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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ALPHA TECHNOLOGIES GROUP, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
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DELAWARE 76-0079338
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
750 LEXINGTON AVENUE
27TH FLOOR
NEW YORK, NY 10022
(212) 446-5258
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF SMALL BUSINESS ISSUER'S PRINCIPAL EXECUTIVE OFFICES)
JOSEPH GREENBERGER, ESQ.
GREENBERGER & FORMAN
1370 AVENUE OF THE AMERICAS
NEW YORK, NY 10019
(212) 757-4001
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH A COPY TO:
ROBERT ROSENMAN, ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NY 10019
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
possible after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If the Registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
DOLLAR AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
% Convertible Subordinated
Debentures Due 2005.............. $28,750,000(1) 100%(2) $28,750,000(3) $9,914
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Common Stock, $.03 par value..... (4) -- -- -- (5)
</TABLE>
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(1) Includes $3,750,000 principal amount of additional Debentures which the
Underwriters have the option to purchase solely to cover over-allotments,
if any.
(2) Plus accrued interest, if any.
(3) Estimated solely for the purpose of calculating the registration fee.
(4) Such indeterminate number of shares of Common Stock as may be issued upon
conversion of the Debentures.
(5) No additional consideration will be received for the Common Stock and
therefore no registration fee is required pursuant to Rule 457(i).
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 28, 1995
PROSPECTUS
$25,000,000
Alpha
LOGO Technologies
Group, Inc.,
% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2005
-----------
The Debentures offered hereby are convertible at any time prior to maturity,
unless previously redeemed, into the Common Stock of Alpha Technologies Group,
Inc. at a conversion price of $ per share, subject to adjustment in certain
events. The Common Stock is quoted on The Nasdaq National Market (the "National
Market") under the symbol "ATGI." On September 22, 1995, the closing price for
the Common Stock was $10 1/8 per share. Application has been made to list the
Debentures on The Nasdaq SmallCap Market (the "SmallCap Market") under the
symbol "ATGIG."
The Debentures are redeemable, in whole or in part, at any time on or after
, 1998, at the option of the Company, at the redemption prices set
forth herein, plus accrued interest. The Debentures are unsecured. See
"Description of Debentures."
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THE DEBENTURES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
AT PAGE 5.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
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<S> <C> <C> <C>
Per Debenture.................... 100.00% % %
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Total(4)......................... $25,000,000 $ $
</TABLE>
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(1) Plus accrued interest, if any, from , 1995.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated to be
$ .
(4) The Company has granted the several Underwriters an option, exercisable
within 30 days from the date hereof, to purchase up to an additional
$3,750,000 principal amount of Debentures solely to cover over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$28,750,000, $ and $ , respectively. See "Underwriting."
The Debentures are offered by the several Underwriters subject to receipt and
acceptance of such Debentures by them. The Underwriters reserve the right to
reject any order in whole or in part. It is expected that the Debentures will
be ready for delivery on or about , 1995.
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UNTERBERG HARRIS
, 1995
<PAGE>
[PHOTO]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES
OFFERED HEREBY OR THE SHARES OF COMMON STOCK AT A LEVEL ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
NASDAQ OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME. IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS, IF ANY, MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON NASDAQ IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE
ACT OF 1934. SEE "UNDERWRITING."
2
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless otherwise indicated, all
information and data in this Prospectus assumes no exercise of the
Underwriters' over-allotment option.
THE COMPANY
The Company designs, manufactures and sells thermal management products and
connectors. The Company's thermal management products serve the microprocessor,
computer, consumer electronics, transportation and other industries, and its
connector products serve the defense, telecommunications, automotive and
aerospace industries.
Thermal management products, principally heat sinks, remove excess heat
generated by electronic components within personal computers, power supplies,
stereo amplifiers and other electronic systems. The Company's largest thermal
management customers are Intel, IBM, General Electric and Pioneer Electronics.
The Company's Penguin Cooler line of heat sinks is specifically designed to
solve the thermal management problems of the rapidly growing microprocessor
market. As microprocessors become more powerful and are packaged in smaller
enclosures, the need for heat sinks increases. The Company believes that most
current 486 microprocessors and almost all Pentium and PowerPC microprocessors
require heat sinks. According to a Dataquest Incorporated market research
analysis published in June 1995, 5 million Pentium microprocessors were shipped
worldwide in 1994, an aggregate of 29 million Pentium and P6 (Pentium Pro)
microprocessors are projected to be shipped in 1995 and an aggregate of 61
million are projected to be shipped in 1996. The largest customers for Penguin
Coolers are Intel, IBM and Compaq.
The Company also designs, manufactures and sells miniature and micro-
miniature connectors to meet rigid industrial and military specifications. Most
of the Company's connectors are customized products sold to niche markets.
These markets offer the Company an attractive revenue stream and significant
cash flow from operations. As the miniaturization of electronic systems
continues, the Company believes the demand for its miniature and micro-
miniature connectors will grow. The Company's largest connector customers are
Lockheed Martin, General Motors, Hughes Electronics, AT&T, Rockwell
International and Loral.
In 1993, the composition of the Board of Directors of the Company changed.
Since then, the Company has grown through a combination of acquisitions and
internal growth. See "Business--History." The Company entered the thermal
management business in October 1993, when it acquired Wakefield Engineering,
Inc. from EG&G, Inc. In August 1994, the Company acquired Aham Tor Inc., a
manufacturer of heat sinks. In June 1995, the Company acquired Specialty
Extrusions, Ltd., a manufacturer of aluminum extrusions, the primary raw
material in heat sinks. In June 1994, the Company entered the niche-market
connector business when it acquired the Interconnect System Division of
Microdot Inc. Management believed that each acquisition was of a business that
was undervalued or undermanaged and was acquired for a favorable purchase
price.
The Company's goal is to continue to grow internally and through
acquisitions. The Company intends to continue acquiring companies in its
current and related markets that it believes to be undervalued or undermanaged.
See "Use of Proceeds." To achieve internal growth, the Company intends to
continue providing its customers with strong value-added engineering and timely
product customization. The Company plans to purchase additional capital
equipment in order to increase capacity, lower manufacturing costs and further
improve customer response time.
Alpha Technologies Group, Inc. was incorporated under its original corporate
name, Synercom Technology, Inc., in Texas in 1969, as a software company, and
was reincorporated in Delaware in 1983. The Company's corporate headquarters
are located at 750 Lexington Avenue, 27th Floor, New York, New York 10022, its
telephone number is (212) 446-5258, and its facsimile number is (212) 446-5290.
Unless the context otherwise requires, "Company" refers to Alpha Technologies
Group, Inc. and its subsidiaries, and "Management" refers to the management of
the Company.
3
<PAGE>
PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE MATTERS DESCRIBED UNDER
"RISK FACTORS."
THE OFFERING
<TABLE>
<C> <S>
Securities Offered........ $25,000,000 principal amount of % Convertible
Subordinated Debentures Due 2005.
Terms of Debentures:
Interest Payment Dates. , and , , commencing on
, 1996.
Conversion............. Convertible into Common Stock at a conversion price
of $ per share, subject to adjustment in
certain events.
Optional Redemption.... Redeemable in whole or in part on or after
, 1998 at the Company's option, at a redemption
price of % of par in 1998, declining
thereafter to par in , 2004.
Subordination.......... Subordinated to all existing and future Senior
Indebtedness.
Use of Proceeds........... To repay certain indebtedness, make capital
expenditures and for general corporate purposes,
including working capital, possible acquisitions
and possible strategic investments. See "Use of
Proceeds."
Nasdaq Symbol............. "ATGIG." The Debentures will be quoted (pending
approval) on the SmallCap Market. The Common Stock
is quoted on the National Market under the symbol
"ATGI."
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL AND PRO FORMA INFORMATION
<TABLE>
<CAPTION>
PRO FORMA(1)
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FISCAL YEAR
FISCAL YEAR ENDED NINE MONTHS ENDED ENDED NINE MONTHS ENDED
----------------------- ------------------ ----------- ------------------
OCTOBER 31, OCTOBER 31, JULY 31, JULY 30, OCTOBER 31, JULY 31, JULY 30,
1993 1994 1994 1995 1994 1994 1995
----------- ----------- -------- -------- ----------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales................... $ 258 $30,145 $18,579 $44,590 $51,420 $37,871 $48,206
Gross profit............ 68 9,518 5,620 12,035 14,529 10,291 12,456
Operating income........ 9 2,272 1,117 2,539 3,526 2,278 2,651
Income before taxes less
minority interest...... 346 2,072 1,121 2,286 3,239 2,023 2,476
Provision (benefit) for
taxes (2).............. 118 (860) 198 (175) (781) 270 (175)
Net income (continuing
operations)............ 339 2,932 923 2,461 4,020 1,753 2,651
PER SHARE DATA:
Income before taxes
less minority
interest.............. $0.06 $ 0.33 $ 0.18 $ 0.35 $ 0.48 $ 0.31 $ 0.36
Net income (continuing
operations)........... 0.05 0.46 0.15 0.38 0.60 0.26 0.38
Shares used in
computation........... 6,018 6,344 6,255 6,533 6,709 6,620 6,898
OTHER OPERATING DATA:
EBITDA (3).............. $ 34 $ 2,725 $ 1,368 $ 3,414 $ 4,558 $ 3,007 $ 3,729
Ratio of earnings to
fixed charges (4)...... -- 19.8x 34.6x 5.9x 8.3x 7.9x 5.0x
</TABLE>
<TABLE>
<CAPTION>
JULY 30, 1995
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA(5) AS ADJUSTED(6)
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash....................................... $ 3,689 $ 5,298 $21,818
Working capital............................ 15,134 16,578 33,098
Total assets............................... 38,205 40,894 57,714
Long-term debt (including current
maturities and Debentures)................ 8,439 10,048 27,806
Stockholders' equity....................... 17,410 20,138 20,138
</TABLE>
- -------
(1) Pro forma information reflects the impact of acquisitions as if such
acquisitions had been completed as of November 1, 1993. See Pro Forma
Consolidated Statements of Income at F-2.
(2) The Company had net operating loss carryforwards of $14,613,000 and tax
credits of $814,000 as of July 30, 1995. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition--Income Taxes"
and Note 14 to Financial Statements.
(3) Represents operating income plus depreciation and amortization.
(4) For purposes of calculating the ratio of earnings to fixed charges,
earnings include income before taxes plus interest.
(5) Reflects the effects of the Company's proposed purchase of the minority
interest of Uni-Star and the proceeds of Uni-Star's accounts receivable
loan and equipment term loan.
(6) Reflects the sale of Debentures hereby and the application of the estimated
proceeds therefrom as described in "Use of Proceeds."
4
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following risk factors in
addition to the other information set forth in this Prospectus before making
any decision to invest in the Debentures.
MANAGEMENT OF GROWTH
The Company's revenues have grown significantly during the past two years due
to several acquisitions. This growth has resulted in increased responsibilities
for Management. In addition, the Company is operating its manufacturing
facilities in Massachusetts near full capacity. The Company intends to address
these capacity constraints by expanding these facilities and acquiring related
operations or facilities. See "Use of Proceeds." Such expansion will further
increase the responsibilities of Management. There can be no assurance that the
Company will be able to manage its expansion. The failure to do so could
adversely affect the Company's financial position and results of operations.
FLUCTUATION IN QUARTERLY RESULTS
The Company's quarterly operating results may vary significantly depending on
the types of products sold and the purchasing patterns of customers. Generally,
profit margins on connectors are higher than those on thermal management
products and profit margins on customized connectors are higher than those on
standard connectors. Connector sales and gross margins thereon can vary
significantly from period to period. In addition, the Company's backlog is not
indicative of future operating results, and quarterly sales and operating
results generally depend upon the volume and timing of, and ability to fill,
orders received within the quarter. These and other factors can materially
adversely affect the Company's operating results for one or more quarters. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Quarterly Comparisons."
FUTURE ACQUISITIONS; STRATEGIC INVESTMENTS
All the Company's current revenues are derived from businesses acquired since
September 1993. See "Business--History." The Company intends to continue to
pursue acquisitions of businesses and product lines which the Company believes
have significant growth possibilities. See "Business--Strategy." Although the
Company's acquisitions have been profitable to date, there can be no assurance
that future acquisitions will be. In addition, the Company may take strategic
positions in marketable securities in connection with potential acquisitions or
other corporate transactions. If these acquisitions or transactions are not
undertaken or completed, the sale of these securities may result in investment
losses to the Company. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Investment Income."
DEPENDENCE ON CERTAIN INDUSTRIES
Sales of connectors to customers in the defense industry account for a
significant portion of connector sales. A decline in the defense budget for
programs which use the Company's products could adversely affect the Company's
operating results. In addition, sales of the Company's thermal management
products to customers in the microprocessor industry accounted for most of the
growth in sales of such products during the nine months ended July 30, 1995. A
decline in the growth of demand for high-performance microprocessors could
cause a decline in the growth of sales of the Company's thermal management
products and adversely affect its operating results. See "Business--Products"
and "Business--Customers."
QUALITY CONTROL STANDARDS
The Company's products are incorporated into high technology products
manufactured by OEMs and, accordingly, must meet exacting specifications. A
substantial portion of the Company's OEM customers require the Company to
qualify as an approved supplier. In order to so qualify, the Company must
satisfy
5
<PAGE>
stringent quality control standards and undergo extensive in-plant inspections
of its manufacturing processes, equipment and quality control systems. There
can be no assurance that the Company will be able to meet future customer
quality requirements. See "Business--Customers."
COMPETITION
Supplying components for use in electronic products is highly competitive.
Competition is based on many factors, including product quality and
reliability, timely delivery, price and customer service. A number of companies
offer products and services similar to those offered by the Company. Several of
these competitors are divisions of larger companies with access to greater
financial and marketing resources. There can be no assurance that competitors
will not develop products that are superior to the Company's products. Further,
there can be no assurance that the Company will not experience additional price
competition that may adversely affect the Company's position and results of
operations. See "Business--Competition."
TECHNOLOGICAL CHANGES
The markets for the Company's products are characterized by technological
advances, changes in customer requirements, product introductions and evolving
industry standards. The Company believes that its future success will depend,
in part, on its ability to continue to develop and market products and product
enhancements cost-effectively, which will require continued expenditures for
product engineering, sales and marketing. There can be no assurance that the
Company will be able to modify its products to meet customers' needs or that
the Company's product offerings will be accepted by its markets. See
"Business--Product Development" and "Business--Competition."
RAW MATERIALS COST
The Company is dependent on aluminum for the production of its products.
Historically, the price for aluminum has experienced substantial volatility. A
significant cost increase for aluminum would have a material adverse effect on
the Company's results of operations. See "Management's Discussion and Analysis
of Results of Operations and Financial Condition--Gross Profit" and "Business--
Raw Materials."
DEPENDENCE UPON KEY MEMBERS OF MANAGEMENT AND OTHER EXECUTIVE OFFICERS
The success of the Company is largely dependent on the efforts of Marshall D.
Butler, Chairman of the Board, Lawrence Butler, President and Chief Executive
Officer, Neal Castleman, President of Uni-Star, and Harry Chase, President of
Wakefield. The loss of their services could have a material adverse effect on
the Company's business and prospects. The Company has recently entered into a
three-year employment agreement with Mr. Lawrence Butler. See "Management" and
"Executive Compensation."
CONTROL BY MANAGEMENT AND CERTAIN DIRECTORS
Members of Management and the Board of Directors, individually and through
partnerships controlled by certain members of Management and the Board,
beneficially own 1,570,123 shares of Common Stock in the aggregate,
representing 24.9% of the currently outstanding shares of Common Stock
(including options for 266,263 shares of Common Stock exercisable within 60
days, but not including options for 608,737 shares of Common Stock exercisable
after 60 days). By virtue of such ownership and their positions with the
Company, Marshall D. Butler, Lawrence Butler and Warren G. Lichtenstein may
have the practical ability to determine the election of all directors and
control the outcome of substantially all matters submitted to the Company's
stockholders. Such concentration of ownership could have the effect of making
it more difficult for a third party to acquire, or discourage a third party
from seeking to acquire, control of the Company. See "Security Ownership of
Certain Beneficial Owners and Management."
6
<PAGE>
POTENTIAL CONFLICTS OF INTEREST
Certain of the directors and executive officers of the Company are the
general partners of, and investors in, Steel Partners and Steel Partners II.
See "Security Ownership of Certain Beneficial Owners and Management." The
Company, Steel Partners and Steel Partners II have cooperated, and expect to
cooperate in the future, in making strategic investments intended to advance
the Company's acquisition strategy. Although they intend to cooperate in
achieving the Company's best interests, conflicts of interests may arise in the
future.
ENVIRONMENTAL CONSIDERATIONS
The Company's manufacturing operations are subject to environmental laws and
regulations which govern waste water discharges, air emissions, the handling
and disposal of solid and hazardous wastes and the remediation of contamination
associated with the disposal of such wastes. See "Business--Environmental."
ABSENCE OF PUBLIC MARKET FOR THE DEBENTURES; VOLATILITY OF SECURITIES PRICES
There is currently no public market for the Debentures. Although the
Debentures are expected to be traded on the SmallCap Market, there can be no
assurance that an active trading market will develop for the Debentures or, if
developed, that such market can be sustained. The Debentures may trade at a
discount from the initial offering price, depending upon prevailing interest
rates and other factors which may have a significant impact on the Debentures
and the Common Stock into which the Debentures are convertible. Such factors
could include the market price of similar securities, announcements of
technological innovations, new products or new customer relationships by the
Company or its competitors, regulatory developments, general economic and
political factors, as well as periodic fluctuations in financial results.
SUBORDINATION OF DEBENTURES; HOLDING COMPANY STRUCTURE
The indebtedness evidenced by the Debentures is subordinate to the prior
payment when due of the principal of, and interest on, all Senior Indebtedness.
The Indenture does not limit the incurrence of additional Senior Indebtedness,
including trade debt incurred by the Company's subsidiaries or indebtedness on
borrowed funds. See "Description of Debentures--Subordination of Debentures."
The Company is a holding company which derives all its operating income from
its subsidiaries. The holders of the Debentures will have no direct claim
against such subsidiaries. The Company must rely upon dividends and other
payments from its subsidiaries to generate the funds necessary to meet its
obligations with respect to the Debentures. The ability of the Company's
subsidiaries to make such payments may be restricted by, among other things,
applicable laws or by the terms of agreements to which they may become party,
and may be subject to the claims of secured or other creditors of the
subsidiaries.
POTENTIAL ANTI-TAKEOVER EFFECTS OF DELAWARE LAW; POSSIBLE ISSUANCES OF
PREFERRED STOCK
Certain provisions of Delaware law could delay, impede or make more difficult
a merger, tender offer or proxy contest involving the Company, even if such
events could be beneficial to the interests of the stockholders. Such
provisions could limit the price that certain investors might be willing to pay
in the future for shares of Common Stock. In addition, shares of preferred
stock can be issued by the Board of Directors without stockholder approval on
such terms as the Board may determine. The rights of the holders of Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any preferred stock that may be issued in the future. Moreover,
although the ability to issue preferred stock may provide flexibility in
connection with possible acquisitions and other corporate purposes, such
issuance may make it more difficult for a third party to acquire, or may
discourage a third party from acquiring, a majority of the voting stock of the
Company. See "Description of Capital Stock."
7
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Debentures in the
offering (the "Offering") are estimated to be $23,762,500 (or $27,371,875 if
the Underwriters' over-allotment option is exercised in full), after deducting
underwriting discounts and commissions and estimated offering expenses. The net
proceeds of the Offering will be applied to repay (i) the outstanding balance
(presently $5.6 million) under a revolving line of credit, due May 5, 1997,
bearing interest at a rate of 9 1/2% per annum on September 22, 1995 (computed
at .75% above the bank's corporate base rate), and (ii) the outstanding balance
(presently $1 million) under a revolving line of credit, due August 31, 1996,
bearing interest at a rate of 9 1/4% per annum on September 22, 1995 (computed
at .50% above the bank's prime rate). In addition, approximately $7 million of
the net proceeds will be used for capital expenditures, including expansion of
existing anodizing facilities, additional milling and machining centers,
production equipment, automated handling equipment and new computer systems.
The balance of the net proceeds, approximately $10 million, will be used to
fund increases in working capital and for general corporate purposes, including
strategic investments and acquisitions. Although the Company intends to pursue
acquisitions, there are no current agreements or understandings with respect to
any acquisitions.
Pending its application as described above, the net proceeds of the Offering
will be invested in U.S. Treasury bills and other short-term investment grade,
interest-bearing instruments.
PRICE RANGE OF COMMON STOCK
The Common Stock, $.03 par value ("Common Stock"), of the Company is quoted
on the National Market under the symbol "ATGI." The following table sets forth
for the periods indicated the range of the high and low sales prices of Common
Stock as reported on the National Market.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Fiscal Year 1993:
First Quarter............................................. 2 3/16 1 3/8
Second Quarter............................................ 2 5/8 2 1/16
Third Quarter............................................. 3 1/4 1 7/8
Fourth Quarter............................................ 3 1/4 2 3/8
Fiscal Year 1994:
First Quarter............................................. 3 1/8 2 9/16
Second Quarter............................................ 4 2 5/8
Third Quarter............................................. 3 3/4 3
Fourth Quarter............................................ 5 3/8 3 3/8
Fiscal Year 1995:
First Quarter............................................. 6 4 7/8
Second Quarter............................................ 7 1/8 4 7/8
Third Quarter............................................. 12 3/8 5 1/4
Fourth Quarter (through September 22, 1995)............... 13 3/8 9 1/2
</TABLE>
On September 22, 1995, the closing sales price of the Common Stock, as
reported on the National Market, was $10 1/8 per share. On September 22, 1995,
there were approximately 235 holders of record of Common Stock.
8
<PAGE>
DIVIDENDS
The Company has paid no dividends on the Common Stock and it is anticipated
that no cash dividends will be paid in the forseeable future. The payment of
cash dividends will depend on the earnings of the Company, the Company's
capital requirements, restrictions in future loan agreements, if any, and
other factors considered relevant by the Board of Directors of the Company.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of July
30, 1995: (i) on an actual basis, (ii) on a pro forma basis, reflecting the
balance sheet effects of the Company's proposed purchase of the minority
interest of Uni-Star (as hereinafter defined) and the proceeds of Uni-Star's
accounts receivable loan and equipment term loan as described in "Management's
Discussion and Analysis of Results of Operations and Financial Condition--
Results of Actual and Pro Forma Operations--Minority Interest" and "--
Liquidity and Capital Resources," and (iii) on a pro forma as adjusted basis
to give effect to the sale of the Debentures offered hereby (assuming no
exercise of the over-allotment option) and the application of the estimated
net proceeds therefrom as described in "Use of Proceeds."
<TABLE>
<CAPTION>
JULY 30, 1995
---------------------------
PRO
FORMA
AS
ACTUAL PRO FORMA ADJUSTED
------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt.................. $ 470 $ 635 $ 635
======= ======= =======
Long-term debt, less current portion:
Bank credit...................................... $ 7,969 $ 9,413 $ 2,171
Convertible Debentures due 2005.................. -- -- 25,000
------- ------- -------
7,969 9,413 27,171
Stockholders' equity:
Preferred Stock, $100 par value per share,
180,000 shares authorized, none issued.......... -- -- --
Common Stock, $.03 par value per share,
17,000,000 shares authorized, 5,985,941 shares
outstanding actual, 6,350,941 as pro forma and
pro forma as adjusted (1)....................... 180 191 191
Additional paid in capital....................... 35,931 38,648 38,648
Retained earnings (deficit)...................... (18,746) (18,746) (18,746)
Other............................................ 45 45 45
------- ------- -------
Total stockholders' equity..................... 17,410 20,138 20,138
------- ------- -------
Total capitalization........................... $25,379 $29,551 $47,309
======= ======= =======
</TABLE>
- --------
(1) Does not include 1,306,416 shares of Common Stock reserved for issuance
upon exercise of currently outstanding options at a weighted average
exercise price of $3.88 per share.
9
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below at and for the fiscal years ended
October 31, 1993 and October 31, 1994 and the nine months ended July 30, 1995
have been derived from the Consolidated Financial Statements of the Company
audited by Arthur Andersen LLP, independent accountants. The selected
consolidated financial data presented below at and for the nine months ended
July 31, 1994 have been derived from unaudited consolidated financial
statements of the Company which, in the opinion of the Company, reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the consolidated financial position of the Company.
Operating results for the nine months ended July 30, 1995 are not necessarily
indicative of the results that may be expected for the full year. The selected
financial data set forth below should be read in conjunction with the Company's
Consolidated Financial Statements and the notes thereto, Pro Forma Consolidated
Financial Statements and the notes thereto, and "Management's Discussion and
Analysis of Results of Operations and Financial Condition," which are included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA(1)
------------------------------
FISCAL YEAR
FISCAL YEAR ENDED NINE MONTHS ENDED ENDED NINE MONTHS ENDED
----------------------- ------------------ ----------- ------------------
OCTOBER 31, OCTOBER 31, JULY 31, JULY 30, OCTOBER 31, JULY 31, JULY 30,
1993 1994 1994 1995 1994 1994 1995
----------- ----------- -------- -------- ----------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales
Thermal management..... $ 258 $20,758 $14,410 $29,353 $31,805 $23,474 $32,969
Connectors............. -- 9,387 4,169 15,237 19,615 14,397 15,237
----- ------- ------- ------- ------- ------- -------
Total sales.......... 258 30,145 18,579 44,590 51,420 37,871 48,206
Cost of sales........... 190 20,627 12,959 32,555 36,891 27,580 35,750
----- ------- ------- ------- ------- ------- -------
Gross profit........... 68 9,518 5,620 12,035 14,529 10,291 12,456
Operating expenses
Research and
development........... 11 674 438 838 674 438 838
Selling, general and
administrative........ 48 6,572 4,065 8,658 10,329 7,575 8,967
----- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 59 7,246 4,503 9,496 11,003 8,013 9,805
----- ------- ------- ------- ------- ------- -------
Operating income........ 9 2,272 1,117 2,539 3,526 2,278 2,651
Investment income....... -- 108 93 242 108 93 242
Interest income
(expense), net......... 337 76 100 (231) (395) (348) (417)
----- ------- ------- ------- ------- ------- -------
Income before taxes..... 346 2,456 1,310 2,550 3,239 2,023 2,476
Provision (benefit) for
income taxes(2)........ 118 (860) 198 (175) (781) 270 (175)
----- ------- ------- ------- ------- ------- -------
Income before minority
interest, discontinued
operations and
extraordinary credit... 228 3,316 1,112 2,725 4,020 1,753 2,651
Less: minority interest. -- (384) (189) (264) -- -- --
Gain on sale of
discontinued
operations, net of
income tax effect...... -- 1,380 -- -- -- -- --
Income (loss) from
discontinued
operations, net of
income tax effect...... (22) 978 1,070 -- -- -- --
Extraordinary credit.... 111 -- -- -- -- -- --
----- ------- ------- ------- ------- ------- -------
Net income.............. $ 317 $ 5,290 $ 1,993 $ 2,461 $ 4,020 $ 1,753 $ 2,651
===== ======= ======= ======= ======= ======= =======
PER SHARE DATA:
Income before taxes
less minority
interest.............. $0.06 $0.33 $0.18 $0.35 $0.48 $0.31 $0.36
Net income............. 0.05 0.83 0.32 0.38 0.60 0.26 0.38
Shares used in
computation(3)........ 6,018 6,344 6,255 6,533 6,709 6,620 6,898
OTHER OPERATING DATA:
EBITDA (4).............. $ 34 $ 2,725 $ 1,368 $ 3,414 $ 4,558 $ 3,007 $ 3,729
Ratio of earnings to
fixed charges(5)....... -- 19.8x 34.6x 5.9x 8.3x 7.9x 5.0x
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
OCTOBER 31,
------------- JULY 30,
1993 1994 1995
------ ------ --------
<S> <C> <C> <C>
BALANCE SHEET DATA:(6)
Cash and short-term investments.......................... $5,448 $7,406 $3,689
Working capital.......................................... 8,932 15,924 15,134
Total assets............................................. 16,079 31,689 38,205
Long-term debt (including current maturities)............ -- 3,902 8,439
Stockholders' equity..................................... 10,951 16,544 17,410
</TABLE>
- --------
(1) Pro forma information reflects the impact of acquisitions as if such
acquisitions had been completed as of November 1, 1993. See Pro Forma
Consolidated Statements of Income at F-2.
(2) The Company had net operating loss carryforwards of $14,613,000 and tax
credits of $814,000 as of July 30, 1995. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition--Income Taxes"
and Note 14 to Financial Statements.
(3) See Note 13 to Financial Statements for an explanation of the
determination of weighted average Common Stock and equivalents used in
computing net income (loss) per share.
(4) Represents operating income plus depreciation and amortization.
(5) For purposes of calculating the ratio of earnings to fixed charges,
earnings include income before taxes plus interest.
(6) Pro forma balance sheet data is not presented.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The Company entered the electronic components business in October 1993. The
following table sets forth the significant acquisitions made by the Company:
<TABLE>
<CAPTION>
DATE ACQUIRED OPERATION PREDECESSOR'S NAME
- ------------- --------- ------------------
<S> <C> <C>
October 1993............ Thermal management operations in Wakefield Wakefield Engineering,
and Fall River, Massachusetts ("Wakefield") Inc. & Alutech, Inc.
June 1994............... Connector and related product operations in Interconnect Systems
South Pasadena, California, Division of Microdot Inc.
Montgomeryville, Pennsylvania and
Cincinnati, Ohio ("Uni-Star")
August 1994............. Thermal management operations in Temecula, Aham Tor, Inc.
California ("Ahamtor")
June 1995............... Aluminum extrusion operations in Fullerton, Specialty Extrusions Ltd.
California ("Specialty")
</TABLE>
Since their acquisition, Ahamtor has been operated as a division, and
Specialty has been operated as a subsidiary, of Wakefield.
The results of operations acquired are included in the Company's consolidated
results of operations only since their respective acquisition dates. In
September 1994, the Company sold the assets and business of its Information
Solutions Segment ("ISS") and is no longer in the software business. The
consolidated financial statements of the Company report separately the net
assets, gain on the sale and results of operations of such discontinued
operation. Because fiscal 1993 only includes one week of continuing operations,
1993 results are not meaningful.
RESULTS OF ACTUAL AND PRO FORMA OPERATIONS
The following table sets forth, for the periods indicated, certain financial
data stated as a percentage of total sales:
<TABLE>
<CAPTION>
PRO FORMA
----------------------------
FISCAL YEAR NINE MONTHS
FISCAL YEAR ENDED NINE MONTHS ENDED ENDED ENDED
----------------------- ----------------- ----------- ----------------
OCTOBER 31, OCTOBER 31, JULY 31, JULY 30, OCTOBER 31, JULY 31 JULY 30,
1993 1994 1994 1995 1994 1994 1995
----------- ----------- -------- -------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales
Thermal management..... 100.0% 68.9% 77.6% 65.8% 61.9% 62.0% 68.4%
Connectors............. 0.0 31.1 22.4 34.2 38.1 38.0 31.6
----- ----- ----- ----- ----- ----- -----
Total sales.......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Gross profit............ 26.4 31.6 30.2 27.0 28.3 27.2 25.8
Research and development
expense................ 4.3 2.2 2.4 1.9 1.3 1.2 1.7
Selling, general and
administrative expense. 18.6 21.8 21.9 19.4 20.1 20.0 18.6
Operating income........ 3.5 7.5 6.0 5.7 6.9 6.0 5.5
Income before taxes..... 134.1 8.1 7.1 5.7 6.3 5.3 5.1
Provision (benefit) for
income taxes........... 45.7 (2.9) 1.1 (0.4) (1.5) 0.7 (0.4)
Net income.............. 122.9 17.5 10.7 5.5 7.8 4.6 5.5
</TABLE>
12
<PAGE>
Sales. Total sales for the nine months ended July 30, 1995 increased 140%
compared to total sales for the comparable period in fiscal 1994. During the
1995 period, thermal management sales increased 104% due to internal growth of
54% and Ahamtor sales from the date of acquisition. Internal growth was due to
higher sales of extruded heat sink products, primarily Penguin Coolers, related
to the rapid growth of the high-performance microprocessor market. The nine-
month period ended July 30, 1994 included only two months of connector sales
following the acquisition of Uni-Star on June 1, 1994. In those two months, the
Company had above average connector sales because it shipped products under
backorders existing at the time of acquisition.
Sales in fiscal year 1994 were not comparable to those in fiscal year 1993
due to the acquisition of Wakefield in October 1993, Uni-Star in June 1994 and
Ahamtor in August 1994.
Pro forma sales for the 1994 and 1995 periods were higher than actual sales
for the same periods due to the inclusion of acquired operations. Pro forma
sales for the nine months ended July 30, 1995 increased 27% compared to pro
forma sales for the comparable period in fiscal 1994 primarily due to
significant growth in sales of extruded heat sinks, primarily Penguin Coolers,
as well as moderate growth in connector sales.
Gross Profit. The Company's gross profit percentage decreased for the nine
months ended July 30, 1995 compared to the same period in 1994 as a result of
(i) the inclusion in the 1995 period of Ahamtor, which has a lower gross profit
percentage than the Company's average, (ii) an increase in the cost of
aluminum, a portion of which could not be reflected in the sales price of the
Company's products, (iii) a significant increase in sales of Penguin Coolers,
which have a lower gross profit percentage than the Company's average, (iv) a
high gross profit contribution during the 1994 period from backorders existing
at the time of the acquisition of Uni-Star and (v) a change in the mix of
higher margin customized connector products versus lower margin standard
connector products sold. The gross profit percentage decrease was offset in
part by a more efficient use of capacity.
Pro forma gross profit percentage for the nine months ended July 30, 1995 was
lower than actual gross profit percentage for the same period due to the
inclusion of Specialty, which has a significantly lower gross profit percentage
than the Company's average, as well as an increase in pro forma cost of sales
related to the increase in the depreciable basis of equipment resulting from
the proposed purchase of the minority interest of Uni-Star. Pro forma gross
profit percentage for the nine months ended July 31, 1994 and the fiscal year
1994 was lower than the actual gross profit percentage for the same periods due
to the lower gross profit percentages of Uni-Star and Ahamtor in the period
prior to their being acquired relative to actual results.
Pro forma gross profit percentage for the nine months ended July 30, 1995
compared to that for the nine months ended July 31, 1994 decreased due to the
operating factors discussed above.
Research and Development Expense. Research and development expense includes
the cost of enhancing existing products and, to a lesser extent, the cost of
developing new products. The increase for the nine months ended July 30, 1995
compared to the same period in fiscal 1994 was due to an increase in
engineering staff as well as new licensing costs for engineering software and
the purchase of related workstations. Pro forma research and development
expense as a percentage of sales was lower than actual expense for the
comparable periods due to the absence of research and development activities at
the acquired operations prior to their being acquired by the Company.
Selling, General and Administrative Expense. The decrease in selling, general
and administrative expense as a percentage of sales for the nine months ended
July 30, 1995 compared to the same period of fiscal 1994 was primarily
attributable to increased sales without a proportionate increase in selling,
general and administrative expense. Pro forma selling, general and
administrative expense as a percentage of sales was lower than actual expense
for the comparable periods due to the very low operating expenses of Ahamtor
and Specialty.
13
<PAGE>
Investment Income. In the past, the Company held marketable securities for
both strategic and investment purposes. Securities held for investment purposes
are reflected at fair market value, and the gain or loss is reflected in
investment income. Securities held for strategic purposes are reflected at fair
market value with the unrealized gain or loss thereon reflected in
stockholders' equity. The gain or loss on such securities is reflected as
investment income only upon sale. Investment income for the nine months ended
July 30, 1995 included $36,000 of investment security gains and $206,000 of
gains on sales of strategic investment securities. In September 1995, the
Company adopted a policy precluding any equity investments other than for
strategic purposes. The Company currently has no marketable investment
securities.
Interest Income (Net). Interest income, which was $292,000 for the nine
months ended July 30, 1995 and $139,000 for the nine months ended July 31,
1994, was earned on excess cash. Interest expense was $39,000 for the nine
months ended July 31, 1994 and $523,000 for the nine months ended July 30,
1995.
Income Taxes. The Company's provision for income taxes was impacted
substantially by tax benefits from net operating loss carryforwards ("NOL
Carryforwards"). The Company's tax provision is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
FISCAL JULY 31, JULY 30,
1994 1994 1995
------- -------- --------
<S> <C> <C> <C>
Income before tax........................... $ 2,456 $1,310 $ 2,550
======= ====== =======
Tax at Federal statutory rate (34%)......... $ 835 $ 445 $ 867
State taxes, net of federal benefit......... 305 117 207
Net reversal of Valuation Allowance......... (2,846) (820) (1,256)
Effects of discontinued operations and
other...................................... 846 456 7
------- ------ -------
Income tax provision (benefit).............. $ (860) $ 198 $ (175)
======= ====== =======
</TABLE>
On November 1, 1993, the Company implemented Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement 109").
On that date, the Company had NOL Carryforwards of $23,214,000, which resulted
in a tax benefit of $7,893,000 (34% of the NOL Carryforwards). In addition to
tax benefits related to NOL Carryforwards, the Company had net tax benefits of
$814,000 related to tax credits and $714,000 related to certain temporary
differences. The Company established a net deferred tax asset for the total of
the aforementioned tax benefits of $9,421,000. Due to the lack of taxable
income in several prior years and uncertainty regarding the utilization of NOL
Carryforwards, a valuation allowance equal to the net deferred tax asset was
established (the "Valuation Allowance").
During fiscal 1994, the Company reversed $2,846,000 of the Valuation
Allowance. The reversal represented (a) tax benefits of (i) $1,807,000 (34% of
the $5,314,000 of NOL Carryforwards utilized that year) and (ii) $1,360,000
resulting from Management's estimate of probable future taxable income, offset
by (b) $321,000 related to the tax effects of temporary differences. For the
nine months ended July 30, 1995, the Company reversed $1,256,000 of the
Valuation Allowance. This reversal represented (a) tax benefits of (i) $872,000
(34% of the $3,287,000 of NOL Carryforwards utilized, less the portion of the
Valuation Allowance previously allocated to these NOL Carryforwards) and (ii)
$693,000 resulting from Management's estimate of future taxable income, offset
by (b) $309,000 related to the tax effects of temporary differences. These
reversals of the Valuation Allowance are reflected as income tax benefits in
the respective periods. The remaining Valuation Allowance of $5,319,000
(primarily relating to net operating losses of $14,613,000) will be reversed as
warranted by future profitable operations and Management's future estimates of
the realization of the deferred tax asset based on expected taxable income.
14
<PAGE>
On July 30, 1995, the Company had, for tax purposes, remaining NOL
Carryforwards of approximately $14,613,000 available to offset future taxable
income, and approximately $814,000 of unused investment and research and
development tax credits available to offset future Federal income taxes. The
NOL Carryforwards will expire from 2000 to 2008, and the tax credit
carryforwards will expire from 1995 to 2005. All carryforwards are subject to
review and possible adjustment by the Internal Revenue Service. In addition,
Section 382 of the Internal Revenue Code significantly limits the amount of NOL
Carryforwards usable by a corporation following a more than 50% change in
ownership of the corporation during a three-year period. It is possible that
subsequent transactions involving the Company's capital stock could result in
such a limitation.
Minority Interest. The Company acquired 80% of Uni-Star in June 1994. The
Company is currently negotiating the purchase of the remaining interest for
approximately 365,000 shares of Common Stock. The Company estimates the market
value of these shares to be approximately $2.7 million (valued as "restricted
securities," as defined in Rule 144 under the Securities Act of 1933 (the
"Act"), subject to certain contractual voting and sale restrictions). Based
upon this estimate, the purchase will increase the basis of Uni-Star's assets
by $1,080,000 for financial statement purposes and thereby increase
depreciation and amortization expense by an estimate of $108,000 per year.
Discontinued Operation. The Company sold its software product business in
September 1994. The purchase price was $4 million, of which $2 million was paid
at closing, $1 million was paid in January 1995 and the final $1 million was
paid in March 1995. An expense of approximately $800,000 was accrued,
principally representing lease payments and estimated costs that the Company
expected to incur on the space used by the disposed business, less estimated
payments that it expected to receive for subleasing the space. The Company
recognized a gain on the sale of $1,380,000, net of the $800,000 accrual,
income taxes and a reserve to cover contingencies.
15
<PAGE>
QUARTERLY COMPARISONS
The following table sets forth unaudited selected quarterly financial
information for the periods indicated. This information includes all
adjustments, consisting only of normal recurring accruals, that Management
considers necessary for a fair presentation of the data when read in
conjunction with the Consolidated Financial Statements and the notes thereto
included elsewhere herein. The results of operations for historical periods
may not necessarily be indicative of results for any future period. In the
first quarter of 1995, total sales decreased due to a decrease in connector
sales. Connector sales vary from period to period based on the purchasing
patterns of certain customers. In the first quarter of 1995, gross profit
percentage was lower than in the preceding three quarters due to the amount of
custom connector products sold in each quarter. The gross profit percentage of
connectors fluctuates based upon the mix of custom products, which have a
higher gross profit percentage, and standard products sold. Generally, the
gross profit percentage for connectors is higher than that for thermal
management products.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------
JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 29, APRIL 30, JULY 30,
1994 1994 1994 1994 1995 1995 1995
----------- --------- -------- ----------- ----------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales
Thermal management..... $4,710 $4,873 $4,827 $ 6,348 $ 7,624 $10,424 $11,305
Connectors............. -- -- 4,169 5,218 3,584 5,529 6,124
------ ------ ------ ------- ------- ------- -------
Total sales.......... 4,710 4,873 8,996 11,566 11,208 15,953 17,429
Cost of sales........... 3,521 3,481 5,957 7,668 8,208 11,726 12,621
------ ------ ------ ------- ------- ------- -------
Gross profit......... 1,189 1,392 3,039 3,898 3,000 4,227 4,808
Operating expenses
Research and
development........... 150 145 143 236 243 302 293
Selling, general and
administrative........ 1,092 1,188 1,785 2,507 2,558 2,806 3,294
------ ------ ------ ------- ------- ------- -------
Total operating
expenses............ 1,242 1,333 1,928 2,743 2,801 3,108 3,587
Operating income (loss). (53) 59 1,111 1,155 199 1,119 1,221
Investment income....... -- 17 76 15 11 62 169
Interest income
(expense), net......... 44 38 18 (24) (64) (101) (66)
------ ------ ------ ------- ------- ------- -------
Income (loss) before
taxes.................. (9) 114 1,205 1,146 146 1,080 1,324
Provision (benefit) for
income tax............. 23 71 104 (1,058) 51 227 (453)
------ ------ ------ ------- ------- ------- -------
Income (loss) before
minority interest,
discontinued operations
and extraordinary
credit................. (32) 43 1,101 2,204 95 853 1,777
Minority interest....... -- -- (189) (195) 6 (102) (168)
Gain on sale of
discontinued
operations, net of
income tax effect...... -- -- -- 1,380 -- -- --
Income (loss) from
discontinued
operations, net of
income tax effect...... 631 (132) 571 (92) -- -- --
------ ------ ------ ------- ------- ------- -------
Net income (loss)....... $ 599 $ (89) $1,483 $ 3,297 $ 101 $ 751 $ 1,609
====== ====== ====== ======= ======= ======= =======
PER SHARE DATA:
Income before taxes
less minority
interest.............. -- $0.02 $0.16 $0.15 $0.02 $0.15 $0.18
Net income (loss)...... 0.10 (0.02) 0.23 0.50 0.02 0.11 0.24
Shares used in
computation........... 6,159 5,885 6,336 6,561 6,590 6,415 6,591
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------
JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 29, APRIL 30, JULY 30,
1994 1994 1994 1994 1995 1995 1995
----------- --------- -------- ----------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales
Thermal management..... 100.0% 100.0% 53.7% 54.9% 68.0% 65.3% 64.9%
Connectors............. 0.0 0.0 46.3 45.1 32.0 34.7 35.1
------ ------ ------ ------- ------- ------- -------
Total sales.......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Gross profit............ 25.2 28.6 33.8 33.7 26.8 26.5 27.6
Research and
development............ 3.2 3.0 1.6 2.0 2.2 1.9 1.7
Selling, general and
administrative......... 23.2 24.4 19.8 21.7 22.8 17.6 18.9
Operating income (loss). (1.1) 1.2 12.3 10.0 1.8 7.0 7.0
Income (loss) before
taxes.................. (0.2) 2.3 13.4 9.9 1.3 6.8 7.6
</TABLE>
16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Funds for operations and purchases of capital equipment, businesses and stock
for the nine months ended July 30, 1995 were provided primarily from existing
cash and advances under the Wakefield loan agreement. The funds were used as
follows:
(i) $1,130,000 were used to fund operating activities, primarily to
increase accounts receivables and inventories, offset in part by amounts
collected on notes receivable related to the sale of the software business.
See Note 3 to Financial Statements;
(ii) $2,560,000 were used to purchase Specialty and to retire existing
Specialty debt;
(iii) $3,168,000 were used to purchase equipment, including machines to
add capacity and improve productivity in the manufacturing of extruded heat
sinks, primarily Penguin Coolers, and to upgrade internal computer systems;
and
(iv) approximately $2,118,000 were used to purchase 391,155 shares of
Common Stock pursuant to the Company's Common Stock repurchase plan. This
repurchase program has been completed.
In June 1994, Wakefield entered into a loan agreement which included a
revolving credit facility of up to $4 million, an equipment term loan of
$1,250,000 and an equipment credit facility of $600,000. In May 1995, Wakefield
amended this loan agreement to increase the revolving credit facility to $7
million and the equipment credit facility to $1,050,000, and to extend the term
of the revolving credit facility to May 5, 1997. In addition, Wakefield
borrowed $265,000 as an equipment term loan. Interest on the revolving credit
facility and equipment loans accrues at the bank's corporate base rate plus
.75%. On September 22, 1995, the interest rate on the bank debt was 9 1/2% per
annum. The obligations under the loan agreement are secured by a first lien on
and assignment of the assets of Wakefield, excluding Specialty's assets. The
loan agreement includes various financial covenants which the Company was in
compliance with on July 30, 1995, the most recently ended fiscal quarter. On
September 22, 1995, $5,625,000 was outstanding under the revolving credit
facility.
On August 31, 1995, Uni-Star entered into an accounts receivable loan
agreement which included a revolving credit commitment of up to $2.5 million.
Uni-Star also entered into an equipment term loan in the amount of $750,000
(from which $104,000 of preexisting debt was refinanced) and an equipment
acquisition facility of $300,000. The initial proceeds of $963,000 from the
revolving credit commitment and $646,000 net proceeds from the equipment term
loans were used to repay advances of $1,609,000 from the Company to Uni-Star.
The proceeds from the equipment acquisition facility may be used only for the
purchase of capital equipment. Interest on the funds advanced under the
revolving credit commitment ($1 million on September 22, 1995) accrues at the
bank's prime corporate rate plus .50% (9 1/4% per annum on September 22, 1995)
and interest on the equipment term loan accrues at the bank's prime rate plus
.75% (9 1/2% per annum on September 22, 1995). The principal amount of the
equipment term loan is repayable in 48 equal monthly installments, beginning
October 1, 1995. All Uni-Star credit facilities are secured by a first lien and
assignment of substantially all Uni-Star's assets, including its accounts
receivable, inventory, equipment and general intangibles.
The Company believes that the net proceeds of this Offering, together with
its currently available cash, anticipated cash flow from operations and
availability under credit facilities should be sufficient to satisfy its
current and planned operations for the next 12 to 18 months.
17
<PAGE>
BUSINESS
OVERVIEW
The Company designs, manufactures and sells thermal management products and
connectors. The Company's thermal management products serve the microprocessor,
computer, consumer electronics, transportation and other industries, and its
connector products serve the defense, telecommunications, automotive and
aerospace industries.
Thermal management products, principally heat sinks, remove excess heat
generated by electronic components within personal computers, power supplies,
stereo amplifiers and other electronic systems. The Company's largest thermal
management customers are Intel, IBM, General Electric and Pioneer Electronics.
The Company's Penguin Cooler line of heat sinks is specifically designed to
solve the thermal management problems of the rapidly growing microprocessor
market. As microprocessors become more powerful and are packaged in smaller
enclosures, the need for heat sinks increases. The Company believes that most
current 486 microprocessors and almost all Pentium and PowerPC microprocessors
require heat sinks. According to a Dataquest Incorporated market research
analysis published in June 1995, 5 million Pentium microprocessors were shipped
worldwide in 1994, an aggregate of 29 million Pentium and P6 (Pentium Pro)
microprocessors are projected to be shipped in 1995, and an aggregate of 61
million are projected to be shipped in 1996. The largest customers for Penguin
Coolers are Intel, IBM and Compaq.
