SCHEDULE 13e-4
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Issuer Tender Offer Statement
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
(Amendment No. 1)
MOTOROLA, INC.
(Name of Issuer)
MOTOROLA, INC.
(Name of Person(s) Filing Statement)
620076 AE 9
(CUSIP Number of Class of Securities)
James K. Markey
Senior Corporate Counsel
Motorola, Inc.
1303 East Algonquin Road
Schaumburg, IL 60196
(708) 576-9564
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
August 10, 1994
(Date Tender Offer First Published, Sent or Given to Securities Holders)
Calculation of Filing Fee
Transaction Valuation* Amount of Filing Fee
$138,574,072.47 $27,714.81
* The transaction valuation upon which the filing fee was based was
calculated as follows: The purchase price of the Liquid Yield Option (Trade
Mark Symbol Inserted Here) Notes due 2009, as described herein, is $411.99 per
$1,000 principal amount outstanding. As of August 5, 1994, there was
$336,353,000 in aggregate principal amount outstanding, resulting in an
aggregate purchase price of $138,574,072.47.
[x] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration number,
or the Form or Schedule and the date of its filing.
Amount Previously Paid: $81,086
Form or Registration No.: S-3 Registration Statement (No. 33-30662)
Filing Party: Motorola, Inc.
Date Filed: August 28, 1989 (S-3)
ITEM 1. SECURITY AND ISSUER.
(a) The issuer is Motorola, Inc., a Delaware corporation (the "Company").
The address of the principal offices of the Company is 1303 East
Algonquin Road, Schaumburg, Illinois 60196.
(b) This statement relates to the Company's Liquid Yield Option Notes Due
2009 (the "Notes"). As of August 5, 1994, there were $336,353,000 in
aggregate principal amount of the Notes outstanding. The Notes are
convertible at any time, at the option of the holder of a Note, into
18.268 shares of the Company's common stock, $3 par value per share,
subject to adjustment for dilutive events such as stock dividends or
stock splits (the shares being herein referred to as the "Shares").
Pursuant to an Indenture, dated as of September 1, 1989 between the
Company and First National Bank of Chicago, pursuant to which the
Notes were issued (the "Indenture"), the holders of the Notes have the
rights to require the Company to purchase the Notes on September 7,
1994 (the "Purchase Date") for $411.99 per $1,000 principal amount of
Notes (the "Purchase Price"). The Company has the option to pay the
Purchase Price in cash, Extension Notes (as such term is defined in
the Indenture) or in Shares with a value equal to the Purchase Price.
The Company will notify holders of the Notes twenty (20) days prior to
the Purchase Date that, if any holders require the Company to purchase
any Notes, the Company will elect to pay the Purchase Price in cash.
As to any officer, director or affiliate of the Company who is the
holder of any Notes and who elects to require the Company to purchase
any or all of them on the Purchase Date, the Company will do so as
described above, pursuant to the terms of the Indenture.
The requirement to purchase the Notes terminates on September 7, 1994.
(c) Both the Notes and the Shares are traded on the New York Stock
Exchange (the "NYSE"). The high and low sales prices of the Notes, as
reported by the NYSE, for each quarterly period during the previous
two years is as follows:
NOTES
QUARTER ENDED HIGH LOW
09/30/92 $42.50 $36.875
12/31/92 $48.50 $39.75
03/31/93 $61.00 $46.00
06/30/93 $80.00 $67.50
09/30/93 $94.625 $76.50
12/31/93 $97.75 $78.50
03/31/94 $99.00 $79.50
06/30/94 $98.00 $75.50
(d) This Schedule 13E-4 is being filed by the issuer.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) General corporate funds; no special fund-raising efforts will be
undertaken to finance the repurchase.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER
OR AFFILIATE.
The purpose of the tender offer is described in Item 1 above. Any Notes
that are purchased by the Company will be retired. There presently are no
plans which would relate to or would result in:
(a) The acquisition by any person of additional securities of the Company,
or the disposition of securities of the Company;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its
subsidiaries with the exception of a previously-announced transaction
with Nextel Communications, Inc. related to the Company's specialized
mobile radio (SMR) business;
(c) A sale or transfer of a material amount of assets of the Company or
any of its subsidiaries;
(d) Any change in the present board of directors or management of the
Company including, but not limited to, any plans or proposals to
change the number or the term of directors, to fill any existing
vacancy on the board or to change any material term of the employment
contract of any executive officer;
(e) Any material change in the present dividend rate or policy, or
indebtedness or capitalization of the Company;
(f) Any other material change in the Company's corporate structure or
business, including, if the Company is a registered closed-end
investment company, any plans or proposals to make any changes in its
investment policy for which a vote would be required by Section 13 of
the Investment Company Act of 1940;
(g) Changes in the Company's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control
of the Company by any person;
(h) Causing a class of equity security of the Company to be delisted from
a national securities exchange or to cease to be authorized to be
quoted in an inter-dealer quotation system of a registered national
securities association;
(i) A class of equity security of the Company becoming eligible for
termination of registration pursuant to Section 12 (g) (4) of the
Securities Exchange Act of 1934 (the "Act"); or
(j) The suspension of the issuer's obligation to file reports pursuant to
Section 15 (d) of the Act.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
During the past 40 business days, there have been no transactions in the
Notes effected by the Company or any of its directors or executive officers.
ITEM 5. CONTRACT, AGREEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
Except for the Sections of the Indenture (including those Exhibit A to
the Indenture) filed as exhibits, there are no contracts, arrangements,
understandings, or relationships relating directly or indirectly, to the
tender offer (whether or not legally enforceable) between the Company (or any
director or executive officer of the Company) and any person with respect to
any securities of the Company, including, without limitation, any contract,
arrangement, understanding, or relationship concerning the transfer or the
voting of any of such securities, joint ventures, loan or option arrangements,
puts or calls, guaranties or loans, guaranties against loss, or the giving or
withholding of proxies, consents or authorizations.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
There are no persons employed, retained or to be compensated by the
Company to make solicitations or recommendations in connection with the tender
offer. First National Bank of Chicago, however, is the trustee under the
Indenture and will be communicating with and providing notices to holders of
the Notes as required by the Indenture.
ITEM 7. FINANCIAL INFORMATION.
The Company does not believe that there is any additional information
that is material to a decision by a holder of a Note with respect to the
tender offer.
ITEM 8. ADDITIONAL INFORMATION.
The Company does not believe that there is any additional information
that is material to a decision by a holder of a Note with respect to the
tender offer.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(1) Notice to Securityholders.
(2) Sections of an Indenture dated as of September 1, 1989 between the
Company and First National Bank of Chicago, as Trustee, relating to
$1,322,500,000 in principal amount of Liquid Yield Option Notes due
2009.
(3) Sections of a final prospectus filed with the Commission on August 31,
1989 pursuant to Rule 430A in connection with the Company's
Registration Statement on Form S-3 (No. 33-3062).
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and
correct.
MOTOROLA, INC.
By: /s/ Garth L. Milne
Its: Senior Vice President &
Treasurer
Dated: August 29, 1994
EXHIBIT INDEX
(AMENDMENT NO. 1 TO SCHEDULE 13e-4)
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NO.
A Notice to Securityholders *
B Sections of an Indenture dated as of _
September 1, 1989 between the Company and
First National Bank of Chicago, as Trustee, relating
to $1,322,500,000 in principal amount of Liquid
Yield Option Notes due 2009
C Sections of a final prospectus filed with the Commission _
on August 31, 1989 pursuant to Rule 430A in
connection with the Company's Registration
Statement on Form S-3 (No. 33-3062)
* Previously filed with Schedule 13e-4.
EXHIBIT B
MOTOROLA, INC.
Liquid Yield Option (Trademark Symbol Inserted Here) Notes
due 2009
(Zero Coupon-Subordinated)
INDENTURE
Dated as of September 1, 1989
THE FIRST NATIONAL BANK OF CHICAGO
TRUSTEE
(Trademark Symbol Inserted Here) Trademark of Merrill Lynch & Co.,
Inc.
. . . . . . . . . .
INDENTURE dated as of September 1, 1989, between MOTOROLA,
INC., a Delaware corporation ("Company"), and THE FIRST NATIONAL
BANK OF CHICAGO ("Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the
Company's Liquid Yield Option Notes due 2009 (Zero Coupon -
Subordinated) ("Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Affiliate" of any specified person means any other person
directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified person. For
the purposes of this definition, "control" when used with respect
to any specified person means the power to direct or cause the
direction of the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
. . . . . . . . . .
"Business Day" meaning each day of the year on which banking
institutions are not required or authorized to close in the City
of New York.
. . . . . . . . . .
"Company" means the party named as the "Company" in the first
paragraph on this Indenture until a successor replaces it pursuant
to the applicable provisions of this Indenture and, thereafter,
shall mean such successor. The foregoing sentence shall likewise
apply to any subsequent such successor or successors.
. . . . . . . . . .
"Default" means any event which is, or after notice or
passage of time or both would be, an Event of Default.
- -----------------------------
(Trademark Symbol Inserted Here) Trademark of Merrill Lynch & Co.,
Inc.
"Holder" or "Securityholder" means a person in whose name a
Security is registered on the Registrar's books.
"Indenture" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
. . . . . . . . . .
"Principal" or "Principal Amount" of a Security means the
Principal Amount as set forth on the face of the Security.
. . . . . . . . . .
"Securities" means any of the Company's Liquid Yield Option
Notes due 2009 (Zero Coupon-Subordinated), as amended or
supplemented from time to time, issued under this Indenture.
. . . . . . . . . .
"Stated Maturity", when used with respect to any Security,
means the date specified in such Security as the fixed date on
which an amount equal to the Principal of such Security is due and
payable.
. . . . . . . . . .
"trading day" means a day during which trading in securities
generally occurs on the New York Stock Exchange or, if the Common
Stock is not listed on the New York Stock Exchange, on the
principal other national or regional securities exchange on which
the Common Stock is then listed or, if the Common Stock is not
listed on a national or regional securities exchange, on the
National Association of Securities Dealers Automated Quotation
System or, if the Common Stock is not quoted on the National
Association of Securities Dealers Automated Quotation System, on
the principal other market on which the Common Stock is then
traded.
. . . . . . . . . .
ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating. The Securities and the
Trustee's certificate of authentication shall be substantially in
the form of Exhibit A, which is a part of this Indenture.
SECTION 2.02. Execution and Authentication. The Securities
shall be executed on behalf of the Company by its Chairman of the
Board, one of its Vice Chairmen, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon and
attested by its Secretary or one of its Assistant Secretaries.
The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper Officers of the
Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior
to the authentication and delivery of such Securities or did not
hold such offices at the date of authentication of such
Securities.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there
appears on such Security a certificate of authentication
substantially in the form provided for herein duly executed by the
Trustee by manual signature of an authorized officer, and such
certificate upon any Security shall be conclusive evidence, and
the only evidence, that such Security has been duly authenticated
and delivered hereunder.
The Trustee shall authenticate and deliver Securities for
original issue in an aggregate Principal Amount of up to
$1,150,000,000 upon a Company Order without any further action by
the Company; provided, however, that in the event that the Company
sells any Securities pursuant to the Underwriter's over-allotment
option (the "Over-Allotment Option") granted pursuant to Section 2
of the Purchase Agreement between the Company and Merrill Lynch,
Pierce, Fenner & Smith Incorporated dated August 29, 1989, then
the Trustee shall authenticate and deliver Securities for original
issue in an aggregate Principal Amount of up to $1,150,000,000
plus up to $172,500,000 aggregate Principal Amount of Securities
sold pursuant to the Over-Allotment Option upon a Company Order
without any further action by the Company. The aggregate Principal
Amount of Securities outstanding at any time may not exceed the
amount set forth in the foregoing sentence, subject to the proviso
set forth therein, except as provided in Section 2.07.
SECTION 2.03. Registrar, Paying Agent and Conversion Agent.
The Company shall maintain an office or agency where Securities
may be presented for registration of transfer or for exchange
("Registrar"), an office or agency where Securities may be
presented for purchase or payment ("Paying Agent") and an office
or agency where Securities may be presented for conversion
("Conversion Agent"). The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may
have one or more co-registrars, one or more additional paying
agents and one or more additional conversion agents. The term
Paying Agent includes any additional paying agent. The term
Conversion Agent includes any additional conversion agent.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent, Conversion Agent or co-registrar
(if not the Trustee). The agreement shall implement the
provisions of this Indenture that relate to such agent. The
Company shall notify the Trustee of the name and address of any
such agent. If the Company fails to maintain a Registrar, Paying
Agent or Conversion Agent, the Trustee shall act as such and shall
be entitled to appropriate compensation therefor pursuant to
Section 7.07. The Company or any Subsidiary or an Affiliate of
either of them may act as Paying Agent, Registrar, Conversion
Agent or co-registrar.
The Company initially appoints the Trustee as Registrar,
Conversion Agent and Paying Agent in connection with the
Securities.
. . . . . . . . . .
SECTION 2.06. Transfer and Exchange.
. . . . . . . . . .
The Company shall not be required to make, and the Registrar
need not register, transfers or exchanges of Securities selected
for redemption (except, in the case of Securities to be redeemed
in part, the portion thereof not to be redeemed) or any Securities
in respect of which a Purchase Notice or Change in Control
Purchase Notice has been given and not withdrawn by the Holder
thereof in accordance with the terms of this Indenture (except, in
the case of Securities to be purchased in part, the portion
thereof not to be purchased) or any Securities for a period of 15
days before a selection of Securities to be redeemed.
. . . . . . . . .
SECTION 2.08. Outstanding Securities; Determinations of
Holders' Action.
. . . . . . . . . .
If the Paying Agent holds, in accordance with this Indenture,
on a Redemption Date, or on the Business Day following a Purchase
Date or a Change in Control Purchase Date, or on Stated Maturity,
money or securities, if permitted hereunder, sufficient to pay
Securities payable on that date, then on and after that date such
Securities shall cease to be outstanding and Original Issue
Discount and interest, if any, on such Securities shall cease to
accrue; provided, that if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has
been made.
. . . . . . . . . .
ARTICLE 3
REDEMPTION AND PURCHASES
. . . . . . . . . .
SECTION 3.08. Purchase of Securities at Option of the
Holder.
