Company to the Trustee for authentication, and
any Debentures which
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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
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Debentures; 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
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<PAGE> 85
SECTION 14.01. Satisfaction and Discharge of Indenture. If the
Company shall deliver to the Trustee for cancellation all Debentures theretofore
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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<PAGE> 86
SECTION 14.03. Repayment 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, Stockholders, 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
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<PAGE> 87
Debentures as a condition of, and as a consideration for, the execution and
delivery of the Indenture and the issue of such Debentures.
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 Successors 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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<PAGE> 88
SECTION 16.06. Officers' Certificates and Opinions of Counsel;
Statement 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
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succeeding business day with the same force and 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 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 on 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 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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<PAGE> 90
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
(SEAL) By: _________________________________
Vice President
Attest:
_____________________________
Assistant Secretary
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<PAGE> 91
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 tobe the free act
and deed of said corporation.
______________________________
82
<PAGE> 1
Exhibit 5
January 27, 1997
General DataComm Industries, Inc.
Route 63 - Straits Turnpike
Middlebury, CT 06762-1299
Gentlemen:
Reference is made to the registration statement ("Registration
Statement") which General DataComm Industries, Inc. (the "Corporation") is
filing with the Securities and Exchange Commission under the Securities Act of
1933, as amended, for the registration of 800,000 shares of 9% Cumulative
Convertible Exchangeable Preferred Stock ("Preferred Stock"), $20,000,000
aggregate principal amount of 9% Convertible Subordinated Debentures due 2006
issuable in exchange for the Preferred Stock ("Debentures") and the common
stock ("Common Stock") issuable on conversion of the Preferred Stock and
Debentures.
Pursuant to your request, we have examined those of the Corporation's
books and records deemed relevant by us for the purpose of furnishing you with
our opinion concerning the legality and validity of issue of the shares of
Preferred Stock and Common Stock and binding effect of the Debentures of the
Corporation covered by the Registration Statement.
Based upon the foregoing and upon our investigation and examination of
certain other matters pertaining to the Corporation, we are of the opinion
that:
1. The Corporation is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of Delaware.
2. All of the shares of Preferred Stock proposed to be registered
by the above Registration Statement are validly issued, fully paid and
nonassessable by the Corporation with no personal liability attaching to the
ownership thereof.
<PAGE> 2
3. The Debentures proposed to be registered by the above
Registration Statement, when issued, sold and paid for as set forth in said
Registration Statement, will be binding obligations of the Corporation.
4. All of the shares of Common Stock proposed to be registered by
the above Registration Statement, when and if issued upon the conversion of the
above Preferred Stock and Debentures as set forth in said Registration
Statement, will be validly issued, fully paid and nonassessable by the
Corporation, with no personal liability attaching to the ownership thereof.
We herewith give our consent to the use of this opinion as an Exhibit
to the herein referred to Registration Statement and to the use of our name
therein.
Very truly yours,
WEISMAN CELLER SPETT & MODLIN, P.C.
<PAGE> 1
Exhibit 10.1
GENERAL DATACOMM INDUSTRIES, INC.
REGISTRATION RIGHTS AGREEMENT
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is entered
into as of the Closing Date (as defined herein) by and among General DataComm
Industries, Inc., a Delaware corporation, and the Purchaser as defined below
whose signatures appear on the execution pages of this Agreement.
This Agreement is made pursuant to the 9% Cumulative Convertible
Exchangeable Preferred Stock Purchase Agreement between the Company, the
Placement Agent and each of the purchasers as defined below listed therein (the
"Purchase Agreement" and the "Purchasers"). In order to induce the Purchasers to
enter into the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution of this Agreement
by the Company is a condition to closing under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
Capitalized terms used herein without definition shall have
their respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
Closing Date: The date assigned thereto in the Purchase
Agreement.
Common Stock: The Common Stock, $.10 par value per share of the
Company.
Company: General DataComm Industries, Inc., a Delaware
corporation.
Debentures: The Convertible Subordinated Debentures of the
Company for which the 9% Preferred Stock may be exchanged at the option of the
Company.
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
Expiration Date: Three (3) years from the issuance of the Shares
or such shorter period of time under Rule 144(k) if the three (3) year holding
period thereunder is shortened.
Filing Date: The date of filing of a registration statement
effected pursuant to Section 3(a) hereof.
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<PAGE> 3
Holders: The Persons with a beneficial interest in the
Registrable Securities.
Majority Holders: The Holders of a majority of the aggregate
principal amount or number of shares of outstanding Registrable Securities at
any given time as applicable.
Losses: See Section 6(a) hereof.
Person: Shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government agency or political
subdivision thereof.
Placement Agent: Utendahl Capital Partners, L.P.