The Company also designs, manufactures and sells miniature and micro-
miniature connectors to meet rigid industrial and military specifications. Most
of the Company's connectors are customized products sold to niche markets.
These markets offer the Company an attractive revenue stream and significant
cash flow from operations. As the miniaturization of electronic systems
continues, the Company believes the demand for its miniature and micro-
miniature connectors will grow. The Company's largest connector customers are
Lockheed Martin, General Motors, Hughes Electronics, AT&T, Rockwell
International and Loral.
HISTORY
In 1993, Marshall D. Butler, Frederic A. Heim and Warren G. Lichtenstein
joined the Board of Directors and Lawrence Butler became a consultant to the
Company. Subsequently, Lawrence Butler joined the Board and in 1995 became
President of the Company. Beginning in 1993, the Company embarked on a strategy
to acquire electronic component companies which were: (i) operating profitably,
(ii) offering products to rapidly growing markets or high-margin niche-markets,
and (iii) available at prices the Company believed to be attractive. The
directors believed that their collective experience, as well as the Company's
cash reserves and NOL Carryforwards, were advantages in pursuing this strategy.
Concurrently, the Company reduced expenses in its software business and
achieved profitability. Subsequently, the Company sold the software business.
The Company has made four significant acquisitions since September 1993, three
thermal management operations and one connector company. The aggregate cost of
the acquisitions (excluding the proposed acquisition of the minority interest
in Uni-Star) was $15 million paid in cash.
The Company entered the thermal management business in October 1993 by
acquiring Wakefield from EG&G, Inc. These operations were profitable and had a
strong existing customer base. Using the business plan developed by the
existing management team, the Company invested heavily in product engineering,
inventory and capital equipment. Wakefield's management was given greater
autonomy to make pricing and market-related decisions. This resulted in a
significant increase in sales of thermal management products, especially
Penguin Coolers.
In June 1994, the Company acquired an 80% interest in the connector
operations of Microdot Inc. Neal Castleman, the current President of Uni-Star
and an experienced manager in this market, acquired the remaining 20% interest.
At the time, Microdot Inc. was being operated under Chapter 11 of the
Bankruptcy Code. This acquisition was an opportunity to enter a high-margin,
niche-market business with relatively stable revenues at what the Company
believed to be a highly attractive price. The Company is currently negotiating
the purchase of Mr. Castleman's minority interest. See "Management's Discussion
and Analysis of Financial Results and Operations--Results of Actual and Pro
Forma Operations--Minority Interest."
18
<PAGE>
In August 1994, the Company acquired Ahamtor, which designs, manufactures and
sells extruded aluminum heat sinks. Ahamtor, based in California, complemented
the Company's existing Massachusetts thermal management operations by enlarging
its market territory and broadening the Company's customer base for thermal
management products.
In June 1995, the Company acquired a supplier of extruded aluminum, the
primary raw material for heat sinks, by purchasing Specialty. This acquisition
provided the Company with a supplier for a portion of its extruded aluminum
needs. Specialty sells most of its output to third party customers.
STRATEGY
The Company's goals are to be the leading provider of thermal management
products and a profitable supplier of niche-market connectors. The Company
intends to achieve these goals by using the following strategies.
Supply Thermal Management Solutions to Growing High Technology Markets. The
Company seeks to capitalize on selected growth segments of the high technology
sector by supplying thermal management solutions. Sales of the Company's
Penguin Cooler line of heat sinks, a thermal management component for Pentium
and PowerPC microprocessors, have grown in response to this expanding market.
Acquire Businesses and Assets at Attractive Prices. The Company intends to
continue acquiring companies in its current and related markets that it
believes to be undervalued or undermanaged. See "Use of Proceeds" and
"Business--History."
Invest in Value-Added Engineering and Product Development. The Company seeks
to offer its customers customized value-added products that meet their
individual needs. By maintaining a strong engineering capability, the Company
is able to provide products that meet customer specifications in a timely
manner. The Company does not expend resources in research areas that are not
directly related to customer needs, and its emphasis has been on product
engineering rather than on basic research.
Invest Capital to Increase Capacity and Production Efficiencies. The Company
has experienced significant internal growth, particularly in its thermal
management business. It plans to increase capacity and improve manufacturing
efficiencies through expenditures for new equipment and additional facilities,
as well as through acquisitions. See "Use of Proceeds."
Create Entrepreneurial Environment for Operating Management. The Company
gives its managers autonomy to make pricing and market-related decisions that
allows them to respond to customer needs and increase market share. In
addition, the Company provides incentives to managers of its operating
subsidiaries through performance bonuses and stock option programs.
PRODUCTS
Thermal Management
Thermal management products are designed to dissipate heat generated within
electronic components and systems. The Company designs, manufactures and sells
thermal management products which serve a variety of industries, including the
microprocessor, computer, consumer electronics, industrial control, medical
instrumentation, laser, power supply and conversion, telecommunication
equipment, transportation and welding equipment industries. Company customers
for thermal management products include leading original equipment
manufacturers ("OEMs") of electronic equipment such as IBM, Intel, General
Electric and Pioneer Electronics.
The demand for thermal management products is growing. As published in
Electronic Buyers' News in February 1995, International Interconnect
Intelligence, a market research firm, estimates that the average annual
compound growth rate for thermal products for electronic applications will be
13% to 14% worldwide
19
<PAGE>
for the ten-year period from 1990 to 2000, a jump from $2 billion to $6
billion, and sales of thermal management products to the digital electronics
industry are projected to grow even faster, from $95 million in 1993 to more
than $725 million by 1998 in North America. In addition, the introduction of
the Pentium, which uses up to 16 watts of electrical power, made thermal
management critical for proper performance and reliability. According to an
independent market research study published by ARS inc. in September 1994,
Pentium microprocessors are estimated to grow from less than 1% of the
microprocessor market in 1993 to over 27% in 1995 and 63% in 1997.
The Company believes it has distinguished itself in its ability to design and
manufacture innovative thermal management products to meet the needs of this
rapidly growing market segment. The Company's Penguin Cooler line of heat sinks
is specifically designed to solve thermal management problems in high-
performance microprocessors, such as the Pentium. Sales of Penguin Coolers have
experienced considerable growth in the past year and are an increasingly
significant portion of the Company's sales.
The Company's thermal management products include:
Heat sinks specifically designed for high-
PENGUIN COOLERS performance microprocessors and personal
computers. These are used to solve thermal
problems of Pentium and certain 486 and
PowerPC products. Other microprocessor-
specific products include fansink
assemblies (heat sinks with electric fans
attached to them) and plastic heat sinks.
EXTRUDED HEAT SINKS Heat sinks and heat sink assemblies
designed for high power industrial
applications, including transportation and
stereo amplifiers. Other products include
bonded fin heat sinks used by makers of
power supplies.
LOW POWER HEAT SINKS Heat sinks designed for heat dissipation in
power semiconductors, transistors,
rectifier, diodes and other electronic
components used in electronic applications.
Typically, these are smaller components
used on printed circuit boards.
ACTIVE COOLING These products use air or liquid to
COMPONENTS dissipate heat. Air-to-air heat exchangers
use fans to exchange heat with cooler air
and are used in high-performance
telecommunications, military and aerospace
systems. Liquid cooling systems are used in
applications which require the removal of
significantly greater amounts of heat such
as mainframe computers.
PRECISION COMPRESSION These products are complete mounting clamp
MOUNTING CLAMP and heat sink assembly systems for proper
SYSTEMS installation, compression and cooling of
high-power compression pack silicon-
controlled rectifiers.
ACCESSORY PRODUCTS The Company's accessories include high-
performance thermal compounds, adhesives,
interface materials, hardware and
installation tools and other accessories.
Connector Products
Connectors are electro-mechanical devices which permit electronic components
such as printed circuit boards, power supplies and peripherals to be attached
and separated. The Company designs, manufactures and sells high-reliability
miniature and micro-miniature connectors used in military-specification and
high-performance applications. The Company's products also include backpanels,
headers and automotive switches. The Company's connector products are typically
produced in small volumes for niche markets and are highly customized for the
user's specific requirements. Company customers for connectors include Lockheed
Martin, General Motors, AT&T, Hughes Electronics and Loral.
20
<PAGE>
Connectors are required in many applications and are used in a diverse group
of industries, including the military, aerospace, medical instrumentation and
telecommunication industries. As a result, the demand for connectors is
growing. Fleck Research estimated in their 1995 Outlook, that the connectors,
cable assemblies and backpanel market in North America was $10 billion in 1994
and is projected to grow by 9.1% to $10.9 billion in 1995. Furthermore,
significant increases in printed circuit board performance require connectors
to take more connection points off the board, and to accommodate more contacts
in smaller spaces. As a result, the Company believes the demand for miniature
and micro-miniature connectors will grow.
The Company's connector products include:
MICRO-MINIATURE Connectors which are configured in one to
RECTANGULAR CONNECTORS four rows with up to 400 contacts and
designed for high reliability military and
commercial applications.
COAXIAL CONNECTORS Coaxial connectors are single contact
miniature and micro-miniature devices used
predominantly in high reliability
communications and control systems.
CIRCULAR CONNECTORS The Company produces numerous families of
circular connectors, including hermetic
connectors. Hermetic connectors are
designed and produced to be impervious to
liquids and gases and to function in severe
environmental areas such as jet engines and
various instrumentation and manufacturing
systems.
BACKPANELS AND HEADERS Backpanels are manufactured either as
aluminum or printed circuit card units for
use in control systems and avionics. The
Company also produces VME (an international
specification) backpanels and systems
enclosures containing backpanels. The
Company also provides automatic wire
wrapping services, which permit engineers
to test and de-bug prototype boards before
producing printed circuit cards.
AUTOMOTIVE SWITCHES The Company's automotive switches are used
for brake lights, door jams, cruise
control, neutral safety start, junction
blocks and other automotive uses.
TELEPHONE MODULE PLUGS Modular plugs are available in various
configurations for a host of telephone and
other applications.
CUSTOMERS
The Company has established a broad base of over three thousand customers,
representing a wide range of industries. No single customer accounted for
greater than 10% of the Company's sales during its fiscal year 1994 or during
the nine months ended July 30, 1995. The electronics industry, especially the
high-performance microprocessor and personal computer markets, represents the
Company's fastest growing customer group. Sales of the Company's thermal
management products in the microprocessor industry accounted for most of the
growth of such sales in the nine months ended July 30, 1995. Generally, sales
of connectors to the defense industry account for approximately 50% of
connector sales.
The Company's products are incorporated into high technology products
manufactured by OEMs and, accordingly, must meet exacting specifications. A
substantial portion of the Company's OEM customers require the Company to
qualify as an approved supplier. In order to so qualify, the Company must
satisfy stringent quality control standards and undergo extensive in-plant
inspections of its manufacturing processes, equipment and quality control
systems.
SALES, MARKETING, AND DISTRIBUTION
The Company designs, manufactures and sells both standard and customized
products. The Company seeks to become a strategic supplier to its customers and
to differentiate itself from its competitors by offering
21
<PAGE>
a higher level of service and technical sales support to its customers. The
Company has a team of trained technical applications engineers and technicians
who are dedicated to providing ongoing technical support. These engineers and
technicians develop application-related literature, provide answers to
customers' questions on the use and application of the Company's products and
provide field support to customers. In addition, the Company has entered into a
joint marketing relationship with Flomerics, the developer of FLOtherm, a
software used by engineers to design new thermal management products, to make
joint presentations at trade shows and for Flomerics to feature products
developed by the Company in its demonstrations. The Company believes the
technical services provided by its engineers and technicians are an important
factor in its sales and product development efforts.
The Company sells its products through a network of independent contract
manufacturers' representatives and distributors. In North America, thermal
management products are marketed through a seven-person direct sales force, 18
sales representatives and 60 distributors, and connectors are marketed through
17 manufacturers' representatives supported by the Company's six-person product
sales force. Sales offices are located in Wakefield, Massachusetts; Temecula,
Fullerton and South Pasadena, California; Cincinnati, Ohio; and Colmar,
Pennsylvania. In international markets, the Company uses five manufacturers'
representatives and 19 international distributors. International sales of
connector products are supported by two Company facilities located in England
and France, which also assemble and sell micro-miniature connectors for the
European market. Overall, international sales were responsible for 6.4% of the
Company's revenues during the nine months ended July 30, 1995.
In general, the Company's sales representatives and distributors have entered
into agreements that allow for termination by either party upon 30 to 90 days
notice. Generally, distributors are permitted to return a small portion of
products purchased by them during the term of the agreements and to return all
products (other than obsolete products) purchased by them upon termination by
the Company. The Company's distributors are generally not precluded from
marketing competitive products.
PRODUCT DEVELOPMENT
The Company's product development strategy is focused on engineering
modifications of existing products in response to customer needs. The Company
does not focus on the development of entirely new products or materials. During
fiscal 1994, the Company spent $674,000 on product research and development,
and during the nine months ended July 30, 1995, it spent $838,000, primarily
for development of thermal management products. The Company believes that its
technical capabilities, in conjunction with collaborative efforts with
customers, will allow it to continue to introduce products responsively and
quickly.
The Company is currently developing standard and custom heat sink assemblies
for next generation microprocessors, such as the P6 (Pentium Pro) and P7. In
addition, the Company plans to expand product offerings for many types of low
power heat sinks and to expand its collaboration programs with manufacturers of
alternative materials to achieve cost reduction and performance improvements
for thermal management components.
The Company intends to continue developing new connector products by
modifying and enhancing its current products. In keeping with this strategy,
the Company is currently designing and developing its next generation micro-
miniature connector family, which it expects will quadruple connection capacity
in a given space. The Company expects these products to be ready for market in
1996.
COMPETITION
The thermal management market is highly competitive. There are several
companies which compete directly with the Company in the thermal management
business and offer products and services similar to those offered by the
Company. Although no one competitor is dominant, there are four principal
competitors in the thermal management market, including the Company. The
Company's three major competitors are
22
<PAGE>
Aavid Thermal Technologies, Inc., IERC, a division of Dynamics Corporation of
America, and Thermalloy, a division of Bowthorpe, plc. Two of the Company's
thermal management product competitors are divisions of larger corporations
and, as such, have significantly greater financial, marketing, and technical
resources than the Company. Additional competition comes from hundreds of small
machine shops located throughout the country.
The connector industry is highly fragmented with competition drawn along very
specific product lines. The larger connector companies, which include AMP,
Molex, ITT and Labinal, are large multi-national companies. These firms have
financial, marketing and technical resources far greater than the Company's.
Typically, these firms manufacture mass market, large volume standardized
products which do not compete directly with the Company's product lines. The
Company's principal competition in its connector operations, comes from smaller
niche-oriented companies which, like the Company, focus on low volume
customized products. Occasionally, the Company competes with smaller divisions
of the larger firms. The Company's direct competitors include HCC and Deutsch
in the hermetic connector market, CTS's Fabritek division and Teradyne in the
backpanel and header market, and ITT's Cannon division and Labinal's Cinch
division in the miniature and micro-miniature connector market.
BACKLOG
The Company's backlog as of July 30, 1995 was approximately $22 million
compared with $9.5 million on October 31, 1994. Backlog typically consists of
purchase orders scheduled for shipment within 60 days following the order date
for thermal management products and 90 days for connector products. The
Company's backlog at any time is not indicative of future revenue. The Company
has also entered into buying agreements with several customers for its
connectors, including Lockheed Martin, Raytheon and Rockwell International.
These buying agreements generally provide that, for a term of 18 months to two
years, a customer will purchase all its requirements, if any, for a particular
product from the Company for a fixed price.
PROPRIETARY RIGHTS
The Company applies for patents with respect to its most significant
patentable developments. It owns six patents related to its thermal management
products which expire from 1997 to 2012, and it has eight patents pending. The
Company owns 11 patents related to its connector products. Management believes
that its competitive position is not dependent on patents and that patent
expirations will not materially adversely affect the Company's competitive
position.
RAW MATERIALS
The principal raw material used in thermal management products is aluminum.
The principal raw materials used in connector products are aluminum, copper,
stainless steel and steel alloy. The Company also uses gold, plating chemicals,
plastics, bar metal and wire in its production of connectors. The price of raw
materials represents a significant portion of the sales price of the Company's
products. With the exception of a portion of the Company's extruded aluminum
needs supplied under a one-year fixed price contract, these prices are based
upon market prices at the time of purchase. Historically, the price of aluminum
has experienced substantial volatility. Although thermal management products
are generally shipped within 60 days, and connectors are generally shipped
within 90 days, of receipt of orders, increases in raw materials prices cannot
always be reflected in product sales price. All raw materials are readily
available from multiple suppliers at competitive prices. In addition, Specialty
supplies a portion of the Company's needs for extruded aluminum.
ENVIRONMENTAL
The Company believes that it conducts its operations in substantial
compliance with applicable environmental requirements.
23
<PAGE>
The Company uses several metal finishing processes in conjunction with
manufacturing its products. Anodizing, a method of electro-charging aluminum
and coating it with chemicals to enhance appearance and improve corrosion
resistance, is used in manufacturing heat sinks and certain other thermal
management products. Anodizing is done by the Company at its Fall River,
Massachusetts facility. A waste-product of the anodizing process is removed
from the Fall River facility by licensed waste haulers. The Company's Temecula,
California thermal management facility utilizes fully licensed third party
vendors to anodize its products. The Company also uses plating in its connector
operations to improve the products' appearance, provide corrosion protection
and, in some cases, enhance conductivity. The Company's connector facilities in
South Pasadena, California and Cincinnati, Ohio include precious metal plating
operations. These operations generate small amounts of toxic waste, which are
removed from the facilities by licensed waste haulers.
While the Company believes that it has all environmental permits necessary to
conduct its business and that its activities conform to current environmental
regulations, more stringent environmental regulations may be enacted in the
future, and there can be no assurance that the Company will not incur
significant costs in the future in complying with such regulations. Local
environmental agencies monitor the Company's operations for ongoing compliance
with environmental requirements, and the Company is required to correct any
violations revealed by such monitoring. Although the Company is periodically
subject to notices of violations with respect to environmental requirements, it
is not aware of any violations that would require the Company to incur material
costs.
EMPLOYEES
On July 30, 1995, the Company had 707 employees (661 of whom were full time).
Its thermal management operations had 374 employees (358 of whom were full
time), all in domestic operations, and its connector operations had 316
employees in domestic operations (287 of whom were full time) and seven
resident outside the United States (all of whom were full time). In addition,
the Company had 10 corporate employees (nine of whom were full time). Employees
are not represented by a labor union. Management believes that employee
relations are excellent.
PROPERTIES
The Company has leases for manufacturing facilities at the following
locations:
<TABLE>
<CAPTION>
APPROXIMATE PRINCIPAL EXPIRATION
LOCATION SQUARE FEET FACILITY USE DATE
-------- ----------- ------------ ----------
<S> <C> <C> <C>
South Pasadena, California...... 52,696 connectors May 2004
Temecula, California............ 44,200 thermal management December
products 1996
Fullerton, California........... 15,000 thermal management August
products 1998
Cincinnati, Ohio................ 18,000 connectors November
1999
Wakefield, Massachusetts........ 56,500 thermal management November
products 2003
Fall River, Massachusetts....... 60,000 thermal management April
products 2000
Colmar, Pennsylvania............ 37,000 connectors March
2000
</TABLE>
Management feels that these facilities are suitable for the purposes for
which they are used. The Company is currently negotiating a five-year extension
of the lease for its Temecula, California facility. The Company has office
space for its corporate staff in Houston, Texas, Santa Monica, California and
New York, New York.
In addition, the Company currently has approximately 67,000 square feet of
leased space in Houston, Texas, substantially all of which is subleased under
subleases which expire concurrently with the Company's overlease in 1998. See
"Business--History" and Note 9 to Financial Statements.
LEGAL PROCEEDINGS
There are no material pending legal proceedings against the Company and, to
the Company's knowledge, no such proceedings are threatened.
24
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The directors, executive officers and key employees of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Marshall D. Butler...... 68 Chairman of the Board(1)(2)
Lawrence Butler......... 33 President, Chief Executive Officer and Director(1)(4)
Johnny J. Blanchard..... 37 Secretary, Treasurer and Chief Financial Officer
Neal Castleman.......... 45 President, Uni-Star Industries, Inc.
Harry Chase............. 59 President, Wakefield Engineering, Inc.
Donald K. Grierson...... 61 Director(3)
Frederic A. Heim........ 68 Director(2)(3)(4)
Warren G. Lichtenstein.. 30 Director(1)
Dr. Kenneth W. Rind..... 60 Director(2)(4)
</TABLE>
- --------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Stock Option Committee.
(4) Member of the Audit Committee.
MR. MARSHALL D. BUTLER has been Chairman of the Board of the Company and a
director since April 1993. He has served as a director of AVX Corporation, a
manufacturer of ceramic capacitors and a subsidiary of Kyocera Corporation,
since 1973. Mr. Butler served as Chief Executive Officer of AVX Corporation
from December 1973 until his resignation on April 1, 1993. From 1973 to 1990,
Mr. Butler was Chairman of the Board of AVX Corporation. Mr. Butler was a
director of Kyocera Corporation from January 1990 through June 1995. Mr. Butler
has been a director of MassMutual Corporate Investors and MassMutual
Participation Investors since 1989.
MR. LAWRENCE BUTLER has been President and Chief Executive Officer of the
Company since April 1995. From September 1994, he was an executive vice
president. He has served as a director of the Company since September 1994. He
has been a director and President of Camelia Group, Inc., a general partner of
Steel Partners, L.P. (a private investment partnership), a Delaware limited
partnership ("Steel Partners"), since 1990. Mr. Butler has served as President
and a director of Steel Partners, Ltd., the general partner of Steel Partners
Associates, L.P., which is the general partner of Steel Partners II, L.P.
(private investment partnership) ("Steel Partners II"), since 1993. He received
his Bachelor of Arts from the University of Pennsylvania in 1984 and his
Masters of Business Administration from University of California--Los Angeles
in 1989. Lawrence Butler is Marshall D. Butler's son.
MR. WARREN G. LICHTENSTEIN has served as a director of the Company since
April 1993 and as an Executive Vice President from September 1994 through
September 1995. Mr. Lichtenstein has been President of a general partner of
Steel Partners since he co-founded Steel Partners with Lawrence Butler in 1990.
Mr. Lichtenstein has also been the chief executive of the general partner of
the general partner of Steel Partners II, since 1993. From 1988 to 1990, he was
an acquisition/risk arbitrage analyst with Ballantrae Partners, L.P., a private
investment partnership. Since 1993, Mr. Lichtenstein has also served as a
director of SL Industries, Inc., a New York Stock Exchange company engaged in
the manufacture and sale of electrical-mechanical and specialty products. Mr.
Lichtenstein has also served, since April 1994, as a director of Gateway
Industries, Inc., formerly a software designer and manufacturer, and since 1994
as a director of Saratoga Spring Water, Inc., a bottler and distributor of
spring water.
25
<PAGE>
MR. DONALD K. GRIERSON served as Vice-Chairman of the Board of the Company
from April 1993 through April 1995. From December 1988 until April 1993, Mr.
Grierson served as Chairman of the Board of the Company. He has been a director
of the Company since February 1988. Since 1991, Mr. Grierson has also served as
Chairman of the Board, President and Chief Executive Officer of ABB Vetco Gray
Inc., which designs, manufactures, sells and services highly engineered
exploration and production equipment used by the worldwide oil and gas
industry, primarily for offshore applications. From July 1985 to December 1990,
Mr. Grierson was an independent venture capitalist and business consultant. Mr.
Grierson currently serves as a director of Parametric Technology Inc., a
developer and marketer of software products for the automation of the
mechanical design process.
MR. FREDERIC A. HEIM has been a director of the Company since April 1993. Mr.
Heim, a private investor, has served as a director of Encino Savings and Loan,
Van Nuys, California from 1991 until 1994. He was a co-founder and, from 1981
to 1990, a director and Executive Vice President of Computer Memories
Incorporated, a manufacturer of computer disk drives.
DR. KENNETH W. RIND has been a director of the Company since April 1995. Dr.
Rind since 1981, has been a chairman of Oxford Partners Corporation, an
independent venture capital management firm. Dr. Rind is currently a director
of Medical Sterilization, Inc., a supplier of sterilization equipment and
services and Vaso Medical, Inc., a medical technology company and several
private companies. Dr. Rind holds a Ph.D. in nuclear chemistry from Columbia
University.
MR. JOHNNY J. BLANCHARD has been Treasurer, Secretary and Chief Financial
Officer of the Company since September 1994; prior thereto, from December 1989,
he was Controller of the Company; and prior thereto, from October 1988, he was
General Accounting Manager of the Company. Mr. Blanchard is a Certified Public
Accountant.
MR. HARRY CHASE has been President of Wakefield Engineering, Inc. since
October 1993. Prior thereto, from August 1990, he was General Manager of
Wakefield Engineering, Inc., a division of EG&G, Inc.
MR. NEAL CASTLEMAN has been President of Uni-Star Industries, Inc. since June
1994. Since January 1992 he has also been the President of Ergo Mechanical
Systems, Inc., a manufacturer of video deployment systems. From December 1982
to October 1991, Mr. Castleman was President of Tri-Star Electronics Inc., a
manufacturer of electronic connectors and contacts.
26
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of August 31, 1995 (unless otherwise
noted) the number and percentage of outstanding shares of Common Stock of the
Company owned beneficially, within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act of 1934 (the "Exchange Act"), by (i) each
stockholder known by the Company to own more than 5% of the outstanding shares
of Common Stock and (ii) each director and named Executive Officer of the
Company. Except as otherwise specified, the named beneficial owner has sole
voting and investment power.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS NATURE OF PERCENT
OF BENEFICIAL OF
BENEFICIAL OWNERS(1) OWNERSHIP(2) CLASS(2)
-------------------- ------------ --------
<S> <C> <C>
Marshall D. Butler(3)(4)............................ 258,000 4.3%
Lawrence Butler(5)(6)............................... 960,308 15.7%
Donald K. Grierson(7)............................... 210,000 3.4%
Frederic A. Heim(3)(8).............................. 15,000 *
Warren G. Lichtenstein(5)(9)........................ 974,942 15.9%
Dr. Kenneth W. Rind(10)............................. -- *
Johnny J. Blanchard(11)............................. 9,033 *
Harry Chase(12)(13)................................. 6,150 *
All Directors and Executive Officers as Group
(seven persons)(14)................................ 1,570,123 24.9%
Steel Partners, L.P................................. 639,810 10.6%
Dimensional Fund Advisors(15)....................... 307,400 5.09%
</TABLE>
- --------
*Constitutes less than 1%.
(1) Unless otherwise indicated, the address of each beneficial owner is c/o
Alpha Technologies Group, Inc., 750 Lexington Avenue, 27th Floor, New
York, New York 10022.
(2) Includes shares deemed to be beneficially owned by such persons or
entities pursuant to Rule 13d-3 promulgated under the Exchange Act
because they have the right to acquire such shares within 60 days upon
the exercise of options or similar rights or because such persons or
entities have or share investment or voting power.
(3) Does not include shares owned by Steel Partners and Steel Partners II of
which Mr. M. Butler and Mr. Heim are each limited partners. Messrs.
Butler and Heim disclaim beneficial ownership of such shares.
(4) Includes 10,000 shares which Mr. M. Butler has the right to acquire upon
the exercise of stock options within 60 days at an exercise price of
$2.38 per share. Does not include 115,000 shares which he will have the
right to acquire upon the exercise of stock options after 60 days at a
weighted average exercise price of $5.04 per share.
(5) Includes 639,810 and 223,500 shares owned by Steel Partners and Steel
Partners II, respectively, which Messrs. L. Butler and Lichtenstein may
be deemed to beneficially own by virtual of their shared voting and
dispositive power.
(6) Includes 96,998 shares owned directly by Lawrence Butler, of which 89,998
are shares which Mr. Butler has the right to acquire upon the exercise of
stock options within 60 days at a weighted average exercise price of
$3.31 per share. Does not include 205,002 shares which he will have the
right to acquire upon the exercise of stock options after 60 days at a
weighted average exercise price of $4.70 per share.
(7) Includes 60,000 shares which Mr. Grierson has the right to acquire upon
the exercise of stock options within 60 days at a weighted average
exercise price of $2.96 per share.
(8) Includes 10,000 shares which Mr. Heim has the right to acquire upon the
exercise of stock options within 60 days at an exercise price of $2.38
per share. Does not include 15,000 shares which he will have the right to
acquire upon the exercise of stock options after 60 days at an exercise
price of $2.38 per share.
(9) Includes 111,632 shares owned directly by Mr. Lichtenstein, of which
83,332 are shares which Mr. Lichtenstein has the right to acquire upon
the exercise of stock options within 60 days at a weighted average
exercise price of $3.34 per share. Does not include
27
<PAGE>
111,668 shares which he will have the right to acquire upon the exercise of
stock options after 60 days at a weighted average exercise price of $3.64
per share.
(10) Does not include 60,000 shares which Dr. Rind has the right to acquire
upon the exercise of stock options after 60 days at an exercise price of
$5.56 per share.
(11) Includes 8,933 shares which Mr. Blanchard has the right to acquire upon
the exercise of stock options within 60 days at a weighted average
exercise price of $3.12 per share. Does not include 19,067 shares which he
will have the right to acquire upon the exercise of stock options after 60
days at a weighted average exercise price of $4.87 per share.
(12) Address is c/o Wakefield Engineering, Inc., 60 Audubon Road, Wakefield,
Massachusetts 01880.
(13) Includes 4,000 shares which Mr. Chase has the right to acquire upon the
exercise of stock options within 60 days at an exercise price of $2.93 per
share. Does not include 83,000 shares which he will have the right to
acquire upon the exercise of stock options after 60 days at a weighted
average exercise price of $4.60 per share.
(14) Includes an aggregate of 266,263 shares which individuals in the group
have the right to acquire upon the exercise of stock options which are
exercisable within 60 days at a weighted average exercise price of $3.16
per share. Also includes 639,810 shares held by Steel Partners and 223,500
shares held by Steel Partners II over which Messrs. Lichtenstein and L.
Butler may be deemed to be the beneficial owners by virtue of their shared
voting and dispositive power. Does not include 608,737 shares which the
individuals in this group have the right to acquire, at a weighted average
exercise price of $4.59, upon the exercise of stock options after 60 days.
(15) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
adviser, is deemed to have beneficial ownership of 307,400 shares of Alpha
stock as of December 31, 1994, all of which shares are held in portfolios
of DFA Investment Dimensions Group Inc., a registered open-end investment
company, or in series of the DFA Investment Trust Company, a Delaware
business trust or the DFA Group Trust and the DFA Participating Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares.
Directors are elected at the Annual Meeting of Stockholders or to fill
vacancies by the Board of Directors, to serve until the next Annual Meeting of
Stockholders or the election of their successors. Officers are appointed by the
Board of Directors, typically at its first meeting after the Annual Meeting of
Stockholders, for such terms as the Board of Directors may determine or until
the election of their successors.
28
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued for services
rendered in all capacities to the Company during the fiscal years ended
October 31, 1994 and October 31, 1993 and the nine months ended July 30, 1995
to the current executive officers who are compensated at an annual rate of
more than $100,000 (including amounts paid to Mr. L. Butler and Mr.
Lichtenstein for services rendered before their election as officers). Neal
Castleman has served as President of Uni-Star without compensation since June
1995. The Company and Mr. Castleman are currently negotiating a three-year
employment contract.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
AWARDS
------
ANNUAL COMPENSATION
NAME AND PRINCIPAL ----------------------- SECURITIES UNDERLYING ALL OTHER
POSITION PERIOD SALARY($) BONUS($) OPTIONS/SARS(#) COMPENSATION ($)
- ------------------ ------ --------- -------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
Marshall D. Butler Nine months ended
Chairman of the Board July 30, 1995 $112,500(1) $ -- 100,000 $ --
Fiscal 1994 16,538(2) -- -- --
Fiscal 1993 --(2) -- 25,000 --
Lawrence Butler Nine months ended
Chief Executive July 30, 1995 107,039(3) 54,000(5) 100,000(6) --
Officer and Director Fiscal 1994 13,231 -- 120,000(7) 57,500(7)
Fiscal 1993 -- -- 75,000(8)(9) 75,000(9)
Warren G. Lichtenstein Nine months ended
Executive Vice July 30, 1995 90,000(4) -- -- --
President and Direc- Fiscal 1994 13,231(2) -- 120,000(7) 57,500(7)
tor Fiscal 1993 --(2) -- 75,000(9) 75,000(9)
Harry Chase Nine months ended
President, Wakefield July 30, 1995 96,912 35,875 1,983(11)
Engineering, Inc. Fiscal 1994 116,896 25,000 120,000(10) 2,107(11)
Fiscal 1993 -- -- -- --
</TABLE>
- --------
(1) During the current fiscal year, Marshall D. Butler is receiving
compensation at the rate of $150,000 per annum.
(2) Does not include $2,000 paid as a director's fee in fiscal 1994 and $4,000
in fiscal 1993.
(3) On April 19, 1995, Lawrence Butler became President and Chief Executive
Officer of the Company at a salary of $180,000 per annum. In August 1995,
Mr. Butler entered into a three-year employment agreement with the
Company. As part of his employment agreement and consistent with the
Company's policy of not paying investment banking fees to a director
receiving compensation as an employee, Mr Butler agreed that no such fees
would be payable to him, directly or indirectly, during the term of the
agreement.
(4) Until September 30, 1995, Mr. Lichtenstein was receiving compensation at
the rate of $120,000 per annum.
(5) Mr. Butler's employment contract provides for a bonus, based on the
Company's earnings for its fiscal year ended October 31, 1995 from
continuing operations, less minority interest and before provision for
income taxes. Based on specific earning targets, the bonus will range
between 16% to 69% of his salary, and is contingent on the Company's net
income reaching certain levels. The amount shown represents Mr. Butler's
accrued bonus to July 30, 1995.
(6) On April 19, 1995, in connection with his election as President of the
Company, Lawrence Butler was granted options to purchase 100,000 shares of
Common Stock, 50,100 of which are exercisable at $5.98 per share and
49,900 of which are exercisable at $5.44 per share in three equal
cumulative annual installments until April 19, 1998. The fair market value
of the shares on April 19, 1995 was $5.44.
(7) For investment banking and consulting services rendered in connection with
the acquisitions of Uni-Star and Ahamtor, the Company granted options to
purchase 50,000 shares and 70,000 shares, respectively, of Common Stock to
each of Lawrence Butler and Warren G. Lichtenstein. Such options are
exercisable at a price of $3.50 and $4.47 per share (the fair market
values of the shares at the dates of grant), respectively, each in three
equal cumulative annual installments through 1997. For investment and
consulting services rendered in connection with the acquisition of Uni-
Star, the Company paid $57,500 to each of Lawrence Butler and Warren G.
Lichtenstein.
(8) Prior to his serving as a director or becoming an employee, on June 21,
1993 Lawrence Butler entered into a consulting agreement with the Company
pursuant to which he received stock options entitling him to purchase
25,000 shares of Common Stock at an exercise price of $2.63 per share (the
fair market value of a share at the date of grant) in three equal
cumulative annual installments until June 21, 1996.
(9) For investment banking and consulting services rendered in connection with
the acquisition of Wakefield, the Company (a) paid $75,000 and (b) granted
stock options to purchase 50,000 shares of Common Stock at an exercise
price of $2.75 per share (the fair market value of the shares on the date
of the grant), exercisable in three equal cumulative annual installments
until October 29, 1996 to each of Lawrence Butler and Warren G.
Lichtenstein .
(10) On October 28, 1994, Mr. Chase was granted stock appreciation rights
("SARs") for 100,000 shares of Common Stock with 33,000 shares vesting
immediately, 33,000 on October 31, 1996 and 34,000 on October 31, 1997.
In July 1995, Mr. Chase exercised the 33,000 vested shares and received a
cash payment of $156,625.00, representing appreciation on the underlying
shares. In addition, in July 1995, he exchanged the remaining 67,000
unvested SARs for stock options with the same vesting schedule as the
SARs and an exercise price of $5.00 per share.
(11) Represents the value of Mr. Chase's personal use of a Company-provided
car.
29
<PAGE>
DESCRIPTION OF DEBENTURES
The Debentures are to be issued under an Indenture, dated as of ,
1995 (the "Indenture"), between the Company and , as Trustee (the
"Trustee"). A copy of the Indenture substantially in the form in which it is to
be executed has been filed as an exhibit to the Registration Statement. The
following summarizes the material provisions of the Indenture and is subject
to, and qualified in its entirety by reference to, all the provisions of the
Indenture, including the definition therein of certain terms. Wherever
particular articles, sections or defined terms of the Indenture are referred
to, it is intended that such articles, sections or defined terms shall be
incorporated herein by reference.
GENERAL
The Debentures will be limited to $25,000,000 aggregate principal amount (or
$28,750,000 aggregate principal amount assuming exercise in full of the
Underwriter's over-allotment option), will be unsecured subordinated
obligations of the Company, and will mature on , 2005. The
Debentures will bear interest from , 1995 at the rate per annum
shown on the cover page of this Prospectus. Interest will be payable semi-
annually on and of each year ("Interest Payment Dates"),
subject to certain exceptions, commencing , 1996, to the person in
whose name the Debenture is registered at the close of business on the day
of or , as the case may be ("Regular Record Date"),
next preceding such Interest Payment Date. Principal of, premium, if any, and
interest on the Debentures will be payable, and the Debentures will be
convertible and exchangeable and transfers thereof will be registrable, at the
office of the Trustee or the office or agency of the Company maintained for
such purpose in the City of New York and at any other office or agency
maintained by the Company for such purpose, provided that at the option of the
Company, payment of interest may be made by check mailed to the address of the
person entitled thereto as it appears in the Debenture Register. All payments
of interest and principal will be made in United States Dollars. (Sections
3.01, 3.05, 3.07, 10.02, 12.02 and 13.01)
The Debentures will be issued only in registered form without coupons in
denominations of $1,000 or any integral multiple thereof. (Section 3.02) No
service charge will be made for any registration of transfer or exchange of
Debentures, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith. (Section
3.05)
CONVERSION RIGHTS
The Debentures will be convertible into Common Stock at any time prior to
redemption (except as set forth in the following sentence) or maturity,
initially at the conversion price stated on the cover page hereof. The right to
convert Debentures called for redemption will terminate at the close of
business on the Business Day immediately preceding a Redemption Date and will
be lost if not exercised prior to that time. (Section 12.01) See "Optional
Redemption."
Debentures surrendered for conversion during the period from the close of
business on any Regular Record Date next preceding any Interest Payment Date to
the opening of business on such Interest Payment Date (except Debentures called
for redemption on a Redemption Date within such period) must be accompanied by
payment of an amount equal to the interest thereon which the registered Holder
is to receive. No other adjustment for interest or dividends is to be made upon
conversion. (Sections 3.07 and 12.02) Fractional shares of Common Stock will
not be issued upon conversion, but in lieu thereof, the Company will pay a cash
adjustment based upon market price. (Section 12.03)
The Conversion Price is subject to adjustment (under formulae set forth in
the Indenture) under certain circumstances, including: (i) the issuance of
Common Stock as a dividend or distribution on Common Stock;
30
<PAGE>
(ii) the issuance to all holders of Common Stock of rights or warrants
entitling them to subscribe for or purchase Common Stock at a price per share
less than the Current Market Price; (iii) certain subdivisions and combinations
of Common Stock; (iv) the issuance as a dividend or distribution to all holders
of Common Stock of shares of capital stock of the Company (other than Common
Stock) or evidences of indebtedness, cash or other assets of the Company
(including securities, but excluding those rights, warrants, dividends and
distributions referred to above and dividends and distributions in connection
with the liquidation, dissolution or winding up of the Company or paid
exclusively in cash); (v) dividends or other distributions consisting
exclusively of cash (excluding any cash portion of distributions referred to in
clause (iv)) to all holders of Common Stock to the extent such distributions,
combined with (A) all such all-cash distributions made within the preceding 12
months in respect of which no adjustment has been made, plus (B) any cash and
the fair market value of other consideration payable in respect of any tender
offers by the Company or any of its subsidiaries for Common Stock concluded
within the preceding 12 months in respect of which no adjustment has been made,
exceeds 10% of the Company's market capitalization (being the product of the
then current market price of the Common Stock times the number of shares of
Common Stock then outstanding) on the record date for such distribution; and
(vi) the purchase of Common Stock pursuant to a tender offer made by the
Company or any of its subsidiaries to the extent that the aggregate
consideration, together with (X) any cash and the fair market value of any
other consideration payable in any other tender offer expiring within the 12
months preceding such tender offer in respect of which no adjustment has been
made, plus (Y) the aggregate amount of any such all-cash distributions referred
to in clause (v) above to all holders of Common Stock within the 12 months
preceding the expiration of such tender offer in respect of which no
adjustments have been made, exceeds 10% of the Company's market capitalization
on the expiration of such tender offer. (Section 12.04) In the case of certain
consolidations or mergers to which the Company is a party or the conveyance or
transfer of the properties and assets of the Company substantially as an
entirety, each Debenture then outstanding would, without the consent of any
Holders of Debentures, become convertible only into the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance or transfer by a holder of the number of shares of Common Stock into
which the Debenture might have been converted immediately prior to such
consolidation, merger, conveyance or transfer, assuming such holder of Common
Stock failed to exercise his rights of election, if any, as to the kind or
amount of securities, cash and other property receivable upon the
consolidation, merger, conveyance or transfer (provided that if the kind or
amount of securities, cash or other property so receivable is not the same for
each non-electing share, the kind and amount so receivable by each non-electing
share shall be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). (Section 12.10)
SUBORDINATION OF DEBENTURES
The Debentures will be subordinated and subject, to the extent and in the
manner set forth in the Indenture, to the prior payment in full of all Senior
Indebtedness. (Section 13.01) Senior Indebtedness is defined to include the
principal of, premium, if any, interest and other amounts due on any
indebtedness, whether now outstanding or hereafter created, incurred, assumed
or guaranteed by the Company, for money borrowed from others (including
obligations under capitalized leases or purchase money indebtedness) or in
connection with the acquisition by the Company or a Subsidiary of any other
business or entity, or in respect of letters of credit or bid, performance or
surety bonds issued for the account or on the credit of the Company or a
Subsidiary, and, in each case, all renewals, extensions and refundings thereof,
other than (i) any such indebtedness as to which, in the instrument creating or
evidencing the same, it is provided that such indebtedness is not superior in
right of payment to the Debentures, (ii) indebtedness of the Company to any
Affiliate and (iii) the Debentures. (Section 1.01) At July 30, 1995, the
Company had approximately $19,147,000 of outstanding indebtedness that would
have constituted Senior Indebtedness under the Indenture. The Indenture does
not limit the amount of Senior Indebtedness that the Company may incur.
No payments of principal of, premium, if any, or interest on the Debentures
may be made and no Debentures may be redeemed, retired or purchased if the
Company is then in default in the payment of any
31
<PAGE>
Senior Indebtedness or if at the time any other Event of Default under the
terms of any Senior Indebtedness exists permitting acceleration thereof. Upon
any payment or distribution of assets of the Company in the event of any
insolvency, reorganization, liquidation or similar proceeding, all Senior
Indebtedness must be repaid in full (including any interest thereon accruing
after the commencement of any proceeding) before the Holders will be entitled
to receive or retain any payment. If the Debentures are declared due and
payable before their Stated Maturity because of the occurrence of an Event of
Default, no payment may be made in respect of the Debentures unless and until
all Senior Indebtedness shall have been paid in full. (Section 13.02)
By reason of such subordination, in the event of insolvency, creditors of the
Company who are holders of Senior Indebtedness may recover more, ratably, than
Holders, and creditors of the Company who are neither holders of Senior
Indebtedness nor Holders may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than Holders.
OPTIONAL REDEMPTION
The Debentures will be redeemable upon not less than 30 nor more than 60
days' notice by mail at any time, as a whole or in part, at the election of the
Company, at a Redemption Price equal to the percentage of the principal amount
set forth below if redeemed in the 12-month period beginning of the
years indicated:
<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
YEAR PRICE YEAR PRICE
- ---- ---------- ---- ----------
<S> <C> <S> <C>
1998 2001
1999 2002
2000 2003
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount,
with accrued interest to the Redemption Date (subject to the right of Holders
of record on Regular Record Dates to receive interest due on an Interest
Payment Date), provided that the Company may not redeem any Debentures prior to
, 1998. (Sections 2.03, 11.01, 11.04, 11.05 and 11.06)
CERTAIN RIGHTS TO REQUIRE REPURCHASE OF DEBENTURES BY THE COMPANY
In the event of any Change in Control (as defined below) of the Company
occurring after the date of issuance of the Debentures and on or prior to
Maturity, each Holder of Debentures will have the right, at the Holder's
option, to require the Company to repurchase all or any part of the Holder's
Debentures on the date (the "Repurchase Date") that is 75 days after the date
the Company gives notice of the Change in Control as described below at a price
(the "Repurchase Price") equal to 100% of the principal amount thereof,
together with accrued and unpaid interest to the Repurchase Date. (Section
14.01) On or prior to the Repurchase Date, the Company shall deposit with the
Trustee or a Paying Agent an amount of money sufficient to pay the Repurchase
Price of the Debentures which are to be repaid on the Repurchase Date. (Section
14.03) Neither the Board of Directors of the Company nor the Trustee, acting
alone or together, can modify or waive this required repurchase of the
Debentures.
Failure by the Company to repurchase the Debentures when required under the
preceding paragraph will result in an Event of Default under the Indenture
whether or not such repurchase is permitted by the subordination provisions of
the Indenture. (Section 5.01)
On or before the 15th day after the occurrence of a Change in Control, the
Company is obligated to mail to all Holders a notice of the event constituting
and the date of such Change in Control,
32
<PAGE>
the Repurchase Date, the date by which the repurchase right must be exercised,
the Repurchase Price for Debentures, and the procedures which a Holder must
follow to exercise a repurchase right. To exercise the repurchase right, a
Holder of a Debenture must deliver, on or before the 10th day prior to the
Repurchase Date, written notice to the Company (or an agent designated by the
Company for such purpose) and to the Trustee of the Holder's exercise of such
right, together with the certificates evidencing the Debentures with respect to
which the right is being duly exercised, duly endorsed for transfer. (Section
14.02)
A "Change in Control" shall occur when: (i) all or substantially all of the
Company's assets are sold as an entirety to any person or related group of
persons; (ii) there shall be consummated any consolidation or merger of the
Company (A) in which the Company is not the continuing or surviving corporation
(other than a consolidation or merger with a wholly-owned subsidiary of the
Company in which all shares of Common Stock outstanding immediately prior to
the effectiveness thereof are changed into or exchanged for the same
consideration) or (B) pursuant to which the Common Stock is converted into
cash, securities or other property, in each case other than a consolidation or
merger of the Company in which the holders of the Common Stock immediately
prior to the consolidation or merger have, directly or indirectly, at least a
majority of the common stock of the continuing or surviving corporation
immediately after such consolidation or merger, or (iii) any person, or any
persons acting together which would constitute a "group" for purposes of
Section 13(d) of the Exchange Act, together with any Affiliates thereof, shall
acquire beneficial ownership (as defined in Rule 13d-3 under the Exchange Act)
of at least 50% of the total voting power of all classes of capital stock of
the Company entitled to vote generally in the election of directors of the
Company. Notwithstanding clause (iii) of the foregoing definition, a Change in
Control shall not be deemed to have occurred solely by virtue of the Company,
any Subsidiary, any employee stock purchase plan, stock option plan or other
stock incentive plan or program, retirement plan or automatic dividend
reinvestment plan or any substantially similar plan of the Company or any
Subsidiary or any person holding securities of the Company for or pursuant to
the terms of any such employee benefit plan, filing or becoming obligated to
file a report under or in response to Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report) under the Exchange Act disclosing
beneficial ownership by it of shares or securities of the Company, whether in
excess of 50% or otherwise. (Section 14.05) A recapitalization or a leveraged
buyout or similar transaction involving members of Management or their
Affiliates will constitute a Change in Control if it meets the foregoing
definition.