(a) General. Securities shall be purchased by the Company
pursuant to paragraph 6 of the Securities as of September 7, 1994,
September 7, 1999 and September 7, 2004 (each, a "Purchase Date"),
at the purchase price specified therein (each, a "Purchase
Price"), at the option of the Holder thereof, upon:
(1) delivery to the Paying Agent by the Holder of a written
notice of purchase (a "Purchase Notice") at any time from the
opening of business on the date that is 20 Business Days
prior to a Purchase Date until the close of business on such
Purchase Date, stating:
(A) the certificate number of the Security which the
Holder will deliver to be purchased,
(B) the portion of the Principal Amount of the Security
which the Holder will deliver to be purchased, which
portion must be $1,000 or an integral multiple thereof,
(C) that such Security shall be purchased pursuant to
the terms and conditions specified in paragraph 6 of the
Securities, and
(D) in the event the Company elects, pursuant to a
Company Notice, to pay the Purchase Price to be paid as
of such Purchase Date in Common Stock or Extension Notes
but such Purchase Price shall ultimately be payable in
cash because (i) the Company has so elected to pay in
Extension Notes but less than $25,000,000 aggregate
principal amount of Extension Notes would otherwise be
issued in respect of the aggregate Purchase Price to be
paid as of such Purchase Date, as set forth in Section
3.08(d), or (ii) any of the conditions to payment of the
Purchase Price in Common Stock or Extension Notes is not
satisfied prior to or on the Purchase Date, as set forth
in Section 3.08(d) and 3.08(e), whether such Holder
elects (x) to withdraw such Purchase Notice as to some
or all of the Securities to which such Purchase Notice
relates (stating the Principal Amount and certificate
numbers of the Securities as to which such withdrawal
shall relate), or (y) to receive cash in respect of the
Purchase Price for all Securities to which such Purchase
Notice relates; and
(2) delivery of such Security to the Paying Agent prior
to, on or after the Purchase Date (together with all
necessary endorsements) at the offices of the Paying Agent,
such delivery being a condition to receipt by the Holder of
the Purchase Price therefor; provided, however, that such
Purchase Price shall be so paid pursuant to this Section 3.08
only if the Security so delivered to the Paying Agent shall
conform in all respects to the description thereof in the
related Purchase Notice.
If a Holder, in such Holder's Purchase Notice and in any
written notice of withdrawal delivered by such Holder pursuant to
the terms of Section 3.10, fails to indicate such Holder's choice
with respect to the election set forth in clause (D) of
Section 3.08(a)(1), such Holder shall be deemed to have elected to
receive cash in respect of the Purchase Price for all Securities
subject to such Purchase Notice in the circumstances set forth in
such clause (D).
The Company shall purchase from the Holder thereof, pursuant
to this Section 3.08, a portion of a Security if the Principal
Amount of such portion is $1,000 or an integral multiple of
$1,000. Provisions of this Indenture that apply to the purchase
of all of a Security also apply to the purchase of such portion of
such Security.
Any purchase by the Company contemplated pursuant to the
provisions of this Section 3.08 shall be consummated by the
delivery of the consideration to be received by the Holder
promptly following the later of the Purchase Date and the time of
delivery of the Security.
Notwithstanding anything herein to the contrary, any Holder
delivering to the Paying Agent the Purchase Notice contemplated by
this Section 3.08(a) shall have the right at any time prior to the
close of business on the Purchase Date to withdraw such Purchase
Notice by delivery of a written notice of withdrawal to the Paying
Agent in accordance with Section 3.10.
(b) Company's Right to Elect Manner of Payment of Purchase
Price. The Company may elect with respect to any Purchase Date to
pay the Purchase Price in respect of the Securities to be
purchased pursuant to Section 3.08(a) as of such Purchase Date, in
U.S. legal tender ("cash"), Extension Notes or Common Stock,
subject to the conditions set forth in Sections 3.08(c), (d) and
(e). However, the Company shall not pay the Purchase Price
payable as of any particular Purchase Date pursuant to
Section 3.08(a) in any combination of cash, Extension Notes, or
Common Stock, except for payment in cash for fractional interests
in Common Stock or Extension Notes. For purposes of determining
the existence of potential fractional interests, all Securities
subject to purchase by the Company held by a Holder shall be
considered together (no matter how many separate certificates are
to be presented). The Company may not change its election with
respect to the consideration to be paid once the Company has given
its Company Notice to Securityholders except pursuant to
Section 3.08(d) or (e).
At least two Business Days before the Company Notice Date,
the Company shall deliver an Officers' Certificate to the Trustee
specifying:
(i) the manner of payment selected by the Company,
(ii) the information required by Section 3.08(f),
(iii) that the conditions to such manner of payment set
forth in Section 3.08(d) or (e), as the case may be, have
been or will be complied with, and
(iv) whether the Company desires the Trustee to give the
Company Notice required by Section 3.08(f).
(c) Purchase with Cash. At the option of the Company, the
Purchase Price of Securities in respect of which a Purchase Notice
pursuant to Section 3.08(a) has been given may be paid by the
Company with cash equal to the aggregate Purchase Price of such
Securities. If the Company elects to purchase Securities with
cash, a Company Notice as provided in Section 3.08(f) shall be
sent to Holders (and to beneficial owners as required by
applicable law) not less than 20 Business Days prior to the
Purchase Date (the "Company Notice Date").
(d) Purchase by Issuance of Extension Notes. At the option of
the Company, the Purchase Price of Securities in respect of which
a Purchase Price Notice pursuant to Section 3.08(a) has been given
may be paid by the Company by the issuance of Extension Notes in a
principal amount equal to the amount of cash to which the
Securityholders would have been entitled had the Company elected
to pay the Purchase Price of such Securities in cash; provided,
however, that (i) the Extension Notes will be issued only in
integral multiples of $1,000 and cash shall be paid in lieu of
fractional Extension Notes, (ii) if a Holder elects to have more
than one Security purchased, the principal amount of Extension
Notes shall be based on the aggregate amount of Securities to be
purchased from such Holder and (iii) if as of any Purchase Date
less than $25,000,000 aggregate principal amount of Extension
Notes would otherwise be issued in respect of the aggregate
Purchase Price to be paid as of such Purchase Date, the Company
shall instead pay such Purchase Price in cash. If the Company
elects to purchase the Securities by the issuance of Extension
Notes, a Company Notice as provided in Section 3.08(f) shall be
sent to the Holders (and to beneficial owners as required by
applicable law) on the Company Notice Date.
If the Company elects to purchase the Securities by the
issuance of Extension Notes, it shall designate a method (an
"Interest Rate Method") which will be used to determine the fixed
per annum rate of interest which such Extension Notes will bear
(an "Extension Note Interest Rate"). An Interest Rate Method
shall provide that the Extension Note Interest Rate will be
determined as of the fifth Business Day prior to the Purchase
Date, according to a spread over or under the interest rate of a
U.S. Treasury security that matures at approximately the same time
as such Extension Notes and taking into account all the terms and
conditions of the Extension Notes to be issued as of such Purchase
Date. The Company Notice mailed to Holders on the Company Notice
Date will advise Holders of the U.S. Treasury security pursuant to
which the Extension Note Interest Rate will be calculated and the
number of basis points above or below the interest rate of such
U.S. Treasury security (the "spread") that will be applied to
determine the Extension Note Interest Rate. Prior to the Company
Notice Date, the Company shall have obtained an opinion from
Merrill Lynch, Pierce, Fenner & Smith Incorporated (or any
successor firm thereto) ("Merrill Lynch") to the effect that the
Interest Rate Method as so specified in the Company Notice would
cause the Extension Notes to be issued as of the Purchase Date to
have a market value at or as near as possible to par on a fully
distributed basis as of the Company Notice Date (assuming issuance
as of the Company Notice Date). An Interest Rate Method shall be
so designated and an Extension Note Interest Rate shall be so
determined for each series of Extension Notes to be issued.
The Company's right to exercise its election to purchase the
Securities pursuant to this Section 3.08 through the issuance of
Extension Notes shall be conditioned upon:
(i) the Company's not having given its Company Notice of an
election to pay in Common Stock or cash and its giving of
timely Company Notice of election to purchase with Extension
Notes as provided herein;
(ii) the execution of the Extension Indenture, substantially
in the form attached hereto as Exhibit B, with only such
changes as (A) are necessary to comply with law or usage, (B)
are requested by the Company and which would make any
provision of the Extension Notes or the Extension Indenture,
including the covenants contained therein and the price or
prices at which Extension Notes may be redeemed, more
restrictive to the Company or beneficial to the holders of
the Extension Notes, as determined by the Board of Directors
in good faith, such determination to be conclusive, (C) are
requested by the Company to add to the covenants and
agreements of the Company contained in the Extension
Indenture or to remove any right or power therein reserved to
or conferred upon the Company, or (D) would not adversely
affect the rights of the holders of the Extension Notes, and
the adoption of any resolution of the Board of Directors or
the execution of any supplements to the Extension Indenture
necessary to create a particular series of Extension Notes
pursuant to the terms of the Extension Indenture, all on or
before the Purchase Date;
(iii) the listing of the Extension Notes on a nationally
recognized stock exchange if Merrill Lynch shall deem such
listed appropriate in connection with its opinion relating to
the Extension Notes Interest Rate;
(iv) the registration of the Extension Notes under the
Securities Act of 1933, as amended (the "Securities Act"),
and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), if required;
(v) the qualification of the Extension Indenture under the
TIA, if required;
(vi) the qualification of the Extension Trustee to act as
trustee under the Extension Indenture; and
(vii) the receipt by the Trustee of an Officers' Certificate
and an Opinion of Counsel each stating that (A) the terms of
the Extension Notes have been established in conformity with
the terms of this Indenture and the Extension Indenture, (B)
the Extension Notes have been duly authorized and, when
issued and delivered, pursuant to the terms of this Indenture
and the Extension Indenture, in payment of the Purchase Price
in respect of Securities, and assuming due execution and
authentication thereof in accordance with the terms of this
Indenture and the Extension Indenture, will be duly and
validly issued and delivered and will constitute valid and
legally binding obligations of the Company, entitled to the
benefits provided by the Extension Indenture (including any
supplements thereto) under which they are to be issued and
(C) the Extension Indenture (including any supplements
thereto) has been duly authorized, executed and delivered by
the Company and the Extension Trustee and constitutes a valid
and legally binding instrument enforceable in accordance with
its terms subject as to enforcement to bankruptcy,
insolvency, reorganization or other laws of general
applicability relating to or affecting creditors' rights and
to general equity principles, and, in the case of such
Officers' Certificate, stating that conditions (i), (ii),
(iii), (iv), (v) and (vi) above have been satisfied.
The Company may elect to pay in Extension Notes only if
information regarding the interest rate of the U.S. Treasury
security pursuant to which the Extension Note Interest Rate is
determined is published in a daily newspaper of national
circulation. If such conditions are not satisfied prior to or on
the Purchase Date and the Company elected to purchase the
Securities to be purchased as of such Purchase Date pursuant to
this Section 3.08 through the issuance of Extension Notes, the
Company shall pay the Purchase Price in respect of such Securities
in cash.
(e) Payment by Issuance of Common Stock. At the option of
the Company, the Purchase Price of Securities in respect of which
a Purchase Notice pursuant to Section 3.08(a) has been given may
be paid by the Company by the issuance of a number of shares of
Common Stock equal to the quotient obtained by dividing (i) the
amount of cash to which the Securityholders would have been
entitled had the Company elected to pay the Purchase Price of such
Securities in cash by (ii) the Market Price of a share of Common
Stock, subject to the next succeeding paragraph.
The Company will not issue a fractional share of Common Stock
in payment of the Purchase Price. Instead the Company will pay
cash for the current market value of the fractional share. The
current market value of a fraction of a share shall be determined
by multiplying the Market Price by such fraction and rounding the
product to the nearest whole cent. It is understood that if a
Holder elects to have more than one Security purchased, the number
of shares of Common Stock shall be based on the aggregate amount
of Securities to be purchased.
Each share of Common Stock issued upon purchase of Securities
pursuant to Section 3.08(a) shall be entitled to receive the
appropriate number of preferred share purchase rights (the
"Rights"), if any, and the certificates representing the Common
Stock issued upon such purchase shall bear such legends, if any,
in each case as provided by and subject to the terms of the Rights
Agreement dated as of November 9, 1988 between the Company and
Harris Trust and Savings Bank, as Rights Agent, as in effect at
the time of such purchase.
If the Company elects to purchase the Securities by the
issuance of shares of Common Stock, a Company Notice as provided
in Section 3.08(f) shall be sent to the Holders (and to beneficial
owners as required by applicable law) on the Company Notice Date.
The Company's right to exercise its election to purchase the
Securities pursuant to Section 3.08 through the issuance of shares
of Common Stock shall be conditioned upon:
(i) the Company's not having given its Company Notice of an
election to pay in Extension Notes or cash and its giving of
timely Company Notice of election to purchase with Common
Stock as provided herein;
(ii) the registration of the shares of Common Stock to be
issued in respect of the payment of the Purchase Price under
the Securities Act, if required; and
(iii) the receipt by the Trustee of an Officers' Certificate
and an Opinion of Counsel each stating that (A) the terms of
the issuance of the Common Stock are in conformity with this
Indenture and (B) the shares of Common Stock to be issued by
the Company in payment of the Purchase Price in respect of
Securities have been duly authorized and, when issued and
delivered pursuant to the terms of this Indenture in payment
of the Purchase Price in respect of Securities, will be
validly issued, fully paid and nonassessable, and, in the
case of such Officers' Certificate, stating that conditions
(i) and (ii) above have been satisfied and, in the case of
such Opinion of Counsel, stating that condition (ii) above
has been satisfied.
Such Officers' Certificate shall also set forth the number of
shares of Common Stock to be issued for each $1,000 Principal
Amount of Securities and the Sale Price of a share of Common Stock
on each of the seven Business Days prior to the Purchase Date.
The Company may elect to pay in Common Stock only if the
information necessary to calculate the Market Price is reported in
a daily newspaper of national circulation. If such conditions are
not satisfied prior to or on the Purchase Date and the Company
elected to purchase the Securities to be purchased as of such
Purchase Date pursuant to this Section 3.08 through the issuance
of shares of Common Stock, the Company shall pay the Purchase
Price in respect of such Securities in cash.
The "Market Price" means the average of the Sale Price of the
Common Stock for the five Business Day period ending on the third
Business Day prior to the Purchase Date, appropriately adjusted to
take into account the occurrence, during the seven Business Days
preceding such Purchase Date, of any event described in
Section 11.06 or 11.07 or 11.08; subject, however, to the
conditions set forth in Sections 11.09 and 11.10. The "Sale
Price" of the Common Stock on any date means the closing sale
price (or if no closing sale price is reported the average of the
high and low bid prices) on such date as reported in composite
transactions for the principal United States securities exchange
on which the Common Stock is traded or, if the Common Stock is not
listed on a United States national or regional stock exchange, as
reported by the National Association of Securities Dealers
Automated Quotation System.
(f) Notice of Election. Company Notices of election to
purchase with cash, Extension Notes or Common Stock shall be sent
to the Holders (and to beneficial owners as required by applicable
law) in the manner provided in Section 12.02 at the time specified
in Section 3.08(c), (d) or (e), as applicable (a "Company
Notice"). Such Company Notices shall state the manner of payment
elected and shall contain the following information:
In the event the Company has elected to pay a Purchase Price
with Extension Notes, the Company Notice shall describe the
Interest Rate Method (including the information referred to in the
third sentence of the second paragraph of Section 3.08(d)) and any
material amendment to the Extension Indenture or material
additional terms of the series of Extension Notes to be issued in
payment of such Purchase Price.
