<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 1996
REGISTRATION NO. 33-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
PARK ELECTROCHEMICAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 11-1734643
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYERIDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
5 DAKOTA DRIVE
LAKE SUCCESS, NEW YORK 11042
(516) 354-4100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
PAUL R. SHACKFORD
PARK ELECTROCHEMICAL CORP.
5 DAKOTA DRIVE
LAKE SUCCESS, NEW YORK 11042
(516) 354-4100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
COPIES TO:
BRIAN W. PUSCH, ESQ. RAYMOND W. WAGNER, ESQ.
PENTHOUSE SUITE SIMPSON THACHER & BARTLETT
29 WEST 57TH STREET 425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10017
(212) 980-0408 (212) 455-2568
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
% Convertible
Subordinated Notes due
2006.................. $115,000,000 100%(1) $115,000,000(1) $39,656(2)
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Common Stock, $.10 par
value, and Preferred
Stock Purchase
Rights(3)............. (4) -- -- --
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Common Stock, $.10 par
value, and Preferred
Stock Purchase 500,000 Shares
Rights(3)............. and Rights $32.5625(5) $ 16,281,250(5) $ 5,615(5)
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Total................ -- -- -- $45,271
</TABLE>
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(1) Plus accrued interest, if any. Estimated solely for the purposes of
determining the registration fee.
(2) Pursuant to Rule 457(i) promulgated under the Securities Act of 1933, the
registration fee for the % Convertible Subordinated Notes has been
calculated solely on the basis of the proposed offering price thereof.
(3) The Preferred Stock Purchase Rights initially trade only with the Common
Stock and are not currently exerciseable.
(4) Such indeterminate number of shares and rights as may be required for
delivery on conversions of the % Convertible Subordinated Notes.
(5) Pursuant to Rule 457(c) promulgated under the Securities Act of 1933, the
registration fee for the 500,000 shares of Common Stock has been
calculated on the basis of the average of the high and low sales prices
for the Common Stock on the New York Stock Exchange, Inc. Composite Tape
on January 12, 1996, as reported by The Wall Street Journal.
--------------
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
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 January 16, 1996
PROSPECTUS
PARK ELECTROCHEMICAL CORP.
LOGO $100,000,000 % CONVERTIBLE SUBORDINATED NOTES DUE 2006
500,000 SHARES OF COMMON STOCK
The Notes are convertible at the option of the holder at any time prior to
maturity, unless previously redeemed or repurchased, into Common Stock, $.10
par value per share (the "Common Stock"), of Park Electrochemical Corp. (the
"Company") at a conversion price of $ per share, subject to adjustment in
certain events. Interest on the Notes will be payable semi-annually on February
and August of each year, commencing August , 1996, and the Notes will
mature on February , 2006.
Prior to February , 1999, the Notes are not redeemable at the option of the
Company. At any time on or after such date, the Notes are redeemable at the
option of the Company, in whole or in part, at the redemption prices set forth
herein plus accrued interest. See "Description of Notes--Optional Redemption by
the Company." No sinking fund is provided for the Notes. In the event that a
Fundamental Change (as defined) occurs, each holder of Notes will have the
right, subject to certain conditions and restrictions, to require the Company
to repurchase all outstanding Notes, in whole or in part, owned by such holder
at the repurchase prices set forth herein plus accrued interest. See
"Description of Notes--Repurchase at Option of Holders Upon a Fundamental
Change." The Notes will be subordinated in right of payment to all existing and
future Senior Indebtedness (as defined). See "Description of Notes--
Subordination."
The Notes will be represented by one or more global registered certificates
(the "Global Notes"), registered in the name of a nominee of The Depository
Trust Company, as Depositary (the "Depositary"). Ownership of interests in the
Global Notes will be shown on, and the transfer thereof will be effected only
through, records maintained by the Depositary or its nominee for such Global
Notes and on the records of its participants or persons that hold through its
participants. Except as otherwise described under "Description of Notes--Book
Entry, Delivery and Form," owners of beneficial interests in the Global Notes
will not be entitled to receive Notes in definitive form and will not be
considered the holders thereof. Settlement for the Notes will be made in
immediately available funds. The Notes will trade in the Depositary's Same-Day
Funds Settlement System, and secondary market trading activity for the Notes
will therefore settle in immediately available funds. See "Description of
Notes--Settlement and Payment."
Contemporaneously with the offering of the Notes, 500,000 shares of Common
Stock are being offered hereby by Jerry Shore (the "Selling Shareholder"), the
Chairman of the Board, Chief Executive Officer and President of the Company.
The Company will not receive any proceeds of such sale of the shares of Common
Stock offered hereby. Following the completion of the offering of the shares of
Common Stock, the Selling Shareholder will beneficially own approximately 9.7%
of the outstanding shares of Common Stock.
The Common Stock of the Company is listed on the New York Stock Exchange,
Inc. (the "NYSE") and trades under the symbol "PKE." On January 15, 1996, the
last reported sale price of the Common Stock on the NYSE Composite Tape was $32
3/4 per share. See "Price Range of Common Stock and Dividends." Application
will be made for listing on the NYSE of the Notes under the symbol " " and of
the shares of Common Stock issuable on conversion of the Notes.
The offerings of the Notes and the Common Stock are not contingent upon each
other.
FOR A DESCRIPTION OF THE MATERIAL RISKS RELATING TO THE PURCHASE OF THE NOTES
OR COMMON STOCK, SEE "RISK FACTORS" BEGINNING ON PAGE 9.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
Price Underwriting Discounts Proceeds to Company
to Public and Commissions or to Selling Shareholder
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<S> <C> <C> <C>
Per Note................ %(1) %(2) %(1)(3)
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Total(4)................ $ (1) $ (2) $ (3)
- -------------------------------------------------------------------------------------
Per Share of Common
Stock.................. $ $ (5) $ (6)
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Total................... $ $ (5) $ (6)
</TABLE>
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- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from February , 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $500,000.
(4) The Company has granted the Underwriters a 30-day option to purchase up to
$15,000,000 additional principal amount of Notes on the same terms and
conditions as set forth above, 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 $ , $ and
$ , respectively. See "Underwriting."
(5) The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(6) Before deducting expenses payable by the Selling Shareholder estimated at
$20,000.
------------
The Notes and shares of Common Stock offered by this Prospectus are offered
by the Underwriters subject to prior sale, withdrawal, cancellation or
modification of the offers without notice, to delivery to and acceptance by the
Underwriters and to certain further conditions. It is expected that delivery of
the Notes offered hereby will be made in book-entry form through the facilities
of The Depository Trust Company, and delivery of the shares of Common Stock
offered hereby will be made at the offices of Lehman Brothers Inc., New York,
New York, on or about February , 1996.
------------
LEHMAN BROTHERS
NEEDHAM & COMPANY, INC.
ROBERTSON, STEPHENS & COMPANY
, 1996
<PAGE>
IN CONNECTION WITH THESE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES
AND THE COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (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 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the
following Regional Offices of the Commission: New York Regional Office, Seven
World Trade Center, Suite 1300, New York, New York 10048; and Chicago Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549
at prescribed rates. The Common Stock is listed on the NYSE. Reports and other
information concerning the Company may be inspected at the office of the NYSE,
20 Broad Street, New York, New York.
A Registration Statement on Form S-3 relating to the Notes and shares of
Common Stock offered hereby has been filed by the Company with the Commission.
This Prospectus, which forms a part of the Registration Statement, does not
contain all of the information set forth or incorporated by reference in the
Registration Statement and the exhibits thereto. For further information with
respect to the Company and the Notes and shares of Common Stock offered
hereby, reference is made to such Registration Statement and exhibits and the
documents incorporated by reference in such Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission,
each such statement being qualified in all respects by such reference. A copy
of the Registration Statement may be inspected without charge at the
Commission's principal offices in Washington D.C., and copies of all or any
part thereof may be obtained from the Commission upon the payment of certain
fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have heretofore been filed by the Company with
the Commission pursuant to the Exchange Act are incorporated by reference
herein and shall be deemed to be part hereof: (1) Annual Report on Form 10-K
for the fiscal year ended February 26, 1995; (2) Quarterly Reports on Form 10-
Q for the fiscal quarters ended May 28, 1995, August 27, 1995, and November
26, 1995; (3) Amendment No. 1 on Form 10-Q/A to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended May 28, 1995, filed with the
Commission on August 23, 1995 solely to correct an EDGAR format error; (4)
description of the Company's Common Stock, par value $.10 per share, contained
in the Company's Registration Statement on Form 8-A, filed with the Commission
on April 6, 1984 pursuant to Section 12(b) of the Exchange Act; and (5)
description of the Company's Preferred Stock Purchase Rights contained in
Amendment No. 1 on Form 8-A/A to the Company's Registration Statement on Form
8-A, filed with the Commission on August 10, 1995 pursuant to Section 12(b) of
the Exchange Act.
All documents filed by the Company with the Commission 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 of the Notes and
shares of Common Stock offered hereby shall be deemed to be incorporated by
reference in this
2
<PAGE>
Registration Statement and to be a part hereof from the respective dates of
filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated herein by reference shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated herein by reference modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request from such person, a copy of any and all of the documents that have
been incorporated by reference in this Prospectus, other than exhibits to such
documents not specifically incorporated by reference. Written or telephone
requests for such documents should be directed to Park Electrochemical Corp.,
5 Dakota Drive, Lake Success, New York 11042 (Telephone (516) 354-4100),
Attention: Mr. Paul R. Shackford, Chief Financial Officer.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) included or
incorporated by reference in this Prospectus. See "Risk Factors." Unless
otherwise indicated, all information in this Prospectus (1) has been adjusted
to give effect to the Company's two-for-one stock split in the form of a stock
dividend, which was paid on August 15, 1995 to shareholders of record at the
close of business on July 24, 1995, and (2) assumes no exercise of the
Underwriters' over-allotment option. See "Underwriting." The Company's fiscal
year is the 52- or 53-week period ending the Sunday nearest to the last day of
February. Unless the context otherwise indicates, reference to the "Company" or
"Park" means Park Electrochemical Corp. and its subsidiaries.
THE COMPANY
Park is a leading designer and producer for the global market of advanced
electronic materials used to fabricate complex multilayer printed circuit
boards and other electronic interconnect systems, such as backplanes, PC cards
and semiconductor packaging systems. The Company's multilayer printed circuit
materials include copper-clad laminates, prepregs and semi-finished multilayer
printed circuit board panels. Multilayer printed circuit boards and
interconnect systems are used in virtually all advanced electronic equipment to
direct, sequence and control electronic signals between semiconductor devices
(such as microprocessors and memory and logic devices) and passive components
(such as resistors and capacitors). Examples of end uses of the Company's
printed circuit materials range from supercomputers to laptops and from
satellite switching equipment to cellular phones.
According to The Institute for Interconnecting and Packaging Electronic
Circuits, an international trade organization for the printed circuit and
interconnect industry (the "IPC"), in 1994 the worldwide market for all printed
circuit boards was approximately $21.2 billion and the worldwide market for
multilayer printed circuit boards was approximately $9.6 billion. Based upon
IPC data, the Company estimates that, in 1994 the worldwide market for all
printed circuit materials was approximately $3.7 billion and the worldwide
market for multilayer printed circuit materials was approximately $1.4 billion.
The Company estimates that the annual worldwide market for multilayer printed
circuit materials is currently approximately $1.5 billion to $1.6 billion.
The Company believes it offers the most diverse advanced printed circuit
materials product line in the industry designed to address a wide array of end-
use applications and performance requirements. The Company's product line has
been developed internally and through long-term development projects with its
principal suppliers. The Company focuses its research and development efforts
on the most demanding product requirements and on developing industry leading
product technology to meet these requirements. Park founded the modern day
printed circuit industry in 1957 by inventing a composite material consisting
of an epoxy resin substrate reinforced with fiberglass cloth which was
laminated together with sheets of thin copper foil. This laminate system is
still used to construct the large majority of today's advanced printed circuit
boards. The Company has introduced its entire current electronic materials
product line within the last five years and believes it continues to be one of
the industry's technological leaders.
As a result of its leading edge products, extensive technical and engineering
service support and responsive manufacturing capabilities, the Company expects
to continue to take advantage of several industry trends. These trends include
the increasing global demand for electronic products and technology, the
increasing complexity of electronic products, the increasingly advanced
electronic materials required for interconnect performance and
manufacturability, the consolidation of the printed circuit board fabrication
industry and the time-to-market and time-to-volume pressures requiring closer
collaboration with materials suppliers. The Company's customers include the
leading independent printed circuit board fabricators and major electronic
equipment manufacturers in the computer, telecommunications, transportation,
aerospace and instrumentation industries. The Company has developed long-term
relationships with the larger, more technologically advanced and better
capitalized customers which are committed to building long-term relationships
with their suppliers.
4
<PAGE>
The Company believes that it is one of the world's largest manufacturers of
multilayer printed circuit materials and the market leader in North America and
Southeast Asia. It also believes that it is the only significant independent
manufacturer of multilayer printed circuit materials in the world. The Company
was the first manufacturer in the printed circuit materials industry to
establish manufacturing presences in the three major global markets of North
America, Europe and Asia, with facilities established in Europe in 1969 and
Southeast Asia in 1986. Park is expanding its global manufacturing facilities
to satisfy demand from existing customers and to add new select customers which
the Company has been unable to serve due to capacity constraints.
The Company believes it has achieved its leading position by following its
basic operating principles: customer responsiveness; quest for perfect quality;
and technological innovation. The Company's strategy includes the following
specific components: (i) sustaining, enhancing and developing relationships
with the more advanced printed circuit board fabricators and electronic
equipment manufacturers; (ii) in its quest for perfect quality product,
producing the highest quality advanced printed circuit materials to maximize
the performance and manufacturability of increasingly complex interconnect
systems; (iii) developing more advanced high performance electronic materials
products and technology capable of meeting the needs of future advanced
interconnect systems; and (iv) pursuing strategic acquisitions of related
electronic materials businesses, product lines or technologies that will
strengthen the Company's leadership position in the electronic materials
industry.
The Company is incorporated in the State of New York. Its corporate offices
are located at 5 Dakota Drive, Lake Success, New York 11042. Its telephone
number is (516) 354-4100.
THE OFFERING OF NOTES
Notes Offered....................... $100,000,000 principal amount of %
Convertible Subordinated Notes due 2006
(the "Notes") to be issued under an
indenture (the "Indenture") as more fully
described under "Description of Notes."
The Company has granted to the
Underwriters an option for 30 days to
purchase up to an additional $15,000,000
principal amount of Notes, solely to
cover over-allotments, if any.
Maturity............................ February , 2006
Interest............................ Interest on the Notes is payable on the
principal amount thereof at the rate
stated on the cover page of this
Prospectus, semi-annually on each
February and August , commencing
August , 1996.
Conversion Rights................... The Notes are convertible at the option
of the holder at any time prior to
maturity, unless previously redeemed or
repurchased, into the Company's Common
Stock at a conversion price of $ per
share, subject to adjustment under
certain conditions. See "Description of
Notes--Conversion."
Optional Redemption................. The Notes are not redeemable at the
option of the Company prior to February
, 1999. At any time on or after such
date, the Notes will be redeemable on at
least
5
<PAGE>
15 days' notice at the option of the
Company, in whole or in part, at any
time, initially at % and thereafter at
prices declining to 100% on February ,
2001, together with accrued interest. See
"Description of Notes--Optional
Redemption by the Company."
Repurchase at Option of Holders
Upon a Fundamental Change.......... If a Fundamental Change (as defined in
the Indenture) occurs, each holder of
Notes will have the right, subject to
certain conditions and restrictions, to
require the Company to repurchase all
outstanding Notes, in whole or in part,
owned by such holder, at the repurchase
prices set forth herein, plus accrued
interest. The term "Fundamental Change"
means the occurrence of any transaction
or event in connection with which all or
substantially all of the Common Stock
shall be exchanged for, be converted
into, be acquired for, or constitute
solely the right to receive,
consideration which is not all or
substantially all common stock which is
(or, upon consummation of or immediately
following such transaction or event, will
be) listed on a United States national
securities exchange or approved for
quotation on the Nasdaq National Market
or any similar United States system of
automated dissemination of quotation of
securities prices. See "Description of
Notes--Repurchase at Option of Holders
Upon a Fundamental Change."
Subordination....................... The Notes are subordinate in right of
payment to all existing and future Senior
Indebtedness (as defined in the
Indenture) of the Company (which for this
purpose means Park Electrochemical Corp.
and excludes its subsidiaries). As of
November 26, 1995, the Company had no
outstanding obligations or liabilities
which would have constituted Senior
Indebtedness. The Indenture contains no
limitation on the incurrence of Senior
Indebtedness or other liabilities by the
Company or the incurrence of indebtedness
by the Company's subsidiaries. See "Risk
Factors--Subordination" and "Description
of Notes-- Subordination."
Global Notes........................ The Notes will be represented by one or
more Global Notes, registered in the name
of a nominee of The Depository Trust
Company, as Depositary. Accordingly,
ownership of interests in such Global
Notes will be shown on, and the transfer
thereof will be effected only through,
records maintained by the Depositary or
its nominee for the Notes and on the
records of institutions that have
accounts with the Depositary
("participants") or persons that hold
such interests through participants.
6
<PAGE>
See "Description of Notes--Book-Entry,
Delivery and Form."
Listing.............................
Application will be made for listing of
the Notes on the NYSE under the symbol
" ."
Use of Proceeds..................... The net proceeds from the sale of the
Notes will be used for general corporate
purposes, which may include acquisitions
of businesses, product lines or
technologies that expand or complement
the Company's electronic materials
business, capital expenditures and
working capital requirements. Although
there are currently no agreements or
understandings with respect to any such
acquisition, the Company seeks to be able
to respond to opportunities as they
arise. There can be no assurance that the
Company will be able to identify or to
consummate any such acquisition in the
foreseeable future. See "Use of
Proceeds."
THE OFFERING OF COMMON STOCK
Common Stock Offered................
500,000 shares
Common Stock Outstanding(1)......... 11,544,064 shares
Common Stock to Be Owned by the
Selling Shareholder After the 1,125,612 shares
Offering(2)........................
Use of Proceeds..................... The Company will not receive any of the
proceeds from the sale of the shares of
Common Stock offered hereby.
NYSE Symbol.........................
PKE
- --------
(1) As of November 26, 1995. Excludes 658,224 shares of Common Stock reserved
for issuance on the exercise of options granted or to be granted pursuant
to certain employee compensation and benefit plans.
(2) The amount shown represents beneficial ownership.
The Company believes that Jerry Shore will remain the Company's largest
shareholder upon the completion of the sale of his shares of Common Stock
offered hereby.
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
-------------------------------------- -------------------------
FEBRUARY 28, FEBRUARY 27, FEBRUARY 26, NOVEMBER 27, NOVEMBER 26,
1993 1994 1995 1994 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $175,176 $208,410 $253,022 $186,398 $227,215
Gross profit............ 26,031 40,235 56,105 40,541 51,323
Profit from operations.. 3,166 14,305 26,110 18,565 25,524
Earnings before income
taxes.................. 3,075 12,845 27,501 19,373 27,207
Net earnings............ 2,265 8,062 17,345 12,205 17,857
Earnings per common
share:
Primary............... $.25 $1.01 $1.59 $1.14 $1.52
Fully diluted......... $.25 $ .84 $1.52 $1.08 $1.51
Weighted average number
of common shares
outstanding:
Primary............... 9,068 7,986 10,858 10,666 11,763
Fully diluted......... 9,068 11,454 11,570 11,560 11,801
Ratio of earnings to
fixed charges(1)....... 1.83 4.89 24.55 49.14
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 26, 1995
-----------------------
ACTUAL AS ADJUSTED(2)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and marketable securities.......................... $ 42,545 $139,295
Working capital......................................... 59,755 156,505
Total assets............................................ 192,606 292,606
Long-term debt.......................................... -- 100,000
Stockholders' equity.................................... 128,610 128,610
</TABLE>
- --------
(1) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of consolidated earnings before income taxes plus fixed
charges and (ii) fixed charges consist of interest expense incurred and the
portion of rental expense under leases deemed by the Company to be
representative of the interest factor.
(2) As adjusted to reflect the sale of the Notes offered hereby and receipt of
the estimated net proceeds therefrom, assuming no exercise of the
Underwriters' overallotment option.
8
<PAGE>
RISK FACTORS
CYCLICALITY OF ELECTRONICS INDUSTRY
The Company's business is dependent on printed circuit board fabricators and
electronic equipment manufacturers. The electronics industry is cyclical and
has experienced recurring downturns, which have often reduced demand for, and
prices of, electronic materials. Over the past two to three years, the
electronics industry has been experiencing significant growth, but there can
be no assurance that such growth will continue. No assurance can be given that
the Company's business, financial condition and results of operations will not
be materially adversely affected if downturns or changes in any particular
market segment of the electronics industry occur in the future, especially if
all of the market segments in which the Company participates experience
downturns at the same time.
FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results are affected by a number of factors,
including, without limitation, product prices, process yields, timing of
expenditures in anticipation of future sales, economic conditions in the
electronics industry, the mix of products sold, the timing of orders from
major customers and scheduled maintenance-related shutdowns of facilities. As
a result, the Company's results of operations may fluctuate significantly from
period to period. Operating results can also be influenced by acquisitions and
development and introduction of new products. Results of operations in any
period should not be considered indicative of the results to be expected for
any future period. See "--Acquisitions," "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Consolidated Financial Statements and the Notes to
Consolidated Financial Statements.
TECHNOLOGICAL CHANGE
Rapid technological advances in semiconductors have demanded increased
performance from printed circuit boards, packaging systems and related
materials. These advances have placed increasingly rigorous demands on the
electrical, thermal, chemical and mechanical properties of the electronic
materials manufactured by the Company and used in printed circuit board
production. Technological change in the printed circuit board industry is
rapid and continuous and will continue to require increased technological and
manufacturing capability and expertise. There is no assurance that the Company
will be able to maintain its current technological position. The introduction
of new technologies could require the Company to increase substantially its
capital expenditures. In addition, the printed circuit board industry served
by the Company could in the future encounter competition from new technologies
which could reduce the number of circuit boards required in electronic
equipment or render existing technology less competitive or obsolete.
COMPETITION
The electronic materials industry is characterized by intense competition
and ongoing consolidation. The Company's electronic materials business
competes worldwide in the market for materials used in the production of
complex multilayer printed circuit boards. The Company's competitors in this
market are primarily divisions or subsidiaries of very large, diversified,
multinational manufacturers, which are substantially larger and have greater
financial resources than the Company and, to a lesser degree, smaller regional
producers. In addition, electronic equipment manufacturers with captive
printed circuit board manufacturing operations may seek orders in the open
market to fill excess capacity, thereby increasing price competition. See
"Business--Competition."
AVAILABILITY OF MATERIALS; CONCENTRATION OF SUPPLIERS
The principal materials used in the manufacture of the Company's electronic
materials products are specially manufactured copper foil, fiberglass cloth
and synthetic reinforcements, and specially formulated resins and chemicals.
There are a limited number of qualified suppliers of these materials,
substitutes for these materials are not readily available, and, in the recent
past, there have been shortages in the market for certain of these
9
<PAGE>
materials. While the Company has not experienced significant problems in the
delivery of these materials and considers its relationships with its suppliers
to be strong, a disruption of the supply of material from one of the Company's
principal suppliers or an inability to obtain essential materials could
materially adversely affect the business, financial condition and results of
operations of the Company. Significant increases in the cost of materials
purchased by the Company could also have a material adverse effect on the
Company's business, financial condition and results of operations if the
Company were unable to pass such price increases through to its customers. See
"Business--Materials and Sources of Supply."
CUSTOMER CONCENTRATION
The Company's customer base is concentrated in part because, for many years,
the Company has implemented a strategy of developing long-term relationships
with a select group of customers. During the nine months ended November 26,
1995, the Company's ten largest customers accounted for approximately 46% of
net sales. One of these customers, a large domestic manufacturing concern,
accounted for approximately 17% of the Company's net sales during this period.
See Note 12 of Notes to Consolidated Financial Statements. At its current
level of sales, the Company expects that sales to a relatively small number of
customers will continue to account for a significant portion of its net sales
for the foreseeable future. The loss of, or a significant decline in orders
from, one of the Company's key customers could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business--Strategy," "Business--Customers and End Markets" and "Business--
Products and Services."
VARIABILITY OF CUSTOMER REQUIREMENTS; ABSENCE OF CUSTOMER ORDER COMMITMENTS
The level and timing of orders placed by the Company's customers vary due to
a number of factors, including their inventory management, changes in their
manufacturing strategies and variations relating to demand for their products.
The Company typically does not obtain long-term purchase orders or
commitments. It relies primarily on continual communication with its customers
to anticipate the future volume of purchase orders. A variety of conditions,
both specific to the individual customer and generally affecting the
customer's industry, could cause a customer to reduce or delay orders that
were previously anticipated by the Company. Reductions or delays in orders by
a significant customer or group of customers could have a material adverse
effect on the Company's business, financial condition and results of
operations.
CAPACITY; CAPITAL INTENSIVE BUSINESS
Certain of the Company's manufacturing facilities for electronic materials
have been operating in excess of their designed capacity. In order for the
Company to continue to achieve its sales growth objectives from increased
product output, the Company must expand its electronic materials manufacturing
capacity. The Company expects to commence commercial operation of expansions
in Newburgh, New York and Tempe, Arizona during the early part of its next
fiscal year. The Company also may invest in one or more additional expansions
of its manufacturing capacity during its 1997 fiscal year. There can be no
assurance that the Company will be able to expand its manufacturing capacity
in a timely manner or that the cost of such expansion will not exceed
management's estimates. In addition, the Company's expansion of its
manufacturing capacity will increase the Company's fixed costs, and the future
profitability of the Company will depend on its ability to utilize its
manufacturing capacity in an effective manner.
The Company's electronic materials business is capital intensive. In the
three fiscal years ended February 26, 1995 and the nine months ended November
26, 1995, the Company has expended a total of approximately $35.3 million and
$18.7 million, respectively, for the purchase of property, plant and equipment
for its electronic materials business. In order to remain competitive, the
Company must continue to make significant investments in capital equipment and
expansion of operations. However, there can be no assurance that additional
capital will be available when needed by the Company or that such capital will
be available on terms acceptable to the
10
<PAGE>
Company. See "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Business--Manufacturing."
ACQUISITIONS
The Company may use all or a portion of the proceeds of the sale of the
Notes to acquire businesses, product lines or technologies that expand or
complement those of the Company. There are currently no agreements or
understandings with respect to any such acquisition. Although the Company
believes that integration of acquired businesses, product lines or
technologies will result in long-term growth and profitability, there is no
assurance that the Company will successfully identify, negotiate, finance or
complete any such acquisition or successfully integrate or operate any
acquired business, product line or technology. Furthermore, the integration
and management of an acquired company or business may strain the Company's
management resources and technical, financial and operating systems. In
addition, implementation of acquisitions can result in large one-time charges
and costs. There can be no assurance that a given acquisition, if consummated,
would not materially adversely affect the Company's business, financial
condition and results of operations.
INTERNATIONAL OPERATIONS
Sales by the Company's foreign operations accounted for approximately 26%,
22%, 24% and 30% of net sales in fiscal years 1993, 1994 and 1995 and in the
nine months ended November 26, 1995, respectively. International operations
are subject to certain risks, including unexpected changes in regulatory
requirements, exchange rates, tariffs and other barriers, political and
economic instability and potentially adverse tax consequences. There can be no
assurances that some or all of these factors will not have a material adverse
effect on the Company's business, financial condition and results of
operations in the future. A portion of the sales and costs of the Company's
foreign operations are denominated in currencies other than the U.S. dollar
and, accordingly, the Company's business, financial condition and results of
operations may be affected by fluctuations in currency exchange rates. With
respect to international sales that are denominated in U.S dollars, increases
in the value of the U.S. dollar relative to foreign currencies can increase
the effective price of, and reduce demand for, the Company's products relative
to competitive products priced in such foreign currencies. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Manufacturing."
DEPENDENCE ON KEY PERSONNEL
The Company's success is dependent upon certain key management and technical
personnel. There is intense competition for qualified employees among
companies in the electronic materials industry, and the loss of certain of the
Company's employees or an inability to continue to attract and motivate highly
skilled employees could adversely affect the Company's business, financial
condition and results of operations.
INTELLECTUAL PROPERTY
The Company's future success depends in part upon its intellectual property.
Although the Company seeks to protect its intellectual property through a
combination of contract provisions, trade secret protections, copyrights and
patents, there can be no assurance that the steps taken by the Company to
protect its intellectual property will be adequate to prevent misappropriation
of its technology or that the independent development by others of similar
technology will not occur. See "Business--Patents and Trademarks."
ENVIRONMENTAL MATTERS
The Company's production processes require the use, storage, treatment and
disposal of certain materials which are considered hazardous under applicable
federal and state laws and the Company is subject to a variety of regulatory
requirements relating to the handling of such materials and the release of
emissions and effluents into the environment. The Company believes it
maintains an effective and comprehensive materials handling and environmental
compliance program. However, any inadvertent mishandling of materials,
improper release of
11
<PAGE>
emissions or effluents or similar incident could result in costly
administrative or legal proceedings, or remediation. Other possible
developments, such as the enactment or adoption of even more stringent
environmental laws and regulations, could result in substantial additional
costs to the Company. See "Business--Environmental Matters."
SUBORDINATION
The Notes will be unsecured and subordinated in right of payment in full to
all existing and future Senior Indebtedness (as defined in the Indenture) of
the Company. As a result of such subordination, in the event of bankruptcy,
liquidation or reorganization of the Company, or upon the acceleration of any
Senior Indebtedness, the assets of the Company will be available to pay
obligations on the Notes only after all Senior Indebtedness has been paid in
full, and there may not be sufficient assets remaining to pay amounts due on
the Notes. The Company expects from time to time to incur indebtedness
constituting Senior Indebtedness. Creditors, including trade creditors, of the
Company's subsidiaries generally will have a claim against the assets of the
particular subsidiaries of the Company in the event of bankruptcy, liquidation
or reorganization of the Company and its subsidiaries which ranks ahead of the
claim of the holders of the Notes against such assets. The Indenture does not
prohibit or limit the incurrence of additional indebtedness by the Company or
its subsidiaries. The incurrence of additional indebtedness by the Company or
its subsidiaries could adversely affect the Company's ability to pay its
obligations on the Notes. As of November 26, 1995, the Company had no
outstanding liabilities or obligations which would have constituted Senior
Indebtedness. In addition, as of November 26, 1995, subsidiaries of the
Company had outstanding an aggregate of approximately $56 million of
liabilities (excluding intercompany liabilities, deferred taxes on income and
commitments, contingencies and other liabilities of the types not required to
be reflected as liabilities on the balance sheets of such subsidiaries
prepared in accordance with generally accepted accounting principles). See
"Description of Notes--Subordination."
In addition, the Notes are obligations exclusively of the Company and not of
any of its subsidiaries. The Company's cash flow and ability to service debt,
including the Notes, may be dependent on the earnings of its subsidiaries and
the distribution of those earnings to the Company, or on other payments of
funds by the subsidiaries to the Company. The subsidiaries are separate and
distinct legal entities and have no obligation, contingent or otherwise, to
pay any amounts due pursuant to the Notes or to make any funds available
therefor, whether by dividends, loans or other payments. In addition, the
payment of dividends and the making of loans and advances to the Company by
its subsidiaries may be subject to statutory, contractual or other
restrictions, are dependent on the earnings of those subsidiaries and are
subject to various business considerations. Any right of the Company to
receive assets of one of its subsidiaries upon the liquidation or
reorganization of such subsidiary (and the consequent right of the holders of
the Notes to participate in these assets) will be effectively subordinated to
the claims of that subsidiary's creditors (including trade creditors), except
to the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interests in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company and would
be subject to judicial powers to subordinate the Company's claim against such
subsidiary to that of other creditors of such subsidiary in certain cases. See
"Description of Notes--Subordination."
LIMITATIONS ON REPURCHASE OF NOTES
Upon a Fundamental Change (as defined in the Indenture), each holder of
Notes will have certain rights, at the holder's option, to require the Company
to repurchase all or a portion of such holder's Notes. If a Fundamental Change
were to occur, there can be no assurance that the Company would have
sufficient funds to pay the repurchase price for all Notes tendered by the
holders thereof. Future credit agreements or other agreements relating to
other indebtedness (including Senior Indebtedness) to which the Company
becomes a party may contain restrictions on such repurchases. In the event a
Fundamental Change occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its lenders to the
repurchase of Notes or could attempt to refinance the borrowings that contain
such prohibition. If the Company does not obtain such a consent, or repay such
borrowings, the Company would remain prohibited from
12
<PAGE>
purchasing Notes. In such case, the Company's failure to purchase tendered
Notes would constitute an Event of Default under the Indenture, which may, in
turn, constitute a default under the terms of other indebtedness that the
Company may incur from time to time. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the holders of
Notes. See "Description of Notes--Repurchase at Option of Holders Upon a
Fundamental Change."
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS
Certain provisions of the Company's Certificate of Incorporation, the
Company's Shareholder Rights Plan and certain provisions of the New York
Business Corporation Law could discourage potential acquisition proposals and
could delay or prevent a change in control of the Company. Such provisions
could diminish the opportunities for a shareholder to participate in tender
offers, including tender offers at a price above the market value of the
Common Stock at the time of any such tender offer. Such provisions may also
inhibit increases in the market price of the Common Stock that could result
from takeover attempts. In addition, the Board of Directors of the Company,
without further shareholder approval, may issue Preferred Stock, with such
terms as the Board of Directors may determine, that could have the effect of
delaying or preventing a change in control of the Company. The issuance of
Preferred Stock could adversely affect the voting power of the holders of
Common Stock, including the loss of voting control to others. The Company
intends, consistent with its legal obligations to the shareholders, to
maintain the Company's status as an independent business and believes such
independence is in the best interests of the Company and its shareholders. See
"Description of Capital Stock."
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Notes
are estimated to be $96,750,000 ($111,337,500 if the Underwriter's over-
allotment option is exercised in full) after deducting the estimated
underwriting discounts and commissions and expenses of the offering payable by
the Company. The Company will not receive any proceeds from the sale of shares
of Common Stock by the Selling Shareholder. See "Selling Shareholder."
The net proceeds from the sale of the Notes will be used for general
corporate purposes, which may include acquisitions of other businesses,
product lines or technologies that expand or complement the Company's
electronic materials business, capital expenditures and working capital
requirements. Although there are currently no agreements or understandings
with respect to any such acquisition, the Company seeks to be able to respond
to opportunities as they arise. The Company is undertaking the offering of the
Notes at this time in part because it believes that the availability of the
net proceeds of such offering will better enable the Company to pursue any
such acquisition opportunities. There can be no assurance that the Company
will successfully identify, negotiate, finance or complete any such
acquisition in the foreseeable future. See "Risk Factors--Acquisitions."
Capital expenditures for which the net proceeds could be used include
additional expansions of the Company's manufacturing facilities for advanced
electronic materials, including expansions in which the Company intends to
invest during its next fiscal year. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources." Pending such uses, the Company intends to invest the net proceeds
in investment-grade, interest-bearing investments.
13
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is listed and trades on the NYSE (trading symbol
PKE). The Common Stock also trades on the Midwest Stock Exchange. The
following table sets forth, for each of the quarterly periods indicated, the
high and low sales prices for the Common Stock, as reported on the NYSE
Composite Tape, and dividends declared on the Common Stock, in each case after
giving effect to the Company's two-for-one stock split in the form of a stock
dividend, which was paid in August 1995.
<TABLE>
<CAPTION>
STOCK PRICE
----------------- DIVIDENDS
HIGH LOW DECLARED
-------- -------- ---------
<S> <C> <C> <C>
FISCAL YEAR ENDED FEBRUARY 27, 1994
First Quarter..................................... 8 1/4 5 3/4 $.04
Second Quarter.................................... 7 15/16 7 5/16 $.04
Third Quarter..................................... 9 1/16 7 3/8 $.04
Fourth Quarter.................................... 13 1/2 8 5/16 $.04
FISCAL YEAR ENDED FEBRUARY 26, 1995
First Quarter..................................... 15 7/16 12 15/16 $.04
Second Quarter.................................... 17 3/8 12 13/16 $.04
Third Quarter..................................... 17 7/8 14 11/16 $.06
Fourth Quarter.................................... 17 11/16 13 5/8 $.06
FISCAL YEAR ENDING MARCH 3, 1996
First Quarter..................................... 20 1/16 16 7/8 $.06
Second Quarter.................................... 31 1/2 17 1/8 $.06
Third Quarter..................................... 34 1/8 28 $.08
Fourth Quarter (through January 15, 1996)......... 34 3/4 28 3/8 $.08
</TABLE>
On January 15, 1996, the last reported sale price of the Common Stock on the
NYSE Composite Tape was $32 3/4 per share.
As of December 15, 1995, there were approximately 2,400 holders of record of
the Common Stock.
On December 12, 1995, the Company's Board of Directors declared a cash
dividend of $.08 per share payable February 6, 1996 to holders of record on
January 9, 1996. The Company expects, for the immediate future, to continue to
pay regular cash dividends. The Company's Board of Directors reserves the
right to change the dividend rate on the Common Stock at any time and from
time to time.
14
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at November 26, 1995 and as adjusted to reflect the sale of
$100,000,000 principal amount of the Notes offered hereby.
<TABLE>
<CAPTION>
NOVEMBER 26, 1995
-------------------------
ACTUAL AS ADJUSTED
---------- -------------
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C>
Short-term debt....................................... $ -- $ --
Long-term debt
% Convertible Subordinated Notes due 2006.......... -- 100,000
Stockholders' equity:
Preferred stock, $1 par value--500,000 shares autho-
rized; none issued................................. -- --
Common stock, $.10 par value--30,000,000 shares
authorized;
13,580,018 shares issued........................... 1,358 1,358
Additional paid-in capital.......................... 50,814 50,814
Retained earnings................................... 87,775 87,775
Currency translation adjustments.................... 1,744 1,744
Pension liability adjustment........................ (972) (972)
Unrealized losses on investments.................... (17) (17)
---------- ----------
140,702 140,702
Less treasury stock, at cost; 2,035,954 shares...... (12,092) (12,092)
---------- ----------
Total stockholders' equity........................ 128,610 128,610
---------- ----------
Total capitalization............................ $ 128,610 $ 228,610
========== ==========
</TABLE>
15
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth certain consolidated summary financial data
of the Company, which should be read in conjunction with, and is qualified by
reference to, the more detailed information contained in the Consolidated
Financial Statements and Notes thereto included herein. The data as of and for
the years ended February 27, 1994 and February 26, 1995 are derived from the
Company's consolidated financial statements, which have been audited by Ernst
& Young LLP, independent auditors. The data as of and for the years ended
March 3, 1991, March 1, 1992 and February 28, 1993 are derived from the
Company's consolidated financial statements, which have been audited by
Deloitte & Touche LLP, independent auditors. The data for the nine months
ended November 27, 1994 and November 26, 1995 are unaudited, but in the
opinion of management include all adjustments necessary for a fair
presentation of the Company's financial condition as of those dates and its
results of operations for those periods. The results of operations for the
nine months ended November 26, 1995 should not be considered an indication of
the results of operations which may be expected for the full year.
STATEMENT OF EARNINGS DATA:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------------ ------------------
MAR. 3, MAR. 1, FEB. 28, FEB. 27, FEB. 26, NOV. 27, NOV. 26,
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $163,982 $165,287 $175,176 $208,410 $253,022 $186,398 $227,215
Cost of sales........... 141,278 141,717 149,145 168,175 196,917 145,857 175,892
-------- -------- -------- -------- -------- -------- --------
Gross profit............ 22,704 23,570 26,031 40,235 56,105 40,541 51,323
Selling, general and ad-
ministrative........... 21,385 21,250 22,865 25,930 29,995 21,976 25,799
-------- -------- -------- -------- -------- -------- --------
Profit from operations.. 1,319 2,320 3,166 14,305 26,110 18,565 25,524
-------- -------- -------- -------- -------- -------- --------
Other income (expense):
Interest expense....... (2,735) (2,649) (2,058) (2,407) (431) (417) --
Other income, net...... 4,323 2,252 1,967 947 1,822 1,225 1,683
-------- -------- -------- -------- -------- -------- --------
Total other income (ex-
pense)................ 1,588 (397) (91) (1,460) 1,391 808 1,683
-------- -------- -------- -------- -------- -------- --------
Earnings before income
taxes.................. 2,907 1,923 3,075 12,845 27,501 19,373 27,207
Income tax provision.... 1,018 608 810 4,783 10,156 7,168 9,350
-------- -------- -------- -------- -------- -------- --------
Earnings before extraor-
dinary gain............ 1,889 1,315 2,265 8,062 17,345 12,205 17,857
Extraordinary gain--net
of taxes............... 290 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings............ $ 2,179 $ 1,315 $ 2,265 $ 8,062 $ 17,345 $ 12,205 $ 17,857
======== ======== ======== ======== ======== ======== ========
Primary earnings per
common share:
Earnings before ex-
traordinary gain...... $ .19 $ .15 $ .25 $ 1.01 $ 1.59 $ 1.14 $ 1.52
Extraordinary gain..... .03 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings--primary.. $ .22 $ .15 $ .25 $ 1.01 $ 1.59 $ 1.14 $ 1.52
======== ======== ======== ======== ======== ======== ========
Fully diluted earnings
per common share:
Earnings before ex-
traordinary gain...... $ .19 $ .15 $ .25 $ .84 $ 1.52 $ 1.08 $ 1.51
Extraordinary gain..... .03 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings--fully di-
luted................. $ .22 $ .15 $ .25 $ .84 $ 1.52 $ 1.08 $ 1.51
======== ======== ======== ======== ======== ======== ========
Weighted average number of
common shares outstanding:
Primary................ 9,846 9,056 9,068 7,986 10,858 10,666 11,763
======== ======== ======== ======== ======== ======== ========
Fully diluted.......... 9,846 9,056 9,068 11,454 11,570 11,560 11,801
======== ======== ======== ======== ======== ======== ========
Dividends per common
share.................. $ .16 $ .16 $ .16 $ .16 $ .20 $ .14 $ .20
======== ======== ======== ======== ======== ======== ========
Ratio of earnings to
fixed charges (1)...... 1.74 1.52 1.83 4.89 24.55 49.14
======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
<CAPTION>
MAR. 3, MAR. 1, FEB. 28, FEB. 27, FEB. 26, NOV. 27, NOV. 26,
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and marketable se-
curities............... $ 42,802 $ 36,880 $ 32,768 $ 38,053 $ 45,910 $ 46,246 $ 42,545
Working capital......... 56,790 51,737 45,811 45,867 55,035 54,183 59,755
Total assets............ 135,759 130,734 129,009 140,750 162,051 156,690 192,606
Long-term debt.......... 33,420 33,439 33,957 32,861 23 9 --
Stockholders' equity.... 63,676 62,275 60,700 61,454 112,048 106,216 128,610
</TABLE>
- -------
(1) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of consolidated earnings before income taxes plus fixed
charges and (ii) fixed charges consist of interest expense incurred and
the portion of rental expense under leases deemed by the Company to be
representative of the interest factor.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Park is a leading designer and producer for the global market of advanced
electronic materials used to fabricate complex multilayer printed circuit
boards and other electronic interconnect systems, such as backplanes, PC cards
and semiconductor packaging systems. The Company's customers for its advanced
printed circuit materials include the leading independent circuit board
fabricators and large electronic equipment manufacturers in the computer,
telecommunications, transportation, aerospace and instrumentation industries.