Notwithstanding the foregoing, a Change in Control as described above shall
not be deemed to have occurred if (i) the Current Market Price of the Common
Stock on the date of a Change in Control is at least equal to 105% of the
Conversion Price of the Debentures in effect immediately preceding the time of
such Change in Control, or (ii) all of the consideration (excluding cash
payments for fractional shares) in the transaction giving rise to such Change
in Control to the holders of Common Stock consists of shares of common stock
that are, or immediately upon issuance will be, listed on a national securities
exchange or quoted on the National Market, and as a result of such transaction
the Debentures become convertible solely into such common stock, or (iii) the
consideration in the transaction giving rise to such Change in Control to the
holders of Common Stock consists of cash or securities that are, or immediately
upon issuance will be, listed on a national securities exchange or quoted on
the National Market, or a combination or cash and such securities, and the
aggregate fair market value of such consideration (which, in the case of such
securities, shall be equal to the average of the daily Closing Price of such
securities during the 10 consecutive trading days commencing with the sixth
trading day following consummation of such transaction) is at least 105% of the
Conversion Price of the Debentures in effect on the date immediately preceding
the Closing Date of such transaction. (Section 14.05)
There is no definition of the phrase "all or substantially all" as applied to
the Company's assets and used in the definition of Change in Control in the
Indenture, and there is no clear definition of such phrase under applicable
law. As a result of the uncertainty of the meaning of this phrase, in the event
the Company were to sell a significant amount of its assets, the Holders and
the Company may disagree over whether the sale gave rise to the right of
Holders to require the Company to repurchase the Debentures. In such case, the
33
<PAGE>
Holders would likely not be able to require the Company to repurchase unless
and until the disagreement were resolved in favor of the Holders.
The right to require the Company to repurchase Debentures as a result of the
occurrence of a Change in Control could create an Event of Default under Senior
Indebtedness, as a result of which any repurchase could, absent a waiver, be
blocked by the subordination provisions of the Debentures. See "Subordination
of Debentures". The Company's ability to pay cash to the Holders upon a
repurchase may be limited by certain financial covenants contained in the
Company's Senior Indebtedness.
In the event a Change in Control occurs and the Holders exercise their rights
to require the Company to repurchase Debentures, the Company intends to comply
with applicable tender offer rules under the Exchange Act, including Rules 13e-
4 and 14e-1, as then in effect, with respect to any such purchase. The Change
in Control purchase feature of the Debentures may in certain circumstances make
more difficult or discourage a takeover of the Company and, thus, the removal
of incumbent Management. The Change in Control purchase feature, however, is
not the result of Management's knowledge of any specific effort to accumulate
shares of Common Stock or to obtain control of the Company by means of a
merger, tender offer, solicitation or otherwise, or part of a plan by
Management to adopt a series of anti-takeover provisions. Instead, the Change
in Control purchase feature is a standard term contained in other similar debt
offerings and the specific terms of this feature result from negotiations
between the Company and the Underwriters. Management has no present intention
to engage in a transaction involving a Change in Control.
The foregoing provisions would not necessarily afford Holders protection in
the event of highly leveraged or other transactions involving the Company that
may adversely affect Holders.
SINKING FUND
There will be no sinking fund established for the retirement of the
Debentures.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of two-thirds in principal amount
of the Outstanding Debentures provided that no such modification or amendment
may, without the consent of the Holder of each Outstanding Debenture affected
thereby, (i) change the stated maturity date of the principal of, or any
installment of interest on, the Debentures, (ii) reduce the principal amount
of, the rate of interest thereon, or any premium payable on, any Debentures,
(iii) change the place of payment where, or the coin or currency in which, any
Debenture or any payment or the interest thereon is payable, (iv) impair the
right to institute suit for the enforcement of any such payment when due, (v)
adversely affect the conversion rights of the Holders, (vi) modify the
provisions of the Indenture with respect to the subordination of the Debentures
in a manner adverse to the Holders, (vii) adversely affect the right to require
the Company to repurchase Debentures or (viii) reduce the percentage in
principal amount of Debentures the consent of whose Holders is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults. (Section
9.02)
EVENTS OF DEFAULT; NOTICE AND WAIVER
The following are to be Events of Default: (i) default in the payment of any
interest, continued for 30 days; (ii) default in the payment of principal or
premium, if any, when due; (iii) default in the payment of the Repurchase Price
in respect of any Debenture on the Repurchase Date in accordance with the
Indenture; (iv) default in the performance of any other covenant continued for
60 days after written notice to the Company as provided in the Indenture; (v)
default in respect of indebtedness of the Company for money borrowed which
results in acceleration of the maturity of $1 million or more of indebtedness,
if such acceleration is not rescinded or indebtedness discharged within 30 days
after written notice to the Company
34
<PAGE>
as provided in the Indenture; and (vi) certain events in bankruptcy, insolvency
or reorganization. (Section 5.01) If any Event of Default shall happen and be
continuing, the Trustee or the Holders of not less than 25% in principal amount
of the Outstanding Debentures may declare the Debentures due and payable
immediately. (Section 5.02) At any time after a declaration of acceleration
with respect to the Debentures has been made, but before a judgment or decree
based on acceleration has been obtained, the Holders of a majority in principal
amount of the Outstanding Debentures may, under certain circumstances, rescind
and annul such acceleration. (Section 5.02)
No Holder will have any right to institute any proceeding with respect to the
Indenture or for any remedy under the Indenture unless (i) the Holder
previously has given to the Trustee written notice of a continuing Event of
Default, (ii) the Holders of not less than 25% in principal amount of the
Outstanding Debentures have made written request, and offered reasonable
indemnity, to the Trustee to institute proceedings as trustee, and (iii) within
60 days after such request, the Trustee has neither instituted such proceeding
nor received from the Holders of a majority in aggregate principal amount of
the Outstanding Debentures a direction inconsistent with the request. (Section
5.07)
The Indenture will provide that the Trustee will be under no obligation,
subject to the duty of the Trustee during default to act with the required
standard of care, to exercise any of its rights or powers under the Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee reasonable indemnification. (Section 6.03) Subject
to such provisions for indemnification of the Trustee, the Holders of a
majority in principal amount of the Outstanding Debentures will have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee. (Section 5.12)
The Holders of a majority in principal amount of the Outstanding Debentures
may on behalf of the Holders of all Debentures waive compliance by the Company
with certain restrictive provisions of the Indenture. (Section 10.07) The
Holders of a majority in principal amount of the Outstanding Debentures may on
behalf of the Holders of all Debentures waive certain past defaults except a
default in payment of the principal of (or premium if any) or interest on any
Debenture or in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of the Holder of each
Outstanding Debenture affected. (Section 5.13)
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
The Indenture provides that the Company shall not consolidate with or merge
into any other corporation or convey or transfer its properties and assets
substantially as an entirety to any person, unless (i) any such successor
assumes the Company's obligations under the Debentures and the Indenture, (ii)
after giving effect thereto, no Event of Default shall have occurred and be
continuing and (iii) certain other conditions under the Indenture are met.
(Section 8.01) Upon any such consolidation or merger, or any such conveyance or
transfer of the properties and assets of the Company substantially as an
entirety, the successor corporation formed by such consolidation, or into which
the Company is merged, or to which such conveyance or transfer is made, shall
succeed to, and be substituted for, any may exercise every right and power of,
the Company under the Indenture with the same effect as if such successor
corporation had been named as the Company. The Company as the predecessor
corporation shall be relieved of all obligations and covenants under the
Indenture. (Section 8.02)
GOVERNING LAW
The Indenture will provide that the Debentures will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law.
THE TRUSTEE
will be the Trustee under the Indenture.
35
<PAGE>
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The authorized capital stock of the Company includes 17 million shares of
Common Stock, par value $.03 per share. Holders of Common Stock have no
preemptive rights. The outstanding shares of Common Stock are fully paid and
non-assessable. Holders of Common Stock are entitled to dividends when, as and
if declared by the Board of Directors of the Company out of any funds legally
available to the Company for that purpose. A Holder will not be entitled to
receive dividends actually declared and paid, if any, with respect to the
Common Stock unless such holder has first exercised the conversion rights
associated with the Debentures, and then only to the extent such Holder has so
converted Debentures into shares of Common Stock.
Holders of Common Stock are entitled to one vote per share held of record
with respect to all matters submitted to a vote of the stockholders. There is
no cumulative voting for the election of directors, who are elected annually to
one-year terms.
PREFERRED STOCK
The Company is authorized to issue 180,000 shares of Preferred Stock, par
value $100 per share, and to establish and issue shares of Preferred Stock in
series and to fix, determine and vary the voting rights, designations,
preferences, qualifications, privileges, options, conversion rights and other
special rights of each series of Preferred Stock. As of the date of this
Prospectus no shares of Preferred Stock were issued and outstanding.
CERTAIN PROVISIONS OF DELAWARE LAW
The Company is subject to Section 203 of (the "DGCL"), which prohibits a
Delaware corporation from engaging in a wide range of specified transactions
with any interested stockholder, defined to include, among others, any person
or entity who in the previous three years obtained 15% or more of any class or
series of stock entitled to vote in the election of directors, unless, among
other exceptions, the transaction is approved by (i) the Board of Directors
prior to the date the interested stockholder obtained such status or (ii) the
holders of two-thirds of the outstanding shares of each class or series owned
by the interested stockholder.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Limitation of Liability. Pursuant to the DGCL, the Company has adopted
provisions in its Certificate of Incorporation which eliminate the personal
liability of its directors and officers to the Company and its stockholders for
monetary damages for breach of the directors' fiduciary duties in certain
circumstances and which authorize the Company to indemnify its directors,
officers and other agents, by bylaw, agreement or otherwise, to the fullest
extent permitted by law. Generally, a director will be liable for monetary
damages only for a breach of the duty of loyalty, a failure to act in good
faith, intentional misconduct, a knowing violation of law, an improper personal
benefit, or an illegal dividend or stock repurchase, but not for negligence or
gross negligence in satisfying the duty of care. The Company's Bylaws require
the Company to indemnify its directors, officers, employees and other agents to
the fullest extent permitted by law. Generally, a director will be entitled to
be indemnified against a claim if a majority of the directors who are not
parties, independent legal counsel, or the stockholders determines that the
director acted in good faith and in a manner he or she reasonably believed to
be in, or not opposed to, the best interests of the Company and, with respect
to a criminal action, had no reasonable cause to believe his or her conduct was
unlawful; and his or her expenses may be advanced by the Company if the
director undertakes to reimburse them if it is ultimately determined that he or
she was not entitled to indemnification.
Indemnification Agreements. The Company has entered into an indemnification
agreement with each of its officers and directors. The agreements provide that
in the event any such executive officer or director, is or becomes a party or a
witness or other participant in any threatened, pending or completed action,
suit or proceeding (an "Action") relating to the fact that such person is or
was a director, officer, employee or agent
36
<PAGE>
of the Company, or is or was serving at the request of the Company as a
director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise, the Company shall indemnify such person to the fullest extent or
permitted by the DGCL. In addition, the agreement provides that all reasonable
expenses (including legal fees) incurred by any such person shall be paid by
the Company in advance of the final disposition of any Action.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission (the
"Commission") such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of
the Company in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issuer.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Bank of Boston, P.O.
Box 644, Boston, Massachusetts 02102. Its telephone number is (617) 575-2000.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain anticipated U.S. Federal income tax
consequences of the purchase, ownership and disposition of the Debentures as of
the date hereof. It deals only with the Debentures held as capital assets by
initial holders that are United States holders, and does not deal with special
situations, such as those of foreign persons, dealers in securities, financial
institutions, life insurance companies, holders whose "functional currency" is
not the U.S. dollar, or certain "straddle" or hedging transactions. The Federal
income tax considerations set forth below are based upon the Internal Revenue
Code of 1986, as amended (the "Code") and regulations, rulings and judicial
decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified so as to result in Federal income tax
consequences different from those discussed below. PROSPECTIVE INVESTORS ARE
URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES
OF PURCHASING, HOLDING AND DISPOSING OF THE DEBENTURES, INCLUDING THE TAX
CONSEQUENCES ARISING UNDER ANY STATE, LOCAL OR FOREIGN LAWS.
A holder will not recognize gain or loss upon conversion of the Debentures
solely into Common Stock (except with respect to cash received in lieu of
fractional shares). The holder's basis in the Common Stock received on
conversion will be the same as the holder's adjusted tax basis in the
Debentures at the time of conversion, and the holding period for the Common
Stock received on conversion will include the holding period of the Debentures
that were converted.
The Conversion Price is subject to adjustment under certain circumstances.
Under Section 305 of the Code and the treasury regulations issued thereunder,
adjustments or the failure to make such adjustments to the Conversion Price may
result in a taxable constructive distribution to the holders of Debentures,
resulting in ordinary income (subject to a possible dividends received
deduction in the case of corporate holders) to the extent of the Company's
current or accumulated earnings and profits if, and to the extent that, certain
adjustments in the Conversion Price may occur in limited circumstances
(particularly an adjustment to reflect a taxable dividend to holders of Common
Stock) increase the proportionate interest of a holder of a Debenture
convertible into fully diluted Common Stock, whether or not the holders ever
convert the Debentures. Generally, a holder's tax basis in a Debenture will be
increased by the amount of any such constructive dividend.
37
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters") have severally agreed,
subject to the terms and conditions set forth in the Underwriting Agreement, to
purchase from the Company the principal amount of Debentures indicated below
opposite their respective names at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters will purchase
all the Debentures offered hereby if any such Debentures are purchased.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF DEBENTURES
------------ ----------------
<S> <C>
Unterberg Harris......................................... $
-----------
Total................................................ $25,000,000
===========
</TABLE>
The Company has been advised that the Underwriters propose initially to offer
the Debentures to the public at the offering price set forth on the cover page
of this Prospectus and to certain selected dealers (who may include the
Underwriters) at such price less a concession not in excess of % of the
principal amount thereof. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of % to certain other dealers. After
the initial offering, the offering price and other selling terms may be changed
by the Underwriters. The Debentures are offered subject to receipt and
acceptance by the Underwriters, and to certain other conditions, including the
right to reject orders in whole or in part.
The Company has granted an option to the Underwriters, exercisable during the
30 day period after the date of this Prospectus, to purchase up to a maximum of
$3,750,000 in principal amount of additional Debentures from the Company at the
initial offering price less the underwriting discount shown on the cover page
of this Prospectus. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the Debentures offered
hereby. To the extent the Underwriters exercise the option, the Underwriters
will be committed, subject to certain conditions, to purchase a principal
amount of such additional Debentures in approximately the same proportion as
set forth in the above table.
The Company has agreed to indemnify the Underwriters against certain
liabilities that may be incurred in connection with this Offering, including
liabilities under the Act, or to contribute to payments that the Underwriters
may be required to make in respect thereof.
The Company, the Company's directors and executive officers, Steel Partners
and Steel Partners II have agreed that they will not publicly sell or dispose
of, any shares of Common Stock without the prior written consent of Unterberg
Harris for 180 days after the effectiveness of the Registration Statement,
except for issuances by the Company under employee stock plans, upon conversion
of the Debentures and upon exercise of options outstanding at the commencement
of this Offering.
In connection with this Offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualifying registered
market makers on the National Market may engage in passive market making
transactions in the Common Stock on the National Market in accordance with Rule
10b-6A under the Exchange Act during the two business day period before
commencement of offers or sales
38
<PAGE>
of the Debentures. The passive market transactions must comply with applicable
volume and price limits and be identified as such. In general, a possible
market maker may display its bid at a price not in excess of the highest
independent bid for the security; if all independent bids are lowered below the
passive market maker's bid, however, such bid must then be lowered when certain
purchase limits are exceeded.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Greenberger & Forman, New York, New York. Certain legal matters
relating to this Offering will be passed upon for the Underwriters by Cravath,
Swaine & Moore, New York, New York.
EXPERTS
The Company's consolidated financial statements as of October 31, 1994 and
July 30, 1995 and for each of the two years in the period ended October 31,
1994 and for the nine months ended July 30, 1995, included or incorporated by
reference into this Prospectus and the Registration Statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included or incorporated by reference
herein in reliance upon the authority of said firm as experts in accounting and
auditing in giving said report.
USE OF TRADENAMES AND PRODUCT NAMES
The following trademark or tradenames are used in this Prospectus to identify
the entities claiming the marks and names of their products: "AT&T" for AT&T
Corp.; "Intel," "Pentium," "P6," "Pentium Pro," and "P7" for Intel Corporation;
"IBM" and "PowerPC" for International Business Machines Corporation; "AMP" for
AMP Incorporated; "Molex" for Molex Incorporated; "ITT" for ITT Corporation;
"Labinal" for Labinal, S.A.; "Raytheon" for Raytheon Company; "General
Electric" for General Electric Company, "Pioneer Electronics" for Pioneer
Electronics Corporation, "Acer" for Acer America Corp., "Compaq" for Compaq
Computer Corporation; "NEC" for NEC Corporation; "Lockheed Martin" for Lockheed
Martin Corporation; "General Motors" for General Motors Corporation; "Hughes
Electronics" for GM Hughes Electronics Corporation; "Loral" for Loral
Corporation; "Flomerics" and "FLOtherm" for Flomerics, Limited; "HCC" for HCC
Industries; "Deutsch" for Deutsch Connectors; "CTS" for CTS Corporation;
"Rockwell International" for Rockwell International Corporation; and "Teradyne"
for Teradyne, Inc. None of the companies listed above have participated in or
have endorsed the Offering.
39
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Exchange Act, and
in accordance therewith files reports, proxy and information statements and
other information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material may be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Common Stock of the Company is
traded on the National Market. Reports and other information concerning the
Company may be inspected at the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form S-
2 under the Act, of which this prospectus constitutes a part, with respect to
the Debentures offered hereby. The Registration Statement, including exhibits
and schedules thereto, may be obtained from the Commission's principal office
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of the fees prescribed by the Commission. Statements contained in this
Prospectus as to the contents of any document referred to are not necessarily
complete and in each instance reference is made to the copy of the appropriate
document filed as an exhibit to, or incorporated by reference into, the
Registration Statement, each statement being qualified in all respects by such
reference.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, filed with the Commission (File No. 0-14365), are
hereby incorporated by reference: Annual Report on Form 10-KSB for the fiscal
year ended October 31, 1994, as amended by Form 10-KSB/A dated April 28, 1995;
Quarterly Reports on Form 10-QSB for the fiscal quarters ended January 29,
1995, April 30, 1995 and July 30, 1995; and Current Reports on Form 8-K dated
June 13, 1995 as amended by Form 8-K/A dated September 12, 1995. In addition,
all documents filed by the Company pursuant to sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the Offering shall be deemed to be incorporated by
reference herein and to be a part of this Prospectus from the date of filing of
such documents. Such incorporation by reference shall not be deemed to
incorporate by reference the information referred to in Item 402(a)(7) of
Regulation S-B. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purpose of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon request, a copy of any or all of the foregoing
documents described above which have been incorporated by reference in this
Prospectus other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Such request
should be directed to: Investor Relations, Alpha Technologies Group, Inc., 750
Lexington Avenue, 27th Floor, New York, New York 10022; telephone number (212)
446-5258; facsimile number (212) 446-5240.
40
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
INDEX TO PRO FORMA AND FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Unaudited Pro Forma Consolidated Statements of Income:
Pro Forma Consolidated Statement of Income For the Year Ended October
31, 1994............................................................... F-2
Pro Forma Consolidated Statement of Income For the Nine Months Ended
July 31, 1994.......................................................... F-3
Pro Forma Consolidated Statement of Income For the Nine Months Ended
July 30, 1995.......................................................... F-3
Notes to Pro Forma Consolidated Statements of Income.................... F-4
Financial Statements:
Report of Independent Public Accountants................................ F-6
Consolidated Balance Sheets--October 31, 1994 and July 30, 1995......... F-7
Consolidated Statements of Income--For the Years Ended October 31, 1993
and 1994 and For the Nine Months Ended July 31, 1994 (unaudited) and
July 30, 1995.......................................................... F-8
Consolidated Statements of Stockholders' Equity--For the Years Ended
October 31, 1993 and 1994 and For the Nine Months Ended July 30, 1995.. F-9
Consolidated Statements of Cash Flows--For the Years Ended October 31,
1993 and 1994 and For the Nine Months Ended July 31, 1994 (unaudited)
and July 30, 1995...................................................... F-10
Notes to Consolidated Financial Statements.............................. F-11
</TABLE>
F-1
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
The following unaudited Pro Forma Consolidated Statements of Income for the
fiscal year ended October 31, 1994 and the nine months ended July 31, 1994 and
July 30, 1995 are based on the historical consolidated financial statements of
Alpha Technologies Group, Inc. and subsidiaries, adjusted to give effect to the
acquisitions detailed below:
<TABLE>
<CAPTION>
DATE ACQUIRED OPERATION PREDECESSOR'S NAME
------------- --------- ------------------
<S> <C> <C>
June 1994............... Connector and related product operations in Interconnect Systems
South Pasadena, California, Division of Microdot Inc.
Montgomeryville, Pennsylvania, and (80 percent ownership)
Cincinnati, Ohio ("Uni-Star")
August 1994............. Thermal management operations in Temecula, Aham Tor, Inc.
California ("Ahamtor")
June 1995............... Aluminum extrusion operation in Fullerton, Specialty Extrusion Ltd.
California ("Specialty")
</TABLE>
The above acquisitions were consummated for an aggregate purchase price of
approximately $9.2 million. In addition, the Pro Forma Consolidated Statements
of Income give effect to the proposed acquisition of the remaining 20% interest
in Uni-Star Industries, Inc. in exchange for 365,000 shares of restricted
Common Stock with an assumed fair market value of $2.7 million.
The Pro Forma Consolidated Statements of Income for the year ended October
31, 1994 and the nine months ended July 31, 1994 and July 30, 1995 have been
prepared assuming the acquisitions occurred on November 1, 1993. The Pro Forma
Consolidated Statements of Income do not purport to represent what the
Company's results of operations would have been had the acquisitions occurred
on November 1, 1993 or to project the Company's results of operations for any
future period, nor do the statements give effect to any matters other than
those described in the notes thereto. The Pro Forma Consolidated Statements of
Income should be read in conjunction with the Company's Consolidated Financial
Statements.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED OCTOBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL ACQUIRED PRO FORMA
CONSOLIDATED OPERATIONS(A) ADJUSTMENTS PRO FORMA(I)
------------ ------------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales................... $30,145 $21,815 $ (540)(b) $51,420
Cost of sales........... 20,627 17,295 (1,031)(c) 36,891
------- ------- ------- -------
Gross profit.......... 9,518 4,520 491 14,529
Operating expenses:
Research and
development.......... 674 -- -- 674
Selling, general and
administrative....... 6,572 3,543 214 (d) 10,329
------- ------- ------- -------
Total operating
expenses........... 7,246 3,543 214 11,003
------- ------- ------- -------
Operating income........ 2,272 977 277 3,526
Investment income....... 108 108
Interest income
(expense), net......... 76 (178) (293)(e) (395)
------- ------- ------- -------
Income before taxes..... 2,456 799 (16) 3,239
Provision (benefit) for
income taxes........... (860) (781)(g)
------- -------
Income before minority
interest............... 3,316 4,020
Less: minority interest. (384) -- (h)
------- -------
Net income (continuing
operations)............ $ 2,932 $ 4,020
======= =======
Per Share:
Net income (continuing
operations).......... 0.46 0.60
Shares used in per
share computation.... 6,344 365 (f) 6,709
</TABLE>
F-2
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED JULY 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL ACQUIRED PRO FORMA
CONSOLIDATED OPERATIONS(A) ADJUSTMENTS PRO FORMA(I)
------------ ------------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales.................... $18,579 $19,697 $(405)(b) $37,871
Cost of sales............ 12,959 15,565 (944)(c) 27,580
------- ------- ----- -------
Gross profit........... 5,620 4,132 539 10,291
Operating expenses:
Research and
development........... 438 -- -- 438
Selling, general and
administrative........ 4,065 3,320 190 (d) 7,575
------- ------- ----- -------
Total operating
expenses............ 4,503 3,320 190 8,013
------- ------- ----- -------
Operating income......... 1,117 812 349 2,278
Investment income........ 93 93
Interest income
(expense), net.......... 100 (216) (232)(e) (348)
------- ------- ----- -------
Income before taxes...... 1,310 596 117 2,023
Provision (benefit) for
income taxes............ 198 270 (g)
------- -------
Income before minority
interest................ 1,112 1,753
Less: minority interest.. (189) -- (h)
------- -------
Net income (continuing
operations)............. $ 923 $ 1,753
======= =======
Per Share:
Net income (continuing
operations)........... 0.15 0.26
Shares used in per
share computation..... 6,255 365 (f) 6,620
</TABLE>
FOR THE NINE MONTHS ENDED JULY 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL ACQUIRED PRO FORMA
CONSOLIDATED OPERATIONS(A) ADJUSTMENTS PRO FORMA(I)
------------ ------------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales.................... $44,590 $4,021 $(405)(b) $48,206
Cost of sales............ 32,555 3,413 (218)(c) 35,750
------- ------ ----- -------
Gross profit........... 12,035 608 (187) 12,456
Operating expenses:
Research and
development........... 838 -- -- 838
Selling, general and
administrative........ 8,658 293 16 (d) 8,967
------- ------ ----- -------
Total operating
expenses............ 9,496 293 16 9,805
------- ------ ----- -------
Operating income......... 2,539 315 (203) 2,651
Investment income........ 242 242
Interest income
(expense), net.......... (231) (92) (94)(e) (417)
------- ------ ----- -------
Income before taxes...... 2,550 223 (297) 2,476
Provision (benefit) for
income taxes............ (175) (175)(g)
------- -------
Income before minority
interest................ 2,725 2,651
Less: minority interest.. (264) -- (h)
------- -------
Net income (continuing
operations)............. $ 2,461 $ 2,651
======= =======
Per Share:
Net income (continuing
operations)........... 0.38 0.38
Shares used in per
share computation..... 6,533 365 (f) 6,898
</TABLE>
F-3
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(a). The historical statements of income for the acquired companies represent
their results of operations prior to being acquired as follows:
For the Nine Months Ended July 31, 1994:
Uni-Star November 1, 1993 through May 31, 1994
Ahamtor December 1, 1993 through August 31, 1994
Specialty January 1, 1994 through September 30, 1994
For the Year Ended October 31, 1994:
Uni-Star November 1, 1993 through May 31, 1994
Ahamtor November 1, 1993 through August 31, 1994
Specialty January 1, 1994 through December 31, 1994
For the Nine Months Ended July 30, 1995:
Specialty November 1, 1994 through June 30, 1995
The acquisitions have been accounted for as purchase transactions.
Accordingly, the operating results of Uni-Star, Ahamtor and Specialty have been
included in the Company's consolidated results of operations since their
respective acquisition dates of June 1, 1994, August 31, 1994 and June 30,
1995.
Set forth below are the pre-acquisition revenues and expenses (unaudited) of
each of the acquired companies for the periods ended July 31, 1994 and October
31, 1994 as detailed above:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED JULY
31, 1994:
----------------------------------
UNI-
STAR AHAMTOR SPECIALTY TOTAL
------- ------- --------- -------
<S> <C> <C> <C> <C>
Sales..................................... $10,228 $5,351 $4,118 $19,697
Cost of sales............................. 7,819 4,434 3,312 15,565
------- ------ ------ -------
Gross profit.............................. 2,409 917 806 4,132
Selling, general and administrative....... 2,313 656 351 3,320
------- ------ ------ -------
Income from operations.................... 96 261 455 812
Interest income (expense), net............ 166 (265) (117) (216)
------- ------ ------ -------
Income (loss) before income taxes......... 262 (4) 338 596
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
1994:
----------------------------------
UNI-
STAR AHAMTOR SPECIALTY TOTAL
------- ------- --------- -------
<S> <C> <C> <C> <C>
Sales..................................... $10,228 $5,994 $5,593 $21,815
Cost of sales............................. 7,819 4,955 4,521 17,295
------- ------ ------ -------
Gross profit.............................. 2,409 1,039 1,072 4,520
Selling, general and administrative....... 2,313 761 469 3,543
------- ------ ------ -------
Income from operations.................... 96 278 603 977
Interest income (expense), net............ 166 (188) (156) (178)
------- ------ ------ -------
Income before income taxes................ 262 90 447 799
</TABLE>
F-4
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF INCOME--(CONTINUED)
(b) Adjusted to eliminate the sales by Specialty to Ahamtor.
(c) Adjusted to reduce (i) depreciation expense based on the difference
between the expense recorded by the acquired operation and the expense computed
based on the purchase price allocated to manufacturing equipment and (ii) cost
of sales related to sales by Specialty to Ahamtor. In addition, adjusted to
reflect the increase in the depreciable basis of the manufacturing equipment
due to the proposed purchase of the minority interest in Uni-Star.
(d) Adjusted to reflect the amortization expense of goodwill which was
attributable to the excess of cost over the net assets of the companies
acquired using a straight line basis of 15 years. In addition, adjusted to
reflect amortization expense of non-compete agreements entered into related to
the purchase of Ahamtor.
(e) Adjusted to reduce interest income or incur interest expense on funds
used to acquire companies.
(f) Adjusted to reflect the issuance of 365,000 shares of the common stock of
the Company in conjunction with the proposed purchase of the 20% minority
interest in Uni-Star.
(g) Adjusted to reflect the provision (benefit) for income taxes which would
have been required on the pro forma income from continuing operations before
income taxes and minority interest.
(h) Adjusted to reverse the minority interest in subsidiary earnings, which
interest the Company is currently negotiating the purchase of.
(i) The pro forma information provided above does not reflect adjustments for
the proposed offering of debentures.
F-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Alpha Technologies Group, Inc.
We have audited the accompanying consolidated balance sheets of Alpha
Technologies Group, Inc., (a Delaware corporation) and subsidiaries as of
October 31, 1994 and July 30, 1995, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the two years in the
period ended October 31, 1994 and for the nine months ended July 30, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alpha Technologies Group, Inc.
and subsidiaries as of October 31, 1994 and July 30, 1995, and the results of
their operations and their cash flows for each of the two years in the period
ended October 31, 1994 and for the nine months ended July 30, 1995, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Houston, Texas
September 1, 1995
F-6
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--OCTOBER 31, 1994 AND JULY 30, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
OCTOBER 31, JULY 30,
ASSETS 1994 1995
------ ----------- --------
<S> <C> <C>
Current Assets:
Cash................................................... $ 7,406 $ 3,689
Marketable securities (Note 4)......................... 937 874
Notes receivable (Note 3).............................. 2,000 --
Accounts receivable, net of reserves of $111 and $223
(Note 8).............................................. 7,392 11,366
Inventories, net (Notes 5 and 8)....................... 5,831 8,070
Prepaid expenses (Note 8).............................. 742 1,097
-------- --------
Total current assets................................. 24,308 25,096
Property and Equipment, at cost (Note 8):
Manufacturing equipment, leasehold improvements,
furniture, fixtures and other......................... 4,274 9,092
Less--Accumulated depreciation and amortization........ 315 989
-------- --------
Property and equipment, net............................ 3,959 8,103
Goodwill, net (Notes 2 and 8)............................ 1,667 2,694
Other assets, net (Notes 8 and 14)....................... 1,755 2,312
-------- --------
$ 31,689 $ 38,205
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable, trade................................ 3,421 5,121
Accrued compensation and related benefits (Note 6)..... 1,402 1,470
Other accrued liabilities (Note 7)..................... 2,222 2,015
Current portion of long-term debt (Note 8)............. 346 470
Current portion of other long-term liabilities (Note
9).................................................... 993 886
-------- --------
Total current liabilities............................ 8,384 9,962
Long-term debt (Note 8).................................. 3,556 7,969
Other long-term liabilities (Note 9)..................... 1,821 1,216
Commitments and contingencies (Note 15)
Minority interest (Note 2)............................... 1,384 1,648
Stockholders' equity (Notes 4, 10, 11 and 12):
Preferred stock, $100 par value; shares authorized
180,000............................................... -- --
Common stock, $.03 par value; shares authorized
17,000,000; issued 6,727,345 at October 31, 1994 and
6,921,345 at July 30, 1995............................ 202 208
Additional paid-in capital............................. 38,670 39,004
Retained deficit....................................... (21,207) (18,746)
Unrealized gain (loss) on marketable securities, net of
income taxes.......................................... (138) 44
Cumulative translation adjustment...................... -- 1
Treasury stock, at cost (544,249 common shares at
October 31, 1994 and 935,404 common shares at July 30,
1995)................................................. (983) (3,101)
-------- --------
Total stockholders' equity........................... 16,544 17,410
-------- --------
$ 31,689 $ 38,205
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED OCTOBER 31, 1993 AND 1994 AND FOR THE NINE MONTHS ENDED
JULY 31, 1994 AND JULY 30, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------- JULY 31, JULY 30,
1993 1994 1994 1995
---------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Sales (Note 2)............... $ 258 $ 30,145 $ 18,579 $ 44,590
Cost of sales................ 190 20,627 12,959 32,555
---------- ---------- ---------- ----------
Gross profit............. 68 9,518 5,620 12,035
Operating expenses:
Research and development... 11 674 438 838
Selling, general and
administrative............ 48 6,572 4,065 8,658
---------- ---------- ---------- ----------
Total operating expenses. 59 7,246 4,503 9,496
---------- ---------- ---------- ----------
Operating income............. 9 2,272 1,117 2,539
Investment income (Note 4)... -- 108 93 242
Interest income (expense),
net (Note 8)................ 337 76 100 (231)
---------- ---------- ---------- ----------
Income before taxes.......... 346 2,456 1,310 2,550
Provision (benefit) for
income taxes (Note 14):
Current.................... 101 500 198 518
Deferred................... 17 (1,360) -- (693)
---------- ---------- ---------- ----------
Total provision (benefit)
for income taxes........ 118 (860) 198 (175)
---------- ---------- ---------- ----------
Income before minority
interest, discontinued
operations and extraordinary
credit...................... 228 3,316 1,112 2,725
Less: Minority interest (Note
2).......................... -- (384) (189) (264)
Gain on sale of discontinued
operations, net of income
tax effect (Note 3)......... -- 1,380 -- --
Income (loss) from
discontinued operations, net
of income tax effect (Note
3).......................... (22) 978 1,070 --
---------- ---------- ---------- ----------
Income before extraordinary
credit...................... 206 5,290 1,993 2,461
Extraordinary credit: Tax
benefit of net operating
loss carryforward (Note 14). 111 -- -- --
---------- ---------- ---------- ----------
Net income................... $ 317 $ 5,290 $ 1,993 $ 2,461
---------- ---------- ---------- ----------
Per common and common
equivalent share (Note 13):
Income before minority
interest, discontinued
operations and
extraordinary credit...... $ 0.04 $ 0.52 $ 0.18 $ 0.42
Minority interest.......... -- (0.06) (0.03) (0.04)
Gain on sale of
discontinued operations... -- 0.22 -- --
Discontinued operations.... -- 0.15 0.17 --
Extraordinary credit....... 0.01 -- -- --
---------- ---------- ---------- ----------
Net income............... $ 0.05 $ 0.83 $ 0.32 $ 0.38
---------- ---------- ---------- ----------
Shares used in computing net
income per common equivalent
share....................... 6,017,543 6,343,604 6,255,030 6,532,947
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1993 AND 1994 AND FOR THE NINE MONTHS ENDED
JULY 30, 1995
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
UNREALIZED LOSS
COMMON STOCK ADDITIONAL RETAINED ON CUMULATIVE TREASURY STOCK
---------------- PAID-IN EARNINGS MARKETABLE TRANSLATION ---------------
SHARES AMOUNT CAPITAL (DEFICIT) SECURITIES ADJUSTMENT SHARES AMOUNT
--------- ------ ---------- --------- --------------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, October 31,
1992................... 6,211,963 $186 $37,765 $(26,814) -- -- 461,249 $ (609)
Net income............. -- -- -- 317 -- -- -- --
Issuance to employees
pursuant to stock
options plans
(Note 12)............. 69,926 2 104 -- -- -- -- --
--------- ---- ------- -------- ---- --- ------- -------
Balance, October 31,
1993................... 6,281,889 188 37,869 (26,497) -- -- 461,249 (609)
--------- ---- ------- -------- ---- --- ------- -------
Net income............. -- -- -- 5,290 -- -- -- --
Issuance to employees
pursuant to stock
options plans
(Note 12)............. 445,456 14 801 -- -- -- -- --
Unrealized loss on
marketable securities,
net of income taxes
(Note 4).............. -- -- -- -- (138) -- -- --
Stock repurchase (Note
11)................... -- -- -- -- -- -- 83,000 (374)
--------- ---- ------- -------- ---- --- ------- -------
Balance, October 31,
1994................... 6,727,345 202 38,670 (21,207) (138) -- 544,249 (983)
--------- ---- ------- -------- ---- --- ------- -------
Net income.............. -- -- -- 2,461 -- -- -- --
Issuance to employees
pursuant to stock
options plans (Note
12).................... 194,000 6 334 -- -- -- -- --
Unrealized gain on
marketable securities,
net of income taxes
(Note 4)............... -- -- -- -- 182 -- -- --
Cumulative translation
adjustment............. -- -- -- -- -- 1 -- --
Stock repurchase (Note
11).................... -- -- -- -- -- -- 391,155 (2,118)
--------- ---- ------- -------- ---- --- ------- -------
Balance, July 30, 1995.. 6,921,345 $208 $39,004 $(18,746) $44 $1 935,404 $(3,101)
--------- ---- ------- -------- ---- --- ------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1993 AND 1994 AND
FOR THE NINE MONTHS ENDED JULY 31, 1994 AND JULY 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 31,
----------------- JULY 31, JULY 30,
1993 1994 1994 1995
-------- ------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................... $ 317 $ 5,290 $ 1,993 $ 2,461
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Net (income) loss from discontinued
operations (Note 3)................ 22 (978) (1,070) --
Deferred income taxes (Note 14)..... -- (1,360) -- (535)
Gain on sale of marketable
securities--available-for-sale
(Note 4)........................... -- -- -- (206)
Depreciation and amortization....... 25 453 251 875
Minority interest (Note 2).......... -- 384 189 264
Cumulative translation adjustment... -- -- -- 1
Gain on sale of discontinued
operations (Note 3)................ -- (1,380) -- --
Changes in assets and liabilities,
net of effects from acquisitions:
(Increase) in marketable
securities--trading securities..... -- (27) (177) (36)
(Increase) decrease in accounts
receivable......................... (4) 829 (91) (2,469)
(Increase) decrease in notes
receivable......................... -- (2,000) -- 2,000
(Increase) in prepaid expenses...... (34) (55) (60) (355)
(Increase) decrease in inventories.. 89 (34) 551 (2,124)
(Increase) decrease in goodwill..... -- 22 -- (790)
Increase (decrease) in accounts
payable, trade..................... (70) 755 267 635
Increase in accrued compensation and
related benefits................... 276 99 56 68
Increase (decrease) in other accrued
liabilities........................ (41) 1,541 (230) (207)
(Decrease) in other long-term
liabilities........................ -- -- -- (712)
-------- ------- ------- --------
Total adjustments.................... 263 (1,751) (314) (3,591)
-------- ------- ------- --------
Net cash provided (used) by
continuing operations.............. 580 3,539 1,679 (1,130)
Net cash provided by discontinued
operations (Note 3)................ 596 1,456 1,155 --
-------- ------- ------- --------
Net cash provided (used) by
operating activities............... 1,176 4,995 2,834 (1,130)
-------- ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments... (13,211) -- -- --
Proceeds from sale and maturity of
short-term investments.............. 12,595 3,516 3,516 --
Payments and expenditures for
business acquisitions (Notes 2 and
16)................................. (4,966) (6,899) (4,325) (2,560)
Proceeds from sale of discontinued
operations.......................... -- 2,000 -- --
Purchase of marketable securities--
available-for-sale (Note 4)......... -- (1,285) (1,251) (767)
Proceeds from sale of marketable
securities--available-for-sale
(Note 4)............................ -- 237 237 1,254
Purchase of property and equipment,
net................................. (78) (1,427) (276) (3,168)
(Increase) decrease in other assets,
net................................. (95) (6) 8 (105)
-------- ------- ------- --------
Net cash (used) by investing
activities......................... (5,755) (3,864) (2,091) (5,346)
-------- ------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
stock (Note 12)..................... 106 815 140 340
Payments to repurchase common stock
(Note 11)........................... -- (374) -- (2,118)
Proceeds from debt (Note 8).......... -- 13,183 6,184 33,662
Payments on debt (Note 8)............ -- (9,281) (2,037) (29,125)
-------- ------- ------- --------
Net cash provided by financing
activities......................... 106 4,343 4,287 2,759
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS..................... (4,473) 5,474 5,030 (3,717)
-------- ------- ------- --------
CASH AND CASH EQUIVALENTS, beginning
of year.............................. 6,405 1,932 1,932 7,406
-------- ------- ------- --------
CASH AND CASH EQUIVALENTS, end of
period............................... $ 1,932 $ 7,406 $ 6,962 $ 3,689
======== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Alpha
Technologies Group, Inc. ("Alpha" or the "Company") (formerly Synercom
Technology, Inc.) and its wholly- and majority-owned subsidiaries. All material
intercompany transactions and balances have been eliminated. Certain
information in the prior years financial statements has been reclassified to
conform to the current presentation. As more fully described in Note 3, the
discontinued operation, the Information Solutions Segment ("ISS"), was
deconsolidated and fiscal 1993 financial statements have been restated
accordingly.
The Company designs, manufactures and sells thermal management products and
connectors. Thermal management products serve the microprocessor, computer,
consumer electronics, transportation and other industries. Connector products
serve the defense, telecommunications, automotive and aerospace industries.
Revenue Recognition
Revenue from product sales is generally recognized upon shipment to the
customer.
Marketable Securities
Investments in marketable securities are accounted for in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("Statement 115"). Of the three
categories of securities prescribed by Statement 115, the Company's security
investments are classified in one of the two following categories:
Available-for-Sale Securities-- These securities are stated at cost adjusted
for market value fluctuations. Unrealized gains and losses created by changes
in the market values of these securities are recognized as an adjustment to and
are reported as a separate component of stockholders' equity, net of tax. The
specific identification method is used in determining realized gains and losses
from the sale of securities.
Trading Securities-- These securities are carried at market value. Realized
and unrealized gains and losses are recognized currently in investment income.
The specific identification method is used in determining gains and losses.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
Property and Equipment
The cost of property and equipment is depreciated using the straight-line
method for financial reporting purposes over the estimated useful lives of such
assets, ranging from three to ten years. Leasehold improvements are amortized
on a straight-line basis over the related lease term.
F-11
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Goodwill
Goodwill represents the excess of cost over fair value of net assets acquired
and is being amortized over 15 years using the straight-line method. The
accumulated amortization on October 31, 1994 and July 30, 1995 was
approximately $6,500 and $119,500, respectively. Amortization expense of
approximately $6,500 and $113,000 was recorded in fiscal 1994 and the nine
months ended July 30, 1995, respectively.
Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," ("Statement 109") on November 1, 1993. Under the
asset and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using current enacted tax rates. Under Statement 109,
the effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the results of operations in the period that includes the
enactment date. Income taxes were accounted for in compliance with APB Opinion
No. 11--Accounting for Income Taxes; therefore, the tax benefit of net
operating loss carryforwards for fiscal 1993 was classified as an extraordinary
credit.
Cash Flows
Cash equivalents are defined as short-term, highly liquid investments with
maturities of less than 90 days that are readily convertible to known amounts
of cash. During fiscal 1994 and the nine months ended July 30, 1995, taxes
amounting to approximately $16,000 and $724,000, respectively, were paid.
Interest payments in fiscal 1994 and the nine months ended July 30, 1995
amounted to approximately $116,000 and $479,000, respectively.
Foreign Currency Translation
Assets and liabilities of the Company's foreign operations are translated
into U. S. dollars at the current exchange rate in effect at the balance sheet
date, and revenues and expenses are translated at the average exchange rate for
the period in accordance with Statement of Financial Accounting Standards No.
52, "Foreign Currency Translation". Resulting translation adjustments are
reported as a separate component of shareholders' equity.
Fiscal Year
For fiscal 1995, the Company adopted a 52/53 week fiscal calendar ending on
the last Sunday of October, therefore the first nine month period for fiscal
1995 ended on July 30, 1995. The comparable period in fiscal 1994 ended July
31, 1994. The nine month periods for fiscal 1995 and fiscal 1994 include 39
weeks of operations.
2. ACQUISITIONS
Effective October 22, 1993, the Company, through a newly-organized, wholly-
owned subsidiary, acquired substantially all of the assets and assumed certain
liabilities of Wakefield Engineering, Inc., a wholly-owned subsidiary of EG&G,
Inc. The purchase price, which in aggregate amounted to approximately
$5,725,000, included a $4,637,000 cash payment, an estimated payable of
$759,000 to EG&G, Inc. and estimated expenses of $329,000. On June 1, 1994, the
Company, through Uni-Star Industries, Inc. ("Uni-Star"), acquired substantially
all of the assets and business and assumed certain liabilities of the
Interconnect
F-12
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Systems Division of Microdot Inc. The aggregate purchase price of approximately
$5,075,000 included a net cash payment of $4,836,000 and expenses of $239,000.
The Company's share of the purchase price was $3,988,000. The minority interest
not acquired by the Company is included in income before provision for income
taxes on the consolidated statement of operations and as a separate item on the
consolidated balance sheet and statement of cash flows. On August 31, 1994,
Wakefield Engineering, Inc. ("Wakefield"), a wholly-owned subsidiary of the
Company, acquired substantially all of the assets and business of Aham Tor,
Inc. ("ATI"). The purchase price of $2,911,000 was paid in cash. Effective June
30, 1995, Wakefield acquired substantially all of the assets and business of
Specialty Extrusion Ltd. ("Specialty"). The purchase price of $2,000,000 was
paid in cash. In addition, the Company paid existing Specialty debt in the
amount of $560,000. The acquisitions have been accounted for as purchase
transactions, and accordingly, the purchase price has been allocated to the
assets acquired and liabilities assumed for each acquisition. Goodwill, which
relates to the ATI and Specialty acquisitions, represents the excess of cost
over the fair value of the net assets acquired and is being amortized over 15
years using the straight-line method. Adjustments to the purchase price may be
made during the 12 months following the date of acquisition as a result of
resolutions of uncertainties existing at the acquisition date. The operating
results of Wakefield, Uni-Star, ATI and Specialty have been included in the
Company's consolidated results of operations since their respective acquisition
dates of October 22, 1993, June 1, 1994, August 31, 1994, and June 30, 1995.
The following unaudited pro forma summary is not necessarily indicative
either of results of operations that would have occurred had the purchase been
made on November 1, 1992, or of future results of operations of the combined
companies. Total revenues included in the following unaudited pro forma summary
reflect the effect of accounting for ISS as a discontinued operation. Net
income included in the following unaudited pro forma summary does not reflect
the effect of income from discontinued operations or the gain on sale of
discontinued operations.
For the periods ended (Unaudited):
<TABLE>
<CAPTION>
OCTOBER 31,
------------------------- JULY 30,
1993 1994 1995
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Total revenues.................... $ 47,719 $ 51,420 $ 48,206
Net income........................ 724 3,680 2,460
Net income per common and common
equivalent share................. $ .12 $ .58 $ .38
Number of shares used in computing
earnings per share............... 6,018 6,344 6,533
</TABLE>
3. DISCONTINUED OPERATION
Effective September 21, 1994, the Company sold the assets and business of ISS
to Logica North America, Inc. ("Logica"). Logica purchased the rights to WMIS,
a work management information system product; the intellectual property rights
for the INFORMAP family of products; and the computer equipment, furniture and
fixtures of ISS. The purchase price was $4,000,000 payable as follows: (1)
$2,000,000 cash at closing and (2) two promissory notes of $1,000,000 each with
the first note payable 120 days after the closing and the second note 180 days
after the closing. The sale resulted in a gain of approximately $1,380,000, net
of income tax expense of $49,000.
F-13
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Summary operating results of the discontinued operation are as follows for
the fiscal years ended October 31:
<TABLE>
<CAPTION>
1993 1994
------- ------
(IN THOUSANDS)
<S> <C> <C>
Revenues................................................. $10,594 $8,184
Costs and expenses....................................... 10,617 7,186
------- ------
Income (loss) before taxes............................... (23) 998
Income tax provision (benefit)........................... (1) 20
------- ------
Net income (loss)........................................ $ (22) $ 978
======= ======
</TABLE>
4. MARKETABLE SECURITIES
Marketable securities consist of equity securities classified as available-
for-sale securities and trading securities. On October 31, 1994 and July 30,
1995 available-for-sale securities were valued at $910,000 and $815,000,
respectively. Trading securities were valued at $27,000 and $59,000 on October
31, 1994 and July 30, 1995, respectively. A net unrealized holding loss on
available-for-sale securities of $138,000, which is net of income taxes, was
included in stockholders' equity on October 31, 1994, while on July 30, 1995, a
net unrealized holding gain of $44,000, net of income taxes, was included in
stockholders' equity. Proceeds from the sale of available-for-sale securities
totaled approximately $1,254,000 for the nine months ended July 30, 1995. A
gain of $206,000 was realized on those sales and included in investment income
for the period ended July 30, 1995.