In the event the Company has elected to pay a Purchase Price
with Common Stock, the Company Notice shall:
(1) state that each Holder will receive Common Stock with a
Market Price determined as of a specified date prior to the
Purchase Date equal to 100% of the Purchase Price of the
Securities held by such Holder (including any cash amount to
be paid in lieu of fractional shares); and
(2) state that because the Market Price of Common Stock will
be determined prior to the Purchase Date, Holders will bear
the market risk with respect to the value of the Common Stock
to be received from the date such Market Price is determined
to the Purchase Date.
In any case, each Company Notice shall state:
(i) the Conversion Rate;
(ii) the name and address of the Paying Agent and the
Conversion Agent;
(iii) that Securities as to which a Purchase Notice has been
given may be converted only if the applicable Purchase Notice
has been withdrawn in accordance with the terms of this
Indenture;
(iv) that Securities must be surrendered to the Paying Agent
to collect payment; and
(v) the procedures for withdrawing a Purchase Notice
(including, without limitation, for a conditional withdrawal
pursuant to the terms of Section 3.08 (a)(1)(D) or
Section 3.10).
At the Company's request, the Trustee shall give such notice
in the Company's name and at the Company's expense; provided,
however, that, in all cases, the text of such Company Notice shall
be prepared by the Company.
Upon determination of the actual number of shares of Common
Stock to be issued for each $1,000 Principal Amount of Securities
or the Extension Note Interest Rate, the Company will publish such
determination in a daily newspaper of national circulation.
(g) Covenants of the Company. All shares of Common Stock
delivered upon purchase of the Securities shall be newly issued
shares or treasury shares, shall be fully paid and nonassessable
and shall be free from preemptive rights and free of any lien or
adverse claim.
The Company shall use its best efforts (x) to list or cause
to have quoted any shares of Common Stock on each national
securities exchange or over-the-counter or other domestic market
on which the Common Stock is then listed or quoted, and (y)
subject to Section 3.08(d), to list or cause to be quoted any
Extension Notes on such national securities exchange or other
domestic market as Merrill Lynch deems appropriate.
(h) Procedure upon Purchase. On the Business Day following
the Purchase Date, the Company shall deposit with the Paying Agent
cash (in respect of a cash purchase under Section 3.08(c) or for
fractional interests, as applicable), Extension Notes or shares of
Common Stock, as applicable, sufficient to pay the Purchase Price
due and owing as of the close of business on the Purchase Date of
the Securities to be purchased pursuant to this Section 3.08. As
soon as practicable after the Purchase Date, the Company shall
deliver to each Holder entitled to receive Extension Notes or
Common Stock, as applicable, through the Paying Agent, a
certificate for the number of full shares of Common Stock, as
applicable, issuable in payment of such Purchase Price and cash in
lieu of any fractional interests. The person in whose name the
certificate for Extension Notes or Common Stock is registered
shall be treated as a holder of record on and after the Purchase
Date. Subject to Section 3.08(e), no payment or adjustment will
be made for dividends on the Common Stock the record date for
which occurred prior to the Purchase Date.
(i) Taxes. If a Holder of a Security is paid in Common
Stock or Extension Notes, the Company shall pay any documentary,
stamp or similar issue or transfer tax due on such issue of shares
of Common Stock or Extension Notes. However, the Holder shall pay
any such tax which is due because the Holder requests the shares
of Common Stock or the Extension Notes to be issued in a name
other than the Holder's name. The Paying Agent may refuse to
deliver the certificates representing the Common Stock being
issued in a name other than the Holder's name until the Paying
Agent receives a sum sufficient to pay any tax which will be due
because the shares of Common Stock or the Extension Notes are to
be issued in a name other than the Holder's name. Nothing herein
shall preclude any income tax withholding required by law or
regulations.
. . . . . . . . . .
SECTION 3.10. Effect of Purchase Notice or Change in Control
Purchase Notice. Upon receipt by the Company of the Purchase
Notice or Change in Control Purchase Notice specified in
Section 3.08(a) or Section 3.09(c), as applicable, the Holder of
the Security in respect of which such Purchase Notice or Change in
Control Purchase Notice, as the case may be, was given shall
(unless such Purchase Notice or Change in Control Purchase Notice
is withdrawn as specified in the following two paragraphs)
thereafter be entitled to receive solely the Purchase Price or
Change in Control Purchase Price, as the case may be, with respect
to such Security. Such Purchase Price or Change in Control
Purchase Price shall be paid to such Holder promptly following the
later of (x) the Purchase Date or the Change in Control Purchase
Date, as the case may be, with respect to such Security (provided
the conditions in Section 3.08(a) or Section 3.09(c), as
applicable, have been satisfied) and (y) the time of delivery of
such Security to the Paying Agent by the Holder thereof in the
manner required by Section 3.08(a) or Section 3.09(c), as
applicable. Securities in respect of which a Purchase Notice or
Change in Control Purchase Notice, as the case may be, has been
given by the Holder thereof may not be converted into shares of
Common Stock on or after the date of the delivery of such Purchase
Notice (or Change in Control Purchase Notice, as the case may be),
unless such Purchase Notice (or Change in Control Purchase Notice,
as the case may be), has first been validly withdrawn as specified
in the following two paragraphs.
A Purchase Notice or Change in Control Purchase Notice, as
the case may be, may be withdrawn by means of a written notice of
withdrawal delivered to the office of the Paying Agent at any time
prior to the close of business on the Purchase Date or the Change
in Control Purchase Date, as the case may be, to which it relates
specifying:
(1) the certificate number of the Security in respect of
which such notice of withdrawal is being submitted,
(2) the Principal Amount of the Security with respect to
which such notice of withdrawal is being submitted, and
(3) the Principal Amount, if any, of such Security which
remains subject to the original Purchase Notice or Change in
Control Purchase Notice, as the case may be, and which has
been or will be delivered for purchase by the Company.
A written notice of withdrawal of a Purchase Notice may,
without limitation, be in the form of (i) a conditional
withdrawal contained in a Purchase Notice pursuant to the terms of
Section 3.08(a)(1)(D) or (ii) a conditional withdrawal containing
the information set forth in Section 3.08(a)(1)(D) and the
preceding paragraph and contained in a written notice of
withdrawal delivered to the Paying Agent as set forth in the
preceding paragraph.
There shall be no purchase of any Securities pursuant to
Section 3.08 or 3.09 if there has occurred (prior to, on or after,
as the case may be, the giving, by the Holders of such Securities,
of the required Purchase Notice or Change in Control Purchase
Notice, as the case may be and is continuing an Event of Default
(other than a default in the payment of the Purchase Price or
Change in Control Purchase Price, as the case may be, with respect
to such Securities).
SECTION 3.11. Deposit of Purchase Price or Change in Control
Purchase Price. On or before the Business Day following a
Purchase Date or a Change in Control Purchase Date, as the case
may be, the Company shall deposit with the Trustee or with the
Paying Agent (or, if the Company or a Subsidiary or an Affiliate
of either of them is acting as the Paying Agent, shall segregate
and hold in trust as provided in Section 2.04) an amount of money
or securities, if permitted hereunder, sufficient to pay the
aggregate Purchase Price or Change in Control Purchase Price, as
the case may be, of all the Securities or portions thereof which
are to be purchased as of such Purchase Date or Change in Control
Purchase Date, as the case may be.
SECTION 3.12. Securities Purchased in Part. Any Security
which is to be purchased only in part shall be surrendered at the
office of the Paying Agent (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or such Holder's attorney duly authorized
in writing) and the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Security, without
service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder in aggregate Principal
Amount equal to, and in exchange for, the portion of the Principal
Amount of the Security so surrendered which is not purchased.
SECTION 3.13. Covenant to Comply With Securities Laws Upon
Purchase of Securities. In connection with any offer to purchase
or purchase of Securities under Section 3.08 or 3.09 hereof, the
Company shall (i) comply with Rule 13e-4 (which term, as used
herein, includes any successor provision thereto) under the
Exchange Act, if applicable, (ii) file the related Schedule 13e-4
(or any successor schedule, form or report) under the Exchange
Act, if applicable, and (iii) otherwise comply with all Federal
and state securities laws so as to permit the rights and
obligations under Section 3.08 and 3.09 to be exercised in the
time and in the manner specified in Sections 3.08 and 3.09.
SECTION 3.14. Repayment to the Company. The Trustee and the
Paying Agent shall return to the Company any cash, Extension Notes
or shares of Common Stock, together with interest on such cash or
Extension Notes, if any, or dividends on such shares of Common
Stock, if any, held by them for the payment of a Purchase Price or
Change in Control Purchase Price, as the case may be, in respect
of cash or shares of Common Stock or Extension Notes that remain
unclaimed as provided in paragraph 13 of the Securities.
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Securities. The Company shall
promptly make all payments in respect of the Securities on the
dates and in the manner provided in the Securities or pursuant to
this Indenture. Principal Amount, Issue Price, accrued Original
Issue Discount, Redemption Price, Purchase Price, Change in
Control Purchase Price and interest, if any, shall be considered
paid on the applicable date due if on such date the Trustee or the
Paying Agent holds, in accordance with this Indenture, money or
securities, if permitted hereunder, sufficient to pay all such
amounts then due.
SECTION 4.02. SEC Reports. The Company shall file with the
Trustee, within 15 days after it files such annual and quarterly
reports, information, documents and other reports with the SEC,
copies of its annual report and of the information, documents and
other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which the
Company is required to file with the SEC pursuant to Section 13 or
15(d) of the Exchange Act. The Company also shall comply with the
other provisions of TIA Section 314(a).
. . . . . . . . . .
SECTION 4.05. Maintenance of Office or Agency. The Company
will maintain in the Borough of Manhattan, the City of New York,
an office or agency where Securities may be presented or
surrendered for payment, where Securities may be surrendered for
registration of transfer, exchange, purchase, redemption or
conversion and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The
office of the Trustee at First Chicago Trust Company of New York,
120 Broadway, New York, New York 10271, Attention: Corporate Trust
Administration shall be such office or agency for all of the
aforesaid purposes unless the Company shall maintain some other
office or agency for such purposes and shall give prompt written
notice to the Trustee of the location, and any change in the
location, of such other office or agency. If at any time the
Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee set forth in Section 12.02.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or
surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough
of Manhattan, the City of New York, for such purposes.
. . . . . . . . . .
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default"
occurs if:
(1) the Company defaults in the payment of the Principal
Amount, Issue Price, accrued Original Issue Discount,
Redemption Price, Purchase Price (and, with respect to a
default in the payment of a Purchase Price, such default
continues for a period of three Business Days) or Change in
Control Purchase Price on any Security when the same becomes
due and payable at its Stated Maturity, upon redemption, upon
declaration, when due for purchase by the Company or
otherwise, whether or not such payment shall be prohibited by
Article 10;
. . . . . . . . . .
SECTION 6.02. Acceleration. If an Event of Default (other
than an Event of Default specified in Section 6.01(3) or (4))
occurs and is continuing, the Trustee by notice to the Company, or
the Holders of at least 25% in aggregate Principal Amount of the
Securities at the time outstanding by notice to the Company and
the Trustee, may declare the Issue Price and accrued Original
Issue Discount to the date of declaration on all the Securities to
be immediately due and payable. Upon such a declaration, such
Issue Price and accrued Original Issue Discount shall be due and
payable immediately. . . . . . . . . . . The Holders of a
majority in aggregate Principal Amount of the Securities at the
time outstanding, by notice to the Trustee (and without notice to
any other Securityholder) may rescind an acceleration and its
consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been
cured or waived except nonpayment of the Issue Price and accrued
original Issue Discount that have become due solely as a result of
acceleration and if all amounts due to the Trustee under
Section 7.07 have been paid. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
. . . . . . . . . .
SECTION 6.04. Waiver of Past Defaults. The Holders of a
majority in aggregate Principal Amount of the Securities at the
time outstanding, by notice to the Trustee (and without notice to
any other Securityholder), may waive an existing Default and its
consequences except (1) an Event of Default described in
Section 6.01(1), (2) a Default in respect of a provision that
under Section 9.02 cannot be amended without the consent of each
Securityholder affected or (3) a Default under Article 11. When
a Default is waived, it is deemed cured, but no such waiver shall
extend to any subsequent or other Default or impair any consequent
right.
. . . . . . . . .
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right
of any Holder to receive payment of the Principal Amount, Issue
Price, accrued Original Issue Discount, Redemption Price, Purchase
Price, Change in Control Purchase Price or interest, if any, in
respect of the Securities held by such Holder, on or after the
respective due dates expressed in the Securities or any Redemption
Date, and to convert the Securities in accordance with Article 11,
or to bring suit for the enforcement of any such payment on or
after such respective dates or the right to convert, shall not be
impaired or affected adversely without the consent of each such
Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default described in Section 6.01(1) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an
express trust against the Company for the whole amount owing with
respect to the Securities and the amounts provided for in
Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. In case of
the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition
or other judicial proceeding relative to the Company or any other
obligor upon the Securities or the property of the Company or of
such other obligor or their creditors, the Trustee (irrespective
of whether the Principal Amount, Issue Price, accrued Original
Issue Discount, Redemption Price, Purchase Price, Change in
Control Purchase Price or interest, if any, in respect of the
Securities shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment
of any such amount) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of the
Principal Amount, Issue Price, accrued Original Issue
Discount, Redemption Price, Purchase Price, Change in Control
Purchase Price, or interest, if any, and to file such other
papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the
Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute
the same;
and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or similar official in any such judicial proceeding
is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under
Section 7.07.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money
pursuant to this Article 6, it shall pay out the money in the
following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness to the extent
required by Article 10;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for the Principal Amount, Issue Price, accrued
Original Issue Discount, Redemption Price, Purchase Price,
Change in Control Purchase Price or interest, if any, as the
case may be, ratably, without preference or priority of any
kind, according to such amounts due and payable on the
Securities; and
FOURTH: the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section 6.10. At
least 15 days before such record date, the Company shall mail to
each Securityholder and the Trustee a notice that states the
record date, the payment date and amount to be paid.
. . . . . . . . . .
SECTION 6.12. Waiver of Stay, Extension or Usury Laws. The
Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury or other law wherever enacted, now or
at any time hereafter in force, which would prohibit or forgive
the Company from paying all or any portion of the Principal
Amount, Issue Price, accrued Original Issue Discount, Redemption
Price, Purchase Price or Change in Control Purchase Price in
respect of Securities, or any interest on any such amounts, as
contemplated herein, or 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 laws and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
. . . . . . . . . .