The Company's electronic materials operations accounted for more than 84% of
net sales worldwide and more than 95% of operating profit in each of the last
three fiscal years and in the nine-month period ended November 26, 1995. The
Company's foreign electronic materials operations accounted for an average of
approximately 24% of net sales worldwide for the last three fiscal years and
approximately 30% for the nine-month period ended November 26, 1995.
The Company's sales growth during the last three fiscal years has been led
by strong growth in sales by its United States and Singapore electronic
materials operations. More recently, increased sales by the Company's European
operations have also contributed to this growth. The Company's ongoing efforts
to expand its higher technology, higher margin product lines have contributed
to the growth of the Company's sales of electronic materials during this
period.
The Company has also improved the manufacturing efficiencies of its
electronic materials business since the beginning of its 1993 fiscal year.
These improvements have been the result of consolidating functions, reducing
manufacturing waste and improving yields, improving the overall productivity
of the Company's workforce, and redesigning product in order to reduce
material costs.
Sales volume of its electronic materials has increased during each of the
last three fiscal years. However, growth of the Company's electronic materials
business has been constrained during its 1996 fiscal year by the Company's
available manufacturing capacity despite the approximate doubling of the
capacity of the Company's Singapore manufacturing facility at the end of its
1995 fiscal year. The Company is currently expanding its manufacturing
capacity in Newburgh, New York and Tempe, Arizona, and expects to commence
commercial operations in both locations during the early part of its 1997
fiscal year. While the Company's capital budget for its 1997 fiscal year has
not yet been finalized, the Company is considering further expansions of its
electronic materials operations, particularly in the United States and
Southeast Asia.
The following table sets forth certain consolidated statements of earnings
information as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
-------------------------------------- -------------------------
FEBRUARY 28, FEBRUARY 27, FEBRUARY 26, NOVEMBER 27, NOVEMBER 26,
1993 1994 1995 1994 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 85.1 80.7 77.8 78.3 77.4
----- ----- ----- ----- -----
Gross profit............ 14.9 19.3 22.2 21.7 22.6
Selling, general and ad-
ministrative........... 13.1 12.4 11.9 11.7 11.4
----- ----- ----- ----- -----
Profit from operations.. 1.8 6.9 10.3 10.0 11.2
----- ----- ----- ----- -----
Other income (expense):
Interest expense...... (1.2) (1.2) (0.2) (0.2) 0.0
Other income, net..... 1.2 0.5 0.8 0.6 0.8
----- ----- ----- ----- -----
Total other income
(expense).......... 0.0 (0.7) 0.6 0.4 0.8
----- ----- ----- ----- -----
Earnings before income
taxes.................. 1.8 6.2 10.9 10.4 12.0
Income taxes............ 0.5 2.3 4.0 3.9 4.1
----- ----- ----- ----- -----
Net earnings............ 1.3% 3.9% 6.9% 6.5% 7.9%
===== ===== ===== ===== =====
</TABLE>
17
<PAGE>
NINE MONTHS ENDED NOVEMBER 26, 1995 COMPARED WITH NINE MONTHS ENDED NOVEMBER
27, 1994
The Company's electronic materials business was responsible for the
improvement in the Company's results of operations for the nine-month period
ended November 26, 1995. The United States and Asian markets for sophisticated
printed circuit materials were strong during this period, and the Company's
electronic materials operations located in these regions performed well as a
result. While the market in Europe for sophisticated printed circuit materials
has not been as strong as in the United States or Asia, it improved over the
comparable period of the prior fiscal year, and the Company's European
operations benefitted from this improvement.
During the nine-month period ended November 26, 1995, the Company's
electronic materials business incurred raw material cost increases and
additional costs associated with the Company's ongoing major expansion
projects in Newburgh, New York and Tempe, Arizona. In addition, the electronic
materials business experienced temporary inefficiencies caused by operating
certain facilities at levels in excess of their designed manufacturing
capacity. These cost increases and temporary operating inefficiencies
adversely affected the Company's gross margins. However, the Company was able
to offset such effects by improving its overall operating efficiencies, in
part, by consolidating functions, by continuing to reduce manufacturing waste
and improve yields, and by improving the overall productivity of its
workforce. In addition, the Company redesigned product in order to reduce
material costs. The Company was also able to offset these cost increases and
inefficiencies through its ongoing efforts to expand its higher technology,
higher margin product lines.
Operating results of the Company's plumbing and industrial components
business were not significant during the nine-month period ended November 26,
1995.
Results of Operations
Sales for the nine-month period ended November 26, 1995 increased 22% to
$227.2 million from $186.4 million for last fiscal year's comparable period.
Sales of the electronic materials business for the nine-month period ended
November 26, 1995 were $199.9 million, or 88% of total sales worldwide,
compared with $161.2 million, or 86% of total sales worldwide, for the last
fiscal year's comparable period. This 24% increase in sales of electronic
materials was principally the result of higher volume of electronic materials
shipped and an increase in sales of higher technology products. Sales of the
plumbing and industrial components business for the nine-month period ended
November 26, 1995 increased 8% to $27.4 million from $25.2 million for last
fiscal year's comparable period.
The Company's foreign electronic materials operations accounted for $68.0
million of sales, or 30% of the Company's total sales worldwide, during the
nine-month period ended November 26, 1995 compared with $43.9 million of
sales, or 24% of total sales worldwide, during last fiscal year's comparable
period. Sales by the Company's foreign operations during the nine-month period
ended November 26, 1995 increased 55% from last fiscal year's comparable
period. While sales by each of the Company's foreign operations were higher in
the nine-month period ended November 26, 1995 compared with the comparable
period in the prior fiscal year, the increase in sales by foreign operations
was principally due to an increase in sales by the Company's Singapore
operations. The expansion of the Company's Singapore manufacturing facility
was completed at the end of the Company's 1995 fiscal year.
The gross margin for the Company's worldwide operations was 22.6% during the
nine-month period ended November 26, 1995 compared with 21.7% for last fiscal
year's comparable period. The improvement in the gross margin was attributable
to the increase in sales volume over the prior fiscal year's comparable
period, the continuing growth in sales of higher technology, higher margin
products and improved operating efficiencies. This improvement was offset in
part by higher raw material costs, costs associated with the start-up of the
new facilities in Newburgh, New York and Tempe, Arizona, and inefficiencies
caused by operating certain facilities at levels in excess of designed
capacity.
18
<PAGE>
Selling, general and administrative expenses, measured as a percentage of
sales, were 11.4% during the nine-month period ended November 26, 1995
compared with 11.7% during last fiscal year's comparable period. This
reduction was a function of the partially fixed nature of the selling, general
and administrative expenses relative to the increase in sales.
For the reasons set forth above, profit from operations for the nine-month
period ended November 26, 1995 increased 37% to $25.5 million from $18.6
million for last fiscal year's comparable period.
Interest expense for the nine-month period ended November 26, 1995 was
minimal compared with $0.4 million during last fiscal year's comparable
period. During the first quarter of the prior fiscal year, the Company called
its 7 1/4% Convertible Subordinated Debentures for redemption; as a result,
nearly all of such Debentures outstanding at the beginning of the prior fiscal
year were converted into Common Stock during that fiscal year's first quarter,
which eliminated the Company's long-term debt and the associated interest
expense. Other income, principally investment income, increased 37% to $1.7
million for the nine-month period ended November 26, 1995 from $1.2 million
for last fiscal year's comparable period. The increase in investment income,
relative to the same period during the prior fiscal year, was attributable to
the increase in the prevailing interest rates during the current period and to
the increase in cash available for investment.
The Company's effective income tax rate for the nine-month period ended
November 26, 1995 was 34.4% compared with 37.0% for last fiscal year's
comparable period. This decrease in the effective tax rate for the current
fiscal year's first nine months was primarily the result of favorable foreign
tax rate differentials.
Net earnings for the nine-month period ended November 26, 1995 increased 47%
to $17.9 million from $12.2 million for last fiscal year's comparable period.
Primary and fully diluted earnings per share increased to $1.52 and $1.51,
respectively, for the nine-month period ended November 26, 1995 from $1.14 and
$1.08, respectively, for last fiscal year's comparable period. This increase
in earnings and earnings per share was primarily attributable to the increase
in the profit from operations, the effects of the conversion of the Debentures
and the lower effective tax rate.
FISCAL YEAR 1995 COMPARED WITH FISCAL YEAR 1994
The electronic materials business in the United States and Singapore
continued its strong growth in the fiscal year ended February 26, 1995 which
significantly improved the Company's operating results during that fiscal
year. As a result of this growth, enhanced operating efficiencies and
continued emphasis on higher technology products, the operating profits of the
electronic materials business were sufficient to offset the impact of rising
raw material costs and pricing pressures. The Company's European electronic
materials operations also improved during the 1995 fiscal year as a result of
strengthening in the European market for the Company's products.
The Company focused its capital investments during the 1995 fiscal year
principally on its electronic materials business for the purpose of enhancing
capability and expanding capacity. The Company also continued to invest in its
electronic materials business' leading edge technology and product development
efforts. The expansion of the Company's Singapore facility was completed at
the end of the Company's 1995 fiscal year.
During the second half of the 1995 fiscal year, the Company's plumbing
hardware business returned to modest profitability. The Company's advanced
composite business' performance improved during the 1995 fiscal year under its
new management team as it refocused its products towards non-military
applications, such as wireless communications. The Company's specialty
adhesive tape business performed well during the 1995 fiscal year, with
increased sales and earnings due in part to focusing towards high-technology,
high-margin products.
Results of Operations
Sales for the fiscal year ended February 26, 1995 increased 21% to $253.0
million from $208.4 million for the fiscal year ended February 27, 1994. Sales
of the electronic materials operations for the 1995 fiscal year were $218.3
million, or 86% of total sales worldwide, compared with $182.6 million, or 88%
of total sales worldwide,
19
<PAGE>
for the 1994 fiscal year. This 20% increase in sales of electronic materials
was principally the result of higher volume of electronic materials shipped.
Sales of the plumbing and industrial component business for the 1995 fiscal
year increased 34% to $34.7 million from $25.9 million for the 1994 fiscal
year, principally due to increased volume.
The Company's foreign electronic materials operations accounted for $61.9
million of sales, or 24% of the Company's total sales worldwide, during the
1995 fiscal year compared with $46.5 million, or 22% of total sales worldwide,
during the fiscal 1994 year. Sales by the Company's foreign operations during
the 1995 fiscal year increased 33% from the 1994 fiscal year. While sales by
the Company's foreign operations were higher in the 1995 fiscal year at each
of the Company's foreign operations compared with the 1994 fiscal year, the
increase in sales by foreign operations was principally due to increased sales
of the Company's Singapore operations.
The gross margin for the Company's worldwide operations was 22.2% for the
1995 fiscal year compared with 19.3% for the 1994 fiscal year. The gross
margin improved as a result of operating efficiencies, attributable in part to
the increase in sales volume and reduced manufacturing waste.
Selling, general and administrative expenses, measured as a percentage of
sales, were 11.9% during the 1995 fiscal year compared with 12.4% during the
1994 fiscal year. This reduction was a function of the partially fixed nature
of the selling, general and administrative expenses relative to the increase
in sales.
For the reasons set forth above, profit from operations for the 1995 fiscal
year increased 83% to $26.1 million from $14.3 million for the 1994 fiscal
year.
During the 1995 fiscal year, interest expense decreased 82% to $0.4 million
from $2.4 million during the 1994 fiscal year. This expense was attributable
to interest on the Company's 7 1/4% Convertible Subordinated Debentures and,
to a lesser extent, on loans carried by certain of the Company's foreign
subsidiaries. The decrease in this expense was due to the call for redemption
of such Debentures, nearly all of which were converted into Common Stock by
May 31, 1994. Other income, principally investment income, increased 92% to
$1.8 million during the 1995 fiscal year from $0.9 million during the 1994
fiscal year. This increase in investment income occurred because the average
rate of interest earned by the Company during the 1995 fiscal year was higher
than during the 1994 fiscal year and because the Company had more cash
available for investment. The Company's cash reserves were invested primarily
in short-term taxable instruments and government securities.
The Company's effective income tax rate for the 1995 fiscal year was 36.9%
compared with 37.2% for the 1994 fiscal year. The effective tax rate for the
1995 fiscal year decreased due to the impact of foreign net operating losses
without tax benefit and favorable foreign tax rate differentials, offset in
part by a reduction in general business credits.
The Company's net earnings increased 115% in the 1995 fiscal year to $17.3
million from $8.1 million during the 1994 fiscal year. Primary and fully
diluted earnings per share increased to $1.59 and $1.52, respectively, for the
1995 fiscal year compared with $1.01 and $.84, respectively, for the 1994
fiscal year. The increase in net earnings and earnings per share was
attributable principally to the increase in profit from operations and the
effects of the conversion of Debentures into Common Stock.
FISCAL YEAR 1994 COMPARED WITH FISCAL YEAR 1993
The significant improvement in the Company's profitability during the 1994
fiscal year was due primarily to increased sales volume and a significant
increase in the operating profits of the Company's United States based
electronic materials operations. Increased sales volume, improved yields and
more effective and efficient resource utilization, particularly at the United
States based electronic materials operations, more than offset continuing
price pressures. Market shrinkage and price pressures in the 1994 fiscal year
adversely affected the Company's European electronic materials operations. The
Company's Singapore based electronic materials operations were also affected
by price pressures.
20
<PAGE>
During the 1994 fiscal year, the Company continued its significant
investment in the machinery and equipment of its electronic materials business
for the purpose of enhancing capability and expanding capacity. The Company
also continued to invest in the electronic materials business' leading edge
technology and product development efforts.
The plumbing and industrial components business reported lower sales and an
increased operating loss in the 1994 fiscal year compared with the 1993 fiscal
year. As previously reported, during the 1994 fiscal year, the Company's
internal accounting staff discovered financial and accounting errors and
irregularities at its composite business. After a thorough internal
investigation, the Company restated its previously reported financial
statements and took corrective action to address the financial and accounting
problems, including the dismissal of certain senior management.
Results of Operations
Sales for the fiscal year ended February 27, 1994 increased 19% to $208.4
million from $175.2 million for the fiscal year ended February 28, 1993. Sales
of the electronic materials business for the 1994 fiscal year were $182.6
million, or 88% of total sales worldwide, compared with $147.4 million, or 84%
of total sales worldwide, for the 1993 fiscal year. This 24% increase was
principally the result of higher volume of electronic materials shipped. Sales
of the plumbing and industrial components business for the 1994 fiscal year
decreased 7% to $25.9 million from $27.8 million for the 1993 fiscal year.
The Company's foreign electronic materials operations accounted for $46.5
million of sales, or 22% of total sales worldwide, during the 1994 fiscal year
compared with $46.3 million, or 26% of total sales worldwide, during the 1993
fiscal year.
The gross margin for the Company's worldwide operations was 19.3% for the
1994 fiscal year compared with 14.9% for the 1993 fiscal year. The improvement
in the gross margin was the result of increased sales volume of the Company's
United States based electronic materials operations, enhanced operating
efficiency, and improved yields.
Selling, general and administrative expenses, measured as a percentage of
sales, were 12.4% during the 1994 fiscal year compared with 13.1% during the
1993 fiscal year. This reduction was due to the partially fixed nature of the
selling, general and administrative expenses relative to the increase in
sales.
For the reasons set forth above, profit from operations for the 1994 fiscal
year increased 352% to $14.3 million from $3.2 million for the 1993 fiscal
year.
During the 1994 fiscal year, interest expense increased 17% to $2.4 million
from $2.1 million during the 1993 fiscal year. This expense was attributable
to interest on the Company's 7 1/4% Convertible Subordinated Debentures and,
to a lesser extent, on loans carried by certain of the Company's foreign
subsidiaries. The increase in interest expense was principally attributable to
the reduction in interest capitalized to property, plant and equipment during
the 1994 fiscal year compared with the 1993 fiscal year. Other income
decreased 52% to $0.9 million during the 1994 fiscal year from $2.0 million
during the 1993 fiscal year. Investment income, which was the principal
component of other income, decreased 42% to $0.9 million during the 1994
fiscal year compared with $1.6 million during the 1993 fiscal year. This
reduction in investment income occurred because the average rate of interest
earned by the Company during the 1994 fiscal year was lower than that earned
during the 1993 fiscal year. The Company's cash reserves were invested
primarily in short-term taxable instruments and government securities. Also
included in other income for the 1993 fiscal year was a $0.3 million gain
derived from foreign currency transactions.
The Company's effective income tax rate for the 1994 fiscal year was 37.2%
compared with 26.3% for the 1993 fiscal year. The effective tax rate for the
1994 fiscal year increased due to the reductions in general business credits,
the reduced impact of favorable foreign tax rate differentials, and the
adjustment in the 1993 fiscal year
21
<PAGE>
of federal and state income tax accruals. These increases were partially
offset by the reduced impact of state and local taxes and foreign net
operating losses without tax benefit.
The Company's net earnings increased 256% in the 1994 fiscal year to $8.1
million from $2.3 million during the 1993 fiscal year. Primary and fully
diluted earnings per share increased to $1.01 and $.84, respectively, for the
1994 fiscal year compared with $.25 for both primary and fully diluted
earnings per share for the 1993 fiscal year. The increase in net earnings and
earnings per share was attributable to the increase in profit from operations,
offset in part by the higher effective tax rate.
QUARTERLY RESULTS OF OPERATIONS
The following table presents certain unaudited consolidated statements of
earnings information for each quarter in the 1995 fiscal year and the first
three quarters of the 1996 fiscal year. In the opinion of the Company's
management, this information includes all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the unaudited
quarterly results set forth herein. The operating results for any quarter are
not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 26,
1995 FISCAL YEAR ENDED MARCH 3, 1996
------------------------------- ---------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $62,769 $58,795 $64,834 $66,624 $75,412 $69,937 $81,866
Gross profit............ 13,247 12,520 14,774 15,564 17,717 15,209 18,397
Profit from operations.. 5,776 5,579 7,210 7,545 8,860 7,579 9,085
Net earnings............ 3,670 3,756 4,779 5,140 6,024 5,366 6,467
The following table sets forth certain consolidated statements of earnings
information as a percentage of net sales for the quarterly periods indicated:
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 26,
1995 FISCAL YEAR ENDED MARCH 3, 1996
------------------------------- ---------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit............ 21.1 21.3 22.8 23.4 23.5 21.7 22.5
Profit from operations.. 9.2 9.5 11.1 11.3 11.7 10.8 11.1
Net earnings............ 5.8 6.4 7.4 7.7 8.0 7.7 7.9
</TABLE>
The Company's sales historically are lower in the second quarter of each
fiscal year than in its other fiscal quarters, principally due to normal shut-
downs of the Company's manufacturing facilities for preventive maintenance and
shut-downs of many of the Company's customers for portions of that quarter.
LIQUIDITY AND CAPITAL RESOURCES
At November 26, 1995, the Company's cash and temporary investments were
$42.5 million compared with $45.9 million at February 26, 1995, the end of the
Company's 1995 fiscal year. The decrease in the Company's cash and investment
position at November 26, 1995 was attributable principally to investments in
property, plant and equipment, as discussed below. The Company's working
capital was $59.8 million at November 26, 1995 compared with $55.0 million at
February 26, 1995. The increase at November 26, 1995 compared with
February 26, 1995 was due to an increase in receivables and inventories,
offset in part by higher payables. The increase in receivables at November 26,
1995 compared with February 26, 1995 was due to increased sales; the increase
in inventories for the same period was due to increased sales and to higher
purchases of raw materials to ensure adequate supply of such materials. The
Company's current ratio (the ratio of current assets to current liabilities)
was 2.1 to 1 at November 26, 1995 compared with 2.3 to 1 at February 26, 1995.
22
<PAGE>
During the nine months ended November 26, 1995, the Company generated funds
from operations of $17.2 million and expended $19.0 million for the purchase
of property, plant and equipment. Cash provided by net earnings before
depreciation and amortization of $24.7 million was reduced by a net increase
in non-cash working capital items, resulting in $17.2 million of cash provided
from operating activities. A significant portion of the current fiscal year's
capital expenditures relate to installation of additional capacity at new
electronic materials facilities in Newburgh, New York and Tempe, Arizona.
These expansions will increase the Company's capacity and capability for the
production of sophisticated printed circuit materials. Expenditures for
property, plant and equipment were $10.3 million, $9.6 million, and $17.5
million in the 1993, 1994 and 1995 fiscal years, respectively. The Company
expects the level of capital expenditures in the 1997 fiscal year to be in the
same range as in the 1996 fiscal year. While the Company's capital budget for
the 1997 fiscal year has not yet been finalized, the Company is currently
considering further expansions of its electronic materials operations,
particularly in the United States and Southeast Asia.
At November 26, 1995 the Company had no long-term debt. The Company believes
its financial resources will be sufficient, for the foreseeable future, to
provide for continued investment in property, plant and equipment and for
general corporate purposes. Such resources, including the proceeds from the
Notes offered hereby, would also be available for appropriate acquisitions and
other expansions of the Company's business.
BUSINESS
GENERAL
Park is a leading designer and producer for the global market of advanced
electronic materials used to fabricate complex multilayer printed circuit
boards and other electronic interconnect systems, such as backplanes, PC cards
and semiconductor packaging systems. The Company's multilayer printed circuit
materials include copper-clad laminates, prepregs and semi-finished multilayer
printed circuit board panels. The Company has long-term relationships with its
major customers, which include leading independent printed circuit board
fabricators and major electronic equipment manufacturers. Multilayer printed
circuit boards and interconnect systems are used in virtually all advanced
electronic equipment to direct, sequence and control electronic signals
between semiconductor devices (such as microprocessors and memory and logic
devices) and passive components (such as resistors and capacitors). Examples
of end uses of the Company's printed circuit materials range from
supercomputers to laptops and from satellite switching equipment to cellular
phones. The Company has developed long-term relationships with major customers
as a result of its leading edge products, extensive technical and engineering
service support and responsive manufacturing capabilities. Park is expanding
its worldwide manufacturing facilities to satisfy demand from existing
customers and to add new select customers not previously served due to
capacity constraints.
Park was founded on March 31, 1954 by Jerry Shore, the Company's Chairman of
the Board, Chief Executive Officer and largest shareholder. Park founded the
modern day printed circuit industry in 1957 by inventing a composite material
consisting of an epoxy resin substrate reinforced with fiberglass cloth which
was laminated together with sheets of thin copper foil. This epoxy-glass
copper-clad laminate system is still used to construct the large majority of
today's advanced printed circuit product. In 1962, the Company invented the
first multilayer printed circuit materials system used to construct multilayer
printed circuit boards. The Company also pioneered vacuum lamination and many
other manufacturing technologies used in the industry today. The Company has
introduced its entire current electronic materials product line within the
last five years and believes it continues to be one of the industry's
technological leaders. In addition, the Company was the first manufacturer in
the printed circuit materials industry to establish manufacturing presences in
the three major global markets of North America, Europe and Asia, with
facilities established in Europe in 1969 and Southeast Asia in 1986. The
Company believes it is one of the world's largest manufacturers of multilayer
printed circuit materials and believes it is the market leader in North
America and Southeast Asia.
23
<PAGE>
INDUSTRY BACKGROUND AND OVERVIEW
The electronic materials manufactured by the Company and its competitors are
used to construct and fabricate complex multilayer printed circuit boards and
other advanced electronic interconnect systems. Multilayer printed circuit
materials consist of prepregs and copper-clad laminates, as well as semi-
finished multilayer printed circuit board panels. Prepregs are chemically and
electrically engineered plastic resin systems which are reinforced with a
specialized fiberglass cloth or other reinforcement materials. These resin
systems are usually based upon an epoxy chemistry. One or more plies of
prepreg are laminated together to form an insulating dielectric substrate to
support the copper circuitry patterns of a multilayer printed circuit board.
Copper-clad laminates consist of one or more plies of prepreg laminated
together with specialty thin copper foil on the top and bottom. The Company
supplies both copper-clad laminates and prepregs to its customers, which use
these products as a system to construct multilayer printed circuit boards.
The following is a diagram of a copper-clad laminate used to fabricate
multilayer printed circuit boards:
DIAGRAM OF COPPER-CLAD LAMINATE
USED TO FABRICATE MULTILAYER PRINTED CIRCUIT BOARDS
[Diagram Depicting Copper-Clad Laminate Used to Fabricate Multilayer
Printed Circuit Boards.]
The printed circuit board fabricator processes copper-clad laminates to form
the inner layers of a multilayer printed circuit board. The fabricator
photoimages these laminates with a dry film or liquid photoresist. After
development of the photoresist, the copper surfaces of the laminate are etched
to form the circuit pattern. The fabricator then assembles these etched
laminates by inserting one or more plies of dielectric prepreg between each of
the inner layer etched laminates and also between an inner layer etched
laminate and the outer layer copper plane, and then laminating the entire
assembly in a press. Prepreg serves as the insulator between the multiple
layers of copper circuitry patterns found in the multilayer circuit board. The
fabricator drills through holes or vias in the multilayer assembly and then
plates the through holes or vias to form conductors between the multiple
layers of circuitry patterns. The outer two layers of copper foil are then
imaged and etched to form the finished multilayer printed circuit board. The
completed multilayer board is a three-dimensional interconnect system with
electronic signals traveling in the horizontal planes of multiple layers of
copper circuitry patterns, as well as the vertical plane through the plated
through holes or vias.
24
<PAGE>
The following is a diagram of the constituents of a multilayer printed
circuit board:
DIAGRAM OF CONSTITUENTS OF MULTILAYER PRINTED CIRCUIT BOARDS
(SIMPLE 6-LAYER CIRCUIT BOARD CONSTRUCTION) (A)
[Diagram Depicting Constituents of Multilayer Printed Circuits Board.
Simple 6-Layer Circuit Board Construction.]
The multilayer printed circuit materials industry is highly competitive and
has experienced consolidation in recent years. The Company believes there are
approximately ten significant multilayer printed circuit materials
manufacturers in the world. Many of these competitors have developed or are
developing significant presences in the three major markets of North America,
Europe and Asia. The industry's significant multilayer materials manufacturers
are primarily divisions or subsidiaries of very large, diversified
multinational manufacturers. Park believes it is the only significant
independent manufacturer of multilayer printed circuit materials in the world.
25
<PAGE>
The Company believes that the ongoing globalization of the multilayer printed
circuit materials industry will make it increasingly difficult for the
remaining smaller regional manufacturers to remain competitive.
According to the IPC, in 1994, the worldwide market for all printed circuit
boards was approximately $21.2 billion and the worldwide market for multilayer
printed circuit boards was approximately $9.6 billion. Based upon IPC data,
the Company estimates that, in 1994, the worldwide market for all printed
circuit materials was approximately $3.7 billion and the worldwide market for
multilayer printed circuit materials was approximately $1.4 billion. The
Company estimates that the annual worldwide market for multilayer printed
circuit materials is currently approximately $1.5 billion to $1.6 billion.
INDUSTRY TRENDS
Increasing Demand for Electronic Products and Technology. The global market
for advanced electronic products is growing as a result of technological
change and frequent new product introductions. This growth is principally
attributable to increased sales and more complex electronic content of newer
products, such as cellular phones, pagers, personal computers and portable
computing devices, and greater use of electronics in other products, such as
automobiles. Further, large, almost completely untapped markets for advanced
electronics equipment have emerged in such areas as India and China and other
areas of the Pacific Rim.
Increasing Complexity of Electronic Products. Semiconductor manufacturers
have introduced successive generations of more powerful microprocessors and
memory and logic devices. Electronic equipment manufacturers have designed
these advanced semiconductors into more compact and often portable products.
High performance computing devices in these smaller portable platforms require
greater reliability, closer tolerances, higher component and circuit density
and increased overall complexity. As a result, the interconnect industry has
developed smaller, lighter, faster and more cost-effective interconnect
systems, including advanced multilayer printed circuit boards and new types of
semiconductor packaging systems such as ball-grid arrays ("BGAs") and multi-
chip modules ("MCMs").
More Advanced Materials Required for Interconnect Performance and
Manufacturability. Advanced interconnect systems require higher technology
printed circuit materials to insure the performance of the electronic system
and to improve the manufacturability of the interconnect platform. The growth
of the market for more advanced printed circuit materials has outpaced the
market growth for standard printed circuit materials in recent years.
Performance--Printed circuit board fabricators and electronic equipment
manufacturers require advanced printed circuit materials that have
increasingly higher temperature tolerances and more advanced electrical
properties in order to support high speed computing in a miniaturized and
often portable environment.
Today's more advanced interconnect and packaging systems are subject to
higher temperature environments during the assembly process and during
systems operations. Higher technology assembly processes, such as surface
mount technology, direct-chip attach and gold wire bonding, subject these
advanced interconnect systems to a greater number of higher temperature
heat cycles than lower technology assembly processes. The utilization of
high density device packaging and advanced high speed microprocessors
subject the interconnect system to higher operating temperature
environments. In addition, many complex printed circuit boards and
interconnect systems are installed in hostile high temperature environments
such as under-the-hood automotive and advanced aerospace applications. To a
significant extent, the ability of the interconnect system to perform in
higher temperature environments is a function of the printed circuit
materials utilized to construct the printed circuit board or interconnect
system. See "--Products and Services."
Advanced wireless communications equipment, as well as next generation
high speed computer chips and microprocessors, require printed circuit
boards and interconnect systems that operate at higher
26
<PAGE>
speeds and higher frequencies with minimal signal loss and distortion.
These high frequency operations often must be accomplished with a limited
low power source, particularly in the case of portable equipment. In order
for the interconnect systems to support higher speed, higher frequency
signals with limited power usage, these systems must employ printed circuit
materials that have more advanced electrical properties. Electronic
manufacturers must utilize advanced materials that are engineered for low
loss electrical properties and also for specific dielectric and impedance
characteristics in order to support these higher frequency signals.
Manufacturability--With the very high density circuit demands of
miniaturized high performance interconnect systems, the uniformity, purity,
consistency, performance predictability, dimensional stability and
production tolerances of printed circuit materials have become successively
more critical. High density printed circuit boards and interconnect systems
often involve higher layer count multilayer circuit boards where the
multiple planes of circuitry and dielectric insulating substrates are very
thin (dielectric insulating substrate layers may be .002 inch or less) and
the circuit line and space geometries in the circuitry plane are very
narrow (.003 inch or less). In addition, advanced surface mount
interconnect systems are typically designed with very small pad sizes and
very narrow plated through holes or vias which electrically connect the
multiple layers of circuitry planes. High density interconnect systems must
utilize printed circuit materials whose dimensional characteristics and
purity are consistently manufactured to very high tolerance levels in order
for the printed circuit board fabricator to attain and sustain acceptable
production yields.
Consolidation of the Printed Circuit Board Industry. The printed circuit
board industry, which historically has been very fragmented, is undergoing a
consolidation led by the larger, more technologically advanced and better
capitalized independent printed circuit board fabricators. According to IPC
estimates, the number of printed circuit board fabricators in the United
States has decreased from 2,500 in 1976 to approximately 700 in 1994.
Management believes that this consolidation is primarily due to the
substantial capital investment and the engineering and manufacturing expertise
required to remain technologically competitive. In addition, large electronic
equipment manufacturers are outsourcing an increasing portion of their printed
circuit fabrication operations to these more sophisticated independent printed
circuit board fabricators. The IPC estimates that the percentage in dollars of
the United States market captured by independent printed circuit board
fabricators increased from 66% in 1991 to 83% in 1994.
Time-to-Market and Time-to-Volume Pressures Require Closer Collaboration
with Materials Suppliers. Shorter product life cycles and competitive
pressures have induced electronic equipment manufacturers to bring new
products to market and increase production volume to commercial levels more
quickly. These trends have highlighted the importance of front-end engineering
of electronic products and have increased the level of collaboration among
system designers, fabricators and printed circuit materials suppliers. As the
complexity of electronic products increases, materials suppliers must provide
greater technical support to interconnect systems fabricators on a timely
basis regarding manufacturability and performance of new materials systems.
STRATEGY
Management believes that the Company is well positioned to take advantage of
trends in the electronic and printed circuit materials industry. The Company
founded the modern day printed circuit industry, and management believes the
Company has remained at the forefront of the industry in technology and
innovation. The Company was the first manufacturer of advanced multilayer
printed circuit materials to establish manufacturing presences in the three
major global markets of North America, Europe and Asia and believes it is the
market leader in both North America and Southeast Asia. The Company believes
it has achieved this level of success by consistently following its basic
operating principles: customer responsiveness; quest for perfect quality; and
technological innovation. The Company believes that its operating principles
are widely held among its work force and that the ongoing commitment of its
employees to these principles is key to the Company's future success. While
the Company has benefited from the recent rapid growth and accelerating
technology trends of the electronic equipment industry, management believes
the commitment of its employees to the
27
<PAGE>
Company's basic principles has enabled the Company to achieve its current
leadership position in the industry. The Company's strategy is to maintain and
enhance its commitment to its basic operating principles and to identify
future opportunities in the electronic materials industry.
The specific components of the Company's strategy include:
. SUSTAINING, ENHANCING AND DEVELOPING RELATIONSHIPS WITH SELECT CUSTOMERS
The Company intends to continue to sustain, enhance and develop long-
term relationships with select customers through broad-based technical
support and service, as well as manufacturing proximity and
responsiveness at multiple levels of the customer's organization. The
Company focuses on developing a thorough understanding of its
customer's business, product lines, processes and technological
challenges. The Company seeks customers which are industry leaders
committed to maintaining and improving their industry leadership
positions and which are committed to long-term relationships with their
suppliers. The Company seeks business opportunities with the more
advanced printed circuit fabricators and electronic equipment
manufacturers which are interested in the full value of products and
services provided by their suppliers.
The Company believes its proactive and timely support in assisting
its customers with the integration of advanced materials technology
into new product designs further strengthens its relationships with its
customers. The product cycle for many of the Company's customers'
interconnect products is now less than one year, and these condensed
product cycles have placed time-to-market and time-to-volume pressures
on its customers to introduce successively more advanced interconnect
systems. Introduction and utilization of more advanced materials
technology is necessary for the Company's customers to maintain their
leading edge positions.
Once a new product has been introduced by a customer, the Company
employs its materials technology and its extensive manufacturing
experience to assist the customer with its time-to-volume requirements.
On short notice, the Company deploys teams of experienced engineering
and technical personnel to solve the customer's design, process or
production problems. The Company believes that its superior technical
service is an increasingly integral part of the value it provides to
its customers.
The Company's emphasis on service and close relationships with its
customers is reflected in its relatively short lead times. The Company
has designed its manufacturing processes and service organizations to
provide the customer with its printed circuit materials products on a
just-in-time basis. According to the IPC, average lead times for
printed circuit materials orders in the United States were
approximately 24 days for the three months ended in October 1995.
During this same period, the Company's average lead times were less
than five days.
The Company has located its advanced printed circuit materials
manufacturing operations in strategic locations intended to serve
specific regional markets. By situating its facilities in close
geographical proximity to its customers, the Company is able to rapidly
adjust its manufacturing processes to meet customers' new requirements
and respond quickly to customers' technical needs. The Company has full
technical staffs based at each of its manufacturing locations, which
allows the rapid dispatch of technical personnel to a customer's
facility to assist the customer in quickly solving design, process,
production or manufacturing problems. This regional manufacturing
approach has enhanced the Company's ability to develop closer
relationships at all levels with its customers.
The Company currently is expanding its New York State operations to
increase its production capacity for advanced printed circuit materials
principally for the United States market. The Company is also in the
process of expanding its Tempe, Arizona operations to provide enhanced
capability and capacity to produce high density, semi-finished
multilayer panels and interconnect systems. These expansions are
intended to allow the Company to better service its existing customers
and to permit the Company to develop relationships with new select
customers which the Company has been unable
28
<PAGE>
to serve due to capacity constraints. The Company is considering
further expansions of its electronic materials operations, particularly
in the United States and Southeast Asia. The Company believes that its
markets will continue to become more globalized, and that customers
will come under additional pressure to develop and produce advanced
products more quickly. As a result, management believes that the
Company's established capabilities in the customer's region will become
increasingly more valuable to its customers.
. QUEST FOR PERFECT QUALITY PRODUCT
The Company believes that the commitment of its employees to strive
for perfect product quality and its advanced manufacturing technology
have earned it a reputation as the producer of the highest quality
advanced printed circuit and interconnect system materials.
As the trend toward electronic equipment miniaturization and higher
density printed circuit boards continues, surface mount pads will
continue to get smaller, vias and line and space widths will continue
to get narrower and the dielectric insulating substrate layers will
continue to get thinner. These design trends will require printed
circuit materials that have much tighter tolerances and perform in a
highly consistent and predictable fashion under a wide variety of
conditions. The pressures being exerted on interconnect system
technology have heightened the importance of the quality, consistency,
purity and predictability of the printed circuit materials product. The
Company believes that these factors will become even more important in
the future, and the Company intends to continue its quest for perfect
quality.
. NEW MATERIALS PRODUCT TECHNOLOGY
All of the Company's current electronic materials products have been
introduced since 1990, and the Company intends to continue to introduce
new, more advanced products into the interconnect materials market.
Management believes there is an industry trend requiring advanced
printed circuit boards and interconnect systems to be capable of
performing and operating in higher temperature environments. See "--
Industry Trends-- More Advanced Materials Required for Interconnect
Performance and Manufacturability." In response to this trend, the
Company has focused a significant portion of its development efforts
toward new printed circuit materials with advanced thermal
capabilities. Because of the Company's emphasis on higher technology
products, the average temperature performance of its printed circuit
materials is substantially higher than that of the industry. A number
of the Company's high temperature products also have advanced
electrical capabilities providing higher frequency signal transmission.
The Company's United States high temperature performance materials
sales grew an average of 52% per year during the last three fiscal
years. The Company is in the process of introducing two new high-
temperature products which are currently being field tested with
certain customers.
Industry trends toward miniaturization and high density circuitry
have created the need for very thin laminates used to construct
multilayer boards with very thin insulating dielectric substrate layers
separating the multiple layers of copper circuitry pattern planes. The
manufacture of very thin materials requires enhanced and different
manufacturing disciplines where tolerances are extremely tight and
purity requirements are very demanding. According to IPC data, the
average thickness of laminates shipped in the United States during the
first eleven months of the 1995 calendar year was approximately .017
inch. During that same period, the average thickness of laminates
shipped by the Company in the United States market was approximately
.009 inch, or approximately one half the thickness of the industry
average. The Company also routinely manufactures high quality laminate
product with thicknesses of .002 inch and less.
The Company intends to continue to invest in the development of more
advanced high performance products capable of meeting the needs of
future advanced electronic interconnect systems and devices. The
Company believes its broad based high performance product line will
become an increasingly significant competitive advantage in the future.
29
<PAGE>
. STRATEGIC ACQUISITIONS
The Company sees substantial overlap of its technology, management
and manufacturing skills in the electronic materials industry. The
Company also believes that many technologies within the larger
electronic materials industry are in the process of converging. For
instance, advanced materials which were formerly used to fabricate
printed circuit boards are now in development for use in the
semiconductor packaging arena. As technology accelerates and converges,
the Company believes that the printed circuit interconnect system will
eventually become more integrated with the semiconductor device and
that the semiconductor device and the interconnect system will
ultimately be designed as one integrated electronics system. The
Company believes it can benefit from its leadership position in this
environment by broadening its base within the larger electronic
materials industry through strategic acquisitions of related electronic
materials businesses, product lines or technologies.
PRODUCTS AND SERVICES
The Company produces a broad line of advanced printed circuit materials used
to fabricate complex multilayer printed circuit boards and other electronic
interconnect systems, including backplanes, PC cards and semiconductor
packaging systems. For information concerning the construction of printed
circuit materials, including copper-clad laminates and prepregs, see "--
Industry Background and Overview." The Company also manufactures semi-finished
multilayer printed circuit board panels for a select group of customers. The
Company believes it currently offers the most diverse advanced printed circuit
materials product line in the industry, which addresses a wide array of end-
use applications and performance requirements.
The Company's product line has been developed internally and through long-
term development projects with its principal suppliers. The Company has
designed its product line with a focus on the higher performance, higher
technology end of the materials spectrum. All of the Company's existing
electronic materials products have been introduced since 1990.
There are several key technical properties of printed circuit materials
which affect the performance capabilities of the printed circuit board or
interconnect system and ultimately the electronic equipment end product. These
properties include glass transition temperature ("Tg"), dielectric constant,
dissipation factor and coefficient of thermal expansion.