5. INVENTORIES
Inventories consisted of the following on:
<TABLE>
<CAPTION>
JULY
OCTOBER 31, 30,
1994 1995
----------- ------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and components.......................... $3,428 $5,014
Work in process....................................... 1,488 1,980
Finished goods........................................ 1,059 1,323
------ ------
5,975 8,317
Valuation reserve..................................... (144) (247)
------ ------
$5,831 $8,070
====== ======
</TABLE>
6. ACCRUED COMPENSATION AND RELATED BENEFITS
Accrued compensation and related benefits consisted of the following on:
<TABLE>
<CAPTION>
OCTOBER 31, JULY 30,
1994 1995
----------- --------
(IN THOUSANDS)
<S> <C> <C>
Accrued salaries and wages........................... $ 480 $ 372
Accrued vacation pay................................. 423 466
Other................................................ 499 632
------ ------
$1,402 $1,470
====== ======
</TABLE>
F-14
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. OTHER ACCRUED LIABILITIES
Other accrued liabilities consisted of the following on:
<TABLE>
<CAPTION>
OCTOBER 31, JULY 30,
1994 1995
----------- --------
(IN THOUSANDS)
<S> <C> <C>
Accrued state income taxes........................... $ 469 $ 242
Accrued commissions.................................. 399 672
Other................................................ 1,354 1,101
------ ------
$2,222 $2,015
====== ======
</TABLE>
8. LONG-TERM DEBT
Long-term debt consisted of the following on:
<TABLE>
<CAPTION>
OCTOBER 31, JULY 30,
1994 1995
----------- --------
(IN THOUSANDS)
<S> <C> <C>
Variable-rate revolving credit facility (effective
interest rate of 9.5% at July 30, 1995), interest
payable monthly, principal is repaid and reborrowed
based on cash requirements......................... $2,447 $6,279
Variable-rate equipment notes (effective interest
rates of 9.5% at July 30, 1995), payable in monthly
installments ranging from 5,521 to 20,833 plus
accrued interest, with maturities ranging from
October of 1997 through June of 1999............... 1,455 2,055
Other............................................... -- 105
------ ------
3,902 8,439
Less current portion................................ 346 470
------ ------
$3,556 $7,969
====== ======
</TABLE>
The revolving credit facility, variable equipment term loan and variable
equipment credit facility relate to a Loan and Security Agreement (the "Loan
Agreement") entered into by Wakefield in June of 1994. The Loan Agreement was
amended in May of 1995 to increase the revolving credit facility from a maximum
aggregate commitment of $4,000,000 to $7,000,000 and to extend the term of such
facility to May 5, 1997. The equipment credit facility was increased from a
maximum aggregate amount of $600,000 to $1,050,000. The proceeds from the
equipment credit facility may be used only for the purchase of capital
equipment. In addition, Wakefield entered into an equipment term note in the
amount of $265,000. Interest accrues at the bank's corporate base rate plus
three-quarters of one percent. The obligations under the Loan Agreement are
secured by a first lien and assignment of the assets of Wakefield, exclusive of
the assets of Specialty Extrusion Corp., including without limitation, all
accounts receivable, inventory, equipment and general intangibles which in
aggregate totals $18,789,000. The terms of the Loan Agreement include various
covenants which provide for, among other things, the maintenance of a tangible
capital base at various levels throughout the commitment period. On July 30,
1995, Wakefield was in compliance with these covenants. On July 30, 1995,
$6,279,000 was outstanding on the revolving credit facility.
Interest paid on all outstanding debt amounted to approximately $116,000 in
fiscal year 1994 and approximately $479,000 for the nine months ended July 30,
1995.
F-15
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Aggregate payments of long-term debt outstanding as of July 30, 1995 for the
next five years are summarized below:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED JULY 30, AMOUNT
---------------------------- ------
<S> <C>
1996............................ $ 470,000
1997............................ 7,037,000
1998............................ 567,000
1999............................ 353,000
2000............................ 12,000
----------
$8,439,000
==========
</TABLE>
Management intends to renew the revolving credit facility upon its maturity.
On August 30, 1995, Uni-Star entered into an Accounts Receivable Loan
Agreement which included a revolving credit commitment in the aggregate
principal amount of $2,500,000. Uni-Star also entered into an equipment term
loan in the amount of $750,000 and an equipment acquisition facility of
$300,000. Interest on the revolving credit commitment accrues at the bank's
prime rate plus one half of one percent and interest on the equipment term loan
accrues at the bank's prime rate plus three quarters of one percent. The
equipment term loan is repayable in 48 equal monthly installments of principal
of $15,625 plus accrued interest, payable on the first day of each month
beginning October 1, 1995. All of the Uni-Star credit facilities are secured by
a first lien and assignment of substantially all of its assets, including
without limitation, accounts receivable, inventory, equipment and general
intangibles.
9. OTHER LONG-TERM LIABILITIES
Other long-term liabilities consisted of the following on:
<TABLE>
<CAPTION>
OCTOBER 31, JULY 30,
1994 1995
----------- --------
(IN THOUSANDS)
<S> <C> <C>
Accrued lease differential........................... $1,865 $1,478
Other................................................ 949 624
------ ------
2,814 2,102
Less current portion................................. 993 886
------ ------
$1,821 $1,216
====== ======
</TABLE>
The accrued lease differential primarily represents the lease payments and
estimated costs that the Company expects to incur related to office space in
Houston, Texas less estimated payments that it expects to receive for
subleasing this space. Approximately $800,000 of the accrued lease differential
was expensed in fiscal 1994 in connection with the sale of the discontinued
operation. The remainder of the accrued lease differential was expensed in
fiscal 1992 as restructuring costs related to the office space.
10. PREFERRED STOCK
On October 31, 1993, 1994 and July 31, 1995, the Company had authorized
180,000 shares of unissued, preferred stock with a par value of $100 per share.
The Board of Directors has the authority to issue such preferred stock and to
set the terms thereof, including the dividend rate, conversion rights,
redemption rights, voting rights and liquidation preferences.
F-16
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. REPURCHASE OF COMMON STOCK
In September of 1994, the Board of Directors of the Company approved a plan
to purchase up to $2,500,000 of the Company's common stock. Pursuant to the
stock repurchase plan, the Company purchased 83,000 shares of common stock
during fiscal year 1994 at an aggregate price of $374,137. During the nine
months ended July 30, 1995, 391,155 shares of common stock were purchased at an
aggregate price of $2,118,173. This repurchase program has been completed.
12. STOCK OPTION PLANS
The Company has in effect nonqualified and incentive stock option plans under
which shares are available for exercise. As of July 30, 1995, the Board of
Directors has reserved 1,656,417 shares of common stock for issuance under the
plans, of which 600,000 shares are subject to shareholder approval. The
exercise prices at which substantially all stock options outstanding have been
granted have been equal to or in excess of the fair market value of the
Company's stock at the time of the grant. These options vest over periods up to
five years. On July 30, 1995, there were 350,000 shares available for future
grants. The following table summarizes activity under the plans:
<TABLE>
<CAPTION>
SHARES
UNDER OPTION PRICE RANGE
------------ ------------
<S> <C> <C>
Outstanding on October 31, 1992....................... 961,530 $1.16-$15.00
Granted............................................. 532,000 1.38-3.19
Forfeited........................................... (171,873) 1.47-4.50
Exercised........................................... (69,926) 1.47-2.69
Expired............................................. (24,734) 4.50-15.00
--------- ------------
Outstanding on October 31, 1993....................... 1,226,997 $1.16-$7.12
Granted............................................. 363,000 2.93-4.53
Forfeited........................................... (48,524) 1.50-7.12
Exercised........................................... (445,456) 1.47-4.06
Expired............................................. (42,600) 4.50
--------- ------------
Outstanding on October 31, 1994....................... 1,053,417 $1.16-$4.53
Granted............................................. 457,000 5.13-5.98
Forfeited........................................... (10,000) 2.69
Exercised........................................... (194,000) 1.16-3.19
--------- ------------
Outstanding on July 30, 1995.......................... 1,306,417 $1.16-$5.98
========= ============
Exercisable on July 30, 1995.......................... 406,470 $1.16-$4.50
========= ============
</TABLE>
13. NET INCOME PER SHARE
Net income per common and common equivalent share was computed using the
weighted average number of shares of common stock and common equivalent shares
outstanding during each year. Common equivalent shares included the number of
shares issuable upon exercise of options, less the number of shares that could
have been purchased with the exercise proceeds.
F-17
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. INCOME TAXES
On November 1, 1993, the Company adopted Statement 109 through a cumulative
catch-up adjustment. The implementation of this statement did not have a
material effect on the Company's balance sheet or results of operations. The
Company's profitable operations during fiscal 1994 and during the nine months
ended July 30, 1995 resulted in the utilization of net operating loss
carryforwards, the tax benefit of which was fully reserved upon implementation
of Statement 109. Income taxes for fiscal year 1993 were accounted for in
compliance with APB Opinion No. 11: therefore, the tax benefit of net operating
loss carryforwards was classified as an extraordinary credit which reduced
taxes for the year by $97,000.
The provisions for income taxes were as follows (in thousands):
<TABLE>
<CAPTION>
OCTOBER 31,
------------- JULY 30,
1993 1994 1995
---- ------- --------
<S> <C> <C> <C>
Federal income tax............................... $118 $ 51 $ 767
State income tax................................. -- 449 314
---- ------- -------
118 500 1,081
Benefit of reversal of valuation reserve
(Statement 109)................................. -- (1,360) (1,256)
Benefit of net operating loss carryforwards (APB
11)............................................. (111) -- --
---- ------- -------
$ 7 $ (860) $ (175)
==== ======= =======
</TABLE>
The differences in the income taxes provided for and the amounts determined
by applying the Federal statutory rate to income before taxes of the Company
are summarized as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
------------- JULY 30,
1993 1994 1995
----- ----- --------
<S> <C> <C> <C>
Federal income statutory rate................... 34.0% 34.0% 34.0%
State income taxes, net of federal income tax
benefit........................................ -- 18.3% 8.1%
Benefit of reversal of valuation reserve
(Statement 109)................................ -- (55.3%) (49.3%)
Benefit of net operating loss carryforwards..... (32.0%) (32.0%) --
Other........................................... -- -- .3%
----- ----- -----
2.0% (35.0%) (6.9%)
===== ===== =====
</TABLE>
F-18
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities and their changes during
the nine months ended July 30, 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
DEFERRED
OCTOBER 31, (PROVISION) JULY 30,
1994 BENEFIT 1995
----------- ---------- --------
<S> <C> <C> <C>
Deferred Tax Assets:
Net operating loss carryforwards...... $ 6,086 $(1,118) $ 4,968
Tax credits........................... 814 -- 814
Accrued liabilities................... 791 66 857
Other................................. 560 504 1,064
------- ------- -------
Total gross deferred tax assets....... 8,251 (548) 7,703
Less: Valuation allowance............. (6,575) 1,256 (5,319)
------- ------- -------
Net deferred tax asset................ 1,676 $ 708 2,384
======= ======= =======
Deferred Tax Liabilities:
Amortization and depreciation......... (183) (220) (403)
Other................................. (133) 47 (86)
------- ------- -------
Total deferred tax liabilities........ (316) (173) (489)
------- ------- -------
Net deferred tax asset................ $ 1,360 $ 535 $ 1,895
======= ======= =======
</TABLE>
Due to the Company's historical results of operations, a valuation allowance
was provided for the deferred tax assets on November 1, 1993. Because the
Company generated taxable income and was able to utilize net operating loss
carryforwards during fiscal 1994 and the nine months ended July 30, 1995 and,
due to an increase in the likelihood of the future realization of the net
deferred tax asset, the Company reversed $1,360,000 and $1,256,000,
respectively, of the valuation allowance. On July 30, 1995, the Company had,
for tax purposes, net operating loss carryforwards of approximately $14,613,000
and unused investment and research and development tax credits of approximately
$814,000 available to offset future taxable income and Federal income taxes.
The net operating loss carryforwards will expire from 2000 to 2008, and the tax
credit carryforwards will expire from 1995 to 2005. All carryforwards are
subject to review and possible adjustment by the Internal Revenue Service. In
compliance with the Tax Reform Act of 1986, investment tax credits carried
forward were reduced by 35%. The Company's ability to utilize the net operating
loss carryforwards to offset alternative minimum taxable income is limited to
90% for tax years after fiscal 1987.
Additionally, Section 382 of the Internal Revenue Code limits the amounts of
net operating loss carryforwards usable by a corporation following a more than
50 percentage point change in ownership of the corporation during a three-year
period. It is possible that subsequent transactions involving the Company's
capital stock could result in such a limitation. As of July 30, 1995,
Management believes that such a change in ownership has not occurred.
F-19
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. COMMITMENTS AND CONTINGENCIES
The Company has operating lease commitments for certain office equipment and
manufacturing, administrative and support facilities. Minimum lease payments
under noncancellable leases on July 30, 1995 are as follows:
<TABLE>
<CAPTION>
OPERATING
TWELVE MONTHS ENDED JULY 30, LEASES
---------------------------- --------------
(IN THOUSANDS)
<S> <C>
1996..................................................... $ 2,485
1997..................................................... 2,356
1998..................................................... 1,683
1999..................................................... 1,040
2000..................................................... 906
Thereafter................................................. 2,324
-------
Minimum lease payments..................................... $10,794
=======
</TABLE>
Rent expense (exclusive of operating expenses and net of sublease rents) for
all operating leases was approximately $384,000 and $869,000 in fiscal 1993 and
1994, respectively, and $943,000 in the nine months ended July 30, 1995.
Expected sublease payments for each twelve month period ending July 30 are as
follows: 1996 $610,000; 1997 $610,000; 1998 $305,000; and 1999 and thereafter
$0. See Note 9.
Through September 30, 1994, the Company, for its Information Solutions
Segment, had a partially self-funded insurance program for its group health
insurance plan. Effective January 1, 1995, Wakefield implemented the same type
of program for its group health insurance plan. Under these plans, the Company
assumed liability for payment of medical claims below a specific dollar amount
related to any one individual. The Company is also insured if claims should
exceed a specific aggregate dollar amount for all covered individuals. Asserted
and unasserted medical/health insurance claims are accrued for based on the
Company's experience and the advice of an independent claims manager.
16. RELATED-PARTY TRANSACTIONS
For services rendered in connection with the acquisitions made during fiscal
years 1993 and 1994, further described in Note 2--Acquisitions, the Company
paid $75,000 each and $57,500 each, respectively for fiscal 1993 and 1994, to
two corporations, which are general partners of a partnership having a greater
than 5% ownership of the Company. The sole stockholders of the aforementioned
corporations are currently employee directors of the Company. In fiscal 1993,
the two individuals were each granted a ten-year nonincentive stock option to
purchase 50,000 shares of the Company's common stock. In fiscal 1994, the two
individuals were each granted five-year nonincentive stock options to purchase
an aggregate of 120,000 shares of the Company's common stock. The options were
granted at an exercise price equal to the fair value of the common stock on the
dates of grant. The right to exercise these options vests in equal installments
over three years.
17. SUBSEQUENT EVENT
The Company is in the process of purchasing the remaining 20% interest of
Uni-Star Industries, Inc. for 365,000 shares of restricted common stock with a
market value of approximately $2,700,000. This purchase will increase the basis
of Uni-Star's assets by $1,080,000 and will eliminate the book value of the
minority interest.
F-20
<PAGE>
[INSIDE BACK COVER]
[PHOTO]
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
ANY SECURITY OTHER THAN THE DEBENTURES OFFERED BY THIS PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE DEBEN-
TURES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMA-
TION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 8
Price Range of Common Stock............................................... 8
Dividends................................................................. 9
Capitalization............................................................ 9
Selected Financial Data................................................... 10
Management's Discussion and Analysis of Results of Operations and
Financial Condition...................................................... 12
Business.................................................................. 18
Management................................................................ 25
Description of Debentures................................................. 30
Description of Capital Stock.............................................. 36
Certain Federal Income Tax Considerations................................. 37
Underwriting.............................................................. 38
Legal Matters............................................................. 39
Experts................................................................... 39
Use of Tradenames and Product Names....................................... 39
Available Information..................................................... 40
Documents Incorporated by Reference....................................... 40
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$25,000,000
Alpha
LOGO Technologies
Group, Inc.,
% CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2005
---------------
PROSPECTUS
---------------
UNTERBERG HARRIS
, 1995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $9,914
NASD Fee.......................................................... 3,375
NASDAQ Entry Fee.................................................. 1,250
Trustee's fees and expenses....................................... *
Printing and engraving fees....................................... *
Legal fees and expenses........................................... *
Accounting fees and expenses...................................... *
Blue Sky fees and expenses (including legal fees)................. *
Miscellaneous..................................................... *
------
Total......................................................... *
======
</TABLE>
- --------
* To be filed by amendment.
The foregoing, except for the Securities and Exchange Commission registration
fee, the National Association of Securities Dealers, Inc. fee and the NASDAQ
Entry Fee are estimates.
ITEM 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the "DGCL") and the
Company's By-Laws provide for indemnification of the Company's directors and
officers and certain other persons. Under Section 145 of the DGCL and the
Company's By-Laws, directors and officers of the Company may be indemnified by
the Company against all expenses incurred in connection with actions
(including, under certain circumstances, derivative actions) brought against
such director or officer by reason of his or her status as a representative of
the Company, or because such director or officer serves or served as a
representative of another entity at the Company's request, so long as the
director or officer acted in good faith and in a manner he or she reasonable
believed to be in, or not opposed to, the best interests of the Company.
See "Description of Capital Stock--Limitation of Liabilities and
Indemnification Matters" of the Prospectus contained herein for additional
information regarding indemnification of directors and officers.
ITEM 16. Exhibits.
<TABLE>
<C> <S>
1 Form of Underwriting Agreement.
4.1 Form of Indenture under which the Company's % Convertible
Subordinated Debentures due , 2005 are to be issued.
4.2 Form of Convertible Subordinated Debenture (included in
Exhibit 4.1).*
4.3 Specimen stock certificate representing the Common Stock.*
5 Opinion and Consent of Greenberger & Forman.*
10.1 1981 Incentive Stock Option Plan, together with amendments
thereto.(1)
10.2 1983 Incentive Stock Option Plan, together with amendments
thereto.(1)
10.3 1983A Incentive Stock Option Plan, together with amendments
thereto.(1)
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
10.4 1984 Incentive Stock Option Plan, together with amendments
thereto.(1)
10.5 1985 Stock Option Plan, together with amendments
thereto.(1)(2)(3)(4)(5)
10.6 401-K Savings/Stock Purchase Plan.(6)
10.7 Lease Agreement, dated October 9, 1987, between PIC Realty
Corporation and the Company.(7)
10.8 Asset Purchase Agreement dated as of October 29, 1993 between
EG&G, Inc., Wakefield Engineering, Inc. and EG&G Alutech,
Inc., on the one hand, and the Company and Wakefield
Acquisition Corporation, on the other.(8)
10.9 Indenture of Lease Agreement dated as of February 6, 1991 by
and between Richard J. Tobin, as Trustee of JLN Realty Trust,
under Declaration of Trust dated June 15, 1981 and filed with
Bristol County Fall River District Registry of Deeds Land
Court Records as Document 12977, and Wakefield Engineering,
Inc. and First Amendment, dated as of October 27, 1992, to
such Agreement.(9)
10.10 Lease dated as of October 29, 1993 by and between The
Equitable Life Assurance Society of the United States and
Wakefield Engineering, Inc.(9)
10.11 Asset Purchase Agreement dated as of May 24, 1994, between
Microdot Inc. and ETP Acquisition Corp.(10)
10.12 Standard Industrial/Commercial Single-Tenant Lease dated as
of June 1, 1994 by and between Pasadena Industrial Associates
and Uni-Star Industries, Inc.(9)
10.13 Lease dated as of November 29, 1994 by and between The
Goldsmith Properties Company and Uni-Star Industries, Inc.(9)
10.14 Lease Agreement dated as of January 1995 by and between
Robert L. Byers and Joyce F. Byers and Uni-Star Industries,
Inc.(9)
10.15 Asset Purchase Agreement dated as of August 31, 1994 between
Wakefield Engineering, Inc. and Aham Tor, Inc.(11)
10.16 Standard Industrial Lease dated as of December 26, 1986 by
and between 999, Inc. and Aham Tor, Inc. and Lease Amendment
No. 1, dated as of December 26, 1991, thereto.(9)
10.17 Asset Purchase Agreement dated as of September 13, 1994
between the Company and Logica North America Inc.(12)
10.18 1994 Stock Option Plan.(9)
10.20 Loan and Security Agreement dated as of June 22, 1994 entered
into by and between Shawmut Bank, N.A. and Wakefield
Engineering, Inc. (The exhibits and schedules to the Loan and
Security Agreement are listed on the last page of such
Agreement. Such exhibits and schedules have not been filed by
the Company, who hereby undertakes to file such exhibits and
schedules upon request of the Commission.)(9)
10.21 Accounts Receivable Loan Agreement between Uni-Star
Industries, Inc. and City National Bank dated as of August
30, 1995.(13)
10.22 Asset Purchase Agreement dated as of June 30, 1995 among
Specialty Extrusions Ltd., Walter Hastie and William Esparza,
and Specialty Acquisition Corp. and Wakefield Engineering
Inc.(14)
10.23 Lease dated September 1, 1993 between B&K Investment Corp.
and Specialty Extrusions, Ltd., together with assignment
thereof dated June 30, 1995 from Specialty Extrusions, Ltd.
to Specialty Acquisitions Corp.
10.24 Employment Agreement with Lawrence Butler dated August 1995.*
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
11 Computation of net income (loss) per share
12 Computation of ratio of earnings to fixed charges
23.1 Consent of Greenberger & Forman--included in Exhibit 5*
23.2(a) Consent of Arthur Andersen
23.2(b) Consent of Arthur Andersen
23.2(c) Consent of Arthur Andersen
24 Power of Attorney
25 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of
1939 of .*
27 Financial Data Schedule
</TABLE>
- --------
*To be filed by amendment.
(1) Incorporated herein by reference to the Company's Registration Statement
on Form S-8, filed September 28, 1987) Reg. No. 33-17359).
(2) Incorporated herein by reference to the Company's Registration Statement
on Form S-8, filed March 17, 1988 (Reg. No. 33-20706).
(3) Incorporated herein by reference to the Company's Registration Statement
on Form S-8, filed June 30, 1989 (Reg. No. 33-29636).
(4) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended October 31, 1990.
(5) Incorporated herein by reference to the Company's Registration Statement
on Form S-8, filed June 23, 1992 (Reg. No. 33-48663).
(6) Incorporated herein by reference to the Company's Registration Statement
on Form S-8, filed January 29, 1987 (Reg. No. 33-11627).
(7) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended October 31, 1987.
(8) Incorporated herein by reference to the Company's Form 8-K dated October
29, 1993, filed on or about November 12, 1993.
(9) Incorporated herein by reference to the Company's Form 10-KSB for the year
ended October 31, 1994.
(10) Incorporated herein by reference to the Company's Form 8-K dated June 1,
1994, filed on or about June 13, 1994.
(11) Incorporated herein by reference to the Company's Form 8-K dated August
31, 1994, filed on or about September 13, 1994.
(12) Incorporated herein by reference to the Company's Form 8-K dated September
21, 1994, filed on or about October 4, 1994.
(13) Incorporated herein by reference to the Company's Form 10QSB for the
quarterly period ended July 30, 1995 filed on September 13, 1995.
(14) Incorporated herein by reference to the Company's Form 8-K dated June 30,
1995 filed on or about July 14, 1995.
II-3
<PAGE>
ITEM 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-2 AND AUTHORIZES THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED.
ALPHA TECHNOLOGIES GROUP, INC
September 28, 1995 /s/Lawrence Butler
Dated: ______________________________ By: _________________________________
LAWRENCE BUTLER, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
/s/ Lawrence Butler President, Chief
- ------------------------------------- Executive Officer
LAWRENCE BUTLER and Director
/s/ Marshall Butler Chairman of the
- ------------------------------------- Board
MARSHALL BUTLER
/s/ Warren Lichtenstein Director
- -------------------------------------
WARREN LICHTENSTEIN
/s/ Donald K. Grierson Director
- -------------------------------------
DONALD K. GRIERSON Sepember 28,
1995
/s/ Kenneth Rind Director
- -------------------------------------
KENNETH RIND
/s/ Frederic Heim Director
- -------------------------------------
FREDERIC HEIM
/s/ Johnny J. Blanchard Chief Financial
- ------------------------------------- Officer (Principal
JOHNNY J. BLANCHARD Financial and
Accounting Officer)
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
XHIBITE DESCRIPTION NO.
- ------- ----------- ----
<S> <C> <C>
1 Form of Underwriting Agreement.
4.1 Form of Indenture under which the Company's % Convertible Subordinated
Debentures due , 2005 are to be issued.
4.2 Form of Convertible Subordinated Debenture (included in Exhibit 4.1).*
4.3 Specimen stock certificate representing the Common Stock.*
5 Opinion and Consent of Greenberger & Forman.*
10.1 1981 Incentive Stock Option Plan, together with amendments thereto.(1)
10.2 1983 Incentive Stock Option Plan, together with amendments thereto.(1)
10.3 1983A Incentive Stock Option Plan, together with amendments thereto.(1)
10.4 1984 Incentive Stock Option Plan, together with amendments thereto.(1)
10.5 1985 Stock Option Plan, together with amendments thereto.(1)(2)(3)(4)(5)
10.6 401-K Savings/Stock Purchase Plan.(6)
10.7 Lease Agreement, dated October 9, 1987, between PIC Realty Corporation and
the Company.(7)
10.8 Asset Purchase Agreement dated as of October 29, 1993 between EG&G, Inc.,
Wakefield Engineering, Inc. and EG&G Alutech, Inc., on the one hand, and
the Company and Wakefield Acquisition Corporation, on the other.(8)
10.9 Indenture of Lease Agreement dated as of February 6, 1991 by and between
Richard J. Tobin, as Trustee of JLN Realty Trust, under Declaration of
Trust dated June 15, 1981 and filed with Bristol County Fall River District
Registry of Deeds Land Court Records as Document 12977, and Wakefield
Engineering, Inc. and First Amendment, dated as of October 27, 1992, to
such Agreement.(9)
10.10 Lease dated as of October 29, 1993 by and between The Equitable Life
Assurance Society of the United States and Wakefield Engineering, Inc.(9)
10.11 Asset Purchase Agreement dated as of May 24, 1994, between Microdot Inc.
and ETP Acquisition Corp.(10)
10.12 Standard Industrial/Commercial Single-Tenant Lease dated as of June 1, 1994
by and between Pasadena Industrial Associates and Uni-Star Industries,
Inc.(9)
10.13 Lease dated as of November 29, 1994 by and between The Goldsmith Properties
Company and Uni-Star Industries, Inc.(9)
10.14 Lease Agreement dated as of January 1995 by and between Robert L. Byers and
Joyce F. Byers and Uni-Star Industries, Inc.(9)
10.15 Asset Purchase Agreement dated as of August 31, 1994 between Wakefield
Engineering, Inc. and Aham Tor, Inc.(11)
10.16 Standard Industrial Lease dated as of December 26, 1986 by and between 999,
Inc. and Aham Tor, Inc. and Lease Amendment No. 1, dated as of December 26,
1991, thereto.(9)
10.17 Asset Purchase Agreement dated as of September 13, 1994 between the Company
and Logica North America Inc.(12)
10.18 1994 Stock Option Plan.(9)
10.20 Loan and Security Agreement dated as of June 22, 1994 entered into by and
between Shawmut Bank, N.A. and Wakefield Engineering, Inc. (The exhibits
and schedules to the Loan and Security Agreement are listed on the last
page of such Agreement. Such exhibits and schedules have not been filed by
the Company, who hereby undertakes to file such exhibits and schedules upon
request of the Commission.)(9)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
XHIBITE DESCRIPTION NO.
- ------- ----------- ----
<S> <C> <C>
10.21 Accounts Receivable Loan Agreement between Uni-Star Industries, Inc. and
City National Bank dated as of August 30, 1995.(13)
10.22 Asset Purchase Agreement dated as of June 30, 1995 among Specialty
Extrusions Ltd., Walter Hastie and William Esparza, and Specialty
Acquisition Corp. and Wakefield Engineering Inc.(14)
10.23 Lease dated September 1, 1993 between B&K Investment Corp. and Specialty
Extrusions, Ltd., together with assignment thereof dated June 30, 1995 from
Specialty Extrusions, Ltd. to Specialty Acquisitions Corp.
10.24 Employment Agreement with Lawrence Butler dated August 1995.*
11 Computation of net income (loss) per share
12 Computation of ratio of earnings to fixed charges
23.1 Consent of Greenberger & Forman--included in Exhibit 5*
23.2(a) Consent of Arthur Andersen
23.2(b) Consent of Arthur Andersen
23.2(c) Consent of Arthur Andersen
24 Power of Attorney
25 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of .*
27 Financial Data Schedule
</TABLE>
- --------
*To be filed by amendment.
(1) Incorporated herein by reference to the Company's Registration Statement
on Form S-8, filed September 28, 1987) Reg. No. 33-17359).
(2) Incorporated herein by reference to the Company's Registration Statement
on Form S-8, filed March 17, 1988 (Reg. No. 33-20706).
(3) Incorporated herein by reference to the Company's Registration Statement
on Form S-8, filed June 30, 1989 (Reg. No. 33-29636).
(4) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended October 31, 1990.
(5) Incorporated herein by reference to the Company's Registration Statement
on Form S-8, filed June 23, 1992 (Reg. No. 33-48663).
(6) Incorporated herein by reference to the Company's Registration Statement
on Form S-8, filed January 29, 1987 (Reg. No. 33-11627).
(7) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended October 31, 1987.
(8) Incorporated herein by reference to the Company's Form 8-K dated October
29, 1993, filed on or about November 12, 1993.
(9) Incorporated herein by reference to the Company's Form 10-KSB for the year
ended October 31, 1994.
(10) Incorporated herein by reference to the Company's Form 8-K dated June 1,
1994, filed on or about June 13, 1994.
(11) Incorporated herein by reference to the Company's Form 8-K dated August
31, 1994, filed on or about September 13, 1994.
(12) Incorporated herein by reference to the Company's Form 8-K dated September
21, 1994, filed on or about October 4, 1994.
(13) Incorporated herein by reference to the Company's Form 10QSB for the
quarterly period ended July 30, 1995 filed on September 13, 1995.
(14) Incorporated herein by reference to the Company's Form 8-K dated June 30,
1995 filed on or about July 14, 1995.
<PAGE>
EXHIBIT 1
[Draft--9/25/95]
Alpha Technologies Group, Inc.
$25,000,000
% Convertible Subordinated Debentures Due 2005 */
-
Underwriting Agreement
New York, New York
, 1995
Unterberg Harris
Swiss Bank Tower
10 East 50th Street
22nd Floor
New York, NY 10022
Ladies and Gentlemen:
Alpha Technologies Group, Inc., a Delaware corporation (the
"Company"), proposes to sell to the underwriters named in Schedule I hereto (the
"Underwriters"), for whom you (the "Representative") are acting as
representative, $25,000,000 principal amount of its % Convertible
Subordinated Debentures Due 2005 (the "Underwritten Securities"), to be issued
under an indenture (the "Indenture") to be dated as of , 1995,
between the Company and , as Trustee (the
"Trustee"). The Company also proposes to grant to the Underwriters an option to
purchase up to an additional $3,750,000 principal amount of its % Convertible
Subordinated Debentures Due 2005 (the "Option Securities"; the Option
Securities, together with the Underwritten Securities, being hereinafter called
the "Securities"). The Securities are convertible into shares of Common Stock
of the Company ("Common Stock").
The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "the Effective Date" shall mean each date that the
Registration Statement and any post-effective amendment or amendments thereto or
any Rule 462(b) Registration Statement became or
- ----------
*/ Plus an option to purchase from Alpha Technologies Group, Inc. up to an
-
additional $3,750,000 principal amount of Convertible Subordinated Debentures to
cover overallotments.
<PAGE>
2
become effective. "Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto. "Preliminary
Prospectus" shall mean any preliminary prospectus referred to in Section 1,
paragraph (a) below, and any preliminary prospectus included in the Registration
Statement at the Effective Date that omits Rule 430A Information. "Prospectus"
shall mean the prospectus relating to the Securities that is first filed
pursuant to Rule 424(b) or Rule 434 after the Execution Time or, if no filing
pursuant to Rule 424(b) is required, shall mean the form of final prospectus
relating to the Securities included in the Registration Statement at the
Effective Date; if the Rule 434 Delivery Alternative is used, such term shall
also include the Rule 434 Term Sheet. "Registration Statement" shall mean the
registration statement referred to in Section 1, paragraph (a) below, exhibits
and financial statements, as amended at the Execution Time (or, if not effective
at the Execution Time, in the form in which it shall become effective) and, in
the event any post-effective amendment thereto or any Rule 434 Term Sheet
becomes effective prior to the Closing Date (as hereinafter defined), shall also
mean such registration statement as so amended. Such term shall include Rule
430A Information and Rule 434 Information deemed to be included therein at the
Effective Date as provided by Rule 430A and Rule 434, respectively. "Rule 424",
"Rule 430A", "Rule 434" and "Rule 462(b)" refer to such rules under the Act.
"Rule 430A Information" means information with respect to the Securities and the
offering thereof permitted to be omitted from the Registration Statement when it
becomes effective pursuant to Rule 430A. "Rule 434 Delivery Alternative" shall
mean the delivery alternative permitted by Rule 434. "Rule 434 Information"
shall mean any information to be included in a Rule 434 Term Sheet. "Rule 434
Term Sheet" shall mean the term sheet or abbreviated term sheet delivered by the
Underwriters to investors and filed by the Company with the Commission pursuant
to Rule 434. "Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b) relating to
the final Delayed Offering covered by the initial Registration Statement
referred to in Section 1, paragraph (a) below.
<PAGE>
3
1. Representations and Warranties. The Company represents and
-------------------------------
warrants to, and agrees with, each Underwriter that:
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (file number 33- ) on
Form S-2, including a related preliminary prospectus, for the registration
under the Securities Act of 1933 (the "Act") of the offering and sale of
the Securities. The Company may have filed one or more amendments thereto,
including the related preliminary prospectus, each of which has previously
been furnished to you. The Company will next file with the Commission
either (i) prior to effectiveness of such registration statement, a further
amendment to such registration statement (including the form of final
prospectus) or (ii) after effectiveness of such registration statement, a
final prospectus in accordance with Rules 430A and 424(b)(1) or (4), and/or
Rule 434. In the case of clause (ii), the Company has included in such
registration statement, as amended at the Effective Date, all information
(other than Rule 430A Information and Rule 434 Information) required by the
Act and the rules thereunder to be included in the Prospectus with respect
to the Securities and the offering thereof. As filed, such amendment and
form of final prospectus, or such final prospectus, shall contain all Rule
430A Information, together with all other such required information, with
respect to the Securities and the offering thereof and, except to the
extent the Representatives shall agree in writing to a modification, shall
be in all substantive respects in the form furnished to you prior to the
Execution Time or, to the extent not completed at the Execution Time, shall
contain only such specific additional information and other changes (beyond
that contained in the latest Preliminary Prospectus) as the Company has
advised you, prior to the Execution Time, will be included or made therein.
If the Rule 434 Delivery Alternative is used, the Company will also file
the Rule 434 Term Sheet in accordance with Rule 434. As filed, such Rule
434 Term Sheet shall contain all the information required by Rule 434, and
except to the extent the Representatives shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to
you prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only
<PAGE>
4
such specific additional information and other changes (beyond that
contained in the latest Preliminary Prospectus) as the Company has advised
you, prior to the Execution Time, will be included or made therein. Upon
your request, but not without your agreement, the Company will also file a
Rule 462(b) Registration Statement in accordance with Rule 462(b).
(b) On the Effective Date, the Registration Statement did or will,
and when the Prospectus and any Rule 434 Term Sheet is first filed (if
required) in accordance with Rule 424(b) or Rule 434 and on the Closing
Date, the Prospectus (and any supplements thereto) will, comply in all
material respects with the applicable requirements of the Act, the
Securities Exchange Act of 1934 (the "Exchange Act") and the Trust
Indenture Act of 1939 (the "Trust Indenture Act") and the respective rules
thereunder; on the Effective Date, the Registration Statement did not or
will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein not misleading; on the Effective Date and on
the Closing Date, the Indenture did or will comply in all material respects
with the applicable requirements of the Trust Indenture Act and the rules
thereunder; and, on the Effective Date, the Prospectus, if not filed
pursuant to Rule 424(b), did not or will not, and on the date of any filing
pursuant to Rule 424(b) or Rule 434 and on the Closing Date, the Prospectus
(together with any supplement thereto) will not, include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
-------- -------
Company makes no representations or warranties as to (i) that part of the
Registration Statement which shall constitute the Statement of Eligibility
and Qualification (Form T-1) under the Trust Indenture Act of the Trustee
or (ii) the information contained in or omitted from the Registration
Statement or the Prospectus (or any supplement thereto) in reliance upon
and in conformity with information furnished in writing to the Company by
or on behalf of any Underwriter through the Representative specifically
for inclusion in the Registration Statement or the Prospectus (or any
supplement thereto).
<PAGE>
5
(c) The Company's authorized equity capitalization is as set forth
in the Prospectus; all the issued and outstanding shares of capital stock,
including Common Stock, of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable; each of the
Company and its subsidiaries has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full power and
authority to own its properties and conduct its business as described in
the Prospectus, and the Company has full power and authority to execute and
deliver this Agreement and to issue and sell the Securities as herein
contemplated.
(d) Each of the Company and its subsidiaries is duly qualified or
licensed by and is in good standing in each jurisdiction in which it
conducts its respective business; and each of the Company and its
subsidiaries is in compliance in all material respects with the laws,
orders, rules, regulations and directives issued or administered by such
jurisdictions.
(e) Neither the Company nor any of its subsidiaries is in breach of,
or in default under (nor has any event occurred which with notice, lapse of
time, or both would constitute a breach of, or default under), its
respective charter or amended and restated by-laws or in the performance or
observance of any obligation, agreement, covenant or condition contained in
any indenture, mortgage, deed of trust, bank loan or credit agreement or
other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which any of them is bound, and the
execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby will not result in any breach of or
constitute a default under (nor constitute any event which with notice,
lapse of time, or both would constitute a breach of, or default under), any
provisions of the charter or amended and restated by-laws of the Company or
any of its subsidiaries or under any provisions of any license, indenture,
mortgage, deed of trust, bank loan or credit agreement or other agreement
or instrument to which the Company or any of its subsidiaries is a party or
by which any of them or their respective properties may be bound or
affected, or under any Federal, state, local or foreign law,
<PAGE>
6
regulation or rule or any decree, judgment or order applicable to the
Company or any of its subsidiaries.
(f) This Agreement has been duly authorized, executed and delivered
by the Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms (subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other
similar laws affecting creditors' rights generally from time to time in
effect, and subject, as to enforceability, to general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(g) The Indenture has been duly authorized, executed and delivered by
the Company, has been duly qualified under the Trust Indenture Act, and,
assuming it has been authorized, executed and delivered by the Trustee,
constitutes a legal, valid and binding instrument enforceable against the
Company in accordance with its terms (subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium
or other laws affecting creditors' rights generally from time to time in
effect); and the Securities have been duly authorized and, when executed
and authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Underwriters pursuant to this Agreement,
will constitute legal, valid and binding obligations of the Company
entitled to the benefits of the Indenture.
(h) The capital stock of the Company, including the Common Stock, and
the Securities conforms in all material respects to the description thereof
contained in the Prospectus, and the certificates for the Common Stock and
the Securities are in due and proper form and the holders of the Common
Stock and the Securities will not be subject to personal liability by
reason of being such holders.
(i) No approval, authorization, consent or order of or filing with
any national, state or local governmental or regulatory commission, board,
body, authority or agency is required in connection with the issuance and
sale of the Securities as contemplated hereby other than registration of
the Securities under
<PAGE>
7
the Act and any necessary qualification under the securities or blue sky
laws of the various jurisdictions in which the Securities are being offered
by the Underwriters.
(j) No person has the right, contractual or otherwise, to cause the
Company to issue to it, or register pursuant to the Act, any shares of
capital stock of the Company upon the issue and sale of the Securities to
the Underwriters hereunder or upon the conversion of the Securities, nor
does any person have preemptive rights, rights of first refusal or other
rights to purchase any of the Securities or the Common Stock.
(k) Arthur Andersen LLP, whose reports on the consolidated financial
statements of the Company and its subsidiaries are filed with the
Commission as part of the Registration Statement and Prospectus, are
independent accountants within the meaning of the Act and the applicable
published rules and regulation thereunder.
(l) Each of the Company and its subsidiaries has all necessary
licenses, authorizations, consents and approvals and has made all necessary
filings required under any Federal, state, local or foreign law, regulation
or rule, and has obtained all necessary authorizations, consents and
approvals from other persons, in order to conduct their respective
businesses; neither the Company nor any of its subsidiaries is in violation
of, or in default under, any such license, authorization, consent or
approval or any Federal, state, local or foreign law, regulation or rule or
any decree, order or judgment applicable to the Company or any of its
subsidiaries.
(m) All legal or governmental proceedings, contracts or documents of
a character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement have
been so described or filed as required.
(n) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries or any of their respective properties, at law or in equity, or
<PAGE>
8
before or by any Federal, state local or foreign governmental or regulatory
commission, board, body, authority or agency which are reasonably likely to
result in a judgment, decree or order having a material adverse effect on
the operations, business, condition, prospects or property of the Company
and its subsidiaries taken as a whole.
(o) The financial statements included in the Registration Statement
and the Prospectus present fairly the consolidated financial position of
the Company and its subsidiaries as of the dates indicated and the
consolidated results of operations and changes in financial position of the
Company and its subsidiaries for the periods specified; such financial
statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis during the periods
involved.
(p) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as may be
otherwise stated in the Registration Statement or Prospectus, there has not
been (A) any material and unfavorable change, financial or otherwise, in
the business, properties, regulatory environment, results of operations or
condition (financial or otherwise), present or prospective, of the Company
and its subsidiaries taken as a whole, (B) any transaction, which is
material to the Company and its subsidiaries taken as a whole, contemplated
or entered into by the Company or any of its subsidiaries or (C) any
obligation, contingent or otherwise, directly or indirectly incurred by the
Company or any of its subsidiaries which is material to the Company and its
subsidiaries taken as a whole.
(q) The Securities have been approved for inclusion on The Nasdaq
SmallCap Market subject to official notice of issuance. The Common Stock is
quoted on Nasdaq under the symbol "ATGI".
2. Purchase and Sale. (a) Subject to the terms and conditions and
------------------
in reliance upon the representations and warranties herein set forth, the
Company agrees to sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
% of the principal amount thereof, plus accrued
<PAGE>
9
interest, if any, on the Securities from , 1995, to the Closing Date,
the principal amount of the Underwritten Securities set forth opposite such
Underwriter's name in Schedule I hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option to the several Underwriters to purchase, severally and not jointly, up to
$3,750,000 principal amount of the Option Securities at the same purchase price
per Option Security as the Underwriters shall pay for the Underwritten
Securities. Said option may be exercised only to cover over-allotments in the
sale of the Underwritten Securities by the Underwriters. Said option may be
exercised in whole or in part at any time (but not more than once) on or before
the 30th day after the date of the Prospectus upon written or telegraphic notice
by the Representative to the Company setting forth the principal amount of the
Option Securities as to which the several Underwriters are exercising the option
and the settlement date. Delivery of Option Securities by the Company, and
payment therefor to the Company, shall be made as provided in Section 3 hereof.
The principal amount of Option Securities to be purchased by each Underwriter
shall be the same percentage of the total principal amount of Option Securities
to be purchased by the several Underwriters as such Underwriter is purchasing of
the Underwritten Securities, subject to such adjustments as you in your absolute
discretion shall make to eliminate any fractional shares.
3. Delivery and Payment. Delivery of and payment for the
---------------------
Underwritten Securities and the Option Securities (if the option provided for in
Section 2(b) hereof shall have been exercised on or before the second business
day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on
, 1995, or such later date (not later than , 1995) as the
Representative shall designate, which date and time may be postponed by
agreement between the Representative and the Company or as provided in Section 9
hereof (such date and time of delivery and payment for the Securities being
herein called the "Closing Date"). Delivery of the Securities shall be made to
the Representative for the respective accounts of the several Underwriters
against payment by the several Underwriters through the Representative of the
purchase price thereof to or upon the order of the Company by certified or
official bank check or checks drawn on or by
<PAGE>
10
a New York Clearing House bank and payable in next day funds. Delivery of the
Underwritten Securities and the Option Securities shall be made at such location
as the Representative shall reasonably designate at least one business day in
advance of the Closing Date and payment for such Securities shall be made at the
office of Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York.
Certificates for the Securities shall be registered in such names and in such
denominations as the Representative may request not less than three full
business days in advance of the Closing Date.
The Company agrees to have the Securities available for inspection,
checking and packaging by the Representative in New York, New York, not later
than 1:00 PM on the business day prior to the Closing Date.
If the option provided for in Section 2(b) hereof is exercised after
the second business day prior to the Closing Date, the Company will deliver (at
the expense of the Company) to the Representative, at such location as the
Representative shall reasonably designate, on the date specified by the
Representative (which shall be within three business days after exercise of
said option), certificates for the Option Securities in such names and
denominations as the Representative shall have requested against payment of the
purchase price thereof to or upon the order of the Company by certified or
official bank check or checks drawn on or by a New York Clearing House bank and
payable in next day funds. If settlement for the Option Securities occurs after
the Closing Date, the Company will deliver to the Representative on the
settlement date for the Option Securities, and the obligation of the
Underwriters to purchase the Option Securities shall be conditioned upon receipt
of, supplemental opinions, certificates and letters confirming as of such date
the opinions, certificates and letters delivered on the Closing Date pursuant to
Section 6 hereof.
4. Offering by Underwriters. It is understood that the several
-------------------------
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. Agreements. The Company agrees with the several Underwriters
-----------
that:
<PAGE>
11
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment
thereof, to become effective. Prior to the termination of the offering of
the Securities, the Company will not file any amendment of the Registration
Statement or supplement to the Prospectus or any Rule 462(b) Registration
Statement without your prior consent. Subject to the foregoing sentence,
if the Registration Statement has become or becomes effective pursuant to
Rule 430A, or filing of the Prospectus is otherwise required under Rule
424(b), the Company will cause the Prospectus, properly completed, and any
supplement thereto to be filed with the Commission pursuant to the
applicable paragraph of Rule 424(b) within the time period prescribed and
will provide evidence satisfactory to the Representative of such timely
filing. If the Rule 434 Delivery Alternative is used, the Company will
also cause the Rule 434 Term Sheet, properly completed, to be filed with
the Commission pursuant to Rule 434 within the time period prescribed and
will provide evidence satisfactory to the Representative of such timely
filing. Upon your request, the Company will cause the Rule 462(b)
Registration Statement, properly completed, to be filed with the Commission
pursuant to Rule 462(b) and will provide evidence satisfactory to the
Representative of such filing. The Company will promptly advise the
Representative (A) when the Registration Statement, if not effective at
the Execution Time, and any amendment thereto, shall have become effective,
(B) when the Prospectus, and any supplement thereto, any Rule 434 Term
Sheet or any Rule 462(b) Registration Statement shall have been filed (if
required) with the Commission pursuant to the applicable rule under the
Act, (C) when, prior to termination of the offering of the Securities, any
amendment to the Registration Statement shall have been filed or become
effective, (D) of any request by the Commission for any amendment of the
Registration Statement or supplement to the Prospectus or for any
additional information, (E) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (F) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any
<PAGE>
12
proceeding for such purpose. The Company will use its best efforts to
prevent the issuance of any such stop order and, if issued, to obtain as
soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or if it shall be necessary to amend
the Registration Statement or supplement the Prospectus to comply with the
Act or the Exchange Act or the respective rules thereunder, the Company
promptly will prepare and file with the Commission, subject to the second
sentence of paragraph (a) of this Section 5, an amendment or supplement
which will correct such statement or omission or effect such compliance.
(c) As soon as practicable, the Company will make generally available
to its security holders and to the Representative an earnings statement or
statements of the Company and its subsidiaries which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to the Representative and counsel for
the Underwriters, without charge, signed copies of the Registration
Statement (including exhibits thereto) and to each other Underwriter a copy
of the Registration Statement (without exhibits thereto) and, so long as
delivery of a prospectus by an Underwriter or dealer may be required by the
Act, as many copies of each Preliminary Prospectus and the Prospectus and
any supplement thereto as the Representative may reasonably request. The
Company will pay the expenses of printing or other production of all
documents relating to the offering.