SECTION 7.07. Compensation and Indemnity.
. . . . . . . . . .
To secure the Company's payment obligations in this
Section 7.07, the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the
Trustee, except that held in trust to pay the Issue Price, accrued
Original Issue Discount, Redemption Price, Purchase Price, Change
in Control Purchase Price or interest, if any, as the case may be,
on particular Securities.
. . . . . . . . . .
SECTION 9.02. With Consent of Holders. With the written
consent of the Holders of at least a majority in aggregate
Principal Amount of the Securities at the time outstanding, the
Company and the Trustee may amend this Indenture or the
Securities. However, without the consent of each Securityholder
affected, an amendment or supplement to this Indenture or the
Securities may not:
(1) make any change to the Principal Amount of Securities
whose Holders must consent to an amendment;
(2) make any change to the rate of accrual in connection
with Original Issue Discount, reduce the rate of interest
referred to in paragraph 1 of the Securities or extend the
time for payment of Original Issue Discount or interest, if
any, on any Security;
(3) reduce the Principal Amount or the Issue Price of or
extend the Stated Maturity of any Security;
(4) reduce the Redemption Price, Purchase Price or Change in
Control Purchase Price of any Security;
(5) make any Security payable in money or securities other
than that stated in the Security;
(6) make any change in Article 10 that adversely affects the
rights of any Securityholder;
(7) make any change in Section 6.04, Section 6.07 or this
Section 9.02, except to increase any such percentage;
(8) make any change that adversely affects the right to
convert any Security; or
(9) make any change that adversely affects the right to
require the Company to purchase the Securities in accordance
with the terms thereof and this Indenture.
. . . . . . . . . .
ARTICLE 10
SUBORDINATION
SECTION 10.01. Securities Subordinate to Senior
Indebtedness. The Company covenants and agrees, and each Holder
of a Security by such Holder's acceptance thereof likewise
covenants and agrees, that, to the extent and in the manner
hereinafter set forth in this Article 10, the indebtedness
represented by the Securities and the payment of the Principal
Amount, Issue Price, accrued Original Issue Discount, Redemption
Price, Purchase Price, Change in Control Purchase Price and
interest, if any, in respect of each and all of the Securities are
hereby expressly made subordinate and subject in right of payment
to the prior payment in full of all Senior Indebtedness.
"Senior Indebtedness" means the principal of (and premium, if
any) and interest on (including interest accruing after the filing
of a petition initiating any proceeding pursuant to any Bankruptcy
Law) and other amounts due on or in connection with any Debt
incurred, assumed or guaranteed by the Company, whether
outstanding on the date of the Indenture or thereafter incurred,
assumed or guaranteed and all renewals, extensions and refundings
of any such Debt; provided, however, that the following will not
constitute Senior Indebtedness: (a) any Debt, if the instrument
creating the same or evidencing the same or pursuant to which the
same is outstanding expressly provides (i) that such Debt shall
not be senior in right of payment to the Securities, or (ii) that
such Debt shall be subordinated to any other Debt of the Company,
unless such instrument expressly provides that such Debt shall be
senior in right of payment to the Securities; (b) Debt of the
Company represented by the Extension Notes (which Extension Notes
shall rank pari passu with the Securities).
SECTION 10.02. Payment Over of Proceeds upon Dissolution,
Etc. Upon any distribution of assets of the Company in the event
of
(a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the
Company or to its creditors, as such, or to its assets, or
(b) any liquidation, dissolution or other winding up of the
Company, whether voluntary or involuntary and whether or not
involving insolvency or bankruptcy, or
(c) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company,
then and in such event
(1) the holders of Senior Indebtedness shall be entitled to
receive payment in full of all amounts due or to become due
on or in respect of all Senior Indebtedness, or provision
shall be made for such payment in cash, before the Holders of
the Securities are entitled to receive any payment on account
of the Principal Amount, Issue Price, accrued Original Issue
Discount, Redemption Price, Purchase Price, Change in Control
Purchase Price or interest, if any, in respect of the
Securities; and
(2) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or
securities, by set-off or otherwise, to which the Holders or
the Trustee would be entitled but for the provisions of this
Article 10, including any such payment or distribution which
may be payable or deliverable by reason of the payment of any
other Debt of the Company being subordinated to the payment
of the Securities, shall be paid by the liquidating trustee
or agent or other person making such payment or distribution,
whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly 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 make payment
in full of all Senior Indebtedness remaining unpaid, after
giving effect to any concurrent payment or distribution to
the holders of such Senior Indebtedness.
In the event that, notwithstanding the foregoing provisions
of this Section 10.02, the Trustee or the Holder of any Security
shall receive any payment or distribution of assets of the Company
of any kind or character, whether in cash, property or securities,
including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other Debt of the
Company being subordinated to the payment of the Securities,
before all Senior Indebtedness is paid in full or payment thereof
provided for, and if such fact shall then have been made known to
the Trustee, or, as the case may be, such Holder, then and in such
event such payment or distribution shall be paid over or delivered
forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, Custodian, assignee, agent or other person making payment
or distribution of assets of the Company for application to the
payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full, after giving
effect to any concurrent payment or distribution to or for the
holders of Senior Indebtedness.
For purposes of this Article 10 only, the words "cash,
property or securities" shall not be deemed to include shares of
Capital 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, at least to the extent provided in this Article 10
with respect to the Securities, to the payment of all Senior
Indebtedness which may at the time be outstanding; provided,
however, that (i) Senior Indebtedness is assumed by the new
corporation, if any, resulting from any such reorganization or
readjustment, and (ii) the rights of the holders of the Senior
Indebtedness are not, without the consent of such holders, altered
by such reorganization or readjustment.
. . . . . . . . . .
SECTION 10.04. Default on Senior Indebtedness. The Company
may not make any payment of the Principal Amount, Issue Price,
accrued Original Issue Discount, Redemption Price, Purchase Price,
Change in Control Purchase Price or interest, if any, in respect
of the Securities and may not acquire any Securities for cash or
property (except as otherwise provided by Article 11 and other
than for Capital Stock or Extension Notes of the Company) if:
(1) a default on Senior Indebtedness occurs and is
continuing that permits holders of such Senior Indebtedness
to accelerate its maturity; and
(2) the default is the subject of judicial proceedings or
the Company receives a notice of default thereof from any
person who may give such notice pursuant to the instrument
evidencing or document governing such Senior Indebtedness. If
the Company receives any such notice, then a similar notice
received within nine months thereafter relating to the same
default on the same issue of Senior Indebtedness shall not be
effective for purposes of this Section 10.04.
The Company may resume payments on the Securities and may
acquire Securities if and when:
(A) the default is cured or waived; or
(B) 120 or more days pass after the receipt by the Company
of the notice described in clause (2) above and the default
is not then the subject of judicial proceedings; and
this Article 10 otherwise permits the payment or acquisition at
that time.
In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any
Security prohibited by the foregoing provisions of this
Section 10.04, and if such fact then shall have been known or
thereafter shall have been made known to the Trustee or such
Holder, as the case may be, pursuant to the terms of this
Indenture, then and in such event such payment shall be paid over
and delivered forthwith to the Company by or on behalf of the
person holding such payment for the benefit of the holders of the
Senior Indebtedness.
Nothing contained in this Article 10 or elsewhere in this
Indenture or in any of the Securities shall prevent the conversion
by a Holder of any Securities in accordance with the provisions
for conversion of such Securities set forth in this Indenture,
including the payment of cash in lieu of fractional shares of
Common Stock in accordance with Article 11, or in any of such
Securities in the event of an occurrence of the events described
in clauses (1) and (2) of this Section 10.04.
The provisions of this Section 10.04 shall not apply to any
payment with respect to which Section 10.02 would be applicable.
SECTION 10.05. Payment Permitted If No Default. Nothing
contained in this Article 10 or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time
except during the pendency of any case, proceeding, dissolution,
liquidation or other winding up, assignment for the benefit of
creditors or other marshalling of assets and liabilities of the
Company referred to in Section 10.02 or under the conditions
described in Section 10.03 or 10.04, from making payments at any
time of the Principal Amount, Issue Price, accrued Original Issue
Discount, Redemption Price, Purchase Price, Change in Control
Purchase Price or interest, if any, as the case may be, in respect
of the Securities, or (b) the application by the Trustee or the
retention by any Holder of any money deposited with it hereunder
to the payment of or on account of the Principal Amount, Issue
Price, accrued Original Issue Discount, Redemption Price, Purchase
Price, Change in Control Purchase Price or interest, if any, as
the case may be, in respect of the Securities if the Trustee did
not have, at the time provided in the proviso to the first
paragraph of Section 10.10, notice that such payment would have
been prohibited by the provisions of this Article 10.
SECTION 10.06. Subrogation to Rights of Holders of Senior
Indebtedness. Subject to the payment in full of all Senior
Indebtedness, the Holders of the Securities shall be subrogated to
the extent of the payments or distributions made to the holders of
such Senior Indebtedness pursuant to the provisions of this
Article 10 to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of cash,
property or securities applicable to the Senior Indebtedness until
the Principal Amount, Issue Price, accrued Original Issue
Discount, Redemption Price, Purchase Price or Change in Control
Purchase Price or interest, if any, as the case may be, in respect
of the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the
Senior Indebtedness of any cash, property or securities to which
the Holders of the Securities or the Trustee would be entitled
except for the provisions of this Article 10, and no payments
pursuant to the provisions of this Article 10 to the Company or to
the holders of Senior Indebtedness by Holders of the Securities or
the Trustee, shall, as between the Company, its creditors other
than holders of Senior Indebtedness and the Holders of the
Securities, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
SECTION 10.07. Provisions Solely to Define Relative Rights.
The provisions of this Article 10 are and are intended solely for
the purpose of defining the relative rights of the Holders of the
Securities, on one hand, and the holders of Senior Indebtedness,
on the other hand. Nothing contained in this Article 10 or
elsewhere in this Indenture or in the Securities is intended to or
shall
(a) impair, as between the Company and the Holders of the
Securities, the obligation of the Company, which is absolute
and unconditional, to pay to the Holders of the Securities
the Principal Amount, Issue Price, accrued Original Issue
Discount, Redemption Price, Purchase Price, Change in Control
Purchase Price, and interest, if any, as the case may be, in
respect of the Securities as and when the same shall become
due and payable in accordance with the terms of the
Securities and this Indenture and which, subject to the
rights under this Article 10 of the holders of Senior
Indebtedness, is intended to rank equally with all other
general obligations of the Company; or
(b) affect the relative rights against the Company of the
Holders of the Securities and creditors of the Company other
than holders of Senior Indebtedness; or
(c) prevent the Trustee or the Holder of any Security from
exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if
any, under this Article 10 of the holders of Senior
Indebtedness to receive cash, property or securities
otherwise payable or deliverable to the Trustee or such
Holder.
. . . . . . . . . .
ARTICLE 11
CONVERSION
SECTION 11.01. Conversion Privilege. A Holder of a Security
may convert such Security into Common Stock at any time during the
period stated in paragraph 9 of the Securities. The number of
shares of Common Stock issuable upon conversion of a Security per
$ 1,000 of Principal Amount thereof (the "Conversion Rate") shall
be that set forth in paragraph 9 in the Securities, subject to
adjustment as herein set forth.
A Holder may convert a portion of the Principal Amount of a
Security if the portion is $1,000 or an integral multiple of
$1,000. Provisions of this Indenture that apply to conversion of
all of a Security also apply to conversion of a portion of a
Security.
"Quoted Price" means the last reported per share sales price
(or, if no sales price is reported, the average of the high and
low bid prices on the last preceding trading day) of the Common
Stock on the New York Stock Exchange or, in the event shares of
Common Stock are not listed on the New York Stock Exchange, such
other national or regional stock exchange upon which the Common
Stock is listed, or, if the shares of Common Stock are not listed
on a national or regional stock exchange, as quoted on the
National Association of Securities Dealers Automated Quotation
System or by the National Quotation Bureau Incorporated. In the
absence of one or more such quotations, the Company shall be
entitled to determine the Quoted Price on the basis of such
quotations as it considers appropriate.
"Average Quoted Price" means the average of the Quoted Prices
of the Common Stock for the shorter of
(i) 30 consecutive trading days ending on the last full
trading day prior to the Time of Determination with respect
to the rights or warrants or distribution in respect of which
the Average Quoted Price is being calculated, or
(ii) the period (x) commencing on the date next succeeding
the first public announcement of (a) the issuance of rights
or warrants or (b) the distribution, in each case, in respect
of which the Average Quoted Price is being calculated and (y)
proceeding through the last full trading day prior to the
Time of Determination with respect to the rights, warrants or
distribution in respect of which the Average Quoted Price is
being calculated, or
(iii) the period, if any, (x) commencing on the date next
succeeding the Ex-Dividend Time with respect to the next
preceding (a) issuance of rights or warrants or (b)
distribution, in each case, for which an adjustment is
required by the provisions of Section 11.06(4), 11.07 or
11.08 and (y) proceeding through the last full trading day
prior to the Time of Determination with respect to the
rights, warrants or distribution in respect of which the
Average Quoted Price is being calculated.
In the event that the Ex-Dividend Time (or in the case of a
subdivision, combination or reclassification, the effective date
with respect thereto) with respect to a dividend, subdivision,
combination or reclassification to which Section 11.06(1), (2),
(3) or (5) applies occurs during the period applicable for
calculating "Average Quoted Price" pursuant to the definition in
the preceding sentence, "Average Quoted Price" shall be calculated
for such period in a manner determined by the Board of Directors
to reflect the impact of such dividend, subdivision, combination
or reclassification on the Quoted Price of the Common Stock during
such period.
"Time of Determination" means the time and date of the
earlier of (i) the determination of stockholders entitled to
receive rights, warrants or a distribution, in each case, to which
Section 11.07 and 11.08 applies and (ii) the time ("Ex-Dividend
Time") immediately prior to the commencement of "ex-dividend"
trading for such rights, warrants or distribution on the New York
Stock Exchange or such other national or regional exchange or
market on which the Common Stock is then listed or quoted.
SECTION 11.02. Conversion Procedure. To convert a Security
a Holder must satisfy the requirements in paragraph 9 of the
Securities. The date on which the Holder satisfies all those
requirements is the conversion date (the "Conversion Date"). As
soon as practicable after the Conversion Date, the Company shall
deliver to the Holder, through the Conversion Agent, a certificate
for the number of full shares of Common Stock issuable upon the
conversion and cash in lieu of any fractional share determined
pursuant to Section 11.03. The person in whose name the
certificate is registered shall be treated as a stockholder of
record on and after the Conversion Date; provided, however, that
no surrender of a Security on any date when the stock transfer
books of the Company shall be closed shall be effective to
constitute the person or persons entitled to receive the shares of
Common Stock upon such conversion as the record holder or holders
of such shares of Common Stock on such date, but such surrender
shall be effective to constitute the person or persons entitled to
receive such shares of Common Stock as the record holder or
holders thereof for all purposes at the close of business on the
next succeeding day on which such stock transfer books are open;
such conversion shall be at the Conversion Rate in effect on the
date that such Security shall have been surrendered for
conversion, as if the stock transfer books of the Company had not
been closed. Upon conversion of a Security, such person shall no
longer be a Holder of such Security.