Preferred Stock: The 9% Cumulative Convertible Exchangeable
Preferred Stock, $l.00 par value per share of the Company sold pursuant to the
Purchase Agreement.
Prospectus: The prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement and all other amendments and supplements to the
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.
Purchase Agreement: The 9% Cumulative Convertible Exchangeable
Preferred Stock Purchase Agreement by and among the Company, the Placement Agent
and the Purchasers thereunder pursuant to which the Shares were or will be
issued.
Registration Expenses: All reasonable expenses incurred by the
Company in complying with Section 3 hereof, including all registration and
filing fees, printing expenses, fees and disbursements of counsel for the
Company, internal expenses and blue sky fees and expenses in such states
reasonably requested but otherwise excluding all fees and expenses of counsel
for the Holders and Purchasers.
Registrable Securities: All Shares of the 9% Preferred Stock
which are Restricted Securities, any Preferred Stock and/or Common Stock issued
or issuable in respect to the Shares as applicable pursuant to any stock split,
stock dividend, recapitalization, or similar event, the Debentures for which the
Preferred Stock may be exchanged and the Shares of Common Stock into which the
Shares of 9% Preferred Stock and the Debentures may be converted.
2
<PAGE> 4
Registration Statement: Any registration statement of the
Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
Restricted Securities: The Shares, the Debentures, issuable upon
exchange thereof, the underlying Common Stock into which the Shares and
Debentures may be converted, and at all times subsequent thereto, until, in the
case of any such security, it is no longer required to bear the legend set forth
on such security pursuant to the terms of the security, the Purchase Agreement
and applicable law.
Rule 144: Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities: The 9% Preferred Stock, the Debentures and the
Shares of Common Stock issuable upon conversion thereof.
Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
Shares: The 9% Preferred Stock issued to the Purchasers pursuant
to the Purchase Agreement.
Shelf Registration: A registration effected pursuant to Section
3(a) hereof.
Suspension Period: The time period in Sections 4(b)(3)(b)(iii)
and 4(b)(9).
Underwritten registration or underwritten offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
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<PAGE> 5
2. Securities Subject to this Agreement
The securities entitled to the benefits of this Agreement are
the Registrable Securities.
3. Shelf Registration
(a) Shelf Registration. The Company shall not later than the
l20th day after the Closing Date (the "Filing Date"), prepare and file with the
SEC a Registration Statement relating to the offer and sale of the Registrable
Securities (including securities deemed registered pursuant to Rule 416 under
the Securities Act) by the Holders from time to time to be made on a continuous
basis pursuant to Rule 415 (or any appropriate similar rule that may be adopted
by the SEC) under the Securities Act (the "Shelf Registration"). The Shelf
Registration shall be on a Form S-3 or other appropriate form (unless the
holders of the Registrable Securities offered thereby reasonably request a
specific form) permitting registration of such Registrable Securities for resale
by the Holders in a public offer and sale.
(b) Effectiveness. The Company shall use its reasonable best
efforts to cause the Shelf Registration to become effective under the Securities
Act as soon as practicable following the Filing Date and in any event no later
than 180 days after the Closing Date. Subject to the requirements of the
Securities Act including, without limitation, requirements relating to updating
prospectuses through post-effective amendments or otherwise, the Company shall
use its reasonable best efforts to keep the Shelf Registration continuously
effective until the Expiration Date, provided, that in the event of a Suspension
Period, as set forth in Section 4(b)(3)(b)(9)hereof, the Company shall extend
the period of effectiveness of such Shelf Registration by the number of days of
each such Suspension Period.
(c) Underwriting. The Majority Holders of Registrable Securities
covered by the Shelf Registration Statement who wish to do so may sell such
Registrable Securities in one underwritten offering. In any such underwritten
offering, the investment banker(s) and manager(s) that will manage the offering
will be selected by the holders of a majority of the then outstanding
Registrable Securities included in such offering (after consultation with the
Company as to such selection and upon the written consent of the Company, which
consent shall not be unreasonably withheld or delayed). If such underwritten
agreement is not requested within 90 days after the date hereof, if at the time
such Majority Holders request an underwritten offering the managing underwriters
in a separate written offering on behalf of the Company (to the extent timely
notified in writing by the Company or such managing underwriters) request the
Holders participating in the underwritten offering not to effect any public sale
or distribution of Registrable Securities pursuant to such underwritten
offering, then no such sales will be made by the Holders pursuant to the
underwritten Shelf Registration Statement during the 10 day period prior to and
the 90 day period beginning on the effective date of such underwritten offering.