(e) The Company will arrange for the qualification of the Securities
for sale under the laws of such jurisdictions as the Representative may
designate, will maintain such qualifications in effect so long as required
for the distribution of the Securities and will pay the fee of the National
<PAGE>
13
Association of Securities Dealers, Inc., in connection with its review of
the offering.
(f) The Company will not, for a period of 180 days following the
Execution Time, without the prior written consent of Unterberg Harris,
offer, sell or contract to sell, or otherwise dispose of, directly or
indirectly, or announce the offering of, any other shares of Common Stock
or any securities convertible into, or exchangeable for, shares of Common
Stock; provided, however, that the Company may issue and sell Common Stock
-------- -------
pursuant to any employee stock option plan, stock ownership plan,
restricted stock purchase plan or dividend reinvestment plan of the Company
in effect at the Execution Time and the Company may issue Common Stock
issuable upon the conversion of securities or the exercise of warrants
outstanding at the Execution Time.
6. Conditions to the Obligations of the Underwriters. The
--------------------------------------------------
obligations of the Underwriters to purchase the Underwritten Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein as of
the Execution Time, the Closing Date and any settlement date pursuant to Section
3 hereof, to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representative agree in writing to a later time,
the Registration Statement will become effective not later than (i) 6:00 PM New
York City time on the date of determination of the public offering price, if
such determination occurred at or prior to 3:00 PM New York City time on such
date or (ii) 12:00 Noon on the business day following the day on which the
public offering price was determined, if such determination occurred after 3:00
PM New York City time on such date; if filing of the Prospectus, or any
supplement thereto, is required pursuant to Rule 424(b), the Prospectus, and any
such supplement, will be filed in the manner and within the time period required
by Rule 424(b), or if the filing of the Rule 434 Term Sheet is required pursuant
to Rule 434, the Rule 434 Term Sheet will be filed in the manner and within the
time period required under
<PAGE>
14
Rule 434; and no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been instituted or threatened.
(b) The Company shall have furnished to the Representative the
opinion of Greenberger & Forman, counsel for the Company, dated the Closing
Date, which states to the effect that:
(i) each of the Company and its subsidiaries (individually a
"Subsidiary" and collectively the "Subsidiaries") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or organized,
with full corporate power and authority to own its properties and conduct
its business as described in the Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
each jurisdiction which requires such qualification wherein it owns or
leases material properties or conducts material business;
(ii) all the outstanding shares of capital stock of each Subsidiary
have been duly and validly authorized and issued and are fully paid and
nonassessable, and, except as otherwise set forth in the Prospectus, all
outstanding shares of capital stock of the Subsidiaries are owned by the
Company either directly or through wholly owned subsidiaries free and clear
of any perfected security interest and, to the knowledge of such counsel,
after due inquiry, any other security interests, claims, liens or
encumbrances;
(iii) the Company's authorized equity capitalization is as set forth
in the Prospectus under the heading "Description of Capital Stock"; the
shares of Common Stock initially issuable upon conversion of the Securities
have been duly and validly authorized and reserved for issuance upon such
conversion and when issued upon conversion will be validly issued, fully
paid and nonassessable; the Securities and the Common Stock conform, as to
legal matters, to the descriptions thereof contained in the Prospectus
under the headings "Description of Debentures" and "Description of Capital
Stock"; the Securities issuable upon conversion of the Securities have been
approved for quotation on the Nasdaq SmallCap Market, subject to official
<PAGE>
15
notice of issuance and the shares of Common Stock issuable upon conversion
of the Securities have been approved for quotation on the Nasdaq National
Market, subject to official notice of issuance; the certificates for the
Securities are in valid and sufficient form; and the holders of outstanding
shares of capital stock of the Company are not entitled to preemptive or
other rights to subscribe for the Securities or the Shares of Common Stock
issuable upon the conversion thereof;
(iv) the Indenture has been duly authorized, executed and delivered by
the Company, has been duly qualified under the Trust Indenture Act, and,
assuming it has been authorized, executed and delivered by the Trustee,
constitutes a legal, valid and binding instrument enforceable against the
Company in accordance with its terms (subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium
or other laws affecting creditors' rights generally from time to time in
effect); and the Securities have been duly authorized and, when executed
and authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Underwriters pursuant to this Agreement,
will constitute legal, valid and binding obligations of the Company
entitled to the benefits of the Indenture;
(v) to the best knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of
its subsidiaries of a character required to be disclosed in the
Registration Statement which is not adequately disclosed in the Prospectus,
and there is no franchise, contract or other document of a character
required to be described in the Registration Statement or Prospectus, or to
be filed as an exhibit, which is not described or filed as required;
(vi) the Registration Statement has become effective under the Act;
any required filing of the Prospectus, and any supplements thereto,
pursuant to Rule 424(b) has been made in the manner and within the time
period required by Rule 424(b), or if the Rule 434 Term Sheet was used, the
required filing has been made in the manner and time period required by
Rule 434; to the best knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement has been issued, no
proceedings for that purpose have been instituted or threatened and the
<PAGE>
16
Registration Statement and the Prospectus (other than the financial
statements and other financial and statistical information contained
therein and the Statement of Eligibility and Qualification of the Trustee
on Form T-1, as to which such counsel need express no opinion) comply as to
form in all material respects with the applicable requirements of the Act,
the Exchange Act and the Trust Indenture Act and the respective rules
thereunder; and such counsel has no reason to believe that at the Effective
Date the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that
the Prospectus includes any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(vii) this Agreement has been duly authorized, executed and delivered by
the Company;
(viii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated herein, except such as have been obtained under
the Act and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters and such other approvals (specified in such
opinion) as have been obtained;
(ix) neither the execution and delivery of the Indenture, the issue and
sale of the Securities, nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof
will conflict with, result in a breach or violation of, or constitute a
default under any law or the charter or by-laws of the Company or the terms
of any indenture or other agreement or instrument known to such counsel and
to which the Company or any of its subsidiaries is a party or bound or any
judgement, order or decree known to such counsel to be applicable to the
Company or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction
over the Company or any of its subsidiaries; and
<PAGE>
17
(x) no holders of securities of the Company have rights to the
registration of such securities under the Registration Statement.
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than the State of Delaware or the
United States, to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters and (B) as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. Reference to the Prospectus in
this paragraph (b) include any supplements thereto at the Closing Date.
(c) The Representative shall have received from Cravath, Swaine &
Moore, counsel for the Underwriters, such opinion or opinions or letters, dated
the Closing Date, with respect to the issuance and sale of the Securities, the
Registration Statement, the Prospectus (together with any supplement thereto)
and other related matters as the Representatives may reasonably require, and the
Company and shall have furnished to such counsel such documents as they request
for the purpose of enabling them to pass upon such matters.
(d) The Company shall have furnished to the Representative a
certificate of the Company, signed by the Chairman of the Board or the President
and the principal financial or accounting officer of the Company, dated the
Closing Date, to the effect that the signers of such certificate have carefully
examined the Registration Statement, the Prospectus, any supplement to the
Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing Date and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the Company's knowledge, threatened; and
<PAGE>
18
(iii) since the date of the most recent financial statements included
in the Prospectus (exclusive of any supplement thereto), there has been no
material adverse change in the condition (financial or other), earnings,
business or properties of the Company and its subsidiaries, whether or not
arising from transactions in the ordinary course of business, except as set
forth in or contemplated in the Prospectus (exclusive of any supplement
thereto).
(e) At the Execution Time and at the Closing Date, Arthur Andersen
LLP, shall have furnished to the Representatives a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in form and
substance satisfactory to the Representative, confirming that they are
independent accountants within the meaning of the Act and the Exchange Act and
the respective applicable published rules and regulations thereunder and stating
in effect that:
(i) in their opinion the audited financial statements and financial
statement schedules included in the Registration Statement and the
Prospectus and reported on by them comply as to form in all material
respects with the applicable accounting requirements of the Act, the
Exchange Act and the related published rules and regulations;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Company and its Subsidiaries; carrying out
certain specified procedures (but not an examination in accordance with
generally accepted auditing standards) which would not necessarily reveal
matters of significance with respect to the comments set forth in such
letter; a reading of the minutes of the meetings of the stockholders,
directors and stock option and compensation committees of the Company and
the Subsidiaries; and inquiries of certain officials of the Company who
have responsibility for financial and accounting matters of the Company and
its subsidiaries as to transactions and events subsequent to July 30, 1995,
nothing came to their attention which caused them to believe that with
respect to the period subsequent to July 30, 1995, there were any changes,
at a specified date not more than five business days prior to the date of
the letter, in the long-term debt of the Company and its subsidiaries or
capital stock of the
<PAGE>
19
Company or decreases in the stockholders' equity of the Company or
decreases in working capital of the Company and its subsidiaries as
compared with the amounts shown on the July 30, 1995 consolidated balance
sheet included in the Registration Statement and the Prospectus, or for the
period from July 30, 1995 to such specified date there were any decreases,
as compared with the corresponding period in the preceding fiscal year, in
subsidiaries' gross profit or income before taxes or in total or per share
amounts of net income of the Company and its subsidiaries, except in all
instances for changes or decreases set forth in such letter, in which case
the letter shall be accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed necessary by the
Representative;
(iii) they have performed certain other specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial
or statistical information derived from the general accounting records of
the Company and its subsidiaries) set forth in the Registration Statement
and the Prospectus agrees with the accounting records of the Company and
its subsidiaries, excluding any questions of legal interpretation; and
(iv) On the basis of a reading of the unaudited pro forma financial
statements included in the Registration Statement and the Prospectus (the
"pro forma financial statements"), carrying out certain specified
procedures, inquiries of certain officials of the Company who have
responsibility for financial and accounting matters, and proving the
arithmetic accuracy of the application of the pro forma adjustments to the
historical amounts in the pro forma financial statements, nothing came to
their attention which caused them to believe that the pro forma financial
statements do not comply in form in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X or that
the pro forma adjustments have not been properly applied to the historical
amounts in the compilation of such statements.
References to the Prospectus in this paragraph (e) include any
supplement thereto at the date of the letter.
<PAGE>
20
The Representative shall have also received from Arthur Andersen LLP a
letter stating that the Company's system of internal accounting controls taken
as a whole is sufficient to meet the broad objectives of internal accounting
control insofar as those objectives pertain to the prevention or detection of
errors or irregularities in amounts that would be material in relation to the
financial statements of the Company and its subsidiaries.
(f) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the letter or
letters referred to in paragraph (e) of this Section 6 or (ii) any change, or
any development involving a prospective change, in or affecting the business or
properties of the Company and its subsidiaries the effect of which, in any case
referred to in clause (i) or (ii) above, is, in the judgment of the
Representatives, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Registration Statement (exclusive of any amendment thereof)
and the Prospectus (exclusive of any supplement thereto).
(g) At the Execution Time, the Company shall have furnished to the
Representative a letter substantially in the form of Exhibit A hereto from each
executive officer and director of the Company and Steel Partners, L.P. and
Steel Partners II, L.P. addressed to the Representative, in which each such
person agrees not to offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, or announce an offering of, any shares of Common Stock
beneficially owned by such person or any securities convertible into, or
exchangeable for, shares of Common Stock for a period of 180 days following the
Execution Time without the prior written consent of Unterberg Harris other
than shares of Common Stock disposed of as bona fide gifts.
(h) Prior to the Closing Date, the Company shall have furnished to
the Representative such further information, certificates and documents as the
Representative may reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material
<PAGE>
21
respects when and as provided in this Agreement, or if any of the opinions and
certificates mentioned above or elsewhere in this Agreement shall not be in all
material respects reasonably satisfactory in form and substance to the
Representative and counsel for the Underwriters, this Agreement and all
obligations of the Underwriters hereunder may be canceled at, or at any time
prior to, the Closing Date by the Representative. Notice of such cancellation
shall be given to the Company in writing or by telephone or telegraph confirmed
in writing.
7. Reimbursement of Underwriters' Expenses. If the sale of the
----------------------------------------
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the Underwriters, the Company will reimburse the Underwriters
severally upon demand for all out-of-pocket expenses (including reasonable fees
and disbursements of counsel) that shall have been incurred by them in
connection with the proposed purchase and sale of the Securities.
8. Indemnification and Contribution. (a) The Company agrees to
---------------------------------
indemnify and hold harmless each Underwriter, the directors, officers, employees
and agents of each Underwriter and each person who controls any Underwriter
within the meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the registration statement for the registration of
the Securities as originally filed or in any amendment thereof, or in any
Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or
<PAGE>
22
defending any such loss, claim, damage, liability or action; provided, however,
-------- -------
that (i) the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Underwriter through the
Representative specifically for inclusion therein and (ii) such indemnity with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter (or any director, officer, employee or agent of such Underwriter or
any person controlling such Underwriter) from whom the person asserting any such
loss, claim, damage or liability purchased the Securities that are the subject
thereof if such person did not receive a copy of the Prospectus (or the
Prospectus as supplemented) excluding documents incorporated therein by
reference at or prior to the confirmation of the sale of such Securities to such
person in any case where such delivery is required under the Act and any untrue
statement or omission of a material fact contained in any Preliminary Prospectus
was corrected in the Prospectus (or the Prospectus as supplemented). This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity to each Underwriter, but only with reference to written
information relating to such Underwriter furnished to the Company by or on
behalf of such Underwriter through the Representatives specifically for
inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any Underwriter
may otherwise have. The Company acknowledges that the statements set forth in
each Preliminary Prospectus and the Prospectus constitute the only information
furnished in writing by or on behalf of the several Underwriters for inclusion
in any Preliminary Prospectus or the Prospectus, and you, as the
Representative, confirm that such statements are correct.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in
<PAGE>
23
respect thereof is to be made against the indemnifying party under this Section
8, notify the indemnifying party in writing of the commencement thereof; but the
failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
-------- -------
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an
<PAGE>
24
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Underwriters agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company and one or more of
the Underwriters may be subject in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and by the
Underwriters on the other from the offering of the Securities; provided,
--------
however, that in no case shall any Underwriter (except as may be provided in any
- -------
agreement among underwriters relating to the offering of the Securities) be
responsible for any amount in excess of the underwriting discount or commission
applicable to the Securities purchased by such Underwriter hereunder. If the
allocation provided by the immediately preceding sentence is unavailable for any
reason, the Company and the Underwriters shall contribute in such proportion as
is appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and of the Underwriters on the other in
connection with the statements or omissions which resulted in such Losses as
well as any other relevant equitable considerations. Benefits received by the
Company shall be deemed to be equal to the total net proceeds from the offering
(before deducting expenses), and benefits received by the Underwriters shall be
deemed to be equal to the total underwriting discounts and commissions, in each
case as set forth on the cover page of the Prospectus. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Company or the Underwriters. The Company
and the Underwriters agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 8, each person
who controls an Underwriter within the meaning of either the Act or the
<PAGE>
25
Exchange Act and each director, officer, employee and agent of an Underwriter
shall have the same rights to contribution as such Underwriter, and each person
who controls the Company within the meaning of either the Act or the Exchange
Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
9. Default by an Underwriter. If any one or more Underwriters shall
--------------------------
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
-------- -------
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representative shall determine in order that the required
changes in the Registration Statement and the Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the
Company and any nondefaulting Underwriter for damages occasioned by its default
hereunder.
10. Termination. This Agreement shall be subject to termination in
------------
the absolute discretion of the Representative, by notice given to the Company
prior to delivery of and payment for the Securities, if prior to such time (i)
trading in the Company's Common Stock shall have
<PAGE>
26
been suspended by the Commission or Nasdaq or trading in securities generally on
the New York Stock Exchange or Nasdaq shall have been suspended or limited or
minimum prices shall have been established on either of such Exchange or Market,
(ii) a banking moratorium shall have been declared either by Federal or New York
State authorities or (iii) there shall have occurred any outbreak or escalation
of hostilities, declaration by the United States of a national emergency or war
or other calamity or crisis the effect of which on financial markets is such as
to make it, in the judgment of the Representative, impracticable or inadvisable
to proceed with the offering or delivery of the Securities as contemplated by
the Prospectus (exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The respective
-------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Underwriters set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Securities. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
12. Notices. All communications hereunder will be in writing and
--------
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telegraphed and confirmed to them, care of Unterberg Harris, Swiss
Bank Tower, 10 East 50th Street, 22nd Floor, New York, New York 10022; or, if
sent to the Company, will be mailed, delivered or telegraphed and confirmed to
it at 333 Cypress Run, Suite 360, Houston, Texas, Attention: Secretary.
13. Successors. This Agreement will inure to the benefit of and be
-----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed
---------------
in accordance with the laws of the State of New York.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us
<PAGE>
27
the enclosed duplicate hereof, whereupon this letter and your acceptance shall
represent a binding agreement among the Company and the several Underwriters.
Very truly yours,
Alpha Technologies Group, Inc.
By: ..........................
[Title]
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Unterberg Harris
By: .........................
[Title]
For itself and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.
<PAGE>
EXHIBIT 4.1
===============================================================================
INDENTURE
Between
ALPHA TECHNOLOGIES GROUP, INC.
and
Trustee
Dated as of , 1995
% Convertible Subordinated Debentures Due 2005
===============================================================================
<PAGE>
ALPHA TECHNOLOGIES GROUP, INC.
Reconcilation and Tie Between the Trust Indenture Act
of 1939 and Indenture dated as of , 1995
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
<S> <C>
(S) 310(a)(1).............................................. 6.08
(a)(2)................................................. 6.08
(a)(3)................................................. Not Applicable
(a)(4)................................................. Not Applicable
(a)(5)................................................. 6.08
(b).................................................... 6.08
6.09
(S) 311(a)................................................. 6.12
(b).................................................... 6.12
(b)(2)................................................. 7.03(a)(2)
7.03(b)
(S) 312(a)................................................. 7.01
7.02(a)
(b).................................................... 7.02(b)
(c).................................................... 7.02(c)
(S) 313(a)................................................. 7.03(a)
(b).................................................... 7.03(b)
(c).................................................... 7.03(a)
(d).................................................... 7.03(c)
(S) 314(a)................................................. 7.04
(b).................................................... Not Applicable
(c)(1)................................................. 1.02
(c)(2)................................................. 1.02
(c)(3)................................................. Not Applicable
(d).................................................... Not Applicable
(e).................................................... 1.02
(S) 315(a)................................................. 6.01(a)
(b).................................................... 6.02
7.03(a)(6)
(c).................................................... 6.01(b)
(d).................................................... 6.01(c)
(d)(1)................................................. 6.01(a)(1)
(d)(2)................................................. 6.01(c)(2)
(d)(3)................................................. 6.01(c)(3)
(e).................................................... 5.14
(S) 316(a)................................................. 1.01
(a)(1)(A).............................................. 5.02
5.12
</TABLE>
<PAGE>
2
<TABLE>
<S> <C>
(a)(1)(B).............................................. 5.13
(a)(2)................................................. Not Applicable
(b).................................................... 5.08
(S) 317(a)(1).............................................. 5.03
(a)(2)................................................. 5.04
(b).................................................... 10.03
(S) 318(a)................................................. 1.07
</TABLE>
____________________
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions and Other Provisions
--------------------------------
of General Application
----------------------
SECTION 1.01. Definitions...................................... 2
SECTION 1.02. Compliance Certificates and
Opinions....................................... 8
SECTION 1.03. Form of Documents Delivered to
Trustee........................................ 9
SECTION 1.04. Acts of Holders.................................. 10
SECTION 1.05. Notices, etc., to Trustee and
Company........................................ 11
SECTION 1.06. Notice to Holders; Waiver........................ 11
SECTION 1.07. Conflict with Trust Indenture Act................ 12
SECTION 1.08. Effect of Headings and Table of
Contents....................................... 12
SECTION 1.09. Successors and Assigns........................... 12
SECTION 1.10. Separability Clause.............................. 12
SECTION 1.11. Benefits of Indenture............................ 13
SECTION 1.12. Governing Law.................................... 13
SECTION 1.13. Legal Holidays................................... 13
ARTICLE II
Debenture Forms
---------------
SECTION 2.01. Forms Generally.................................. 13
SECTION 2.02. Form of Face of Debenture........................ 14
SECTION 2.03. Form of Reverse of Debenture..................... 16
SECTION 2.04. Form of Trustee's Certificate of
Authentication................................. 21
____________________
Note: This table of contents shall not, for any purpose, be deemed to be part
of the Indenture.
<PAGE>
Contents, p. 2
Page
----
ARTICLE III
The Debentures
--------------
SECTION 3.01. Title and Terms.................................. 21
SECTION 3.02. Denominations.................................... 22
SECTION 3.03. Execution, Authentication, Delivery
and Dating..................................... 22
SECTION 3.04. Temporary Debentures............................. 23
SECTION 3.05. Registration, Registration of
Transfer and Exchange.......................... 25
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen
Debentures..................................... 25
SECTION 3.07. Payment of Interest; Interest Rights
Preserved...................................... 26
SECTION 3.08. Persons Deemed Owners............................ 28
SECTION 3.09. Cancelation...................................... 28
SECTION 3.10. Computation of Interest.......................... 28
SECTION 3.11. CUSIP Number..................................... 28
ARTICLE IV
Satisfaction and Discharge
--------------------------
SECTION 4.01. Satisfaction and Discharge of
Indenture..................................... 29
SECTION 4.02. Application of Trust Money....................... 30
ARTICLE V
Remedies
--------
SECTION 5.01. Events of Default................................ 31
SECTION 5.02. Acceleration of Maturity; Rescission
and Annulment................................. 33
SECTION 5.03. Collection of Indebtedness and Suits
for Enforcement by Trustee..................... 34
SECTION 5.04. Trustee May File Proofs of Claim................. 35
SECTION 5.05. Trustee May Enforce Claims Without
Possession of Debentures...................... 36
SECTION 5.06. Application of Money Collected................... 36
SECTION 5.07. Limitation on Suits.............................. 37
SECTION 5.08. Right of Holders to Receive
Principal, Premium and Interest
and To Convert................................ 38
<PAGE>
Contents, p. 3
Page
----
SECTION 5.09. Restoration of Rights and Remedies............... 38
SECTION 5.10. Rights and Remedies Cumulative................... 38
SECTION 5.11. Delay or Omission Not Waiver..................... 39
SECTION 5.12. Control by Holders............................... 39
SECTION 5.13. Waiver of Past Defaults.......................... 39
SECTION 5.14. Undertaking for Costs............................ 40
SECTION 5.15. Waiver of Stay, Usury or Extension
Laws.......................................... 40
ARTICLE VI
The Trustee
-----------
SECTION 6.01. Certain Duties and Responsibilities............. 41
SECTION 6.02. Notice of Defaults.............................. 42
SECTION 6.03. Certain Rights of Trustee....................... 43
SECTION 6.04. Not Responsible for Recitals or
Issuance of Debentures....................... 44
SECTION 6.05. May Hold Debentures............................. 44
SECTION 6.06. Money Held in Trust............................. 44
SECTION 6.07. Compensation and Reimbursement.................. 45
SECTION 6.08. Corporate Trustee Required;
Eligibility.................................. 46
SECTION 6.09. Resignation and Removal; Appointment
of Successor................................. 46
SECTION 6.10. Acceptance of Appointment
by Successor................................. 48
SECTION 6.11. Merger, Conversion, Consolidation or
Succession to Business....................... 48
SECTION 6.12. Preferential Collection of Claims
Against Company.............................. 49
SECTION 6.13. Appointment of Authenticating Agent............. 49
ARTICLE VII
Holders' List and Reports
-------------------------
by Trustee and Company
----------------------
SECTION 7.01. Company To Furnish Trustee Names and
Addresses of Holders.......................... 52
SECTION 7.02. Preservation of Information
Communications to Holders..................... 52
SECTION 7.03. Reports by Trustee............................... 54
SECTION 7.04. Reports by Company............................... 55
<PAGE>
Contents, p. 4
Page
----
ARTICLE VIII
Consolidation, Merger, Conveyance,
----------------------------------
Transfer or Lease
-----------------
SECTION 8.01. Company May Consolidate, etc., Only on
Certain Terms................................. 57
SECTION 8.02. Successor Corporation Substituted................ 57
ARTICLE IX
Supplemental Indentures
-----------------------
SECTION 9.01. Supplemental Indentures Without
Consent of Holders............................ 58
SECTION 9.02. Supplemental Indentures with Consent
of Holders.................................... 58
SECTION 9.03. Execution of Supplemental Indentures............. 60
SECTION 9.04. Effect of Supplemental Indentures................ 60
SECTION 9.05. Conformity with Trust Indenture Act.............. 60
SECTION 9.06. Reference in Debentures to
Supplemental Indentures....................... 60
ARTICLE X
Covenants
---------
SECTION 10.01. Payment of Principal, Premium and
Interest...................................... 61
SECTION 10.02. Maintenance of Office or Agency.................. 61
SECTION 10.03. Money for Debenture Payments To Be
Held in Trust................................. 61
SECTION 10.04. Corporate Existence.............................. 63
SECTION 10.05. Maintenance of Properties........................ 63
SECTION 10.06. Payment of Taxes and Other Claims................ 64
SECTION 10.07. Waiver of Certain Covenants...................... 64
ARTICLE XI
Redemption of Debentures
------------------------
SECTION 11.01. Right of Redemption.............................. 64
SECTION 11.02. Applicability of Article......................... 64
SECTION 11.03. Election To Redeem; Notice to Trustee............ 65
<PAGE>
Contents, p. 5
Page
----
SECTION 11.04. Selection by Trustee of Debentures To
Be Redeemed................................... 65
SECTION 11.05. Notice of Redemption............................. 66
SECTION 11.06. Deposit of Redemption Price...................... 66
SECTION 11.07. Debentures Payable on Redemption Date............ 67
SECTION 11.08. Debentures Redeemed in Part...................... 67
ARTICLE XII
Conversion of Debentures
------------------------
SECTION 12.01. Conversion Privilege and Conversion
Price......................................... 68
SECTION 12.02. Exercise of Conversion Privilege................. 68
SECTION 12.03. Fractions of Shares.............................. 69
SECTION 12.04. Adjustment of Conversion Price................... 70
SECTION 12.05. Notice of Adjustment of Conversion
Price......................................... 84
SECTION 12.06. Notice of Certain Corporate Action............... 84
SECTION 12.07. Company To Reserve Common Stock.................. 85
SECTION 12.08. Taxes on Conversions............................. 85
SECTION 12.09. Covenant as to Common Stock...................... 86
SECTION 12.10. Provisions in Case of Consolidation,
Merger or Sale of Assets...................... 86
SECTION 12.11. Responsibility of Trustee........................ 87
ARTICLE XIII
Subordination of Debentures
---------------------------
SECTION 13.01. Debentures Subordinate to Senior
Indebtedness.................................. 87
SECTION 13.02. No Payments when Senior Indebtedness
in Default; Payment Over of
Proceeds upon Dissolution, etc................ 88
SECTION 13.03. Trustee To Effectuate Subordination.............. 91
SECTION 13.04. Trustee Not Charged with Knowledge of
Prohibition................................... 91
SECTION 13.05. Rights of Trustee as Holder of Senior
Indebtedness.................................. 92
SECTION 13.06. Article Applicable to Paying Agent............... 92
<PAGE>
Contents, p. 6
Page
----
ARTICLE XIV
Right To Require Repurchase
---------------------------
SECTION 14.01. Right To Require Repurchase...................... 92
SECTION 14.02. Notice; Method of Exercising
Repurchase Right.............................. 93
SECTION 14.03. Deposit of Repurchase Price...................... 94
SECTION 14.04. Debentures Not Repurchased on
Repurchase Date............................... 94
SECTION 14.05. "Change in Control" Defined...................... 95
<PAGE>
INDENTURE dated as of , 1995, between
ALPHA TECHNOLOGIES GROUP, INC., a corporation duly organized and
existing under the laws of the State of Delaware (herein called
the "Company"), having its principal office at 750 Lexington
Avenue, 27th Floor, New York, New York 10022, and ,
a national banking association organized and existing under the
laws of the United States of America, as Trustee (herein called
the "Trustee").
The Company has duly authorized the creation of an issue of its
Debentures (herein called the "Debentures") of substantially the tenor and
amount hereinafter set forth and to provide therefor the Company has duly
authorized the execution and delivery of this Indenture.
All things necessary to make the Debentures, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Debentures by the Holders thereof, it is mutually covenanted and agreed, for the
equal and
<PAGE>
2
proportionate benefit of all Holders of the Debentures, as follows:
ARTICLE I
Definitions and Other Provisions
--------------------------------
of General Application
----------------------
SECTION 1.01. Definitions. For all purposes of this Indenture,
------------
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act (as hereinafter defined), either directly or by reference
therein, have the meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act" when used with respect to any Holder has the meaning specified
in Section 1.04.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee to
act on behalf of the Trustee to authenticate Debentures.
<PAGE>
3
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the City of New York
or are authorized or obligated by law or executive order to be
closed.
"Change in Control" has the meaning specified in Section 14.05.
"Closing Price" has the meaning specified in Section 14.05.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Common Stock", as applied to the capital stock of any corporation,
shall mean the capital stock of any class which has no preference in respect of
dividends or other distributions of assets or of amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding up of such
corporation and which is not subject to redemption by such corporation;
provided, however, that, subject to the provisions of Section 12.10, shares
- -------- -------
issuable on conversion of Debentures shall include only shares of the class
designated as Common Stock of the Company at the date of the execution of this
instrument or shares of any class or classes resulting from any reclassification
or reclassifications thereof which have no preference in respect of dividends or
other distributions of assets or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which are not subject to redemption by the Company; provided further that,
-------- -------
if at any time there shall be more than one
<PAGE>
4
such resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of
all such classes resulting from all such reclassifications.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President or
a Vice President and by its Treasurer, an Assistant Treasurer, its Secretary or
an Assistant Secretary and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee in
the City of at which at any particular time its corporate trust
business shall be administered, which office at the time of the execution of
this indenture is located at ,
Attention of .
"Corporation" includes corporations, associations, companies and
business trusts.
"Current Market Price" has the meaning specified in Section 14.05,
except for purposes of Section 12.04 where it has the meaning set forth in such
Section.
"Debenture Register" and "Debenture Registrar" have the respective
meanings specified in Section 3.05.
"Defaulted Interest" has the meaning specified in Section 3.07.
"Event of Default" has the meaning specified in Section 5.01.
"Holder" means a Person in whose name a Debenture is registered in the
Debenture Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or
<PAGE>
5
amended by one or more indentures supplemental hereto entered into pursuant to
the applicable provisions hereof.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Debentures.
"Maturity" when used with respect to any Debenture means the date on
which the principal of such Debenture becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company and delivered
to the Trustee.
"Opinion of Counsel" means a written opinion of counsel acceptable to
the Trustee, who may be counsel for, or employed by, the Company.
"Outstanding" when used with respect to Debentures means, as of the
date of determination, all Debentures theretofore authenticated and delivered
under this Indenture, except:
(i) Debentures theretofore canceled by the Trustee or delivered to
the Trustee for cancelation;
(ii) Debentures for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Debentures; provided that, if such Debentures 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;
and
(iii) Debentures in exchange for or in lieu of which other Debentures
have been authenticated and delivered pursuant to this Indenture;
provided, however, that, in determining whether the Holders of the requisite
- -------- -------
principal amount of the Outstanding Debentures have given any request, demand,
authorization,
<PAGE>
6
direction, notice, consent or waiver or taken any other action hereunder,
Debentures owned by the Company or any other obligor upon the Debentures or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent, waiver or other action, only Debentures which the
Trustee has actual knowledge of being so owned shall be so disregarded.
Debentures so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Debentures and that the pledgee
is not the Company or any other obligor upon the Debentures or any Affiliate of
the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Debentures on behalf of
the Company, which may include the Company or any Affiliate.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Debenture" of any particular Debenture means every
previous Debenture evidencing all or a portion of the same debt as that
evidenced by such particular Debenture; and, for the purposes of this
definition, any Debenture authenticated and delivered under Section 3.06 in
exchange for or in lieu of all or a portion of a mutilated, destroyed, lost or
stolen Debenture shall be deemed to evidence the same debt as such mutilated,
destroyed, lost or stolen Debenture or portion thereof.
"Redemption Date", when used with respect to any Debenture to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Debenture to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the or
<PAGE>
7
(whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date.
"Repurchase Date" has the meaning specified in Section 14.01.
"Repurchase Price" has the meaning specified in Section 14.01.
"Responsible Officer", when used with respect to the Trustee, means
any officer within the (or any successor department) of the
Trustee, including, without limitation, any Vice President, any Assistant Vice
President, any Assistant Secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Senior Indebtedness" means the principal of (and premium, if any) and
interest on and other amounts due on any indebtedness, whether outstanding on
the date of execution of this Indenture or thereafter created, incurred, assumed
or guaranteed by the Company, for money borrowed from others (including, for
this purpose, all obligations under, respecting or constituting capitalized
leases or purchase money indebtedness) or in connection with the acquisition by
the Company or a Subsidiary of any other business or entity, or in respect of
letters of credit or bid, performance or surety bonds issued for the account or
on the credit of the Company or a Subsidiary, and, in each case, all renewals,
extensions and refundings thereof, other than (a) any such indebtedness as to
which, in the instrument creating or evidencing the same, it is provided that
such indebtedness is not superior in right of payment to the Debentures, (b)
indebtedness of the Company to any Affiliate and (c) the Debentures.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 3.07.
"Stated Maturity", when used with respect to any Debenture or any
installment of interest thereon, means the date specified in such Debenture as
the fixed date on which the principal of such Debenture or such installment of
<PAGE>
8
interest is due and payable; provided, however, that, if such date shall not be
-------- -------
a Business Day, then the Stated Maturity shall be the next Business Day.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock which ordinarily
has voting power for the election of directors, whether at all times or only so
long as no senior class of stock has such voting power by reason of any
contingency.
"Trading Day" has the meaning specified in Section 14.05.
"Trigger Event" has the meaning specified in Section 12.04.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended by the Trust Indenture Reform Act of 1990 and as in force at the date as
of which this instrument was executed, except as provided in Section 9.05.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
SECTION 1.02. Compliance Certificates and Opinions. Upon any
-------------------------------------
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
<PAGE>
9
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than certificates
delivered pursuant to Section 7.04(4)) shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.03. Form of Documents Delivered to Trustee. In any case
---------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon
<PAGE>
10
a certificate or opinion of, or representations by, an officer or officers of
the Company stating that the information with respect to such factual matters is
in the possession of the Company, unless such counsel knows, or in the exercise
of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.04. Acts of Holders. (a) Any request, demand,
----------------
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by an agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 6.01)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
<PAGE>
11
(c) The ownership of Debentures shall be proved by the Debenture
Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Debenture shall bind every future
Holder of the same Debenture and the Holder of every Debenture issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Debenture.
SECTION 1.05. Notices, etc., to Trustee and Company. Any request,
--------------------------------------
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(a) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
and mailed, first-class, postage prepaid, to the Trustee at its Corporate
Trust Office, Attention of , or
(b) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company, or
(c) the Company by the Trustee or the Trustee by the Company shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if transmitted by facsimile transmission to the Company at
( ) or to the Trustee at ( ) (or to such other
facsimile transmission number previously furnished in writing to the
Company by the Trustee or to the Trustee by the Company) and in each case
confirmed by a copy sent to the Company or to the Trustee, as the case may
be, by guaranteed overnight courier.
SECTION 1.06. Notice to Holders; Waiver. Where this Indenture
--------------------------
provides for notice to Holders of any event,
<PAGE>
12
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at his address as it appears in the Debenture Register,
not later than the latest date and not earlier than the earliest date,
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice nor any defect in any
notice so mailed to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 1.07. Conflict with Trust Indenture Act. If and to the
----------------------------------
extent that any provision hereof limits, qualifies or conflicts with the duties
imposed by, or with another provision (an "incorporated provision") included in
this Indenture by operation of, any of Sections 3.10 to 3.18, inclusive, of the
Trust Indenture Act, such imposed duties or incorporated provision shall
control.
SECTION 1.08. Effect of Headings and Table of Contents. The Article
-----------------------------------------
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 1.09. Successors and Assigns. All covenants and agreements
-----------------------
in this Indenture by the Company shall bind its successors and assigns, whether
so expressed or not.
SECTION 1.10. Separability Clause. In case any provision in this
--------------------
Indenture or in the Debentures shall be invalid, illegal or unenforceable, the
validity, legality
<PAGE>
13
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 1.11. Benefits of Indenture. Nothing in this Indenture or in
----------------------
the Debentures, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, the holders of Senior
Indebtedness and the Holders of Debentures, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law. This Indenture and the Debentures shall
--------------
be governed by and construed in accordance with the laws of the State of New
York.
SECTION 1.13. Legal Holidays. In any case where any Interest Payment
---------------
Date, Redemption Date, Repurchase Date or Stated Maturity of any Debenture or
the last date on which a Holder has the right to convert his Debentures shall
not be a Business Day, then (notwithstanding any other provision of this
Indenture or of the Debentures) payment of interest or principal (and premium,
if any) or Repurchase Price or conversion of the Debentures need not be made on
such date, but may be made on the next succeeding Business Day with the same
force and effect as if made on the Interest Payment Date, Redemption Date or
Repurchase Date or at the Stated Maturity or on such last day for conversion;
provided that no interest shall accrue for the period from and after such
- --------
Interest Payment Date, Redemption Date, Repurchase Date or Stated Maturity or
such last day for conversion, as the case may be.
ARTICLE II
Debenture Forms
---------------
SECTION 2.01. Forms Generally. The Debentures and the Trustee's
----------------
certificates of authentication shall be in substantially the forms set forth in
this Article, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, including forms
of conversion and forms of assignment, if requested by the Company, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers
<PAGE>
14
executing such Debentures, as evidenced by their execution of the Debentures.
The Company shall furnish any such legends or endorsements to the Trustee in
writing.
The definitive Debentures shall be printed, lithographed or engraved
or produced by any combination of these methods on steel-engraved borders or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Debentures may be listed, all as determined by the
officers executing such Debentures, as evidenced by their execution of such
Debentures.
SECTION 2.02. Form of Face of Debenture.
-------------------------
ALPHA TECHNOLOGIES GROUP, INC.
% Convertible Subordinated Debenture Due 2005
No. $
ALPHA TECHNOLOGIES GROUP, INC., a Delaware corporation (hereinafter
called the "Company", which term includes any successor corporation under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to or registered assigns the principal sum of
dollars on , 2005, and to pay interest thereon from , 1995,
or from the most recent Interest Payment Date to which interest has been paid
or duly provided for, semiannually on and in each
year, commencing , 1996, at the rate of % per annum, until the
principal hereof is paid or made available for payment. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Debenture (or one or more Predecessor Debentures) is registered at the close of
business on the Regular Record Date for such interest, which shall be the
or (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for on the due date for such payment will forthwith cease to be
payable to the Holder on such Interest Payment Date and may either be paid to
the Person in whose name this Debenture (or one or more Predecessor
<PAGE>
15
Debentures) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice of
which shall be given to the Holders of Debentures not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Debentures may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture. Payment of the
principal of (and premium, if any) and interest on this Debenture will be made
at the office or agency of the Company maintained for that purpose in the City
of New York or at any other office or agency maintained by the Company for such
purpose, in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
--------
however, that at the option of the Company payment of interest may be made by
- -------
check mailed to the address of the Person entitled thereto as such address shall
appear in the Debenture Register.
Reference is hereby made to the further provisions of this Debenture
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this
Debenture shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
<PAGE>
16
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
ALPHA TECHNOLOGIES GROUP, INC.,
by
--------------------------------
Attest:
- -----------------------
SECTION 2.03. Form of Reverse of Debenture. This Debenture is one of
-----------------------------
a duly authorized issue of Debentures of the Company designated as its %
Convertible Subordinated Debentures Due 2005 (herein called the "Debentures"),
limited in aggregate principal amount to $25,000,000 (subject to increase as
provided in the Indenture of up to $28,750,000 aggregate principal amount),
issued and to be issued under an Indenture dated as of , 1995 (herein
called the "Indenture"), between the Company and ,
as Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee, the holders of Senior Indebtedness and the Holders of the Debentures
and of the terms upon which the Debentures are, and are to be, authenticated and
delivered.
Subject to and upon compliance with the provisions of the Indenture,
the Holder of this Debenture is entitled, at such Holder's option, at any time
on or before the close of business on , 2005, or, in case this
Debenture or a portion hereof is called for redemption, then in respect of this
Debenture or such portion hereof until and including, but (unless the Company
defaults in making the payment due upon redemption) not after, the close of
business on the Business Day prior to the Redemption Date,
<PAGE>
17
to convert this Debenture (or any portion of the principal amount hereof which
is $1,000 or any integral multiple thereof), at the principal amount hereof, or
of such portion, into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/100 of a share) of Common Stock of the Company at a
conversion price equal to $ aggregate principal amount of Debentures for
each share of Common Stock (or at the current adjusted conversion price if an
adjustment has been made as provided in the Indenture) by surrender of this
Debenture, duly endorsed or assigned to the Company or in blank, at the office
or agency of the Company maintained for that purpose in the City of New York or
at any other office or agency maintained by the Company for such purpose,
accompanied by written notice to the Company that the Holder hereof elects to
convert this Debenture or, if less than the entire principal amount hereof is to
be converted the portion hereof to be converted, and, in case such surrender
shall be made during the period from the close of business on any Regular Record
Date next preceding any Interest Payment Date to the opening of business on such
Interest Payment Date (unless this Debenture or the portion hereof being
converted has been called for redemption on a Redemption Date within such
period), also accompanied by payment in New York Clearing House or other funds
acceptable to the Company of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of this Debenture then being
converted. Subject to the aforesaid requirement for payment and, in the case of
a conversion after the Regular Record Date next preceding any Interest Payment
Date and on or before such Interest Payment Date, to the right of the Holder of
this Debenture (or any Predecessor Debenture) of record at such Regular Record
Date to receive an installment of interest (with certain exceptions provided in
the Indenture), no payment or adjustment is to be made on conversion for
interest accrued hereon or for dividends on the Common Stock issued on
conversion. No fractions of shares or scrip representing fractions of shares
will be issued on conversion, but instead of any fractional interest the Company
shall pay a cash adjustment as provided in the indenture. The conversion price
is subject to adjustment as provided in the Indenture. In addition, the
Indenture provides that, in case of certain consolidations or mergers to which
the Company is a party or the conveyance or transfer of the properties and
assets of the Company substantially as an entirety, the Indenture shall be
amended, without the consent of any Holders of Debentures, so that this
Debenture, if then outstanding, will be
<PAGE>
18
convertible thereafter, during the period this Debenture shall be convertible as
specified above, only into the kind and amount of securities, cash and other
property receivable upon the consolidation, merger, conveyance or transfer by a
holder of the number of shares of Common Stock of the Company into which this
Debenture might have been converted immediately prior to such consolidation,
merger, conveyance or transfer, assuming such holder of Common Stock of the
Company failed to exercise his rights of election, if any, as to the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer (provided that, if the kind or
amount of securities, cash and other property so receivable is not the same for
each nonelecting share of Common Stock of the Company, then the kind and amount
of securities, cash and other property so receivable by each nonelecting share
shall be deemed to be the kind and amount so receivable per share by a plurality
of the nonelecting shares).
The Debentures are subject to redemption upon not less than 30 nor
more than 60 days' notice by mail at any time, as a whole or in part, at the
election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount) if redeemed during the 12-month period
beginning of the years indicated:
<TABLE>
<CAPTION>
Redemption Redemption
Year Price Year Price
- ------ ---------- ---- ----------
<S> <C> <C> <C>
1998...... % 2001...... %
1999...... % 2002...... %
2000...... % 2003...... %
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount,
together in the case of any such redemption with accrued interest to the
Redemption Date, but interest installments whose Stated Maturity is on or prior
to such Redemption Date will be payable to the Holders of such Debentures, or
one or more Predecessor Debentures, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture. The Company may not redeem any Debentures prior to ,
1998.
In certain circumstances involving the occurrence of a Change in
Control (as defined in the Indenture), the Holder hereof shall have the right to
require the Company to repurchase this Debenture at 100% of the principal amount
<PAGE>
19
hereof, together with accrued interest to the Repurchase Date, but interest
installments whose Stated Maturity is on or prior to such Repurchase Date will
be payable to the Holders of such Debentures, or one or more Predecessor
Debentures, of record at the close of business on the relevant Record Dates
referred to on the face hereof, all as provided in the Indenture. In connection
with the exercise of the repurchase right by a Holder prior to a Redemption
Date, a Holder's right to exercise such repurchase right shall terminate at the
close of business on the Business Day prior to the Redemption Date.
In the event of redemption, repurchase or conversion of this Debenture
in part only, a new Debenture or Debentures for the unredeemed, unrepurchased or
unconverted portion hereof will be issued in the name of the Holder hereof upon
the cancelation hereof.
The indebtedness evidenced by the Debentures is, to the extent and in
the manner set forth in the Indenture, expressly subordinated and subject in
right of payment to the prior payment in full of all Senior Indebtedness, as
defined in the Indenture, and this Debenture is issued subject to such
provisions of the Indenture, and each Holder of this Debenture, by accepting the
same, agrees to and shall be bound by such provisions and authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to acknowledge or effectuate the subordination as provided in the Indenture and
appoints the Trustee his attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Debentures may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debentures under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of not
less than two-thirds in aggregate principal amount of the Debentures at the time
Outstanding. The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Debentures at the time
Outstanding, on behalf of the Holders of all the Debentures, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under
<PAGE>
20
the Indenture and their consequences. Any such consent or waiver by the Holder
of this Debenture shall be conclusive and binding upon such Holder and upon all
future Holders of this Debenture and of any Debenture issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Debenture.
Except with respect to the rights of the holders of Senior
Indebtedness set forth in the Indenture and in this Debenture, no reference
herein to the Indenture and no provision of this Debenture or of the Indenture
shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of (and premium, if any) and interest on
this Debenture at the times, place and rate, and in the coin or currency, herein
prescribed or to convert this Debenture as provided in the Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Debenture is registrable in the
Debenture Register, upon surrender of this Debenture for registration of
transfer at the office or agency of the Company maintained for that purpose in
the City of New York or at any other office or agency maintained by the Company
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company, the Trustee and the Debenture
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Debentures, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
The Debentures are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Debentures are
exchangeable for a like aggregate principal amount of Debentures of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Debenture for registration of
transfer, the Company, the Trustee and any
<PAGE>
21
agent of the Company or the Trustee may treat the Person in whose name this
Debenture is registered as the owner hereof for all purposes, whether or not
this Debenture be overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary.
All terms used in this Debenture which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
SECTION 2.04. Form of Trustee's Certificate of Authentication. This
------------------------------------------------
is one of the Debentures referred to in the within-mentioned Indenture.
Dated:
, as Trustee,
by
------------------------------
Authorized Signatory
ARTICLE III
The Debentures
--------------
SECTION 3.01. Title and Terms. The aggregate principal amount of
----------------
Debentures which may be authenticated and delivered under this Indenture is
limited to (a) $25,000,000 plus (b) such aggregate principal amount (which may
not exceed $3,750,000 principal amount) of Debentures as shall be purchased by
the underwriters pursuant to the overallotment option provided in the
Underwriting Agreement dated as of , 1995, between the Company and
Unterberg Harris, as representative of the underwriters, except for Debentures
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Debentures pursuant to Section 3.04, 3.05, 3.06, 9.06,
11.08, 12.02 or 14.02(c).
The Debentures shall be known and designated as the " % Convertible
Subordinated Debentures Due 2005" of the Company. Their Stated Maturity shall
be , 2005, and they shall bear interest at the rate of % per
<PAGE>
22
annum, from , 1995, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, as the case may be, payable
semiannually on and , commencing , 1996, until
the principal thereof is paid or made available for payment.
The principal of (and premium, if any) and interest on the Debentures
shall be payable at the office or agency of the Company maintained for such
purpose in the City of New York and at any other office or agency maintained by
the Company for such purpose, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
-------- -------
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Debenture Register.
The Debentures shall be redeemable as provided in Article XI.
The Debentures shall be convertible into Common Stock of the Company
as provided in Article XII.
The Debentures shall be subordinated in right of payment to Senior
Indebtedness as provided in Article XIII.
The Debentures shall become subject to a Holder's right of repurchase
in the event of a Change in Control as provided in Article XIV.
SECTION 3.02. Denominations. The Debentures shall be issuable only
--------------
in registered form without coupons and only in denominations of $1,000 and any
integral multiple thereof.
SECTION 3.03. Execution, Authentication, Delivery and Dating. The
-----------------------------------------------
Debentures shall be executed on behalf of the Company by its Chairman of the
Board, its President or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Debentures may be
manual or facsimile.