The Tg of the printed circuit material is essentially the temperature to
which the product can be heated for a sustained period of time without
undergoing accelerated expansion. Tg essentially represents the temperature
above which a printed circuit material substrate cannot be elevated for a
sustained period of time without causing the circuit board or interconnect
system to fail or become unreliable. Printed circuit materials which have Tg
properties of 150(degrees)C or higher are generally considered high-
performance materials, while materials which have Tg properties below
150(degrees)C are considered to be non-high performance materials. Because of
the Company's emphasis on higher technology products, the average temperature
performance of its printed circuit materials is substantially higher than that
of the industry.
The dielectric constant and dissipation factor of the material relates to
its electronic signal transmission properties and capabilities. Generally,
more advanced interconnect applications require higher speed, higher
30
<PAGE>
frequency interconnect products manufactured from materials which have
advanced engineered electrical properties that typically include lower
dielectric constants and dissipation factors. Examples of products that
utilize higher frequency signals are the latest generations of advanced
microprocessors and wireless communications equipment.
The coefficient of thermal expansion relates to the material's expansion
rates at elevated temperatures. Because the substrate interconnect material
and the semiconductor package must expand at similar rates in heated
environments to prevent the semiconductor package from separating from the
interconnect system, the coefficient of thermal expansion is critical for
advanced high temperature packaging applications.
The Company currently offers a wide array of high performance products.
These products include high-temperature modified epoxies, bismaleimide
triazine epoxies ("BT epoxy"), non-MDA polyimides, enhanced polyimides, high
performance epoxy Thermount(R) materials, cyanate esters and PTFE materials.
In addition, the Company is in the process of introducing two new high
performance products which are currently being field tested with select
customers.
The table below lists a mix of the Company's product line, along with
certain end-use applications and the operating and performance characteristics
of the individual products.
<TABLE>
<CAPTION>
SELECT PRODUCT DESCRIPTIONS(1)
- -----------------------------------------------------------------------------------------
GLASS
TRANSITION DIELECTRIC
PRODUCT GENERIC TEMPERATURE CONSTANT
DESIGNATION DESCRIPTION APPLICATIONS ("TG")(2) (3)
- -----------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
N4000-2 Multi-functional High Density 140(degrees) C (DSC) 4.5
Epoxy Multilayers, Surface
Mount Technology, PC
Cards, MCMs.
- -----------------------------------------------------------------------------------------
N4000-6 High Performance High Density 180(degrees) C (DSC) 4.5
Epoxy Multilayers, Backplanes,
PC Cards, MCMs, Direct
Chip Attach, Wire
Bonding Substrates,
Under Hood Automotive.
- -----------------------------------------------------------------------------------------
N4000-6T High Performance High Density 180(degrees) C (TMA) 4.1
Epoxy Multilayers, Backplanes,
Thermount(R) (4) High Speed CPU Boards,
MCMs, Telecommunications
Interconnects.
- -----------------------------------------------------------------------------------------
N4000-10(5) Multi-functional High Density 155(degrees) C (TMA) 4.7
Epoxy Multilayers, Surface
Mount Technology, PC
Cards, MCMs, Under Hood
Automotive, Backplanes,
Direct Chip Attach, Wire
Bonding.
- -----------------------------------------------------------------------------------------
N4000-13(5) Enhanced Hybrid Telecommunications 190(degrees) C (TMA) 3.9
Formula Interconnects, High
Speed CPU Boards, MCMs,
BGAs, High Density
Multilayers, Backplanes.
- -----------------------------------------------------------------------------------------
N5000 Bismaleimide High Density 180(degrees) C (TMA) 4.1
Triazine Epoxy Multilayers, BGAs, MCMs,
High Density Surface
Mount, Direct Chip
Attach,
Telecommunications
Interconnects.
- -----------------------------------------------------------------------------------------
N7000-1 Non-MDA High Density 260(degrees) C (TMA) 4.5
Polyimide Multilayers, Backplanes,
Burn-in Boards,
Avionics, MCMs, Wire
Bonding Substrates, High
Temperature
Instrumentation,
Telecommunications
Interconnects.
</TABLE>
31
<PAGE>
SELECT PRODUCT DESCRIPTIONS(1)
<TABLE>
- --------------------------------------------------------------------------------------------------------
<CAPTION>
GLASS
TRANSITION DIELECTRIC
PRODUCT GENERIC TEMPERATURE CONSTANT
DESIGNATION DESCRIPTION APPLICATIONS ("TG") (2) (3)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
N7000-2 Enhanced High Density Multilayers, Backplanes, 220(degrees)C (TMA) 4.5
Polyimide Burn-in Boards, Avionics, MCMs, Wire
Bonding Substrates, High Temperature
Instrumentation, Telecommunications
Interconnects.
- --------------------------------------------------------------------------------------------------------
N8000 Cyanate Ester High Density Multilayers, Backplanes, 250(degrees)C (TMA) 3.6
Burn-in Boards, High Speed CPU Boards,
MCMs, BGAs, Wire Bonding Substrates,
Telecommunications Interconnects.
- --------------------------------------------------------------------------------------------------------
Metclad PTFE PTFE Copper-Clad Microwave, High Frequency Wireless (See note (See note
Copper-Clad Substrates with Communications. 6 below) 6 below)
Laminates (6) Ground Planes
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company's entire printed circuit material product line consists of
non-standard products which are unique to the Company and have been
introduced since 1990. For comparison purposes, standard FR-4 product
used to manufacture single and double sided printed circuit boards and
lower technology, lower density multilayer boards has a Tg of
125(degrees)C. The Company does not manufacture standard FR-4 lower
technology product, except in limited special situations in response
to key customer requests.
(2) DSC and TMA are temperature measurement methods.
(3) Dielectric constant at 1mhz with 50% resin content.
(4) "Thermount" is a registered trademark of E.I. duPont de Nemours & Co.
("DuPont"). N4000-6T is a high temperature epoxy resin system
reinforced with a Thermount(R) non-woven aramid fiber product
developed by DuPont.
(5) N4000-10 and N4000-13 are products recently developed by the Company.
These products are currently being field tested with certain customers
and are slated for market introduction in 1996.
(6) PTFE Copper-Clad substrates with metal ground planes are very high
technology products manufactured by the Company's Metclad, S.A. unit
in France. This product is used for microwave and satellite
transmissions. PTFE does not have a "Tg" or glass transition
temperature, but the material melts at 398(degrees)C. The dielectric
constant of the PTFE product is customized by the Company in the range
of 2.2 through 10.6.
32
<PAGE>
In addition to prepreg and copper-clad laminate printed circuit materials
products, the Company also manufactures semi-finished multilayer printed
circuit board panels as a value-added service for a limited number of its key
customers. Production of the Company's semi-finished multilayer product
involves several additional manufacturing steps beginning with the
photoimaging and etching of the copper-clad laminate product into the
circuitry patterns specified by the customer. These etched laminates form the
inner layers of the multilayer circuit board. The etched inner layers are then
laminated into a multilayer assembly with insulating dielectric prepreg
inserted between the multiple etched inner layers and outer layer copper
planes. The outer planes of copper foil are left in unprocessed "blank" form
and the product is delivered to the customer at this stage in the process. The
fabricator customer then drills and plates the through holes or vias and
finishes the outer layers of circuitry patterns to complete the product.
CUSTOMERS AND END MARKETS
The Company's customers for its advanced electronic materials include the
leading independent printed circuit board fabricators and major electronic
equipment manufacturers in the computer, telecommunications, transportation,
aerospace and instrumentation industries.
The Company seeks to align itself with the larger, more technologically-
advanced and better capitalized independent printed circuit board fabricators
and major electronic equipment manufacturers which are industry leaders
committed to maintaining and improving their industry leadership positions and
which are committed to building long-term relationships with their suppliers.
The Company's recent growth is a function of its strategy of building
relationships with key customers which are positioned for aggressive growth
and market leadership, rather than a result of adding new customer accounts.
Ninety percent of the Company's top twenty customers in the first nine months
of its 1996 fiscal year have done business with the Company during the last
four fiscal years.
Recently, due to capacity constraints, the Company's policy has been to
decline initiating relationships with new customers that might compromise its
ability to respond to needs of existing customers. Although the Company
maintains ongoing discussions with potential new customers, the Company has
been reluctant to commence doing business with these new customers until
additional manufacturing capacity is in place. The Company is currently in the
process of installing new capacity at facilities in Newburgh, New York and
Tempe, Arizona. The Company is considering expanding its operations in one or
more additional locations during the next fiscal year. As the additional
capacity from these expansions comes on line, the Company expects to continue
its growth with existing customers and will evaluate opportunities for
establishing new customer relationships.
During the nine months ended November 26, 1995, the Company's ten largest
customers accounted for approximately 46% of its net sales. During such
period, approximately 17% of the Company's net sales were made to a large
United States based manufacturing concern which services the global
transportation industry. This concern has purchased a significant amount of
product from the Company for more than three years, and the Company believes
its relations with this customer are strong and that this customer will
continue to make significant purchases of printed circuit materials product
from the Company in the immediate future. No other single customer accounted
for 10% or more of the net sales of the Company during the first nine months
of the 1996 fiscal year or in any of the three prior fiscal years.
MANUFACTURING
The Company founded the modern day printed circuit industry in 1957 at its
first printed circuit materials manufacturing facility in Stamford,
Connecticut. The Company developed and manufactured the first multilayer
printed circuit materials at this facility in 1962. The Company also pioneered
vacuum lamination and many other manufacturing technologies used in the
printed circuit materials industry today. Vacuum lamination significantly
enhances the dimensional stability of copper-clad laminate printed circuit
materials used in manufacturing multilayer printed circuit boards. The
dimensional stability characteristics of laminates used in the fabrication of
high density multilayer printed circuit boards are critical.
33
<PAGE>
The process for manufacturing multilayer printed circuit materials is
capital intensive and requires sophisticated equipment as well as clean room
environments. The key steps in the Company's manufacturing process include:
the impregnation of specially designed fiberglass cloth with a resin system
and the partial curing of that resin system; the assembling of laminates
consisting of single or multiple plies of prepreg and copper foil in a clean-
room environment; the vacuum lamination of the copper-clad laminate assemblies
under simultaneous exposure to heat, pressure and vacuum; and the finishing of
the laminates to customer specifications.
Prepreg is manufactured in a treater. A treater is a roll-to-roll continuous
machine which sequences specially designed fiberglass cloth or other
reinforcement fabric into a resin tank and then sequences the resin-coated
cloth through a series of ovens which partially cure the resin system into the
cloth. This partially cured product or prepreg is then sheeted or paneled and
packaged by the Company for sale to customers, or used by the Company to
construct its copper-clad laminates.
The Company manufactures copper-clad laminates by first setting up in a
clean room an assembly of one or more plies of prepreg stacked together with a
sheet of specially manufactured copper foil on the top and bottom sides of the
assembly. This assembly is then inserted into a large, multiple opening vacuum
lamination press, together with a large quantity of other laminate assemblies.
The laminate assemblies are then laminated under simultaneous exposure to
heat, pressure and vacuum. After the press cycle is complete, the laminates
are removed from the press and sheeted, paneled and finished to customer
specifications. The product is then inspected and packaged for shipment to the
customer.
The Company manufactures multilayer printed circuit materials at eight fully
integrated facilities located in the United States, Europe and Southeast Asia.
The Company opened its California facility in 1965, its United Kingdom
facility in 1969, its first Arizona and France facilities in 1984, its
Singapore facility in 1986 and its second Arizona and France facilities in
1992. The Company services the North American market principally through its
United States manufacturing facilities, the European market principally
through its manufacturing facilities in the United Kingdom and France, and the
Asian market principally through its Singapore manufacturing facility. The
Company has located its manufacturing facilities in its important markets. By
maintaining full technical and engineering staffs at each of its manufacturing
facilities, the Company is able to deliver fully-integrated products and
services on a timely basis.
The Company has experienced recent capacity constraints and is in the
process of adding new capacity in Newburgh, New York and Tempe, Arizona, at
which it expects to commence commercial operation during the early part of its
next fiscal year. The Company is considering expanding its operations in one
or more additional locations during the next fiscal year, particularly in the
United States and Southeast Asia.
34
<PAGE>
The following table describes the Company's multilayer printed circuit
materials manufacturing facilities. All of these facilities are used for
manufacturing, engineering and product development, except for the facility
located in Lannemezan, France, which is principally a product research and
development facility. All of the Company's printed circuit materials
manufacturing facilities are ISO 9002 certified.
ELECTRONIC MATERIALS MANUFACTURING FACILITIES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR APPROXIMATE
LOCATION OPENED USE SIZE (SQ. FT.)
- -----------------------------------------------------------------------------------
<C> <C> <S> <C>
Walden, NY 1971 Multilayer Circuit Materials 51,000
- -----------------------------------------------------------------------------------
Newburgh, NY (1) 1996 Multilayer Circuit Materials 57,000
- -----------------------------------------------------------------------------------
Fullerton, CA 1984 Multilayer Circuit Materials 95,000
- -----------------------------------------------------------------------------------
Anaheim, CA 1965 Multilayer Circuit Materials 26,000
- -----------------------------------------------------------------------------------
Tempe, AZ (2) 1984 Semifinished High Technology 86,000
Multilayer Circuit Materials
- -----------------------------------------------------------------------------------
Tempe, AZ 1992 High Performance Multilayer 38,000
Circuit Materials; Product Development
- -----------------------------------------------------------------------------------
Mirebeau, France 1984 Multilayer Circuit Materials 81,000
- -----------------------------------------------------------------------------------
Lannemezan, France 1992 High Technology Circuit Materials, 29,000
including PTFE and Ultra-Thin Copper
Materials; Product Development
- -----------------------------------------------------------------------------------
Skelmersdale, U.K. 1969 Multilayer Circuit Materials 54,000
- -----------------------------------------------------------------------------------
Singapore 1986 Multilayer Circuit Materials 58,000
</TABLE>
- -------------------------------------------------------------------------------
(1) The Company expects to commence commercial operations at this facility
during the early part of its next fiscal year.
(2) Includes an expansion of approximately 19,000 sq. ft. at which the
Company expects to commence commercial operations during the early part
of its next fiscal year.
MATERIALS AND SOURCES OF SUPPLY
The principal materials used in the manufacture of the Company's electronic
products are specially manufactured copper foil, fiberglass cloth and
synthetic reinforcements, and specially formulated resins and chemicals. The
Company attempts to develop and maintain close working relationships with
suppliers of those materials who have dedicated themselves to complying with
the Company's stringent specifications and technical requirements. While the
Company's philosophy is to work with a limited number of suppliers, the
Company has identified alternate sources of supply for each of these
materials. However, there are a limited number of qualified suppliers of these
materials, substitutes for these materials are not readily available, and, in
the recent past, the industry has experienced shortages in the market for
certain of these materials. While the Company has not experienced significant
problems in the delivery of these materials and considers its relationships
with its suppliers to be strong, a disruption of the supply of material from
one of the Company's principal suppliers or an inability to obtain essential
materials could materially adversely affect the business, financial condition
and results of operations of the Company. Significant increases in the cost of
materials purchased by the Company could also have a material adverse effect
on the Company's business, financial condition and results of operations if
the Company were unable to pass such price increases through to its customers.
COMPETITION
The multilayer printed circuit materials industry is characterized by
intense competition and ongoing consolidation. The Company's competitors are
primarily divisions or subsidiaries of very large, diversified
35
<PAGE>
multinational manufacturers which are substantially larger and have greater
financial resources than the Company and, to a lesser degree, smaller regional
producers. Because the Company focuses on the higher technology segment of the
electronic materials market, technological innovation, quality and service, as
well as price, are significant competitive factors.
The Company believes that there are approximately ten significant multilayer
printed circuit materials manufacturers in the world, and many of these
competitors have or are developing significant presences in the three major
global markets of North America, Europe and Asia. The Company believes that
the multilayer printed circuit materials industry is rapidly becoming more
global and that the remaining smaller regional manufacturers will find it
increasingly difficult to remain competitive. The Company believes that it is
currently one of the world's largest multilayer printed circuit materials
manufacturers and the market leader in North America and Southeast Asia. The
Company further believes it is the only significant independent manufacturer
of multilayer printed circuit materials in the world today.
The markets in which the Company's electronic materials operations compete
are characterized by rapid technological advances, and the Company's position
in these markets depends largely on its continued ability to develop
technologically advanced and highly specialized products. Although the Company
believes it is an industry technology leader and directs a significant amount
of its time and resources toward maintaining its technological competitive
advantage, there is no assurance that the Company will be technologically
competitive in the future, or that the Company will continue to develop new
products that are technologically competitive.
PLUMBING AND INDUSTRIAL COMPONENTS OPERATIONS
The Company's operations also include its plumbing hardware, advanced
composites and specialty adhesive tape businesses. The plumbing hardware
business has not performed well in recent years and the Company is evaluating
its options with respect to that business. The advanced composite business
designs and manufactures reinforced engineered plastics used in the wireless
communications industry, as well as aerospace and commercial markets. Although
the Company is not satisfied with the growth or profitability levels of its
advanced composite business, the Company is encouraged by the product and
market opportunities being developed by this business. In addition, there are
product, manufacturing and market synergies between the advanced composite
business and the Company's printed circuit materials business which the
Company finds attractive. The specialty adhesive tape business, which, among
other things, designs and manufactures products used in the manufacture and
assembly of printed circuit boards and electronic interconnect systems, has
performed well in recent periods. This business is currently developing
advanced electronic assembly products.
PATENTS AND TRADEMARKS
The Company holds several patents and trademarks or licenses thereto. In the
Company's opinion, some of these patents and trademarks are important to its
products. Generally, however, the Company does not believe that an inability
to obtain new, or to defend existing, patents and trademarks would have a
material adverse effect on the Company.
EMPLOYEES
At November 26, 1995, the Company had approximately 2,030 employees. Of
these employees, 1,690 were engaged in the Company's electronic materials
operations, 320 in its plumbing and industrial components operations and 20
consisted of executive personnel and general administrative staff.
Approximately 10% of the Company's employees, all of whom are engaged in
plumbing and industrial components operations, are subject to collective
bargaining agreements. Management considers its labor relations to be
satisfactory.
36
<PAGE>
ENVIRONMENTAL MATTERS
The Company is subject to stringent environmental regulation of its use,
storage, treatment and disposal of hazardous materials and the release of
emissions and effluents into the environment. The Company believes that it
currently is in substantial compliance with the applicable federal, state and
local environmental laws and regulations to which it is subject and that
continuing compliance therewith will not have a material effect on its capital
expenditures, earnings or competitive position. The Company does not currently
anticipate making material capital expenditures for environmental control
facilities for its existing manufacturing operations during the remainder of
its current fiscal year or its succeeding fiscal year. However, developments
such as the enactment or adoption of even more stringent environmental laws
and regulations, could conceivably result in substantial additional costs to
the Company.
The Company and certain of its subsidiaries have been named by the
Environmental Protection Agency (the "EPA") or a comparable state agency under
the Comprehensive Environmental Response, Compensation and Liability Act (the
"Superfund Act") or similar state law as potentially responsible parties for a
number of hazardous waste disposal sites or other potentially contaminated
areas. Under the Superfund Act and similar state laws, all parties who may
have contributed any waste to a hazardous waste disposal site or contaminated
area identified by the EPA or comparable state agency are jointly and
severally liable for the cost of cleanup unless the EPA or such agency agrees
otherwise. Generally, these sites are locations at which numerous persons
disposed of hazardous waste. In the case of the Company's subsidiaries,
generally the waste was removed from their manufacturing facilities and
disposed at the waste sites by various companies which contracted with the
subsidiaries to provide waste disposal services. Neither the Company nor any
of its subsidiaries have been accused of or charged with any wrongdoing or
illegal acts in connection with any such sites. The Company believes it
maintains a very effective and comprehensive environmental compliance program.
Management believes the ultimate disposition of known environmental matters
will not have a material adverse effect upon the Company.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party or to which any of its properties is subject.
MANAGEMENT
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME TITLE(S) AGE
---- -------- ---
<S> <C> <C>
Jerry Shore......................... Chairman of the Board, Chief 70
Executive Officer, President and
a Director
Brian E. Shore...................... Executive Vice President and a 44
Director
E. Philip Smoot..................... Executive Vice President and a 58
Director
Paul R. Shackford................... Vice President, Chief Financial 45
Officer, Secretary and Treasurer
</TABLE>
Jerry Shore has been the Chief Executive Officer and a Director of the
Company since it was founded in 1954.
Brian Shore has served as a Director of the Company since 1983. He was
elected a Vice President of the Company in January 1993 and Executive Vice
President in May 1994. He also served as General Counsel of the Company from
April 1988 until April 1994.
37
<PAGE>
Mr. Smoot became President of a subsidiary of the Company in 1981 and was
elected a Vice President of the Company in 1985 and Executive Vice President
in 1988. He has been a Director since 1988. Mr. Smoot is responsible for the
Company's worldwide electronic materials operations.
Mr. Shackford became Vice President, Chief Financial Officer, Secretary and
Treasurer of the Company in August 1995. Prior to that time, he served as
Executive Vice President, Chief Financial Officer and Assistant Secretary of
Equitable Bag Co., Inc. ("Equitable") from January 1993 and also as Treasurer
from June 1993 and as Secretary from June 1994. From January 1991 to December
1992, he was Vice President--Finance and Chief Financial Officer of Equitable.
There are no family relationships between the directors or executive
officers of the Company, except that Brian Shore is the son of Jerry Shore.
The term of office of each executive officer of the Company expires upon the
election and qualification of his successor.
SELLING SHAREHOLDER
The sale of the shares of Common Stock offered by Jerry Shore would be the
first significant sale of shares by him since 1964. Mr. Shore founded the
Company on March 31, 1954. Mr. Shore intends to remain a significant
shareholder of the Company and, in connection with the sale of the shares of
Common Stock offered hereby, has agreed with the Underwriters not to offer for
sale, sell or otherwise dispose of (or enter into any transaction or device
which is designed to, or could be expected to, result in the disposition or
purchase by any person at any time in the future of), any shares of Common
Stock (other than the shares of Common Stock being offered hereby), without
the prior written consent of Lehman Brothers Inc., for a period of one year
from the date of this Prospectus, subject to certain exceptions for gifts of
shares of Common Stock and shares of Common Stock which have been pledged to
secure one or more loans. The Company believes that Mr. Shore will remain the
Company's largest shareholder upon completion of the sale of his shares of
Common Stock offered hereby.
The following table sets forth, as of December 31, 1995 and as adjusted to
reflect the sale of shares of Common Stock offered hereby, certain information
regarding the beneficial ownership of Common Stock by the Selling Shareholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
COMMON STOCK OFFERING COMMON STOCK OFFERING
---------------------------- ----------------------------
NAME NUMBER PERCENT NUMBER PERCENT
---- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Jerry Shore--Chairman of
the Board, Chief
Executive Officer,
President and a
Director............... 1,625,612(1) 14.0% 1,125,612(1) 9.7%
</TABLE>
- --------
(1) Includes 65,000 shares of Common Stock which Jerry Shore may acquire
pursuant to options, and excludes 112,410 shares owned by a member of
Jerry Shore's family, of which he disclaims beneficial ownership.
DESCRIPTION OF NOTES
The Notes are to be issued under an indenture to be dated as of February ,
1996 (the "Indenture"), between the Company and The Chase Manhattan Bank,
N.A., as trustee (the "Trustee"). The Indenture will be substantially in the
form filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The following descriptions of certain provisions of the
Indenture are intended as summaries only and are qualified in their entirety
by reference to the Indenture, including the definitions therein of certain
terms, which is incorporated herein by reference. As used in this "Description
of Notes," the term "Company" means only Park Electrochemical Corp. and not
its subsidiaries.
38
<PAGE>
GENERAL
The Notes will represent unsecured general obligations of the Company
subordinate in right of payment to certain other obligations of the Company as
described under "--Subordination," and convertible into Common Stock as
described under "--Conversion." The Notes will be limited to $100,000,000
aggregate principal amount ($115,000,000 if the over-allotment option is
exercised in full), will be issued in fully registered form only in
denominations of $1,000 or any multiple thereof and will mature on February ,
2006, unless earlier redeemed at the option of the Company, converted into
Common Stock at the option of the holder or repurchased by the Company at the
option of the holder upon a Fundamental Change (as defined in the Indenture).
The Notes will bear interest from February , 1996 at the annual rate set
forth on the cover page hereof, payable semi-annually on February and August
, commencing on August , 1996, to holders of record at the close of business
on the preceding January and July , respectively (other than with respect
to a Note or portion thereof called for redemption on a redemption date, or
repurchased in connection with a Fundamental Change on a repurchase date,
during the period from a record date to (but excluding) the next succeeding
interest payment date, in which case accrued interest shall be payable (unless
such Note or portion thereof is converted) to the holder of the Note or
portion thereof redeemed or repurchased). Interest will be computed on the
basis of a 360-day year composed of twelve 30-day months.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and integral multiples thereof. As described below
under "--Book-Entry, Delivery and Form," the Notes will be represented by one
or more Global Notes registered in the name of or held by The Depository Trust
Company ("Depositary") or its nominee. Payments of principal of and premium,
if any, and interest on the Global Notes will be made in immediately available
funds to the Depositary or its nominee, as the case may be, as the registered
holder of such Global Notes. See "--Settlement and Payment."
The Indenture will not contain any restrictions on the payment of dividends
or the repurchase of securities of the Company or any financial covenants. The
Indenture will contain no covenants or other provisions to afford protection
to holders of Notes in the event of a highly leveraged transaction or a change
in control of the Company except to the extent described under "Repurchase at
Option of Holders Upon a Fundamental Change."
CONVERSION
The holders of Notes will be entitled at any time through the close of
business on the final maturity date of the Notes, subject to prior redemption
or repurchase, to convert any Notes or portions thereof (in denominations of
$1,000 or multiples thereof) into Common Stock of the Company, at the
conversion price set forth on the cover page of this Prospectus, subject to
adjustment as described below. Except as described below, no adjustment will
be made on conversion of any Notes for interest accrued thereon or for
dividends on any Common Stock issued on conversion of the Notes. On conversion
of a Note, accrued and unpaid interest on the principal amount of the Note
being converted shall be deemed to be paid through receipt of such number of
shares of Common Stock issued on such conversion as shall have a current
market value (determined as provided in the Indenture) equal to the amount of
such accrued and unpaid interest. If Notes not called for redemption are
converted after a record date for the payment of interest and prior to the
next succeeding interest payment date, such Notes must be accompanied by funds
equal to the interest payable on such succeeding interest payment date on the
principal amount so converted. The Company will not be required to issue
fractional shares of Common Stock upon conversion of Notes and, in lieu
thereof, will pay a cash adjustment based upon the market price of the Common
Stock on the last business day prior to the date of conversion. In the case of
Notes called for redemption, conversion rights will expire at the close of
business on the business day preceding the date fixed for redemption, unless
the Company defaults in payment of the redemption price, in which case the
conversion right will terminate at the close of business on the date such
default is cured.
39
<PAGE>
The right of conversion attaching to any Note may be exercised by delivery
(a) if such Note is represented by a Global Note, by book-entry transfer to
the conversion agent (which will initially be the Trustee) through the
facilities of the Depositary, or (b) if definitive Notes have been issued, at
the specified office of a conversion agent, accompanied, in either case, by a
duly signed and completed notice of conversion, together with any funds that
may be required as described in the preceding paragraph. The conversion date
shall be the date on which the Note, the duly signed and completed notice of
conversion, and any funds that may be required as described in the previous
paragraph shall have been so delivered. A holder delivering a Note for
conversion will not be required to pay any taxes or duties payable in respect
of the issue or delivery of Common Stock upon conversion, but will be required
to pay any tax or duty which may be payable in respect of any transfer
involved in the issue or delivery of the Common Stock in a name other than the
holder of the Note. Certificates representing shares of Common Stock will not
be issued or delivered unless all taxes and duties, if any, payable by the
holder have been paid.
The initial conversion price of $ per share of Common Stock will be subject
to adjustment (under formulae set forth in the Indenture) in certain events,
including: (i) the issuance of Common Stock as a dividend or distribution on
Common Stock of the Company; (ii) certain subdivisions and combinations of the
Common Stock; (iii) the issuance to all holders of Common Stock of certain
rights or warrants to purchase Common Stock; (iv) the dividend or other
distribution to all holders of Common Stock of shares of capital stock of the
Company (other than Common Stock) or evidences of indebtedness of the Company
or assets (including securities, but excluding those rights, warrants,
dividends and distributions referred to above or paid exclusively in cash);
(v) a dividend or other distribution consisting exclusively of cash to all
holders of Common Stock in an aggregate amount that, 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 15% 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 dividend or other distribution; and
(vi) the purchase of Common Stock pursuant to a tender offer made by the
Company or any of its subsidiaries which involves an aggregate consideration
that together with (X) any cash and the fair market value of any other
consideration payable in any other tender offer made by the Company or any of
its subsidiaries for Common Stock expiring within 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 dividends and other 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 pursuant to clause (v) above, exceeds 15% of the
Company's market capitalization on the expiration of such tender offer.
Subject to the rights of holders of Notes described below under "Repurchase
at Option of Holders Upon a Fundamental Change," in the case of (i) any
reclassification or change of the Common Stock or (ii) a consolidation, merger
or combination involving the Company or a sale or conveyance to another
corporation of the property and assets of the Company as an entirety or
substantially as an entirety, in each case as a result of which holders of
Common Stock shall be entitled to receive stock, other securities, other
property or assets (including cash) with respect to or in exchange for such
Common Stock, the holders of the Notes then outstanding will be entitled
thereafter to convert such Notes into the kind and amount of shares of stock,
other securities or other property or assets which they would have owned or
been entitled to receive upon such reclassification, change, consolidation,
merger, combination, sale or conveyance had such Notes been converted into
Common Stock immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance (assuming, in a case in
which the Company's stockholders may exercise rights of election, that a
holder of Notes would not have exercised any rights of election as to the
stock, other securities or other property or assets receivable in connection
therewith and received per share the kind and amount received per share by a
plurality of non-electing shares).
In the event of a taxable distribution to holders of Common Stock (or other
transaction) which results in any adjustment of the conversion price, the
holders of Notes may, in certain circumstances, be deemed to have
40
<PAGE>
received a distribution subject to United States income tax as a dividend; in
certain other circumstances, the absence of such an adjustment may result in a
taxable dividend to the holders of Common Stock. See "Certain Federal Income
Tax Considerations."
The Company from time to time may, to the extent permitted by law, reduce
the conversion price of the Notes by any amount in any period of at least 20
days, in which case the Company shall give at least 15 days' notice of such
reduction, if the Board of Directors has made a determination that such
decrease would be in the best interests of the Company, which determination
shall be conclusive. The Company may, at its option, make such reductions in
the conversion price, in addition to those set forth above, as the Board of
Directors deems advisable to avoid or diminish any income tax to holders of
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.
See "Certain Federal Income Tax Considerations."
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% of the conversion price then
in effect; provided that any adjustment that would otherwise be required to be
made shall be carried forward and taken into account in any subsequent
adjustment. Except as stated above, the conversion price will not be adjusted
for the issuance of Common Stock or any securities convertible into or
exchangeable for Common Stock or carrying the right to purchase any of the
foregoing.
OPTIONAL REDEMPTION BY THE COMPANY
The Notes will not be redeemable at the option of the Company prior to
February , 1999. At any time on or after that date, the Notes may be redeemed
at the Company's option on at least 15 but not more than 60 days' notice, as a
whole or, from time to time in part, at the following prices (expressed in
percentages of the principal amount), together with accrued interest to the
date fixed for redemption; provided that if a redemption date is an interest
payment date, the semi-annual payment of interest becoming due on such date
shall be payable to the holder of record as of the relevant record date.
If redeemed during the 12-month period beginning February :
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1999..............................
2000..............................
2001 and thereafter............... 100%
</TABLE>
If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed in principal amounts of $1,000 or integral multiples
thereof by lot or, in its discretion, on a pro rata basis. If any Note is to
be redeemed in part only, a new Note or Notes in an aggregate principal amount
equal to the unredeemed principal portion thereof will be issued. If a portion
of a holder's Notes is selected for partial redemption and such holder
converts a portion of such Notes, such converted portion shall be deemed to be
taken from the portion selected for redemption.
No sinking fund is provided for the Notes.
REPURCHASE AT OPTION OF HOLDERS UPON A FUNDAMENTAL CHANGE
The Indenture will provide that if a Fundamental Change (as defined in the
Indenture) occurs, each holder of Notes shall have the right, at the holder's
option, to require the Company to repurchase all of such holder's Notes, or
any portion thereof that is an integral multiple of $1,000, on the date (the
"repurchase date") that is
41
<PAGE>
40 calendar days after the date of the Company Notice (as defined in the
Indenture), for cash at a price (expressed as a percentage of the principal
amount) equal to (i) % if the repurchase date is during the 12-month period
beginning February , 1996, (ii) % if the repurchase date is during the 12-
month period beginning February , 1997, (iii) % if the repurchase date is
during the 12-month period beginning February , 1998 and thereafter at the
redemption price set forth under "Optional Redemption by the Company" which
would be applicable to a redemption at the option of the Company on the
repurchase date, together with accrued interest, if any (the "repurchase
price"). In each case, the Company shall also pay accrued interest on the
repurchased Notes to, but excluding, the repurchase date; provided that, if
such repurchase date is February or August , then the interest payable on
such date shall be paid to the holder of record of the Note on the next
preceding January or July .
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with which all or substantially all of the Common Stock
shall be exchanged for, be converted into, be acquired for, or constitute
solely the right to receive, consideration (whether by means of an exchange
offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise) which is not all or
substantially all common stock which is (or, upon consummation of or
immediately following such transaction or event, will be) listed on a United
States national securities exchange or approved for quotation on the Nasdaq
National Market or any similar United States system of automated dissemination
of quotation of securities prices.
Within 15 calendar days after the occurrence of a Fundamental Change, the
Company will be obligated to mail to all holders of record of the Notes a
notice (the "Company Notice") of the occurrence of such Fundamental Change and
of the repurchase right arising as a result thereof. The Company must deliver
a copy of the Company Notice to the Trustee and cause a copy or a summary of
such notice to be published in a newspaper of general circulation in The City
of New York. To exercise the repurchase right, a holder of Notes must deliver,
on or before the 30th day after the date of the Company Notice, irrevocable
written notice to the Company (or an agent designated by the Company for such
purpose) and the Trustee of the holder's exercise of such right together with
the Notes (if such Note is represented by a Global Note, by book-entry
transfer to the conversion agent through the facilities of the Depositary)
with respect to which the right is being exercised, duly endorsed for
transfer. The submission of such notice together with such Notes pursuant to
the exercise of a repurchase right will be irrevocable on the part of the
holder (unless the Company fails to repurchase the Notes on the repurchase
date) and the right to convert such Notes will expire upon such submission.
The Company will comply with the provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act which may then be applicable in
connection with the repurchase rights of holders of Notes in the event of a
Fundamental Change. The repurchase rights of the holders of Notes could
discourage a potential acquirer of the Company. The Fundamental Change
repurchase feature, however, is not the result of management's knowledge of
any specific effort 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.
The Company could, in the future, enter into certain transactions, including
certain recapitalizations of the Company, that would not constitute a
Fundamental Change, but that would substantially increase the amount of Senior
Indebtedness outstanding at such time. The payment of the Fundamental Change
repurchase price on the Notes is subordinated to the prior payment of Senior
Indebtedness as described under "Subordination" below.
SUBORDINATION
The indebtedness evidenced by the Notes is, to the extent provided in the
Indenture, subordinate to the prior payment in full of all Senior Indebtedness
(as defined). During the continuance beyond any applicable grace period of any
default in the payment of principal, premium, interest or any other payment
due on any Senior Indebtedness, no payment of principal of or premium, if any,
or interest on the Notes (including, but not limited to, the redemption price
or repurchase price with respect to the Notes) shall be made by the Company.
Moreover, in the event of any acceleration of the Notes because of an Event of
Default, the holders of any Senior Indebtedness then outstanding would be
entitled to payment in full of all obligations in respect of such Senior
42
<PAGE>
Indebtedness before the holders of the Notes are entitled to receive any
payment or distribution in respect thereof. The Indenture will further require
that the Company promptly notify holders of Senior Indebtedness if payment of
the Notes is accelerated because of an Event of Default. In addition, upon any
distribution of assets of the Company upon any dissolution, winding up,
liquidation or reorganization, the payment of the principal of, premium, if
any, and interest on the Notes is to be subordinated to the extent provided in
the Indenture in right of payment to the prior payment in full of all Senior
Indebtedness.
By reason of the subordination provisions described above, in the event of
the Company's liquidation or dissolution, holders of Senior Indebtedness may
receive more, ratably, and holders of the Notes may receive less, ratably,
than the other creditors of the Company. Such subordination will not prevent
the occurrence of an Event of Default under the Indenture.
Subject to the qualifications described below, the term "Senior
Indebtedness" means the principal of, premium, if any, and interest on
(including any interest accruing after the filing of a petition by or against
the Company under any bankruptcy law), and any other payment due pursuant to,
any of the following, whether outstanding on the date of the Indenture or
thereafter incurred or created:
(a) All indebtedness of the Company for money borrowed (including, but
not limited to, any indebtedness secured by a security interest, mortgage
or other lien on the assets of the Company which is (i) given to secure all
or part of the purchase price of property subject thereto, whether given to
the vendor of such property or to another, or (ii) existing on property at
the time of acquisition thereof);
(b) All indebtedness of the Company evidenced by notes, debentures, bonds
or other securities (including but not limited to those which are
convertible or exchangeable for securities of the Company);
(c) All indebtedness of the Company due and owing with respect to letters
of credit (including, but not limited to, reimbursement obligations with
respect thereto);
(d) All lease obligations of the Company which are capitalized on the
books of the Company in accordance with generally accepted accounting
principles and all lease obligations of the Company under any lease or
related document (including a purchase agreement) which provides that the
Company is contractually obligated to purchase or cause a third party to
purchase the leased property and thereby guarantee a minimum residual value
of the leased property to the landlord and the obligations of the Company
under such lease or related document to purchase or to cause a third party
to purchase such leased property;
(e) All indebtedness consisting of commitment or standby fees due and
payable to lending institutions with respect to credit facilities available
to the Company;
(f) All indebtedness consisting of obligations of the Company due and
payable under interest rate and currency swaps, floors, caps or other
similar arrangements intended to fix interest rate obligations or hedge
foreign currency exposure;
(g) All indebtedness of others of the kinds described in any of the
preceding clauses (a), (b), (c), (e) or (f) and all lease obligations of
the kind described in the preceding clause (d) assumed by or guaranteed in
any manner by the Company or in effect guaranteed by the Company through an
agreement to purchase, contingent or otherwise, and all obligations of the
Company under such guarantee or other arrangements;
(h) All amounts due to the Trustee under Section 8.6 of the Indenture;
and
(i) All renewals, extensions, refundings, deferrals, amendments or
modifications of indebtedness of the kinds described in any of the
preceding clauses (a), (b), (c), (e), (f), (g) or (h) and all renewals or
extensions of lease obligations of the kinds described in any of the
preceding clauses (d) or (g);
unless in the case of any particular indebtedness, lease, renewal, extension,
refunding, amendment, modification or supplement, the instrument, lease or
other document creating or evidencing the same or the assumption or guarantee
of the same expressly provides that such indebtedness, lease, renewal,
extension, refunding, amendment, modification or supplement is not superior in
right of payment to, or pari passu with, the Notes.
43
<PAGE>
Notwithstanding the foregoing, Senior Indebtedness shall not include (i) any
indebtedness or lease obligations of any kind of the Company to any subsidiary
of the Company, a majority of the voting stock of which is owned, directly or
indirectly, by the Company, and (ii) indebtedness for trade payables or
constituting the deferred purchase price of assets or services incurred in the
ordinary course of business.
In the event that, notwithstanding the foregoing, the Trustee or any holder
of Notes receives any payment or distribution of assets of the Company of any
kind in contravention of any of the terms of the Indenture, whether in cash,
property or securities, including, without limitation, by way of set-off or
otherwise, in respect of the Notes before all Senior Indebtedness is paid in
full, then such payment or distribution will be held by the recipient in trust
for the benefit of holders of Senior Indebtedness of the Company or their
representative or representatives to the extent necessary to make payment in
full of all Senior Indebtedness of the Company remaining unpaid, after giving
effect to any concurrent payment or distribution, or provision therefor, to or
for the holders of Senior Indebtedness of the Company.
The Notes are obligations of the Company. Because the operations of the
Company currently are conducted through subsidiaries, the cash flow and the
consequent ability to service debt, including the Notes, of the Company, may
be dependent upon the earnings of its subsidiaries and the distribution of
those earnings to, or upon loans, or other payments of funds by those
subsidiaries to, the Company. The subsidiaries are separate and distinct legal
entities and have no obligation, contingent or otherwise, to pay any amounts
due pursuant to the Notes or to make any funds available therefor, whether by
dividends, loans or other payments. In addition, the payment of dividends and
the making of loans and advances to the Company by its subsidiaries may be
subject to statutory or contractual restrictions, are dependent upon the
earnings of those subsidiaries and are subject to various business
considerations.
Any right of the Company to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the holders
of the Notes to participate in these assets) will be effectively subordinated
to the claims of that subsidiary's creditors (including trade creditors),
except to the extent that the Company is itself recognized as a creditor of
such subsidiary, in which case the claims of the Company would still be
subordinate to any security interests in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by the Company and would
be subject to judicial power to subordinate the Company's claim to those of
other creditors of such subsidiary in certain cases.
As of November 26, 1995, the Company had no outstanding obligations or
liabilities which would have constituted Senior Indebtedness. In addition, as
of November 26, 1995, subsidiaries of the Company had outstanding an aggregate
of approximately $56 million of liabilities (excluding intercompany
liabilities, deferred taxes on income and commitments, contingencies and other
liabilities of the types not required to be reflected as liabilities on the
balance sheets of such subsidiaries prepared in accordance with generally
accepted accounting principles). The amounts of Senior Indebtedness and such
liabilities of subsidiaries may change in the future. The Indenture will not
limit the amount of additional indebtedness, including Senior Indebtedness,
which the Company can create, incur, assume or guarantee, nor will the
Indenture limit the amount of indebtedness or other liabilities which any
subsidiary of the Company can create, incur, assume or guarantee.