If requested by the
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<PAGE> 6
underwriters, the Company will promptly enter into an underwriting agreement
reasonably acceptable to the Company with such underwriters for such offering,
such agreement to contain such representations and warranties by the Company and
such other terms and conditions as are customary for underwriting agreements
with respect to secondary offerings, including without limitation, indemnities
to the effect and to the extent provided in Section 5 hereof. The Holders of
Registrable Securities on whose behalf such securities are being distributed
shall be party to any such underwriting agreement. Such Holders shall not be
required by the Company to make any representations or warranties to the
underwriters with respect to the Company or the Registrable Securities (other
than that the Holders are conveying such securities free and clear of all
pledges, security interests, liens, charges, encumbrances, agreements, equities,
claims and options of whatever nature), and the Holders shall not be required to
indemnify the Company or the underwriters (other than with respect to the
matters, and to the extent, provided in Section 5).
No Holder of Registrable Securities may participate in any
underwritten distribution hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved in accordance with the terms hereof, and (b) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
4. Expenses and Procedures
(a) Expenses of Registration. The Company shall bear all
Registration Expenses. Each Holder shall bear all selling commissions,
underwriting discounts, sales concessions and similar expenses applicable to the
sale of securities attributable to the Registrable Securities sold by such
Holder and expenses of its counsel.
(b) Registration Procedures. In connection with the one Shelf
Registration Statement required by the Company, the following provisions shall
apply:
(1) The Company shall furnish to the Purchasers, prior
to the filing thereof with the Commission, a copy of any Shelf Registration
Statement, and each amendment thereof and each amendment or supplement, if any,
to the Prospectus included therein and shall each use reasonable efforts to
reflect in each such document, when so filed with the Commission, such comments
as the Placement Agent reasonably may propose.
(2) The Company shall take such action as may be
necessary so that (i) the Shelf Registration Statement and any amendment thereto
and any Prospectus forming part thereof and any amendment or supplement thereto
(and each report or other document incorporated therein by reference in each
case) complies in all material respects with the Securities and the Exchange Act
and the respective rules and regulations thereunder, (ii) any Shelf Registration
Statement and any amendment
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<PAGE> 7
thereto does not, when it becomes effective, contain an untrue statements of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any Prospectus
forming part of any Shelf Registration Statement, and any amendment or
supplement to such Prospectus, does not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they were made, not
misleading, it being understood the Company is not responsible for an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by such
Purchasers, any Holder or any underwriter in writing expressly for use in the
Shelf Registration Statement (or any amendment thereto) or any Prospectus (or
any amendment or supplement thereto).
(3)(a) The Company shall advise the Purchasers and, in
the case of clause (i) below, the Holders and, if requested by the Purchasers or
any such Holder, confirm such advice in writing:
i) when a Shelf Registration Statement and any
amendment thereto has been filed with the Commission and when the Shelf
Registration Statement or any post-effective amendment thereto has
become effective; and
ii) of any request by the Commission for
amendments or supplements to the Shelf Registration Statement or the
Prospectus included therein or for additional information.
(b) The Company shall advise the Purchasers and the
Holders and, if requested by the Purchasers or any such Holder, confirm such
advice in writing of:
i) the issuance by the Commission of any stop
order suspending effectiveness of the Shelf Registration Statement or
the initiation of any proceedings for that purpose;
ii) the receipt by the Company of any
notification with respect to the suspension of the qualification of the
securities included therein for sale in any jurisdiction or the
initiation of any proceeding for such purpose; and
iii) the happening of any event that requires
the making of any changes in the Shelf Registration Statement or the
Prospectus so that, as of such date, the Shelf Registration Statement
and the Prospectus do not contain an untrue statement of a material
fact and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were
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<PAGE> 8
made) not misleading (which advice shall be accompanied by an
instruction to suspend the use of the Prospectus until the requisite
changes have been made).
(4) The Company shall use its best efforts to prevent
the issuance, and if issued to obtain the withdrawal, of any order suspending
the effectiveness of any Shelf Registration Statement at the earliest possible
time.
(5) The Company shall furnish to each Holder of
Registrable Securities included within the coverage of any Shelf Registration
Statement, without charge, at least one copy of such Shelf Registration
Statement and any Post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing, all
exhibits (including those incorporated by reference).
(6) The Company shall, until the Expiration Date,
deliver to each Holder of Registrable Securities included within the coverage of
any Shelf Registration Statement, without charge, as many copies of the
Prospectus (including each preliminary Prospectus or amendment or supplement to
a Prospectus) included in such Shelf Registration Statement and any amendment or
supplement thereto as such Holder may reasonably request.
(7) Prior to any offering of Registrable Securities
pursuant to the Shelf Registration Statement, the Company shall register or
qualify or cooperate with the Holders of Registrable Securities included therein
and their respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions as any such Holders reasonably
request in writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such jurisdictions of the Registrable
Securities covered by such Shelf Registration Statement; provided, however, that
in no event shall the Company be obligated to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it would not
otherwise be required to so qualify but for this Section 4, (ii) file any
general consent to service of process in any jurisdiction where it is not as of
the date hereof then so subject or (iii) subject itself to taxation in any such
jurisdiction if it is not so subject.