Debentures bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
<PAGE>
23
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Debentures or did not
hold such offices at the date of such Debentures.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Debentures executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Debentures; and the Trustee in accordance
with such Company order shall authenticate and deliver such Debentures as in
this Indenture provided and not otherwise.
Each Debenture shall be dated the date of its authentication.
No Debenture shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Debenture a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Debenture shall be conclusive evidence, and the only evidence, that such
Debenture has been duly authenticated and delivered hereunder.
SECTION 3.04. Temporary Debentures. Pending the preparation of
---------------------
definitive Debentures, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Debentures which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Debentures in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Debentures may
determine, as evidenced by their execution of such Debentures.
If temporary Debentures are issued, the Company will cause definitive
Debentures to be prepared without unreasonable delay. After the preparation of
definitive Debentures, the temporary Debentures shall be exchangeable for
definitive Debentures upon surrender of the temporary Debentures, at any office
or agency of the Company designated pursuant to Section 10.02, without charge to
the Holder. Upon surrender for cancelation of any one or more temporary
Debentures, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor
<PAGE>
24
a like principal amount of definitive Debentures of authorized denominations.
Until so exchanged, the temporary Debentures shall in all respects be entitled
to the same benefits under this Indenture as definitive Debentures.
SECTION 3.05. Registration, Registration of Transfer and Exchange.
----------------------------------------------------
The Company shall cause to be kept at the Corporate Trust Office of the Trustee
a register (the register maintained in such office being herein sometimes
referred to as the "Debenture Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Debentures and of transfers of Debentures. The Trustee is hereby appointed
"Debenture Registrar" for the purpose of registering Debentures and transfers of
Debentures as herein provided.
Upon surrender for registration of transfer of any Debenture at an
office or agency of the Company, the Company shall execute, and the Trustee
shall register on the Debenture Register and shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Debentures
of any authorized denominations, of a like aggregate principal amount.
At the option of the Holder, Debentures may be exchanged for other
Debentures of any authorized denominations, of a like aggregate principal
amount, upon surrender of the Debentures to be exchanged at such office or
agency. Whenever any Debentures are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Debentures
which the Holder making the exchange is entitled to receive.
All Debentures issued upon any registration of transfer or exchange of
Debentures shall be the valid obligations of the Company, evidencing the same
debt and entitled to the same benefits under this Indenture, as the Debentures
surrendered upon such registration of transfer or exchange.
Every Debenture presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company, the Trustee and the Debenture Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing.
<PAGE>
25
No service charge shall be made for any registration of transfer or
exchange of Debentures, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Debentures, other than
exchanges pursuant to Section 3.04, 9.06, 11.08, 12.02 or 14.02(c) not involving
any transfer.
Neither the Company nor the Trustee or Debenture Registrar shall be
required (a) to issue, authenticate or register the transfer of or exchange any
Debenture during a period beginning at the opening of business 15 days before
the day of the mailing of a notice of redemption of Debentures selected for
redemption under Section 11.04 and ending at the close of business on the day of
such mailing or (b) to register the transfer of or exchange any Debenture so
selected for redemption in whole or in part, except the unredeemed portion of
any Debenture being redeemed in part.
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Debentures. If
-------------------------------------------------
any mutilated Debenture is surrendered to the Trustee, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a new
Debenture of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (a)
evidence to their satisfaction of the destruction, loss or theft of any
Debenture and (b) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Debenture has been acquired by a
bona fide purchaser, the Company shall execute and upon its request the Trustee
shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Debenture, a new Debenture of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Debenture has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Debenture, pay such Debenture.
Upon the issuance of any new Debenture under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
<PAGE>
26
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Debenture issued pursuant to this Section in lieu of any
destroyed, lost or stolen Debenture shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Debenture shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Debentures duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Debentures.
SECTION 3.07. Payment of Interest; Interest Rights Preserved.
-----------------------------------------------
Interest on any Debenture which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Debenture (or one or more Predecessor Debentures) is registered at the
close of business on the Regular Record Date for such interest. The Company
shall deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such interest in immediately available funds
or shall make arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when deposited to be held in trust
for the benefit of the Persons entitled to such interest as in this clause
provided.
Any interest on any Debenture which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Debentures (or their respective
Predecessor Debentures) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the
<PAGE>
27
amount of Defaulted Interest proposed to be paid on each Debenture and the
date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at his address as it appears in the Debenture Register, not
less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so mailed, such Defaulted Interest shall be paid to
the Persons in whose names the Debentures (or their respective Predecessor
Debentures) are registered at the close of business on such Special Record
Date and shall no longer be payable pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Debentures may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Debenture
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Debenture shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Debenture.
<PAGE>
28
In the case of any Debenture which is converted after any Regular
Record Date and on or prior to the next succeeding Interest Payment Date (other
than any Debenture whose Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date shall be payable
on such Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name the Debenture (or one or more Predecessor Debentures) is
registered at the close of business on such Regular Record Date. Except as
otherwise expressly provided in the immediately preceding sentence, in the case
of any Debenture which is converted, interest whose Stated Maturity is after the
date of conversion of such Debenture shall not be payable.
SECTION 3.08. Persons Deemed Owners. Prior to due presentment of a
----------------------
Debenture for registration of transfer, the Company, the Trustee and any agent
of the Company or the Trustee may treat the Person in whose name such Debenture
is registered as the owner of such Debenture for the purpose of receiving
payment of principal of (and premium, if any) and (subject to Section 3.07)
interest on such Debenture and for all other purposes whatsoever, whether or not
such Debenture be overdue, and neither the Company, the Trustee nor any agent of
the Company or the Trustee shall be affected by notice to the contrary.
SECTION 3.09. Cancelation. All Debentures surrendered for payment,
------------
redemption, registration of transfer or exchange or conversion shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Company may at any time deliver to
the Trustee for cancelation any Debentures previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Debentures so delivered shall be promptly canceled by the
Trustee. No Debentures shall be authenticated in lieu of or in exchange for any
Debentures canceled as provided in this Section, except as expressly permitted
by this Indenture. All canceled Debentures held by the Trustee shall be
destroyed and a certificate of destruction shall be delivered to the Company by
the Trustee.
SECTION 3.10. Computation of Interest. Interest on the Debentures
------------------------
shall be computed on the basis of a 360day year of twelve 30-day months.
<PAGE>
29
SECTION 3.11. CUSIP Number. The Company in issuing Debentures may
-------------
use a "CUSIP" number, and if so, the Trustee may use the CUSIP number in notices
of redemption or exchange as a convenience to Holders; provided that any such
--------
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Debentures, and
that reliance may be placed only on the other identification numbers printed on
the Debentures.
ARTICLE IV
Satisfaction and Discharge
--------------------------
SECTION 4.01. Satisfaction and Discharge of Indenture. This
----------------------------------------
Indenture shall cease to be of further effect (except as to any surviving rights
of conversion, registration of transfer or exchange of Debentures herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(a) either
(i) all Debentures theretofore authenticated and delivered (other
than (A) Debentures which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 3.06 and (B)
Debentures for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 10.03) have been delivered to the Trustee for cancelation; or
(ii) all such Debentures not theretofore delivered to the Trustee
for cancelation
(A) have become due and payable, or
(B) will become due and payable at their Stated Maturity
within one year, or
(C) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of
<PAGE>
30
notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (A), (B) or (C) above, has deposited
or caused to be deposited with the Trustee as trust funds in trust for
that purpose funds sufficient to pay and discharge the entire
indebtedness on such Debentures not theretofore delivered to the
Trustee for cancelation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of Debentures which
have become due and payable) or to the Stated Maturity or Redemption
Date, as the case may be and, in the case of (B) or (C) above, has
delivered to the Trustee an Opinion of Counsel stating that (1) the
Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (2) since the date of the
Indenture, there has been a change in the applicable United States
Federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
Debentures will not recognize income, gain or loss for United States
Federal income tax purposes as a result of such satisfaction and
discharge and will be subject to United States Federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such satisfaction and discharge had not
occurred;
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.07 and the obligations
of the Trustee to any Authenticating Agent under Section 6.13 shall survive.
SECTION 4.02. Application of Trust Money. All money deposited with
---------------------------
the Trustee pursuant to Section 4.01 shall be held in trust and applied by it,
in accordance with
<PAGE>
31
the provisions of the Debentures and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of
the principal (and premium, if any) and interest for whose payment such money
has been deposited with the Trustee. All moneys deposited with the Trustee
pursuant to Section 4.01 (and held by it or any Paying Agent) for the payment of
Debentures subsequently converted shall be returned to the Company upon receipt
by the Trustee of an Officers' Certificate.
ARTICLE V
Remedies
--------
SECTION 5.01. Events of Default. "Event of Default", wherever used
------------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be occasioned by the provisions of Article
XIII or be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) default in the payment of any interest upon any Debenture when it
becomes due and payable, and continuance of such default for a period of 30
days; or
(b) default in the payment of the principal of (or premium, if any,
on) any Debenture at its Maturity; or
(c) default in the payment of the Repurchase Price in respect of any
Debenture on the Repurchase Date therefor in accordance with the provisions
of Article XIV; or
(d) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach for a
period of 60 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in principal amount of the Outstanding
Debentures a written notice
<PAGE>
32
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(e) a default under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Company or under any mortgage,
indenture or instrument under which there may be issued or by which there
may be secured or evidenced any indebtedness for money borrowed by the
Company, whether such indebtedness now exists or shall hereafter be
created, which default shall have resulted in $1,000,000 or more of such
indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable, without such
indebtedness having been discharged, or acceleration having been rescinded
or annulled, within a period of 30 days after there shall have been given,
by registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in principal amount
of the Outstanding Debentures a written notice specifying such default and
requiring the Company to cause such indebtedness to be discharged or cause
such acceleration to be rescinded or annulled and stating that such notice
is a "Notice of Default" hereunder; provided, however, that, subject to the
-------- -------
provisions of Sections 6.01 and 6.02, the Trustee shall not be deemed to
have knowledge of such default unless either (i) a Responsible Officer of
the Trustee shall have actual knowledge of such default or (ii) the Trustee
shall have received written notice thereof from the Company, from any
Holder, from the holder of any such indebtedness or from the trustee under
any such mortgage, indenture or other instrument; or
(f) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (ii) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial
part of its property, or
<PAGE>
33
ordering the winding up or liquidation of its affairs, and the continuance
of any such decree or order for relief or any such other decree or order
unstayed and in effect for a period of 60 consecutive days; or
(g) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company in
furtherance of any such action.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If
---------------------------------------------------
an Event of Default occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Debentures may declare the principal of all the Debentures to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal shall
become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Debentures, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequence if:
<PAGE>
34
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all overdue installments of interest on all Debentures;
(ii) the principal of (and premium, if any, on) any Debentures
which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Debentures;
(iii) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest at the rate borne by
the Debentures; and
(iv) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(b) all Events of Default, other than the nonpayment of the principal
of Debentures which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee. The Company covenants that if:
- --------
(a) default is made in the payment of any installment of interest on
any Debenture when such interest becomes due and payable and such default
continues for a period of 30 days;
(b) default is made in the payment of the principal of (or premium, if
any, on) any Debenture at the Maturity thereof; or
(c) default is made in the payment of the Repurchase Price in respect
of any Debenture on the
<PAGE>
35
Repurchase Date therefor in accordance with the provisions of Article XIV;
the Company will upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Debentures, the whole amount then due and payable on such
Debentures for principal (and premium, if any) and interest, with interest upon
the overdue principal (and premium, if any) and, to the extent that payment of
such interest shall be legally enforceable, upon overdue installments of
interest, at the rate borne by the Debentures; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of sums so due and unpaid, may prosecute
such proceeding to judgment or final decree and may enforce the same against the
Company or any other obligor upon the Debentures and collect the moneys adjudged
or decreed to be payable in the manner provided by law out of the property of
the Company or any other obligor upon the Debentures, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.04. 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 Debentures or
the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Debentures 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 overdue
<PAGE>
36
principal or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Debentures
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 after deduction
of its charges and expenses;
and any receiver, assignee, trustee, liquidator, sequestrator or other similar
official in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.07.
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 or
reorganization, arrangement, adjustment or composition affecting the Debentures
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 5.05. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Debentures. All rights of action and claims under this Indenture or the
- -----------
Debentures may be prosecuted and enforced by the Trustee without the possession
of any of the Debentures or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the
<PAGE>
37
Holders of the Debentures in respect of which such judgment has been recovered.
SECTION 5.06. Application of Money Collected. Subject to Article
-------------------------------
XIII, any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Debentures and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
(a) to the payment of all amounts due the Trustee under Section 6.07;
(b) to the payment of the amounts then due and unpaid for principal of
(and premium, if any) and interest on the Debentures in respect of which or
for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Debentures for principal (and premium, if any) and
interest, respectively; and
(c) to the payment of the remainder, if any, to the Company, its
successors or assigns, or to whomsoever may be lawfully entitled to the
same, or as a court of competent jurisdiction may determine.
SECTION 5.07. Limitation on Suits. No Holder of any Debenture shall
--------------------
have any right to institute any proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the
Outstanding Debentures shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs,
<PAGE>
38
expenses and liabilities to be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the outstanding Debentures;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 5.08. Right of Holders To Receive Principal, Premium and
--------------------------------------------------
Interest and To Convert. Notwithstanding any other provision in this Indenture,
- ------------------------
but subject to Article XIII, the Holder of any Debenture shall have the right to
receive payment of the principal of (and premium, if any) and (subject to
Section 3.07) interest on such Debenture on the Stated Maturity expressed in
such Debenture (or, in the case of redemption or repurchase, on the Redemption
Date or Repurchase Date) and to convert such Debenture in accordance with
Article XII and to institute suit for the enforcement of any such payment and
right to convert, and such rights shall not be impaired without the consent of
such Holder.
SECTION 5.09. Restoration of Rights and Remedies. If the Trustee or
-----------------------------------
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
<PAGE>
39
SECTION 5.10. Rights and Remedies Cumulative. No right or remedy
-------------------------------
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver. No delay or omission of
-----------------------------
the Trustee or of any Holder of any Debenture to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
SECTION 5.12. Control by Holders. The Holders of a majority in
-------------------
principal amount of the Outstanding Debentures shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee;
provided that:
- --------
(a) such direction shall not be in conflict with any rule of law or
with this Indenture;
(b) such direction is not unduly prejudicial to the other security
holders or may involve the Trustee in personal liability or if the Trustee
determines that it does not have sufficient indemnity against any loss or
expense connected to such action; and
(c) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 5.13. Waiver of Past Defaults. The Holders of not less than
------------------------
a majority in principal amount of the Outstanding Debentures may on behalf of
the Holders of all the Debentures waive any past default hereunder and its
consequences, except a default:
<PAGE>
40
(a) in the payment of the principal of (or premium, if any) or
interest on any Debenture; or
(b) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Outstanding Debenture affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs. All parties to this Indenture
----------------------
agree, and each Holder of any Debenture by such Holder's acceptance thereof
shall be deemed to have agreed, that any court may in its discretion require, in
any suit for the enforcement of any right or remedy under this Indenture, or in
any suit against the Trustee for any action taken, suffered or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Company, to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Debentures or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or interest
on any Debenture on or after the Stated Maturity expressed in such Debenture
(or, in the case of redemption or repurchase, on or after the Redemption Date or
Repurchase Date) or for the enforcement of the right to convert any Debenture in
accordance with Article XII.
SECTION 5.15. Waiver of Stay, Usury or Extension Laws. The Company
----------------------------------------
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, usury or extension law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so)
<PAGE>
41
hereby expressly waives all benefit or advantage of any such law and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE VI
The Trustee
-----------
SECTION 6.01. Certain Duties and Responsibilities. (a) Except
------------------------------------
during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of wilful misconduct on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture, but, in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own wilful misconduct, except that:
------
(i) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
<PAGE>
42
(ii) the Trustee shall not be liable for any error of judgment made by
a Responsible Officer, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in accordance with the direction of the
Holders of a majority in principal amount of the Outstanding Debentures
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture; and
(iv) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 6.02. Notice of Defaults. Within 90 days after the
-------------------
occurrence of any default hereunder, the Trustee shall transmit by mail to all
Holders, as their names and addresses appear in the Debenture Register, notice
of such default hereunder known to the Trustee, unless such default shall have
been cured or waived; provided, however, that, except in the case of a default
-------- -------
in the payment of the principal of (or premium, if any) or interest on any
Debenture, the Trustee shall be protected in withholding such notice if and so
long as a trust committee of Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interest of the
Holders; provided further that, in the case of any default of the character
----------------
specified in Section 5.01(d), no such notice to Holders shall be given until at
least 30 days after the occurrence thereof. For the purpose of this Section,
the term "default" means any event which is, or after notice or lapse of time or
both would become, an Event of Default. The Trustee shall not be deemed to have
knowledge of any default other than those described in
<PAGE>
43
Sections 5.01(a), (b) and (c) unless a Responsible Officer of the Trustee has
actual knowledge of such default.
SECTION 6.03. Certain Rights of Trustee. Except as otherwise
--------------------------
provided in Section 6.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
<PAGE>
44
order, bond, debenture, note or other paper or document, but the Trustee,
in its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine
the books, records and premises of the Company, personally or by agent or
attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 6.04. Not Responsible for Recitals or Issuance of Debentures.
------------------------------------------------------
The recitals contained herein and in the Debentures, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Debentures. The Trustee shall not be accountable for the use or
application by the Company or any Paying Agent other than the Trustee of
Debentures or the proceeds thereof.
SECTION 6.05. May Hold Debentures. The Trustee, any Authenticating
--------------------
Agent, any Paying Agent, any Debenture Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Debentures and, subject to Section 6.12 and to Section 310(b) of the
Trust Indenture Act, may otherwise deal with the Company with the same rights it
would have if it were not Trustee, Authenticating Agent, Paying Agent, Debenture
Registrar or such other agent.
Subject to Section 310(b) of the Trust Indenture Act, the Trustee may
become and act as trustee under other indentures under which other securities,
or certificates of interest or participation in other securities, of the Company
are outstanding in the same manner as if it were not Trustee.
SECTION 6.06. Money Held in Trust. Money held by the Trustee in
--------------------
trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
<PAGE>
45
money received by it hereunder except as otherwise agreed on with the Company.
SECTION 6.07. Compensation and Reimbursement. The Company agrees:
-------------------------------
(a) to pay to the Trustee from time to time such compensation as may
be agreed upon by the Trustee and the Company from time to time for all
services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an
express trust);
(b) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents, counsel and
other persons not regularly in its employ), except to the extent any such
expense,, disbursement or advance may be attributable to its negligence or
bad faith; and
(c) to indemnify the Trustee (in its individual capacity and as
Trustee), its officers, directors, attorneys-in-fact and agents for, and to
hold each such person harmless against, any loss, claim, damage, liability
or expense, incurred without negligence or bad faith on such person's part,
arising out of or in connection with the acceptance or administration of
this trust, including the costs and expenses of defending itself against or
investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligations of
the Company under this Section 6.07 to compensate and indemnify the Trustee
and to pay or reimburse the Trustee for expenses, disbursements and
advances shall constitute additional indebtedness hereunder and shall
survive the satisfaction and discharge of this Indenture. To secure the
Company's payment obligations in this Section 6.07, the Trustee shall have
a lien prior to the Debentures on all money or property held or collected
by the Trustee except money or property held in trust to pay principal of
(and premium, if any) or interest on particular Debentures and such lien
shall survive the satisfaction and discharge of the Indenture and any other
termination of the Indenture including any termination
<PAGE>
46
under any bankruptcy law. When the Trustee incurs expenses or renders
services in connection with an Event of Default of Section 5.01(6) or
501(7), the Holders by their acceptance of the Debentures hereby agree that
such expenses and the compensation for such services are intended to
constitute expenses of administration under any bankruptcy law. "Trustee"
for the purposes of this Section 6.07 shall include any predecessor
Trustee, but the negligence or willful misconduct of any Trustee shall not
affect the indemnification of any other Trustee.
SECTION 6.08. Corporate Trustee Required; Eligibility. The Trustee
----------------------------------------
shall at all times satisfy the eligibility requirements of Section 310 of the
Trust Indenture Act and together with its immediate parent maintain a combined
capital and surplus of at least $50,000,000, be subject to supervision or
examination by Federal or State authority and have its Corporate Trust Office in
the City of . If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 6.09. Resignation and Removal; Appointment of Successor. (a)
--------------------------------------------------
No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee under Section 6.10.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the
<PAGE>
47
Outstanding Debentures, delivered to the Trustee and to the Company.
(d) If at any time:
(i) the Trustee shall cease to be eligible under Section 6.08 and
shall fail to resign after written request therefor by the Company or by
any such Holder; or
(ii) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide
Holder of a Debenture for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Debentures
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, the Trustee
or any Holder who has been a bona fide Holder of a Debenture for at least six
months may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each
<PAGE>
48
appointment of a successor Trustee by mailing written notice of such event by
first-class mail, postage prepaid, to all Holders as their names and addresses
appear in the Debenture Register. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 6.10. Acceptance of Appointment by Successor. Every
---------------------------------------
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges pursuant to
Section 6.07, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts. Any retiring trustee shall, nevertheless, retain a lien on
all property or funds held or collected by such trustee to secure any amounts
then due pursuant to the provisions of Section 6.07.
Upon acceptance of appointment by a successor Trustee as provided in
this Section, the Company shall cause such successor Trustee to mail notice of
succession of such Trustee hereunder to all Holders of Debentures as the names
and addresses of such Holders appear on the Debenture Register.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be eligible under this Article
and qualified under Section 3.10(b) of the Trust Indenture Act.
SECTION 6.11. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business. Any corporation or national banking association into which the
- ---------
Trustee may be merged or converted or with which it may be consolidated, or any
corporation or national banking association resulting from
<PAGE>
49
any merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder;
provided such corporation or national banking association shall be otherwise
- --------
eligible under this Article and qualified under Section 3.10(b) of the Trust
Indenture Act, without the execution or filing of any paper or any further act
on the part of any of the parties hereto. In case any Debentures shall have
been authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Debentures so authenticated with
the same effect as if such successor Trustee had itself authenticated such
Debentures.
SECTION 6.12. Preferential Collection of Claims Against Company. The
--------------------------------- ----------------
Trustee is subject to Section 311(a) and (b) of the Trust Indenture Act. Any
Trustee that has resigned or been removed shall be subject to Section 311(a) and
(b) of the Trust Indenture Act to the extent indicated therein.
SECTION 6.13. Appointment of Authenticating Agent. The Trustee may
------------------------------------
appoint an Authenticating Agent or Agents which shall be authorized to act on
behalf of the Trustee to authenticate Debentures issued upon exchange,
registration of transfer or partial redemption or repurchase thereof or pursuant
to Section 3.06, and Debentures so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for all purposes as
if authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Debentures by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said
<PAGE>
50
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
Any corporation or national banking association into which an
Authenticating Agent may be merged or converted or with which it may be
consolidated or any corporation or national banking association resulting from
any merger, conversion or consolidation to which such Authenticating Agent shall
be a party, or any corporation succeeding to the corporate agency or corporate
trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent; provided such corporation or national banking association
--------
shall be otherwise eligible under this Section, without the execution or filing
of any paper or any further act on the part of the Trustee or the Authenticating
Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders as their
names and addresses appear in the Debenture Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent herein. No
successor Authenticating Agent shall be appointed unless eligible under the
provisions of his Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
<PAGE>
51
If an appointment is made pursuant to this Section, the Debentures may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication in the following
form:
This is one of the Debentures referred to in the within-mentioned
Indenture.
Dated:
, as Trustee
by
--------------------------
As Authenticating Agent
by
--------------------------
Authorized Signatory
<PAGE>
52
ARTICLE VII
Holders' Lists and Reports by Trustee and Company
-------------------------------------------------
SECTION 7.01. Company To Furnish Trustee Names and Addresses of
-------------------------------------------------
Holders. The Company will furnish or cause to be furnished to the Trustee:
- --------
(a) semiannually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
- ---------
capacity as Debenture Registrar.
SECTION 7.02. Preservation of Information Communications to Holders.
------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.01 and the names and
addresses of Holders received by the Trustee in its capacity as Debenture
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.01 upon receipt of a new list so furnished.
(b) If three or more Holders (herein referred to as "applicants")
apply in writing to the Trustee, and furnish to the Trustee reasonable proof
that each such applicant has owned a Debenture for a period of at least six
months preceding the date of such application, and such application states that
the applicants desire to communicate with other Holders with respect to their
rights under this Indenture or under the Debentures and is accompanied by a copy
of the form of proxy or other communication which such applicants propose to
transmit, then the Trustee shall,
<PAGE>
53
within five business days after the receipt of such application, at its
election, either:
(i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 7.02(a), or
(ii) inform such applicants as to the approximate number of Holders
whose names and addresses appear in the information preserved at the time
by the Trustee in accordance with Section 7.02(a), and as to the
approximate cost of mailing to such Holders the form of proxy or other
communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder whose name and address appear in the information
preserved at the time by the Trustee in accordance with Section 7.02(a) a copy
of the form of proxy or other communication which is specified in such request,
with reasonable promptness after a tender to the Trustee of the material to be
mailed and of payment, or provision for the payment, of the reasonable expenses
of mailing, unless within five days after such tender the Trustee shall mail to
such applicants and file with the Commission, together with a copy of the
material to be mailed, a written statement to the effect that, in the opinion of
the Trustee, such mailing would be contrary to the best interest of the Holders
or would be in violation of applicable law. Such written statement shall
specify the basis of such opinion. If the Commission, after opportunity for a
hearing upon the objections specified in the written statement so filed, shall
enter an order refusing to sustain any of such objections or if, after the entry
of an order sustaining one or more of such objections, the Commission shall
find, after notice and opportunity for hearing, that all the objections so
sustained have been met and shall enter an order so declaring, the Trustee shall
mail copies of such material to all such Holders with reasonable promptness
after the entry of such order and the renewal of such tender; otherwise the
Trustee shall be relieved of any obligation or duty to such applicants
respecting their application.
(c) Every Holder of Debentures, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of
<PAGE>
54
either of them shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders in accordance with
Section 7.02(b), regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under Section 7.02(b).
SECTION 7.03. Reports by Trustee. (a) Within 60 days after of
-------------------
each year commencing with the year 1996, the Trustee shall transmit by mail to
all Holders, as their names and addresses appear in the Debenture Register, a
brief report dated as of with respect to any of the following events
which may have occurred during the twelve months preceding the date of such
report (but if no such event has occurred within such period, no report need be
transmitted):
(i) any change to its eligibility under Section 6.08 and its
qualifications under Section 310(b) of the Trust Indenture Act;
(ii) the creation of or any material change to a relationship
specified in Section 310(b)(1) through 310(b)(10) of the Trust Indenture
Act;
(iii) the character and amount of any advances (and if the Trustee
elects so to state, the circumstances surrounding the making thereof) made
by the Trustee (as such) which remain unpaid on the date of such report,
and for the reimbursement of which it claims or may claim a lien or charge,
prior to that of the Debentures, on any property or funds held or collected
by it as Trustee, except that the Trustee shall not be required (but may
elect) to report such advances if such advances so remaining unpaid
aggregate not more than 1/2 of 1% of the principal amount of the Debentures
Outstanding on the date of such report;
(iv) any change to the amount, interest rate and maturity date of all
other indebtedness owing by the Company (or by any other obligor on the
Debentures) to the Trustee in its individual capacity, on the date of such
report, with a brief description of any property held as collateral
security therefor except an indebtedness based upon a creditor relationship
arising in any manner described in paragraph (2), (3), (4) or (6) of
Section 311 of the Trust Indenture Act;
<PAGE>
55
(v) any change to the property and funds, if any, physically in the
possession of the Trustee as such on the date of such report;
(vi) any additional issue of Debentures which the Trustee has not
previously reported; and
(vii) any action taken by the Trustee in the performance of its duties
hereunder which it has not previously reported and which in its opinion
materially affects the Debentures, except action in respect of a default,
notice of which has been or is to be withheld by the Trustee in accordance
with Section 6.02.
(b) The Trustee shall transmit by mail to all Holders, as their names
and address appear in the Debenture Register, a brief report with respect to the
character and amount of any advances (and if the Trustee elects so to state, the
circumstances surrounding the making thereof) made by the Trustee (as such)
since the date of the last report transmitted pursuant to Subsection (a) of this
Section (or if no such report has yet been so transmitted, since the date of
execution of this instrument) for the reimbursement of which it claims or may
claim a lien or charge, prior to that of the Debentures, on property or funds
held or collected by it as Trustee and which it has not previously reported
pursuant to this Subsection, except that the Trustee shall not be required (but
may elect) to report such advances if such advances remaining unpaid at any time
aggregate 10% or less of the principal amount of the Debentures Outstanding at
such time, such report to be transmitted within 90 days after such time.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Debentures are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Debentures are listed on any stock
exchange.
SECTION 7.04. Reports by Company. The Company shall:
-------------------
(a) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission
<PAGE>
56
may from time to time by rules and regulations prescribe) which the Company
may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is
not required to file information, documents or reports pursuant to either
of said Sections, then it shall file with the Trustee and the Commission,
in accordance with rules and regulations prescribed from time to time by
the Commission, such of the supplementary and periodic information,
documents and reports which may be required pursuant to Section 13 of the
Securities Exchange Act of 1934 in respect of a security listed and
registered on a national securities exchange as may be prescribed from time
to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations;
(c) transmit by mail to all Holders, as their names and addresses
appear in the Debenture Register, within 30 days after the filing thereof
with the Trustee, such summaries of any information, documents and reports
required to be filed by the Company pursuant to paragraphs (1) and (2) of
this Section as may be required by rules and regulations prescribed from
time to time by the Commission; and
(d) file with the Trustee a certificate of the principal executive
officer, the principal financial officer or the principal accounting
officer of the Company on or before in each year, commencing
with the year 1996 stating whether or not, to the knowledge of the signer,
the Company has complied with all conditions and covenants on its part
contained in this Indenture, and, if the signer has obtained knowledge of
any default by the Company in the performance, observance or fulfillment of
any such condition or covenant, specifying each such default and the nature
thereof. For the purpose this Section 7.04, compliance shall be determined
without regard to any grace period or requirement of notice provided
pursuant to the terms of this Indenture.
<PAGE>
57
ARTICLE VIII
Consolidation, Merger, Conveyance or Transfer
---------------------------------------------
SECTION 8.01. Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------- -----------------
The Company shall not consolidate with or merge into any other corporation or
convey or transfer its properties and assets substantially as an entirety to any
Person, unless:
(a) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Company substantially as an entirety shall
be a corporation organized and existing under the laws of the United States
of America, any State thereof or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of (and premium, if any) and interest on
all the Debentures and the performance of every covenant of this Indenture
on the part of the Company to be performed or observed and shall have
provided for conversion rights in accordance with Section 12.10;
(b) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and such supplemental indenture comply with
this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with.
SECTION 8.02. Successor Corporation Substituted. Upon any
----------------------------------
consolidation or merger or any conveyance or transfer of the properties and
assets of the Company substantially as an entirety in accordance with Section
8.01, the successor corporation formed by such consolidation or into which the
Company is merged or to which such conveyance or transfer is made shall succeed
to, and be substituted for, and may exercise every right and
<PAGE>
58
power of, the Company under this Indenture with the same effect as if such
successor corporation had been named as the Company herein, and thereafter the
predecessor corporation shall be relieved of all obligations and covenants under
this Indenture and the Debentures.
ARTICLE IX
Supplemental Indentures
-----------------------
SECTION 9.01. Supplemental Indentures Without Consent of Holders.
---------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
(a) to evidence the succession of another corporation to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Debentures; or
(b) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(c) to make provision with respect to the conversion rights of Holders
pursuant to the requirements of Section 12.10; or
(d) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture; provided such action shall not adversely affect the
--------
interests of the Holders in any material respect; or
(e) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary to effect or maintain the qualification
of this Indenture under the Trust Indenture Act, or under any similar
Federal statute hereafter enacted.
SECTION 9.02. Supplemental Indentures with Consent of Holders. With
------------------------------------------------
the consent of the Holders of not
<PAGE>
59
less than two-thirds in principal amount of the Outstanding Debentures, by Act
of said Holders delivered to the Company and the Trustee, the Company, when
authorized by a Board Resolution, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
- -------- -------
consent of the Holder of each Outstanding Debenture affected thereby,
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any Debenture, or reduce the principal amount thereof or
the rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or currency in
which, any Debenture or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date), or adversely affect the right to convert any
Debenture as provided in Article XII, or adversely affect the right to
require the Company to repurchase the Debentures as provided in Article XIV
or modify the provisions of this Indenture with respect to the
subordination of the Debentures in a manner adverse to the Holders, or
(b) reduce the percentage in principal amount of the Outstanding
Debentures the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture,
or
(c) modify any of the provisions of this Section or Section 5.13,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Debenture affected thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any
<PAGE>
60
proposed supplemental indenture, but it shall be sufficient if such Act shall
approve the substance thereof.
SECTION 9.03. Execution of Supplemental Indentures. In executing, or
-------------------------------------
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
6.01) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indentures. Upon the execution
----------------------------------
of any supplemental indenture under this Article, this Indenture shall be, and
shall be deemed to be, modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Debentures theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.05. Conformity with Trust Indenture Act. Every
------------------------------------
supplemental indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act as then in effect.
SECTION 9.06. Reference in Debentures to Supplemental Indentures.
---------------------------------------------------
Debentures authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company or the Trustee shall so determine,
new Debentures so modified as to conform, in the opinion of the Trustee and the
Board of Directors, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Debentures.
<PAGE>
61
ARTICLE X
Covenants
---------
SECTION 10.01. Payment of Principal, Premium and Interest. The
-------------------------------------------
Company will duly and punctually pay or cause to be paid by no later than one
Business Day prior to the date such payment is due the principal of (and
premium, if any) and interest on the Debentures in accordance with the terms of
the Debentures and this Indenture.
SECTION 10.02. Maintenance of Office or Agency. The Company will
--------------------------------
maintain in the City of New York an office or agency where Debentures may be
presented or surrendered for payment or repurchase where Debentures may be
surrendered for registration of transfer or exchange, where Debentures may be
surrendered for conversion and where notices and demands to or upon the Company
in respect of the Debentures and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the City of New York) where the Debentures
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 City of New York for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
SECTION 10.03. Money for Debenture Payments To Be Held in Trust. If
-------------------------------------------------
the Company shall at any time act as its own Paying Agent it will, on or before
each due date of the principal of (and premium, if any) or interest on any of
the Debentures, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal (and premium if any) or
interest so becoming due
<PAGE>
62
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents, it will
prior to each due date of the principal of (and premium if any) or interest on
any Debentures, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Debentures in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Debentures) in the making of any payment of
principal (and premium, if any) or interest; and
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
<PAGE>
63
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Debenture and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Debenture
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 10.04. Corporate Existence. Subject to Article VIII, the
--------------------
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, rights (charter and statutory)
and franchises; provided, however, that the Company shall not be required to
-------- -------
preserve any such right or franchise if the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 10.05. Maintenance of Properties. The Company will cause all
--------------------------
properties used or useful in the conduct of its business to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
--------
however, that nothing in this Section shall prevent the Company from
- -------
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company,
<PAGE>
64
desirable in the conduct of its business and not disadvantageous in any material
respect to the Holders.
SECTION 10.06. Payment of Taxes and Other Claims. The Company will
----------------------------------
pay or discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon the Company or upon the income, profits or property of the Company,
and (b) all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a lien upon the property of the Company; provided, however,
-------- -------
that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 10.07. Waiver of Certain Covenants. The Company may omit in
----------------------------
any particular instance to comply with any covenant or condition set forth in
Sections 10.04 to 10.06, inclusive, if before the time for such compliance the
Holders of at least a majority in principal amount of the Outstanding Debentures
shall, by Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such covenant or condition, but no such waiver
shall extend to or affect such covenant or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Company and the duties of the Trustee in respect of any such covenant or
condition shall remain in full force and effect.
ARTICLE XI
Redemption of Debentures
------------------------
SECTION 11.01. Right of Redemption. The Debentures may be redeemed
--------------------
at the election of the Company, as a whole or from time to time in part, at any
time, at the Redemption Prices specified in the form of Debenture hereinbefore
set forth for redemptions, together with accrued interest to the Redemption
Date; provided, however, that the Company may not redeem any of the Debentures
-------- -------
pursuant to such option prior to , 1998.
SECTION 11.02. Applicability of Article. Redemption of Debentures at
-------------------------
the election of the Company or otherwise as permitted or required by any
provision of this
<PAGE>
65
Indenture, shall be made in accordance with such provision and this Article.
SECTION 11.03. Election To Redeem; Notice to Trustee. The election
--------------------------------------
of the Company to redeem any Debentures pursuant to Section 11.01 shall be
evidenced by a Board Resolution. In case of any redemption at the election of
the Company of less than all the Debentures, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee) notify the Trustee of such Redemption Date and
of the principal amount of Debentures to be redeemed.
SECTION 11.04. Selection by Trustee of Debentures To Be Redeemed. If
--------------------------------------------------
less than all the Debentures are to be redeemed the particular Debentures to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Debentures not previously called for
redemption, pro rata or by lot or by such other method as the Trustee shall deem
fair and appropriate and which may provide for the selection for redemption of
portions (equal to $1,000 or any integral multiple thereof) of the principal
amount of Debentures of a denomination larger than $1,000.
If any Debenture selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Debenture so selected, the converted portion of such Debenture shall be deemed
(so far as may be) to be the portion selected for redemption. Debentures which
have been converted during a selection of Debentures to be redeemed shall be
treated by the Trustee as Outstanding for the purpose of such selection.
The Trustee shall promptly notify the Company and the Debenture
Registrar in writing of the Debentures selected for redemption and, in the case
of any Debentures selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Debentures shall relate,
in the case of any Debentures redeemed or to be redeemed only in part, to the
portion of the principal amount of such Debenture which has been or is to be
redeemed.
<PAGE>
66
SECTION 11.05. Notice of Redemption. Notice of redemption shall be
---------------------
given by first-class mail, postage prepaid, mailed not less than 30 nor more
than 60 days prior to the Redemption Date, to each Holder of Debentures to be
redeemed, at his address appearing in the Debenture Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if less than all the Outstanding Debentures
are to be redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Debentures to be
redeemed;
(4) that on the Redemption Date the Redemption Price, together with
(unless the Redemption Date shall be an Interest Payment Date) interest
accrued and unpaid to the Redemption Date, will become due and payable upon
each such Debenture to be redeemed and that interest thereon will cease to
accrue on and after said date;
(5) the conversion price, the date on which the right to convert the
principal of the Debentures to be redeemed will terminate and the place or
places where such Debentures may be surrendered for conversion; and
(6) the place or places where such Debentures are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Debentures to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 11.06. Deposit of Redemption Price. Prior to any Redemption
----------------------------
Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if
the Company is acting as its own Paying Agent, segregate and hold in trust) an
amount of money sufficient to pay the Redemption Price of and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on all the
Debentures which are to be redeemed on that date other than any Debentures
<PAGE>
67
called for redemption on that date which have been converted prior to the date
of such deposit.
If any Debenture called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held in
trust for the redemption of such Debenture shall (subject to any right of the
Holder of such Debenture or any Predecessor Debenture to receive interest as
provided in the last paragraph of Section 3.07) be paid to the Company upon
Company Request or, if then held by the Company, shall be discharged from such
trust.
SECTION 11.07. Debentures Payable on Redemption Date. Notice of
--------------------------------------
redemption having been given as aforesaid, the Debentures so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Debentures shall cease to bear interest. Upon surrender of any such Debenture
for redemption in accordance with said notice, such Debenture shall be paid by
the Company at the Redemption Price, together with accrued interest to the
Redemption Date; provided, however, that installments of interest whose Stated
-------- -------
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Debentures, or one or more Predecessor Debentures, registered as such at
the close of business on the relevant Record Dates according to their terms and
the provisions of Section 3.07.
If any Debenture called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Debenture.
SECTION 11.08. Debentures Redeemed in Part. Any Debenture which is
----------------------------
to be redeemed only in part shall be surrendered at any office or agency of the
Company designated for that purpose (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company, the Trustee and the Debenture Registrar duly
executed by, the Holder thereof or his attorney duly authorized in writing), and
the Company shall execute, and the Trustee shall authenticate and deliver to the
Holder of such Debenture without service charge, a new Debenture or
<PAGE>
68
Debentures, of any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Debenture so surrendered.
ARTICLE XII
Conversion of Debentures
------------------------
SECTION 12.01. Conversion Privilege and Conversion Price. Subject to
------------------------------------------
and upon compliance with the provisions of this Article, at the option of the
Holder thereof, any Debenture or any portion of the principal amount thereof
which is $1,000 or an integral multiple of $1,000 may be converted at the
principal amount thereof, or of such portion thereof, into fully paid and
nonassessable shares (calculated as to each conversion to the nearest 1/100 of a
share) of Common Stock of the Company, at the conversion price, determined as
hereinafter provided, in effect at the time of conversion. Such conversion
right shall expire at the close of business on , 2005. In case a
Debenture or portion thereof is called for redemption, such conversion right in
respect of the Debenture or portion so called shall expire at the close of
business on the Business Day preceding the Redemption Date, unless the Company
defaults in making the payment due upon redemption.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Price") shall be initially $ per
share of Common Stock. The Conversion Price shall be adjusted in certain
instances as provided in paragraphs (1), (2), (3), (4) and (8) of Section 12.04.
SECTION 12.02. Exercise of Conversion Privilege. In order to
---------------------------------
exercise the conversion privilege, the Holder of any Debenture to be converted
shall surrender such Debenture, duly endorsed or assigned to the Company or in
blank, at any office or agency of the Company maintained for that purpose,
accompanied by written notice to the Company at such office or agency that the
Holder elects to convert such Debenture or, if less than the entire principal
amount thereof is to be converted, the portion thereof to be converted. In
connection with the exercise of the conversion privilege by a Holder prior to a
Redemption Date, a Holder's right to exercise his conversion privilege shall
<PAGE>
69
terminate at the close of business on the Business Day prior to the Redemption
Date. Debentures surrendered for conversion during the period from the close of
business on any Regular Record Date next preceding any Interest Payment Date to
the opening of business on such Interest Payment Date shall (except in the case
of Debentures or portions thereof which have been called for redemption on a
Redemption Date within such period) be accompanied by payment in New York
Clearing House funds or other funds acceptable to the Company of an amount equal
to the interest payable on such Interest Payment Date on the principal amount of
Debentures being surrendered for conversion. Except as provided in the
preceding sentence and subject to the last paragraph of Section 3.07, no payment
or adjustment shall be made upon any conversion on account of any interest
accrued on the Debentures surrendered for conversion or on account of any
dividends on the Common Stock issued upon conversion.
Debentures shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of such Debentures for conversion
in accordance with the foregoing provisions, and at such time the rights of the
Holders of such Debentures as Holders shall cease, and the person or persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common Stock at such
time. As promptly as practicable on or after the conversion date, the Company
shall issue and shall deliver at such office or agency a certificate or
certificates for the number of full shares of Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in Section 12.03.
In the case of any Debenture which is converted in part only, upon
such conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Debenture or
Debentures of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Debenture.
SECTION 12.03. Fractions of Shares. No fractional shares of Common
--------------------
Stock shall be issued upon the conversion of Debentures. If more than one
Debenture shall be surrendered for conversion at one time by the same Holder,
the number of full shares which shall be issuable upon conversion thereof shall
be computed on the basis of
<PAGE>
70
the aggregate principal amount of Debentures (or specified portions thereof) so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of any Debenture or Debentures (or
specified portions thereof), the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the closing price
per share of Common Stock at the close of business on the Business Day prior to
the day of conversion (determined as provided in the second sentence of
paragraph (6) of Section 12.04).
SECTION 12.04. Adjustment of Conversion Price. The Conversion Price
-------------------------------
shall be adjusted from time to time by the Company as follows:
(a) If the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of
Common Stock, the Conversion Price in effect at the opening of business on
the date following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution shall be reduced by
multiplying such Conversion Price by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close of
business on the Record Date (as defined in Section 12.04(g)) fixed for such
determination and the denominator shall be the sum of such number of shares
and the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the
opening of business on the day following the Record Date. If any dividend
or distribution of the type described in this Section 12.04(a) is declared
but not so paid or made, the Conversion Price shall again be adjusted to
the Conversion Price which would then be in effect if such dividend or
distribution had not been declared.
(b) If the Company shall issue rights or warrants to all holders of
its outstanding shares of Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price (as defined in Section 12.04 (g)) on the Record Date fixed for
the determination of stockholders entitled to receive such rights or
warrants, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect at
the
<PAGE>
71
opening of business on the date after such Record Date by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the Record Date plus the number of
shares of Common Stock which the aggregate offering price of the total
number of shares so offered would purchase at such Current Market Price and
of which the denominator shall be the number of shares of Common Stock
outstanding at the close of business on the Record Date plus the total
number of additional shares of Common Stock so offered for subscription or
purchase. Such adjustment shall become effective immediately after the
opening of business on the day following the Record Date fixed for
determination of stockholders entitled to receive such rights or warrants.
To the extent that shares of Common Stock are not delivered pursuant to
such rights or warrants, upon the expiration or termination of such rights
or warrants the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made on the basis of
delivery of only the number of shares of Common Stock actually delivered.
If such rights or warrants are not so issued, the Conversion Price shall
again be adjusted to be the Conversion price which would then be in effect
if such date fixed for the determination of stockholders entitled to
receive such rights or warrants had not been fixed. In determining whether
any rights or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock,
there shall be taken into account any consideration received for such
rights or warrants, with the value of such consideration, if other than
cash, to be determined by the Board of Directors.
(c) If the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and,
conversely, if the outstanding shares of Common Stock shall be combined
into a smaller number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day upon which
such
<PAGE>
72
combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(d) If the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock shares of any class of capital stock of the
Company (other than any dividends or distributions to which Section
12.04(a) applies) or evidences of its indebtedness, cash or other assets
(including securities, but excluding any rights or warrants of a type
referred to in Section 12.04(b) and dividends and distributions paid
exclusively in cash and excluding any capital stock, evidences of
indebtedness, cash or assets distributed upon a merger or consolidation to
which Section 12.10 applies) (the foregoing hereinafter in this Section
12.04(d) called the "Securities"), then, in each such case, the Conversion
Price shall be reduced so that the same shall be equal to the price
determined by multiplying the Conversion Price in effect immediately prior
to the close of business on the Record Date (as defined in Section
12.04(g)) with respect to such distribution by a fraction of which the
numerator shall be the Current Market Price (determined as provided in
Section 12.04(g)) on such date less the fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) on such date of the
portion of the Securities so distributed applicable to one share of Common
Stock and the denominator shall be such Current Market Price, such
reduction to become effective immediately prior to the opening of business
on the day following the Record Date; provided, however, that, in the event
-------- -------
the then fair market value (as so determined) of the portion of the
Securities so distributed applicable to one share of Common Stock is equal
to or greater than the Current Market Price on the Record Date, in lieu of
the foregoing adjustment, adequate provision shall be made so that each
holder of Debentures shall have the right to receive upon conversion of a
Debenture (or any portion thereof) the amount of Securities such holder
would have received had such holder converted such Debenture (or portion
thereof) immediately prior to such Record Date. If such dividend or
distribution is not so paid or made, the Conversion Price shall again
<PAGE>
73
be adjusted to be the Conversion Price which would then be in effect if
such dividend or distribution had not been declared. If the Board of
Directors determines the fair market value of any distribution for purposes
of this Section 12.04(d) by reference to the actual or when issued trading
market for any securities comprising all or part of such distribution, it
must in doing so consider the prices in such market over the same period
used in computing the Current Market Price pursuant to Section 12.04(g) to
the extent possible.