The Company will be obligated to pay reasonable compensation to the Trustee
and to indemnify the Trustee against any losses, liabilities or expenses
incurred by it in connection with its duties relating to the Notes. The
Trustee's claims for such payments will be senior to those of holders of the
Notes in respect of all funds collected or held by the Trustee.
EVENTS OF DEFAULT AND REMEDIES
An Event of Default will be defined in the Indenture as being default in
payment of the principal of, or premium, if any, on the Notes, whether or not
such payment is prohibited by the subordination provisions of the Indenture;
default for 30 days in payment of any installment of interest on the Notes,
whether or not such payment is prohibited by the subordination provisions of
the Indenture; default by the Company for 60 days after
44
<PAGE>
notice in the observance or performance of any other covenants in the
Indenture; default in the payment of the repurchase price in respect of the
Notes on the repurchase date therefor, whether or not such payment is
prohibited by the subordination provisions of the Indenture; failure of the
Company or any Significant Subsidiary (as defined in the Indenture) to make
any payment at maturity, including any applicable grace period, in respect of
indebtedness, which term as used in the Indenture means obligations (other
than non-recourse obligations) of, or guaranteed or assumed by, the Company or
any Significant Subsidiary for borrowed money in excess of $25,000,000 and
continuance of such failure for 60 days after notice; a default with respect
to any Indebtedness, which default results in the acceleration of Indebtedness
in an amount in excess of $25,000,000 without such Indebtedness having been
discharged or such acceleration having been cured, waived, rescinded or
annulled for 60 days after notice; or certain events involving bankruptcy,
insolvency or reorganization of the Company or any Significant Subsidiary. The
Indenture provides that the Trustee may withhold notice to the holders of the
Notes of any default (except in payment of principal, premium, if any, or
interest with respect to the Notes) if the Trustee considers it in the
interest of the holders of the Notes to do so.
The Indenture will provide that if any Event of Default shall have occurred
and be continuing, the Trustee or the holders of not less than 25% in
principal amount of the Notes then outstanding may declare the principal of
and premium, if any, on the Notes to be due and payable immediately, but if
the Company shall cure all defaults (except the nonpayment of interest and
premium, if any, on and principal of any Notes which shall have become due by
acceleration) and certain other conditions are met, such declaration may be
canceled and past defaults may be waived by the holders of a majority in
principal amount of Notes then outstanding.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to direct the time, method and place of conducting any
proceedings for any remedy available to the Trustee, subject to certain
limitations specified in the Indenture.
The Indenture will provide that the Company shall promptly notify the
Trustee of the occurrence of any Event of Default and shall annually provide
the Trustee with a certificate stating whether or not the Company knows the
existence of any default or Event of Default.
MODIFICATIONS OF THE INDENTURE
The Indenture will contain provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
principal amount of the Notes at the time outstanding, to modify the Indenture
or any supplemental indenture or the rights of the holders of all Notes,
except that no such modification shall (i) extend the fixed maturity of any
Note, reduce the rate or extend the time for payment of interest thereon,
reduce the principal amount thereof or premium, if any, thereon, reduce any
amount payable upon redemption or repurchase thereof, change the obligation of
the Company to repurchase any Note upon the happening of a Fundamental Change
in a manner adverse to the holders of the Notes, impair or affect the right of
a holder to institute suit for the payment thereof, change the currency in
which the Notes are payable, impair the right to convert the Notes into Common
Stock subject to the terms set forth in the Indenture, or modify the
provisions of the Indenture with respect to the subordination of the Notes in
a manner adverse to the holders of the Notes, without the consent of the
holder of each Note so affected, or (ii) reduce the aforesaid percentage of
Notes, without the consent of the holders of all of the Notes outstanding.
SATISFACTION AND DISCHARGE
The Company may discharge its obligations under the Indenture while Notes
remain outstanding if (i) all outstanding Notes will become due and payable at
their scheduled maturity within one year or (ii) all outstanding Notes are
scheduled for redemption within one year, and, in either case, the Company has
deposited with the Trustee an amount sufficient to pay and discharge all
outstanding Notes on the date of their scheduled maturity or the scheduled
date of redemption.
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BOOK-ENTRY, DELIVERY AND FORM
Upon issuance, the Notes will be represented by a Global Note or Notes. Each
Global Note will be deposited with, or on behalf of, the Depositary and
registered in the name of a nominee of the Depositary. Except under the
limited circumstances described below, Global Notes will not be exchangeable
for definitive certificated Notes.
Ownership of beneficial interests in a Global Note will be limited to
institutions that have accounts with the Depositary or its nominee
("participants") or persons that may hold interests through participants. In
addition, ownership of beneficial interests by participants in such Global
Note will be evidenced only by, and the transfer of that ownership interest
will be effected only through, records maintained by the Depositary or its
nominee for such Global Note. Ownership of beneficial interests in such Global
Note by persons that hold through participants will be evidenced only by, and
the transfer of that ownership interest within such participant will be
effected only through, records maintained by such participant. The Depositary
has no knowledge of the actual beneficial owners of the Notes. Beneficial
owners will not receive written confirmation from the Depositary of their
purchase, but beneficial owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the participants through which the beneficial owners entered
the transaction. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
definitive form. Such laws may impair the ability to transfer beneficial
interests in such Global Note.
Payment of principal of and premium, if any, and interest on Notes
represented by a Global Note registered in the name of or held by the
Depositary or its nominee will be made to the Depositary or its nominee, as
the case may be, as the registered holder of the Global Note representing such
Notes. The Company has been advised by the Depositary that upon receipt of any
payment of principal of or premium, if any, or interest on a Global Note, the
Depositary will immediately credit, on its book-entry registration and
transfer system, accounts of participants with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Note as shown in the records of the Depositary. Payments by
participants to owners of beneficial interests in a Global Note held through
such participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the sole
responsibility of such participants, subject to any statutory or regulatory
requirements as may be in effect from time to time.
None of the Company, the Trustee or any other agent of the Company or the
Trustee will have any responsibility or liability for any aspect of the
records of the Depositary, any nominee or any participant relating to, or
payments made on account of, beneficial interests in a Global Note or for
maintaining, supervising or reviewing any of the records of the Depositary,
any nominee or any participant relating to such beneficial interests.
A Global Note is exchangeable for definitive Notes registered in the name
of, and a transfer of a Global Note may be registered to, any person other
than the Depositary or its nominee, only if:
(a) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for such Global Note or if at any time the
Depositary ceases to be a clearing agency registered under the Exchange
Act; or
(b) the Company in its sole discretion determines that such Global Note
shall be exchangeable for definitive Notes in registered form.
Any Global Note that is exchangeable pursuant to the preceding sentence will
be exchangeable in whole for definitive Notes in registered form, of like
tenor and of an equal aggregate principal amount as the Global Note, in
denominations of $1,000 and integral multiples thereof. Such definitive Notes
will be registered in the name or names of such persons as the Depositary
shall instruct the Trustee. The principal, premium, if any, and interest with
respect to definitive Notes will be payable, the transfer of the definitive
Notes will be registrable, the definitive Notes will be exchangeable, and the
definitive Notes may be presented for conversion, at the office or
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agency of the Company maintained for such purposes, which shall initially be
the Corporate Trust Office of the Trustee located in the Borough of Manhattan,
The City of New York. In addition, payment of interest on definitive Notes
may, at the option of the Company, be made by check mailed to the address of
the person entitled thereto as it appears in the Note register. Interest
payable to any holder of such Notes having an aggregate principal amount in
excess of $5,000,000 shall, at the election of such holder in writing to the
Trustee at least 10 days prior to the date of payment, be paid by wire
transfer in immediately available funds.
The Company will not be required (i) to issue, register the transfer of or
exchange any Note during a period beginning at the opening of business 15 days
before the date of the mailing of a notice of redemption and ending at the
close of business on the date of such mailing, or (ii) to register the
transfer of or exchange any Note selected for redemption in whole or in part,
except the unredeemed portion of Notes being redeemed in part.
Except as provided above, owners of beneficial interests in Global Notes
will not be entitled to receive physical delivery of Notes in definitive form
and will not be considered the holders thereof for any purpose under the
Indenture, and no Global Note shall be exchangeable except for another Global
Note of like denomination and tenor to be registered in the name of the
Depositary or its nominee. Accordingly, each person owning a beneficial
interest in such Global Note must rely on the procedures of the Depositary
and, if such person is not a participant, on the procedures of the participant
through which such person owns its interest, to exercise any rights of a
holder under the Global Note.
The Company understands that, under existing industry practices, in the
event that the Company requests any action of holders, or an owner of a
beneficial interest in such Global Note desires to give or take any action
that a holder is entitled to give or take under the Notes, the Depositary
would authorize the participants holding the relevant beneficial interests to
give or take such action, and such participants would authorize beneficial
owners owning through such participants to give or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
The Depositary has advised the Company that the Depositary is a limited
purpose trust company organized under the laws of the State of New York, a
"banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the Exchange Act. The Depositary was created to hold
securities of its participants and to facilitate the clearance and settlement
of securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. The
Depositary is owned by a number of its participants and by the NYSE, the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the Depositary's book-entry system is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant, either
directly or indirectly. The rules applicable to the Depositary and its
participants are on file with the Securities and Exchange Commission.
SETTLEMENT AND PAYMENT
Settlement for the Notes will be made in immediately available funds. So
long as the Notes are represented by a Global Note or Notes, all payments of
principal, premium, if any, and interest will be made by the Company in
immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. So long as the Notes
are represented by a Global Note or Notes registered in the name of the
Depositary or its nominee, the Notes will trade in the Depositary's Same-Day
Funds Settlement System, and secondary market trading activity in the Notes
will therefore be required by the Depositary to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on the trading activity in the
Notes.
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GOVERNING LAW
The Indenture and Notes will be governed by and construed in accordance with
the laws of the State of New York, without giving effect to such State's
conflicts of laws principles.
CONCERNING THE TRUSTEE
The Chase Manhattan Bank, N.A., the Trustee under the Indenture, has been
appointed by the Company as the initial paying agent, conversion agent and
registrar with regard to the Notes. The Company and its subsidiaries may
maintain deposit accounts and conduct other banking transactions with the
Trustee or its affiliates in the ordinary course of business, and the Trustee
and its affiliates may from time to time in the future provide the Company
with banking and financial services in the ordinary course of their business.
In case an Event of Default shall occur (and shall not be cured) and holders
of the Notes have notified the Trustee, the Trustee will be required to
exercise its powers with the degree of care and skill of a prudent person in
the conduct of such person's own affairs. Subject to such provisions, the
Trustee is under no obligation to exercise any of its rights or powers under
the Indenture at the request of any of the holders of Notes, unless they shall
have offered to the Trustee security and indemnity satisfactory to it.
DESCRIPTION OF CAPITAL STOCK
The following summary description of the Company's capital stock is not
intended to be complete and is qualified in its entirety by reference to the
Company's Restated Certificate of Incorporation and By-laws and the Rights
Agreement (as defined below), included as exhibits to the Registration
Statement of which this Prospectus forms a part, and to the New York Business
Corporation Law ("BCL").
The Company has two classes of authorized capital stock: Common Stock, par
value $.10 per share, of which the Company is authorized to issue 30,000,000
shares, and Preferred Stock, par value $1.00 per share, of which the Company
is authorized to issue 500,000 shares.
COMMON STOCK
At November 26, 1995, approximately 11,544,064 shares of Common Stock were
outstanding, and options to purchase an aggregate of approximately 523,068
shares of Common Stock were also outstanding.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the shareholders, including the
election of directors. The holders of Common Stock are not entitled to
cumulative voting rights with respect to the election of directors and, as a
consequence, the holders of more than 50% of the shares can elect all of the
directors being elected in any election. Under New York law, the approval of
the holders of two-thirds of all outstanding stock is required to effect a
merger of the Company or the disposition of all or substantially all the
Company's assets. A majority vote is sufficient for certain other actions that
require the vote or concurrence of shareholders.
The holders of Common Stock are entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors in its
discretion from funds legally available therefor, subject to the prior payment
of all dividends due on any outstanding Preferred Stock. Upon liquidation or
dissolution of the Company, the holders of Common Stock are entitled to
receive, pro rata, all assets remaining available for distribution to
shareholders, subject to any rights of the holders of any outstanding
Preferred Stock. The shares of Common Stock have no preemptive or other
subscription rights, and there are no conversion rights or redemption or
sinking fund provisions with respect to such shares. The Common Stock
currently outstanding is, and the Common Stock to be issued upon conversion of
the Notes will be, fully paid and non-assessable.
The Common Stock is listed and trades on the NYSE under the symbol "PKE".
The Common Stock also trades on the Midwest Stock Exchange.
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The Transfer Agent and Registrar for the Common Stock is Registrar &
Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016.
PREFERRED STOCK AND PREFERRED STOCK PURCHASE RIGHTS
The Preferred Stock is issuable in such series and with such designations,
full or limited voting rights, redemption provisions, dividend rates,
liquidation and conversions rights and other preferences and limitations as
may be determined by the Board of Directors, without shareholder approval. No
shares of Preferred Stock have been issued and, as described below, one series
of Preferred Stock has been established.
The Board of Directors effected a distribution of one preferred stock
purchase right (collectively the "Rights") per outstanding share of Common
Stock held of record on February 15, 1989 or issued thereafter and prior to
the Distribution Date (as defined below). Each Right entitles the holder
thereof to purchase from the Company one one-hundredth (1/100th) of a share of
Series A Preferred Stock of the Company, $1.00 par value per share (the
"Series A Preferred Stock"), at a price of $75.00 (the "Purchase Price") per
each one one-hundredth of such share. The description and terms of the Rights
are set forth in an Amended and Restated Rights Agreement, dated as of July
12, 1995 (the "Rights Agreement"), between the Company and Registrar and
Transfer Company, as Rights Agent. The provisions of the Rights Agreement are
incorporated herein by reference, and the statements made below are qualified
in their entirety by such reference. Capitalized terms not defined herein have
the respective meanings provided in the Rights Agreement.
Until the Distribution Date (as defined in the Rights Agreement), the Rights
are not exercisable and shall be evidenced only by certificates representing
the shares of Common Stock. The term "Distribution Date" means the earlier of
(i) the tenth day after the date of the first public announcement by the
Company or a Person that such Person, other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or any Subsidiary of
the Company or certain other persons (including the Selling Shareholder) alone
or together with Affiliates and Associates (an "Acquiring Person"), has become
the Beneficial owner of 15% (or 25% in the case of the Selling Shareholder and
certain other persons) or more of the then outstanding shares of Common Stock
or (ii) the tenth Business Day (or such later date as may be determined by the
Board of Directors prior to such time as any Person becomes an Acquiring
Person) after the date of the commencement of, or public announcement of the
intent to commence, a tender or exchange offer by any Person, other than the
Company, any Subsidiary of the Company and certain other persons (including
the Selling Shareholder), for 15% or more of the then outstanding shares of
Common Stock.
In the event that any Person should become an Acquiring Person, each holder
of a Right, other than the Rights of an Acquiring Person (which will become
void), shall thereafter have a right to receive, upon exercise thereof at a
price equal to the then current Purchase Price multiplied by the number of one
one-hundredths of a share of Series A Preferred Stock for which a Right is
then exercisable, and in lieu of shares of Series A Preferred Stock, such
number of shares of Common Stock of the Company as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the number of
one one-hundredths of a share of Series A Preferred Stock for which a Right is
then exercisable and (y) dividing that product by 50% of the then current per
share market price of the Common Stock of the Company. If after a Person
becomes an Acquiring Person, the Company engages or becomes obligated to
engage in any of certain business combination transactions as specified in the
Rights Agreement, the Company will take all action to ensure that, and will
not consummate any such business combination, unless the terms of such
transaction provide that, each holder of a Right, other than Rights of an
Acquiring Person (which will become void), shall have the right to receive,
upon the exercise thereof at a price equal to the then current Purchase Price
multiplied by the number of one one-hundredths of a share of Series A
Preferred Stock for which a Right is then exercisable, and in lieu of shares
of Series A Preferred Stock, such number of shares of common stock of the
other party to such transaction as shall equal the result obtained by (A)
multiplying the then current Purchase Price by the number of one one-
hundredths of a share of Series A Preferred Stock for which a Right is then
exercisable and (B) dividing that product by 50% of the then current per share
market price of the shares of common stock of the other party.
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The Rights Agreement provides that the Board of Directors may amend the
Rights Agreement or redeem the Rights prior to the time any person becomes an
Acquiring Person. In addition, after any Person becomes an Acquiring Person,
but before any Person becomes the beneficial owner of 50% or more of the
Common Stock outstanding, the Board of Directors may exchange all or part of
the Rights for shares of Common Stock at a one-for-one exchange ratio.
The Rights (and the Rights Certificates, if issued) shall expire on July 12,
2005 (the "Final Expiration Date"), unless earlier redeemed or exchanged by
the Company as provided in the Rights Agreement. If shares of Series A
Preferred Stock are issued, holders of shares of Series A Preferred Stock are
entitled to cumulative quarterly dividends equal to 5% of the liquidation
value of $100.00 per share of the Series A Preferred Stock in preference to
any dividends paid to holders of the Common Stock. Holders of shares of Series
A Preferred Stock are not entitled to vote on any matter, except as otherwise
provided by law. Upon liquidation, holders of shares of Series A Preferred
Stock are entitled to a liquidation preference equal to the greater of $100.00
per share or 100 times the amount distributable per share of Common Stock.
NEW YORK ANTI-TAKEOVER LAW
Section 912 of the BCL regulates "business combinations," a term covering a
broad range of transactions between "resident domestic corporations" (as
defined, which term would include the Company) and an interested shareholder,
which is defined as any person beneficially owning 20% or more of the
outstanding voting stock of the resident domestic corporation or any affiliate
or associate of such person. Under the statute, a resident domestic
corporation may not engage in any business combination with any interested
shareholder, unless (a) if the business combination is to occur within five
years of the date the shareholder acquired 20% or more ownership, either the
business combination or the stock acquisition was approved by the Board of
Directors, prior to the date the interested shareholder first attained 20%
ownership (the "Stock Acquisition Date"), or (b) the business combination is
approved by a majority of outstanding voting stock (not including shares owned
by the interested shareholder), which approval may not be effectively given
until at least five years after the Stock Acquisition Date, or (c) the
business combination occurs after five years after the interested
shareholder's Stock Acquisition Date and the consideration paid to the non-
interested shareholders meets certain conditions imposed by Section 912. The
restrictions imposed by Section 912 will not apply to a corporation that
amends its by-laws by the affirmative vote of a majority of its outstanding
voting stock (not including shares owned by the interested shareholder) to
"opt out" of Section 912; however, an amendment will not be effective for 18
months after the vote and will not apply to any business combination where the
Stock Acquisition Date precedes the amendment. At this time, the Company will
not seek to "opt out" of Section 912 and, therefore, the restrictions imposed
by Section 912 will apply to the Company.
Section 912 of the BCL and the Rights may discourage other persons from
making a tender offer for, or acquisitions of, a number of shares of the
Common Stock. This could have the incidental effect of inhibiting changes in
management and also may prevent temporary fluctuations in the market price of
the Common Stock that often result from actual or rumored takeover attempts.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain material United States
federal income tax considerations relevant to initial holders of the Notes and
shares of Common Stock issuable upon conversion of the Notes. This discussion
is based upon the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury Regulations, Internal Revenue Service ("IRS") rulings and judicial
decisions now in effect, all of which are subject to change (possibly with
retroactive effect) or different interpretations. This discussion does not
purport to deal with all aspects of federal income taxation that may be
relevant to a particular investor's decision to purchase the Notes or acquire
shares of Common Stock on conversion of Notes, and it is not intended to be
wholly applicable to all categories of investors, some of which, such as
dealers in securities, banks, insurance companies, persons that will hold the
Notes as a position in a "straddle" or as part of a hedging or "conversion"
transaction for tax purposes, tax-exempt organizations and non-United States
holders of Notes, may be subject to special rules. In addition, this
discussion is limited to persons who purchase the Notes pursuant to this
Prospectus, who hold the
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Notes or shares of Common Stock issued on conversion of the Notes as a
"capital asset" within the meaning of Section 1221 of the Code and who are
United States holders of Notes. For purposes of this discussion, United States
holders of Notes are holders of Notes who are (i) citizens or residents of the
United States, (ii) domestic corporations, or (iii) otherwise subject to U.S.
federal income taxation on a net income basis in respect of income and gain
from the Notes and Common Stock. A non-United States holder of Notes is any
holder of Notes that is not a United States holder of Notes.
ALL PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE SHARES OF COMMON
STOCK ISSUABLE ON CONVERSION OF THE NOTES. PURCHASERS OF SHARES OF COMMON
STOCK IN THE OFFERING SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF SUCH SHARES OF COMMON STOCK.
PAYMENTS OF INTEREST
Interest on a Note will generally be taxable to a holder as ordinary income
at the time it is paid or accrued in accordance with the holder's method of
accounting for tax purposes.
CONVERSION OF NOTES INTO COMMON STOCK
In general, no gain or loss will be recognized for income tax purposes on a
conversion of the Notes into shares of Common Stock. However, cash paid in
lieu of a fractional share of Common Stock will result in taxable gain (or
loss), which will be capital gain (or loss), to the extent that the amount of
such cash exceeds (or is exceeded by) the portion of the adjusted basis of the
Note allocable to such fractional share. The adjusted basis of shares of
Common Stock received on conversion (other than shares of Common Stock
received as payment of accrued interest) will equal the adjusted basis of the
Note converted, reduced by the portion of adjusted basis allocated to any
fractional share of Common Stock exchanged for cash. The adjusted basis of
shares of Common Stock received as payment of accrued interest will equal the
amount of such accrued interest. The holding period of an investor in the
Common Stock received on conversion will include the period during which the
converted Notes were held. Any interest deemed paid to a holder of Notes in
connection with a conversion will be taxable as ordinary income.
The conversion price of the Notes is subject to adjustment under certain
circumstances. See "Description of Notes--Conversion." Section 305 of the Code
and the Treasury Regulations issued thereunder may treat the holders of the
Notes as having received a constructive distribution, 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 earnings and profits
as of the end of the taxable year to which such constructive distribution
relates and/or accumulated earnings and profits, if and to the extent that
certain adjustments in the conversion price that 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
Notes in the fully diluted Common Stock, whether or not such holder ever
exercises its conversion privilege. Moreover, if there is not a full
adjustment to the conversion price of the Notes to reflect a stock dividend or
other event increasing the proportionate interest of the holders of
outstanding Common Stock in the assets or earnings and profits of the Company,
then such increase in the proportionate interest of the holders of the Common
Stock generally will be treated as a distribution to such holders, taxable as
ordinary income (subject to a possible dividends received deduction in the
case of corporate holders) to the extent of the Company's current earnings and
profits as of the end of the taxable year to which constructive distribution
relates and/or accumulated earnings and profits.
MARKET DISCOUNT
Investors acquiring Notes pursuant to this Prospectus should note that the
resale of those Notes may be adversely affected by the market discount
provisions of sections 1276 through 1278 of the Code. Under the market
discount rules, if a holder of a Note purchases it at market discount (i.e.,
at a price below its stated redemption price at maturity) in excess of a
statutorily-defined de minimis amount and thereafter recognizes gain
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upon a disposition or retirement of the Note, then the lesser of the gain
recognized or the portion of the market discount that accrued on a ratable
basis (or, if elected, on a constant interest rate basis) generally will be
treated as ordinary income at the time of the disposition. Moreover, any
market discount on a Note may be taxable to an investor to the extent of
appreciation at the time of certain otherwise non-taxable transactions, such
as gifts. Any accrued market discount not previously taken into income prior
to a conversion of a Note, however, should (under Treasury Regulations not yet
issued) carry over to the Common Stock received on conversion and be treated
as ordinary income upon a subsequent disposition of such Common Stock to the
extent of any gain recognized on such disposition. In addition, absent an
election to include market discount in income as it accrues, a holder of a
market discount debt instrument may be required to defer a portion of any
interest expense that otherwise may be deductible on any indebtedness incurred
or maintained to purchase or carry such debt instrument until the holder
disposes of the debt instrument in a taxable transaction.
DISTRIBUTIONS ON COMMON STOCK
Distributions on the Common Stock into which Notes have been converted will
be taxable as dividends to the extent of the Company's current and/or
accumulated earnings and profits, as determined under United States federal
income tax principles. Such dividends may be eligible for the dividends-
received deduction in the case of holders which are domestic corporations,
subject to applicable limitations.
To the extent that the amount of any distribution exceeds the Company's
current and accumulated earnings and profits for a taxable year, the
distribution will first be treated as a tax-free return of capital, causing a
reduction in the adjusted basis of the Common Stock (thereby increasing the
amount of gain, or decreasing the amount of loss, to be recognized by the
investor on a subsequent disposition of the Common Stock), and the balance in
excess of adjusted basis will be taxed as capital gain.
DISPOSITION OF NOTES OR COMMON STOCK
Subject to the discussion above under "--Conversion of Notes into Common
Stock," each holder of Notes generally will recognize gain or loss upon the
sale, redemption, repurchase, retirement or other disposition of those Notes
measured by the difference (if any) between (i) the amount of cash and the
fair market value of any property received (except to the extent that such
cash or other property is attributable to the payment of accrued interest not
previously included in income, which amount will be taxable as ordinary
income) and (ii) the holder's adjusted tax basis in those Notes (including any
market discount previously included in income by the holder). Each holder of
Common Stock into which the Notes are converted, in general, will recognize
gain or loss upon the sale or other disposition of the Common Stock measured
under rules similar to those described in the preceding sentence for the
Notes. Special rules may apply to redemptions of Common Stock which may result
in different treatment. Any such gain or loss recognized on the sale,
redemption, repurchase, retirement or other disposition of a Note or share of
Common Stock should be capital gain or loss (except as discussed under "--
Market Discount" above), and would be long-term capital gain or loss if the
Note or the Common Stock had been held for more than one year at the time of
the sale or exchange. An investor's initial basis in a Note will be the cash
price paid therefor. Any payment of interest received by a holder in
connection with a redemption, repurchase, retirement or other disposition will
be taxed as ordinary income.
BACKUP WITHHOLDING
A holder of Notes or Common Stock may be subject to "back-up withholding" at
a rate of 31% with respect to certain "reportable payments," including
interest payments, dividend payments and, under certain circumstances,
principal payments on the Notes. These back-up withholding rules apply if the
holder, among other things, (i) fails to furnish a social security number or
other taxpayer identification number ("TIN") certified under penalties of
perjury within a reasonable time after the request therefor, (ii) furnishes an
incorrect TIN, (iii) fails to report properly interest or dividends, (iv)
under certain circumstances, fails to provide a certified statement, signed
under penalties of perjury, that the TIN furnished is the correct number and
that such holder is
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not subject to back-up withholding, or (v) does not certify its foreign or
other exempt status. A holder who does not provide the Company with its
correct TIN also may be subject to penalties imposed by the IRS. Any amount
withheld from a payment to a holder under the back-up withholding rules is
creditable against the holder's federal income tax liability, provided the
required information is furnished to the IRS. Back-up withholding will not
apply, however, with respect to payments made to certain holders, including
corporations, tax-exempt organizations and certain foreign persons, provided
their exemption from back-up withholding is properly established.
The Company will report to the holders of Notes and Common Stock and to the
IRS the amount of any "reportable payments" required to be reported by the
Company under U.S. Treasury Regulations for each calendar year and the amount
of tax withheld, if any, with respect to such payments.
UNDERWRITING
Lehman Brothers Inc., Needham & Company, Inc. and Robertson, Stephens &
Company LLC (the "Underwriters"), have severally agreed, subject to the terms
and conditions of the Underwriting Agreement for the Notes (the "Notes
Underwriting Agreement"), to purchase from the Company, and the Company has
agreed to sell to each Underwriter, the aggregate principal amount of Notes
set forth opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITERS AMOUNT OF NOTES
------------ ---------------
<S> <C>
Lehman Brothers Inc.......................................... $
Needham & Company, Inc.......................................
Robertson, Stephens & Company LLC............................
------------
Total...................................................... $100,000,000
============
</TABLE>
The Underwriters have severally agreed, subject to the terms and conditions
of the Underwriting Agreement for the shares of Common Stock (the "Common
Stock Underwriting Agreement"; together with the Notes Underwriting Agreement,
the "Underwriting Agreements"), to purchase from the Selling Shareholder, and
the Selling Shareholder has agreed to sell to each Underwriter, the aggregate
number of shares of Common Stock set forth opposite the name of such
Underwriter below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
<S> <C>
Lehman Brothers Inc.........................................
Needham & Company, Inc......................................
Robertson, Stephens & Company LLC...........................
-------
Total..................................................... 500,000
=======
</TABLE>
In the Underwriting Agreements, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all the
Notes offered hereby (other than those offered pursuant to the over-allotment
option described below) or all of the shares of Common Stock offered hereby,
as the case may be, if any such securities are purchased. In the event of
default by any Underwriter, each Underwriting Agreement provides that, in
certain circumstances, purchase commitments of the non-defaulting Underwriters
may be increased or such Underwriting Agreement may be terminated.
The offering of the Notes and the offering of the shares of Common Stock are
not contingent upon each other.
The Company has been advised that the Underwriters propose to offer the
Notes to the public initially at the public offering price set forth on the
cover page of this Prospectus and to certain selected dealers (which
53
<PAGE>
may include the Underwriters) at such public offering price less a concession
not to exceed % of the principal amount of such Notes. The Underwriters may
allow and such dealers may reallow a concession not to exceed % of the
principal amount of such Notes to certain other dealers. After the initial
offering of the Notes to the public, the public offering price, the concession
to selected dealers and the reallowance to other dealers may be changed.
The Company and the Selling Shareholder have been advised that the
Underwriters propose to offer the shares of Common Stock offered hereby to the
public initially at the public offering price set forth on the cover page of
this Prospectus and to certain selected dealers (which may include the
Underwriters) at such public offering price less a concession not to exceed
$ per share. The Underwriters may allow and such dealers may reallow a
concession not to exceed $ per share to certain other dealers. After the
initial offering of the shares of Common Stock to the public, the public
offering price, the concession to selected dealers and the reallowance to
other dealers may be changed.
The Notes are a new issue of securities. Application will be made to list
the Notes on the NYSE. The Company has been advised by the Underwriters that
they intend to make a market in the Notes but are not obligated to do so and
may discontinue market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the Notes.
The Company has granted the Underwriters an option to purchase, in the
aggregate, up to an additional $15,000,000 principal amount of Notes at the
initial public offering price less underwriting discounts and commissions,
solely to cover over-allotments. Such option may be exercised at any time
until 30 days after the date of this Prospectus. To the extent that the
Underwriters exercise such option, each Underwriter will be committed, subject
to certain conditions, to purchase an additional amount of Notes proportionate
to such Underwriter's initial commitment as indicated in the table above.
The Company has agreed in the Notes Underwriting Agreement, and the Company
and the Selling Shareholder have agreed in the Common Stock Underwriting
Agreement, to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
that the Underwriters may be required to make in respect thereof.
The Company has agreed not to register for sale, offer for sale, sell or
otherwise dispose of (or enter into any transaction or device which is
designed to, or which could be expected to result in the disposition or
purchase by any person at any time in the future of), any debt securities of
the Company with maturities longer than one year (other than the Notes being
offered hereby) or any shares of Common Stock, any securities convertible into
or exercisable or exchangeable for Common Stock, or any rights to acquire
Common Stock, without the prior written consent of Lehman Brothers Inc., for a
period of 90 days from the date of this Prospectus; provided, however, that
such restriction shall not affect the ability of the Company or its
subsidiaries to take any such actions (i) in connection with any employee
benefit or incentive plan of the Company or (ii) in connection with the
offering of the Notes made hereby or the conversion thereof. The Selling
Shareholder has agreed not to offer for sale, sell or otherwise dispose of (or
enter into any transaction or device which is designed to, or which could be
expected to result in the disposition or purchase by any person at any time in
the future of), any shares of Common Stock (other than shares of the Common
Stock being offered hereby), without the prior written consent of Lehman
Brothers Inc., for a period of one year from the date of this Prospectus,
subject to certain exceptions for gifts of shares of Common Stock and shares
of Common Stock which have been pledged to secure one or more loans. In
addition, certain of the Company's other officers and directors have agreed
not to offer for sale, sell or otherwise dispose of (or enter into any
transaction or device which is designed to, or which could be expected to
result in the disposition or purchase by any person at any time in the future
of) any shares of Common Stock for a period of 90 days from the date of this
Prospectus, without the prior written consent of Lehman Brothers Inc.
54
<PAGE>
LEGAL MATTERS
The validity of the Notes and the shares of Common Stock offered by this
Prospectus is being passed on for the Company by the Law Offices of Brian W
Pusch, New York, New York, special counsel to the Company. Brian W. Pusch owns
760 shares of Common Stock. Certain legal matters are being passed on for the
Underwriters by Simpson Thacher & Bartlett (a partnership which includes
professional corporations), New York, New York.
EXPERTS
The consolidated financial statements of Park Electrochemical Corp. as of
February 26, 1995 and February 27, 1994 and for the two years then ended
included in the Registration Statement of which this Prospectus forms a part,
and the financial statement schedule for the two years then ended incorporated
by reference in the Registration Statement of which this Prospectus forms a
part, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports accompanying such consolidated financial statements and
such financial statement schedule. The consolidated financial statements of
Park Electrochemical Corp. for the year ended February 28, 1993 included in
the Registration Statement of which this Prospectus forms a part, and the
financial statement schedule for the year then ended incorporated by reference
in the Registration Statement of which this Prospectus forms a part, have been
audited by Deloitte & Touche LLP, independent auditors, as set forth in their
reports accompanying such financial statements and such financial statement
schedule and, in the case of such consolidated financial statements, include
the financial statements of certain wholly-owned subsidiaries of the Company
which have been audited by Arthur Andersen, independent auditors, as set forth
in their reports accompanying such financial statements. Such consolidated
financial statements and such financial statement schedules are included and
incorporated herein in reliance on such reports given on the authority of such
firms as experts in accounting and auditing.
55
<PAGE>
PARK ELECTROCHEMICAL CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports of Independent Auditors............................................ F- 2
Consolidated Balance Sheets................................................ F- 7
Consolidated Statements of Earnings........................................ F- 8
Consolidated Statements of Stockholders' Equity............................ F- 9
Consolidated Statements of Cash Flows...................................... F-10
Notes to Consolidated Financial Statements................................. F-11
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of Park Electrochemical Corp. Lake
Success, New York
We have audited the accompanying consolidated balance sheets of Park
Electrochemical Corp. and subsidiaries as of February 27, 1994 and February
26, 1995 and the related consolidated statements of earnings, stockholders'
equity, and cash flows for the years then ended. 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 1994 and 1995 consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Park Electrochemical Corp. and subsidiaries as of February 27, 1994 and
February 26, 1995, and the results of their operations and their cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Ernst & Young LLP
New York, New York
April 17, 1995
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of Park Electrochemical Corp. Lake
Success, New York
We have audited the accompanying consolidated statements of earnings,
stockholders' equity, and cash flows of Park Electrochemical Corp. and
subsidiaries for the year ended February 28, 1993. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements based on our audit. We did not
audit the financial statements relating to certain wholly-owned subsidiaries,
which statements reflect total net sales constituting 9.8% of consolidated
total net sales for the fiscal year ended February 28, 1993. Such financial
statements were audited by other auditors whose reports have been furnished to
us, and our opinion, insofar as it relates to the amounts included for such
subsidiaries, is based solely on the reports of such other auditors.
We conducted our audit 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 audit and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the reports of other auditors, such
consolidated financial statements present fairly, in all material respects,
the results of operations and cash flows of Park Electrochemical Corp. and
subsidiaries for the year ended February 28, 1993, in conformity with
generally accepted accounting principles.
As discussed in Note 14, the accompanying consolidated financial statements
for the year ended February 28, 1993 have been restated.
Deloitte & Touche LLP
New York, New York
May 7, 1993
(October 8, 1993 as to Note 14)
F-3
<PAGE>
REPORT OF AUDITORS
Board of Directors and Shareholders
Park Electrochemical Corp.
Lake Success, New York
We have audited the balance sheet of New England Laminates (UK) Limited (a
wholly-owned United Kingdom subsidiary of Park Electrochemical Corp.) as of
February 28, 1993 and the related statements of operations, shareholders'
equity, and cash flows for the year then ended. These financial statements
(which are not presented separately herein) are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of New England Laminates (UK) Limited as of
February 28, 1993 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Arthur Andersen
Chartered Accountants and Registered Auditors
Manchester, England
May 1, 1993
F-4
<PAGE>
REPORT OF AUDITORS
Board of Directors and Shareholders
Park Electrochemical Corp.
Lake Success, New York
We have audited the balance sheet of Tweedbank P.C.B. Supplies Limited (a
wholly-owned United Kingdom subsidiary of Park Electrochemical Corp.) as of
February 28, 1993 and the related statements of operations, shareholders'
equity, and cash flows for the year then ended. These financial statements
(which are not presented separately herein) are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Tweedbank P.C.B. Supplies Limited as of
February 28, 1993 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Arthur Andersen
Chartered Accountants and Registered Auditors
Manchester, England
May 1, 1993
F-5
<PAGE>
REPORT OF AUDITORS
Board of Directors and Shareholders
Park Electrochemical Corp.
Lake Success, New York
We have audited the balance sheet of Technocharge Limited (a wholly-owned
United Kingdom subsidiary of Park Electrochemical Corp.) as of February 28,
1993 and the related statements of operations, shareholders' equity, and cash
flows for the year then ended. These financial statements (which are not
presented separately herein) are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Technocharge Limited as of February 28,
1993 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
Arthur Andersen
Chartered Accountants and Registered Auditors
Manchester, England
May 1, 1993
F-6
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FEBRUARY 27, FEBRUARY 26, NOVEMBER 26,
1994 1995 1995
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............. $ 14,135 $ 30,803 $ 20,153
Marketable securities (Note 2)......... 23,918 15,107 22,392
Accounts receivable, less allowance for
doubtful accounts of $2,673 in fiscal
1994, $2,490 in fiscal 1995 and $1,986
in fiscal 1996........................ 28,904 33,172 45,367
Inventories (Note 3)................... 16,144 16,181 24,770
Prepaid expenses and other current
assets (Note 7)....................... 2,738 3,057 3,844
-------- -------- --------
Total current assets.................. 85,839 98,320 116,526
Property, plant and equipment--at cost,
less accumulated depreciation and
amortization (Note 4).................. 51,398 61,427 74,187
Other assets (Notes 6, 7 and 10)........ 3,513 2,304 1,893
-------- -------- --------
Total................................. $140,750 $162,051 $192,606
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans payable..................... $ 78 $ -- $ --
Accounts payable....................... 24,443 24,616 36,255
Accrued liabilities (Note 5)........... 12,487 15,844 16,180
Income taxes payable................... 2,964 2,825 4,336
-------- -------- --------
Total current liabilities............. 39,972 43,285 56,771
Long-term debt (Note 6)................. 32,861 23 --
Deferred income taxes (Note 7).......... 4,772 5,243 5,773
Deferred pension liability (Note 10).... 1,691 1,452 1,452
Commitments and contingencies (Notes 10
and 11)................................