(8) Unless any Registrable Securities shall be in
book-entry only form, the Company shall cooperate with the Holders of
Registrable Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to any
Shelf Registration Statement free of any restrictive legends and in such
permitted denominations and registered in such names as Holders may request in
connection with the sale of Registrable Securities pursuant to such Shelf
Registration Statement.
(9) Upon the occurrence of any event contemplated by
paragraph 4(b)(3)(b)(iii) above, the Company shall promptly prepare a
post-effective amendment to the Shelf Registration Statement or an amendment or
supplement to the
7
<PAGE> 9
related Prospectus or file any other required document so that, as thereafter
delivered to purchasers of the Registrable Securities included therein, the
Prospectus will not include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If the Company
notifies the Holders of the occurrence of any event contemplated by paragraph
4(b)(3)(b)(iii) above, the Holders shall suspend the use of the Prospectus until
the requisite changes to the Prospectus have been made.
(10) If required, not later than the effective date of
the Shelf Registration Statement hereunder, the Company shall provide CUSIP
numbers as appropriate for the Securities registered under such Shelf
Registration Statement.
(11) The Company shall use its best efforts to comply
with all applicable rules and regulations of the Commission and shall make
generally available to its security holders or otherwise provide in accordance
with Section 11(a) of the Securities Act as soon as practicable after the
effective date of the Shelf Registration Statement an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act.
(12) The Company shall cause the Indenture and the
Securities to be qualified under the Trust Indenture Act of 1939, as amended, in
a timely manner as and to extent required thereby. In the event that such
qualification would require the appointment of a new trustee under the
Indenture, the Company shall appoint a new trustee thereunder pursuant to the
applicable provisions of the Indenture.
(13) The Company may require each Holder of Registrable
Securities to be sold pursuant to the Shelf Registration Statement to furnish to
the Company such information regarding the Holder and the distribution of such
Registrable Securities as the Company may from time to time reasonably require
for inclusion in such Shelf Registration Statement and the Company may exclude
from such registration the Registrable Securities of any Holder that fails to
furnish such information within a reasonable time after receiving such request.
(14) The Company shall, if requested, promptly include
or incorporate in a Prospectus supplement or post-effective amendment to the
Shelf Registration Statement, such information as the underwriters (in an
underwritten offering undertaken in accordance with the provisions of Section 4
hereto) reasonably agree, should be included therein and to which the Company
does not reasonably object and shall make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable after
they are notified of the matters to be included or incorporated in such
Prospectus supplement or post-effective amendment.
8
<PAGE> 10
(15) The Company shall enter into such customary
agreements (including underwriting agreements in customary form) to take all
other appropriate actions in order to expedite or facilitate the registration or
the disposition of the Registrable Securities pursuant to the Shelf Registration
Statement required of the Company hereunder.
(16) The Company shall in connection with an
underwritten public offering of the Registrable Securities (i) make reasonably
available for inspection by the Holders of Registrable Securities to be
registered thereunder, any underwriter participating in any disposition pursuant
to such Shelf Registration Statement, and any attorney, accountant or other
agent retained by such Holders or any such underwriter all relevant
non-privileged financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries; (ii) cause the Company's
officers, directors and employees to make reasonably available for inspection
all relevant non-privileged information reasonably requested by such Holders or
any such underwriter, attorney, accountant or agent in connection with any such
Shelf Registration Statement, in each case, as is customary for similar due
diligence examinations; provided, however, that any information that is
designated in writing by the Company, in good faith, as confidential at the time
of delivery of such information shall be kept confidential and not used by such
Holders or any such underwriter, attorney, accountant or agent except as
permitted by law and in connection with the Shelf Registration Statement, unless
such disclosure is made in connection with a court proceeding or required by
law, or such information becomes available to the public generally or through a
third party without an accompanying obligation of confidentiality; and provided
further that the foregoing inspection and information gathering shall, to the
greatest extent possible, be coordinated on behalf of the Holders and the other
parties entitled thereto by one counsel designated by and on behalf of such
Holders and other parties; (iii) make such representations and warranties to the
Holders of Registrable Securities registered thereunder and the underwriters, if
any, in form, substance and scope as are customarily made by the Company to
underwriters in primary underwritten offerings and covering matters including,
but not limited to, those set forth in the Underwriting Agreement; (iv) obtain
opinions of counsel to the Company and updates thereof (which opinions (in form,
scope and substance) shall be reasonably satisfactory to the underwriters, if
any) addressed to each selling Holder and the underwriters, if any, covering
such matters as are customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by Majority
Holders and underwriters (it being agreed that the matters to be covered by such
opinion or written statement by such counsel delivered in connection with such
opinions shall include in customary form, without limitation, as of the date of