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of
the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a
specified event or events ("Trigger Event"): (i) are deemed to be
transferred with such shares of Common Stock; (ii) are not exercisable; and
(iii) are also issued in respect of future issuances of Common Stock, shall
be deemed not to have been distributed for purposes of this Section
12.04(d) (and no adjustment to the Conversion Price under this Section
12.04(d) shall be required) until the occurrence of the earliest Trigger
Event, whereupon such rights and warrants shall be deemed to have been
distributed and an appropriate adjustment to the Conversion Price under
this Section 12.04(d) shall be made. If any such rights or warrants,
including any such existing rights or warrants distributed prior to the
date of this Indenture, are subject to subsequent events, upon the
occurrence of each of which such rights or warrants shall become
exercisable to purchase different securities, evidences of indebtedness or
other assets, then the occurrence of each such event shall be deemed to be
such date of issuance and record date with respect to new rights or
warrants (and a termination or expiration of the existing rights or
warrants without exercise by the holder thereof). In addition, in the
event of any distribution (or deemed distribution) of rights or warrants,
or any Trigger Event with respect thereto, that was counted for purposes of
calculating a distribution amount for which an adjustment to the Conversion
Price under this Section 12.04 was made, (1) in the case of any such rights
or warrants which shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Price shall be readjusted
upon such
<PAGE>
74
final redemption or repurchase to give effect to such distribution or
Trigger Event, as the case may be, as though it were a cash distribution,
equal to the per share redemption or repurchase price received by a holder
or holders of Common Stock with respect to such rights or warrants
(assuming such holder had retained such rights or warrants), made to all
holders of Common Stock as of the date of such redemption or repurchase,
and (2) in the case of such rights or warrants which shall have expired or
been terminated without exercise by any holders thereof, the Conversion
Price shall be readjusted as if such rights and warrants had not been
issued.
Notwithstanding any other provision of this Section 12.04(d) to the
contrary, rights, warrants, evidences of indebtedness, other securities,
cash or other assets (including, without limitation, any rights distributed
pursuant to any stockholder rights plan) shall be deemed not to have been
distributed for purposes of this Section 12.04(d) if the Company makes
proper provision so that each holder of Debentures who converts a Debenture
(or any portion thereof) after the date fixed for determination of
stockholders entitled to receive such distribution shall be entitled to
receive upon such conversion, in addition to the shares of Common Stock
issuable upon such conversion, the amount and kind of such distributions
that such holder would have been entitled to receive if such holder had,
immediately prior to such determination date, converted such Debenture into
Common Stock.
For purposes of this Section 12.04(d) and Sections 12.04(a) and (b),
any dividend or distribution to which this Section 12.04(d) is applicable
that also includes shares of Common Stock, or rights or warrants to
subscribe for or purchase shares of Common Stock to which Section 12.04(b)
applies (or both), shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, assets, shares of capital
stock, rights or warrants other than such shares of Common Stock or rights
or warrants to which Section 12.04(b) applies (and any Conversion Price
reduction required by this Section 12.04(d) with respect to such dividend
or distribution shall then be made) immediately followed by (2) a dividend
or distribution of such shares of Common Stock or such rights or warrants
(and any further Conversion Price
<PAGE>
75
reduction required by Sections 12.04(a) and (b) with respect to such
dividend or distribution shall then be made), except that (a) the Record
Date of such dividend or distribution shall be substituted as "the date
fixed for the determination of stockholders entitled to receive such
dividend or other distribution", "Record Date fixed for such determination"
and "Record Date" within the meaning of Section 12.04(a) and as "the date
fixed for the determination of stockholders entitled to receive such rights
or warrants", "the Record Date fixed for the determination of the
stockholders entitled to receive such rights or warrants" and "such Record
Date" within the meaning of Section 12.04(b), and (b) any shares of Common
Stock included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such
determination" within the meaning of Section 12.04(a).
(e) If the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock cash (excluding any cash that is distributed
upon a merger or consolidation to which Section 12.10 applies or as part of
a distribution referred to in Section 12.04(d)) in an aggregate amount
that, combined together with (1) the aggregate amount of any other such
distributions to all holders of its Common Stock made exclusively in cash
within the 12 months preceding the date of payment of such distribution,
and in respect of which no adjustment pursuant to this Section 12.04(e) has
been made, and (2) the aggregate of any cash plus the fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors) of
consideration payable in respect of any tender offer by the Company or any
of its subsidiaries for all or any portion of the Common Stock concluded
within the 12 months preceding the date of payment of such distribution,
and in respect of which no adjustment pursuant to Section 12.04(f) has been
made, exceeds 10% of the product of the Current Market Price (determined as
provided in Section 12.04(g)) on the Record Date with respect to such
distribution times the number of shares of Common Stock outstanding on such
date, then, and in each such case, immediately after the close of business
on such date, the Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying the
<PAGE>
76
Conversion Price in effect immediately prior to the close of business on
such Record Date by a fraction (i) the numerator of which shall be equal to
the Current Market Price on the Record Date less an amount equal to the
quotient of (x) the excess of such combined amount over such 10% and (y)
the number of shares of Common Stock outstanding on the Record Date and
(ii) the denominator of which shall be equal to the Current Market Price on
such Record Date; provided, however, that, if the portion of the cash so
-------- -------
distributed applicable to one share of Common Stock is equal to or greater
than the Current Market Price of the Common Stock on the Record Date, in
lieu of the foregoing adjustment, adequate provision shall be made so that
each holder of Debentures shall have the right to receive upon conversion
of a Debenture (or any portion thereof) the amount of cash such holder
would have received had such holder converted such Debenture (or portion
thereof) immediately prior to such Record Date. If such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not been declared. Any cash distribution to
all holders of Common Stock as to which the Company makes the election
permitted by Section 12.04(m) and as to which the Company has complied with
the requirements of such Section shall be treated as not having been made
for all purposes of this Section 12.04(e).
(f) If a tender offer made by the Company or any of its subsidiaries
for all or any portion of the Common Stock expires and such tender offer
(as amended upon the expiration thereof) requires the payment to
stockholders (based on the acceptance (up to any maximum specified in the
terms of the tender offer) of Purchased Shares (as defined below)) of an
aggregate consideration having a fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described
in a resolution of the Board of Directors) that, combined together with (1)
the aggregate of the cash plus the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described
in a resolution of the Board of Directors), as of the expiration of such
tender offer, of consideration payable in respect of any other tender
offers, by the Company or any of its subsidiaries for all or any
<PAGE>
77
portion of the Common Stock expiring within the 12 months preceding the
expiration of such tender offer and in respect of which no adjustment
pursuant to this Section 12.04(f) has been made and (2) the aggregate
amount of any distributions to all holders of the Common Stock made
exclusively in cash within 12 months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to Section
12.04(e) has been made, exceeds 10% of the product of the Current Market
Price (determined as provided in Section 12.04(g)) as of the last time (the
"Expiration Time") tenders could have been made pursuant to such tender
offer (as it may be amended) times the number of shares of Common Stock
outstanding (including any tendered shares) at the Expiration Time, then,
and in each such case, immediately prior to the opening of business on the
day after the date of the Expiration Time, the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to the close of business
on the date of the Expiration Time by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding (including any
tendered shares) at the Expiration Time multiplied by the Current Market
Price of the Common Stock on the trading day next succeeding the Expiration
Time and the denominator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the
terms of the tender offer) of all shares validly tendered and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (y) the product
of the number of shares of Common Stock outstanding (less any Purchased
Shares) at the Expiration Time and the Current Market Price of the Common
Stock on the Trading Day next succeeding the Expiration Time, such
reduction (if any) to become effective immediately prior to the opening of
business on the day following the Expiration Time. If the Company is
obligated to purchase shares pursuant to any such tender offer, but the
Company is permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect
if such tender offer had not been made. If the application of
<PAGE>
78
this Section 12.04(f) to any tender offer would result in an increase in
the Conversion Price, no adjustment shall be made for such tender offer
under this Section 12.04(f).
(g) For purposes of this Section 12.04, the following terms shall
have the meaning indicated:
(i) "closing price" with respect to any securities on any day
means the closing price on such day or, if no such sale takes place on
such day, the average of the reported high and low prices on such day,
in each case on The Nasdaq National Market or the New York Stock
Exchange, as applicable, or, if such security is not listed or
admitted to trading on such national market or exchange, on the
principal national securities exchange or quotation system on which
such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities
exchange or quotation system, the average of the high and low prices
of such security on the over-the-counter market on the day in question
as reported by the National Quotation Bureau Incorporated or a similar
generally accepted reporting service, or, if not so available, in such
manner as furnished by any New York Stock Exchange member firm
selected from time to time by the Board of Directors for that purpose,
or a price determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the
Board of Directors.
(ii) "Current Market Price" means the average of the daily
closing prices per share of Common Stock for the 10 consecutive
trading days immediately prior to the date in question; provided,
--------
however, that (A) if the "ex" date (as hereinafter defined) for any
-------
event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price
pursuant to Section 12.04(a), (b), (c), (d), (e) or (f) occurs during
such 10 consecutive trading days, the closing price for each trading
day prior to the "ex" date for such other event shall be adjusted by
multiplying such closing price by the same fraction by which the
<PAGE>
79
Conversion Price is so required to be adjusted as a result of such
other event, (B) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section 12.04(a), (b),
(c), (d), (e) or (f) occurs on or after the "ex" date for the issuance
or distribution requiring such computation and prior to the day in
question, the closing price for each trading day on and after the "ex"
date for such other event shall be adjusted by multiplying such
closing price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such
other event and (C) if the "ex" date for the issuance or distribution
requiring such computation is prior to the day in question, after
taking into account any adjustment required pursuant to clause (A) or
(B) of this proviso, the closing price for each trading day on or
after such "ex" date shall be adjusted by adding thereto the amount of
any cash and the fair market value (as determined by the Board of
Directors in a manner consistent with any determination of such value
for purposes of Section 12.04(d) or (f), whose determination shall be
conclusive and described in a resolution of the Board of Directors) of
the evidences of indebtedness, shares of capital stock or assets being
distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For purposes of any
computation under Section 12.04(f), the Current Market Price on any
date shall be deemed to be the average of the daily closing prices per
share of Common Stock for such day and the next two succeeding trading
days; provided, however, that, if the "ex" date for any event (other
-------- -------
than the tender offer requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section 12.04(a), (b),
(c), (d), (e) or (f) occurs on or after the Expiration Time for the
tender or exchange offer requiring such computation and prior to the
day in question, the closing price for each trading day on and after
the "ex" date for such other event shall be adjusted by multiplying
such closing price by the reciprocal of the fraction by which the
Conversion
<PAGE>
80
Price is so required to be adjusted as a result of such other event.
For purposes of this paragraph, the term "ex" date (I) when used with
respect to any issuance or distribution, means the first date on which
the Common Stock trades regular way on the relevant exchange or in the
relevant market from which the closing price was obtained without the
right to receive such issuance or distribution, (II) when used with
respect to any subdivision or combination of shares of Common Stock,
means the first date on which the Common Stock trades regular way on
such exchange or in such market after the time at which such
subdivision or combination becomes effective and (III) when used with
respect to any tender or exchange offer means the first date on which
the Common Stock trades regular way on such exchange or in such market
after the Expiration Time of such offer. Notwithstanding the
foregoing, whenever successive adjustments to the Conversion Price are
called for pursuant to this Section 12.04, such adjustments shall be
made to the Current Market Price as may be necessary or appropriate to
effectuate the intent of this Section 12.04 and to avoid unjust or
inequitable results, as determined in good faith by the Board of
Directors.
(iii) "fair market value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's-length transaction.
(iv) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of
Common Stock have the right to receive any cash, securities or other
property or in which the Common Stock (or other applicable security)
is exchanged for or converted into any combination of cash, securities
or other property, the date fixed for determination of stockholders
entitled to receive such cash, securities or other property (whether
such date is fixed by the Board of Directors or by statute, contract
or otherwise).
(v) "trading day" shall mean (A) if the applicable security is
listed or admitted for trading on the New York Stock Exchange or
another
<PAGE>
81
national securities exchange, a day on which the New York Stock
Exchange or another national securities exchange is open for business,
(B) if the applicable security is quoted on The Nasdaq National
Market, a day on which trades may be made thereon or (c) if the
applicable security is not so listed, admitted for trading or quoted,
any day other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by
law or executive order to close.
(h) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 12.04(a), (b), (c), (d), (e) and
(f), as the Board of Directors considers to be advisable to avoid or
diminish any income tax to holders of Common Stock or rights to purchase
Common Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes.
To the extent permitted by applicable law, the Company from time to
time may reduce the Conversion Price by any amount for any period of time
if the period is at least 20 days, the reduction is irrevocable during the
period and the Board of Directors has made a determination that such
reduction would be in the Company's best interests, which determination
shall be conclusive and described in a resolution of the Board of
Directors. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Company shall mail to the holders of Debentures at
their last addresses appearing on the register of holders maintained for
that purpose a notice of the reduction at least 15 days prior to the date
the reduced Conversion Price takes effect, and such notice shall state the
reduced Conversion Price and the period during which it will be in effect.
(i) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that any adjustments which by reason of this
-------- -------
Section 12.04(i) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Article 12 shall be made by the Company and shall be
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82
made to the nearest cent or to the nearest one-hundredth of a share, as the
case may be.
No adjustment need be made for a change in the par value or no par
value of the Common Stock.
(j) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Trustee an Officers' Certificate
setting forth the Conversion Price after such adjustment and setting forth
a brief statement of the facts requiring such adjustment. Promptly after
delivery of such certificate, the Company shall prepare a notice of such
adjustment of the Conversion Price setting forth the adjusted Conversion
Price and the date on which each adjustment becomes effective and shall
mail such notice of such adjustment of the Conversion Price to each holder
of Debentures at such holder's last address appearing on the register of
holders maintained for that purpose within 20 days of the effective date of
such adjustment. Failure to deliver such notice shall not affect the
legality or validity of any such adjustment.
(k) In any case in which this Section 12.04 provides that an
adjustment shall become effective immediately after a Record Date for an
event, the Company may defer until the occurrence of such event issuing to
the holder of any Debenture converted after such Record Date and before the
occurrence of such event the additional shares of common Stock issuable
upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment.
(l) For purposes of this Section 12.04, the number of shares of
common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of Common Stock.
The Company shall not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Company.
(m) In lieu of making any adjustment to the Conversion Price pursuant
to Section 12.04(e), the
<PAGE>
83
Company may elect to reserve an amount of cash for distribution to the
holders of Debentures upon the conversion of the Debentures so that any
such holder converting Debentures will receive upon such conversion, in
addition to the shares of Common Stock and other items to which such holder
is entitled, the full amount of cash which such holder would have received
if such holder had, immediately prior to the Record Date for such
distribution of cash, converted its Debentures into Common Stock, together
with any interest accrued with respect to such amount, in accordance with
this Section 12.04(m). The Company may make such election by providing an
Officers' Certificate to the Trustee to such effect on or prior to the
payment date for any such distribution and depositing with the Trustee on
or prior to such date an amount of cash equal to the aggregate amount that
the holders of Debentures would have received if such holders had,
immediately prior to the Record Date for such distribution, converted all
the Debentures into Common Stock. Any such funds so deposited by the
Company with the Trustee shall be invested by the Trustee in U.S.
Government Obligations with a maturity not more than three months from the
date of issuance. Upon conversion of Debentures by a holder thereof, such
holder shall be entitled to receive, in addition to the Common Stock
issuable upon conversion, an amount of cash equal to the amount such holder
would have received if such holder had, immediately prior to the Record
Date for such distribution, converted its Debentures into Common Stock,
along with such holder's pro rata share of any accrued interest earned as a
consequence of the investment of such funds. Promptly after making an
election pursuant to this Section 12.04(m), the Company shall give or shall
cause to be given notice to all holders of Debentures of such election,
which notice shall state the amount of cash per $1,000 principal amount of
Debentures such holders shall be entitled to receive (excluding interest)
upon conversion of the Debentures as a consequence of the Company having
made such election.
SECTION 12.05. Notice of Adjustment of Conversion Price. Whenever
-----------------------------------------
the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price in
accordance with Section 12.04 and
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84
shall prepare a certificate signed by any Vice President or the Treasurer
of the Company setting forth the adjusted conversion price and showing in
reasonable detail the facts upon which such adjustment is based and the
effective date of such adjustment, and such certificate shall forthwith be
filed at each office or agency maintained for the purpose of conversion of
Debentures; and
(b) a notice stating that the conversion price has been adjusted and
setting forth the adjusted conversion price shall, as soon as practicable,
be mailed by the Company to all Holders at their last addresses as they
shall appear in the Debenture Register.
SECTION 12.06. Notice of Certain Corporate Action. In case:
-----------------------------------
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock payable otherwise than in cash out of its earned
surplus; or
(b) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any other rights; or
(c) of any reclassification of the Common Stock of the Company (other
than a subdivision or combination of its outstanding shares of Common
Stock), or of any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required, or
the sale or transfer of all or substantially all the assets of the Company;
or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed with the Trustee and at each office or
agency maintained for the purpose of conversion of Debentures, and shall cause
to be mailed to all Holders at their last addresses as they shall appear in the
Debenture Register, at least 20 days (or 10 days in any case specified in clause
(a) or (b) above) prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, rights or warrants, or, if a record is not to be taken,
the date as of which the
<PAGE>
85
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up. Failure to give the notice requested by
this Section or any defect therein shall not affect the legality or validity of
any dividend, distribution, right, warrant, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up, or the vote upon
any such action.
SECTION 12.07. Company To Reserve Common Stock. The Company shall at
--------------------------------
all times reserve and keep available, free from preemptive rights, out of its
authorized but unissued Common Stock, for the purpose of effecting the
conversion of Debentures, the full number of shares of Common Stock then
issuable upon the conversion of all outstanding Debentures.
SECTION 12.08. Taxes on Conversions. The Company will pay any and
---------------------
all taxes that may be payable in respect of the issue or delivery of shares of
Common Stock on conversion of Debentures pursuant hereto. The Company shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that of the Holder of the Debenture or Debentures to be converted,
and no such issue or delivery shall be made unless and until the person
requesting such issue has paid to the Company the amount of any such tax, or has
established to the satisfaction of the Company that such tax has been paid.
SECTION 12.09. Covenant as to Common Stock. The Company covenants
----------------------------
that all shares of Common Stock which may be issued upon conversion of
Debentures will upon issue be duly and validly issued and fully paid and
nonassessable and, except as provided in Section 12.08, the Company will pay all
taxes, liens and charges with respect to the issue thereof.
<PAGE>
86
SECTION 12.10. Provisions in Case of Consolidation, Merger or
----------------------------------------------
Conveyance or Transfer of Properties and Assets. In case of any consolidation
- ------------------------------------------------
of the Company with, or merger of the Company into, any other corporation, or in
case of any merger of another corporation into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancelation of outstanding shares of Common Stock of the Company), or in case of
any conveyance or transfer of the properties and assets of the Company
substantially as an entirety, the corporation formed by such consolidation or
resulting from such merger or which acquires by conveyance or transfer such
properties and assets, as the case may be, shall execute and deliver to the
Trustee a supplemental indenture providing that the Holder of each Debenture
then outstanding shall have the right thereafter, during the period such
Debenture shall be convertible as specified in Section 12.01, to convert such
Debenture only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, conveyance or transfer by a holder
of the number of shares of Common Stock of the Company into which such Debenture
might have been converted immediately prior to such consolidation, merger,
conveyance or transfer, assuming such holder of Common Stock of the Company
failed to exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance or transfer (provided that, if the kind or amount of securities, cash
and other property receivable upon such consolidation, merger, conveyance or
transfer is not the same for each share of Common Stock of the Company in
respect of which such rights of election shall not have been exercised
("nonelecting share"), then for the purpose of this Section the kind and amount
of securities, cash and other property receivable upon such consolidation,
merger, conveyance or transfer by each nonelecting share shall be deemed to be
the kind and amount so receivable per share by a plurality of the nonelecting
shares). Such supplemental indenture shall provide for adjustments which, for
events subsequent to the effective date of such supplemental indenture, shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Article. The above provisions of this Section shall similarly apply to
successive consolidations, mergers, conveyance or transfers.
SECTION 12.11. Responsibility of Trustee. The Trustee, subject to
--------------------------
the provisions of Section 6.01, and any conversion agent shall not at any time
be under any duty or
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87
responsibility to any Holder to determine whether any facts exist which may
require any adjustment of the conversion price, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed,
or herein or in any supplemental indenture, provided to be employed, in making
the same. Neither the Trustee nor any conversion agent shall be accountable
with respect to the validity or value (or the kind or amount) of any shares of
Common Stock, or of any other securities or property, which may at any time be
issued or delivered upon the conversion of any Debenture; and it or they do not
make any representation with respect thereto. Neither the Trustee nor any
conversion agent shall be responsible for any failure of the Company to make any
cash payment or to issue, transfer or deliver any shares of Common Stock or
stock certificates or other securities or property upon the surrender of any
Debenture for the purpose of conversion; and the Trustee, subject to the
provisions of Section 6.01, and any conversion agent shall not be responsible
for any failure of the Company to comply with any of the covenants of the
Company contained in this Article.
ARTICLE XIII
Subordination of Debentures
---------------------------
SECTION 13.01. Debentures Subordinate to Senior Indebtedness. The
----------------------------------------------
Company, for itself, its successors and assigns, covenants and agrees, and each
Holder of Debentures, by his acceptance thereof likewise covenants and agrees,
that all Debentures issued hereunder shall be subordinated and subject, to the
extent and in the manner herein set forth, in right of payment to the prior
payment in full of all Senior Indebtedness.
SECTION 13.02. No Payments when Senior Indebtedness in Default;
------------------------------------------------
Payment Over of Proceeds upon Dissolution, etc. In the event the Company shall
- -----------------------------------------------
default in the payment of any Senior Indebtedness when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by declaration
or otherwise, then, unless and until such default shall have been cured or
waived or shall have ceased to exist, no direct or indirect payment (in cash,
property, securities, by setoff or otherwise) shall be made or agreed to be made
on account of the principal of (or premium, if any) or interest on the
Debentures, or in respect of any redemption, retirement, purchase or other
<PAGE>
88
acquisition (except through the conversion thereof) of any of the Debentures.
Upon the happening of an event of default with respect to any Senior
Indebtedness, as defined therein or in the instrument under which the same is
outstanding, permitting the holders thereof to accelerate the maturity thereof
(under circumstances when the terms of the preceding paragraph are not
applicable), unless and until such event of default shall have been cured or
waived or shall have ceased to exist, no direct or indirect payment (in cash,
property, securities, by setoff or otherwise) shall be made or agreed to be made
on account of the principal of (or premium, if any) or interest on the
Debentures, or in respect of any redemption, retirement, purchase or other
acquisition (except through the conversion thereof) of any of the Debentures.
In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Company or its property;
(b) any proceeding for the liquidation, dissolution or other winding
up of the Company or its property;
(c) any assignment by the Company for the benefit of creditors; or
(d) any other marshalling of the assets of the Company;
all Senior Indebtedness (including any interest thereon accruing after the
commencement of any such proceedings) shall first be paid in full before any
payment or distribution (direct or indirect), whether in cash, property or
securities, by setoff or otherwise, shall be made to any Holder on account of
any Debentures, and to that end any payment or distribution, whether in cash,
property or securities (other than securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment the payment
of which is subordinate, at least to the extent provided in this Article with
respect to the Debentures, to the payment of all Senior Indebtedness at the time
outstanding and to any securities issued in respect
<PAGE>
89
thereof under any such plan of reorganization or readjustment) which would
otherwise (but for the subordination provisions contained in this Article) be
payable or deliverable in respect of the Debentures shall be paid or delivered
directly to the holders of Senior Indebtedness, as their respective interests
may appear, until all Senior Indebtedness (including any interest thereon
accruing after the commencement of any such proceedings) shall have been paid in
full.
If the Debentures are declared due and payable before their Stated
Maturity because of the occurrence of an Event of Default (under circumstances
where the preceding paragraph is not applicable), no payment (direct or
indirect) shall be made in respect of any Debenture unless and until all Senior
Indebtedness has been paid in full or such declaration and its consequence shall
have been rescinded and all such defaults shall have been remedied or waived.
If any payment or distribution (other than securities of the Company
or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in this Article with respect to the Debentures, to the payment of all
Senior Indebtedness at the time outstanding and to any securities issued in
respect thereof under any such plan of reorganization or readjustment) shall be
received by the Trustee or the Holders in contravention of any of the terms of
this Article and before all the Senior Indebtedness has been paid in full, such
payment or distribution shall be held in trust for the benefit of, and shall be
paid over or delivered and transferred to, the holders of such Senior
Indebtedness at the time outstanding as their respective interests may appear
for application to the payment of Senior Indebtedness until all Senior
Indebtedness (including any interest thereon accruing after the commencement of
any such proceeding referred to in paragraph (a), (b), (c) or (d) above) shall
have been paid in full. If the Trustee or any such Holder fails to endorse or
assign any such payment or distribution as required by this Section, the Trustee
and the Holder of each Debenture by his acceptance thereof authorizes each
holder of Senior Indebtedness, any representative or representatives of holders
of Senior Indebtedness and the trustee or trustees under any indenture pursuant
to which any instrument evidencing such Senior Indebtedness may have been issued
so to endorse or assign the same.
<PAGE>
90
No holder of Senior Indebtedness shall be prejudiced in the right to
enforce subordination of the Debentures by any act or failure to act on the part
of the Company.
Subject to the payment in full of all Senior Indebtedness, the Holders
shall be subrogated (equally and ratably with the holders of all indebtedness of
the Company which ranks on a parity with the Debentures and is entitled to like
rights of subrogation) to the rights of the holders of Senior Indebtedness to
receive payments or distributions applicable to the Senior Indebtedness until
the Debentures shall be paid in full, and no such payments or distributions
shall, as between the Company, its creditors other than the holders of Senior
Indebtedness and the Holders of the Debentures, be deemed to be a payment by the
Company to or on account of the Debentures. The provisions of this Article are
and are intended solely for the purpose of defining the relative rights of the
Holders of the Debentures, on the one hand, and the holders of Senior
Indebtedness, on the other hand, and nothing contained in this Article or
elsewhere in this Indenture or in the Debentures is intended to or shall impair,
as between the Company, its creditors other than the holders of Senior
Indebtedness and the Holders of the Debentures, the obligation of the Company to
pay the Holders the principal of (and premium, if any) and interest on the
Debentures as and when the same shall become due and payable in accordance with
the terms thereof, or prevent the Trustee or the Holders from exercising all
rights, powers and remedies otherwise permitted by applicable law or under this
Indenture, upon a default or Event of Default hereunder, all subject to the
rights of the holders of Senior Indebtedness to receive cash, property or
securities otherwise payable or deliverable to the Trustee or the Holders.
Upon any payment or distribution pursuant to this Section, the Trustee
shall be entitled to rely upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in this Section
are pending, and the Trustee, subject as between the Trustee and the Holders to
the provisions of Section 6.01, shall be entitled to rely upon a certificate of
the liquidating trustee or agent or other person making such payment or
distribution to the Trustee or to the Holders for the purpose of ascertaining
the Persons entitled to participate in such payment or distribution, the holders
of the Senior Indebtedness and other indebtedness of the
<PAGE>
91
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Section.
In the event that the Trustee determines, in good faith, that evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Section, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, as to the extent to which such Person is entitled to
participate in such payment or distribution, and as to other facts pertinent to
the rights of such Person under this Section, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 13.03. Trustee To Effectuate Subordination. The Holder of
------------------------------------
each Debenture by his acceptance thereof authorizes and directs the Trustee in
his behalf to take such action as may be necessary or appropriate to acknowledge
or effectuate the subordination as provided in this Article and appoints the
Trustee as attorney-in-fact for any and all such purposes.
SECTION 13.04. Trustee Not Charged with Knowledge of Prohibition.
--------------------------------------------------
Notwithstanding the provisions of this Article or any other provision of this
Indenture, but subject as between the Trustee and the Holders to the provisions
of Section 6.01, the Trustee shall not be charged with knowledge of the
existence of any Senior Indebtedness, or of any default in the payment of any
Senior Indebtedness, or of any facts which would prohibit the making of any
payment of moneys to or by the Trustee, unless and until three Business Days
after the Trustee shall have received written notice thereof from the Company or
any holder of Senior Indebtedness or the representative or representatives of
such holder, and the Trustee may conclusively rely on any writing purporting to
be from a holder of Senior Indebtedness, or a representative of such holder, as
being genuine; nor shall the Trustee be charged with knowledge of the curing of
any such default or of the elimination of the act or condition preventing any
such payment unless and until the Trustee shall have received an Officers'
Certificate to such effect. The provisions of this Section shall not limit any
rights of holders of Senior Indebtedness under this Article XIII to recover from
the Holders of Debentures any payment made to any such Holder.
<PAGE>
92
SECTION 13.05. Rights of Trustee as Holder of Senior Indebtedness.
---------------------------------------------------
The Trustee shall be entitled to all the rights set forth in this Article with
respect to any Senior Indebtedness which may at any time be held by it, to the
same extent as any other holder of Senior Indebtedness; and nothing in Section
6.12, or elsewhere in this Indenture, shall deprive the Trustee of any of its
rights as such holder.
SECTION 13.06. Article Applicable to Paying Agent. In case at any
-----------------------------------
time any Paying Agent other than the Trustee shall have been appointed by the
Company and be then acting hereunder, the term "Trustee" as used in this Article
shall in such case (unless the context shall otherwise require) be construed as
extending to and including such Paying Agent within its meaning as fully for all
intents and purposes as if such Paying Agent were named in this Article in
addition to or in place of the Trustee; provided, however, that Sections 13.04
-------- -------
and 13.05 shall not apply to the Company or any Affiliate of the Company if the
Company or such Affiliate acts as Paying Agent.
ARTICLE XIV
Right To Require Repurchase
---------------------------
SECTION 14.01. Right To Require Repurchase. In the event that there
----------------------------
shall occur a Change in Control (as defined in Section 14.05), each Holder shall
have the right, at such Holder's option to require the Company to purchase, and
upon the exercise of such right, the Company shall, subject to the provisions of
Article XIII, purchase, all or any part of such Holder's Debentures on the date
(the "Repurchase Date") that is 75 days after the date the Company gives notice
of the Change in Control as contemplated in Section 14.02(a) at a price (the
"Repurchase Price") equal to 100% of the principal amount thereof, together with
accrued and unpaid interest to the Repurchase Date. In connection with the
exercise of the repurchase right by a Holder prior to a Redemption Date, a
Holder's right to exercise his repurchase right shall terminate at the close of
business on the Business Day prior to the Redemption Date.
SECTION 14.02. Notice; Method of Exercising Repurchase Right. (a)
----------------------------------------------
On or before the 15th day after the Change in Control, the Company or, at the
request of the
<PAGE>
93
Company, the Trustee (in the name and at the expense of the Company), shall give
notice of the occurrence of the Change in Control and of the repurchase right
set forth herein arising as a result thereof by first-class mail, postage
prepaid, to each Holder of the Debentures at such Holder's address appearing in
the Debenture Register. The Company shall also deliver a copy of such notice of
a repurchase right to the Trustee.
Each notice of a repurchase right shall state:
(i) the event constituting the Change in Control and the date thereof;
(ii) the Repurchase Date;
(iii) the date by which the repurchase right must be exercised;
(iv) the Repurchase Price; and
(v) the instructions a Holder must follow to exercise a repurchase
right.
No failure of the Company to give the foregoing notice shall limit any
Holder's right to exercise a repurchase right. The Trustee shall have no
affirmative obligation to determine if there shall have occurred a Change in
Control.
(b) To exercise a repurchase right, a Holder shall deliver to the
Company (or an agent designated by the Company for such purpose in the notice
referred to in (a) above) and to the Trustee on or before the 10th day prior to
the Repurchase Date (i) written notice of the Holder's exercise of such right,
which notice shall set forth the name of the Holder, the principal amount of the
Debenture or Debentures (or portion of a Debenture) to be repurchased and a
statement that an election to exercise the repurchase right is being made
thereby and (ii) the Debenture or Debentures with respect to which the
repurchase right is being exercised, duly endorsed for transfer to the Company.
Such written notice shall be irrevocable. If the Repurchase Date falls between
any Regular Record Date and the next succeeding Interest Payment Date,
Debentures to be repurchased must be accompanied by payment from the Holder of
an amount equal to the interest thereon which the registered Holder thereof is
to receive on such Interest
<PAGE>
94
Payment Date. A Holder that fails to exercise a repurchase right in accordance
with the terms hereof shall waive such repurchase right but the rights of such
Holder to receive principal of and interest on the Debentures and all other
rights of such Holder under this Indenture shall not be affected thereby.
(c) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall on the Repurchase Date pay or cause to
be paid in cash to the Holder thereof the Repurchase Price of the Debenture or
Debentures as to which the repurchase right has been exercised. In the event
that a repurchase right is exercised with respect to less than the entire
principal amount of a surrendered Debenture, the Company shall execute and
deliver to the Trustee and the Trustee shall authenticate for issuance in the
name of the Holder a new Debenture or Debentures in the aggregate principal
amount of the unrepurchased portion of such surrendered Debenture.
SECTION 14.03. Deposit of Repurchase Price. On or prior to the
----------------------------
Repurchase Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 10.03) an amount of money sufficient to pay the
Repurchase Price of the Debentures which are to be repaid on the Repurchase
Date.
SECTION 14.04. Debentures Not Repurchased on Repurchase Date. If any
----------------------------------------------
Debenture surrendered for repurchase shall not be so paid on the Repurchase
Date, the principal shall, until paid, bear interest to the extent permitted by
applicable law from the Repurchase Date at a rate per annum borne by such
Debenture.
SECTION 14.05. "Change in Control" Defined. For purposes of this
---------------------------
Article, "Change in Control" means any of the following events that occur after
the date of this Indenture and on or prior to Maturity:
(a) all or substantially all of the Company's assets are sold as an
entirety to any person or related group of persons;
(b) there shall be consummated any consolidation or merger of the
Company (i) in which the Company is not the continuing or surviving
corporation (other than a consolidation or merger with a wholly owned
<PAGE>
95
subsidiary of the Company in which all shares of Common Stock outstanding
immediately prior to the effectiveness thereof are changed into or
exchanged for the same consideration) or (ii) pursuant to which the Common
Stock is converted into cash, securities or other property, in each case
other than a consolidation or merger of the Company in which the holders of
the Common Stock immediately prior to the consolidation or merger have,
directly or indirectly, at least a majority of the common stock of the
continuing or surviving corporation immediately after such consolidation or
merger; or
(c) any person, or any persons acting together which would constitute
a "group" for purposes of Section 13(d) of the Securities Exchange Act of
1934 (a "Group"), together with any Affiliates thereof, shall acquire
beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of at least 50% of the total voting power of all
classes of capital stock of the Company entitled to vote generally in the
election of directors of the Company.
Notwithstanding anything to the contrary set forth in this definition,
a Change in Control shall not be deemed to have occurred:
(A) under paragraph (c) above, solely by virtue of the Company, any
Subsidiary, any employee stock purchase plan, stock option plan or other
stock incentive plan or program, retirement plan or automatic dividend
reinvestment plan or any substantially similar plan of the Company or any
Subsidiary or any person holding securities of the Company for or pursuant
to the terms of any such employee benefit plan, filing or becoming
obligated to file a report under or in response to Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report) under the Exchange Act
disclosing beneficial ownership by it of shares or securities of the
Company, whether in excess of 50% or otherwise; or
(B) under paragraphs (a), (b) or (c) above if:
(1) the Current Market Price of the Common Stock on the date the
Change in Control shall have occurred is at least equal to 105% of the
<PAGE>
96
Conversion Price in effect immediately preceding the time of such
Change in Control; or
(2) all of the consideration (excluding cash payments for
fractional shares) in the transaction giving rise to such Change in
Control to the holders of Common Stock consists of shares of common
stock that are, or immediately upon issuance will be, listed on a
national securities exchange or quoted on The Nasdaq National Market,
and as a result of such transaction the Debentures become convertible
solely into such common stock; or
(3) the consideration in the transaction giving rise to such
Change in Control to the holders of Common Stock consists of cash,
securities that are, or immediately upon issuance will be, listed on a
national securities exchange or quoted on The Nasdaq National Market,
or a combination of cash and such securities, and the aggregate fair
market value of such consideration (which, in the case of such
securities, shall be equal to the average of the daily Closing Prices
of such securities during the 10 consecutive Trading Days commencing
with the sixth Trading Day following consummation of such transaction)
is at least 105% of the Conversion Price in effect on the date
immediately preceding the closing date of such transaction.
If a Change in Control shall have occurred under paragraph (b) above,
the Company shall deliver the Officer's Certificate and Opinion of Counsel
called for under Section 8.01(3) as well as the Notices called for under Section
14.02(a).
For purposes of this definition of Change of Control, "Current Market
Price" on any date means the average daily Closing Prices for the 5 consecutive
Trading Days selected by the Company commencing not more than 10 Trading Days
before, and ending not later than, the date in question; "Closing Price" for any
Trading Day means the last reported sale price (or, if none on any day, the mean
between the bid and asked quotations on such day) of the securities in question
for such date, in either case on the New York Stock Exchange or, if the
securities are not listed or admitted to trading on such exchange, on the
principal
<PAGE>
97
national securities exchange on which such securities are listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange, on The Nasdaq National Market or, if the securities are not listed or
admitted to trading on any national securities exchange or quoted on such
National Market, the average of the closing bid and asked prices in the over-
the-counter market as furnished by any New York Stock Exchange member firm
selected by the Company for such purpose; and "Trading Day", with respect to any
stock exchange or securities market, means any Monday, Tuesday, Wednesday,
Thursday or Friday on which such stock exchange or securities market is open for
business.
* * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to
<PAGE>
98
be an original, but all such counterparts shall together constitute but one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
ALPHA TECHNOLOGIES GROUP, INC.,
by
--------------------------
Name:
Title:
[Seal]
Attest:
- -------------------------
Title:
,
by
--------------------------
Name:
Title:
[Seal]
Attest:
- -------------------------
Title:
<PAGE>
Exhibit 10.23
STANDARD INDUSTRIAL LEASE -- NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Parties. This Lease, dated, for reference purposes only, September 1, 1993,
is made by and between B & K Investment Company (herein called "Lessor") and
Specialty Extrusions Limited (herein called "Lessee").
2. Premises. Lessor hereby leases to Lessee and Lessee leases from Lessor for
the term, at the rental, and upon all of the conditions set forth herein, that
certain real property situated in the County of Orange State of California
commonly known as 801 South Acacia Avenue (Portion of larger) and described as
an approximately 15,000 square foot metal building and adjacent mobile office on
approximately one (1) acre of land as shown on Exhibit A attached hereto and
made a part hereof. Said real property including the land and all improvements
therein, is herein called "the Premises".
3. Term.
3.1 Term. The term of this Lease shall be for five (5) years commencing on
September 1, 1993 and ending on August 31, 1998 unless sooner terminated
pursuant to any provision hereof.
3.2 Delay in Possession. Notwithstanding said commencement date, if for any
reason Lessor cannot deliver possession of the Premises to Lessee on said date,
Lessor shall not be subject to any liability therefor, nor shall such failure
affect the validity of this Lease or the obligations of Lessee hereunder or
extend the term hereof, but in such case, Lessee shall not be obligated to pay
rent until possession of the Premises is tendered to Lessee; provided, however,
that if Lessor shall not have delivered possession of the Premises within sixty
(60) days from said commencement date, Lessee may, at Lessee's option, by notice
in writing to Lessor within ten (10) days thereafter, cancel this Lease, in
which event the parties shall be discharged from all obligations hereunder;
provided further, however, that if such written notice of Lessee is not received
by Lessor within said ten (10) day period, Lessee's right to cancel this Lease
hereunder shall terminate and be of no further force or effect.
3.3 Early Possession. If Lessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the termination date, and Lessee shall pay rent
for such period at the initial monthly rates set forth below.
4. Rent. Lessee shall pay to Lessor as rent for the Premises, monthly payments
of $7,717.00, in advance, on the first day of each month of the term hereof.
Lessee shall pay Lessor upon the execution hereof $7,717.00 as rent for the
month of September, 1993. Rent for any period during the term hereof which is
for less than one month shall be a pro rata portion of the monthly installment.
Rent shall be payable in lawful money of the United States to Lessor at the
address stated herein or to such other persons or at such other places as Lessor
may designate in writing.
5. Security Deposit. Lessee's $5,000.00 security deposit shall remain as
security for Lessee's faithful performance of Lessee's obligations hereunder. If
Lessee fails to pay rent or other charges due hereunder, or otherwise defaults
with respect to any provision of this Lease, Lessor may use, apply or retain all
or any portion of said deposit for the payment of any rent or other charge in
default or for the payment of any other sum to which Lessor may become obligated
by reason of Lessee's default, or to compensate Lessor for any loss or damage
which Lessor may suffer thereby. If Lessor so uses or applies all or any portion
of said deposit Lessee shall within ten (10) days after written demand therefor
deposit cash with Lessor in an amount sufficient to restore said deposit to the
full amount hereinabove stated and Lessee's failure to do so shall be a
<PAGE>
material breach of this Lease. If the monthly rent shall, from time to time,
increase during the term of this Lease, Lessee shall thereupon deposit with
Lessor additional security deposit so that the amount of security deposit held
by Lessor shall at all times bear the same proportion to current rent as the
original security deposit bears to the original monthly rent set forth in
paragraph 4 hereof. Lessor shall not be required to keep said deposit separate
from its general accounts. If Lessee performs all of Lessee's obligations
hereunder, said deposit, or so much thereof as has not theretofore been applied
by Lessor, shall be returned, without payment of interest or other increment for
its use, to Lessee (or, at Lessor's option, to the last assignee, if any, of
Lessee's interest hereunder) at the expiration of the term hereof, and after
Lessee has vacated the Premises. No trust relationship is created herein between
Lessor and Lessee with respect to said Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for aluminum
extrusion and related legal activities or any other use which is reasonably
comparable and for no other purpose.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises, in its state existing on
the date that the Lease term commences, but without regard to the use for which
Lessee will use or has used the Premises, does not violate any covenants or
restrictions of record, or any applicable building code, regulation or ordinance
in effect on such Lease term commencement date. In the event it is determined
that this warranty has been violated, then it shall be the obligation of the
Lessor, after written notice from Lessee, to promptly, at Lessor's sole cost and
expense, rectify any such violation. In the event Lessee does not give to Lessor
written notice of violation of this warranty within six months from the date
that the Lease term commences, the correction of same shall be the obligation of
the Lessee at Lessee's sole cost. The warranty contained in this paragraph 6.2
(a) shall be of no force or effect if, prior to the date of this Lease, Lessee
was the owner or occupant of the Premises, and, in such event, Lessee shall
correct any such violation at Lessee's sole cost.
(b) Except as provided in paragraph 6.2(a), Lessee shall, at Lessee's
expense, comply promptly with all applicable statutes, ordinances, rules,
regulations, orders, covenants and restrictions of record, and requirements in
effect during the term or any part of the term hereof, regulating the use by
Lessee of the Premises. Lessee shall not use nor permit the use of the Premises
in any manner that will tend to create waste or a nuisance or, if there shall be
more than one tenant in the building containing the Premises, shall tend to
disturb such other tenants.
6.3 Condition of Premises.
(a) Lessor shall deliver the Premises to Lessee clean and free of debris on
lease commencement date (unless Lessee is already in possession) and Lessor
further warrants to Lessee that the plumbing, lighting, air conditioning,
heating, and loading doors in the Premises shall be in good operating condition
on the Lease commencement date. In the event that it is determined that this
warranty has been violated, then it shall be the obligation of Lessor, after
receipt of written notice from Lessee setting forth with specificity the nature
of the violation, to promptly, at Lessor's sole cost, rectify such violation.
Lessee's failure to give such written notice to Lessor within thirty (30) days
after the Lease commencement date shall cause the conclusive presumption that
Lessor has complied with all of Lessor's obligations hereunder. The warranty
contained in this paragraph 6.3(a) shall be of no force or effect if prior to
the date of this Lease, Lessee was the owner or occupant of the Premises.
(b) Except as otherwise provided in this Lease, Lessee hereby accepts the
Premises in their condition existing as of the Lease commencement date or the
date that Lessee takes possession of the Premises, whichever is earlier, subject
to all applicable
2
<PAGE>
zoning, municipal, county and state laws, ordinances and regulations governing
and regulating the use of the Premises, and any covenants or restrictions of
record and accepts this Lease subject thereto and to all matters disclosed
thereby and by any exhibits attached hereto. Lessee acknowledges that neither
Lessor nor Lessor's agent has made any representation or warranty as to the
present or future suitability of the Premises for the conduct of Lessee's
business.
7. Maintenance, Repairs and Alterations.
7.1 Lessee's Obligations. Lessee shall keep in good order, condition and
repair the Premises and every part thereof, structural and non structural,
(whether or not such portion of the Premises requiring repair, or the means of
repairing the same are reasonably or readily accessible to Lessee, and whether
or not the need for such repairs occurs as a result of Lessee's use, any prior
use, the elements or the age of such portion of the Premises) including, without
limiting the generality of the foregoing, all plumbing, heating, air
conditioning, (Lessee shall procure and maintain, at Lessee's expense, an air
conditioning system maintenance contract) ventilating, electrical, lighting
facilities and equipment within the Premises, fixtures, walls (interior and
exterior), foundations, ceilings, roofs (interior and exterior), floors,
windows, doors, plate glass and skylights located within the Premises, and all
landscaping, driveways, parking lots, fences and signs located on the Premises
and sidewalks and parkways adjacent to the Premises.
7.1.1 Toxic Waste Inspection. Lessee at Lessee's expense during the period
between ninety (90) and forty-five (45) days prior to the expiration of the
lease shall cause the premises to be inspected for toxic materials by a licensed
environmental inspection service approved in writing by Lessor and shall provide
Lessor with a written report issued by such a licensed environmental inspection
service showing the results of the inspection and a determination of what
corrective measures should be taken, if any, to eliminate such toxic materials,
if any, to the extent necessary to meet the standards set out in the federal,
state, county or municipal codes as to the presence of such materials. Lessee
agrees that at its own expense, it will have such corrective measures performed
and completed before the expiration of the lease.
7.2 Surrender. On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same condition
as when received, ordinary wear and tear expected, clean and free of debris.
Lessee shall repair any damage to the Premises occasioned by the installation or
removal of Lessee's trade fixtures, furnishings and equipment. Notwithstanding
anything to the contrary otherwise stated in this Lease, Lessee shall leave the
air lines, power panels, electrical distribution systems, lighting fixtures,
space heaters, air conditioning, plumbing and fencing on the premises in good
operating condition.
7.3 Lessor's Rights. If Lease fails to perform Lessee's obligations under
this Paragraph 7, or under any other paragraph of this Lease, Lessor may at its
option (but shall not be required to) enter upon the Premises after ten (10)
days' prior written notice to Lessee (except in the case of any emergency, in
which case no notice shall be required), perform such obligations on Lessee's
behalf and put the same in good order, condition and repair, and the cost
thereof together with interest thereon at the maximum rate then allowable by law
shall become due and payable as additional rental to Lessor together with
Lessee's next rental installment.
7.4 Lessor's Obligations. Except for the obligations of Lessor under
Paragraph 6.2(a) and 6.3(a) (relating to Lessor's warranty), Paragraph 9
(relating to destruction of the Premises) and under Paragraph 14 (relating to
condemnation of the Premises), it is intended by the parties hereto that Lessor
have no obligations, in any manner whatsoever, to repair and maintain the
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Premises nor the building located thereon nor the equipment therein, whether
structural or non structural, all of which obligations are intended to be that
of the Lessee under Paragraph 7.1 hereof. Lessee expressly waives the benefit of
any statute now or hereinafter in effect which would otherwise afford Lessee the
right to make repairs at Lessor's expense or to terminate this Lease because of
Lessor's failure to keep the premises in good order, condition and repair.
7.5 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, or Utility Installations in, on or about
the Premises, except for nonstructural alterations not exceeding $2,500 in
cumulative costs during the term of this Lease. In any event, whether or not in
excess of $2,500 in cumulative cost, Lessee shall make no change or alteration
to the exterior of the Premises nor the exterior of the building(s) on the
Premises without Lessor's prior written consent. As used in this Paragraph 7.5
the term "Utility Installation" shall mean carpeting, window coverings, air
lines, power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing, and fencing. Lessor may require that Lessee
remove any or all of said alterations, improvements, additions or Utility
Installations at the expiration of the term, and restore the Premises to their
prior condition. Lessor may require Lessee to provide Lessor, at Lessee's sole
cost and expense, a lien and completion bond in an amount equal to one and
one-half times the estimated cost of such improvements, to insure Lessor against
any liability for mechanic's and materialmen's liens and to insure completion of
the work. Should Lessee make any alterations, improvements, additions or Utility
Installations without the prior approval of Lessor, Lessor may require that
Lessee remove any or all of the same.