Holders may surrender a Security for conversion by means of
book entry delivery in accordance with paragraph 9 of the
Securities and the regulations of the applicable book entry
facility.
No payment or adjustment will be made for dividends on any
Common Stock except as provided in this Article 11. On conversion
of a Security, that portion of accrued Original Issue Discount
attributable to the period from the Issue Date of the Security to
the Conversion Date with respect to the converted Security shall
not be cancelled, extinguished or forfeited, but rather shall be
deemed to be paid in full to the Holder thereof through delivery
of the Common Stock in exchange for the Security being converted
pursuant to the provisions hereof.
If the Holder converts more than one Security at the same
time, the number of shares of Common Stock issuable upon the
conversion shall be based on the total Principal Amount of the
Securities converted.
Upon surrender of a Security that is converted in part, the
Company shall execute, and the Trustee shall authenticate and
deliver to the Holder, a new Security in an authorized
denomination equal in Principal Amount to the unconverted portion
of the Security surrendered.
If the last day on which a Security may be converted is a
Legal Holiday in a place where a Conversion Agent is located, the
Security may be surrendered to that Conversion Agent on the next
succeeding day that is not a Legal Holiday.
SECTION 11.03. Fractional Shares. The Company will not
issue a fractional share of Common Stock upon conversion of a
Security. Instead, the Company will deliver cash for the current
market value of the fractional share. The current market value of
a fractional share shall be determined to the nearest 1/1000th of
a share by multiplying the Quoted Price, on the last Business Day
prior to the Conversion Date, of a full share by the fractional
amount and rounding the product to the nearest whole cent.
SECTION 11.04. Taxes on Conversion. If a Holder converts a
Security, the Company shall pay any documentary, stamp or similar
issue or transfer tax due on the issue of shares of Common Stock
upon the conversion. However, the Holder shall pay any such tax
which is due because the Holder requests the shares to be issued
in a name other than the Holder's name. The Conversion Agent may
refuse to deliver the certificates representing the Common Stock
being issued in a name other than the Holder's name until the
Conversion Agent receives a sum sufficient to pay any tax which
will be due because the shares are to be issued in a name other
than the Holder's name. Nothing herein shall preclude any tax
withholding required by law or regulations.
SECTION 11.05. Company to Provide Stock. The Company shall,
prior to issuance of any Securities hereunder, and from time to
time as may be necessary, reserve out of its authorized but
unissued Common Stock a sufficient number of shares of Common
Stock to permit the conversion of the Securities.
All shares of Common Stock delivered upon conversion of the
Securities shall be newly issued shares or treasury shares, shall
be duly and validly issued and fully paid and nonassessable and
shall be free from preemptive rights and free of any lien or
adverse claim.
The Company will endeavor promptly to comply with all Federal
and state securities laws regulating the offer and delivery of
shares of Common Stock upon conversion of Securities, if any, and
will list or cause to have quoted such shares of Common Stock on
each national securities exchange or in the over-the-counter
market or such other market on which the Common Stock is then
listed or quoted.
SECTION 11.06. Adjustment for Change in Capital Stock. If,
after the Issue Date of the Securities, the Company:
(1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) pays a dividend or makes a distribution on its Common
Stock in shares of its Capital Stock (other than Common Stock
or rights, warrants, or options for its Capital Stock); or
(5) issues by reclassification of its Common Stock any
shares of its Capital Stock (other than rights, warrants, or
options for its Capital Stock),
then the conversion privilege and the Conversion Rate in effect
immediately prior to such action shall be adjusted so that the
Holder of a Security thereafter converted may receive the number
of shares of Capital Stock of the Company which such Holder would
have owned immediately following such action if such Holder had
converted the Security immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and
immediately after the effective date in the case of a subdivision,
combination or reclassification.
If after an adjustment a Holder of a Security upon conversion
of such Security may receive shares of two or more classes of
Capital Stock of the Company, the Conversion Rate shall thereafter
be subject to adjustment upon the occurrence of an action taken
with respect to any such class of Capital Stock as is contemplated
by this Article 11 with respect to the Common Stock, on terms
comparable to those applicable to Common Stock in this Article 11.
SECTION 11.07. Adjustment for Rights Issue. If after the
Issue Date of the Securities, the Company distributes any rights,
warrants or options to all holders of its Common Stock entitling
them, for a period expiring within 60 days after the record date
for such distribution, to purchase shares of Common Stock at a
price per share less than the Quoted Price as of the Time of
Determination, the Conversion Rate shall be adjusted in accordance
with the formula:
R1 = R x (O + N)
(O + (N x P)/M)
where:
R1 =the adjusted Conversion Rate.
R =the current Conversion Rate.
O =the number of shares of Common Stock outstanding on the
record date for the distribution to which this
Section 11.07 is being applied.
N =the number of additional shares of Common Stock offered
pursuant to the distribution.
P =the offering price per share of the additional shares.
M =the Average Quoted Price, minus, in the case of (i) a
distribution to which Section 11.06(4) applies or (ii) a
distribution to which Section 11.08 applies, for which,
in each case, (x) the record date shall occur on or
before the record date for the distribution to which this
Section 11.07 applies and (y) the Ex-Dividend Time shall
occur on or after the date of the Time of Determination
for the distribution to which this Section 11.07 applies,
the fair market value (on the record date for the
distribution to which this Section 11.07 applies) of the
(1) Capital Stock of the Company distributed in respect of
each share of Common Stock in such Section 11.06(4)
distribution and
(2) assets of the Company or debt securities or any rights,
warrants or options to purchase securities of the Company
distributed in respect of each share of Common Stock in such
Section 11.08 distribution.
The Board of Directors shall determine fair market values for
the purposes for this Section 11.07.
The adjustment shall become effective immediately after the
record date for the determination of shareholders entitled to
receive the rights, warrants or options to which this
Section 11.07 applies.
No adjustment shall be made under this Section 11.07 if the
application of the formula stated above in this Section 11.07
would result in a value of R1 that is less than the value of R.
SECTION 11.08. Adjustment for Other Distributions. If,
after the Issue Date of the Securities, the Company distributes to
all holders of its Common Stock any of its assets, or debt
securities or any rights, warrants or options to purchase
securities of the Company (including securities or cash, but
excluding (x) distributions of Capital Stock referred to in
Section 11.06 and distributions of rights, warrants or options
referred to in Section 11.07 and (y) cash dividends or other cash
distributions that are paid out of consolidated current net
earnings or earnings retained in the business as shown on the
books of the Company unless such cash dividends or other cash
distributions are Extraordinary Cash Dividends) the Conversion
Rate shall be adjusted, subject to the provisions of the last
paragraph of this Section 11.08, in accordance with the formula:
R1 = R x M
M - F
where:
R1 =the adjusted Conversion Rate.
R =the current Conversion Rate.
M =the Average Quoted Price, minus, in the case of a
distribution to which Section 11.06(4) applies, for which
(i) the record date shall occur on or before the record
date for the distribution to which this Section 11.08
applies and (ii) the Ex-Dividend Time shall occur on or
after the date of the Time of Determination for the
distribution to which this Section 11.08 applies, the
fair market value (on the record date for the
distribution to which this Section 11.08 applies) of any
Capital Stock of the Company distributed in respect of
each share of Common Stock in such Section 11.06(4)
distribution.
F =the fair market value (on the record date for the
distribution to which this Section 11.08 applies) of the
assets, securities, rights, warrants or options to be
distributed in respect of each share of Common Stock in
the distribution to which this Section 11.08 is being
applied (including, in the case of cash dividends or other
cash distributions giving rise to an adjustment, all such
cash distributed concurrently).
The Board of Directors shall determine fair market values for
the purposes of this Section 11.08.
The adjustment shall become effective immediately after the
record date for the determination of shareholders entitled to
receive the distribution to which this Section 11.08 applies.
For purposes of this Section 11.08, the term "Extraordinary
Cash Dividend" shall mean any cash dividend with respect to the
Common Stock the amount of which, together with the aggregate
amount of cash dividends on the Common Stock to be aggregated with
such cash dividend in accordance with the provisions of this
paragraph, equals or exceeds the threshold percentages set forth
in item (i) or (ii) below:
(i) If, upon the date prior to the Ex-Dividend Time with
respect to a cash dividend on the Common Stock, the aggregate
amount of such cash dividend together with the amounts of all
cash dividends on the Common Stock with Ex-Dividend Times
occurring in the 85 consecutive day period ending on the date
prior to the Ex-Dividend Time with respect to the cash
dividend to which this provision is being applied equals or
exceeds 12.5% of the average of the Quoted Prices during the
period beginning on the date after the first such Ex-Dividend
Time in such period and ending on the date prior to the Ex
-Dividend Time with respect to the cash dividend to which
this provision is being applied (except that if no other cash
dividend has had an Ex-Dividend Time occurring in such
period, the period for calculating the average of the Quoted
Prices shall be the period commencing 85 days prior to the
date prior to the Ex-Dividend Time with respect to the cash
dividend to which this provision is being applied), such cash
dividend together with each other cash dividend with an Ex
-Dividend Time occurring in such 85 day period shall be
deemed to be an Extraordinary Cash Dividend and for purposes
of applying the formula set forth above in this
Section 11.08, the value of "F" shall be equal to (w) the
aggregate amount of such cash dividend together with the
amounts of the other cash dividends with Ex-Dividend Times
occurring in such period minus (x) the aggregate amount of
such other cash dividends with Ex-Dividend Times occurring in
such period for which a prior adjustment in the Conversion
Rate was previously made under this Section 11.08.
(ii) If, upon the date prior to the Ex-Dividend Time with
respect to a cash dividend on the Common Stock, the aggregate
amount of such cash dividend together with the amounts of all
cash dividends on the Common Stock with Ex-Dividend Times
occurring in the 365 consecutive day period ending on the
date prior to the Ex-Dividend Time with respect to the cash
dividend to which this provision is being applied equals or
exceeds 25% of the average of the Quoted Prices during the
period beginning on the date after the first such Ex-Dividend
Time in such period and ending on the date prior to the Ex
-Dividend Time with respect to the cash dividend to which
this provision is being applied (except that if no other cash
dividend has had an Ex-Dividend Time occurring in such
period, the period for calculating the average of the Quoted
Prices shall be the period commencing 365 days prior to the
date prior to the Ex-Dividend Time with respect to the cash
dividend to which this provision is being applied), such cash
dividend together with each other cash dividend with an Ex
-Dividend Time occurring in such 365 day period shall be
deemed to be an Extraordinary Cash Dividend and for purposes
of applying the formula set forth above in this
Section 11.08, the value of "F" shall be equal to (y) the
aggregate amount of such cash dividend together with the
amounts of the other cash dividends with Ex-Dividend Times
occurring in such period minus (z) the aggregate amount of
such other cash dividends with Ex-Dividend Times occurring in
such period for which a prior adjustment in the Conversion
Rate was previously made under this Section 11.08.
In the event that, with respect to any distribution to which
this Section 11.08 would otherwise apply, the difference "M-F" as
defined in the above formula is less than $1.00 or "F" is greater
than "M", then the adjustment provided by this Section 11.08 shall
not be made and in lieu thereof the provisions of Section 11.14
shall apply to such distribution.
SECTION 11.09. When Adjustment May Be Deferred. No
adjustment in the Conversion Rate need be made unless the
adjustment would require an increase or decrease of at least 1% in
the Conversion Rate. Any adjustments that are not made shall be
carried forward and taken into account in any subsequent
adjustment.
All calculations under this Article 11 shall be made to the
nearest cent or to the nearest 1/1,000th of a share, as the case
may be.
SECTION 11.10. When No Adjustment Required. No adjustment
need be made for a transaction referred to in Section 11.06,
11.07, 11.08 or 11.14 if Securityholders are to participate in the
transaction on a basis and with notice that the Board of Directors
determines to be fair and appropriate in light of the basis and
notice on which holders of Common Stock participate in the
transaction.
No adjustment need be made for rights to purchase Common
Stock pursuant to a Company plan for reinvestment of dividends or
interest or for rights to purchase Capital Stock pursuant to any
future dividend or distribution which the Company determines to be
comparable in purpose and in effect to the dividend and subsequent
distribution of Rights contemplated by the Rights Agreement.
No adjustment need be made for a change in the par value or
no par value of the Common Stock.
To the extent the Securities become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will
not accrue on the cash.
SECTION 11.11. Notice of Adjustment. Whenever the
Conversion Rate is adjusted, the Company shall promptly mail to
Securityholders a notice of the adjustment. The Company shall
file with the Trustee and the Conversion Agent such notice and a
certificate from the Company's independent public accountants
briefly stating the facts requiring the adjustment and the manner
of computing it. The certificate shall be conclusive evidence
that the adjustment is correct. Neither the Trustee nor any
Conversion Agent shall be under any duty or responsibility with
respect to any such certificate except to exhibit the same to any
Holder desiring inspection thereof.
SECTION 11.12. Voluntary Increase. The Company from time to
time may increase the Conversion Rate by any amount for any period
of time. Whenever the Conversion Rate is increased, the Company
shall mail to Securityholders and file with the Trustee and the
Conversion Agent a notice of the increase. The Company shall mail
the notice at least 15 days before the date the increased
Conversion Rate takes effect. The notice shall state the
increased Conversion Rate and the period it will be in effect.
A voluntary increase of the Conversion Rate does not change
or adjust the Conversion Rate otherwise in effect for purposes of
Section 11.06, 11.07 or 11.08.
SECTION 11.13. Notice of Certain Transactions. If:
(1) the Company takes any action that would require an
adjustment in the Conversion Rate pursuant to Section 11.06,
11.07 or 11.08 (unless no adjustment is to occur pursuant to
Section 11.10); or
(2) the Company takes any action that would require a
supplemental indenture pursuant to Section 11.14; or
(3) there is a liquidation or dissolution of the Company;
then the Company shall mail to Securityholders and file with the
Trustee and the Conversion Agent a notice stating the proposed
record date for a dividend or distribution or the proposed
effective date of a subdivision, combination, reclassification,
consolidation, merger, binding share exchange, transfer,
liquidation or dissolution. The Company shall file and mail the
notice at least 15 days before such date. Failure to file or mail
the notice or any defect in it shall not affect the validity of
the transaction.