the opinion and as of the effective date of the Shelf Registration Statement or
most recent post-effective amendment thereto, as the case may be, that such
counsel has o reason to believe such Shelf Registration Statement and the
prospectus included therein, as then amended or supplemented, including the
documents incorporated by reference therein, omitted an untrue statement of a
material fact or the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
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<PAGE> 11
not misleading; (v) obtain "cold comfort" letters and updates thereof from the
independent public accountants of the Company (and, if necessary, any other
independent public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and financial
data are, or are required to be, included in the Shelf Registration Statement or
incorporated by reference), addressed to each such Holder of Registrable
Securities registered thereunder and the underwriters, if any, in customary form
and covering matters of the type customarily covered in "cold comfort" letters
in connection with primary underwritten offerings; (vi) deliver such documents
and certificates as may be reasonably requested by the Majority Holders and the
underwriters, if any, including those to evidence compliance with this Section
and with any customary conditions contained in the underwriting agreement or
other agreement entered into by the Company. The foregoing actions set forth in
clauses (iii), (iv), (v) and (vi) of this Section 4(b)(16) shall be performed at
the closing of the one underwritten offering to the extent required thereunder.
(17) The Company will use its best efforts to cause the
shares of Common Stock issuable upon conversion of the Securities to be listed
on the New York Stock Exchange upon effectiveness of any Shelf Registration
Statement hereunder.
(18) In the event that any broker-dealer registered
under the Exchange Act shall underwrite any Registrable Securities or
participate as a member of an underwriting syndicate or selling group or "assist
in the distribution" (within the meaning of the Rules of Fair Practice and the
By-Laws of the National Association of Securities Dealers, Inc. ("NASD"))
thereof, whether as a Holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company will assist such broker-dealer in complying
with the requirements of such Rules and By-Laws, including, without limitation,
by (A) such Rules or By-Laws, including Schedule E thereto, shall so require,
engaging a "qualified independent underwriter" (as defined in Schedule E) to
participate in the preparation of the Shelf Registration Statement relating to
such Registrable Securities and to exercise usual standards of due diligence in
respect thereto, (B) indemnifying any such qualified independent underwriter to
the extent of the indemnification of underwriters provided in Section 6 hereof
and (C) providing such information to such broker-dealer as may be required in
order for such broker-dealer to comply with the requirements of the Rules of
Fair Practice of the NASD.
(19) The Company shall use its best efforts to take all
other steps reasonable and necessary to effect the registration, offering and
sale of the Registrable Securities covered by the Shelf Registration Statement
contemplated hereby.
(20) The Company shall not be obligated to bear any
extra expenses relating to an additional underwritten offering of the Shelf
Registration if the underwriters selected by the Holders breach their
obligations to purchase the
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<PAGE> 12
Registrable Securities or exercise market out rights under the Underwriting
Agreement, which additional expenses shall be borne by the Holders.
5. Indemnification
(a) Indemnification by Company. The Company shall, without
limitation as to time, indemnify and hold harmless, to the full extent permitted
by law, each Purchaser or Holder of Registrable Securities, each underwriter who
participates in an offering of Registrable Securities and their respective
officers, directors, agents and employees, each person who controls such
Purchaser, Holder or underwriter (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act), and the officers, directors,
agents or employees of any such controlling person, from and against all losses,
claims, damages, liabilities, costs (including, without limitation, all
reasonable attorneys' fees) and expenses (collectively, "Losses"), as incurred,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement, Prospectus or
preliminary prospectus, or supplement or amendment thereto including all
documents incorporated by reference therein or arising out of or based upon any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances under
which they were made not misleading; provided that this indemnity shall not
apply to any loss, liability, claim, damage or expense to the extent arising out
of an untrue statement or omission or alleged untrue statement or omission made
in reliance upon and in conformity with written information furnished to the
Company by such Purchasers, any Holder or any underwriter in writing expressly
for use in the Shelf Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) and provided, further
however, that the Company shall not be liable in any such case to the extent
that any such Loss arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any preliminary
prospectus or Prospectus if (i) such Holder failed to send or deliver a copy of
the Prospectus or Prospectus supplement provided by the Company in requisite
quantities on a timely basis with or prior to the delivery of written
confirmation of the sale of Registrable Securities and (ii) the Prospectus or
Prospectus supplement would have corrected such untrue statement or omission. If
requested, the Company shall also indemnify selling brokers and similar
securities industry professionals participating in the distribution, their
officers, directors, agents and employees and each person who controls such
persons (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) to the same extent as provided above with respect to the
indemnification of the Purchasers, Holders and underwriters of Registrable
Securities subject to this Section 5(a).