Stockholders' equity (Notes 6, 8, 9, 10
and 15):
Preferred stock, $1 par value per
share--authorized, 500,000 shares;
issued, none.......................... -- -- --
Common stock, $.10 par value per
share--authorized, 15,000,000 shares
in fiscal 1994 and 1995 and 30,000,000
shares in fiscal 1996; issued,
10,407,650 shares in fiscal 1994 and
13,580,018 shares in fiscal 1995 and
1996.................................. 1,041 1,358 1,358
Additional paid-in capital............. 17,444 50,728 50,814
Retained earnings...................... 57,098 72,216 87,775
Currency translation adjustments....... 177 1,545 1,744
Pension liability adjustment........... (1,148) (972) (972)
Unrealized losses on investments....... -- (139) (17)
-------- -------- --------
74,612 124,736 140,702
Less treasury stock, at cost, 2,301,284
shares in fiscal 1994, 2,136,416
shares in fiscal 1995, and 2,035,954
shares in fiscal 1996................. (13,158) (12,688) (12,092)
-------- -------- --------
Total stockholders' equity............ 61,454 112,048 128,610
-------- -------- --------
Total................................. $140,750 $162,051 $192,606
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
52 WEEKS ENDED NINE MONTHS ENDED
-------------------------------------- -------------------------
FEBRUARY 28, FEBRUARY 27, FEBRUARY 26, NOVEMBER 27, NOVEMBER 26,
1993 1994 1995 1994 1995
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............... $175,176 $208,410 $253,022 $186,398 $227,215
Cost of sales........... 149,145 168,175 196,917 145,857 175,892
-------- -------- -------- -------- --------
Gross profit............ 26,031 40,235 56,105 40,541 51,323
Selling, general and
administrative......... 22,865 25,930 29,995 21,976 25,799
-------- -------- -------- -------- --------
Profit from operations.. 3,166 14,305 26,110 18,565 25,524
-------- -------- -------- -------- --------
Other income (expense):
Interest expense (Note
6)..................... (2,058) (2,407) (431) (417) --
Other income, net
(Note 2)............. 1,967 947 1,822 1,225 1,683
-------- -------- -------- -------- --------
Total other income
(expense).......... (91) (1,460) 1,391 808 1,683
-------- -------- -------- -------- --------
Earnings before income
taxes.................. 3,075 12,845 27,501 19,373 27,207
Income tax provision
(Note 7)............... 810 4,783 10,156 7,168 9,350
-------- -------- -------- -------- --------
Net earnings............ $ 2,265 $ 8,062 $ 17,345 $ 12,205 $ 17,857
======== ======== ======== ======== ========
Earnings per common
share
(Notes 9 and 15):
Primary............... $ .25 $ 1.01 $ 1.59 $ 1.14 $ 1.52
======== ======== ======== ======== ========
Fully diluted......... $ .25 $ .84 $ 1.52 $ 1.08 $ 1.51
======== ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CURRENCY PENSION UNREALIZED TREASURY STOCK
----------------- PAID-IN RETAINED TRANSLATION LIABILITY LOSSES ON -------------------
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS ADJUSTMENT INVESTMENTS SHARES AMOUNT
---------- ------ ---------- -------- ----------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 1, 1992.. 10,354,902 $1,036 $16,795 $49,498 $ 2,590 $ (365) $ -- 1,304,670 $ (7,279)
Net earnings............ 2,265
Exchange rate changes... (2,481)
Change in pension
liability adjustment... (33)
Stock options
exercised.............. (63) (33,750) 188
Cash dividends.......... (1,451)
Purchase of treasury
stock.................. 2 --
---------- ------ ------- ------- ------- ------- ----- --------- --------
Balance, February 28,
1993................... 10,354,902 1,036 16,732 50,312 109 (398) -- 1,270,922 (7,091)
Net earnings............ 8,062
Exchange rate changes... 68
Change in pension
liability adjustment... (750)
Stock options
exercised.............. 184 (87,250) 499
Conversion of
debentures............. 52,748 5 528
Cash dividends.......... (1,276)
Purchase of treasury
stock.................. 1,117,612 (6,566)
---------- ------ ------- ------- ------- ------- ----- --------- --------
Balance, February 27,
1994................... 10,407,650 1,041 17,444 57,098 177 (1,148) -- 2,301,284 (13,158)
Net earnings............ 17,345
Exchange rate changes... 1,368
Change in pension
liability adjustment... 176
Market revaluation...... (139)
Stock options
exercised.............. 696 (212,700) 1,220
Conversion of
debentures............. 3,172,368 317 32,588
Cash dividends.......... (2,227)
Purchase of treasury
stock.................. 47,832 (750)
---------- ------ ------- ------- ------- ------- ----- --------- --------
Balance, February 26,
1995................... 13,580,018 1,358 50,728 72,216 1,545 (972) (139) 2,136,416 (12,688)
(Unaudited):
Net earnings............ 17,857
Exchange rate changes... 199
Market revaluation...... 122
Stock options
exercised.............. 86 (100,476) 596
Cash dividends.......... (2,298)
Purchase of treasury
stock.................. 14 --
---------- ------ ------- ------- ------- ------- ----- --------- --------
Balance, November 26,
1995................... 13,580,018 $1,358 $50,814 $87,775 $ 1,744 $ (972) $ (17) 2,035,954 $(12,092)
========== ====== ======= ======= ======= ======= ===== ========= ========
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
52 WEEKS ENDED NINE MONTHS ENDED
-------------------------------------- -------------------------
FEBRUARY 28, FEBRUARY 27, FEBRUARY 26, NOVEMBER 27, NOVEMBER 26,
1993 1994 1995 1994 1995
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net earnings.......... $ 2,265 $ 8,062 $ 17,345 $ 12,205 $ 17,857
Adjustments to
reconcile net
earnings to net cash
provided by operating
activities:
Depreciation and
amortization......... 7,840 8,733 8,951 6,557 6,820
Provision for doubtful
accounts receivable.. 1,904 (3) (44) -- --
(Gain) loss on sale of
marketable
securities........... (180) (61) 17 17 (51)
Provision for deferred
income taxes......... (1,025) (52) 355 641 831
Accrued interest in
connection with
Debenture
conversion........... -- -- 389 389 --
Other, net............ 220 282 (89) (194) --
Changes in operating
assets and
liabilities:
(Increase) in
accounts
receivable.......... (1,154) (2,773) (3,536) (96) (12,145)
(Increase) decrease
in inventories...... (1,100) (1,908) 249 (2,328) (8,590)
Decrease (increase)
in prepaid expenses
and other current
assets.............. 784 89 (77) (541) (834)
(Increase) decrease
in other assets..... (2,138) 164 25 4 (249)
Increase (decrease)
in accounts
payable............. 544 5,265 (620) 1,783 11,754
Increase in accrued
liabilities......... 810 3,247 3,719 2,209 248
Increase (decrease)
in income taxes
payable............. 633 1,007 277 (495) 1,511
--------- --------- -------- -------- --------
Net cash provided by
operating
activities......... 9,403 22,052 26,961 20,151 17,152
--------- --------- -------- -------- --------
Cash flows from
investing activities:
Purchases of property,
plant and equipment,
net.................. (10,301) (9,627) (17,523) (10,787) (19,029)
Purchases of
marketable
securities........... (288,213) (200,404) (11,161) (11,018) (20,206)
Proceeds from sales of
marketable
securities........... 293,584 200,309 19,827 19,034 13,094
--------- --------- -------- -------- --------
Net cash used in
investing
activities......... (4,930) (9,722) (8,857) (2,771) (26,141)
--------- --------- -------- -------- --------
Cash flows from
financing activities:
Repayments of
borrowings........... (1,402) (64) (84) (93) (3)
Dividends paid........ (1,451) (1,276) (2,227) (1,541) (2,298)
Proceeds from exercise
of stock options..... -- 683 1,499 638 682
Purchase of treasury
stock................ -- (6,566) (750) -- --
Other................. 3 -- (100) (100) 2
--------- --------- -------- -------- --------
Net cash used in
financing
activities......... (2,850) (7,223) (1,662) (1,096) (1,617)
--------- --------- -------- -------- --------
Increase (decrease) in
cash and cash
equivalents before
effect of exchange
rate changes.......... 1,623 5,107 16,442 16,284 (10,606)
Effect of exchange rate
changes on cash and
cash equivalents...... (544) 22 226 (58) (44)
--------- --------- -------- -------- --------
Increase (decrease) in
cash and cash
equivalents........... 1,079 5,129 16,668 16,226 (10,650)
Cash and cash
equivalents, beginning
of period............. 7,927 9,006 14,135 14,135 30,803
--------- --------- -------- -------- --------
Cash and cash
equivalents, end of
period................ $ 9,006 $ 14,135 $ 30,803 $ 30,361 $ 20,153
========= ========= ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principles of Consolidation--The consolidated financial statements
include the accounts of Park Electrochemical Corp. ("Park") and its
subsidiaries (collectively, the "Company"), all of which are wholly-owned. All
significant intercompany balances and transactions have been eliminated.
b. Accounting Period--The Company's fiscal year is the 52 or 53 week period
ending the Sunday nearest to the last day of February. Fiscal years 1993, 1994
and 1995 ended on February 28, 1993, February 27, 1994 and February 26, 1995,
respectively. Each fiscal year presented included 52 weeks.
c. Marketable Securities--All marketable securities are classified as
available-for-sale and carried at fair value, with the unrealized gains and
losses, net of tax, reported as a separate component of stockholders' equity.
Realized gains and losses, amortization of premiums and discounts, and
interest and dividend income are included in other income. The cost of
securities sold is based on the specific identification method.
d. Inventories--Inventories are stated at the lower of cost (first-in,
first-out method) or market.
e. Depreciation and Amortization--Depreciation and amortization are computed
principally by the straight- line method over the estimated useful lives of
the related assets or, with respect to leasehold improvements, the term of the
lease, if shorter.
f. Income Taxes--Deferred income taxes are provided for temporary
differences in the reporting of certain items, primarily depreciation, for
income tax purposes as compared to financial accounting purposes.
United States ("U.S.") Federal income taxes have not been provided on the
undistributed earnings (approximately $10,700,000 at February 26, 1995) of the
Company's foreign subsidiaries, since it is management's practice and intent
to reinvest such earnings in the operations of these subsidiaries.
g. Foreign Currency Translation--Assets and liabilities of foreign
subsidiaries using currencies other than the U.S. dollar as their functional
currency are translated into U.S. dollars at year-end exchange rates and
income and expense items are translated at average exchange rates for the
period. Gains and losses resulting from translation are recorded as currency
translation adjustments in stockholders' equity.
h. Deferred Charges--Preoperating and start-up costs incurred in connection
with new manufacturing facilities are deferred and included in other assets
and amortized on a straight-line basis over five years.
Costs incurred in connection with the issuance of debt financing are
deferred and included in other assets and amortized on a straight-line basis
over the respective debt repayment period.
i. Consolidated Statements of Cash Flows--The Company considers all money
market securities and investments with maturities at the date of purchase of
90 days or less to be cash equivalents.
Supplemental cash flow information:
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Cash paid during the year for:
Interest............................... $2,002,000 $2,352,000 $ 42,000
Income taxes........................... 1,072,000 3,960,000 9,712,000
</TABLE>
j. Interim Financial Statements--The consolidated balance sheet and
statement of stockholders' equity as of November 26, 1995 and the consolidated
statements of earnings and cash flows for the nine-month periods
F-11
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ended November 27, 1994 and November 26, 1995 have been prepared by the
Company, without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position at November 26, 1995, and the results of operations and
cash flows for the nine-month periods ended November 27, 1994 and November 26,
1995, have been made. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
2. MARKETABLE SECURITIES
The following is a summary of available-for-sale securities:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
February 27, 1994:
U.S. Treasury and other govern-
ment securities............... $18,912,000 $ -- $130,000 $18,782,000
U.S. corporate debt securi-
ties.......................... 3,000,000 -- -- 3,000,000
Other debt securities.......... 2,000,000 -- -- 2,000,000
----------- ------- -------- -----------
Total debt securities.......... 23,912,000 -- 130,000 23,782,000
Equity securities.............. 145,000 -- 9,000 136,000
----------- ------- -------- -----------
$24,057,000 -- $139,000 $23,918,000
=========== ======= ======== ===========
February 26, 1995:
U.S. Treasury and other
government securities......... $12,019,000 $ -- $235,000 $11,784,000
U.S. corporate debt
securities.................... 3,000,000 -- 5,000 2,995,000
----------- ------- -------- -----------
Total debt securities.......... 15,019,000 -- 240,000 14,779,000
Equity securities.............. 303,000 25,000 -- 328,000
----------- ------- -------- -----------
$15,322,000 $25,000 $240,000 $15,107,000
=========== ======= ======== ===========
</TABLE>
The Company adopted SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," effective February 28, 1994. The cumulative
effect of the adoption of SFAS No. 115 was not significant.
The gross realized gains on sales of available-for-sale securities totaled
$301,000 and $76,000 for 1993 and 1994, respectively, and the gross realized
losses totaled $121,000, $15,000 and $17,000 for 1993, 1994 and 1995,
respectively. The net of tax adjustment to unrealized holding losses included
as a separate component of stockholders' equity totaled $139,000 in 1995.
The amortized cost and estimated fair value of the debt and marketable
equity securities at February 26, 1995 by contractual maturity are shown
below:
<TABLE>
<CAPTION>
ESTIMATED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
Due in one year or less........................... $11,002,000 $10,910,000
Due after one year through three years............ 4,017,000 3,869,000
----------- -----------
15,019,000 14,779,000
Equity securities................................. 303,000 328,000
----------- -----------
$15,322,000 $15,107,000
=========== ===========
</TABLE>
F-12
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. INVENTORIES
<TABLE>
<CAPTION>
FEBRUARY FEBRUARY NOVEMBER 26,
27, 1994 26, 1995 1995
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials........................ $ 4,727,000 $ 5,215,000 $11,025,000
Work-in-process...................... 3,479,000 2,997,000 4,854,000
Finished goods....................... 7,581,000 7,446,000 8,145,000
Manufacturing supplies............... 357,000 523,000 746,000
----------- ----------- -----------
$16,144,000 $16,181,000 $24,770,000
=========== =========== ===========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
FEBRUARY 27, FEBRUARY 26,
1994 1995
------------ ------------
<S> <C> <C>
Land, buildings and improvements............... $ 17,460,000 $ 21,353,000
Machinery, equipment, furniture and fixtures... 88,463,000 103,822,000
------------ ------------
105,923,000 125,175,000
Less accumulated depreciation and
amortization.................................. 54,525,000 63,748,000
------------ ------------
$ 51,398,000 $ 61,427,000
============ ============
</TABLE>
Depreciation and amortization expense relating to property, plant and
equipment amounted to $7,148,000, $8,188,000 and $8,501,000 for fiscal 1993,
1994 and 1995, respectively. Interest expense capitalized to property, plant
and equipment amounted to $508,000 and $109,000 for fiscal 1993 and 1994,
respectively.
5. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
FEBRUARY 27, FEBRUARY 26,
1994 1995
------------ ------------
<S> <C> <C>
Payroll and commissions.......................... $ 3,112,000 $ 4,641,000
Taxes, other than income taxes................... 1,191,000 1,230,000
Other............................................ 8,184,000 9,973,000
----------- -----------
$12,487,000 $15,844,000
=========== ===========
</TABLE>
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
FEBRUARY 27, FEBRUARY 26,
1994 1995
------------ ------------
<S> <C> <C>
7 1/4% Convertible Subordinated Debentures..... $32,852,000 $ --
Other.......................................... 71,000 29,000
----------- -------
32,923,000 29,000
Less current portion (included in accrued
liabilities).................................. 62,000 6,000
----------- -------
$32,861,000 $23,000
=========== =======
</TABLE>
On June 12, 1986, the Company issued $35,000,000 principal amount of 7 1/4%
Convertible Subordinated Debentures maturing on June 15, 2006 with interest
payable semiannually on June 15 and December 15 of each year. The Debentures
were unsecured, subordinated to bank loans payable and other long-term debt
and were convertible at any time prior to maturity, or earlier redemption,
into shares of the Company's common stock at
F-13
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$10.35 per share. The Company had the option to redeem the Debentures at
specified prices, plus accrued interest. On April 5, 1994, the Company
announced that it had elected to redeem the Debentures on May 31, 1994. (Prior
to that announcement, during the 1991 fiscal year, the Company had
repurchased, in the open market, an aggregate of $1,602,000 principal amount
of Debentures.) Including conversions prior to the call for redemption,
$33,381,000 principal amount of Debentures were converted into 3,225,116
shares of the Company's common stock. The remaining $17,000 principal amount
of Debentures not converted into common stock were redeemed on May 31, 1994.
The $720,000 unamortized balance of deferred issuance costs incurred in
connection with this financing was transferred from other assets to additional
paid-in capital.
As a result of the conversion and redemption of the Debentures, virtually
all of the Company's long-term debt and associated interest expense has been
eliminated. Furthermore, $792,000 of accrued interest expense and costs
related to the conversion of these Debentures was reclassified to additional
paid-in capital during fiscal 1995. If the conversion of substantially all the
debentures had occurred as of the beginning of the 1995 fiscal year, the
primary earnings per share for fiscal 1995 would have approximated the fully
diluted earnings per share for that period.
Foreign lines of credit totaled $5,500,000 at February 26, 1995 all of which
remains available to the subsidiaries.
7. INCOME TAXES
The income tax provision includes the following:
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------------
1993 1994 1995
----------- ---------- -----------
<S> <C> <C> <C>
Current:
Federal............................. $ 1,650,000 $4,300,000 $ 8,798,000
State and local..................... 185,000 535,000 1,003,000
----------- ---------- -----------
1,835,000 4,835,000 9,801,000
Deferred:
Federal............................. (475,000) 396,000 50,000
State and local..................... (160,000) (145,000) 40,000
Foreign............................. (390,000) (303,000) 265,000
----------- ---------- -----------
(1,025,000) (52,000) 355,000
----------- ---------- -----------
$ 810,000 $4,783,000 $10,156,000
=========== ========== ===========
</TABLE>
The Company's effective income tax rate differs from the statutory U.S.
Federal income tax rate as a result of the following:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------------
1993 1994 1995
----- ---- ----
<S> <C> <C> <C>
Statutory U.S. Federal tax rate......................... 34.0% 35.0% 35.0%
Tax accruals no longer required......................... (16.3) -- --
Foreign net operating losses without tax benefit........ 34.1 4.6 .5
Foreign tax rate differentials.......................... (21.9) (.9) (2.0)
State and local taxes, net of Federal benefit........... 8.0 2.0 2.5
General business credits................................ (11.0) (2.8) (.5)
Other, net.............................................. (.6) (.7) 1.4
----- ---- ----
26.3% 37.2% 36.9%
===== ==== ====
</TABLE>
F-14
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has foreign net operating loss carryforwards of approximately
$19,600,000 which was primarily acquired through a business combination, none
of which relates to goodwill or other intangible assets. Approximately
$8,500,000 of the foreign tax net operating loss carryforwards expire in
varying amounts from 1996 through 1999; the remainder have an indefinite
expiration.
At February 27, 1994 and February 26, 1995 current deferred tax assets of
$962,000 and $1,099,000, respectively, which are primarily attributable to
reserves not currently deductible for tax purposes, are included in other
current assets. Long-term deferred tax assets of $339,000 and $319,000 are net
of valuation reserves of approximately $8,300,000 and $6,200,000 at February
27, 1994 and February 26, 1995, respectively, which are primarily attributable
to foreign net operating loss carryforwards, are included in other assets. The
long-term deferred tax liabilities consist primarily of timing differences
relating to depreciation.
8. STOCKHOLDERS' EQUITY
a. Stock Options--Under the stock option plans approved by the Company's
stockholders, key employees may be granted options to purchase shares of
common stock exercisable at prices not less than the fair market value at the
date of grant. Options become exercisable 25% one year from the date of grant,
with an additional 25% exercisable each succeeding year. The options expire 10
years from the date of grant.
On July 14, 1992, the Company's stockholders approved the adoption of a 1992
stock option plan (the "1992 Plan") pursuant to which options to acquire
600,000 shares of the Company's common stock are available for grant to key
employees. The purchase price for common stock to be acquired, upon the
exercise of options, will be no less than 100% of the fair market value of
such stock at the date the options are granted. The 1992 Plan will expire in
March 2002.
Information with respect to the Company's stock option plans follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
RANGE OF ---------------------
EXERCISE PRICES GRANTED EXERCISABLE
--------------- -------- -----------
<S> <C> <C> <C>
Balance, March 1, 1992............... $3.70 -$ 8.59 379,850 175,852
Options becoming exercisable......... 5.50 - 6.81 -- 54,200
Granted.............................. 6.63 - 7.43 78,018 --
Exercised............................ 3.70 (33,750) (33,750)
Canceled............................. 5.50 - 6.81 (2,700) (952)
-------- --------
Balance, February 28, 1993........... 5.50 - 8.59 421,418 195,350
Options becoming exercisable......... 5.50 - 7.43 -- 73,104
Granted.............................. 7.38 - 7.44 181,300 --
Exercised............................ 5.50 - 8.59 (87,250) (87,250)
Canceled............................. 5.50 - 7.43 (24,000) (7,600)
-------- --------
Balance, February 27, 1994........... 5.50 - 8.59 491,468 173,604
Options becoming exercisable......... 5.50 - 7.44 -- 112,682
Granted.............................. 13.13 - 17.00 139,600 --
Exercised............................ 5.50 - 8.59 (112,700) (112,700)
Canceled............................. 5.50 - 13.13 (13,650) (6,526)
-------- --------
Balance, February 26, 1995........... $5.50 -$17.00 504,718 167,060
======== ========
</TABLE>
At February 26, 1995, 254,832 stock options were available for future grant
under the plans.
F-15
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
b. Dividends--During fiscal 1995, the Company declared and paid cash
dividends of $.20 per share, aggregating $2,227,000.
c. Treasury Stock--The Company repurchased 12 shares and 24 shares of its
common stock under authorizations of the Board of Directors during fiscal 1994
and 1995, respectively.
On March 9, 1993, in a privately negotiated transaction with an unaffiliated
third party, the Company repurchased 1,117,600 shares of its common stock for
$6,566,000. The purchase was made outside the Company's stock repurchase
program.
Pursuant to a grant approved by the Company stockholders dated July 24,
1985, an officer of the Company exercised options on November 22, 1994 to
purchase 100,000 shares of the Company's common stock. As permissible under
the terms of the option agreement, the exercise price was paid by surrendering
47,808 shares of the Company's common stock (which was held as a long-term
investment by the officer) to the Company, valued at $15.6875 per share, the
market price at that time.
d. Shareholders' Rights Plan--On February 2, 1989, the Company adopted a
shareholders' rights plan designed to protect shareholder interests in the
event the Company is confronted with coercive or unfair takeover tactics.
Under the terms of the plan, each shareholder of record on February 15, 1989
received one right for each share of common stock owned at that date. In the
event that a person has acquired, or has the right to acquire, 30% or more of
the then outstanding common stock of the Company or tenders for 20% or more of
the outstanding common stock of the Company (in either event, an "acquiring
person"), such rights will become exercisable, unless the Board of Directors
otherwise determines. Upon becoming exercisable as aforesaid, each right will
entitle the holder thereof to purchase one one-hundredth of a share of Series
A Preferred Stock for $30. In addition, each holder of an unexercised
exercisable right, other than an acquiring person, shall have the right to
purchase one share of the principal voting security of the acquiring person
for each right held by such holder at a purchase price per share equal to 50%
of the then market price per share of such acquiring person's securities.
Under certain circumstances, each unexercised exercisable right may instead
entitle the holder thereof to purchase one or fewer shares of the Company's
common stock at a 50% discount of the then market price. The Company may
redeem the rights for a nominal consideration at any time. Unless redeemed or
exercised earlier, all rights expire on February 15, 1999.
On July 12, 1995 the Company amended the shareholders' rights plan; see Note
15.
e. Reserved Common Shares--At February 26, 1995, 759,550 shares of common
stock were reserved for issuance upon exercise of stock options.
9. EARNINGS PER COMMON SHARE
Primary earnings per common share are computed based on the weighted average
number of common shares outstanding during the period. For fiscal year 1993,
the assumed conversion of the Company's 7 1/4% Convertible Subordinated
Debentures (after elimination of related interest expense and amortization of
deferred debt issuance costs, net of income tax effect) was not considered in
the calculation of the fully diluted earnings per share, as the effect was
antidilutive.
The weighted average number of common shares used to compute earnings per
share are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED
------------------------------- ---------------------
NOV. 27, NOV. 26,
1993 1994 1995 1994 1995
--------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Primary............. 9,068,000 7,986,000 10,858,000 10,666,000 11,763,000
========= ========== ========== ========== ==========
Fully diluted....... 9,068,000 11,454,000 11,570,000 11,560,000 11,801,000
========= ========== ========== ========== ==========
</TABLE>
F-16
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. EMPLOYEE BENEFIT PLANS
a. Profit Sharing Plan--Park and certain of its subsidiaries have a
noncontributory profit sharing retirement plan covering their regular full-
time employees. The plan may be modified or terminated at any time, but in no
event may any portion of the contributions revert to the Company. The
Company's contributions under the plan amounted to $708,000, $1,513,000 and
$2,297,000 for fiscal 1993, 1994 and 1995, respectively. Contributions are
discretionary and may not exceed the amount allowable as a tax deduction under
the Internal Revenue Code.
b. Pension Plans--A subsidiary of the Company has two pension plans covering
its union employees. The pension plans are noncontributory defined benefit
plans. The Company's funding policy is to contribute annually the amounts
necessary to satisfy the Internal Revenue Service's funding standards.
In accordance with SFAS No. 87, the Company records its unfunded pension
liability related to its two defined benefit pension plans, which amounted to
$1,691,000 and $1,452,000 at February 27, 1994 and February 26, 1995,
respectively. The effect on the Company's consolidated financial statements in
recording the liability is to recognize an asset (included in "Other Assets")
of $543,000 and $480,000 at February 27, 1994 and February 26, 1995,
respectively, and to record a reduction of stockholders' equity of $1,148,000
and $972,000 at February 27, 1994 and February 26, 1995, respectively.
Pension cost includes the following components:
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost--benefits earned during the
period................................... $ 41,000 $ 48,000 $ 65,000
Interest cost on projected benefit
obligation............................... 247,000 276,000 279,000
Return on plan assets--actual............. (94,000) (40,000) (24,000)
Net amortization and deferral............. (5,000) (39,000) 9,000
-------- -------- --------
Net periodic pension cost................. $189,000 $245,000 $329,000
======== ======== ========
</TABLE>
The funded status of the pension plans follows:
<TABLE>
<CAPTION>
FEBRUARY 27, FEBRUARY 26,
1994 1995
------------ ------------
<S> <C> <C>
Accumulated benefit obligation (including vested
benefit obligation of $3,816,000 and
$3,665,000, respectively)...................... $ 3,816,000 $3,671,000
=========== ==========
Projected benefit obligation.................... $ 3,816,000 $3,671,000
Plan assets at fair value....................... 1,983,000 1,997,000
----------- ----------
Excess of projected benefit obligation over plan
assets......................................... 1,833,000 1,674,000
Unrecognized net loss........................... (1,152,000) (976,000)
Unrecognized prior service cost................. (301,000) (268,000)
Unrecognized initial net obligation being
amortized over 15 years........................ (238,000) (208,000)
----------- ----------
Accrued pension liability....................... $ 142,000 $ 222,000
=========== ==========
</TABLE>
The projected benefit obligation was determined using an assumed discount
rate of 7% and 8.25% for fiscal 1994 and 1995, respectively, and the assumed
long-term rate of return on plan assets was 8% for both fiscal years.
Projected wage increases are not applicable as benefits pursuant to the plans
are based upon years of service without regard to levels of compensation.
At February 26, 1995, plan assets were invested in U.S. government
securities, discounted bank notes and equity securities.
F-17
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. COMMITMENTS AND CONTINGENCIES
a. Lease Commitments--The Company conducts certain of its operations from
leased facilities which include several manufacturing plants, warehouses and
offices, and land leases. The leases on facilities are for terms of up to 10
years, the latest of which expires in 2000. Many of the leases contain renewal
options for periods ranging from 1 to 15 years and require the Company to pay
real estate taxes and other operating costs. The latest land lease expiration
is 2013 and this land lease contains renewal options of up to 35 years.
These noncancelable operating leases have the following payment schedule:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ----------
<S> <C>
1996.............................. $1,779,000
1997.............................. 1,320,000
1998.............................. 1,313,000
1999.............................. 726,000
2000.............................. 441,000
Thereafter........................ 1,264,000
----------
$6,843,000
==========
</TABLE>
Rental expense, inclusive of real estate taxes and other costs, amounted to
$1,755,000, $2,142,000 and $2,226,000 for fiscal 1993, 1994 and 1995,
respectively.
b. Environmental Contingencies--The Company and certain of its subsidiaries
have been named by the Environmental Protection Agency (the "EPA") or a
comparable state agency under the Comprehensive Environmental Response,
Compensation and Liability Act (the "Superfund Act") or a similar state law as
potentially responsible parties for a number of hazardous waste disposal sites
or other potentially contaminated areas. Under the Superfund Act and similar
state laws, all parties who may have contributed any waste to a hazardous
waste disposal site or contaminated area identified by the EPA or a comparable
state agency are jointly and severally liable for the cost of cleanup unless
the EPA or such agency agrees otherwise. Generally, these sites are locations
at which numerous persons dispose hazardous waste. In the case of the
Company's subsidiaries, generally the waste was removed from their
manufacturing facilities and disposed at waste sites by various companies
which contracted with the subsidiaries to provide waste disposal services.
Neither the Company nor any of its subsidiaries have been accused of or
charged with any wrongdoing or illegal acts in connection with any such sites.
The Company believes it maintains an effective and comprehensive environmental
compliance program.
Included in cost of sales are charges for actual expenditures and accruals,
based on estimates, for certain environmental matters described above. The
Company accrues estimated costs associated with known environmental matters,
when such costs can be estimated. Management believes the ultimate disposition
of known environmental matters will not have a material adverse effect upon
the liquidity, capital resources, business or consolidated financial position
of the Company. However, one or more of such environmental matters could have
a significant negative impact on the Company's consolidated financial results
for a particular reporting period.
12. BUSINESS SEGMENTS
The Company has two major business segments: electronics and plumbing and
industrial components. The Company's electronic materials and circuitry
products are marketed primarily to large computer and electronics original
equipment manufacturers ("OEMs") and to major independent printed circuit
board manufacturers that
F-18
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
are located throughout the United States, Canada, Europe and the Far East. The
Company's plumbing and industrial components customers, the majority of which
are located in the United States, include OEMs, hardware and plumbing
wholesalers, home improvement centers and aerospace and defense manufacturers.
Financial information concerning the Company's business segments follows
(all amounts stated in thousands of dollars):
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Sales to unaffiliated customers:
Electronics.................................. $147,419 $182,559 $218,288
Plumbing and industrial components........... 27,757 25,851 34,734
-------- -------- --------
Net sales.................................. $175,176 $208,410 $253,022
======== ======== ========
Operating profit(1):
Electronics.................................. $ 6,292 $ 18,597 $ 28,710
Plumbing and industrial components........... (555) (1,244) 1,226
-------- -------- --------
Total operating profit..................... 5,737 17,353 29,936
-------- -------- --------
General corporate expense...................... (2,571) (3,048) (3,826)
-------- -------- --------
Interest expense............................... (2,058) (2,407) (431)
Other income, net.............................. 1,967 947 1,822
-------- -------- --------
Total other income (expense)............... (91) (1,460) 1,391
-------- -------- --------
Earnings before income taxes............... $ 3,075 $ 12,845 $ 27,501
======== ======== ========
Identifiable assets(2):
Electronics.................................. $ 85,880 $ 91,786 $104,478
Plumbing and industrial components........... 11,318 9,516 12,588
-------- -------- --------
97,198 101,302 117,066
Corporate assets............................... 31,811 39,448 44,985
-------- -------- --------
Total assets............................... $129,009 $140,750 $162,051
======== ======== ========
Depreciation and amortization:
Electronics.................................. $ 6,955 $ 7,910 $ 8,133
Plumbing and industrial components........... 782 737 793
-------- -------- --------
7,737 8,647 8,926
Corporate depreciation....................... 103 86 25
-------- -------- --------
Total depreciation and amortization........ $ 7,840 $ 8,733 $ 8,951
======== ======== ========
Capital expenditures:
Electronics.................................. $ 9,758 $ 9,193 $ 16,302
Plumbing and industrial components........... 618 266 1,472
-------- -------- --------
10,376 9,459 17,774
Corporate capital expenditures............... 17 23 30
-------- -------- --------
Total capital expenditures................. $ 10,393 $ 9,482 $ 17,804
======== ======== ========
</TABLE>
- --------
(1) Operating profit is comprised of total operating revenues, less costs and
expenses other than interest expense, general corporate expense and income
taxes.
(2) Identifiable assets consist of those assets which are used by the
segments. Corporate identifiable assets consist primarily of cash, cash
equivalents and marketable securities.
F-19
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Sales to customers under common control, which were mostly attributed to the
electronics segment, were 15.6%, 25.3% and 21.8% of the Company's consolidated
sales for fiscal 1993, 1994 and 1995, respectively. Intersegment sales and
sales between geographic areas were not significant.
Financial information regarding the Company's foreign operations, which are
conducted substantially in the United Kingdom, France and Singapore, follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Sales to unaffiliated customers................. $46,347 $46,491 $61,919
Sales to U.S. affiliates(1)..................... -- -- 2,992
------- ------- -------
$46,347 $46,491 $64,911
======= ======= =======
Operating income (loss)......................... $(2,942) $(3,252) $ 1,531
======= ======= =======
Income (loss) before income taxes............... $(2,989) $(3,242) $ 1,535
======= ======= =======
Identifiable assets............................. $37,031 $38,477 $44,150
======= ======= =======
</TABLE>
- --------
(1) Sales to U.S. affiliates are accounted for at cost and are eliminated in
consolidation.
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
-------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
FISCAL 1994:
Net sales...................................... $49,229 $47,318 $54,063 $57,800
Gross profit................................... 8,031 8,902 10,378 12,924
Net earnings................................... 892 1,588 2,177 3,405
Earnings per common share:
Primary...................................... $ .11 $ .20 $ .27 $ .43
Fully diluted................................ $ .11 $ .18 $ .23 $ .33
Weighted average common shares outstanding:
Primary...................................... 8,004 7,966 7,966 8,010
Fully diluted................................ 8,004 11,456 11,456 11,456
FISCAL 1995:
Net sales...................................... $62,769 $58,795 $64,834 $66,624
Gross profit................................... 13,247 12,520 14,774 15,564
Net earnings................................... 3,670 3,756 4,779 5,140
Earnings per common share:
Primary...................................... $ .39 $ .33 $ .42 $ .45
Fully diluted................................ $ .34 $ .33 $ .41 $ .44
Weighted average common shares outstanding:
Primary...................................... 9,416 11,344 11,374 11,432
Fully diluted................................ 11,464 11,544 11,658 11,610
</TABLE>
F-20
<PAGE>
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Earnings per common share is computed separately for each quarter.
Therefore, the sum of such quarterly per share amounts may differ from the
total for the years.
14. RESTATEMENT
On September 20, 1993, the Company announced that its internal accounting
staff had recently uncovered financial and accounting errors and
irregularities at FiberCote Industries, Inc. ("FiberCote"), its advanced
composites subsidiary. On the basis of the Company's investigation of such
financial and accounting errors and irregularities, the Company had determined
to restate the audited consolidated financial statements. The adjustments
involved the write-off of certain improperly recorded receivables and the
recognition of previously unrecorded liabilities at FiberCote. The
consolidated financial statements have been restated to reverse the
overstatements of net earnings in the following amounts:
<TABLE>
<CAPTION>
FISCAL YEAR 1993
----------------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C>
Earnings before income taxes, as previously reported.... $3,370
Adjustments............................................. (295)
------
Earnings before income taxes, as restated............... $3,075
======
Net earnings, as previously reported.................... $2,460
Adjustments............................................. (195)
------
Net earnings, as restated............................... $2,265
======
Earnings per common share primary and fully diluted, as
previously reported.................................... $ 0.27
Adjustments to earnings................................. (0.02)
------
Earnings per common share primary and fully diluted, as
restated............................................... $ 0.25
======
</TABLE>
15. SUBSEQUENT EVENTS
On July 12, 1995 the Company's Board of Directors voted a two-for-one stock
split in the form of a 100% common stock dividend. The stock dividend was
distributed on August 15, 1995 to shareholders of record on July 24, 1995. All
share and per share data for prior periods have been retroactively restated to
reflect the stock split. In addition, on July 12, 1995 the Company's
shareholders approved an increase in the number of authorized shares of common
stock from 15,000,000 to 30,000,000.
On July 12, 1995 the Company amended its shareholders' rights plan. Among
other things, these amendments lowered the threshold for triggering the rights
to 15% of the outstanding stock (subject to limited exceptions), increased the
exercise price of the rights to $75 per share, and added a provision which
will enable shareholders other than an acquiring person to purchase shares of
Common Stock at half the market price if the 15% threshold is crossed.
Further, the amendments add a provision which permits the Company to exchange
exercisable rights for shares of Common Stock and extend the term of the
shareholders' rights plan to 2005.
F-21
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALES PERSON, OR ANY OTHER PERSON IS AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFER-
ENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT CONTAINED
OR INCORPORATED BY REFERENCE HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY, THE SELLING SHAREHOLDER OR ANY UNDERWRITER. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE REGIS-
TERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD
BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALES MADE HERE-
UNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
Prospectus Summary....................................................... 4
Risk Factors............................................................. 9
Use of Proceeds.......................................................... 13
Price Range of Common Stock and Dividends................................ 14
Capitalization........................................................... 15
Selected Financial Data.................................................. 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 17
Business................................................................. 23
Management............................................................... 37
Selling Shareholder...................................................... 38
Description of Notes..................................................... 38
Description of Capital Stock............................................. 48
Certain Federal Income Tax Considerations................................ 50
Underwriting............................................................. 53
Legal Matters............................................................ 55
Experts.................................................................. 55
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOGO
PARK ELECTROCHEMICAL CORP.
$100,000,000
% CONVERTIBLE SUBORDINATED
NOTES DUE 2006
500,000 SHARES OF
COMMON STOCK
-----------------
PROSPECTUS
, 1996
-----------------
LEHMAN BROTHERS
NEEDHAM & COMPANY, INC.
ROBERTSON, STEPHENS & COMPANY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Company in
connection with the sale of the Notes and the shares of Common Stock
registered hereunder. All amounts shown are estimates, except the registration
fee of the SEC and the NASD fees:
<TABLE>
<S> <C>
SEC registration fee............................................ $ 39,656
Blue sky fees and expenses...................................... 9,300
Legal fees and expenses......................................... 100,000
Accounting fees and expenses.................................... 60,000
Printing........................................................ 70,000
Trustee's fees.................................................. 7,000
Rating agency fees.............................................. 50,000
NYSE listing fees............................................... 10,800
NASD fees....................................................... 12,000
Miscellaneous................................................... 141,244
--------
Total......................................................... $500,000(1)
========
</TABLE>
- --------
(1) Excludes amounts of $5,615 and $6,115 for the SEC Registration and NASD
fees, respectively, and estimated amounts of $1,700 and $6,570 for Blue
sky fees and expenses and legal fees, respectively, in each case payable
by the Selling Shareholder.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The New York Business Corporation Law (the "BCL") generally permits
indemnification and advancement of expenses to corporate officers and
directors other than in instances where a judgment or other final adjudication
adverse to the officer or director establishes (i) that his or her acts were
committed in bad faith or were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated, or (ii) that he or
she personally gained in fact a financial profit or other advantage to which
he or she was not legally entitled. In addition, the BCL provides that the
indemnification and advancement of expenses provided for by statute are not
the exclusive basis upon which a corporation may indemnify its officers and
directors, and that a corporation may provide for indemnification pursuant to
the certificate of incorporation or by-laws or, when authorized by the
certificate of incorporation or by-laws, pursuant to a resolution of the board
of directors, a resolution of the shareholders or an agreement for
indemnification.
Paragraph XI of the Company's Restated Certificate of Incorporation
provides, in effect, that any person made a party to any action, suit or
proceeding by the fact that he, his testator or intestate, is or was a
director, officer or employee of the Company, or any corporation which he
served as such at the request of the Company, shall be indemnified by the
Company against the reasonable expenses (including attorneys' fees) and, to
the extent permitted by law, any amount paid in a court approved settlement
actually and necessarily incurred in connection with the defense of such
action, suit or proceeding, or in connection with any appeal therein, except
in relation to matters as to which it shall be adjudged in such action, suit
or proceeding that such officer, director or employee is liable for negligence
or misconduct in the performance of his duties.
Article VIII of the Company's By-Laws generally provides for indemnification
of and advancement of expenses to the Company's officers and directors, unless
otherwise expressly prohibited by the BCL or unless relating to an action
(other than an action for enforcement of indemnification) initiated by the
officer or director without the authorization of the Company's Board of
Directors, and establishes procedures to obtain such indemnification. Under
Article VIII, the Company is obligated to indemnify certain persons, including
officers
II-1
<PAGE>
and directors of the Company, who by virtue of such capacity are, were or are
threatened to be made a party to a civil, criminal or other legal action.
Indemnification will extend to costs and expenses (as defined in Article VIII)
related to such action. At the election of the indemnitee, expenses also can
be advanced by the Company, as long as the indemnitee undertakes to repay such
advances in the event that a court determines that indemnification is not
permissible in that particular case. Article VIII, which by its terms is not
the exclusive basis for granting certain indemnification rights, establishes a
procedure whereby indemnification or advancement of expenses generally must
occur within 45 days after the request for such indemnification or advancement
is made by the indemnitee.
In May 1995, the Company purchased from Reliance Insurance Company insurance
covering the Company's directors and officers against claims arising out of
their service to the Company and its subsidiaries. The insurance policy runs
for a period of one year at a total cost of $55,000.
In the Underwriting Agreement relating to the Notes, the Underwriters have
agreed to indemnify the Company and its officers and directors against certain
liabilities, including liabilities under the Securities Act of 1933.
In the Underwriting Agreement relating to the Common Stock, the Underwriters
have agreed to indemnify the Company and its officers and directors and the
Selling Shareholder against certain liabilities, including liabilities under
the Securities Act of 1933.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1.01 --Form of Underwriting Agreement relating to the Notes
1.02 --Form of Underwriting Agreement relating to the Common Stock
4.01 --Form of Indenture dated as of February , 1996
4.02 --Restated Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 3.01 of the Company's Quarterly Report on Form 10-
Q for the fiscal quarter ended August 27, 1995 (File No. 1-4415))
4.03 --By-laws, as amended (incorporated by reference to Exhibit 3.02 of the
Company's Annual Report on Form 10-K for the fiscal year ended March 1,
1992 (File No. 1-4415))
4.04 --Amended and Restated Rights Agreement, dated as of July 12, 1995,
between the Company and Registrar and Transfer Company, as Rights Agent
(incorporated herein by reference to Exhibit 1 to Amendment No. 1 on
Form 8-A/A to the Company's Registration Statement on Form 8-A (File
No. 1-4415), filed on August 10, 1995)
5.01 --Opinion of Law Offices of Brian W Pusch
12 --Computation of Ratio of Earnings to Fixed Charges
23.01 --Consent of Law Offices of Brian W Pusch (included in Exhibit 5.01)
23.02 --Consent of Ernst & Young LLP
23.03 --Consent of Deloitte & Touche LLP
23.04 --Consent of Arthur Andersen & Co.
24 --Power of Attorney (see page II-4)
25 --Statement of Eligibility on Form T-1 of The Chase Manhattan Bank, N.A.
</TABLE>
ITEM 17. UNDERTAKINGS
(b) 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 15(d) of the
Securities and Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be
II-2
<PAGE>
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(h) 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.
(i) 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 this Registration Statement in reliance upon Rule 430A and
contained in a 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 this 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the Village of Lake Success, State of New York on January 16,
1996.
Park Electrochemical Corp.
/s/ Brian E. Shore
By:
BRIAN E. SHORE
EXECUTIVE VICE PRESIDENT
Pursuant to 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. Each person whose individual signature
appears below hereby authorizes Jerry Shore and Brian Shore, or either one of
them, to execute in the name of each such person and to file any amendment to
this Registration Statement and appoints Jerry Shore and Brian Shore, or
either one of them, as attorney-in-fact to sign on his behalf individually and
in each capacity stated below and to file any amendments to this Registration
Statement, including any and all post-effective amendments.