SECTION 11.14. Reorganization of Company; Special
Distributions. If the Company is a party to a transaction subject
to Section 5.01 or a merger or binding share exchange which
reclassifies or changes its outstanding Common Stock, the person
obligated to deliver securities, cash or other assets upon
conversion of Securities shall enter into a supplemental
indenture. If the issuer of securities deliverable upon
conversion of Securities is an Affiliate of the successor Company,
that issuer shall join in the supplemental indenture.
The supplemental indenture shall provide that the Holder of a
Security may convert it into the kind and amount of securities,
cash or other assets which such Holder would have received
immediately after the consolidation, merger, binding share
exchange or transfer if such Holder had converted the Security
immediately before the effective date of the transaction, assuming
(to the extent applicable) that such Holder (i) was not a
constituent person or an Affiliate of a constituent person to such
transaction; (ii) made no election with respect thereto; and (iii)
was treated alike with the plurality of non-electing Holders. The
supplemental indenture shall provide for adjustments which shall
be as nearly equivalent as may be practical to the adjustments
provided for in this Article 11. The successor Company shall mail
to Securityholders a notice briefly describing the supplemental
indenture.
If this Section applies, neither Section 11.06 nor 11.07
applies.
If the Company makes a distribution to all holders of its
Common Stock of any of its assets, or debt securities or any
rights, warrants or options to purchase securities of the Company
that, but for the provisions of the last paragraph of
Section 11.08, would otherwise result in an adjustment in the
Conversion Rate pursuant to the provisions of Section 11.08, then,
from and after the record date for determining the holders of
Common Stock entitled to receive the distribution, a Holder of a
Security that converts such Security in accordance with the
provisions of this Indenture would upon such conversion be
entitled to receive, in addition to the shares of Common Stock
into which the Security is convertible, the kind and amount of
securities, cash or other assets comprising the distribution that
such Holder would have received if such Holder had converted the
Security immediately prior to the record date for determining the
holders of Common Stock entitled to receive the distribution.
SECTION 11.15. Company Determination Final. Any
determination that the Company or the Board of Directors must make
pursuant to Section 11.03, 11.06, 11.07, 11.08, 11.09, 11.10,
11.14 or 11.17 is conclusive.
SECTION 11.16. Trustee's Adjustment Disclaimer. The Trustee
has no duty to determine when an adjustment under this Article 11
should be made, how it should be made or what it should be. The
Trustee has no duty to determine whether a supplemental indenture
under Section 11.14 need be entered into or whether any provisions
of any supplemental indenture are correct. The Trustee shall not
be accountable for and makes no representation as to the validity
or value of any securities or assets issued upon conversion of
Securities. The Trustee shall not be responsible for the
Company's failure to comply with this Article 11. Each Conversion
Agent shall have the same protection under this Section 11.16 as
the Trustee.
SECTION 11.17. Simultaneous Adjustments. In the event that
this Article 11 requires adjustments to the Conversion Rate under
more than one of Sections 11.06(4), 11.07 or 11.08, and the record
dates for the distributions giving rise to such adjustments shall
occur on the same date, then such adjustments shall be made by
applying, first, the provisions of Section 11.06, second, the
provisions of Section 11.08 and, third, the provisions of
Section 11.07.
SECTION 11.18. Successive Adjustments. After an adjustment
to the Conversion Rate under this Article 11, any subsequent event
requiring an adjustment under this Article 11 shall cause an
adjustment to the Conversion Rate as so adjusted.
SECTION 11.19. Rights Issued in Respect of Common Stock
Issued Upon Conversion. Each share of Common Stock issued upon
conversion of Securities pursuant to this Article 11 shall be
entitled to receive the appropriate number of preferred share
purchase rights (the "Rights"), if any, and the certificates
representing the Common Stock issued upon such conversion shall
bear such legends, if any, in each case as provided by and subject
to the terms of the Rights Agreement dated as of November 9, 1988
between the Company and Harris Trust and Savings Bank, as Rights
Agent, as amended from time to time (the "Rights Agreement") as in
effect at the time of such conversion. Notwithstanding anything
else to the contrary in this Article 11, there shall not be any
adjustment to the conversion privilege or Conversion Rate as a
result of (i) the distribution of separate certificates
representing the Rights, (ii) the occurrence of certain events
entitling holders of Rights to receive, upon exercise thereof,
Common Stock of the Company or Capital Stock of another
corporation or (iii) the exercise of such Rights in accordance
with the Rights Agreement.
. . . . . . . . . .
SECTION 12.01. Trust Indenture Act Controls. If any
provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
EXHIBIT A
[FORM OF FACE OF LYON]
FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE
CODE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT WITH RESPECT TO EACH
$1,000 OF PRINCIPAL AMOUNT OF THIS SECURITY IS $693.44, THE ISSUE
DATE IS SEPTEMBER 7, 1989, THE YIELD TO MATURITY IS 6.00%.
MOTOROLA, INC.
Liquid Yield Option (Trademark Symbol Inserted Here) Note due
2009
(Zero Coupon-Subordinated)
No.
Issue Date: September 7, 1989 Original Issue Discount: $693.44
Issue Price: $306.56 (for each $1,000 Principal
(for each $1,000 Principal Amount)
Amount
. . . . . . . . . .
[FORM OF REVERSE SIDE OF LYON]
Liquid Yield Option (Trademark Symbol Inserted Here) Note due
2009
(Zero Coupon-Subordinated)
1. Interest
This Security shall not bear interest, except that if the
Principal hereof or any portion of such Principal is not paid when
due (whether upon acceleration pursuant to Section 6.02 of the
Indenture, upon the date set for payment of the Redemption Price
pursuant to paragraph 5 hereof, upon the date set for payment of a
Purchase Price or Change in Control Purchase Price pursuant to
paragraph 6 hereof or upon the Stated Maturity of this Security),
then in each such case the overdue amount shall bear interest at
the rate of 7.00% per annum, compounded semiannually (to the
extent that the payment of such interest shall be legally
enforceable), which interest shall accrue from the date such
overdue amount was due to the date payment of such amount,
including interest thereon, has been made or duly provided for.
All such interest shall be payable on demand.
. . . . . . . . . .
2. Method of Payment
Subject to the terms and conditions of the Indenture, the
Company will make payments in respect of the Securities to the
persons who are registered Holders of Securities at the close of
business on the Business Day preceding the Redemption Date or
Stated Maturity, as the case may be, or at the close of business
on a Purchase Date or Change in Control Purchase Date, as the case
may be. Holders must surrender Securities to a Paying Agent to
collect such payments in respect of the Securities. The Company
will pay cash amounts in money of the United States that at the
time of payment is legal tender for payment of public and private
debts. However, the Company may make such cash payments by check
payable in such money.
. . . . . . . . . .
6. Purchase by the Company at the Option of the Holder
Subject to the terms and conditions of the Indenture, the
Company shall become obligated to purchase, at the option of the
Holder, the Securities held by such Holder on the following
____________________________
(Trademark Symbol Inserted Here) Trademark of Merrill Lynch & Co.,
Inc.
Purchase Dates and at the following Purchase Prices per $1,000
Principal Amount, upon delivery of a Purchase Notice containing
the information set forth in the Indenture, from the opening of
business on the date that is 20 Business Days prior to such
Purchase Date until the close of business on such Purchase Date
and upon delivery of the Securities to the Paying Agent by the
Holder as set forth in the Indenture. Such Purchase Prices may be
paid, at the option of the Company, in cash or by the issuance and
delivery of Extension Notes of the Company or by the issuance and
delivery of shares of Common Stock of the Company, or in any
combination thereof (except in the case of the payment of cash for
fractional shares of Common Stock or fractional Extension Notes).
PURCHASE DATE PURCHASE PRICE
September 7, 1994 $411.99
September 7, 1999 553.68
September 7, 2004 744.10
. . . . . . . . . .
Holders have the right to withdraw any Purchase Notice or
Change in Control Purchase Notice, as the case may be, by
delivering to the Paying Agent a written notice of withdrawal in
accordance with the provisions of the Indenture.
If cash (or securities if permitted under the Indenture)
sufficient to pay a Purchase Price or Change in Control Purchase
Price, as the case may be, of all Securities or portions thereof
to be purchased as of the Purchase Date or the Change in Control
Purchase Date, as the case may be, is deposited with the Paying
Agent on the Business Day following the Purchase Date or the
Change in Control Purchase Date, as the case may be, Original
Issue Discount ceases to accrue on such Securities (or portions
thereof) on and after such date, and the Holder thereof shall have
no other rights as such (other than the right to receive the
Purchase Price or Change in Control Purchase Price, as the case
may be, upon surrender of such Security).
7. Notice of Redemption
Notice of redemption will be mailed at least 15 days but not
more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at the Holder's registered address. If
money sufficient to pay the Redemption Price of all Securities (or
portions thereof) to be redeemed on the Redemption Date is
deposited with the Paying Agent prior to or on the Redemption
Date, on and after such date Original Issue Discount ceases to
accrue on such Securities or portions thereof. Securities in
denominations larger than $1,000 of Principal Amount may be
redeemed in part but only in integral multiples of $1,000 of
Principal Amount.
. . . . . . . . . .
11. Denominations; Transfer; Exchange
. . . . . . . . . . The Registrar need not transfer or
exchange any Securities selected for redemption (except, in the
case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or any Securities in respect of which
a Purchase Notice or Change in Control Purchase Notice has been
given and not withdrawn (except, in the case of a Security to be
purchased in part, the portion of the Security not to be
purchased) or any Securities for a period of 15 days before a
selection of Securities to be redeemed.
. . . . . . . . .
14. Amendment; Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written
consent of the Holders of at least a majority in aggregate
Principal Amount of the Securities at the time outstanding and
(ii) certain defaults or noncompliance with certain provisions may
be waived with the written consent of the Holders of a majority in
aggregate Principal Amount of the Securities at the time
outstanding. . . . . . . . . .
15. Defaults and Remedies
Under the Indenture, Events of Default include (i) default in
payment of the Principal Amount, Issue Price, accrued Original
Issue Discount, Redemption Price, Purchase Price (continuing for
three Business Days) or Change in Control Purchase Price,
(continuing for three Business Days) of the Securities when the
same becomes due and payable; (ii) failure by the Company to
comply with other agreements in the Indenture or the Securities,
subject to notice and lapse of time; and (iii) certain events of
bankruptcy or insolvency. If an Event of Default occurs and is
continuing, the Trustee, or the Holders of at least 25% in
aggregate Principal Amount of the Securities at the time
outstanding, may declare all the Securities to be due and payable
immediately. . . . . . . . . . .
EXHIBIT C
PROSPECTUS
$1,150,000,000
Motorola, Inc.
Liquid Yield Option (Trademark Symbol Inserted Here) Notes due 2009
(Zero Coupon-Subordinated)
. . . . . . . . . .
LYONs will be purchased by the Company at the option of Holders on
September 7, 1994, September 7, 1999 and September 7, 2004 at Purchase Prices
equal to the Issue Price plus accrued Original Issue Discount to such dates.
The Company, at its option, may elect to pay any of such Purchase Prices in
cash, shares of Common Stock or Ten-Year Subordinated Extension Notes of the
Company. See "Description of LYONs-Purchase of LYONs at the Option of the
Holder."
. . . . . . . . . .
PROSPECTUS SUMMARY
The following summary is qualified by the detailed information and
consolidated financial statements included elsewhere or incorporated by
reference in this Prospectus.
. . . . . . . . . .
The Offering
LYONs. . . . . . . . $1,150,000,000 aggregate principal amount at maturity
(excluding $172,500,000 subject to the Underwriter's over
-allotment option) of LYONs due September 7, 2009. There
will be no periodic interest payments on the LYONs. Each
LYON will have an Issue Price of $306.56 and a principal
amount due at maturity of $1,000.
. . . . . . . . . .
Conversion Rights . . Each LYON will be convertible, at the option of the
Holder, at any time on or prior to maturity, unless
previously redeemed or otherwise purchased, into Common
Stock at the Conversion Rate of 4.567 shares per LYON.
The Conversion Rate will not be adjusted for accrued
Original Issue Discount, but will be subject to
adjustment upon the occurrences of certain events
affecting the Common Stock. Upon conversion, the Holder
will not receive any cash payment representing accrued
Original Issue Discount; such accrued Original Issue
Discount will be deemed paid by the Company Stock
received on conversion.
Subordination . . . . The LYONs will be subordinated to all existing and future
Senior Indebtedness of the Company. At July 1, 1989, the
Company had approximately $1,625 million of consolidated
indebtedness outstanding (excluding accrued interest
thereon), which would have constituted either Senior
Indebtedness or indebtedness of subsidiaries of Motorola,
Inc. to which the LYONs are effectively subordinated.
See "Capitalization" and "Description of LYONs
-Subordination of LYONs."
. . . . . . . . . .
Purchase at the Option
of the Holder . . The Company will purchase LYONs at the option of Holders
on September 7, 1994, September 7, 1999, and September 7,
2004 at Purchase Prices equal to the Issue Price plus
accrued Original Issue Discount to the Purchase Date.
The Company, at its option, may elect to pay any of such
Purchase Prices in cash, shares of Common Stock or Ten
-Year Subordinated Extension Notes of the Company (the
"Extension Notes").
. . . . . . . . . .
DESCRIPTION OF LYONS
The LYONs are to be issued under an indenture to be dated as of September
1, 1989, (the "Indenture"), between the Company and The First National Bank of
Chicago, as trustee (the "Trustee"). A copy of the form of Indenture is filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
The following summaries of certain provisions of the LYONs and the Indenture do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all the provisions of the LYONs and the Indenture,
including the definitions therein of certain terms which are not otherwise
defined in this Prospectus. Wherever particular provisions or defined terms of
the Indenture (or of the Form of LYON which is a part thereof) are referred to,
such provisions or defined terms are incorporated herein by reference.
References herein are to section in the Indenture and paragraphs in the Form of
LYON.
General
The LYONs will be unsecured obligations of the Company limited to
$1,150,000,000 aggregate principal amount at maturity ($1,322,500,000 aggregate
principal amount at maturity if the Underwriter's over-allotment option is
exercised in full) and will mature on September 7, 2009. The principal amount
at maturity of each LYON is $1,000 and will be payable at the office of the
Paying Agent, initially the Trustee, in the Borough of Manhattan, the City of
New York, or any other office of the Paying Agent maintained for such purpose.
(Sections 2.03 and 4.05 and Form of LYON, paragraph 3.).
. . . . . . . . . .
The LYONs will be issued only in fully registered form, without coupons,
in denominations of $1,000 of principal amount at maturity or an integral
multiple thereof. (Form of LYON, paragraph 11.) LYONs may be presented for
conversion at the office of the Conversion Agent and for exchange or
registration of transfer at the office of the Registrar, each such agent
initially being the Trustee. (Section 2.03.) The Company will not charge a
service charge for any registration or transfer or exchange of LYONs; however,
the Company may require payment by a Holder of a sum sufficient to cover any
tax, assessment or other governmental charge payable in connection therewith.