(b) Indemnification by Holder of Registrable Securities. In
connection with any Registration Statement in which a holder of Registrable
Securities is participating, such holder of Registrable Securities shall furnish
to the Company in writing such information as the Company may reasonably request
for use in connection
11
<PAGE> 13
with the Shelf Registration Statement and any Prospectus or Preliminary
Prospectus or supplement or amendment thereto issued in connection thereto. Such
Holder hereby agrees to indemnify and hold harmless, to the full extent
permitted by law, the Company, and its officers, directors, agents and
employees, each person who controls the Company (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents or employees of any such controlling person, from and against
all Losses arising out of or based upon any untrue statement of a material fact
contained in any Registration Statement, Prospectus or preliminary prospectus,
or arising out of or based upon any omission of a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances under which they were made (in the case of any Prospectus) not
misleading, to the extent, but only to the extent, that such untrue statement or
omission made in the Shelf Registration Statement or any Prospectus or
Preliminary Prospectus or supplement or amendment thereto issued in connection
thereto in reliance upon and in conformity with information so furnished in
writing by such holder to the Company expressly for use in such Shelf
Registration Statement, Prospectus or Preliminary Prospectus. The Company shall
be entitled to receive indemnities from accountants, selling brokers and similar
securities industry professionals participating in the distribution to the same
extent as provided above with respect to information furnished in writing by
such persons specifically for inclusion in the Shelf Registration Statement,
Prospectus or preliminary prospectus, provided, that the failure of the Company
to obtain any such indemnity shall not relieve the Company of any of its
obligations hereunder.
(c) Conduct of Indemnification Proceedings. If any action or
proceeding (including any governmental investigation or inquiry) shall be
brought or any claim shall be asserted against any person entitled to indemnity
hereunder (an "indemnified party"), such indemnified party shall promptly notify
the party from which such indemnity is sought (the "indemnifying party") in
writing, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability which it may have other than unless and to
the extent such failure results in the forfeiture by the Company of substantial
defenses. The indemnifying party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the indemnified party and the
payment of all fees and expenses incurred in connection with the defense
thereof. Any such indemnified party shall have the right to employ separate
counsel in any such action, claim or proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be the expense
of such indemnified party unless (a) the indemnifying party has agreed to pay
such fees and expenses, (b) the indemnifying party shall have failed promptly to
assume the defense of such action, claim or proceeding and to employ counsel
reasonably satisfactory to the indemnified party in any such action, claim or
proceeding, or (c) the named parties to any such action, claim or proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party, and such indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to
12
<PAGE> 14
the indemnifying party (in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action, claim or proceeding on behalf of
such indemnified party, it being understood, however, that the indemnifying
party shall not, in connection with any one such action, claim or proceeding or
separate but substantially similar or related actions, claims or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (together with appropriate local counsel) at any time
for all such indemnified parties, unless in the opinion of counsel for such
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such action,
claim or proceeding, in which event the indemnifying party shall be obligated to
pay the fees and expenses of such additional counsel or counsels. No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the release
of such indemnified party from all liability in respect to such claim or
litigation without the written consent of the indemnified party. No indemnified
party shall consent to entry of any judgment or enter into any settlement
without the written consent of the indemnifying party from which indemnity or
contribution is sought.
(d) Contribution. If the indemnification provided for in this
Section 6 is unavailable to an indemnified party under Section 5(a) or 5(b)
hereof (other than by reason of exceptions provided in those Sections) in
respect of any Losses, then each applicable indemnifying party in lieu of
indemnifying such indemnified party shall contribute to the amount paid or
payable by such indemnified party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of the indemnifying party and
indemnified party in connection with the actions, statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and the indemnified party shall be
determined by reference to, among other things, whether any action in question,
including any untrue statement or alleged untrue statement of a material fact or
omission or alleged omission of a material fact, has been taken or made by, or
relates to information supplied by, such indemnifying party or indemnified
party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action, statement or omission. The amount
paid or payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in Section 5(c), any legal or other fees or
expenses reasonably incurred by such party in connection with any action, suit,
claim, investigation or proceeding.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act)
13
<PAGE> 15
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
For purposes of this Section 5(d), each director, officer,
employee, trustee, agent and Person, if any, who controls an indemnified party
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act shall have the same rights to contribution as such an indemnified
party and each director, officer, employee, trustee and agent of the Company,
and each Person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company.
6. Rule l44
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder, to the extent required from time to time, to
enable such Holder to sell Registrable Securities without registration under the
Securities Act within the limitations of the exemptions provided by Rule l44 and
Rule 144A. Upon the request of any Holder of Registrable Securities, the Company
shall deliver to such Holder a written statement as to whether the Company has
complied with such information and requirements.