SIGNATURE TITLE DATE
/s/ Jerry Shore Chairman of the January 16,
JERRY SHORE Board, President, 1996
Chief Executive
Officer and
Director (principal
executive officer)
/s/ Paul R. Shackford Chief Financial January 16,
PAUL R. SHACKFORD Officer and 1996
Treasurer
(principal
financial and
accounting officer)
/s/ E. Philip Smoot Director January 16,
E. PHILIP SMOOT 1996
/s/ Brian E. Shore Director January 16,
BRIAN E. SHORE 1996
/s/ Anthony Chiesa Director January 16,
ANTHONY CHIESA 1996
/s/ Lloyd Frank Director January 16,
LLOYD FRANK 1996
/s/ Norman M. Schneider Director January 16,
NORMAN M. SCHNEIDER 1996
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER EXHIBIT
------ ------- ---
<C> <S> <C>
1.01 --Form of Underwriting Agreement relating to the Notes
1.02 --Form of Underwriting Agreement relating to the Common Stock
4.01 --Form of Indenture dated as of February , 1996
4.02 --Restated Certificate of Incorporation, as amended (incorporated
by reference to Exhibit 3.01 of the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended August 27, 1995 (File
No. 1-4415))
4.03 --By-laws, as amended (incorporated by reference to Exhibit 3.02
of the Company's Annual Report on Form 10-K for the fiscal year
ended March 1, 1992 (File No. 1-4415))
4.04 --Amended and Restated Rights Agreement, dated as of July 12,
1995, between the Company and Registrar and Transfer Company, as
Rights Agent (incorporated herein by reference to Exhibit 1 to
Amendment No. 1 on Form 8-A/A to the Company's Registration
Statement on Form 8-A (File No. 1-4415), filed on August 10,
1995)
5.01 --Opinion of Law Offices of Brian W Pusch
12 --Computation of Ratio of Earnings to Fixed Charges
23.01 --Consent of Law Offices of Brian W Pusch (included in Exhibit
5.01)
23.02 --Consent of Ernst & Young LLP
23.03 --Consent of Deloitte & Touche LLP
23.04 --Consent of Arthur Andersen & Co.
24 --Power of Attorney (see page II-4)
25 --Statement of Eligibility on Form T-1 of The Chase Manhattan
Bank, N.A.
</TABLE>
<PAGE>
EXHIBIT 1.01
$100,000,000
PARK ELECTROCHEMICAL CORP.
___% CONVERTIBLE SUBORDINATED NOTES DUE 2006
UNDERWRITING AGREEMENT
----------------------
______________ __, 1996
Lehman Brothers Inc.
Needham & Company, Inc.
Robertson, Stephens & Company LLC,
As Representatives of the several
Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Park Electrochemical Corp., a New York corporation (the "Company"),
proposes to sell $100,000,000 principal amount of ___% Convertible Subordinated
Notes due 2006 (the "Firm Notes"). In addition, the Company proposes to grant
to the Underwriters (as defined below) an option to purchase up to an additional
$15,000,000 principal amount of ___% Convertible Subordinated Notes due 2006 on
the terms and for the purposes set forth in Section 2 (the "Option Notes").
The Firm Notes and the Option Notes, if purchased, are hereinafter collectively
called the "Notes." The Notes are convertible into shares of common stock, par
value $.10 per share (the "Common Stock"), of the Company, upon the terms and
subject to the conditions and adjustments set forth in the Indenture (as defined
below), at a conversion price of $___ per share. The Notes are to be issued
pursuant to an Indenture (the "Indenture"), dated as of _________, 1996, between
the Company and The Chase Manhattan Bank, N.A., as trustee (the "Trustee"), the
form of which has been filed as an exhibit to the Registration Statements (as
defined below). This is to confirm the agreement concerning the purchase of the
Notes from the Company by the Underwriters named in Schedule 1 hereto (the
"Underwriters").
1. Representations, Warranties and Agreements of the Company. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-3, and amendments
thereto, with respect to the Notes have (i) been prepared by the
Company in conformity with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, (ii) been filed with the
Commission under the Securities Act and (iii) become effective under
the Securities Act; a second registration statement on Form S-3 with
respect to the
<PAGE>
2
Notes (i) may also be prepared by the Company in conformity with the
requirements of the Securities Act and the Rules and Regulations and
(ii) if to be so prepared, will be filed with the Commission on the
date hereof under the Securities Act on the date hereof pursuant to
Rule 462(b) of the Rules and Regulations; and the Indenture has been
qualified under the Trust Indenture Act of 1939 (the "Trust Indenture
Act"). Copies of the first such registration statement and the
amendments to such registration statement, together with the form of
any such second registration statement, have been delivered by the
Company to you as the representatives (the "Representatives") of the
Underwriters. As used in this Agreement, "Effective Time" means (i)
with respect to the first such registration statement, the date and
the time as of which such registration statement, or the most recent
post-effective amendment thereto, if any, was declared effective by
the Commission and (ii) with respect to any second registration
statement, the date and time as of which such second registration
statement is filed with the Commission, and "Effective Times" is the
collective reference to both Effective Times; "Effective Date" means
(i) with respect to the first such registration statement, the date of
the Effective Time of such registration statement and (ii) with
respect to any second registration statement, the date of the
Effective Time of such second registration statement, and "Effective
Dates" is the collective reference to both Effective Dates;
"Preliminary Prospectus" means each prospectus included in any such
registration statement, or amendments thereof, before it became
effective under the Securities Act and any prospectus filed with the
Commission by the Company with the consent of the Representatives
pursuant to Rule 424(a) of the Rules and Regulations; "Primary
Registration Statement" means the first registration statement
referred to in this Section 1(a), as amended at its Effective Time,
"Rule 462(b) Registration Statement" means the second registration
statement, if any, referred to in this Section 1(a), as filed with the
Commission, and "Registration Statements" means both the Primary
Registration Statement and any Rule 462(b) Registration Statement,
including in each case any documents incorporated by reference therein
at such time and all information contained in the final prospectus
filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations in accordance with Section 5(a) hereof and deemed to be a
part of the Registration Statements as of the Effective Time of the
Primary Registration Statement pursuant to paragraph (b) of Rule 430A
of the Rules and Regulations; and "Prospectus" means such final
prospectus, as first filed with the Commission pursuant to paragraph
(1) or (4) of Rule 424(b) of the Rules and Regulations. Reference
made herein to any Preliminary Prospectus or to the Prospectus shall
be deemed to refer to and include any documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Securities
Act, as of the date of such Preliminary Prospectus or the Prospectus,
as the case may be, and any reference to any amendment or supplement
to any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include any document filed under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), after the date of such
Preliminary Prospectus or the Prospectus, as the case may
<PAGE>
3
be, and incorporated by reference in such Preliminary Prospectus or
the Prospectus, as the case may be; and any reference to any amendment
to either of the Registration Statements shall be deemed to include
any annual report of the Company filed with the Commission pursuant to
Section 13(a) or 15(d) of the Exchange Act after the Effective Time
that is incorporated by reference in the Registration Statements. The
Commission has not issued any order preventing or suspending the use
of any Preliminary Prospectus.
(b) The Primary Registration Statement conforms (and the Rule
462(b) Registration Statement, if any, the Prospectus and any further
amendments or supplements to the Registration Statements or the
Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform) in all material respects
to the requirements of the Securities Act and the Rules and
Regulations and do not and will not, as of the applicable effective
date (as to the Registration Statements and any amendment thereto) and
as of the applicable filing date (as to the Prospectus and any
amendment or supplement thereto) contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided that no representation or warranty is made as to information
contained in or omitted from the Registration Statements or the
Prospectus in reliance upon and in conformity with written information
furnished to the Company through the Representatives by or on behalf
of any Underwriter specifically for inclusion therein; and the
Indenture conforms in all material respects to the requirements of the
Trust Indenture Act and the applicable rules and regulations
thereunder.
(c) The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Exchange Act and the rules and regulations of the Commission
thereunder, and none of such documents, when they became effective or
were filed with the Commission, as the case may be, 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; and any further documents so filed and
incorporated by reference in the Prospectus, when such documents
become effective or are filed with Commission, as the case may be,
will conform in all material respects to the requirements of the
Exchange Act and the rules and regulations of the Commission
thereunder and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
(d) The Company and each of its subsidiaries (as defined in
Section 15) have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective
jurisdictions of incorporation, are duly
<PAGE>
4
qualified to do business and are in good standing as foreign
corporations in each jurisdiction in which their respective ownership
or lease of property or the conduct of their respective businesses
requires such qualification except where the failure to be so
qualified is not reasonably likely to have a material adverse effect
on the consolidated financial position, stockholders' equity, results
of operations or business of the Company and its subsidiaries, and
have all power and authority necessary to own or hold their respective
properties and to conduct the businesses in which they are engaged;
and none of the subsidiaries of the Company (other than New England
Laminates Co., Inc., Nelco Products, Inc., Nelco Technology Inc.,
Neltec, Inc., Nelco Products Pte, Ltd. and Nelco International
Corporation (collectively, the "Significant Subsidiaries")) is a
"significant subsidiary", as such term is defined in Rule 405 of the
Rules and Regulations.
(e) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable, subject to Section 630 of the New York
Business Corporation Law (the "BCL"), and conform to the description
thereof contained in the Prospectus; and all of the issued shares of
capital stock of each subsidiary of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable
and (except for directors' qualifying shares) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims.
(f) The Indenture has been duly authorized and, when duly
executed by the proper officers of the Company (assuming due execution
and delivery by the Trustee) and delivered by the Company, will have
been duly executed and delivered by the Company and will constitute a
valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing; and the Notes have been duly authorized, and,
when duly executed, authenticated, issued and delivered as provided in
the Indenture, will be duly and validly issued and outstanding, and
will constitute valid and binding obligations of the Company entitled
to the benefits of the Indenture and enforceable in accordance with
their terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
(g) All of the shares of Common Stock issuable upon conversion
of the Notes have been duly and validly authorized and reserved for
issuance upon such conversion and, when issued and delivered in
accordance with the terms of the
<PAGE>
5
Indenture, will be duly and validly issued, fully paid and non-
assessable, subject to Section 630 of the BCL; and the Indenture, the
Notes and the Common Stock issuable upon conversion of the Notes will
conform in all material respects to the descriptions thereof contained
in the Prospectus; there are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the voting or
transfer of, any shares of the Common Stock issuable upon conversion
of the Notes pursuant to the Company's charter or by-laws or any
agreement or other instrument.
(h) The execution, delivery and performance of this Agreement
and the Indenture by the Company, the consummation of the transactions
contemplated hereby and thereby and the issuance and delivery of the
Notes and the Common Stock issuable upon conversion of the Notes will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound or to
which any of the properties or assets of the Company or any of its
subsidiaries is subject, nor will such actions result in any violation
of the provisions of the charter or by-laws of the Company or any of
its subsidiaries or any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties or
assets; and except for the registration of the Notes and the Common
Stock issuable upon conversion of the Notes under the Securities Act
and such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and
applicable state securities laws in connection with the purchase and
distribution of the Notes by the Underwriters, no consent, approval,
authorization or order of, or filing or registration with, any such
court or governmental agency or body is required for the execution,
delivery and performance of this Agreement or the Indenture by the
Company and the consummation of the transactions contemplated hereby
and thereby and the issuance of the Common Stock issuable upon
conversion of the Notes.
(i) There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require
the Company to file a registration statement under the Securities Act
with respect to any securities of the Company owned or to be owned by
such person or to require the
<PAGE>
6
Company to include such securities in the securities registered
pursuant to the Registration Statements or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Securities Act.
(j) Except as described in the Prospectus, the Company has not
sold or issued any shares of Common Stock during the six-month period
preceding the date of the Prospectus, including any sales pursuant to
Rule 144A under, or Regulations D or S of, the Securities Act, other
than shares issued pursuant to employee benefit plans, stock options
plans or other employee compensation plans or pursuant to outstanding
options, rights or warrants.
(k) Neither the Company nor any of its subsidiaries has
sustained, since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus, any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since such
date, there has not been any change in the capital stock or long-term
debt of the Company or any of its subsidiaries or any material adverse
change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries, otherwise than as set forth or contemplated in
the Prospectus.
(l) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statements or
included or incorporated by reference in the Prospectus present fairly
the financial condition and results of operations of the entities
purported to be shown thereby, at the dates and for the periods
indicated, and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis
throughout the periods involved.
(m) Ernst & Young LLP, who have certified certain financial
statements of the Company, whose reports appear in the Prospectus or
are incorporated by reference therein and who have delivered the
initial letter referred to in Section 7(f) hereof, are independent
public accountants as required by the Securities Act and the Rules and
Regulations; and Deloitte & Touche LLP and Arthur Andersen LLP, whose
respective reports appear in the Prospectus and are incorporated by
reference therein and who have each delivered the initial letter
referred to in Section 7(g) hereof, were independent accountants as
required by the Securities Act and the Rules and Regulations during
the periods covered by the respective financial statements on which
they reported as set forth in their respective reports contained and
incorporated in the Prospectus and as of the date of such reports.
<PAGE>
7
(n) The Company and each of its subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as
are described in the Prospectus or such as do not materially affect
the value of such property and do not materially interfere with the
use made and proposed to be made of such property by the Company and
its subsidiaries; and all real property and buildings held under lease
by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
subsidiaries.
(o) The Company and each of its subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of their respective businesses and the value
of their respective properties and as is customary for companies
engaged in similar businesses in similar industries.
(p) Each of the Company and its subsidiaries owns or possesses
adequate rights to use all material patents, patent applications,
trademarks, service marks, trade names, trademark registrations,
service mark registrations, copyrights and licenses described in the
Prospectus as being owned or used by it or which are necessary for the
conduct of its business and has no reason to believe that the conduct
of its business will conflict with, and have not received any notice
of any claim of conflict with, any such rights of others which claims,
singularly or in the aggregate, if subject to an unfavorable decision,
ruling or finding, are reasonably likely to have a material adverse
effect on the consolidated financial position, stockholders' equity,
results of operations or business of the Company and its subsidiaries.
(q) Except for environmental proceedings referred to under the
caption "Business--Environmental Matters" in the Prospectus, there are
no legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property or asset
of the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries, are
reasonably likely to have a material adverse effect on the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries;
and to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others.
(r) The conditions for use of Form S-3, as set forth in General
Instruction I thereto, have been satisfied.
<PAGE>
8
(s) There are no contracts or other documents which are required
to be described in the Prospectus or filed as exhibits to either of
the Registration Statements by the Securities Act or by the Rules and
Regulations which have not been described in the Prospectus or filed
as exhibits to either of the Registration Statements or incorporated
therein by reference as permitted by the Rules and Regulations.
(t) No relationship, direct or indirect, exists between or among
the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand,
which is required to be described in the Prospectus which is not so
described.
(u) No labor disturbance by the employees of the Company exists
or, to the knowledge of the Company, is imminent which might be
expected to have a material adverse effect on the consolidated
financial position, stockholders' equity, results of operations,
business or prospects of the Company and its subsidiaries.
(v) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company would have any liability;
the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and
each "pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which would cause the loss of
such qualification.
(w) The Company has filed all federal, state and local income
and franchise tax returns required to be filed through the date hereof
and has paid all taxes shown by such returns to be due, and no tax
deficiency has been determined adversely to the Company or any of its
subsidiaries which has had (nor does the Company have any knowledge of
any tax deficiency which, if determined adversely to the Company or
any of its subsidiaries, might have) a material adverse effect on the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries.
(x) The Company (i) maintains and keeps accurate books and
records and (ii) maintains a system of internal accounting controls
sufficient to provide
<PAGE>
9
reasonable assurance that (A) transactions are executed in accordance
with management's general or specific authorization, (B) transactions
are recorded as necessary to permit preparation of its financial
statements in accordance with generally accepted accounting principles
and to maintain accountability for its assets, (C) access to its
assets is permitted only in accordance with management's general or
specific authorization and (D) the reported accountability for its
assets is compared with existing assets at reasonable intervals.
(y) Neither the Company nor any of its subsidiaries (i) is in
violation of its charter or by-laws, (ii) is in default in any
respect, and no event has occurred which, with notice or lapse of time
or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which it is a party or by which it is bound or to
which any of its properties or assets is subject or (iii) is in
violation in any respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its properties or assets may
be subject or has failed to obtain any material license, permit,
certificate, franchise or other governmental authorization or permit
necessary to the ownership of its properties or assets or to the
conduct of its business, other than such defaults, violations or
failures described in clauses (ii) or (iii) above which, singularly or
in the aggregate, are not reasonably likely to have a material adverse
effect on the consolidated financial position, stockholders' equity,
results of operations or business of the Company and its subsidiaries.
(z) There has been no storage, disposal, generation,
manufacture, refinement, transportation, handling or treatment of
toxic wastes, medical wastes, hazardous wastes or hazardous substances
by the Company or any of its subsidiaries (or, to the knowledge of the
Company, any of their predecessors in interest) at, upon or from any
of the properties now or previously owned or leased by the Company or
its subsidiaries in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require
remedial action under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except for any violation or
remedial action which would not have, or could not be reasonably
likely to have, singularly or in the aggregate with all such
violations and remedial actions, a material adverse effect on the
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; there has been no
material spill, discharge, leak, emission, injection, escape, dumping
or release of any kind onto such property or into the environment
surrounding such property of any toxic wastes, medical wastes, solid
wastes, hazardous wastes or hazardous substances due to or caused by
the Company or any of its subsidiaries or with respect to which the
Company or any of its subsidiaries have knowledge, except for any such
spill, discharge, leak, emission, injection, escape, dumping or
release which would not have or would not be reasonably likely to
have, singularly or in the aggregate with
<PAGE>
10
all such spills, discharges, leaks, emissions, injections, escapes,
dumpings and releases, a material adverse effect on the consolidated
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries; and the terms "hazardous wastes",
"toxic wastes", "hazardous substances" and "medical wastes" shall have
the meanings specified in any applicable local, state, federal and
foreign laws or regulations with respect to environmental protection.
(aa) Neither the Company nor any subsidiary is an "investment
company" within the meaning of such term under the Investment Company
Act of 1940 and the rules and regulations of the Commission
thereunder.
2. Purchase of the Notes by the Underwriters. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell $100,000,000 principal
amount of the Firm Notes to the several Underwriters, and each of the
Underwriters, severally and not jointly, agrees to purchase the principal amount
of the Firm Notes set opposite that Underwriter's name in Schedule 1 hereto.
In addition, the Company grants to the Underwriters an option to
purchase up to $15,000,000 principal amount of Option Notes. Such option is
granted solely for the purpose of covering over-allotments in the sale of Firm
Notes and is exercisable as provided in Section 4 hereof. Option Notes shall
be purchased severally for the account of the Underwriters in proportion to the
principal amount of Firm Notes set opposite the name of such Underwriters in
Schedule 1 hereto. The respective purchase obligations of each Underwriter with
respect to the Option Notes shall be adjusted by the Representatives so that no
Underwriter shall be obligated to purchase Option Notes other than in multiples
of $1,000.
The price of both the Firm Notes and any Option Notes shall be equal
to _____% of the principal amount thereof, plus accrued interest, if any, from
___________, 1996 to the applicable Delivery Date.
The Company shall not be obligated to deliver any of the Notes to be
delivered on the First Delivery Date or the Second Delivery Date (as hereinafter
defined), as the case may be, except upon payment for all the Notes to be
purchased on such Delivery Date as provided herein.
3. Offering of Notes by the Underwriters. Upon authorization by the
Representatives of the release of the Firm Notes, the several Underwriters
propose to offer the Firm Notes for sale upon the terms and conditions set forth
in the Prospectus; provided, however, that no Notes registered pursuant to the
Rule 462(b) Registration Statement, if any, shall be offered prior to the
Effective Time thereof.
4. Delivery of and Payment for the Notes. Delivery of and payment
for the Firm Notes shall be made at the offices of Simpson Thacher & Bartlett at
425 Lexington Avenue, New York, New York 10017, at 10:00 A.M., New York City
time, on the [third][fourth] full business
<PAGE>
11
day following the date of this Agreement or at such other date or place as shall
be determined by agreement between the Representatives and the Company. This
date and time are sometimes referred to as the "First Delivery Date." On the
First Delivery Date, the Company shall deliver or cause to be delivered the Firm
Notes to the Representatives for the account of each Underwriter through the
facilities of The Depository Trust Company against payment to or upon the order
of the Company of the purchase price by certified or official bank check or
checks payable in immediately available (same-day) funds. Time shall be of the
essence, and delivery at the time and place specified pursuant to this Agreement
is a further condition of the obligation of each Underwriter hereunder.
At any time on or before the thirtieth day after the date of this
Agreement the option granted in Section 2 may be exercised by written notice
being given to the Company by the Representatives. Such notice shall set forth
the aggregate principal amount of Option Notes as to which the option is being
exercised, the names in which the Option Notes are to be registered, the
denominations in which the Option Notes are to be issued and the date and time,
as determined by the Representatives, when the Option Notes are to be delivered;
provided, however, that this date and time shall not be earlier than the First
Delivery Date nor earlier than the second business day after the date on which
the option shall have been exercised nor later than the fifth business day after
the date on which the option shall have been exercised. The date and time the
Option Notes are delivered are sometimes referred to as the "Second Delivery
Date" and the First Delivery Date and the Second Delivery Date are sometimes
each referred to as a "Delivery Date").
Delivery of and payment for the Option Notes shall be made at the
place specified in the first sentence of the first paragraph of this Section 4
(or at such other place as shall be determined by agreement between the
Representatives and the Company) at 10:00 A.M., New York City time, on the
Second Delivery Date. On the Second Delivery Date, the Company shall deliver or
cause to be delivered the Option Notes to the Representatives for the account of
each Underwriter through the facilities of The Depository Trust Company against
payment to or upon the order of the Company of the purchase price by certified
or official bank check or checks payable in immediately available (same-day)
funds. Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation of
each Underwriter hereunder.
5. Further Agreements of the Company. The Company agrees:
(a) To prepare the Rule 462(b) Registration Statement, if
necessary, in a form approved by the Representatives and to file such
Rule 462(b) Registration Statement with the Commission on the date
hereof; to prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b)
under the Securities Act not later than 10:00 A.M., New York City
time, the day following the execution and delivery of this Agreement;
to make no further amendment or any supplement to the Registration
Statements or to the Prospectus prior to the Second Delivery Date
except as permitted herein; to advise
<PAGE>
12
the Representatives, promptly after it receives notice thereof, of the
time when any amendment to either Registration Statement has been
filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish the Representatives
with copies thereof; to file promptly all reports and any definitive
proxy or information statements required to be filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of the Prospectus and for so
long as the delivery of a prospectus is required in connection with
the offering or sale of the Notes; to advise the Representatives,
promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending
the use of any Preliminary Prospectus or the Prospectus, of the
suspension of the qualification of the Notes for offering or sale in
any jurisdiction, of the initiation or threatening of any proceeding
for any such purpose, or of any request by the Commission for the
amending or supplementing of the Registration Statements or the
Prospectus or for additional information; and, in the event of the
issuance of any stop order or of any order preventing or suspending
the use of any Preliminary Prospectus or the Prospectus or suspending
any such qualification, to use promptly its best efforts to obtain its
withdrawal;
(b) To furnish promptly to each of the Representatives and to
counsel for the Underwriters a signed copy of each of the Registration
Statements as originally filed with the Commission, and each amendment
thereto filed with the Commission, including all consents and exhibits
filed therewith;
(c) To deliver promptly to the Representatives in New York City
such number of the following documents as the Representatives shall
request: (i) conformed copies of the Registration Statements as
originally filed with the Commission and each amendment thereto (in
each case excluding exhibits other than this Agreement, the Indenture,
the computation of the ratio of earnings to fixed charges and the
computation of per share earnings), (ii) each Preliminary Prospectus,
the Prospectus (not later than 10:00 A.M., New York City time, of the
day following the execution and delivery of this Agreement) and any
amended or supplemented Prospectus (not later than 10:00 A.M., New
York City time, on the day following the date of such amendment or
supplement) and (iii) any document incorporated by reference in the
Prospectus (excluding exhibits thereto); and, if the delivery of a
prospectus is required at any time after the Effective Time of the
Primary Registration Statement in connection with the offering or sale
of the Notes (or any other securities relating thereto) and if at such
time any events shall have occurred as a result of which the
Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be
necessary to amend or supplement the Prospectus or to file under the
Exchange Act any
<PAGE>
13
document incorporated by reference in the Prospectus in order to
comply with the Securities Act or the Exchange Act, to notify the
Representatives and, upon their request, to file such document and to
prepare and furnish without charge to each Underwriter and to any
dealer in securities as many copies as the Representatives may from
time to time request of an amended or supplemented Prospectus which
will correct such statement or omission or effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statements or the Prospectus or any supplement to the
Prospectus that may, in the reasonable judgment of the Company or the
Representatives, be required by the Securities Act or requested by the
Commission;
(e) Prior to filing with the Commission (i) any amendment to
either of the Registration Statements, any supplement to the
Prospectus or any document incorporated by reference in the Prospectus
or (ii) any Prospectus pursuant to Rule 424 of the Rules and
Regulations, to furnish a copy thereof to the Representatives and
counsel for the Underwriters and obtain the consent of the
Representatives to the filing;
(f) As soon as practicable after the Effective Date of the
Primary Registration Statement, to make generally available to the
Company's security holders and to deliver to the Representatives an
earnings statement of the Company and its subsidiaries (which need not
be audited) complying with Section 11(a) of the Securities Act and the
Rules and Regulations (including, at the option of the Company, Rule
158);
(g) For a period of three years following the Effective Date of
the Primary Registration Statement, to furnish to the Representatives
copies of all materials furnished by the Company to its shareholders
and all public reports and all reports and financial statements
furnished by the Company to the principal national securities exchange
upon which the Common Stock may be listed pursuant to requirements of
or agreements with such exchange or to the Commission pursuant to the
Exchange Act or any rule or regulation of the Commission thereunder;
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Notes and the
Common Stock issuable upon conversion of the Notes for offering and
sale under the securities laws of such jurisdictions as the
Representatives may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Notes; provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any
<PAGE>
14
jurisdiction or to subject itself to taxation in any jurisdiction in
which it is not currently subject to jurisdiction;
(i) For a period of 90 days from the date of the Prospectus, not
to, directly or indirectly, offer for sale, sell or otherwise dispose
of (or enter into any transaction or device which is designed to, or
could be expected to, result in the disposition or purchase by any
person at any time in the future of) any (i) debt securities of the
Company with maturities longer than one year (other than the Notes as
contemplated by this Agreement) or (ii) shares of Common Stock (other
than shares offered or issued pursuant to employee benefit plans,
stock option plans or other employee compensation plans existing on
the date hereof or pursuant to currently outstanding options, warrants
or rights and other than in connection with the offer for sale, or the
conversion, of the Notes), or sell or grant options, rights or
warrants with respect to any such debt securities or shares of Common
Stock (other than the grant of options pursuant to option plans
existing on the date hereof and other than in connection with the
offer for sale, or the conversion, of the Notes), without the prior
written consent of the Representatives; and to cause each officer and
director of the Company to furnish to the Representatives, prior to
the First Delivery Date, a letter or letters, in form and substance
satisfactory to counsel for the Underwriters, pursuant to which each
such person shall agree not to, directly or indirectly, offer for
sale, sell or otherwise dispose of (or enter into any transaction or
device which is designed to, or could be expected to, result in the
disposition or purchase by any person at any time in the future of)
any such debt securities or, except as described therein, shares of
Common Stock for a period of 90 days from the date of the Prospectus,
without the prior written consent of Lehman Brothers Inc.;
(j) To reserve and continue to reserve a sufficient number of
shares of Common Stock for issuance upon conversion of the Notes;
(k) To complete the listing of the Notes on the New York Stock
Exchange, Inc. ("NYSE"), subject only to official notice of issuance
and evidence of satisfactory distribution prior to the First Delivery
Date;
(l) To complete the listing of the Common Stock issuable upon
conversion of the Notes on the NYSE, subject to official notice of
issuance of the Notes; and
(m) To apply the net proceeds from the sale of the Notes being
sold by the Company as set forth in the Prospectus.
6. Expenses. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Notes and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statements and any amendments and
exhibits thereto; (c) the costs of distributing
<PAGE>
15
the Registration Statements as originally filed and each amendment thereto and
any post-effective amendments thereof (including, in each case, exhibits), any
Preliminary Prospectus, the Prospectus and any amendment or supplement to the
Prospectus or any document incorporated by reference therein, all as provided in
this Agreement; (d) the costs of reproducing and distributing this Agreement;
(e) the costs of distributing the terms of agreement relating to the
organization of the underwriting syndicate and selling group to the members
thereof by mail, telex or other means of communication; (f) the filing fees
incident to securing any required review by the National Association of
Securities Dealers, Inc. of the terms of sale of the Notes; (g) any applicable
listing or other fees; (h) the fees and expenses of qualifying the Notes under
the securities laws of the several jurisdictions as provided in Section 5 and
of preparing, printing and distributing a Blue Sky Memorandum (including related
fees and expenses of counsel to the Underwriters); (i) any fees charged by
securities rating services for rating the Notes; (j) the acceptance fees of the
Trustee and, unless otherwise agreed with the Trustee, the fees and expenses of
counsel to the Trustee; and (k) all other costs and expenses incident to the
performance of the obligations of the Company under this Agreement; provided
that, except as provided in this Section 6 and in Section 11, the Underwriters
shall pay their own costs and expenses, including the costs and expenses of
their counsel, any transfer taxes on the Notes which they may sell and the
expenses of advertising any offering of the Notes made by the Underwriters.
7. Conditions of Underwriters' Obligations. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on each Delivery Date, of the representations and warranties of the Company
contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Rule 462(b) Registration Statement, if any, and the
Prospectus shall have been timely filed with the Commission in
accordance with Section 5(a); no stop order suspending the
effectiveness of either of the Registration Statements or any part
thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and any
request of the Commission for inclusion of additional information in
either of the Registration Statements or the Prospectus or otherwise
shall have been complied with or withdrawn.
(b) No Underwriter shall have discovered and disclosed to the
Company on or prior to such Delivery Date that either of the
Registration Statements or the Prospectus or any amendment or
supplement thereto contains any untrue statement of a fact which, in
the opinion of Simpson Thacher & Bartlett, counsel for the
Underwriters, is material or omits to state any fact which, in the
opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
<PAGE>
16
(c) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Notes, the
Indenture, the Common Stock issuable upon conversion of the Notes, the
Registration Statements and the Prospectus, and all other legal
matters relating to this Agreement and the transactions contemplated
hereby shall be satisfactory in all material respects to counsel for
the Underwriters, and the Company shall have furnished to such counsel
all documents and information that they may reasonably request to
enable them to pass upon such matters.
(d) Brian W. Pusch, Esq. shall have furnished to the
Representatives his written opinion, as special counsel to the
Company, addressed to the Underwriters and dated such Delivery Date,
in form and substance reasonably satisfactory to the Representatives,
to the effect that:
(i) The Company and each of its Significant
Subsidiaries have been duly incorporated and are validly existing
as corporations in good standing under the laws of their
respective jurisdictions of incorporation, are duly qualified to
do business and are in good standing as foreign corporations in
each jurisdiction specified in such opinion, and have all power
and authority necessary to own or hold their respective
properties and conduct the businesses in which they are engaged;
(ii) The Indenture has been duly authorized, executed
and delivered by the Company and, assuming due execution and
delivery by the Trustee, constitutes a valid and binding
agreement of the Company enforceable against the Company in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good
faith and fair dealing;
(iii) The Notes have been duly authorized, executed
and delivered by the Company and, assuming due authentication
thereof by the Trustee and upon payment and delivery in
accordance with this Agreement, will be duly and validly issued
and outstanding and will constitute valid and binding obligations
of the Company entitled to the benefits of the Indenture and
enforceable in accordance with their terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing;
<PAGE>
17
(iv) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued shares of
capital stock of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable (subject
to Section 630 of the BCL) and conform to the description thereof
contained in the Prospectus; all of the shares of Common Stock
issuable upon conversion of the Notes have been duly and validly
authorized and reserved for issuance upon such conversion and,
when issued and delivered in accordance with the terms of the
Indenture, will be duly and validly issued, fully paid and non-
assessable (subject to Section 630 of the BCL); and all of the
issued shares of capital stock of each Significant Subsidiary of
the Company have been duly and validly authorized and issued and
are fully paid, non-assessable (except as otherwise provided by
applicable law) and (except for directors' qualifying shares) are
owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims;
(v) The Indenture and the Notes conform to the
description thereof contained in the Prospectus;
(vi) There are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the voting
or transfer of, any shares of the Common Stock issuable upon
conversion of the Notes pursuant to the Company's charter or by-
laws or any agreement or other instrument known to such counsel;
(vii) To the best of such counsel's knowledge and
other than as referred to under the caption "Business--
Environmental Matters" in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property or asset of
the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries,
are reasonably likely to have a material adverse effect on the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and its
subsidiaries; and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(viii) The Primary Registration Statement was
declared effective under the Securities Act and the Indenture was
qualified under the Trust Indenture Act as of the date and time
specified in such opinion, the Rule 462(b) Registration
Statement, if any, was filed with the Commission on the date
specified therein, the Prospectus was filed with the Commission
pursuant to the subparagraph of Rule 424(b) of the Rules and
Regulations specified in such opinion on the date specified
therein and, to the
<PAGE>
18
knowledge of such counsel, no stop order suspending the
effectiveness of either of the Registration Statements has been
issued and no proceeding for that purpose is pending or
threatened by the Commission;
(ix) The Registration Statements, as of their
respective Effective Dates, and the Prospectus, as of its date,
and any further amendments or supplements thereto, as of their
respective dates, made by the Company prior to such Delivery Date
(other than the financial statements and other financial data
contained therein, as to which such counsel need express no
opinion) complied as to form in all material respects with the
requirements of the Securities Act and the Rules and Regulations;
the documents incorporated by reference in the Prospectus and any
further amendment or supplement to any such incorporated document
made by the Company prior to such Delivery Date (other than the
financial statements and related schedules and other financial
data contained therein, as to which such counsel need express no
opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all
material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission thereunder; and the
Indenture conforms in all material respects to the requirements
of the Trust Indenture Act and the applicable rules and
regulations thereunder;
(x) To the best of such counsel's knowledge, there
are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the
Registration Statements by the Securities Act or by the Rules and
Regulations which have not been described or filed as exhibits to
the Registration Statements or incorporated therein by reference
as permitted by the Rules and Regulations;
(xi) This Agreement has been duly authorized,
executed and delivered by the Company;
(xii) The issue and sale of the Notes being
delivered on such Delivery Date by the Company and the compliance
by the Company with all of the provisions of this Agreement and
the Indenture and the consummation of the transactions
contemplated hereby and thereby and the issuance and delivery of
the Common Stock issuable upon conversion of the Notes will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
material indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument known to such counsel to
which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which
any of the properties or assets of the Company or any of its
subsidiaries is subject, nor will such actions result
<PAGE>
19
in any violation of the provisions of the charter or by-laws of
the Company or any of its subsidiaries or any statute or any
order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their properties or assets;
and, except for the registration of the Notes and the Common
Stock issuable upon conversion of the Notes under the Securities
Act, such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and
applicable state securities laws in connection with the purchase
and distribution of the Notes by the Underwriters (in the case of
such state securities laws, as to which such counsel need express
no opinion) and the qualification of the Indenture under the
Trust Indenture Act of 1939, as amended, no consent, approval,
authorization or order of, or filing or registration with, any
such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement or the
Indenture by the Company and the consummation of the transactions
contemplated hereby and thereby and the issuance of the Common
Stock issuable upon conversion of the Notes; and
(xiii) To the best of such counsel's knowledge,
there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require
the Company to file a registration statement under the Securities
Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such
securities in the securities registered pursuant to the
Registration Statements or in any securities being registered
pursuant to any other registration statement filed by the Company
under the Securities Act.
In rendering such opinion, such counsel may state that his opinion is
limited to matters governed by the Federal laws of the United States
of America and the laws of the State of New York. Such counsel shall
also have furnished to the Representatives a written statement,
addressed to the Underwriters and dated such Delivery Date, in form
and substance satisfactory to the Representatives, to the effect that
(x) such counsel has acted as counsel to the Company on a regular
basis with respect to corporate and securities law matters (although
the Company is also represented by its General Counsel and, with
respect to certain other matters, by other outside counsel) and has
acted as counsel to the Company in connection with the preparation of
the Registration Statements, and (y) based on the foregoing, no facts
have come to the attention of such counsel which lead him to believe
that (I) the Registration Statements (other than the financial
statements and other financial data contained therein, as to which
such counsel need make no such written statement), as of their
respective Effective Dates, contained any untrue statement of a
material fact or omitted to state any material fact required
<PAGE>
20
to be stated therein or necessary in order to make the statements
therein not misleading, or that the Prospectus (other than the
financial statements and other financial data contained therein, as to
which such counsel need make no such written statement) contains any
untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading or (II) any document incorporated by
reference in the Prospectus or any further amendment or supplement to
any such incorporated document made by the Company prior to such
Delivery Date (other than the financial statements and other financial
data contained therein, as to which such counsel need make no such
written statement), when they became effective or were filed with the
Commission, as the case may be, contained any untrue statement of a
material fact or omitted to state any material fact necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading. The foregoing opinion and
statement may be qualified by a statement to the effect that, except
as set forth in paragraphs (iv) and (v) above, such counsel does not
assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statements or the
Prospectus.
(e) White & Case, special tax counsel to the Company, shall have
furnished to the Representatives their written opinion, as special tax
counsel to the Company, addressed to the Underwriters and dated the
Delivery Date, in form and substance satisfactory to the
Representatives, to the effect that: the statements contained in the
Prospectus under the caption "Certain Federal Income Tax
Consequences", insofar as they describe federal statutes, rules and
regulations, constitute a fair summary thereof.
(f) With respect to the letter of Ernst & Young LLP delivered to
the Representatives concurrently with the execution of this Agreement
(as used in this paragraph, the "initial letter"), the Company shall
have furnished to the Representatives a letter (as used in this
paragraph, the "bring-down letter") of such accountants, addressed to
the Underwriters and dated such Delivery Date (i) confirming that they
are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, (ii) stating, as of the date of the
bring-down letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified
financial information is given in the Prospectus, as of a date not
more than five days prior to the date of the bring-down letter), the
conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and (iii)
confirming in all material respects the conclusions and findings set
forth in the initial letter.
<PAGE>
21
(g) With respect to the letter of each of Deloitte & Touche LLP
and Arthur Andersen LLP delivered to the Representatives concurrently
with the execution of this Agreement (each, as used in this paragraph,
the "initial letter"), the Company shall have furnished to the
Representatives a letter (as used in this paragraph, the "bring-down
letter") of each such accountants, addressed to the
Underwriters and dated the Delivery Date (i) confirming that such
accountants were independent public accountants within the meaning of
the Securities Act and were in compliance with the applicable
requirements relating to the qualification of accountants under Rule
2-01 of Regulation S-X of the Commission during the periods covered by
the respective financial statements on which they reported as set
forth in their respective reports contained and incorporated in the
Prospectus and as of the date of such reports and (ii) confirming in
all material respects the conclusions and findings set forth in such
accountants' initial letter.
(h) The Company shall have furnished to the Representatives a
certificate, dated such Delivery Date, of its Chairman of the Board or
an Executive Vice President and its chief financial officer stating
that:
(i) The representations, warranties and agreements of
the Company in Section 1 are true and correct as of such Delivery
Date; the Company has complied with all its agreements contained
herein; and the condition set forth in Section 7(a) has been
fulfilled;
(ii) Neither the Company nor any of its subsidiaries
has sustained since the date of the latest audited financial
statements included or incorporated by reference in the
Prospectus any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus and since such date there has
not been any material adverse change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a
prospective change, in or affecting the general affairs or
management of the Company or the consolidated financial position,
stockholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in
the Prospectus; and
(iii) They have carefully examined the Registration
Statements and the Prospectus and, in their opinion (A) the
Registration Statements, as of their respective Effective Dates,
and the Prospectus, as of each of the Effective Dates, did not
include any untrue statement of a material fact and did not omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (B)
since the
<PAGE>
22
Effective Date of the Primary Registration Statement no event has
occurred which should have been set forth in a supplement or
amendment to either of the Registration Statements or the
Prospectus which has not been set forth in such a supplement or
amendment.
(i) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus any
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus or (ii) since such
date there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any
change, or any development involving a prospective change, in or
affecting the general affairs or management of the Company or the
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set
forth or contemplated in the Prospectus, the effect of which, in any
such case described in clause (i) or (ii), is, in the reasonable
judgment of the Representatives, so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or
the delivery of the Notes being delivered on such Delivery Date on the
terms and in the manner contemplated in the Prospectus.
(j) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the NYSE or the American Stock Exchange or in
the over-the-counter market, or trading in any securities of the
Company on any exchange or in the over-the-counter market, shall have
been suspended or minimum prices shall have been established on any
such exchange or such market by the Commission, by such exchange or by
any other regulatory body or governmental authority having
jurisdiction, (ii) a banking moratorium shall have been declared by
Federal or state authorities, (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a
declaration of a national emergency or war by the United States or
(iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) as to make it, in the judgment of a majority in
interest of the several Underwriters, impracticable or inadvisable to
proceed with the public offering or delivery of the Notes being
delivered on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
(k) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the rating accorded the
Company's debt
<PAGE>
23
securities by any "nationally recognized statistical rating
organization", as that term is defined by the Commission for purposes
of Rule 436(g)(2) of the Rules and Regulations and (ii) no such
organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its
rating of any of the Company's debt securities.