(Section 2.06.)
Subordination of LYONs
Indebtedness evidenced by the LYONs will be subordinated in right of
payment, as set forth in the Indenture, to the prior payment in full of all
existing and future Senior Indebtedness of Motorola, Inc. (Section 10.01 and
Form of LYON, paragraph 8.) Senior indebtedness is defined in the Indenture as
the principal of (and premium, if any) and interest on (including interest
accruing after the filing of a petition initiating any proceeding pursuant to
any Bankruptcy Law) and other amounts due on or in connection with any Debt
incurred, assumed or guaranteed by Motorola, Inc., whether outstanding on the
date of the Indenture or thereafter incurred, assumed or guaranteed, and all
renewals, extensions and refunding of any such Debt. Excluded from the
definition of Senior Indebtedness are the following: (a) any Debt which
expressly provided (i) that such Debt shall not be senior in right of payment
to the LYONs, or (ii) that such Debt shall be subordinated to any other Debt of
Motorola, Inc., unless such Debt expressly provides that such Debt shall be
senior in right of payment to the LYONs; (b) Debt of Motorola, Inc. in respect
of the LYONs; and (c) Debt of Motorola, Inc. in respect of the Extension Notes
which may be issued in the future (which Extension Notes will rank on a parity
with the LYONs). (Section 10.01.)
By reason of such subordination, in the event of dissolution, insolvency,
bankruptcy or other similar proceedings, upon any distribution of assets, (i)
the Holders of LYONs will be required to pay over their share of such
distribution to the holders of Senior Indebtedness until such Senior
Indebtedness is paid in full; and (ii) creditors of Motorola, Inc. who are not
Holders of LYONs or holders of Senior Indebtedness may recover less, ratably,
than holders of Senior Indebtedness and may recover more, ratably, than the
Holders of LYONs. (Section 10.02.)
In the event that the LYONs are declared due and payable prior to their
Stated Maturity by reason of the occurrence of an Event of Default, then
Motorola, Inc. is obligated to notify promptly holders of Senior Indebtedness
of such acceleration. Motorola, Inc. may not pay the LYONs until 120 days have
passed after such acceleration occurs and may thereafter pay the LYONs if the
terms of the Indenture otherwise permit payment at that time. (Section 10.03.)
No payment of the principal amount at maturity, Issue Price, accrued
Original Issue Discount, Redemption Price, Purchase Price or Change in Control
Purchase Price or interest, if any, with respect to any of the LYONs may be
made, nor may the Company acquire any LYONs except as set forth in the
Indenture, if any default with respect to Senior Indebtedness occurs and is
continuing that permits the acceleration of the maturity thereof and such
default is either the subject of judicial proceedings or Motorola, Inc.
receives notice of the default, unless (a) 120 days pass after notice of the
default is given and such default is not then the subject of judicial
proceedings or the default with respect to the Senior Indebtedness is cured or
waived and (b) the terms of the Indenture otherwise permit the payment or
acquisition of the LYONs at that time. (Section 10.04.)
As of July 1, 1989, the Company had approximately $1,625 million of
consolidated indebtedness outstanding (excluding accrued interest thereon)
which would have constituted either Senior Indebtedness or indebtedness of
subsidiaries of Motorola, Inc. The LYONs are effectively subordinated to the
debt of each subsidiary of Motorola, Inc. to the extent of the assets of each
such subsidiary. There are no restrictions in the Indenture on the creation of
additional Senior Indebtedness (or any other indebtedness).
Conversion Rights
A Holder of a LYON may convert it into Common Stock of the Company at any
time before the close of business on September 7, 2009; provided, however, that
if a LYON is called for redemption, the Holder may convert it only until the
close of business on the Redemption Date. A LYON in respect of which a Holder
has delivered a Purchase Notice or a Change in Control Purchase Notice
exercising the option of such Holder to require the Company to purchase such
LYON amy be converted only if such notice is withdrawn in accordance with the
terms of the Indenture. (Form of LYON, paragraph 9.) A Holder may convert a
portion of such Holder's LYONs so long as such portion is $1,000 principal
amount at maturity or an integral multiple thereof.
The initial Conversion Rate is 4.567 shares of Common Stock per LYON,
subject to adjustment upon the occurrence of certain events. See "Price Range
of Common Stock." A Holder entitled to a fractional share of Common Stock
shall receive cash equal to the then current market value of such fractional
share. (Form of LYON, paragraph 9.) Shares of Common Stock issued upon
conversion of LYONs in accordance with the terms of the Indenture, and prior to
the Distribution Date (as defined below) and the redemption or expiration of
the Rights (as defined below), shall also be entitled to receive Rights, under
the terms and subject tot he conditions of the Rights Agreement (as defined
below). See "Description of Capital Stock-Preferred Share Purchase Rights."
On conversion of a LYON, a Holder will not receive any cash payment
representing accrued Original Issue Discount. The Company's delivery to the
Holder of the fixed number of shares of Common Stock into which the LYON is
convertible will be deemed to satisfy the Company's obligation to pay the
principal amount of the LYON including the accrued Original Issue Discount
attributable to the period from the Issue Date to the Conversion Date. Thus,
the accrued Original Issue Discount is deemed to be paid rather than cancelled,
extinguished or forfeited. The Conversion Rate will not be adjusted at any
time during the terms of the LYONs for such accrued Original Issue Discount.
(Section 11.02.)
To convert a LYON into shares of Common Stock, a Holder must (i) complete
and manually sign the conversion notice on the back of the LYON (or complete
and manually sign a facsimile thereof) and deliver such notice to the
Conversion Agent, or, if applicable, complete and deliver to the Depository
Trust Company ("DTC", which terms includes an successor thereto) the
appropriate instruction form for conversion pursuant to DTC's book entry
conversion program, (ii) surrender the LYON to the Conversion Agency by
physical or book entry delivery (which is not necessary in the case of
conversion pursuant to DTC' book entry conversion program), (iii) if required,
furnish appropriate endorsements and transfer documents, and (iv) if required,
pay all transfer or similar taxes. Although surrender of a LYON may be
effected by book entry deliver at DTC, a completed and manually signed
conversion notice must, in any event, be delivered to the Conversion Agent.
Pursuant to the Indenture, the date on which all of the foregoing requirements
have been satisfied is the Conversion Date. (Section 11.02 and Form of LYON,
paragraph 8.)
Book entry delivery of a LYON to the Conversion Agent may be made by any
financial institution that is a participant in DTC. It is expected that any
LYON which is held in an account maintained at DTC by a financial institution
that is a participant in DTC will be eligible for conversion under DTC's book
entry conversion program. Conversion of LYONs through such program, however,
will be subject to continued eligibility requirements thereunder. The Company
has been advised that in certain circumstances involving tender offers and
similar transactions, DTC may suspend the eligibility of the LYONs for
conversion under its book entry conversion program.
The Conversion Rate will be adjusted for dividends or distributions on
Common Stock payable in Common Stock or other Capital Stock; subdivision,
combinations or certain reclassifications of Common Stock; distributions to all
holders of Common Stock of certain rights to purchase Common Stock for a period
of 60 days at less than the Quoted Price at the time; and distributions to such
holders of assets or debt securities of the Company or certain rights to
purchase securities of the Company or certain rights to purchase securities of
the Company (excluding cash dividends or other cash distributions form current
or retained earnings other than any Extraordinary Cash Dividend). However, no
adjustment need be made if Holders may participate in the transaction or in
certain other cases. In cases where the fair market value of assets, debt
securities or certain rights, warrants, or options to purchase securities of
the Company distributed by less than $1.00, rather than being entitled to an
adjustment in the Conversion Rate, the Holder of a LYON upon conversion thereof
will be entitled to receive, in addition to the shares of Common Stock into
which such LYON is convertible, the kind and amount of assets, debt securities
or rights, warrants or option comprising the distribution that such Holder
would have received if such Holder has converted such LYON immediately prior to
the record date for determining the shareholders entitled to receive the
distribution. None of (i) the distribution to holders of common Stock of
separate certificate representing Rights (as defined, below), (ii) the
occurrence of certain events entitled holder sos such Rights to receive, upon
exercise thereof, Common Stock of the Company or Capital Stock of another
corporation or (iii) the exercise of such Rights, as described under
"Description of Capital Stock-Preferred Share Purchase Rights," will constitute
a distribution requiring an adjustment in the conversion Rate. In addition,
any future dividend or distribution of rights to purchase Capital Stock which
the Company determines to be comparable in purpose and in effect to the
dividend and subsequent distribution of Rights will not constitute a
distribution requiring an adjustment in the Conversion Rate. The Indenture
permits the Company to increase the Conversion Rate from time to time.
(Section 11.06, 11.07, 11.08, 11.10, 11.12, 11.14, 11.17 and 11.19 and Form of
LYON, paragraph 9.)
If the Company is a party to a consolidation, merger or binding share
exchange or a transfer of all or substantially all of its assets, the right to
convert a LYON into Common Stock may be changed into a right to convert it into
securities, cash or other assets of the Company or another person. (Section
11.14.)
. . . . . . . . . .
Purchase of LYONs at the Option of the Holder
On September 7, 1994, September 7, 1999 and September 7, 2004 (each, a
"Purchase Date'), the Company will become obligated to purchase, at the option
of the Holder thereof, any outstanding LYON for which a written Purchase Notice
has been delivered by the Holder to the office of the Paying Agent (initially
the Trustee) at any time from the opening of business on the date that is 20
Business Days prior to such Purchase Date until the close of business on such
Purchase Date and for which such Purchase Notice has not been withdrawn,
subject to certain additional conditions.
The Purchase Notice shall state (i) the certificate numbers of the LYONs
to be delivered by the Holder thereof for purchase by the Company; (ii) the
portion of the principal amount at maturity of LYONs to be purchased, which
portion must be $1,000 or an integral multiple thereof; (iii) that such LYONs
are to be purchased by the Company pursuant to the applicable provisions of the
LYONs; and (iv) in the event the Company elects, pursuant to the Company Notice
(as defined below), to pay the purchase Price to be paid as of such Purchase
Date in Common Stock or Extension Notes but such Purchase price is ultimately
to be paid in cash because (a) the Company has so elected to pay in Extension
Notes but less than $25 million aggregate principal amount of Extension Notes
would otherwise be issued in respect of the aggregate Purchase Price to be paid
as of such Purchase Date, as described below, or (b) any of the other
conditions to payment of the Purchase Price in Common Stock or Extension Notes
is not satisfied by the Purchase Date, as described below, whether such Holder
elects (x) to withdraw such Purchase Notice as to some or all of the LYONs to
which it relates (stating the principal amount at maturity and certificate
numbers of the LYONs as to which such withdrawal shall relate), or (y) to
receive cash in respect of the Purchase Price for all LYONs subject to such
Purchase Notice. If the Holder fails to indicate, in the Purchase Notice and
in any written notice of withdrawal relating to such Purchase Notice, such
Holder's choice with respect to the election described in clause (iv) above,
such Holder shall be deemed to have elected to receive cash in respect of the
Purchase Price for all LYONs subject to such Purchase Notice in such
circumstances. For a discussion of the tax treatment of a Holder receiving
cash instead of Common Stock or Extension Notes, see "Certain Tax Aspects-
Disposition or Conversion."
Any Purchase Notice may be withdrawn by the Holder by a written notice of
withdrawal delivered to the Paying Agent prior to the close of business on the
Purchase Date. The notice of withdrawal shall state the principal amount at
maturity and the certificate numbers of the LYONs as to which the withdrawal
notice relates and the principal amount at maturity, if any, which remains
subject to the Purchase Notice. (Section 3.10.)
The Purchase Price payable in respect of a LYON shall be equal to the
Issue Price plus accrued Original Issue Discount to the Purchase Date. The
table below shows the Purchase Prices of a LYON as of the specified Purchase
Dates. The Company may elect to pay the Purchase Price payable as of any
Purchase Date in cash, shares of Common Stock or Extension Notes. However, the
Company shall not pay the Purchase Price payable as of a particular Purchase
Date in any combination of cash, Common Stock or Extension Notes (except for
the payment of cash for fractional shares of Common Stock or fractional
Extension Notes).
Purchase Date Purchase Price
September 7, 1994 $411.99
September 7, 1999 553.68
September 7, 2004 744.10
If the Company elects to pay the Purchase Price in shares of Common Stock,
the number of shares to be delivered in respect of the Purchase Price shall be
equal to the Purchase price divided by the Market Price of the Common Stock.
Shares of Common Stock issued upon purchase of LYONs in accordance with the
provisions of the Indenture, and prior to the Distribution Date (as defined
below) and the redemption or expiration of the Rights (as defined below), shall
also be entitled to receive Rights, under the terms and subject to the
conditions of the Rights Agreement (as defined below). See "Description of
Capital Stock-Preferred Share Purchase Rights." If the Company elects to pay
the Purchase Price in Extension Notes, the aggregate principal amount of
Extension Notes to be issued in respect of the Purchase Price shall be equal to
the Purchase Price. However, no fractional shares of Common Stock and no
Extension Notes in denominations of other than $1,000 principal amount or an
integral multiple thereof (valued at par) will be delivered upon any purchase
by the Company of LYONs through the delivery of any such security in payment of
the Purchase Price. Instead, the Company will pay cash based on the Market
Price for all fractional shares of Common Stock or cash based on the principal
amount (valued at par) for all fractional Extension Notes. In addition, if as
of any Purchase Date less than $25 million aggregate principal amount of
Extension Notes would otherwise be issued in respect of the aggregate Purchase
Price to be paid as of such Purchase Date, the Company will instead pay such
Purchase Price in cash. (Section 3.08.) See "Certain Tax Aspects-Disposition
or Conversion."
The Company will give notice (the "Company Notice") not less than 20
Business Days prior to the Purchase Date (the "Company Notice Date') to all
Holders at their addresses shown in the register of the Registrar (and to
beneficial owners as required by applicable law) stating, among other things,
whether the Company will pay the Purchase Price of the LYONs in cash, Common
Stock or Extension Notes and, if the Company elects to pay in Common Stock, the
method of calculating the Market Price of the Common Stock, or, if the Company
elects to pay in Extension Notes, a description of the Interest Rate Method
designated by the Company which will be used to determine the Extension Note
Interest Rate (the annual rate of interest) that the Extension Notes will bear
and any material additional terms of the series of Extension Notes to be issued
as of such Purchase Date or any material amendments to the Extension Indenture.
(Section 3.08.)