7. Miscellaneous
(a) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company obtains the written consent of Holders of at
least a majority of the principal amount or number of then outstanding
Registrable Securities as applicable affected by such amendment, modification or
supplement. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter which relates exclusively to the
rights of Holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and which does not directly or indirectly
affect the rights of Holders of Registrable Securities whose securities are not
being sold pursuant to such Registration Statement may be given by Holders of a
majority of the Registrable Securities being sold by such Holders.
(b) Notices, All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, certified
first-class mail, next day air courier, or telecopy: (i) If to a Holder of
Registrable Securities, at the most current address given by such holder to the
Company in accordance with the provisions of this Section 9(b), which address
initially is, with respect to each Purchaser, the address set forth on the
signature page attached hereto; and (ii) If to the Company initially at the
address set forth on the first page of the Purchase Agreement,
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<PAGE> 16
attention: Senior Vice President, Finance, and thereafter at such other address,
notice of which is given in accordance with the provisions of this Section 9(b),
with a copy to Weisman Celler Spett & Modlin, P.C., 445 Park Avenue, New York,
NY l0022, Attention: Howard S. Modlin, Esq.
All such notices and communications shall be deemed to have been
duly given when received by hand or overnight courier or receipt by certified
mail, return receipt requested.
(c) Transfer of Registration Rights. The right granted to the
Holders pursuant to this Agreement may be assigned in connection with the
transfer, assignment or sale of any Registrable Security to the extent such
securities and rights may be transferred, assigned, or sold pursuant to
applicable laws and to the agreements to which the particular holder is a party
or exchanged.
(d) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflict of laws.
(g) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, it being
intended that all of the rights and privileges of the parties shall be
enforceable to the fullest extent permitted by law.
(h) AGENT FOR SERVICE OF PROCESS, SUBMISSION TO JURISDICTION.
The Company and each Holder agree that any legal suit, action or proceeding
brought by any party to enforce any rights under or with respect to this
Agreement shall be instituted in any state or federal court in the City of New
York, State of New York having subject matter jurisdiction, and each waives to
the fullest extent permitted by law any objection which it may now or hereafter
have to the laying of venue of any such suit, action or proceeding and
irrevocably submits it to the non-exclusive jurisdiction of any such court in
any such suit, action or proceeding. The Company hereby irrevocably designates
and appoints Weisman Celler Spett & Modlin, P.C. as the Company's authorized
agent to receive and forward on its behalf service of any and all process which
may be served in any such suit, action or proceeding in any
15
<PAGE> 17
such court and agrees that service of process upon General DataComm Industries,
Inc. (or any successor) c/o such agent at 445 Park Avenue, New York, New York
10022 (or such other address in the Borough of Manhattan, The City of New York
as the Company may designate by written notice to the Holders) and written
notice of said service to the Company mailed or delivered to General DataComm
Industries, Inc., shall be deemed in every respect effective service of process
upon the Company in any such suit, action or proceeding and shall be taken and
held to be valid personal service upon the Company. Said designation and
appointment shall be irrevocable. Nothing in this Section 7(h) shall affect the
right of any party hereto or any Holder to serve process in any manner permitted
by law. The Company agrees to take any and all action, including the execution
and filing of any and all such documents and instruments, as may be necessary to
continue such designation and appointment of Weisman Celler Spett & Modlin, P.C.
in full force and effect so long as this Agreement or any of the Securities
shall be outstanding. To the extent that the Company or any Holder, has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service of notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, the Company and each Holder, respectively hereby irrevocably
waive such immunity in respect of its obligations under this Agreement and the
Securities, to the extent permitted by law.
(i) Entire Agreement. This Agreement is intended by the parties
to be a final expression of their agreement and a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties nor undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Shares sold pursuant to the Purchase Agreement. This Agreement supersedes
all prior agreements and understandings between the parties with respect to such
subject matter.
IN WITNESS WHEREOF, the parties have executed this agreement as
of the date first written above.
GENERAL DATACOMM INDUSTRIES, INC.