(l) The NYSE shall have approved the Notes for listing, subject
only to official notice of issuance and evidence of satisfactory
distribution.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
8. Indemnification and Contribution.
(a) The Company and Nelco International Corporation, a Delaware
corporation and a wholly-owned subsidiary of the Company (the "Principal
Subsidiary"), jointly and severally, shall indemnify and hold harmless each
Underwriter, its officers and employees and each person, if any, who controls
any Underwriter within the meaning of the Securities Act, from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, but not limited to, any loss, claim, damage, liability or
action relating to purchases and sales of Notes), to which that Underwriter,
officer, employee or controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any Preliminary Prospectus, either
of the Registration Statements or the Prospectus, or in any amendment or
supplement thereto, or (B) in any blue sky application or other document
prepared or executed by the Company (or based upon any written information
furnished by the Company) specifically for the purpose of qualifying any or all
of the Notes or the Common Stock issuable upon conversion of the Notes under the
securities laws of any state or other jurisdiction (any such application,
document or information being hereinafter called a "Blue Sky Application"), or
(ii) the omission or alleged omission to state in any Preliminary Prospectus,
either of the Registration Statements or the Prospectus, or in any amendment or
supplement thereto, or in any Blue Sky Application any material fact required to
be stated therein or necessary to make the statements therein not misleading,
and shall reimburse each Underwriter and each such officer, employee and
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by that Underwriter, officer, employee or controlling person
in connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company and the Principal Subsidiary shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any such
amendment or supplement, or in any Blue Sky Application in reliance upon and in
conformity with the written information furnished to the Company through the
<PAGE>
24
Representatives by or on behalf of any Underwriter specifically for inclusion
therein as described in Section 8(e). The foregoing indemnity agreement is in
addition to any liability which the Company or the Principal Subsidiary may
otherwise have to any Underwriter or to any officer, employee or controlling
person of that Underwriter.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, its officers and employees, each of its directors and
each person, if any, who controls the Company within the meaning of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company or any such
director, officer or controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any Preliminary Prospectus, either
of the Registration Statements or the Prospectus, or in any amendment or
supplement thereto, or (B) in any Blue Sky Application or (ii) the omission or
alleged omission to state in any Preliminary Prospectus, either of the
Registration Statements or the Prospectus, or in any amendment or supplement
thereto, or in any Blue Sky Application any material fact required to be stated
therein or necessary to make the statements therein not misleading, but in each
case only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
the written information furnished to the Company through the Representatives by
or on behalf of that Underwriter specifically for inclusion therein as described
in Section 8(e), and shall reimburse the Company and any such director, officer
or controlling person for any legal or other expenses reasonably incurred by the
Company or any such director, officer or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which any Underwriter may
otherwise have to the Company or any such director, officer or controlling
person.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of
<PAGE>
25
investigation; provided, however, that the Representatives shall have the right
to employ counsel to represent jointly the Representatives and those other
Underwriters and their respective officers, employees and controlling persons
who may be subject to liability arising out of any claim in respect of which
indemnity may be sought by the Underwriters against the Company or the Principal
Subsidiary under this Section 8 if, in the reasonable judgment of the
Representatives, it is advisable for the Representatives and those Underwriters,
officers, employees and controlling persons to be jointly represented by
separate counsel, and in that event the fees and expenses of such separate
counsel shall be paid by the Company and the Principal Subsidiary. Each
indemnified party, as a condition of the indemnity agreements contained in
Sections 8(a) and 8(b), shall use its best efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No indemnifying
party shall (i) without the prior written consent of the indemnified parties
(which consent shall not be unreasonably withheld), 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 unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding,
or (ii) be liable for any settlement of any such action effected without its
prior written consent (which consent shall not be unreasonably withheld), but if
settled with its prior written consent or if there be a final judgment of the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Sections 8(a) or 8(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other from
the offering of the Notes or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and the Underwriters on the
other with respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Underwriters on the other with respect to such offering
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Notes purchased under this Agreement (before deducting expenses)
received by the Company on the one hand, and the total underwriting discounts
and commissions received by the Underwriters with respect to the Notes purchased
under this Agreement, on the other hand, bear to the total gross proceeds from
the offering of the Notes under this Agreement, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged
<PAGE>
26
omission to state a material fact relates to information supplied by the Company
or the Underwriters, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Principal Subsidiary and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section
8(d) were to be determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section 8(d) shall be deemed to include, for purposes of this
Section 8(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 8(d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Notes underwritten by it and distributed to the public
was offered to the public exceeds the amount of any damages which such
Underwriter has otherwise paid or become liable to pay by reason of any untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute as provided in this Section 8(d) are several in proportion to their
respective underwriting obligations and not joint.
(e) The Underwriters severally confirm that the statements with
respect to the public offering of the Notes set forth on the cover page of, and
under the caption "Underwriting" in, the Prospectus are correct and constitute
the only information furnished in writing to the Company by or on behalf of the
Underwriters specifically for inclusion in the Registration Statements and the
Prospectus.
9. Defaulting Underwriters. If, on either Delivery Date, any
Underwriter defaults in the performance of its obligations under this Agreement,
the remaining non-defaulting Underwriters shall be obligated to purchase the
Notes which the defaulting Underwriter agreed but failed to purchase on such
Delivery Date in the respective proportions which the principal amount of Firm
Notes set opposite the name of each remaining non-defaulting Underwriter in
Schedule 1 hereto bears to the total principal amount of Firm Notes set opposite
the names of all the remaining non-defaulting Underwriters in Schedule 1 hereto;
provided, however, that the remaining non-defaulting Underwriters shall not be
obligated to purchase any of the Notes on such Delivery Date if the total
principal amount of Notes which the defaulting Underwriter or Underwriters
agreed but failed to purchase on such date exceeds 9.09% of the total principal
amount of Notes to be purchased on such Delivery Date, and any remaining non-
defaulting Underwriter shall not be obligated to purchase more than 110% of the
principal amount of Notes which it agreed to purchase on such Delivery Date
pursuant to the terms of Section 2. If the foregoing maximums are exceeded,
the remaining non-defaulting Underwriters, or those other underwriters
satisfactory to the Representatives who so agree, shall have the right, but
shall not be obligated, to purchase, in such proportion as may be agreed upon
among them, all the Notes to be purchased on such Delivery Date. If the
remaining Underwriters or other underwriters
<PAGE>
27
satisfactory to the Representatives do not elect to purchase the Notes which the
defaulting Underwriter or Underwriters agreed but failed to purchase on such
Delivery Date, this Agreement (or, with respect to the Second Delivery Date, the
obligation of the Underwriters to purchase, and of the Company to sell, the
Option Notes) shall terminate without liability on the part of any non-
defaulting Underwriter or the Company, except that the Company will continue to
be liable for the payment of expenses to the extent set forth in Sections 6 and
11. As used in this Agreement, the term "Underwriter" includes, for all purposes
of this Agreement unless the context requires otherwise, any party not listed in
Schedule 1 hereto who, pursuant to this Section 9, purchases Firm Notes which a
defaulting Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If
other underwriters are obligated or agree to purchase the Notes of a defaulting
or withdrawing Underwriter, either the Representatives or the Company may
postpone the First Delivery Date for up to seven full business days in order to
effect any changes that in the opinion of counsel for the Company or counsel for
the Underwriters may be necessary in the Registration Statement, the Prospectus
or in any other document or arrangement.
10. Termination. The obligations of the Underwriters hereunder may
be terminated by the Representatives by notice given to and received by the
Company prior to delivery of and payment for the Firm Notes if, prior to that
time, any of the events described in Sections 7(i), 7(j) or 7(k) shall have
occurred or if the Underwriters shall decline to purchase the Notes for any
reason permitted under this Agreement.
11. Reimbursement of Underwriters' Expenses. If (a) the Company
shall fail to tender the Notes for delivery to the Underwriters for any reason
permitted under this Agreement, or (b) the Underwriters shall decline to
purchase the Notes for any reason permitted under this Agreement (including the
termination of this Agreement pursuant to Section 10), the Company shall
reimburse the Underwriters for the reasonable fees and expenses of their counsel
and for such other out-of-pocket expenses as shall have been incurred by them in
connection with this Agreement and the proposed purchase of the Notes, and upon
demand the Company shall pay the full amount thereof to the Representatives. If
this Agreement is terminated pursuant to Section 9 by reason of the default of
one or more Underwriters, the Company shall not be obligated to reimburse any
defaulting Underwriter on account of those expenses.
12. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission to Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate
Department (Fax: 212-528-8822);
<PAGE>
28
(b) if to the Company or the Principal Subsidiary, shall be
delivered or sent by mail, telex or facsimile transmission to the
address of the Company set forth in the Primary Registration
Statement, Attention: Chief Financial Officer (Fax: 516-354-4128);
provided, however, that any notice to an Underwriter pursuant to Section 8(c)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the Underwriters by Lehman Brothers Inc. on behalf of the
Representatives.
13. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Underwriters, the Company and
their respective personal representatives and successors. This Agreement and the
terms and provisions hereof are for the sole benefit of only those persons,
except that (A) the indemnities and agreements of the Company contained in
Section 8(a) of this Agreement shall also be deemed to be for the benefit of the
officers and employees of each Underwriter and the person or persons, if any,
who control each Underwriter within the meaning of Section 15 of the Securities
Act and (B) the indemnity agreement of the Underwriters contained in Section
8(b) of this Agreement shall be deemed to be for the benefit of directors,
officers and employees of the Company and any person controlling the Company
within the meaning of Section 15 of the Securities Act. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section 13, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
14. Survival. The respective indemnities, representations,
warranties and agreements of the Company, the Principal Subsidiary and the
Underwriters contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall survive the delivery of and
payment for the Notes and shall remain in full force and effect, regardless of
any investigation made by or on behalf of any of them or any person controlling
any of them.
15. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, (a) "business day" means any day on which the NYSE
is open for trading and (b) "subsidiary" has the meaning set forth in Rule 405
of the Rules and Regulations.
16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF NEW YORK.
17. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each
<PAGE>
29
be deemed to be an original but all such counterparts shall together constitute
one and the same instrument.
18. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
30
If the foregoing correctly sets forth the agreement among the Company,
the Principal Subsidiary and the Underwriters, please indicate your acceptance
in the space provided for that purpose below.
Very truly yours,
PARK ELECTROCHEMICAL CORP.
By ________________________________________
Title:
NELCO INTERNATIONAL CORPORATION
By ________________________________________
Title:
Accepted:
Lehman Brothers Inc.
Needham & Company, Inc.
Robertson, Stephens & Company LLC
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
By Lehman Brothers Inc.
By _____________________________________
Authorized Representative
<PAGE>
SCHEDULE 1
Principal Amount
Underwriters of Firm Notes
------------ ----------------
Lehman Brothers Inc. . . . . . . . . . . . . . . . . .
Needham & Company, Inc. . . . . . . . . . . . . . . .
Robertson, Stephens & Company LLC . . . . . . . . . . .
____________
Total . . . . . . . . . . . . . . . . . . . . . . . $100,000,000
============
<PAGE>
EXHIBIT 1.02
500,000 SHARES
PARK ELECTROCHEMICAL CORP.
COMMON STOCK
UNDERWRITING AGREEMENT
----------------------
______________ __, 1996
Lehman Brothers Inc.
Needham & Company, Inc.
Robertson, Stephens & Company LLC,
As Representatives of the several
Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Jerry Shore (the "Selling Shareholder") proposes to sell an aggregate of
500,000 shares (the "Stock") of the common stock, par value $.10 per share (the
"Common Stock"), of Park Electrochemical Corp., a New York corporation (the
"Company"). This is to confirm the agreement concerning the purchase of the
Stock from the Selling Shareholder by the Underwriters named in Schedule 1
hereto (the "Underwriters").
1. Representations, Warranties and Agreements of the Company. The
Company represents and warrants to, and agrees with, the Underwriters and the
Selling Shareholder that:
(a) A registration statement on Form S-3, and amendments
thereto, with respect to the Stock have (i) been prepared by the
Company in conformity with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, (ii) been filed with the
Commission under the Securities Act and (iii) become effective under
the Securities Act; and a second registration statement on Form S-3
with respect to the Stock (i) may also be prepared by the Company in
conformity with the requirements of the Securities Act and the Rule
and Regulations and (ii) if to be so prepared, will be filed with the
Commission under the Securities Act on the date hereof pursuant to
Rule 462(b) of the Rules and Regulations. Copies of the first such
registration statement and the amendments to such registration
statement, together with the form of any such second registration
statement, have been delivered by the Company to you as the
representatives (the "Representatives") of the Underwriters. As used
in this Agreement, "Effective Time" means (i) with respect to the
first such registration statement, the date and the time as of which
<PAGE>
2
such registration statement, or the most recent post-effective
amendment thereto, if any, was declared effective by the Commission
and (ii) with respect to any second registration statement, the date
and time as of which such second registration statement is filed with
the Commission, and "Effective Times" is the collective reference to
both Effective Times; "Effective Date" means (i) with respect to the
first such registration statement, the date of the Effective Time of
such registration statement and (ii) with respect to any second
registration statement, the date of the Effective Time of such second
registration statement, and "Effective Dates" is the collective
reference to both Effective Dates; "Preliminary Prospectus" means each
prospectus included in any such registration statement, or amendments
thereof, before it became effective under the Securities Act and any
prospectus filed with the Commission by the Company with the consent
of the Representatives pursuant to Rule 424(a) of the Rules and
Regulations; "Primary Registration Statement" means the first
registration statement referred to in this Section 1(a), as amended at
its Effective Time, "Rule 462(b) Registration Statement" means the
second registration statement, if any, referred to in this Section
1(a), as filed with the Commission, and "Registration Statements"
means both the Primary Registration Statement and any Rule 462(b)
Registration Statement, including in each case any documents
incorporated by reference therein at such time and all information
contained in the final prospectus filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations in accordance with Section
6(a) hereof and deemed to be a part of the Registration Statements as
of the Effective Time of the Primary Registration Statement pursuant
to paragraph (b) of Rule 430A of the Rules and Regulations; and
"Prospectus" means such final prospectus, as first filed with the
Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the
Rules and Regulations. Reference made herein to any Preliminary
Prospectus or to the Prospectus shall be deemed to refer to and
include any documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the Securities Act, as of the date of such
Preliminary Prospectus or the Prospectus, as the case may be, and any
reference to any amendment or supplement to any Preliminary Prospectus
or the Prospectus shall be deemed to refer to and include any document
filed under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), after the date of such Preliminary Prospectus or the
Prospectus, as the case may be, and incorporated by reference in such
Preliminary Prospectus or the Prospectus, as the case may be; and any
reference to any amendment to either of the Registration Statements
shall be deemed to include any annual report of the Company filed with
the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act
after the Effective Time that is incorporated by reference in the
Registration Statements. The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus.
(b) The Primary Registration Statement conforms (and the Rule
462(b) Registration Statement, if any, the Prospectus and any further
amendments or supplements to the Registration Statements or the
Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform) in all material respects
to the requirements of the Securities Act and the Rules and
Regulations and do not and will not, as of the applicable effective
date (as to the
<PAGE>
3
Registration Statements and any amendment thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or
supplement thereto) contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; provided that
no representation or warranty is made by the Company (i) as to
information contained in or omitted from the Registration Statements
or the Prospectus in reliance upon and in conformity with written
information furnished to the Company through the Representatives by or
on behalf of any Underwriter specifically for inclusion therein or
(ii) as to information contained in or omitted from the Registration
Statements or the Prospectus with respect to the Selling Shareholder
in reliance upon and in conformity with written information furnished
to the Company by or on behalf of the Selling Shareholder specifically
for inclusion therein.
(c) The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Exchange Act and the rules and regulations of the Commission
thereunder, and none of such documents, when they became effective or
were filed with the Commission, as the case may be, 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; and any further documents so filed and
incorporated by reference in the Prospectus, when such documents
become effective or are filed with Commission, as the case may be,
will conform in all material respects to the requirements of the
Exchange Act and the rules and regulations of the Commission
thereunder and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
(d) The Company and each of its subsidiaries (as defined in
Section 17) have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective
jurisdictions of incorporation, are duly qualified to do business and
are in good standing as foreign corporations in each jurisdiction in
which their respective ownership or lease of property or the conduct
of their respective businesses requires such qualification except
where the failure to be so qualified is not reasonably likely to have
a material adverse effect on the consolidated financial position,
stockholders' equity, results of operations or business of the Company
and its subsidiaries, and have all power and authority necessary to
own or hold their respective properties and to conduct the businesses
in which they are engaged; and none of the subsidiaries of the Company
(other than New England Laminates Co., Inc., Nelco Products, Inc.,
Nelco Technology, Inc., Neltec, Inc., Nelco Products Pte, Ltd. and
Nelco International Corporation (collectively, the "Significant
Subsidiaries")) is a "significant subsidiary", as such term is defined
in Rule 405 of the Rules and Regulations.
<PAGE>
4
(e) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable, subject to Section 630 of the New York
Business Corporation Law (the "BCL"), and conform to the description
thereof contained in the Prospectus; and all of the issued shares of
capital stock of each subsidiary of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable
and (except for directors' qualifying shares) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims.
(f) The Stock has been duly and validly authorized and is duly
and validly issued, fully paid and non-assessable, subject to Section
630 of the BCL; and the Stock conforms to the descriptions thereof
contained in the Prospectus.
(g) The execution, delivery and performance of this Agreement by
the Company and the consummation by the Company of the transactions on
the part of the Company contemplated hereby will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the properties or
assets of the Company or any of its subsidiaries is subject, nor will
such actions result in any violation of the provisions of the charter
or by-laws of the Company or any of its subsidiaries or any statute or
any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries
or any of their properties or assets; and except for the registration
of the Stock under the Securities Act and such consents, approvals,
authorizations, registrations or qualifications as may be required
under the Exchange Act and applicable state securities laws in
connection with the purchase and distribution of the Stock by the
Underwriters, no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or
body is required for the execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions on the part of the Company contemplated hereby.
(h) There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require
the Company
<PAGE>
5
to file a registration statement under the Securities Act with respect
to any securities of the Company owned or to be owned by such person
or to require the Company to include such securities in the securities
registered pursuant to the Registration Statements or in any
securities being registered pursuant to any other registration
statement filed by the Company under the Securities Act.
(i) Except as described in the Prospectus, the Company has not
sold or issued any shares of Common Stock during the six-month period
preceding the date of the Prospectus, including any sales pursuant to
Rule 144A under, or Regulations D or S of, the Securities Act, other
than shares issued pursuant to employee benefit plans, stock options
plans or other employee compensation plans or pursuant to outstanding
options, rights or warrants.
(j) Neither the Company nor any of its subsidiaries has
sustained, since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus, any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since such
date, there has not been any change in the capital stock or long-term
debt of the Company or any of its subsidiaries or any material adverse
change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries, otherwise than as set forth or contemplated in
the Prospectus.
(k) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statements or
included or incorporated by reference in the Prospectus present fairly
the financial condition and results of operations of the entities
purported to be shown thereby, at the dates and for the periods
indicated, and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis
throughout the periods involved.
(l) Ernst & Young LLP, who have certified certain financial
statements of the Company, whose reports appear in the Prospectus or
are incorporated by reference therein and who have delivered the
initial letter referred to in Section 9(f) hereof, are independent
public accountants as required by the Securities Act and the Rules and
Regulations; and Deloitte & Touche LLP and Arthur Andersen LLP, whose
respective reports appear in the Prospectus and are incorporated by
reference therein and who have each delivered the initial letter
referred to in Section 9(g) hereof, were independent accountants as
required by the Securities Act and the Rules and Regulations during
the periods covered by the respective financial statements on which
they reported as set forth in their respective reports
<PAGE>
6
contained and incorporated in the Prospectus and as of the date of
such reports.
(m) The Company and each of its subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as
are described in the Prospectus or such as do not materially affect
the value of such property and do not materially interfere with the
use made and proposed to be made of such property by the Company and
its subsidiaries; and all real property and buildings held under lease
by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
subsidiaries.
(n) The Company and each of its subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of their respective businesses and the value
of their respective properties and as is customary for companies
engaged in similar businesses in similar industries.
(o) Each of the Company and its subsidiaries owns or possesses
adequate rights to use all material patents, patent applications,
trademarks, service marks, trade names, trademark registrations,
service mark registrations, copyrights and licenses described in the
Prospectus as being owned or used by it or which are necessary for the
conduct of its business and has no reason to believe that the conduct
of its business will conflict with, and have not received any notice
of any claim of conflict with, any such rights of others which claims,
singularly or in the aggregate, if subject to an unfavorable decision,
ruling or finding, are reasonably likely to have a material adverse
effect on the consolidated financial position, stockholders' equity,
results of operations or business of the Company and its subsidiaries.
(p) Except for environmental proceedings referred to under the
caption "Business--Environmental Matters" in the Prospectus, there are
no legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property or asset
of the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries, are
reasonably likely to have a material adverse effect on the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries;
and to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others.
(q) The conditions for use of Form S-3, as set forth in General
Instruction I thereto, have been satisfied.
<PAGE>
7
(r) There are no contracts or other documents which are required
to be described in the Prospectus or filed as exhibits to either of
the Registration Statements by the Securities Act or by the Rules and
Regulations which have not been described in the Prospectus or filed
as exhibits to either of the Registration Statements or incorporated
therein by reference as permitted by the Rules and Regulations.
(s) No relationship, direct or indirect, exists between or among
the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand,
which is required to be described in the Prospectus which is not so
described.
(t) No labor disturbance by the employees of the Company exists
or, to the knowledge of the Company, is imminent which might be
expected to have a material adverse effect on the consolidated
financial position, stockholders' equity, results of operations,
business or prospects of the Company and its subsidiaries.
(u) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company would have any liability;
the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and
each "pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which would cause the loss of
such qualification.
(v) The Company has filed all federal, state and local income
and franchise tax returns required to be filed through the date hereof
and has paid all taxes shown by such returns to be due, and no tax
deficiency has been determined adversely to the Company or any of its
subsidiaries which has had (nor does the Company have any knowledge of
any tax deficiency which, if determined adversely to the Company or
any of its subsidiaries, might have) a material adverse effect on the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries.
(w) The Company (i) maintains and keeps accurate books and
records and (ii) maintains a system of internal accounting controls
sufficient to provide
<PAGE>
8
reasonable assurance that (A) transactions are executed in accordance
with management's general or specific authorization, (B) transactions
are recorded as necessary to permit preparation of its financial
statements in accordance with generally accepted accounting principles
and to maintain accountability for its assets, (C) access to its
assets is permitted only in accordance with management's general or
specific authorization and (D) the reported accountability for its
assets is compared with existing assets at reasonable intervals.
(x) Neither the Company nor any of its subsidiaries (i) is in
violation of its charter or by-laws, (ii) is in default in any
respect, and no event has occurred which, with notice or lapse of time
or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which it is a party or by which it is bound or to
which any of its properties or assets is subject or (iii) is in
violation in any respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its properties or assets may
be subject or has failed to obtain any material license, permit,
certificate, franchise or other governmental authorization or permit
necessary to the ownership of its properties or assets or to the
conduct of its business, other than such defaults, violations or
failures described in clauses (ii) or (iii) above which, singularly or
in the aggregate, are not reasonably likely to have a material adverse
effect on the consolidated financial position, stockholders' equity,
results of operations or business of the Company and its subsidiaries.
(y) There has been no storage, disposal, generation,
manufacture, refinement, transportation, handling or treatment of
toxic wastes, medical wastes, hazardous wastes or hazardous substances
by the Company or any of its subsidiaries (or, to the knowledge of the
Company, any of their predecessors in interest) at, upon or from any
of the properties now or previously owned or leased by the Company or
its subsidiaries in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require
remedial action under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except for any violation or
remedial action which would not have, or could not be reasonably
likely to have, singularly or in the aggregate with all such
violations and remedial actions, a material adverse effect on the
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; there has been no
material spill, discharge, leak, emission, injection, escape, dumping
or release of any kind onto such property or into the environment
surrounding such property of any toxic wastes, medical wastes, solid
wastes, hazardous wastes or hazardous substances due to or caused by
the Company or any of its subsidiaries or with respect to which the
Company or any of its subsidiaries have knowledge, except for any such
spill, discharge, leak, emission, injection, escape, dumping or
release which would not have or would not be reasonably likely to
have, singularly or in the aggregate with
<PAGE>
9
all such spills, discharges, leaks, emissions, injections, escapes,
dumpings and releases, a material adverse effect on the consolidated
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries; and the terms "hazardous wastes",
"toxic wastes", "hazardous substances" and "medical wastes" shall have
the meanings specified in any applicable local, state, federal and
foreign laws or regulations with respect to environmental protection.
(z) Neither the Company nor any subsidiary is an "investment
company" within the meaning of such term under the Investment Company
Act of 1940 and the rules and regulations of the Commission
thereunder.
2. Representations, Warranties and Agreements of the Selling
Shareholder. The Selling Shareholder represents and warrants to, and agrees
with, the Underwriters and the Company that:
(a) The Selling Shareholder has, and immediately prior to the
Delivery Date (as defined in Section 5 hereof) the Selling
Shareholder will have, good and valid title to the Stock, free and
clear of all liens, encumbrances, equities or claims; and upon
delivery of the Stock and payment therefor pursuant hereto, good and
valid title to the Stock, free and clear of all liens, encumbrances,
equities or claims, will pass to the several Underwriters.
(b) The Selling Shareholder has full right, power and authority
to enter into this Agreement; the execution, delivery and performance
of this Agreement by the Selling Shareholder and the consummation by
the Selling Shareholder of the transactions on his part contemplated
hereby will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Selling Shareholder is a party or by which
the Selling Shareholder is bound or to which any of the property or
assets of the Selling Shareholder is subject, nor will such actions
result in any violation of any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Selling Shareholder or the property or assets of
the Selling Shareholder; and, except for the registration of the Stock
under the Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Exchange
Act and applicable state securities laws in connection with the
purchase and distribution of the Stock by the Underwriters, no
consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is
required for the execution, delivery and performance of this Agreement
by the Selling Shareholder and the consummation by the Selling
Shareholder of the transactions contemplated hereby.
<PAGE>
10
(c) To the extent that any statements or omissions made in the
Registration Statements, the Prospectus or any amendment or supplement
thereto are made in reliance upon and in conformity with written
information furnished to the Company by the Selling Shareholder
specifically for use therein, the Primary Registration Statement did
not, and the Rule 462(b) Registration Statement, if any, the
Prospectus and any amendments or supplements to the Registration
Statements or the Prospectus will not, when they become effective or
are filed with the Commission, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading.
(d) The Selling Shareholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result
in the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the shares of the
Stock in violation of Rule 10b-6 under the Exchange Act.
3. Purchase of the Stock by the Underwriters. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Selling Shareholder hereby agrees to sell
500,000 shares of Stock to the several Underwriters, and each of the
Underwriters, severally and not jointly, agrees to purchase the number of shares
of the Stock set opposite that Underwriter's name in Schedule 1 hereto. The
price to be paid by the Underwriters for the Stock shall be $_____ per share.
The Selling Shareholder shall not be obligated to deliver any of the
Stock to be delivered on the Delivery Date except upon payment for all the Stock
to be purchased on the Delivery Date as provided herein.
4. Offering of Stock by the Underwriters.
Upon authorization by the Representatives of the release of the Stock,
the several Underwriters propose to offer the Stock for sale upon the terms and
conditions set forth in the Prospectus; provided, however, that no Stock
registered pursuant to the Rule 462(b) Registration Statement, if any, shall be
offered prior to the Effective Time thereof.
5. Delivery of and Payment for the Stock. Delivery of and payment
for the Stock shall be made at the offices of Simpson Thacher & Bartlett at 425
Lexington Avenue, New York, New York 10017, at 10:00 A.M., New York City time,
on the [third][fourth] full business day following the date of this Agreement or
at such other date or place as shall be determined by agreement between the
Representatives and the Company. This date and time are sometimes referred to
as the "Delivery Date." On the Delivery Date, the Selling Shareholder shall
deliver or cause to be delivered certificates representing the Stock to the
Representatives for the account of each Underwriter against payment to or upon
the order of the Selling Shareholder of the
<PAGE>
11
purchase price by certified or official bank check or checks payable in New York
Clearing House (next-day) funds. Time shall be of the essence, and delivery at
the time and place specified pursuant to this Agreement is a further condition
of the obligation of each Underwriter hereunder. Upon delivery, the Stock shall
be registered in such names and in such denominations as the Representatives
shall request in writing not less than two full business days prior to the
Delivery Date. For the purpose of expediting the checking and packaging of the
certificates for the Stock, the Company and the Selling Shareholder shall make
the certificates representing the Stock available for inspection by the
Representatives in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the Delivery Date.
6. Further Agreements of the Company. The Company agrees:
(a) To prepare the Rule 462(b) Registration Statement, if
necessary, in a form approved by the Representatives and to file such
Rule 462(b) Registration Statement with the Commission on the date
hereof; to prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b)
under the Securities Act not later than 10:00 A.M., New York City
time, the day following the execution and delivery of this Agreement;
to make no further amendment or any supplement to the Registration
Statements or to the Prospectus prior to the Delivery Date except as
permitted herein; to advise the Representatives, promptly after it
receives notice thereof, of the time when any amendment to either
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish the Representatives with copies thereof; to file
promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering
or sale of the Stock; to advise the Representatives, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, of the suspension of the
qualification of the Stock for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statements or the Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its
withdrawal;
(b) To furnish promptly to each of the Representatives and to
counsel for the Underwriters a signed copy of each of the Registration
Statements as originally filed with the Commission, and each amendment
thereto filed with the Commission, including all consents and exhibits
filed therewith;
<PAGE>
12
(c) To deliver promptly to the Representatives in New York City
such number of the following documents as the Representatives shall
request: (i) conformed copies of the Registration Statements as
originally filed with the Commission and each amendment thereto (in
each case excluding exhibits other than this Agreement and the
computation of per share earnings), (ii) each Preliminary Prospectus,
the Prospectus (not later than 10:00 A.M., New York City time, of the
day following the execution and delivery of this Agreement) and any
amended or supplemented Prospectus (not later than 10:00 A.M., New
York City time, on the day following the date of such amendment or
supplement) and (iii) any document incorporated by reference in the
Prospectus (excluding exhibits thereto); and, if the delivery of a
prospectus is required at any time after the Effective Time of the
Primary Registration Statement in connection with the offering or sale
of the Stock (or any other securities relating thereto) and if at such
time any events shall have occurred as a result of which the
Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be
necessary to amend or supplement the Prospectus or to file under the
Exchange Act any document incorporated by reference in the Prospectus
in order to comply with the Securities Act or the Exchange Act, to
notify the Representatives and, upon their request, to file such
document and to prepare and furnish without charge to each Underwriter
and to any dealer in securities as many copies as the Representatives
may from time to time request of an amended or supplemented Prospectus
which will correct such statement or omission or effect such
compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statements or the Prospectus or any supplement to the
Prospectus that may, in the reasonable judgment of the Company or the
Representatives, be required by the Securities Act or requested by the
Commission;
(e) Prior to filing with the Commission (i) any amendment to
either of the Registration Statements, any supplement to the
Prospectus or any document incorporated by reference in the Prospectus
or (ii) any Prospectus pursuant to Rule 424 of the Rules and
Regulations, to furnish a copy thereof to the Representatives and
counsel for the Underwriters and obtain the consent of the
Representatives to the filing;
(f) As soon as practicable after the Effective Date of the
Primary Registration Statement, to make generally available to the
Company's security holders and to deliver to the Representatives an
earnings statement of the Company and its subsidiaries (which need not
be audited) complying with Section
<PAGE>
13
11(a) of the Securities Act and the Rules and Regulations (including,
at the option of the Company, Rule 158);
(g) For a period of three years following the Effective Date of
the Primary Registration Statement, to furnish to the Representatives
copies of all materials furnished by the Company to its shareholders
and all public reports and all reports and financial statements
furnished by the Company to the principal national securities exchange
upon which the Common Stock may be listed pursuant to requirements of
or agreements with such exchange or to the Commission pursuant to the
Exchange Act or any rule or regulation of the Commission thereunder;
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Stock for
offering and sale under the securities laws of such jurisdictions as
the Representatives may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Stock; provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any jurisdiction or
to subject itself to taxation in any jurisdiction in which it is not
currently subject to taxation; and
(i) For a period of 90 days from the date of the Prospectus, not
to, directly or indirectly, offer for sale, sell or otherwise dispose
of (or enter into any transaction or device which is designed to, or
could be expected to, result in the disposition or purchase by any
person at any time in the future of) any shares of Common Stock (other
than the Stock and shares offered or issued pursuant to employee
benefit plans, stock option plans or other employee compensation plans
existing on the date hereof or pursuant to currently outstanding
options, warrants or rights and other than in connection with the
offer for sale, or the conversion, of the Company's Convertible
Subordinated Notes (the "Notes") being offered contemporaneously with
the offering of the Stock), or sell or grant options, rights or
warrants with respect to any shares of Common Stock (other than the
grant of options pursuant to option plans existing on the date hereof
and other than in connection with the offer, or conversion, of the
Notes), without the prior written consent of Lehman Brothers Inc.; and
to cause each officer and director of the Company to furnish to the
Representatives, prior to the First Delivery Date, a letter or
letters, in form and substance satisfactory to counsel for the
Underwriters, pursuant to which each such person shall agree not to,
directly or indirectly, offer for sale, sell or otherwise dispose of
(or enter into any transaction or device which is designed to, or
could be expected to, result in the disposition or purchase by any
person at any time in the future of) any shares of Common Stock for a
period of 90 days from the date of the Prospectus, without the prior
written consent of the Representatives.
7. Further Agreements of the Selling Shareholder. The Selling
Shareholder agrees:
(a) For a period of one year from the date of the Prospectus,
not to, directly or indirectly, offer for sale, sell or otherwise
dispose of (or enter into any transaction or device which is designed
to, or could be expected to, result in the disposition or purchase by
any person at any time in the future of) any shares of
<PAGE>
14
Common Stock (other than the Stock), without the prior written consent
of Lehman Brothers Inc.; provided, however, that nothing herein shall
prohibit or require any consent for (1) gifts by the Selling
Shareholder made more than 90 days after the date of the Prospectus of
up to an aggregate of _________ shares of Common Stock or (2) the
offer for sale, sale or other disposition of shares of Common Stock in
connection with a default or event of default under the terms of one
or more loans to the Selling Shareholder in an aggregate principal
amount not in excess of $1 million secured by shares of Common Stock
or the pledge of shares of Common Stock by the Selling Shareholder to
secure any such loans.
(b) That the Stock to be sold by the Selling Shareholder
hereunder is subject to the interest of the Underwriters and that the
obligations of the Selling Shareholder hereunder shall not be
terminated by any act of the Selling Shareholder, by operation of law,
by the death or incapacity of the Selling Shareholder or the
occurrence of any other event.
(c) To deliver to the Representatives prior to the Delivery Date
a properly completed and executed United States Treasury Department
Form W-9.
8. Expenses. The Company agrees to pay (a) the costs incident to the
sale and delivery of the Stock and any taxes payable in that connection; (b) the
costs incident to the preparation, printing and filing under the Securities Act
of the Registration Statements and any amendments and exhibits thereto (other
than filing fees of the Commission relating to the Stock); (c) the costs of
distributing the Registration Statements as originally filed and each amendment
thereto and any post-effective amendments thereof (including, in each case,
exhibits), any Preliminary Prospectus, the Prospectus and any amendment or
supplement to the Prospectus or any document incorporated by reference therein,
all as provided in this Agreement; (d) the costs of reproducing and distributing
this Agreement; (e) the costs of distributing the terms of agreement relating to
the organization of the underwriting syndicate and selling group to the members
thereof by mail, telex or other means of communication; (f) any applicable
listing or other fees; (g) the fees and expenses of preparing, printing and
distributing a Blue Sky Memorandum (including related fees and expenses of
counsel to the Underwriters); and (h) all other costs and expenses incident to
the performance of the obligations of the Company and, except as otherwise
specifically provided in this Section 8, of the Selling Shareholder under this
Agreement. The Selling Shareholder agrees to pay (a) the filing fees relating to
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of the sale of the Stock, (b) the fees and expenses of
qualifying the Stock under the securities laws of the several jurisdictions as
provided in Section 6(h) (including related fees and expenses of counsel to the
Underwriters), (c) any transfer taxes payable in connection with the sale of the
Stock to the Underwriters, (d) the filing fees of the Commission under the
Securities Act relating to the Stock and (e) legal fees of counsel to the
Selling Shareholder. Except as provided in this Section 8 and in Section 13,
the Underwriters shall pay their own costs and expenses, including the costs and
expenses of their
<PAGE>
15
counsel, any transfer taxes on the Stock which they may sell and the expenses of
advertising any offering of the Stock made by the Underwriters.
9. Conditions of Underwriters' Obligations. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on the Delivery Date, of the representations and warranties of the Company
and the Selling Shareholder contained herein, to the performance by the Company
and the Selling Shareholder of their respective obligations hereunder, and to
each of the following additional terms and conditions:
(a) The Rule 462(b) Registration Statement, if any, and the
Prospectus shall have been timely filed with the Commission in
accordance with Section 6(a); no stop order suspending the
effectiveness of either of the Registration Statements or any part
thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and any
request of the Commission for inclusion of additional information in
either of the Registration Statements or the Prospectus or otherwise
shall have been complied with or withdrawn.
(b) No Underwriter shall have discovered and disclosed to the
Company on or prior to the Delivery Date that either of the
Registration Statements or the Prospectus or any amendment or
supplement thereto contains any untrue statement of a fact which, in
the opinion of Simpson Thacher & Bartlett, counsel for the
Underwriters, is material or omits to state any fact which, in the
opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the Stock,
the Registration Statements and the Prospectus, and all other legal
matters relating to this Agreement and the transactions contemplated
hereby shall be satisfactory in all material respects to counsel for
the Underwriters, and the Company and the Selling Shareholder shall
have furnished to such counsel all documents and information that they
may reasonably request to enable them to pass upon such matters.
(d) Brian W. Pusch, Esq. shall have furnished to the
Representatives his written opinion, as special counsel to the
Company, addressed to the Underwriters and dated the Delivery Date, in
form and substance reasonably satisfactory to the Representatives, to
the effect that:
(i) The Company and each of its Significant Subsidiaries
have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective
jurisdictions of incorporation, are duly qualified to do business
and are in good standing
<PAGE>
16
as foreign corporations in each jurisdiction specified in such
opinion, and have all power and authority necessary to own or
hold their respective properties and conduct the businesses in
which they are engaged;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital
stock of the Company (including the shares of Stock) have been
duly and validly authorized and issued, are fully paid and non-
assessable (subject to Section 630 of the BCL) and conform to the
description thereof contained in the Prospectus; and all of the
issued shares of capital stock of each Significant Subsidiary of
the Company have been duly and validly authorized and issued and
are fully paid, non-assessable (except as otherwise provided by
applicable law) and (except for directors' qualifying shares) are
owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims;
(iii) There are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the voting
or transfer of, any shares of the Stock pursuant to the Company's
charter or by-laws or any agreement or other instrument known to
such counsel;
(iv) To the best of such counsel's knowledge and other
than as referred to under the caption "Business--Environmental
Matters" in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or asset of the
Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries,
are reasonably likely to have a material adverse effect on the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and its
subsidiaries; and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(v) The Primary Registration Statement was declared
effective under the Securities Act as of the date and time
specified in such opinion, the Rule 462(b) Registration
Statement, if any, was filed with the Commission on the date
specified therein, the Prospectus was filed with the Commission
pursuant to the subparagraph of Rule 424(b) of the Rules and
Regulations specified in such opinion on the date specified
therein and, to the knowledge of such counsel, no stop order
suspending the effectiveness of either of the Registration
Statements has been issued and no proceeding for that purpose is
pending or threatened by the Commission;
<PAGE>
17
(vi) The Registration Statements, as of their respective
Effective Dates, and the Prospectus, as of its date, and any
further amendments or supplements thereto, as of their respective
dates, made by the Company prior to the Delivery Date (other than
the financial statements and other financial data contained
therein, as to which such counsel need express no opinion)
complied as to form in all material respects with the
requirements of the Securities Act and the Rules and Regulations;
and the documents incorporated by reference in the Prospectus
(other than the financial statements and related schedules and
other financial data contained therein, as to which such counsel
need express no opinion), when they were filed with the
Commission, complied as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations of
the Commission thereunder;
(vii) To the best of such counsel's knowledge, there are
no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the
Registration Statements by the Securities Act or by the Rules and
Regulations which have not been described or filed as exhibits to
the Registration Statements or incorporated therein by reference
as permitted by the Rules and Regulations;
(viii) This Agreement has been duly authorized, executed
and delivered by the Company;
(ix) The sale of the shares of Stock by the Selling
Shareholder and the compliance by the Company and the Selling
Shareholder with all of the provisions of this Agreement and the
consummation by the Company and the Selling Shareholder of the
transactions on their respective parts contemplated hereby will
not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any
material indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument known to such counsel to
which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which
any of the properties or assets of the Company or any of its
subsidiaries is subject, nor will such actions result in any
violation of the provisions of the charter or by-laws of the
Company or any of its subsidiaries or any statute or any order,
rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their properties or assets;
and, except for the registration of the Stock under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the
Exchange Act and applicable state securities laws in connection
with the purchase and distribution of the Stock by the
Underwriters (in the
<PAGE>
18
case of such state securities laws, as to which such counsel need
express no opinion), no consent, approval, authorization or order
of, or filing or registration with, any such court or
governmental agency or body is required for the execution,
delivery and performance of this Agreement by the Company and the
consummation of the transactions on the part of the Company
contemplated hereby; and
(x) To the best of such counsel's knowledge, there are no
contracts, agreements or understandings between the Company and
any person granting such person the right to require the Company
to file a registration statement under the Securities Act with
respect to any securities of the Company owned or to be owned by
such person or to require the Company to include such securities
in the securities registered pursuant to the Registration
Statements or in any securities being registered pursuant to any
other registration statement filed by the Company under the
Securities Act.