The "Market Price" means the average of the Sale Price (as defined below)
of the Common Stock for the five Business Day period ending on the third
Business Day prior to the Purchase Date, appropriately adjusted to take into
account the occurrence during the seven Business Days preceding such Purchase
Date of certain events that would result in an adjustment of the Conversion
Rate with respect to the Common Stock. The "Sale Price" of the Common Stock on
any date means the closing sale price (or if no closing sale price is reported,
the average of the high and low bid prices) on such date as reported in the
composite transactions for the principal United States securities exchange on
which the Common Stock is traded or, if the Common Stock is not listed on a
United States national or regional stock exchange, as reported by the National
Association of Securities Dealers Automated Quotation System. Because the
Market Price of the Common Stock is determined prior to the Purchase Date,
Holders of LYONs bear the market risk with respect to the value of the Common
Stock to be received from the date such Market Price is determined to the
Purchase Date. The Company may elect to pay in Common Stock only if the
information necessary to calculate the Market Price is reported in a daily
newspaper of national circulation. (Section 3.08.)
The Indenture requires that the Extension Note Interest Rate be determined
as of the fifth Business Day prior to the Purchase Date according to a spread
to the interest rate of a U.S. Treasury security that matures at approximately
the same time as the Extension Notes being issued on such Purchase Date and
taking into account all the terms and conditions of such Extension Notes. The
Company Notice will advise Holders of the U.S. Treasury security pursuant to
which the Extension Note Interest Rate will be calculated and the spread that
will be applied to determine the Extension Note Interest Rate. Prior to the
Company Notice Date, the Company shall have obtained an opinion from Merrill
Lynch, Pierce, Fenner & Smith Incorporated (or any successor thereto) to the
effect that the Interest Rate Method as so specified in the Company Notice
would cause the Extension Notes to be issued as of the Purchase Date to have a
market value at or as near possible to par on a fully distributed basis
(assuming issuance as of the Company Notice Date). No assurance can be given,
however, that the Extension Notes when issued will trade at a price consistent
with such market value. An Extension Note Interest Rate will be so determined
for each series of Extension Notes to be issued. The Company may elect to pay
in Extension Notes only if information regarding the interest rate of the U.S.
Treasury security pursuant to which the Extension Note Interest Rate is
determined is published in a daily newspaper of national circulation. (Section
3.08.)
Upon determination of the actual number of shares of Common Stock or of
the Extension Note Interest Rate in accordance with the foregoing provisions,
the Company will publish such determination in a daily newspaper of national
circulation. (Section 3.08.)
The Company's right to purchase LYONs with Extension Notes or shares of
Common Stock is subject to the Company satisfying various conditions,
including: (i) the registration of the Extension Notes or the Common Stock, as
the case may be, under the Securities Act and the Exchange Act, if applicable;
(ii) the qualification of an Extension Indenture covering the Extension Notes
under the Trust Indenture Act of 1939, if applicable; and (iii) compliance with
other applicable federal securities laws, if any. If such conditions are not
satisfied by the Purchase Date, the Company will pay the Purchase Price of the
LYONs to be purchased on the Purchase Date in such year in cash. (Section
3.08.) See "Certain Tax Aspects-Disposition or Conversion." The Company will
comply with the provisions of Rule 13e-4 and any other tender offer rules under
the Exchange Act which may then be applicable and will file Schedule 13E-4 or
any other schedule required thereunder in connection with any offer by the
Company to purchase LYONs at the option of Holders. (Section 3.13.)
Payment of the Purchase Price for a LYON for which a Purchase Notice has
been delivered and not withdrawn is conditioned upon delivery of such LYON
(together with necessary endorsements) to the Paying Agent at its office in the
Borough of Manhattan, the City of New York, or any other office of the Paying
Agent maintained for such purpose, at any time (whether prior to, on or after
the Purchase Date) after delivery of such Purchase Notice. Payment of the
Purchase Price for such LYON will be made promptly following the later of the
Purchase Date or the time of delivery of such LYON. (Section 3.10.) If the
Paying Agent holds, in accordance with the terms of the Indenture, money or
securities sufficient to pay the Purchase Price of such LYON on the Business
Day following the Purchase Date, then, on and after such date, Original Issue
Discount on such LYON will cease to accrue, whether or not such LYON is
delivered to the Paying Agent, and all other rights of the Holder shall
terminate (other than the right to receive the Purchase Price upon delivery of
the LYON). (Section 2.08.)
No LYONs may be purchased if there has occurred and is continuing an Event
of Default described under "Events of Default; Notice and Waiver" below (other
than a default in the payment of the Purchase Price with respect to such
LYONs). (Sections 3.10 and 10.03.)
. . . . . . . . . .
Events of Default; Notice and Waiver
The Indenture provides that, if an Event of Default specified therein
shall have happened and be continuing, either the Trustee or the Holders of not
less than 25% in aggregate principal amount at maturity of the LYONs then
outstanding may declare the Issue Price of the LYONs plus the Original Issue
Discount on the LYONs accrued to the date of such declaration to be immediately
due and payable. In the case of certain events of bankruptcy or insolvency,
the Issue Price of the LYONs plus the Original Issue Discount accrued thereon
to the occurrence of such event shall automatically become and be immediately
due and payable. See "Subordination of LYONs." Under certain circumstances,
the Holders of a majority in aggregate principal amount at maturity of the
outstanding LYONs may rescind any such acceleration with respect to the LYONs
and its consequences. (Section 6.02.) Interest shall accrue and be payable on
demand upon a default in the payment of the Issue Price, accrued Original Issue
Discount, or any Redemption Price, Purchase Price or Change in Control Purchase
Price to the extent that payment of such interest shall be legally enforceable.
(Form of LYON, paragraph 1.)
Under the Indenture, Events of Default are defined as: (i) default in
payment of the principal amount at maturity, Issue Price, accrued Original
Issue Discount, Redemption Price, Purchase Price (continuing for three Business
Days) or Change in Control Purchase Price with respect to any LYON when such
becomes due and payable (whether or not payment is prohibited by the provisions
of the Indenture); (ii) failure by the Company to comply with any of its other
agreements in the LYONs or the Indenture upon the receipt by the Company of
notice of such default by the Trustee or by Holders of not less than 25% in
aggregate principal amount at maturity of the LYONs then outstanding and the
Company's failure to cure such default within 60 days after receipt by the
Company of such notice; or (iii) certain events of bankruptcy or insolvency.
(Section 6.01.)
. . . . . . . . . .
However, the right of any Holder (x) to receive payment of the principal
amount at maturity, Issue Price, accrued Original Issue Discount, Redemption
Price, Purchase Price, Change in Control Purchase Price and any interest in
respect of a default in the payment of any such amounts on a LYON, on or after
the due date expressed in such LYON, (y) to institute suit for the enforcement
of any such payments or conversion or (z) to convert LYONs shall not be
impaired or adversely affected without such Holder's consent. (Section 6.07.)
The Holders of at least a majority in aggregate principal amount at maturity of
the outstanding LYONs may waive an existing default and its consequences, other
than (i) any default in any payment on the LYONs, (ii) any default with respect
to the conversion rights of the LYONs or (iii) any default in respect of
certain covenants or provisions in the Indenture which may not be modified
without the consent of the Holder of each LYON as described in "Modification"
below. (Section 6.04.)
. . . . . . . . . .
Modification
. . . . . . . . . .
Modification and amendment of the Indenture or the LYONs may be effected
by the Company and the Trustee with the consent of the Holders of not less than
a majority in aggregate principal amount at maturity of the LYONs then
outstanding. However, without the consent of each Holder affected thereby, no
amendment may, among other things: (i) reduce the principal amount at
maturity, Issue Price, Purchase Price, Change in Control Purchase Price or
Redemption Price, or extend the stated maturity of any LYON or alter the manner
or rate of accrual of Original Issue Discount or interest, or make any LYON
payable in money or securities other than that stated in the LYON; (ii) make
any change to the principal amount at maturity of LYONs whose Holders must
consent to an amendment or any waiver under the Indenture or modify the
Indenture provisions relating to such amendments or waivers; (iii) make any
change that adversely affects the right to convert any LYON or the right to
require the Company to purchase a LYON; (iv) modify the provisions of the
Indenture relating to the subordination of the LYONs in a manner adverse to the
Holders of the LYONs; or (v) impair the right to institute suit for the
enforcement of any payment with respect to, or conversion of, the LYONs.
(Section 9.02.)
. . . . . . . . . .
CERTAIN TAX ASPECTS
The following is a summary of the material Federal income tax consequences
of the ownership, disposition and conversion of LYONs. Such tax treatment may
vary depending upon a Holder's particular situation. This summary does not
discuss all of the tax consequences which may be relevant to certain types of
investors subject to special treatment under the Federal income tax laws (such
as individual retirement accounts and other tax-deferred accounts, life
insurance companies, tax-exempt organizations and foreign persons). This
summary also does not discuss the tax consequences to subsequent purchasers of
LYONs and is limited to investors who hold LYONs as capital assets. This
summary is based on law and regulations in effect on the date of this
Prospectus. Congress may from time to time make changes in the law affecting
the tax treatment of investments in debt instruments. Accordingly, purchasers
of LYONs should consult their own tax advisors with respect to the particular
consequences to them of holding LYONs, including the applicability and effect
of any state, local or foreign tax laws to which they may be subject and of any
legislative or administrative changes in law.
The Company has been advised by its special tax counsel, Baker & McKenzie,
that the LYONs will be treated as indebtedness for Federal income tax purposes.
The following discussion of tax consequences assumes that the LYONs will be
treated as indebtedness. Certain capitalized terms used in this summary, not
otherwise defined herein, are defined terms from the Indenture and such defined
terms are incorporated herein by reference.
Original Issue Discount
The LYONs are being issued at a discount from their principal amount at
maturity. For Federal income tax purposes, the difference between the Issue
Price (the initial offering price to the public at which a substantial amount
of LYONs are to be sold) and the principal amount at maturity of each LYON
constitutes original issue discount ("Original Issue Discount"). Holders of
the LYONs will be required to include Original Issue Discount in income
periodically over the term of the LYONs before receipt of the cash attributable
to such income. Proposed U.S. Treasury regulations regarding Original Issue
Discount are not clear as to what are the "maturity date" and the "principal
amount due at maturity" of a note issued at a discount which may be purchased
by the Company before maturity in exchange for an interest-bearing note with a
principal amount less than the amount due at maturity of the original note.
The Company believes that Original Issue Discount with respect to a LYON should
be calculated using either the Purchase Date and the amount due on the Purchase
Date, or the final maturity date and the $1,000 due on that date, both of which
produce annual inclusions of Original Issue Discount of exactly the same
amounts. The Company intends to file information returns with the Internal
Revenue Service ("IRS") on this basis.
A Holder of a LYON must include in gross income for Federal income tax
purposes the sum of the daily portions of Original Issue Discount with respect
to the LYON for each day during the taxable year or portion of a taxable year
on which such Holder holds the LYON ("Accrued Original Issue Discount"). The
daily portion is determined by allocating to each day of the accrual period a
pro rata portion of an amount equal to the adjusted Issue Price of the LYON at
the beginning of the accrual period multiplied by the yield to maturity of the
LYON (determined by compounding at the close of each accrual period and
adjusted for the length of the accrual period). The accrual period will be
each six month period (or shorter period from the date of original issue) which
ends on the date in each calendar year corresponding to the maturity date of
the LYON or the date six months before such maturity date. The adjusted Issue
Price of the LYON at the start of any accrual period is the Issue Price of the
LYON increased by the Accrued Original Issue Discount for each prior accrual
period. Under these rules, Holders will have to include in gross income
increasingly greater amounts of Original Issue Discount in each successive
accrual period.
The certificate representing the LYONs will set forth the Issue Date,
Issue Price, yield to maturity and amount of Original Issue Discount. The
Company will be required to furnish annually to the IRS and to certain
noncorporate Holders information regarding the amount of the Original Issue
Discount attributable to that year.
Disposition or Conversion
A Holder's basis for determining gain or loss on the sale or other
disposition of a LYON will be increased by any Accrued Original Issue Discount
includible in such Holder's gross income. Gain or loss upon a sale or other
disposition, except as described below, of a LYON (including a sale to the
Company) will generally be capital gain or loss (which will be long term if the
LYON is held for more than one year).
A Holder's conversion of a LYON into Common Stock is generally not a
taxable event. The Holder's obligation to include in gross income daily
portions of the Original Issue Discount with respect to a LYON will terminate
on the date of conversion. The Holder's basis in the Common Stock received on
conversion of a LYON will be the same as the Holder's basis in the LYON at the
time of conversion, and the holding period for the Common Stock received on
conversion will include the holding period of the LYON converted (assuming each
is held as a capital asset). Gain or loss upon a sale or other disposition of
the Common Stock received on conversion of a LYON will be capital gain or loss
if the Common Stock is a capital asset in the hands of the Holder.
If the Holder elects to exercise his option to tender the LYONs to the
Company on a Purchase Date and the Company issues Extension Notes or Common
Stock in satisfaction of the pre-maturity purchase price, such exchanges should
qualify as a reorganization for Federal income tax purposes and, therefore,
neither gain nor loss would be recognized. In such event (i) a Holder's tax
basis in the Extension Notes or Common Stock received in the exchange will be
the same as the Holder's tax basis in the LYON tendered to the Company in
exchange therefore (exclusive of any tax basis allocable to a fractional share
interest as described below), and (ii) the holding period for Extension Notes
or Common Stock received in the exchange will include the holding period for
the LYON tendered to the Company in exchange therefor (assuming each is held as
a capital asset).
If the Holder elects to exercise his option to tender the LYONs to the
Company on a Purchase Date and the Company delivers cash in satisfaction of the
pre-maturity purchase price or if a Holder elects to exercise his option to
tender the LYONs to the Company for cash on a Change in Control Purchase Date,
such an exchange would be a taxable sale. The Holder would recognize gain or
loss upon the sale, measured by the difference between the amount of cash
transferred by the Company to the Holder in satisfaction of the Purchase Price
or the Change in Control Purchase Price and the Holder's basis in the exchanged
LYON. Gain or loss recognized by the Holder would be capital gain or loss.
Under the current advance ruling policy of the IRS, cash received in lieu
of a fractional share of Common Stock upon conversion or purchase of a LYON
should be treated as a payment in exchange for the fractional share interest in
such Common Stock. Accordingly, if the Common Stock is a capital asset in the
hand of the Holder, the receipt of cash in lieu of a fractional share of Common
Stock should generally result in capital gain or loss, if any, measured by the
difference between the cash received for the fractional share interest and the
Holder's tax basis in the fractional share interest.
Constructive Dividend
If at any time the Company makes a distribution of property to
stockholders which would be taxable to such stockholders as a dividend for
Federal income tax purposes (for example, distributions of evidences of
indebtedness or assets of the Company, but generally not stock dividends or
rights to subscribe for Common Stock) and, pursuant to the antidilution
provisions of the Indenture, the Conversion Rate of LYONs is increased, such
increase may be deemed to be the payment of a taxable dividend to Holders of
LYONs. If the Conversion Rate is increased at the discretion of the Company,
such increase would be deemed to be the payment of a taxable dividend to
Holders of LYONs.