By: /s/ William Lawrence
------------------------------
Sr. V.P. Finance
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PURCHASER
---------------------------------
[Please Print]
By:
------------------------------
Name:
Title:
Address: ------------------------
---------------------------------
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<PAGE> 1
EXHIBIT 12
RATIOS OF EARNINGS TO FIXED CHARGES
and
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Continuing operations only; presented in thousands, except ratio factors)
<TABLE>
<CAPTION>
Fiscal Years Ended September 30,
----------------------------------------------------------------
1992 1993 1994 1995 1996
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes $3,197 $7,141 $(2,870)(1) $(26,480) $(15,970)
Add Fixed Charges:
Interest 3,006 1,799 3,335 3,120 2,757
Interest factor portion of rentals 2,760 2,465 1,384 1,435 1,605
----------------------------------------------------------------
5,766 4,264 4,719 4,555 4,362
Earnings (loss) before income taxes and
fixed charges $8,963 $11,405 $1,849 $(21,925) $(11,608)
================================================================
Ratio of earnings to fixed charges 1.55 2.67 0.39(2) --(2) --(2)
================================================================
Ratio of earnings to combined fixed charges
and preferred stock dividends(3) 1.55 2.67 0.39(2) --(2) --(2)
================================================================
</TABLE>
(1) Does not include $433,000 of charges for the cumulative effect of
accounting changes for post-retirement benefits ($117,000) and
post-employment benefits ($316,000). The charges resulted from the
adoption of Statement of Financial Accounting Standards No. 106 and No.
112, respectively.
(2) Earnings were not sufficient to cover "fixed charges" or "combined fixed
charges and preferred stock dividends" as follows (in thousands):
$2,870, $26,480 and $15,970 in the fiscal years ended September 30,
1994, 1995 and 1996, respectively. An insufficiency (approximately $5.6
million) also existed for the first fiscal quarter of 1997; financial
results for the quarter have not yet been filed with the Securities and
Exchange Commission.
(3) The Company paid no preferred stock dividends in the years presented. As
a result, the presented ratios are unchanged from the ratios of earnings
to fixed charges presented above.
<PAGE> 1
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
13
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Exhibit 25
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Continental Stock Transfer & Trust Company
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(Exact name of trustee as specified in its charter)
New York 13-2780552
- ---------------------------------------------- ---------------------------
(State of incorporation (I.R.S. employer
if not a national bank) identification no.)
2 Broadway, New York, New York 10004
- ---------------------------------------------- ---------------------------
(Address of principal executive offices) (Zip code)
Jesse R. Meer, 120 W. 45th St., New York, N.Y. 10036, 212-704-0100
- -------------------------------------------------------------------------------
(Name, address and telephone number of agent for service)
General DataComm Industries, Inc.
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(Exact name of obligor as specified in its charter)
Delaware 06-0853856
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1579 Straits Turnpike
Middlebury, Connecticut 06762-1299
- ---------------------------------------------- ----------------------------
(Address of principal executive offices) (Zip code)
9% Convertible Subordinated Debentures due 2006
- -------------------------------------------------------------------------------
(Title of indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
(a) The name and address of each examining or supervising
authority to which the trustee is subject:
Banking Department of the State of New York
2 Rector Street
New York, New York 10006
(b) Whether the trustee is authorized to exercise corporate
trust powers.
The trustee is so authorized.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
such affiliation:
NOTE: Items 3 through and including 15 are omitted, in accordance
with General Instruction B., based upon the obligor's
representation that it is not in default under other indentures
under which Continental Stock Transfer & Trust Company is the
trustee.
ITEM 16. LIST OF EXHIBITS.
The following exhibits to this Statement of Eligibility and
Qualification were filed as exhibits to the Statements of Eligibility and
Qualification on Form T-1 that accompanied the registration statements of the
named obligors in the S.E.C. files specified. Such exhibits are hereby
incorporated by reference to such filings.
1(a). Amended organization certificate of the trustee. Trans-Lux Corporation,
S.E.C. File NO. 33-1695.
1(b). Certificate of amendment, dated May 14, 1986, of the trustee's
organization certificate. Howtek, Inc., S.E.C. File No. 33-8971.
2. Certificate of authority of the Banking Department of New York.
Trans-Lux Corporation, S.E.C. File No. 33-1695.
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<PAGE> 3
3. Certificate of amendment, dated December 19, 1984, of the trustee's
organization certificate. Trans-Lux Corporation, S.E.C. File No.
33-1695.
4. By-laws of the trustee. Trans-Lux Corporation, S.E.C. File No. 33-1695.
5. Not applicable.
6. Consent of the trustee as required by Section 321(b) of the Act.
Trans-Lux Corporation, S.E.C. File No. 33-1695.
7. Balance sheet of the trustee, as of December 31, 1995. Trans-Lux
Corporation, S.E.C. File No. 33-1695. (The trustee is not required by
the Banking Department to publish a report of its condition.)
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirement of the Trust Indenture Act of 1939, the
trustee, Continental Stock Transfer & Trust Company, a limited purpose trust
company, organized and existing under the laws of the State of New York, has
duly caused this statement of eligibility and qualification to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City and the
State of New York on January 17, 1997.
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By: /s/ Michael Nelson, President
------------------------------
Michael Nelson, President
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