(b) Any alterations, improvements, additions or Utility Installations in, or
about the Premises that Lessee shall desire to make and which requires the
consent of the Lessor shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent, the consent shall be
deemed conditioned upon Lessee acquiring a permit to do so from appropriate
governmental agencies, the furnishing of a copy thereof to Lessor prior to the
commencement of the work and the compliance by Lessee of all conditions of said
permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials furnished
or alleged to have been furnished to or for Lessee at or for use in the
Premises, which claims are or may be secured by any mechanics' or materialmen's
lien against the Premises or any interest therein. Lessee shall give Lessor not
less than ten (10) days' notice prior to the commencement of any work in the
Premises, and Lessor shall have the right to post notices of non-responsibility
in or on the Premises as provided by law. If Lessee shall, in good faith,
contest the validity of any such lien, claim or demand, then Lessee shall, at
its sole expense defend itself and Lessor against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Lessor or the Premises, upon the condition that
if Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to such contested lien claim or demand
indemnifying Lessor against liability for the same and holding the Premises free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's attorneys fees and costs in participating in such action if Lessor
shall decide it is to its best interest to do so.
(d) Unless Lessor requires their removal, as set forth in Paragraph 7.5(a),
all alterations, improvements, additions and Utility Installations (whether or
not such Utility Installations constitute trade fixtures of Lessee), which may
be made on the Premises, shall become the property of Lessor and remain upon and
be surrendered with the Premises at the expiration of the term.
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Notwithstanding the provisions of this Paragraph 7.5(d), Lessee's machinery and
equipment, other than that which is affixed to the Premises so that it cannot be
removed without material damage to the Premises, shall remain the property of
Lessee and may be removed by Lessee subject to the provisions of Paragraph 7.2.
8. Insurance Indemnity.
8.1 Insuring Party. As used in this Paragraph 8, the term "insuring party"
shall mean the party who has the obligation to obtain the Property Insurance
required hereunder. The insuring party shall be designated in Paragraph 46
hereof. In the event Lessor is the insuring party, Lessor shall also maintain
the liability insurance described in paragraph 8.2 hereof, in addition to, and
not in lieu of, the insurance required to be maintained by Lessee under said
paragraph 8.2, but Lessor shall not be required to name Lessee as an additional
insured on such policy. Whether the insuring party is the Lessor or the Lessee,
Lessee shall, as additional rent for the Premises, pay the cost of all insurance
required hereunder, except for that portion of the cost attributable to Lessor's
liability insurance coverage in excess of $1,000,000 per occurrence. If Lessor
is the insuring party Lessee shall, within ten (10) days following demand by
Lessor, reimburse Lessor for the cost of the insurance so obtained.
8.2 Liability Insurance. Lessee shall, at Lessee's expense obtain and keep
in force during the term of this Lease a policy of Combined Single Limit, Bodily
Injury and Property Damage insurance insuring Lessor and Lessee against any
liability arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be a combined
single limit policy in an amount not less than $500,000 per occurrence. The
policy shall insure performance by Lessee of the indemnity provisions of this
Paragraph 8. The limits of said insurance shall not, however, limit the
liability of Lessee hereunder.
8.3 Property Insurance.
(a) The insuring party shall obtain and keep in force during the term of
this Lease a policy or policies of insurance covering loss or damage to the
Premises, in the amount of the full replacement value thereof, as the same may
exist from time to time, which replacement value is now $1,000,000.00, but in no
event less than the total amount required by lenders having liens on the
Premises, against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, flood (in the event same is
required by a lender having a lien on the Premises), and special extended perils
("all risk" as such term is used in the insurance industry). Said insurance
shall provide for payment of loss thereunder to Lessor or to the holders of
mortgages or deeds of trust on the Premises. The insuring party shall, in
addition, obtain and keep in force during the term of this Lease a policy of
rental value insurance covering a period of one year, with loss payable to
Lessor, which insurance shall also cover all real estate taxes and insurance
costs for said period. A stipulated value or agreed amount endorsement deleting
the coinsurance provision of the policy shall be procured with said insurance as
well as an automatic increase in insurance endorsement causing the increase in
annual property insurance coverage by 2% per quarter. If the insuring party
shall fail to procure and maintain said insurance the other party may, but shall
not be required to, procure and maintain the same, but at the expense of Lessee.
If such insurance coverage has a deductible clause, the deductible amount shall
not exceed $1,000 per occurrence, and Lessee shall be liable for such deductible
amount.
(b) If the Premises are part of a larger building, or if the Premises are
part of a group of buildings owned by Lessor which are adjacent to the Premises,
then Lessee shall pay for any increase in the property insurance of such other
building or buildings if said increase is caused by Lessee's acts, omissions,
use or occupancy of the Premises.
(c) If the Lessor is the insuring party the Lessor will not
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insure Lessee's fixtures, equipment or tenant improvements unless the tenant
improvements have become a part of the Premises under paragraph 7, hereof. But
if Lessee is the insuring party the Lessee shall insure its fixtures, equipment
and tenant improvements.
8.4 Insurance Policies. Insurance required hereunder shall be in companies
holding a "General Policyholders Rating" of at least B plus, or such other
rating as may be required by a lender having a lien on the Premises, as set
forth in the most current issue of "Best's Insurance Guide". The insuring party
shall deliver to the other party copies of policies of such insurance or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses as required by this paragraph 8. No such policy shall be
cancelable or subject to reduction of coverage or other modification except
after thirty (30) days' prior written notice to Lessor. If Lessee is the
insuring party Lessee shall, at least thirty (30) days prior to the expiration
of such policies, furnish Lessor with renewals or "binders" thereof, or Lessor
may order such insurance and charge the cost thereof to Lessee, which amount
shall be payable by Lessee upon demand. Lessee shall not do or permit to be
done anything which shall invalidate the insurance policies referred to in
Paragraph 8.3. If Lessee does or permits to be done anything which shall
increase the cost of the insurance policies referred to in Paragraph 8.3, then
Lessee shall forthwith upon Lessor's demand reimburse Lessor for any additional
premiums attributable to any act or omission or operation of Lessee causing such
increase in the cost of insurance. If Lessor is the insuring party, and if the
insurance policies maintained hereunder cover other improvements in addition to
the Premises, Lessor shall deliver to Lessee a written statement setting forth
the amount of any such insurance cost increase and showing in reasonable detail
the manner in which it has been computed.
8.5 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive the entire right of recovery against the other for
loss or damage arising out of or incident to the perils insured against under
paragraph 8.3, which perils occur in, on or about the Premises, whether due to
the negligence of Lessor or Lessee or their agents, employees, contractors
and/or invitees. Lessee and Lessor shall, upon obtaining the policies of
insurance required hereunder, give notice to the insurance carrier or carriers
that the foregoing mutual waiver of subrogation is contained in this Lease.
8.6 Indemnity. Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Premises, or from
the conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere and shall
further indemnify and hold harmless Lessor from and against any and all claims
arising from any breach or default in the performance of any obligation on
Lessee's part to be performed under the terms of this Lease, or arising from any
negligence of the Lessee, or any of Lessee's agents, contractors, or employees,
and from and against all costs, attorney's fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon; and in case any action proceeding be brought against Lessor be reason
of any such claim, Lessee upon notice from Lessor shall defend the same at
Lessee's expense by counsel satisfactory to Lessor. Lessee, as a material part
of the consideration to Lessor, hereby assume all risk of damage to property or
injury to persons, in, upon or about the Premises arising from any cause and
Lessee hereby waives all claims in respect thereof against Lessor.
8.7 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or about
the Premises, nor shall Lessor be liable for injury to the person of Lessee,
Lessee's employees, agents or contractors, whether such
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damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether the said damage or injury results
from conditions arising upon the Premises or upon other portions of the building
of which the Premises are a part, or from other sources or places and regardless
of whether the cause of such damage or injury or the means of repairing the same
is inaccessible to Lessee. Lessor shall not be liable for any damages arising
from any act or neglect of any other tenant, if any, of the building in which
the Premises are located.
9. Damage of Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall herein mean damage or destruction to the
Premises to the extent that the cost of repair is less than 50% of the then
replacement cost of the Premises. "Premises Building Partial Damage" shall
herein mean damage or destruction to the building of which the Premises are a
part to the extent that the cost of repair is less than 50% of the then
replacement cost of such building as a whole.
(b) "Premises Total Destruction" shall herein mean damage or destruction to
the Premises to the extent that the cost of repair is 50% or more of the then
replacement cost of the Premises. "Premises Building Total Destruction" shall
herein mean damage or destruction to the building of which the Premises are a
part to the extent that the cost of repair is 50% or more of the then
replacement cost of such building as a whole.
(c) "Insured Loss" shall herein mean damage or destruction which was caused
by an event required to be covered by the insurance described in paragraph 8.
9.2 Partial Damage -- Insured Loss. Subject to the provisions of paragraphs
9.4, 9.5, and 9.6, if at anytime during the term of this Lease there is damage
which is an Insured Loss and which fails into the classification of Premises
Partial Damage or Premises Building Partial Damage, then Lessor shall, at
Lessor's expense, repair such damage, but not Lessee's fixtures, equipment or
tenant improvements unless the same become a part of the Premises pursuant to
Paragraph 7.5 hereof as soon as reasonably possible and this Lease shall
continue in full force and effect. Notwithstanding the above, if the Lessee is
the insuring party, and if the insurance proceeds received by Lessor are not
sufficient to effect such repair, Lessor shall give notice to Lessee of the
amount required in addition to the insurance proceeds to effect such repair.
Lessee shall contribute the required amount to Lessor within ten days after
Lessee has received notice from Lessor of the shortage in the insurance. When
Lessee shall contribute such amount to Lessor, Lessor shall make such repairs as
soon as reasonably possible and this Lease shall continue in full force and
effect. Lessee shall in no event have any right to reimbursement for any such
amounts so contributed.
9.3 Partial Damage -- Uninsured Loss. Subject to the provisions of
Paragraphs 9.4, 9.5 and 9.6, at any time during the term of this Lease there is
damage which is not an Insured Loss and which falls within the classification of
Premises Partial Damage or Premises Building Partial Damage, unless caused by a
negligent or willful act of Lessee (in which event Lessee shall make the repairs
at Lessee's expense). Lessor may at Lessor's option either (i) repair such
damage as soon as reasonably possible at Lessor's expense, in which event this
Lease shall continue in full force and effect, or (ii) give written notice to
Lessee within thirty (30) days after the date of the occurrence of such damage
of Lessor's intention to cancel and terminate this Lessee, as of the date of the
occurrence of such damage. In the event Lessor elects to give such notice of
Lessor's intention to cancel and terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give
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written notice to Lessor of Lessee's intention to repair such damage at Lessee's
expense, without reimbursement from Lessor, in which event this Lease shall
continue in full force and effect, and Lessee shall proceed to make such repairs
as soon as reasonably possible. If Lessee does not give such notice within such
10-day period this Lease shall be canceled and terminated as of the date of the
occurrence of such damage.
9.4 Total Destruction. If at any time during the term of this Lease there
is damage, whether or not an Insured Loss (including destruction required by
any authorized public authority), which falls into the classification of
Premises Total Destruction or Premises Building Total Destruction, this lease
shall automatically terminate as of the date of such total destruction.
9.5 Damage Near End of Term.
(a) If at any time during the last six months of the term of this Lease
there is damage, whether or not an Insured Loss, which falls within the
classification of Premises Partial Damage, Lessor may at Lessor's option cancel
and terminate this Lease as of the date of occurrence of such damage by giving
written notice to Lessee of Lessor's election to do so within 30 days after the
date of occurrence of such damage.
(b) Notwithstanding paragraph 9.5(a), in the event that Lessee has an option
to extend or renew this Lease, and the time within which said option may be
exercised has not yet expired, Lessee shall exercise such option, if it is to be
exercised at all, no later than 20 days after the occurrence of an Insured Loss
falling within the classification of Premises Partial Damage during the last six
months of the term of this Lease. If Lessee duly exercises such option during
said 20 day period, Lessor shall, at Lessor's expense, repair such damage as
soon as reasonably possible and this Lease shall continue in full force and
effect. If Lessee fails to exercise such option during said 20 day period, then
Lessor may at Lessor's option terminate and cancel this Lease as of the
expiration of said 20 day period by giving written notice to Lessee of Lessor's
election to do so within 10 days after the expiration of said 20 day period,
notwithstanding any term or provision in the grant of option to the contrary.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in paragraphs 9.2 or 9.3, through no
fault of Lessee, and Lessor or Lessee repairs or restores the Premises pursuant
to the provisions of this Paragraph 9, the rent payable hereunder for the period
during which such damage, repair or restoration continues shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired.
Except for abatement of rent, if any, Lessee shall have no claim against Lessor
for any damage suffered by reason of any such damage, destruction, repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the Premises under the
provisions of this Paragraph 9 and shall not commence such repair or restoration
within 90 days after such obligations shall accrue, Lessee may at Lessee's
option cancel and terminate this Lease by giving Lessor written notice of
Lessee's election to do so at any time prior to the commencement of such repair
or restoration. In such event this Lease shall terminate as of the date of such
notice.
9.7 Termination -- Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall, in
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.8 Waiver. Lessor and Lessee waive the provisions of any statutes which
relate to termination of lease when leased property is destroyed and agree that
such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessee shall pay the real property tax
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as defined in paragraph 10.2, applicable to the Premises during the term of this
Lease. All such payments shall be made at least ten (10) days prior to the
delinquency date of such payment. Lessee shall promptly furnish Lessor with
satisfactory evidence that such taxes have been paid. If any such taxes paid by
Lessee shall cover any period of time prior to or after the expiration of the
term hereof, Lessee's share of such taxes shall be equitably prorated to cover
only the period of time within the tax fiscal year during which this Lease shall
be in effect and Lessor shall reimburse Lessee to the extent required. If Lessee
shall fail to pay any such taxes, Lessor shall have the right to pay the same,
in which case Lessee shall repay such amount to Lessor with Lessee's next rent
installment together with interest at the maximum rate then allowable by law.
10.2 Definition of "Real Property Tax". As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Premises by any authority having the direct or
indirect power to tax, including any city, state or federal government, or any
school, agricultural, sanitary, fire, street, drainage or other improvement
district thereof, as against any legal or equitable interest of Lessor in the
Premises or in the real property of which the Premises are a part, as against
Lessor's right to rent or other income therefrom, and as against Lessor's
business of leasing the Premises. The term "real property tax" shall also
include any tax, fee, levy, assessment or charge (i) in substitution of,
partially or totally, any tax, fee, levy, assessment or charge hereinabove
included within the definition of "real property tax," or (ii) the nature of
which was hereinbefore included within the definition of "real property tax," or
(iii) which is imposed for a service or right not charged prior to June 1, 1978,
or, if previously charged, has been increased since June 1, 1978, or (iv) which
is imposed as a result of a transfer, either partial or total, of Lessor's
interest in the Premises or which is added to a tax or charge hereinbefore
included within the definition of real property tax by reason of such transfer,
or (v) which is imposed by reason of this transaction, any modifications or
changes hereto, or any transfers hereof.
10.3 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible, Lessee
shall cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee
within 10 days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to
Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor of
all charges jointly metered with other Premises.
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily
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or by operation of law assign, transfer, mortgage, sublet, or otherwise transfer
or encumber all or any part of Lessee's interest in this Lease or in the
Premises, without Lessor's prior written consent, which Lessor shall not
unreasonably withhold. Lessor shall respond to Lessee's request for consent
hereunder in a timely manner and any attempted assignment, transfer, mortgage,
encumbrance or subletting without such consent shall be void, and shall
constitute a breach of this Lease.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Premises, provided that said assignee assumes, in full, the
obligations of Lessee under this Lease. Any such assignment shall not, in any
way, affect or limit the liability of Lessee under the terms of this Lease even
if after such assignment or subletting the terms of this Lease are materially
changed or altered without the consent of Lessee, the consent of whom shall not
be necessary.
12.3 No Release of Lessee. Regardless of Lessor's consent, no subletting or
assignment shall release Lessee of Lessee's obligation or alter the primary
liability of Lessee to pay the rent and to perform all other obligations to be
performed by Lessee hereunder. The acceptance of rent by Lessor from any other
person shall not be deemed to be a waiver by Lessor of any provision hereof.
Consent to one assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting. In the event of default by any assignee of
Lessee or any successor of Lessee, in the performance of any of the terms
hereof, Lessor may proceed directly against Lessee without the necessity of
exhausting remedies against said assignee. Lessor may consent to subsequent
assignments or subletting of this Lease or amendments or modifications to this
Lease with assignees of Lessee, without notifying Lessee, or any successor of
Lessee, and without obtaining its or their consent thereto and such action shall
not relieve Lessee of liability under this Lease.
12.4 Attorney's Fees. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable attorneys fees incurred in connection
therewith, such attorneys fees not to exceed $350.00 for each such request.
13. Defaults; Remedies.
13.1 Defaults. The occurrence of any one or more of the following events
shall constitute a material default and breach of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by Lessee.
(b) The failure by Lessee to make any payment of rent or any other payment
required to be made by Lessee hereunder, as and when due, where such failure
shall continue for a period of three days after written notice thereof from
Lessor to Lessee. In the event that Lessor serves Lessee with a Notice to Pay
Rent or Quit pursuant to applicable Unlawful Detainer statutes such Notice to
Pay Rent or Quit shall also constitute the notice required by this subparagraph.
(c) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee,
other than described in paragraph (b) above, where such failure shall continue
for a period of 30 days after written notice hereof from Lessor to Lessee;
provided, however, that if the nature of Lessee's default is such that more than
30 days are reasonably required for its cure, then Lessee shall not be deemed to
be in default if Lessee commenced such cure within said 30-day period and
thereafter diligently prosecutes
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such cure to completion.
(d) (i) The making by Lessee of any general arrangement or assignment for
the benefit of creditors; (ii) Lessee becomes a "debtor" as defined in 11 U.S.C.
(S)101 or any successor statute thereto (unless, in the case of a petition filed
against Lessee, the same is dismissed within 60 days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's
asset's located at the Premises or of Lessee's interest in this Lease, where
possession is not restored to Lessee within 30 days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within 30 days. Provided, however, in the event that
any provision of this paragraph 13.1(d) is contrary to any applicable law, such
provision shall be of no force or effect.
(e) The discovery by Lessor that any financial statement given to Lessor by
lessee, any assignee of Lessee, any subtenant of Lessee, any successor in
interest of Lessee or any guarantor of Lessee's obligation hereunder, and any of
them, was materially false.
13.2 Remedies. In the event of any such material default or breach by
Lessee, Lessor may at any time thereafter, with or without notice or demand and
without limiting Lessor in the exercise of any right or remedy which Lessor may
have by reason of such default or breach:
(a) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease shall terminate and Lessee shall immediately
surrender possession of the Premises to Lessor. In such event Lessor shall be
entitled to recover from Lessee all damages incurred by Lessor by reason of
Lessee's default including, but not limited to, the cost of recovering
possession of the Premises; expenses of reletting, including time of award by
the court having jurisdiction thereof of the amount by which the unpaid rent for
the balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Lessee proves could be reasonably avoided;
that portion of the leasing commission paid by Lessor pursuant to Paragraph 15
applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this Lease shall
continue in effect whether or not Lessee shall have abandoned the Premises. In
such event Lessor shall be entitled to enforce all of Lessor's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor under the
laws or judicial decisions of the state wherein the Premises are located. Unpaid
installments of rent and other unpaid monetary obligations of Lessee under the
terms of this Lease shall bear interest from the date due at the maximum rate
then allowable by law.
13.3 Default by Lessor. Lessor shall not be in default unless Lessor fails
to perform obligations required of Lessor within a reasonable time, but in no
event later than thirty (30) days after written notice by Lessee to Lessor and
to the holder of any first mortgage or deed of trust covering the Premises whose
name and address shall have theretofore been furnished to Lessee in writing,
specifying wherein Lessor has failed to perform such obligation; provided,
however, that if the nature of Lessor's obligation is such that more than thirty
(30) days are required for performance then Lessor shall not be in default if
Lessor commences performance within such 30-day period and thereafter diligently
prosecutes the same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed on Lessor by the
terms of any mortgage or trust deed covering the
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Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten
(10) days after such amount shall be due, then, without any requirement for
notice to Lessee, Lessee shall pay to Lessor a late charge equal to 6% of such
overdue amount. The parties hereby agree that such late charge represents a fair
and reasonable estimate of the costs Lessor will incur by reason of late payment
by Lessee. Acceptance of such late charge by Lessor shall in no event constitute
a waiver of Lessee's default with respect to such overdue amount, nor prevent
Lessor from exercising any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of rent, then rent shall automatically
become due and payable quarterly in advance, rather than monthly,
notwithstanding paragraph 4 or any other provision of this Lease to the
contrary.
13.5 Impounds. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installments of rent or any other
monetary obligation of Lessee under the terms of this Lease, Lessee shall pay to
Lessor, if Lessor shall so request, in addition to any other payments required
under this Lease, a monthly advance installment, payable at the same time as the
monthly rent, as estimated by Lessor, for real property tax and insurance
expenses on the Premises which are payable by Lessee under the terms of this
Lease. Such fund shall be established to insure payment when due, before
delinquency, of any or all such real property taxes and insurance premiums. If
the amounts paid to Lessor by Lessee under the provisions of this paragraph are
insufficient to discharge the obligation of Lessee to pay such real property
taxes and insurance premiums as the same become due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums necessary to pay such obligations.
All moneys paid to Lessor under this paragraph may be intermingled with other
moneys of Lessor and shall not bear interest. In an event of a default in the
obligations of Lessee to perform under this Lease, then any balance remaining
from funds paid to Lessor under the provisions of this paragraph may, at the
option of Lessor, be applied to the payment of any monetary default of Lessee in
lieu of being applied to the payment of real property tax and insurance
premiums.
14. Condemnation. If the Premises or any portion thereof are taken under
the power of eminent domain, or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than 10% of the floor area
of the building on the Premises, or more than 25% of the land area of the
Premises which is not occupied by any building, is taken by condemnation, Lessee
may, at Lessee's option, to be exercised in writing only within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemnating authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the rent shall be
reduced in the proportion that the floor area of the building taken bears to the
total floor area of the building situated on the Premises. No reduction of rent
shall occur if the only area taken is that which does not have a building
located thereon. Any award for the taking of all or any part of the Premises
under the power of eminent domain or any payment made under threat of the
exercise of such power shall be the property of Lessor, whether such award shall
be made as compensation for diminution in value of the leasehold or for the
taking of the fee, or as severance damages; provided, however, that Lessee shall
be entitled to any award for loss of or damage to Lessee's trade fixtures and
removable personal property. In the event that this Lease is not terminated
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by reason of such condemnation, Lessor shall to the extent of severance damages
received by Lessor in connection with such condemnation, repair any damage to
the Premises caused by such condemnation except to the extent that Lessee has
been reimbursed therefor by the condemning authority. Lessee shall pay any
amount in excess of such severance damages required to complete such repair.
15. Broker's Fee.
(a) Upon execution of this Lease by both parties, Lessor shall pay to Lee
and Associates Commercial Brokerage Company (John Sullivan) Licensed real estate
broker(s), a fee as set forth in a separate agreement between Lessor and said
broker(s), or in the event there is no separate agreement between Lessor and
said broker(s), the sum as agreed, for brokerage services rendered by said
broker(s) to Lessor in this transaction.
(b) Lessor further agrees that if Lessee exercises any Option as defined in
paragraph 39.1 of this Lease, which is granted to Lessee under this Lease, or
any subsequently granted option which is substantially similar to an option
granted to Lessee under this Lease or if Lessee acquires any rights to the
Premises or other premises described in this Lease which are substantially
similar to what Lessee would have acquired had an Option herein granted to
Lessee been exercised, or if Lessee remains in possession of the Premises after
the expiration of the term of this Lease after having failed to exercise an
Option, or if said broker(s) are the procuring cause of any other lease or sale
entered into between the parties pertaining to the Premises and/or any adjacent
property in which Lessor has an interest, then as to any of said transactions,
Lessor shall pay said broker(s) a fee in accordance with the schedule of said
broker(s) in effect at the time of execution of this Lease.
(c) Lessor agrees to pay said fee not only on behalf of Lessor but also on
behalf of any person, corporation, association, or other entity having an
ownership interest in said real property or any part thereof, when such fee is
due hereunder. Any transferee of Lessor's interest in this Lease, whether such
transfer is by agreement or by operation of law, shall be deemed to have assumed
Lessor's obligation under this Paragraph 15. Said broker shall be a third party
beneficiary of the provisions of this Paragraph 15.
16. Estoppel Certificate.
(a) Lessee shall at any time upon not less than ten (10) days prior written
notice from Lessor execute, acknowledge and deliver to Lessor a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, so modified, is in full force and effect) and the date to which
the rent and other charges are paid in advance, if any, and (ii) acknowledging
that there are not, to Lessee's knowledge, any uncured defaults on the part of
Lessor hereunder, or specifying such defaults if any are claimed. Any such
statement may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Premises.
(b) At Lessor's option, Lessee's failure to deliver such statement within
such time shall be a material breach of this lease or shall be conclusive upon
Lessee (i) that this Lease is in full force and effect, without modification
except as may be represented by Lessor, (ii) that there are no uncured defaults
in Lessor's performance, and (iii) that not more than one month's rent has been
paid in advance or such failure may be considered by Lessor as a default by
Lessee under this Lease.
(c) If Lessor desires to finance, refinance, or sell the Premises, or any
part thereof, Lessee hereby agrees to deliver to any lender or purchaser
designated by Lessor such financial statements of Lessee as may be reasonably
required by such lender or purchaser. Such statements shall include the past
three years' financial statements of Lessee. All such financial statements
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shall be received by Lessor and such lender or purchaser in confidence and shall
be used only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean only the
owner or owners at the time in question of the fee title or a lessee interest in
a ground lease of the Premises, and except as expressly provided in Paragraph
15, in the event of any transfer of such title or interest, Lessor herein named
(and in case of any subsequent transfers then the grantor) shall be relieved
from and after the date of such transfer of all liability as respects Lessor's
obligations thereafter to be performed, provided that any funds in the hands of
Lessor or the then grantor at the time of such transfer, in which Lessee has an
interest, shall be delivered to the grantee. The obligations contained in this
Lease to be performed by Lessor shall, subject as aforesaid, be binding on
Lessor's successors and assigns, only during their respective periods of
ownership.
18. Severability. The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. Interest on Past-due Obligations. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law from the date due. Payment of such interest shall not
excuse or cure any default by Lessee under this Lease, provided, however, that
interest shall not be payable on late charges incurred by Lessee nor on any
amounts upon which late charges are paid by Lessee.
20. Time of Essence. Time is of the essence.
21. Additional Rent. Any monetary obligations of Lessee to Lessor under the
terms of this Lease shall be deemed to be rent.
22. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease may be modified in writing only, signed by the parties in interest at
the time of the modification. Except as otherwise stated in this Lease, Lessee
hereby acknowledges that neither the real estate broker listed in Paragraph 15
hereof or any cooperating broker on this transaction nor the Lessor or any
employees or agents of any of said persons has made any oral or written
warranties or representations to Lessee relative to the condition or use by
Lessee of said Premises and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all applicable laws
and regulations in effect during the term of this Lease except as otherwise
specifically stated in this Lease.
23. Notices. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery or by certified mail, and if given
personally or by mail, shall be deemed sufficiently given if addressed to Lessee
or to Lessor at the address noted below the signature of the respective parties,
as the case may be. Either party may by notice to the other specify a different
address for notice purposes except that upon Lessee's taking possession of the
Premises, the Premises shall constitute Lessee's address for notice purposes. A
copy of all notices required or permitted to be given to Lessor hereunder shall
be concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by notice to Lessee.
24. Waivers. No waiver by Lessor or any provison hereof shall be deemed a
waiver of any other provision hereof or of any
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subsequent breach by Lessee of the same or any other provision. Lessor's consent
to, or approval of, any act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to or approval of any subsequent act by Lessee.
The acceptance of rent hereunder by Lessor shall not be a waiver of any
preceding breach by Lessee of any provision hereof, other than the failure of
Lessee to pay the particular rent so accepted, regardless of Lessor's knowledge
of such preceding breach at the time of acceptance of such rent.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. Holding Over. If Lessee, with Lessor's consent, remains in possession of
the Premises or any pad thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, but all options and rights of
first refusal, if any, granted under the terms of this Lease shall be deemed
terminated and be of no further effect during said month to month tenancy.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29. Binding Effect; Choice of Law. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of Paragraph
17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
wherein the Premises are located.
30. Subordination.
(a) This Lease, at Lessor's option, shall be subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation or security now or
hereafter placed upon the real property of which the Premises are a part and to
any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgage, trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to Lessee, this Lease shall be deemed prior to such mortgage,
deed of trust, or ground lease, whether this Lease is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination or to make the Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Lessee's failure to
execute such documents within 10 days after written demand shall constitute a
material default by Lessee hereunder, or, at Lessor's option, Lessor shall
execute such documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee
does hereby make, constitute and irrevocably appoint Lessor as Lessee's
attorney-in-fact and in Lessee's name, place and stead, to execute such
documents in accordance with this paragraph 30(b).
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31. Attorney's Fees. If either party or the broker named herein brings an
action to enforce the terms hereof or declare rights hereunder, the prevailing
party in any such action, on trial or appeal, shall be entitled to his
reasonable attorney's fees to be paid by the losing party as fixed by the court.
The provisions of this paragraph shall inure to the benefit of the broker named
herein who seeks to enforce a right hereunder.
32. Lessor's Access. Lessor and Lessor's agents shall have the right to enter
the Premises at reasonable times for the purpose of inspecting the same, showing
the same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs, all without
rebate of rent or liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the Premises without Lessor's
prior written consent except that Lessee shall have the right, without the prior
permission of Lessor, to place ordinary and usual for rent or sublet signs
thereon.
35. Merger. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. Consents. Except for paragraph 33 hereof, wherever in this Lease the
consent of one party is required to an act of the other party such consent shall
not be unreasonably withheld.
37. Guarantor. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. Quiet Possession. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Premises.
39. Options.
39.1 Definition. As used in this paragraph the word "Options" has the
following meaning: (1) the right or option to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option or right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of first
refusal to lease other property of Lessor or the right of first offer to lease
other property of Lessor; (3) the right or option to purchase the Premises, or
the right of first refusal to purchase the Premises, or the right of first offer
to purchase the
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Premises or the right or option to purchase other property of Lessor, or the
right of first refusal to purchase other property of Lessor or the right of
first offer to purchase other property of Lessor.
39.2 Options Personal. Each Option granted to Lessee in this Lease are
personal to Lessee and may not be exercised or be assigned, voluntarily or
involuntarily, by or to any person or entity other than Lessee, provided,
however, the Option may be exercised by or assigned to any Lessee Affiliate as
defined in paragraph 12.2 of this Lease. The Options herein granted to Lessee
are not assignable separate and apart from this Lease.
39.3 Multiple Options. In the event that Lessee has any multiple options to
extend or renew this Lease a later option cannot be exercised unless the prior
option to extend or renew his Lease has been so exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding any
provision in the grant of Option to the contrary, (i) during the time commencing
from the date Lessor gives to Lessee a notice of default pursuant to paragraph
13.1(b) or 13.1(c) and continuing until the default alleged in said notice of
default is cured or (ii) during the period of time commencing on the day after a
monetary obligation to Lessor is due from Lessee and unpaid (without any
necessity for notice thereof to Lessee) continuing until the obligation is paid,
or (iii) at any time after an event of default described in paragraphs 13.1(a),
13.1(d), or 13.1(e) (without any necessity of Lessor to give notice of such
default to Lessee), or (iv) in the event that Lessor has given to Lessee three
or more notices of default under paragraph 13.1(b), where a late charge has
become payable under paragraph 13.4 for each of such defaults, or paragraph
13.1(c), whether or not the defaults are cured, during the 12 month period prior
to the time that Lessee intends to exercise the subject Option.
(b) The period of time within which an Option may be exercised shall not be
extended or enlarged by reason of Lessee's inability to exercise an Option
because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall terminate
and be of no further force or effect, notwithstanding Lessee's due and timely
exercise of the Option, if, after such exercise and during the term of this
Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee for a
period of 30 days after such obligation becomes due (without any necessity of
Lessor to give notice thereof to Lessee), or (ii) Lessee fails to commence to
cure a default specified in paragraph 13.1(c) within 30 days after the date that
Lessor gives notice to Lessee of such default and/or Lessee fails thereafter to
diligently prosecute said cure to completion, or (iii) Lessee commits a default
described in paragraph 13.1(a), 13.1(d) or 13.1(e) (without any necessity of
Lessor to give notice of such default to Lessee), or (iv) Lessor gives to Lessee
three or more notices of default under paragraph 13.1(b), where a late charge
becomes payable under paragraph 13.4 for each such default, or paragraph
13.1(c), whether or not the defaults are cured.
40. Multiple Tenant building. In the event that the Premises are part of a
larger building or group of buildings then Lessee agrees that it will abide by,
keep and observe all reasonable rules and regulations which Lessor may make from
time to time for the management, safety, care and cleanliness of the building
and grounds, the parking of vehicles and the preservation of good order therein
as well as for the convenience of other occupants and tenants of the building.
The violations of any such rules and regulations shall be deemed a material
breach of this Lease by Lessee..
41. Security Measures. Lessee hereby acknowledges that the rental
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payable to Lessor hereunder does not include the cost of guard service or other
security measures, and that Lessor shall have no obligation whatsoever to
provide same. Lessee assumes all responsibility for the protection of Lessee,
its agents and invitees from acts of third parties.
42. Easements. Lessor reserves to itself the right, from time to time, to grant
such easements, rights and dedications that Lessor deems necessary or desirable,
and to cause the recordation of Parcel Maps and restrictions, so long as such
easements, rights, dedications, Maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material breach of this Lease.
43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the provisions
hereof, the party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment, and there shall survive the right on the part
of said party to institute suit for recovery of such sum. If it shall be
adjudged that there was no legal obligation on the part of said party to pay
such sum or any part thereof, said party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions of
this Lease.
44. Authority. If Lessee is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of said entity. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after execution of this
Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. Insuring Party. The insuring party under this lease shall be the Lessee.
47. Addendum. Attached hereto is an addendum or addenda containing paragraphs
1, 2 and 3 which constitutes a part of this lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR
ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER OR ITS
AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO; THE PARTIES
SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND
TAX CONSEQUENCES OF THIS LEASE.
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The parties hereto have executed this Lease at the place on the dates specified
immediately adjacent to their respective signatures.
Executed at Fullerton, CA B & K Investment Company
on March 11, 1994 By /s/ Gordon Bagne
-----------------------------
Gordon Bagne
Address 801 S. Acacia Avenue
Fullerton, CA 92631 By /s/ Robert Klinger
-----------------------------
Robert Klinger
"LESSOR" (Corporate Seal)
Executed at SPECIALTY EXTRUSION, LTD. Speciality Extrusions Limited
on March 11, 1994 By_____________________________
Ronald Safer
Address 801 S. Acacia Avenue
Fullerton, CA 92631 By /s/ Walter M. Hastie
-----------------------------
Walter M. Hastie
By /s/ William Esparza
-----------------------------
William Esparza
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GUARANTY
--------
THIS IS A GUARANTY by each of the undersigned (hereinafter referred to as
"Guarantor") to B & K Investment company (hereinafter referred to as "Lessor").
Negotiations between Specialty Extrusions Limited (hereinafter referred to
as "Lessee"), and Lessor have culminated in the execution concurrently herewith,
of a Lease dated September 1, 1993 by and between Lessor and Lessee (hereinafter
referred to as the "Lease").
In consideration of Lessor entering into the Lease, each Guarantor hereby
unconditionally guarantees to Lessor the full and prompt payment by Lessee of
all sums to be paid, expended and disbursed by Lessee and the full and prompt
performance of any of the other covenants and conditions of the Lease at the
times and in the manner and mode as provided by the Lease.
This is a continuing Guaranty, and shall not be affected by any change,
modification, alteration, assignment, renewal, compromise, extension,
acceleration or supplement of the Lease or any part thereof. This Guaranty shall
be irrevocable throughout the term of the Lease and any extension thereof. No
act or omission on the part of Lessor and no agreement of any kind between
Lessor and Lessee shall in any manner or to any extent releases or change or
modify or affect the obligation and liability of each Guarantor.
This Guaranty shall be an independent obligation of each Guarantor and is
independent of the obligation and liability of each Guarantor.
This Guaranty shall be an independent obligation of each Guarantor and is
independent of the obligation and liabilities of Lessee. A separate action or
actions may be brought against Lessee and whether Lessee be joined in any such
action or actions. Each Guarantor waives all statutes of limitations affecting
his obligations or liabilities hereunder or the enforcement thereof.
Each Guarantor expressly waives any and all demands and notices of every
type, nature, kind and description whatsoever to which such Guarantor might
otherwise be entitled by law, including, but not limited to, notice of
acceptance hereof, protests, presentment, notice of protest, notice of the
incurring by Lessee of obligations or liabilities, defaults, notice of default,
or breach of non-payment.
Each Guarantor agrees to pay reasonable attorneys' fees and costs incurred
by Lessor in enforcing this Guaranty whether or not suit is brought.
This Guaranty shall inure to the benefit of Lessor and shall be binding upon
each Guarantor and their respective heirs, administrators, executors, successors
and assigns.
Dated: March 11, 1994.
Guarantor: ____________________________________
Ronald Safer
/s/ Walter M. Hastie
------------------------------------
Walter M. Hastie
/s/ William Esparza
------------------------------------
William Esparza
20
<PAGE>
ADDENDUM TO
STANDARD INDUSTRIAL LEASE
Dated September 1, 1993
By and Between B & K Investment Company and
Specialty Extrusions Limited
1 RENT ESCALATIONS
(a) At the commencement of the 7th month, 25th month and 43rd month respectively
of the Lease term, the monthly rent payable under paragraph 4 of the attached
Lease shall be adjusted by the increase, if any, from the date this lease
commenced, in the Consumer Price Index of the Bureau of Labor Statistics of the
U.S. Department of Labor for Urban Wage Earners and Clerical Workers, Los
Angeles-Long Beach-Anaheim, California (1967=100), "All Items", herein referred
to as "C.P.I."
(b) The monthly rent payable in accordance with paragraph (a) of the Addendum
shall be calculated as follows: the rent payable for the first month of the term
of this Lease, as set forth in paragraph 4 of the attached Lease, shall be
multiplied by a fraction, the numerator of which shall be C.P.I. of the month
immediately preceding the effective date of the subject rent escalation and the
denominator of which shall be the C.P.I. for the first month of the Lease term.
The sum so calculated shall constitute the new monthly rent hereunder, but, in
no event, shall such new monthly rent be less than the rent payable for the
month immediately preceding the date for rent adjustment. In no event shall this
increase amount to less than a 7-1/2 percent increase of the base amount, every
eighteen months.
(c) In the event the compilation and/or publication of the C.P.I. shall be
transferred to any other governmental department or bureau or agency or shall be
discontinued, then the index most nearly the same as the C.P.I. shall be used to
make such calculation. In the event that Lessor and Lessee cannot agree on such
alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the then rules of said
association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitrators shall be paid equally by Lessor and
Lessee.
21
<PAGE>
ADDENDUM TO
STANDARD INDUSTRIAL LEASE
Dated September 1, 1993
By and Between B & K Investment Company
and Specialty Extrusions Limited
2 OPTION TO EXTEND
A. Lessor hereby grants to Lessee the option to extend the term of this Lease
for a 5 year period commencing when the prior term expires upon each and all of
the following terms and conditions:
(i) Lessee gives to Lessor and Lessor receives written
notice of the exercise of the option to extend this Lease for said
additional term no earlier than nine months and no later than six
months prior to the time that the option period would commence if
the option were exercised, time being of the essence. If said
notification of the exercise of said option is not so given and
received, this option shall automatically expire;
(ii) At the time said written notification of exercise of option is given
and received, Lessee shall not be in default under any of the material
obligation of this Lease to be performed by Lessee and this Lease shall not
have previously terminated nor terminated prior to the commencement of the
option term;
(iii) All of the terms and conditions of this Lease except where
specifically modified by this option shall apply;
(iv) The monthly rent for each month of the option period shall be
calculated in accordance with the preceding Rent Escalation's and renewal term
rental adjustments and shall be made at the commencement of the 61st month,
61st, 79th, 97th and 115th month, respectively.
22
<PAGE>
ADDENDUM TO
STANDARD INDUSTRIAL LEASE
Dated September 1, 1993
By and Between B & K Investment Company
and Specialty Extrusions Limited
3 OPTION FOR NEW OWNER TO TERMINATE
In the event that Lessee sells and transfers the extrusion business being
conducted on the Premises to an unaffiliated third party then the new owner
shall have the option to terminate this lease on the anniversary of the transfer
date of the business by giving notice of the intention to terminate within
thirty days of the transfer date. This option to terminate the lease on the sale
of the business shall apply to Lessee's purchaser only and not to any subsequent
purchaser of the business.
B & K INVESTMENT COMPANY
--------------------------------------
By /s/ Gordon Bagne
------------------------------------
Gordon Bagne
By /s/ Robert Klinger
------------------------------------
Robert Klinger
"LESSOR"
SPECIALTY EXTRUSION, LIMITED
--------------------------------------
By /s/ Walter M. Hastie
------------------------------------
Walter M. Hastie
By /s/ William Esparza
------------------------------------
William Esparza
23
<PAGE>
EXHIBIT 11
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER
31, NINE MONTHS ENDED
-------------------- --------------------
JULY 31, JULY 30,
1993 1994 1994 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Shares:
Weighted average common shares
outstanding..................... 5,773,885 5,914,254 5,871,283 5,967,118
Net common shares issuable on
exercise of stock options....... 243,658 429,350 383,747 565,829
--------- --------- --------- ---------
Weighted average common and common
equivalent shares outstanding..... 6,017,543 6,343,604 6,255,030 6,532,947
========= ========= ========= =========
Income before minority interest,
discontinued operations and
extraordinary credit.............. $ 228 $3,316 $1,112 $2,725
Minority interest.................. -- (384) (189) (264)
Gain on sale of discontinued
operations........................ -- 1,380 -- --
Discontinued operations............ (22) 978 1,070 --
Extraordinary credit............... 111 -- -- --
--------- --------- --------- ---------
Net income......................... $ 317 $5,290 $1,993 $2,461
========= ========= ========= =========
Net income per common and common
equivalent share:
Income before minority interest,
discontinued operations and
extraordinary credit............ $0.04 $ 0.52 $ 0.18 $ 0.42
Minority interest................ -- (0.06) (0.03) (0.04)
Gain on sale of discontinued
operations...................... -- 0.22 -- --
Discontinued operations.......... -- 0.15 0.17 --
Extraordinary credit............. 0.01 -- -- --
--------- --------- --------- ---------
Net income......................... $0.05 $ 0.83 $ 0.32 $ 0.38
========= ========= ========= =========
</TABLE>
<PAGE>
EXHIBIT 12
ALPHA TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES
(UNAUDITED)
(IN THOUSANDS, EXCEPT RATIO DATA)
<TABLE>
<CAPTION>
PRO FORMA(1)
-----------------------------
FISCAL YEAR
FISCAL YEAR ENDED NINE MONTHS ENDED ENDED NINE MONTHS ENDED
----------------------- ----------------- ----------- -----------------
OCTOBER 31, OCTOBER 31, JULY 31, JULY 30, OCTOBER 31, JULY 31, JULY 30,
1993 1994 1994 1995 1994 1994 1995
----------- ----------- -------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Income before taxes.... $346 $2,456 $1,310 $2,550 $3,239 $2,023 $ 2,476
Add:
Interest expense....... -- 131 39 523 442 295 615
---- ------ ------ ------ ------ ------ -------
Earnings................ $346 $2,587 $1,349 $3,073 $3,681 $2,318 $ 3,091
==== ====== ====== ====== ====== ====== =======
Fixed Charges
Interest Expense....... $ -- $ 131 $ 39 $ 523 $ 442 $ 295 $ 615
---- ------ ------ ------ ------ ------ -------
Fixed Charges........... $ -- $ 131 $ 39 $ 523 $ 442 $ 295 $ 615
==== ====== ====== ====== ====== ====== =======
Ratio of earnings to
fixed charges.......... -- 19.8x 34.6x 5.9x 8.3x 7.9x 5.0x
==== ====== ====== ====== ====== ====== =======
</TABLE>
- --------
(1) Pro forma information reflects the impact of acquisitions as if such
acquisitions had been completed as of November 1, 1993.
<PAGE>
EXHIBIT 23.2(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated September 1, 1995, included in Alpha Technologies Group, Inc.'s (the
"Company"), Form S-2 for the nine months ended July 30, 1995, and to all
references to our Firm included in this registration statement.
Arthur Andersen LLP
Houston, Texas
September 28, 1995
<PAGE>
EXHIBIT 23.2(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated December 15, 1994,
except with respect to the matter discussed in Note 13, as to which the date is
January 12, 1995, included in Alpha Technologies Group, Inc.'s (the "Company")
(formerly Synercom Technology, Inc.) Form 10-KSB for the year ended October 31,
1994, and to all references to our Firm included in this registration
statement.
Arthur Andersen LLP
Houston, Texas
September 28, 1995
<PAGE>
EXHIBIT 23.2(c)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion or
incorporation by reference in this registration statement of our reports dated
September 1, 1995 and December 15, 1994, except with respect to the matter
discussed in Note 13, as to which the date is January 12, 1995, into the
Company's Form S-8 Registration Statements filed on January 29, 1987 (Reg. No.
33-11627); September 28, 1987 (Reg. No. 33-17359); March 17, 1988 (Reg. No. 33-
20706); June 30, 1989 (Reg. No. 33-29636); and June 23, 1992 (Reg. No. 33-
48663).
Arthur Andersen LLP
Houston, Texas
September 28, 1995
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Lawrence Butler and Johnny Blanchard, or either
of them, his true and lawful attorney-in-fact and agent with full power of
substitution or resubstitution, for him and in his name, place and stead, in
any and all capacities to sign any or all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, each acting alone, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully for all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Lawrence Butler September 28, 1995
- ------------------------------------- -------------------------------------
LAWRENCE BUTLER DATE
/s/ Marshall Butler September 28, 1995
- ------------------------------------- -------------------------------------
MARSHALL BUTLER DATE
/s/ Warren Lichtenstein September 28, 1995
- ------------------------------------- -------------------------------------
WARREN LICHTENSTEIN DATE
/s/ Donald K. Grierson September 28, 1995
- ------------------------------------- -------------------------------------
DONALD K. GRIERSON DATE
/s/ Kenneth Rind September 28, 1995
- ------------------------------------- -------------------------------------
KENNETH RIND DATE
/s/ Frederic Heim September 28, 1995
- ------------------------------------- -------------------------------------
FREDERIC HEIM DATE
/s/ Johnny J. Blanchard September 28, 1995
- ------------------------------------- -------------------------------------
JOHNNY J. BLANCHARD DATE
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS -- OCTOBER 31, 1994 AND JULY 30, 1995 AND CONSOLIDATED STATEMENTS
OF INCOME FOR THE YEARS ENDED OCTOBER 31, 1993 AND 1994 AND THE NINE MONTHS
ENDED JULY 31, 1994 AND JULY 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS 9-MOS
<FISCAL-YEAR-END> OCT-31-1993 OCT-31-1994 OCT-31-1994 OCT-29-1995
<PERIOD-START> NOV-01-1992 NOV-01-1993 NOV-01-1993 NOV-01-1994
<PERIOD-END> OCT-31-1993 OCT-31-1994 JUL-31-1994 JUL-30-1995
<CASH> 0 7,406 0 3,689
<SECURITIES> 0 937 0 874
<RECEIVABLES> 0 9,392 0 11,366
<ALLOWANCES> 0 111 0 223
<INVENTORY> 0 5,831 0 8,070
<CURRENT-ASSETS> 0 24,308 0 25,096
<PP&E> 0 4,274 0 9,092
<DEPRECIATION> 0 315 0 989
<TOTAL-ASSETS> 0 31,689 0 38,205
<CURRENT-LIABILITIES> 0 8,384 0 9,962
<BONDS> 0 3,556 0 7,969
<COMMON> 0 202 0 208
0 0 0 0
0 0 0 0
<OTHER-SE> 0 16,342 0 17,202
<TOTAL-LIABILITY-AND-EQUITY> 0 31,689 0 38,205
<SALES> 258 30,145 18,579 44,590
<TOTAL-REVENUES> 258 30,145 18,579 44,590
<CGS> 190 20,627 12,959 32,555
<TOTAL-COSTS> 190 20,627 12,959 32,555
<OTHER-EXPENSES> 59 7,246 4,503 9,496
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 0 131 39 523
<INCOME-PRETAX> 346 2,456 1,310 2,550
<INCOME-TAX> 118 (860) 198 (175)
<INCOME-CONTINUING> 228 3,316 1,112 2,725
<DISCONTINUED> (22) 978 1,070 0
<EXTRAORDINARY> 111 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 317 5,290 1,993 2,461
<EPS-PRIMARY> .05 .83 .32 .38
<EPS-DILUTED> 0 0 0 0
</TABLE>