In rendering such opinion, such counsel may state that his opinion is
limited to matters governed by the Federal laws of the United States
of America and the laws of the State of New York. Such counsel shall
also have furnished to the Representatives a written statement,
addressed to the Underwriters and dated the Delivery Date, in form and
substance satisfactory to the Representatives, to the effect that (x)
such counsel has acted as counsel to the Company on a regular basis
with respect to corporate and securities law matters (although the
Company is also represented by its General Counsel and, with respect
to certain other matters, by other outside counsel) and has acted as
counsel to the Company in connection with the preparation of the
Registration Statements, and (y) based on the foregoing, no facts have
come to the attention of such counsel which lead him to believe that
(I) the Registration Statements (other than the financial statements
and other financial data contained therein, as to which such counsel
need make no such written statement), as of their respective Effective
Dates, contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading, or that the
Prospectus (other than the financial statements and other financial
data contained therein, as to which such counsel need make no such
written statement) contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or (II) any
document incorporated by reference in the Prospectus or any further
amendment or supplement to any such incorporated document made by the
Company prior to the Delivery Date (other than the financial
statements and other financial data contained therein, as to which
such counsel need make no such written statement), when they became
effective or were filed with the Commission, as the case may be,
contained any untrue statement of a material fact
<PAGE>
19
or omitted to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The foregoing opinion and statement may be
qualified by a statement to the effect that, except as stated in
paragraph (ii) above, such counsel does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained
in the Registration Statements or the Prospectus.
(e) Brian W. Pusch, Esq., as counsel for the Selling
Shareholder, shall have furnished to the Representatives his written
opinion, addressed to the Underwriters and dated the Delivery Date, in
form and substance satisfactory to the Representatives, to the effect
that:
(i) The Selling Shareholder has full right, power and
authority to enter into this Agreement; the execution, delivery
and performance of this Agreement by the Selling Shareholder and
the consummation by the Selling Shareholder of the transactions
on the part of the Selling Shareholder contemplated hereby will
not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any
statute, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to such counsel to which
the Selling Shareholder is a party or by which the Selling
Shareholder is bound or to which any of the property or assets of
the Selling Shareholder is subject, nor will such actions result
in any violation of any statute or any order, rule or regulation
known to such counsel of any court or governmental agency or body
having jurisdiction over the Selling Shareholder or the property
or assets of the Selling Shareholder; and, except for the
registration of the Stock under the Securities Act and such
consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and
applicable state securities laws in connection with the purchase
and distribution of the Stock by the Underwriters (as to which
such counsel need express no opinion), no consent, approval,
authorization or order of, or filing or registration with, any
such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement by the
Selling Shareholder and the consummation by the Selling
Shareholder of the transactions on the part of the Selling
Shareholder contemplated hereby;
(ii) This Agreement has been duly executed and delivered
by or on behalf of the Selling Shareholder; and
(iii) Upon payment for, and delivery of, the shares of
Stock to be sold by the Selling Shareholder under this Agreement
in accordance with the terms hereof, the Underwriters will
acquire all of the rights of the Selling Shareholder in such
shares and will also acquire the interest of the
<PAGE>
20
Selling Shareholder in such shares free of any adverse claim
(within the meaning of the Uniform Commercial Code).
In rendering such opinion, such counsel may (i) state that his opinion
is limited to matters governed by the Federal laws of the United
States of America and the laws of the State of New York and (ii) in
rendering the opinion in Section 9 above, rely upon a certificate of
the Selling Shareholder in respect of matters of fact as to ownership
of, and the absence of adverse claims regarding, the shares of Stock
sold by the Selling Shareholder, provided that such counsel shall
furnish copies thereof to the Representatives and state that he
believes that both the Underwriters and he are justified in relying
upon such certificate. Such counsel shall also have furnished to the
Representatives a written statement, addressed to the Underwriters and
dated the Delivery Date, in form and substance reasonably satisfactory
to the Representatives, to the effect that (x) such counsel has acted
as counsel to the Selling Shareholder in connection with the
preparation of the Registration Statements, and (y) based on the
foregoing, no facts have come to the attention of such counsel which
lead him to believe that the Registration Statements (other than the
financial statements and other financial data contained therein, as to
which such counsel need make no such written statement), as of their
respective Effective Dates, contained any untrue statement of a
material fact relating to the Selling Shareholder or omitted to state
such a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, or that the
Prospectus (other than the financial statements and other financial
data contained therein, as to which such counsel need make no such
written statement) contains any untrue statement of a material fact
relating to the Selling Shareholder or omits to state such a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The foregoing opinion and statement may be
qualified by a statement to the effect that such counsel, as counsel
to the Selling Shareholder, does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statements or the Prospectus.
(f) With respect to the letter of Ernst & Young LLP delivered to
the Representatives concurrently with the execution of this Agreement
(as used in this paragraph, the "initial letter"), the Company shall
have furnished to the Representatives a letter (as used in this
paragraph, the "bring-down letter") of such accountants, addressed to
the Underwriters and dated the Delivery Date (i) confirming that they
are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, (ii) stating, as of the date of the
bring-down letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified
financial information is given in the Prospectus, as of a date not
<PAGE>
21
more than five days prior to the date of the bring-down letter), the
conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and (iii)
confirming in all material respects the conclusions and findings set
forth in the initial letter.
(g) With respect to the letter of each of Deloitte & Touche LLP
and Arthur Andersen LLP delivered to the Representatives concurrently
with the execution of this Agreement (each, as used in this paragraph,
the "initial letter"), the Company shall have furnished to the
Representatives a letter (as used in this paragraph, the "bring-down
letter") of each such accountants, addressed to the Underwriters and
dated the Delivery Date (i) confirming that such accountants were
independent public accountants within the meaning of the Securities
Act and were in compliance with the applicable requirements relating
to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission during the periods covered by the respective
financial statements on which they reported as set forth in their
respective reports contained and incorporated in the Prospectus and as
of the date of such reports and (ii) confirming in all material
respects the conclusions and findings set forth in such accountants'
initial letter.
(h) The Company shall have furnished to the Representatives a
certificate, dated the Delivery Date, of its Chairman of the Board or
an Executive Vice President and its chief financial officer stating
that:
(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of the Delivery
Date; the Company has complied with all its agreements contained
herein; and the condition set forth in Section 9(a) has been
fulfilled;
(ii) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial
statements included or incorporated by reference in the
Prospectus any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus and since such date there has
not been any material adverse change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a
prospective change, in or affecting the general affairs or
management of the Company or the consolidated financial position,
stockholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in
the Prospectus; and
<PAGE>
22
(iii) They have carefully examined the Registration
Statements and the Prospectus and, in their opinion (A) the
Registration Statements, as of their respective Effective Dates,
and the Prospectus, as of each of the Effective Dates, did not
include any untrue statement of a material fact and did not omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (B)
since the Effective Date of the Primary Registration Statement no
event has occurred which should have been set forth in a
supplement or amendment to either of the Registration Statements
or the Prospectus which has not been set forth in such a
supplement or amendment.
(i) The Selling Shareholder shall have furnished to the
Representatives a certificate, dated the Delivery Date, signed by the
Selling Shareholder stating that:
(i) The representations, warranties and agreements of the
Selling Shareholder contained herein are true and correct as of
the Delivery Date and that the Selling Shareholder has complied
with all agreements contained herein to be performed by the
Selling Shareholder at or prior to the Delivery Date; and
(ii) The Selling Shareholder has carefully examined the
Registration Statements and the Prospectus and, in his opinion,
to the extent that any statements or omissions made in the
Registration Statements, the Prospectus or any amendment or
supplement thereto are made in reliance upon and in conformity
with written information furnished to the Company by the Selling
Shareholder specifically for use therein, (A) the Registration
Statements, as of their respective Effective Dates, and the
Prospectus, as of each of the Effective Dates, did not include
any untrue statement of a material fact and did not omit to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (B) since the
Effective Date of the Primary Registration Statement no event has
occurred which should have been set forth in a supplement or
amendment to either of the Registration Statements or the
Prospectus which has not been set forth in such a supplement or
amendment.
(j) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus any
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus or (ii) since such
date there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any
change, or any development involving a prospective change, in or
affecting the general affairs or management of the Company or the
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set
forth or contemplated in the Prospectus, the effect of which, in any
such case
<PAGE>
23
described in clause (i) or (ii), is, in the reasonable judgment of the
Representatives, so material and adverse as to make it impracticable
or inadvisable to proceed with the public offering or the delivery of
the Stock on the terms and in the manner contemplated in the
Prospectus.
(k) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market, or trading in any
securities of the Company on any exchange or in the over-the-counter
market, shall have been suspended or minimum prices shall have been
established on any such exchange or such market by the Commission, by
such exchange or by any other regulatory body or governmental
authority having jurisdiction, (ii) a banking moratorium shall have
been declared by Federal or state authorities, (iii) the United States
shall have become engaged in hostilities, there shall have been an
escalation in hostilities involving the United States or there shall
have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse
change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the
United States shall be such) as to make it, in the judgment of a
majority in interest of the several Underwriters, impracticable or
inadvisable to proceed with the public offering or delivery of the
Stock on the terms and in the manner contemplated in the Prospectus.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
10. Indemnification and Contribution.
(a) The Company and Nelco International Corporation, a Delaware
corporation and a wholly-owned subsidiary of the Company (the "Principal
Subsidiary"), jointly and severally, shall indemnify and hold harmless each
Underwriter, its officers and employees and each person, if any, who controls
any Underwriter within the meaning of the Securities Act and the Selling
Shareholder, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of
Stock), to which that Underwriter, officer, employee or controlling person or
Selling Stockholder may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained (A) in any Preliminary Prospectus, either of the Registration
Statements or the Prospectus, or in any amendment or supplement thereto, or (B)
in any blue sky application or other document prepared or executed by the
Company (or based upon any written information furnished by the Company)
specifically for the purpose of qualifying any or all of the Stock under the
securities laws of any
<PAGE>
24
state or other jurisdiction (any such application, document or information being
hereinafter called a "Blue Sky Application"), or (ii) the omission or alleged
omission to state in any Preliminary Prospectus, either of the Registration
Statements or the Prospectus, or in any amendment or supplement thereto, or in
any Blue Sky Application any material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse
each Underwriter and each such officer, employee and controlling person and the
Selling Shareholder promptly upon demand for any legal or other expenses
reasonably incurred by that Underwriter, officer, employee or controlling person
or Selling Shareholder in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company and the
Principal Subsidiary shall not be liable (x) to any Underwriter or any such
officer, employee or controlling person in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or in any such amendment or supplement, or in any Blue Sky
Application in reliance upon and in conformity with the written information
furnished to the Company through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein as described in Section 10(f) or
(y) in any such case to the extent that any such loss, claim, damage, liability
or action arises out of, or is based upon, any untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any such
amendment or supplement, or in any Blue Sky Application in reliance upon and in
conformity with the written information furnished to the Company by or on behalf
of the Selling Shareholder specifically for inclusion therein as described in
Section 10(f). The foregoing indemnity agreement is in addition to any liability
which the Company or the Principal Subsidiary may otherwise have to any
Underwriter or to any officer, employee or controlling person of that
Underwriter or to the Selling Shareholder.
(b) The Selling Shareholder shall indemnify and hold harmless the
Company, its officers and employees, each of its directors and each person, if
any, who controls the Company within the meaning of the Securities Act, each
Underwriter, its officers and employees and each person, if any, who controls
any Underwriter within the meaning of the Securities Act, from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, but not limited to, any loss, claim, damage, liability or
action relating to purchases and sales of Stock), to which the Company, or any
such director, officer, employee or controlling person of the Company or such
Underwriter, officer, employee or controlling person may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage, liability
or action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in any Preliminary Prospectus,
either of the Registration Statements or the Prospectus, or in any amendment or
supplement thereto, or (B) in any Blue Sky Application or (ii) the omission or
alleged omission to state in any Preliminary Prospectus, either of the
Registration Statements or the Prospectus, or in any amendment or supplement
thereto, any material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in
<PAGE>
25
conformity with written information furnished to the Company by or on behalf of
the Selling Shareholder specifically for inclusion therein as described in
Section 10(f), and shall reimburse the Company and any such director, officer,
employee or controlling person of the Company and each Underwriter, its officers
and employees and each such controlling person promptly upon demand for any
legal or other expenses reasonably incurred by the Company or any such director,
officer, employee or controlling person of the Company or such Underwriter, its
officers, employees or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred. The foregoing indemnity agreement is in
addition to any liability which the Selling Shareholder may otherwise have to
the Company or any such director, officer, employee or controlling person of the
Company or any Underwriter or any officer, employee or controlling person of
that Underwriter. In no event shall the Selling Shareholder be liable under this
Section 10 for an aggregate amount in excess of the aggregate initial public
offering price of the Stock as set forth on the cover page of the Prospectus.
(c) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, its officers and employees, each of its directors,
each person, if any, who controls the Company within the meaning of the
Securities Act, and the Selling Shareholder, from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof, to
which the Company or any such director, officer or controlling person or the
Selling Shareholder may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained (A) in any Preliminary Prospectus, either of the Registration
Statements or the Prospectus, or in any amendment or supplement thereto, or (B)
in any Blue Sky Application or (ii) the omission or alleged omission to state in
any Preliminary Prospectus, either of the Registration Statements or the
Prospectus, or in any amendment or supplement thereto, or in any Blue Sky
Application any material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with the written information
furnished to the Company through the Representatives by or on behalf of that
Underwriter specifically for inclusion therein as described in Section 10(f),
and shall reimburse the Company, any such director, officer or controlling
person and the Selling Shareholder for any legal or other expenses reasonably
incurred by the Company, any such director, officer or controlling person or the
Selling Shareholder in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which any Underwriter may otherwise have to the Company, any such
director, officer or controlling person or the Selling Shareholder.
(d) Promptly after receipt by an indemnified party under this Section
10 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 10, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability
<PAGE>
26
which it may have under this Section 10 except to the extent it has been
materially prejudiced by such failure and, provided further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 10. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 10 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the Representatives shall have the right to employ counsel to represent jointly
the Representatives and those other Underwriters and their respective officers,
employees and controlling persons who may be subject to liability arising out of
any claim in respect of which indemnity may be sought by the Underwriters
against the Company, the Principal Subsidiary or the Selling Shareholder under
this Section 10 if, in the reasonable judgment of the Representatives, it is
advisable for the Representatives and those Underwriters, officers, employees
and controlling persons to be jointly represented by separate counsel, and in
that event the fees and expenses of such separate counsel shall be paid by the
Company, the Principal Subsidiary and, if it is a claim in respect of which
indemnification may be sought by the Underwriters against the Selling
Shareholder, the Selling Shareholder. Each indemnified party, as a condition of
the indemnity agreements contained in Sections 10, 10(b) and 10(c), shall use
its best efforts to cooperate with the indemnifying party in the defense of any
such action or claim. No indemnifying party shall (i) without the prior written
consent of the indemnified parties (which consent shall not be unreasonably
withheld), 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
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding, or (ii) be liable for any settlement
of any such action effected without its prior written consent (which consent
shall not be unreasonably withheld), but if settled with its prior written
consent or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(e) If the indemnification provided for in this Section 10 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 10(a), 10(b) or 10(c) in respect of any loss, claim, damage
or liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and the Selling Shareholder on the one hand and the
Underwriters on the other from the offering of the Stock or (ii) if the
<PAGE>
27
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Selling Shareholder on the one hand and the Underwriters on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Shareholder on the one hand and the Underwriters on the other with
respect to such offering shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Stock purchased under this Agreement
(before deducting expenses) received by the Selling Shareholder, on the one
hand, and the total underwriting discounts and commissions received by the
Underwriters with respect to the shares of the Stock purchased under this
Agreement, on the other hand, bear to the total gross proceeds from the offering
of the shares of the Stock under this Agreement, in each case as set forth in
the table on the cover page of the Prospectus. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Selling Shareholder, or the
Underwriters, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Principal Subsidiary, the Selling Shareholder and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section 10(e) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 10(e) shall be deemed to include, for
purposes of this Section 10(e), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 10(e), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Stock underwritten by it and distributed
to the public was offered to the public exceeds the amount of any damages which
such Underwriter has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Underwriters' obligations
to contribute as provided in this Section 10(e) are several in proportion to
their respective underwriting obligations and not joint.
(f) The Underwriters severally confirm that the statements with
respect to the public offering of the Stock set forth on the cover page of, and
under the caption "Underwriting" in, the Prospectus are correct and constitute
the only information furnished in writing to the Company by or on behalf of the
Underwriters specifically for inclusion in the Registration Statements and the
Prospectus. The Selling Shareholder confirms that the statements set forth
under the caption "Selling Shareholder" in the Prospectus (other than statements
therein expressly made by the Company) are correct and constitute the only
information furnished in
<PAGE>
28
writing to the Company by or on behalf of the Selling Shareholder specifically
for inclusion in the Registration Statements and the Prospectus.
11. Defaulting Underwriters.
If, on the Delivery Date, any Underwriter defaults in the performance
of its obligations under this Agreement, the remaining non-defaulting
Underwriters shall be obligated to purchase the Stock which the defaulting
Underwriter agreed but failed to purchase on the Delivery Date in the respective
proportions which the number of shares of the Stock set opposite the name of
each remaining non-defaulting Underwriter in Schedule 1 hereto bears to the
total number of shares of the Stock set opposite the names of all the remaining
non-defaulting Underwriters in Schedule 1 hereto; provided, however, that the
remaining non-defaulting Underwriters shall not be obligated to purchase any of
the Stock on the Delivery Date if the total number of shares of the Stock which
the defaulting Underwriter or Underwriters agreed but failed to purchase on such
date exceeds 9.09% of the total number of shares of the Stock to be purchased on
the Delivery Date, and any remaining non-defaulting Underwriter shall not be
obligated to purchase more than 110% of the number of shares of the Stock which
it agreed to purchase on the Delivery Date pursuant to the terms of Section 3.
If the foregoing maximums are exceeded, the remaining non-defaulting
Underwriters, or those other underwriters satisfactory to the Representatives
who so agree, shall have the right, but shall not be obligated, to purchase, in
such proportion as may be agreed upon among them, all the Stock to be purchased
on the Delivery Date. If the remaining Underwriters or other underwriters
satisfactory to the Representatives do not elect to purchase the shares which
the defaulting Underwriter or Underwriters agreed but failed to purchase on the
Delivery Date, this Agreement shall terminate without liability on the part of
any non-defaulting Underwriter or the Company or the Selling Shareholder, except
that the Company will continue to be liable for the payment of expenses to the
extent set forth in Sections 8 and 13. As used in this Agreement, the term
"Underwriter" includes, for all purposes of this Agreement unless the context
requires otherwise, any party not listed in Schedule 1 hereto who, pursuant to
this Section 11, purchases Stock which a defaulting Underwriter agreed but
failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company and the Selling Shareholder for damages
caused by its default. If other underwriters are obligated or agree to purchase
the Stock of a defaulting or withdrawing Underwriter, either the Representatives
or the Company may postpone the Delivery Date for up to seven full business days
in order to effect any changes that in the opinion of counsel for the Company or
counsel for the Underwriters may be necessary in the Registration Statement, the
Prospectus or in any other document or arrangement.
12. Termination.
The obligations of the Underwriters hereunder may be terminated by the
Representatives by notice given to and received by the Company and the Selling
Shareholder prior to delivery of and payment for the Stock if, prior to that
time, any of the events described
<PAGE>
29
in Sections 9(j) or 9(k) shall have occurred or if the Underwriters shall
decline to purchase the Stock for any reason permitted under this Agreement.
13. Reimbursement of Underwriters' Expenses. If (a) the Selling
Shareholder shall fail to tender the Stock for delivery to the Underwriters for
any reason permitted under this Agreement, or (b) the Underwriters shall decline
to purchase the Stock for any reason permitted under this Agreement (including
the termination of this Agreement pursuant to Section 12), the Company and the
Selling Shareholder shall reimburse the Underwriters for the reasonable fees and
expenses of their counsel and for such other out-of-pocket expenses as shall
have been incurred by them in connection with this Agreement and the proposed
purchase of the Stock, and upon demand the Company and the Selling Shareholder
shall pay the full amount thereof to the Representatives. If this Agreement is
terminated pursuant to Section 11 by reason of the default of one or more
Underwriters, neither the Company nor the Selling Shareholder shall be obligated
to reimburse any defaulting Underwriter on account of those expenses.
14. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission to Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate
Department (Fax: 212-528-8822);
(b) if to the Company or the Selling Shareholder, shall be
delivered or sent by mail, telex or facsimile transmission to the
address of the Company set forth in the Primary Registration
Statement, Attention: Chief Financial Officer (Fax: 516-354-4128);
provided, however, that any notice to an Underwriter pursuant to Section 10(d)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company and
the Selling Shareholder shall be entitled to act and rely upon any request,
consent, notice or agreement given or made on behalf of the Underwriters by
Lehman Brothers Inc. on behalf of the Representatives.
15. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Underwriters, the Company, the
Selling Shareholder and their respective personal representatives and
successors. This Agreement and the terms and provisions hereof are for the sole
benefit of only those persons, except that (A) the indemnities and agreements of
the Company contained in Section 10(a) of this Agreement shall also be deemed to
be for the benefit of the officers and employees of each Underwriter and the
person or persons, if any, who control each Underwriter within the meaning of
Section 15 of the Securities Act, (B) the indemnities and
<PAGE>
30
agreements of the Selling Shareholder contained in Section 10(b) of this
Agreement shall also be deemed to be for the benefit of the directors, officers
and employees of the Company and any person controlling the Company within the
meaning of Section 15 of the Securities Act and the officers and employees of
each Underwriter and the person or persons, if any, who control each Underwriter
within the meaning of Section 15 of the Securities Act and (C) the indemnity
agreement of the Underwriters contained in Section 10(c) of this Agreement shall
be deemed to be for the benefit of directors, officers and employees of the
Company and any person controlling the Company within the meaning of Section 15
of the Securities Act. Nothing in this Agreement is intended or shall be
construed to give any person, other than the persons referred to in this Section
15, any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision contained herein.
16. Survival. The respective indemnities, representations,
warranties and agreements of the Company, the Principal Subsidiary, the Selling
Shareholder and the Underwriters contained in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement, shall survive the
delivery of and payment for the Stock and shall remain in full force and effect,
regardless of any investigation made by or on behalf of any of them or any
person controlling any of them.
17. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations.
18. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF NEW YORK.
19. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
20. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
31
If the foregoing correctly sets forth the agreement among the Company,
the Principal Subsidiary, the Selling Shareholder and the Underwriters, please
indicate your acceptance in the space provided for that purpose below.
Very truly yours,
PARK ELECTROCHEMICAL CORP.
By ________________________________________
Title:
NELCO INTERNATIONAL CORPORATION
By ________________________________________
Title:
The Selling Shareholder:
___________________________________________
Jerry Shore
Accepted:
Lehman Brothers Inc.
Needham & Company, Inc.
Robertson, Stephens & Company LLC
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
By Lehman Brothers Inc.
By _____________________________________
Authorized Representative
<PAGE>
SCHEDULE 1
Number of
Underwriters Shares
------------ ---------
Lehman Brothers Inc. . . . . . . . . . . . . . . . .
Needham & Company, Inc. . . . . . . . . . . . . . . .
Robertson, Stephens & Company LLC . . . . . . . . . .
-------
Total. . . . . . . . . . . . . . . . . . . . . . . 500,000
=======
<PAGE>
EXHIBIT 4.01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PARK ELECTROCHEMICAL CORP.
AND
THE CHASE MANHATTAN BANK, N.A.
Trustee
INDENTURE
Dated as of ___________ __, 1996
% Convertible Subordinated Notes due 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET/*/
_____________________
Between
Provisions of Trust Indenture Act of 1939 and Indenture, dated as of
________ __, 1996, between Park Electrochemical Corp. and The Chase Manhattan
Bank, N.A., Trustee, providing for ___% Convertible Subordinated Notes due 2006:
Section of the Act Section of Indenture
------------------ --------------------
310(a)(1) and (2)......... 8.9
310(a)(3), (4) and (5).... Inapplicable
310(b).................... 8.8 and 8.10(b) and (d)
310(c).................... Inapplicable
311(a).................... 8.13
311(b).................... 8.13
311(c).................... Inapplicable
312(a).................... 6.1 and 6.2(a)
312(b).................... 6.2(b)
312(c).................... 6.2(c)
313(a).................... 6.3(a)
313(b)(1)................. Inapplicable
313(b)(2)................. 6.3(a)
313(c).................... 6.3(a)
313(d).................... 6.3(b)
314(a).................... 5.7 and 6.4
314(b).................... Inapplicable
314(c)(1) and (2)......... 17.5
314(c)(3)................. Inapplicable
314(d).................... Inapplicable
314(e).................... 17.5
314(f).................... Inapplicable
315(a), (c) and (d)....... 8.1
315(b).................... 7.8
315(e).................... 7.9
316(a)(1)................. 7.7
316(a)(2)................. Not required
316(a) (last sentence).... 9.4
316(b).................... 11.2
317(a).................... 7.2
317(b).................... 5.4 and 13.2
318(a).................... 17.8
- ----------
/*/ This Cross Reference Sheet is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I
DEFINITIONS........................ 1
Section 1.1 Definitions........................................ 1
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES................... 8
Section 2.1 Designation, Amount and Issue of Notes............. 8
Section 2.2 Form of Notes...................................... 9
Section 2.3 Date and Denomination of Notes; Payments
of Interest........................................ 9
Section 2.4 Execution of Notes................................. 11
Section 2.5 Exchange and Registration of Transfer of
Notes; Restrictions on Transfer;
Depositary......................................... 12
Section 2.6 Mutilated, Destroyed, Lost or Stolen
Notes.............................................. 14
Section 2.7 Temporary Notes.................................... 15
Section 2.8 Cancellation of Notes Paid, Etc.................... 16
ARTICLE III
REDEMPTION OF NOTES.................... 16
Section 3.1 Redemption Prices.................................. 16
Section 3.2 Notice of Redemption; Selection of Notes........... 16
Section 3.3 Payment of Notes Called for Redemption............. 18
Section 3.4 Conversion Arrangement on Call for
Redemption......................................... 19
ARTICLE IV
SUBORDINATION OF NOTES................... 20
Section 4.1 Agreement of Subordination......................... 20
Section 4.2 Payments to Noteholders............................ 20
Section 4.3 Subrogation of Notes............................... 22
Section 4.4 Authorization by Noteholders....................... 23
Section 4.5 Notice to Trustee.................................. 23
Section 4.6 Trustee's Relation to Senior Indebtedness.......... 25
Section 4.7 No Impairment of Subordination..................... 25
Section 4.8 Certain Conversions Deemed Payment................. 25
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY............ 26
Section 5.1 Payment of Principal, Premium and
Interest........................................... 26
<PAGE>
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Section 5.2 Maintenance of Office or Agency.................... 26
Section 5.3 Appointments to Fill Vacancies in
Trustee's Office................................... 27
Section 5.4 Provisions as to Paying Agent...................... 27
Section 5.5 Existence.......................................... 28
Section 5.6 Stay, Extension and Usury Laws..................... 29
Section 5.7 Compliance Certificate............................. 29
Section 5.8 Further Instruments and Acts....................... 29
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY....... 29
Section 6.1 Noteholders' Lists................................. 29
Section 6.2 Preservation and Disclosure of Lists............... 30
Section 6.3 Reports by Trustee................................. 30
Section 6.4 Reports by Company................................. 30
ARTICLE VII
DEFAULTS AND REMEDIES................... 31
Section 7.1 Events of Default.................................. 31
Section 7.2 Payments of Notes on Default; Suit
Therefor........................................... 33
Section 7.3 Application of Monies Collected by
Trustee............................................ 35
Section 7.4 Proceedings by Noteholder.......................... 36
Section 7.5 Proceedings by Trustee............................. 37
Section 7.6 Remedies Cumulative and Continuing................. 37
Section 7.7 Direction of Proceedings and Waiver of
Defaults by Majority of Noteholders................ 38
Section 7.8 Notice of Defaults................................. 38
Section 7.9 Undertaking to Pay Costs........................... 39
Section 7.10 Delay or Omission Not Waiver...................... 39
ARTICLE VIII
CONCERNING THE TRUSTEE................... 39
Section 8.1 Duties and Responsibilities of Trustee............. 39
Section 8.2 Reliance on Documents, Opinions, Etc............... 41
Section 8.3 No Responsibility for Recitals, Etc................ 42
Section 8.4 Trustee, Paying Agents, Conversion Agents
or Registrar May Own Notes...
Section 8.5 Monies to Be Held in Trust......................... 42
Section 8.6 Compensation and Expenses of Trustee............... 42
Section 8.7 Officers' Certificate as Evidence.................. 43
Section 8.8 Conflicting Interests of Trustee................... 43
Section 8.9 Eligibility of Trustee............................. 43
Section 8.10 Resignation or Removal of Trustee................. 44
Section 8.11 Acceptance by Successor Trustee................... 45
Section 8.12 Succession by Merger, Etc......................... 46
Section 8.13 Limitation on Rights of Trustee as
Creditor.......................................... 46
<PAGE>
ARTICLE IX
CONCERNING THE NOTEHOLDERS................. 47
Section 9.1 Action by Noteholders.............................. 47
Section 9.2 Proof of Execution by Noteholders.................. 47
Section 9.3 Who Are Deemed Absolute Owners..................... 47
Section 9.4 Company-Owned Notes Disregarded.................... 48
Section 9.5 Revocation of Consents; Future Holders
Bound.............................................. 48
ARTICLE X
NOTEHOLDERS' MEETINGS................... 49
Section 10.1 Purpose of Meetings............................... 49
Section 10.2 Call of Meetings by Trustee....................... 49
Section 10.3 Call of Meetings by Company or
Noteholders....................................... 50
Section 10.4 Qualifications for Voting......................... 50
Section 10.5 Regulations....................................... 50
Section 10.6 Voting............................................ 51
Section 10.7 No Delay of Rights by Meeting..................... 51
ARTICLE XI
SUPPLEMENTAL INDENTURES.................. 51
Section 11.1 Supplemental Indentures Without Consent
of Noteholders.................................... 51
Section 11.2 Supplemental Indentures with Consent of
Noteholders....................................... 53
Section 11.3 Effect of Supplemental Indentures................. 54
Section 11.4 Notation on Notes................................. 54
Section 11.5 Evidence of Compliance of Supplemental
Indenture to Be Furnished Trustee................. 54
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE..... 54
Section 12.1 Company May Consolidate, Etc. on Certain Terms.... 54
Section 12.2 Successor Corporation to Be Substituted........... 55
Section 12.3 Opinion of Counsel to Be Given Trustee............ 56
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE.......... 56
Section 13.1 Discharge of Indenture............................ 56
Section 13.2 Deposited Monies to Be Held in Trust by
Trustee........................................... 57
Section 13.3 Paying Agent to Repay Monies Held................. 57
Section 13.4 Return of Unclaimed Monies........................ 57
Section 13.5 Reinstatement..................................... 57
<PAGE>
Page
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ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS............................................... 58
Section 14.1 Indenture and Notes Solely Corporate
Obligations....................................... 58
ARTICLE XV
CONVERSION OF NOTES.................... 58
Section 15.1 Right to Convert.................................. 58
Section 15.2 Exercise of Conversion Privilege;
Issuance of Common Stock on Conversion;
No Adjustment for Interest or Dividends........... 59
Section 15.3 Cash Payments in Lieu of Fractional
Shares............................................ 61
Section 15.4 Conversion Price.................................. 62
Section 15.5 Adjustment of Conversion Price.................... 62
Section 15.6 Effect of Reclassification,
Consolidation, Merger or Sale..................... 72
Section 15.7 Taxes on Shares Issued............................ 73
Section 15.8 Reservation of Shares; Shares to Be Fully
Paid; Listing of Common Stock..................... 74
Section 15.9 Responsibility of Trustee......................... 74
Section 15.10 Notice to Holders Prior to Certain
Actions........................................... 75
ARTICLE XVI
REPURCHASE UPON A FUNDAMENTAL CHANGE............ 76
Section 16.1 Repurchase Right.................................. 76
Section 16.2 Notices; Method of Exercising Repurchase
Right, Etc........................................ 77
ARTICLE XVII
MISCELLANEOUS PROVISIONS.................. 78
Section 17.1 Provisions Binding on Company's
Successors........................................ 78
Section 17.2 Official Acts by Successor Corporation............ 78
Section 17.3 Addresses for Notices............................. 78
Section 17.4 Governing Law..................................... 79
Section 17.5 Evidence of Compliance with Conditions
Precedent; Certificates to Trustee................ 79
Section 17.6 Legal Holidays.................................... 80
Section 17.7 No Security Interest Created...................... 80
Section 17.8 Trust Indenture Act to Control.................... 80
Section 17.9 Benefits of Indenture............................. 80
Section 17.10 Table of Contents, Headings, Etc.................. 80
Section 17.11 Authenticating Agent.............................. 80
Section 17.12 Execution in Counterparts......................... 81
<PAGE>
INDENTURE dated as of __________ ___, 1996 between PARK ELECTROCHEMICAL
CORP., a New York corporation (hereinafter sometimes called the "Company", as
more fully set forth in Section 1.1), and The Chase Manhattan Bank, N.A., a
national banking association organized and existing under the laws of the United
States (hereinafter sometimes called the "Trustee", as more fully set forth in
Section 1.1).
W I T N E S S E T H :
-------------------
WHEREAS, for its lawful corporate purposes, the Company has duly authorized
the issue of its % Convertible Subordinated Notes due 2006 (hereinafter
sometimes called the "Notes"), in an aggregate principal amount not to exceed
$115,000,000 and, to provide the terms and conditions upon which the Notes are
to be authenticated, issued and delivered, the Company has duly authorized the
execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be borne by the
Notes, a form of assignment, a form of option to elect repayment upon a
Fundamental Change, a form of conversion notice and a certificate of transfer to
be borne by the Notes are to be substantially in the forms hereinafter provided
for; and
WHEREAS, all acts and things necessary to make the Notes, when executed by
the Company and authenticated and delivered by the Trustee or a duly authorized
authenticating agent, as in this Indenture provided, the valid, binding and
legal obligations of the Company, and to constitute these presents a valid
agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes are,
and are to be, authenticated, issued and delivered, and in consideration of the
premises and of the purchase and acceptance of the Notes by the holders thereof,
the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions The terms defined in this Section 1.1 (except as
-----------
herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this
<PAGE>
2
Indenture and of any indenture supplemental hereto shall have the respective
meanings specified in this Section 1.1. All other terms used in this Indenture,
which are defined in the Trust Indenture Act or which are by reference therein
defined in the Securities Act (except as herein otherwise expressly provided or
unless the context otherwise requires) shall have the meanings assigned to such
terms in said Trust Indenture Act and in said Securities Act as in force at the
date of the execution of this Indenture. The words "herein," "hereof,"
"hereunder," and words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or other Subdivision. The terms defined
in this Article include the plural as well as the singular.
Affiliate: The term "Affiliate" of any specified person shall mean any
---------
other person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person. For the purposes of this
definition, "control," when used with respect to any specified person means the
power to direct or cause the direction of the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Board of Directors: The term "Board of Directors" shall mean the Board of
------------------
Directors of the Company or a committee of such Board duly authorized to act for
it hereunder.
Board Resolution: The term "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, or duly authorized committee thereof (to
the extent permitted by applicable law), and to be in full force and effect on
the date of such certification, and delivered to the Trustee.
Business Day: The term "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 the city in which the Corporate Trust Office is
located are authorized or obligated by law or executive order to close or be
closed.
Commission: The term "Commission" shall mean the Securities and Exchange
----------
Commission.
Common Stock: The term "Common Stock" shall mean any stock of any class of
------------
the Company which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which is not subject to redemption by the Company.
Subject to the provisions of Section 15.6, however, shares issuable on
conversion of Notes shall include only shares of the class designated as common
stock of the Company at the
<PAGE>
3
date of this Indenture or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no preference in
respect of dividends 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 that if at any time there
--------
shall be more than one 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: The term "Company" shall mean Park Electrochemical Corp., a New
-------
York corporation, and subject to the provisions of Article XII, shall include
its successors and assigns.
Conversion Price: The term "Conversion Price" shall have the meaning
----------------
specified in Article XV.
Corporate Trust Office: The term "Corporate Trust Office," or other
----------------------
similar term, shall mean the office of the Trustee at which at any particular
time its corporate trust business shall be principally administered, which
office is, at the date as of which this Indenture is dated, located at 4 Chase
Metro Tech Center, 3rd Floor, Institutional Trust Department, Brooklyn, New York
11245, Attention: Vice President.
default: The term "default" shall mean any event that is, or after notice
-------
or passage of time, or both, would be, an Event of Default.
Depositary: The term "Depositary" shall mean The Depository Trust Company
----------
until a successor Depositary shall have been appointed pursuant to Section 2.5,
and thereafter the term "Depositary" shall mean or include each person who is
then a Depositary hereunder.
Exchange Act: The term "Exchange Act" means the Securities Exchange Act of
------------
1934, as amended, and the rules and regulations promulgated thereunder.
Event of Default: The term "Event of Default" shall mean any event
----------------
specified in Section 7.1(a), (b), (c), (d), (e), (f), (g) or (h).
Fundamental Change: The term "Fundamental Change" means the occurrence of
------------------
any transaction or event in connection with which all or substantially all the
Common Stock shall be exchanged for, converted into, acquired for or constitute
the right to receive consideration (whether by means of an exchange offer,
liquidation, tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise)
<PAGE>
4
which is not all or substantially all common stock which is (or will, upon
consummation of or immediately following such transaction or event, will be)
listed on a national securities exchange or approved for quotation on the Nasdaq
National Market or any similar United States system of automated dissemination
of quotations of securities prices.
Global Note: The term "Global Note" shall mean a Note evidencing all or
-----------
part of the Notes which is issued to the Depositary or its nominee and is
registered in the name of the Depositary or its nominee.
Indebtedness: The term Indebtedness shall have the meaning specified in
------------
Section 7.1(e).
Indenture: The term "Indenture" shall mean this instrument as originally
---------
executed or, if amended or supplemented as herein provided, as so amended or
supplemented.
Note or Notes: The terms "Note" or "Notes" shall mean any Note or Notes,
-------------
as the case may be, authenticated and delivered under this Indenture in
accordance with its terms.
Noteholder or holder: The terms "Noteholder" or "holder" as applied to any
--------------------
Note, or other similar terms (but excluding the term "beneficial holder"), shall
mean any person in whose name at the time a particular Note is registered on the
Note registrar's books.
Note register: The term "Note register" shall have the meaning specified
-------------
in Section 2.5.
Officers' Certificate: The term "Officers' Certificate," when used with
---------------------
respect to the Company, shall mean a certificate signed by the President, the
Chief Executive Officer, any Executive or Senior Vice President or any Vice
President and by the Treasurer or any Assistant Treasurer, the Secretary or any
Assistant Secretary or the Controller of the Company, which is delivered to the
Trustee. Each such certificate shall include the statements provided for in
Section 17.5 if and to the extent required by the provisions of such Section.
Opinion of Counsel: The term "Opinion of Counsel" shall mean an opinion in
------------------
writing signed by legal counsel, who may be an employee of or counsel to the
Company, or other counsel which is delivered to the Trustee. Each such opinion
shall include the statements provided for in Section 17.5 if and to the extent
required by the provisions of such Section.
outstanding: The term "outstanding," when used with reference to Notes,
-----------
shall, subject to the provisions of Section 9.4, mean, as of any particular
time, all Notes authenticated and delivered by the Trustee under this Indenture,
except
<PAGE>
5
(a) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes, or portions thereof, for the payment, redemption or
repurchase of which monies in the necessary amount shall have been
deposited in trust with the Trustee or with any paying agent (other than
the Company) or shall have been set aside and segregated in trust by the
Company (if the Company shall act as its own paying agent); provided that
--------
if such Notes are to be redeemed or repurchased, as the case may be, prior
to the maturity thereof, notice of such redemption or repurchase, as the
case may be, shall have been given as in Article III or XVI provided or
provision satisfactory to the Trustee shall have been made for giving such
notice;
(c) Notes in lieu of which, or in substitution for which, other Notes
shall have been authenticated and delivered pursuant to the terms of
Section 2.6 unless proof satisfactory to the Trustee is presented that any
such Notes are held by bona fide holders in due course; and
(d) Notes converted into Common Stock pursuant to Article XV and
Notes deemed not outstanding pursuant to Section 3.2.
person: The term "person" shall mean a corporation, an association, a
------
partnership, a limited liability company, an individual, a joint venture, a
joint stock company, a trust, an unincorporated organization or a government or
an agency or a political subdivision thereof.
Predecessor Note: The term "Predecessor Note" of any particular Note
----------------
shall mean every previous Note evidencing all or a portion of the same debt as
that evidenced by such particular Note; and, for the purposes of this
definition, any Note authenticated and delivered under Section 2.6 in lieu of a
lost, destroyed or stolen Note shall be deemed to evidence the same debt as the
lost, destroyed or stolen Note that it replaces.
Repurchase Price: The term "Repurchase Price" has the meaning
----------------
specified in Section 16.1.
Responsible Officer: The term "Responsible Officer," when used with
-------------------
respect to the Trustee, shall mean an officer of the Trustee assigned to the
Corporate Trust Office of the Trustee, and any other officer of the Trustee to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
Rights Agreement: The term "Rights Agreement" means that certain
----------------
Amended and Restated Rights Agreement, dated as of July 12, 1995, between the
Company and the Rights Agent (as such term is defined therein), as amended from
time to time.
<PAGE>
6
Rights: The term "Rights" shall mean "Rights" as such term is defined
------
in the Rights Agreement or any New Rights Agreement (as defined in Section 15.5
hereof).
Securities Act: The term "Securities Act" means the Securities Act of
--------------
1933, as amended, and the rules and regulations promulgated thereunder.
Senior Indebtedness: The term "Senior Indebtedness" means the
-------------------
principal of, premium, if any, and interest on (including any interest accruing
after the filing of a petition by or against the Company under any bankruptcy
law, whether or not allowed as a claim after such filing in any proceeding under
such bankruptcy law), and any other payment due pursuant to, any of the
following, whether outstanding on the date of the Indenture or thereafter
incurred or created:
(a) All indebtedness of the Company for money borrowed (including,
but not limited to, any indebtedness secured by a security interest,
mortgage or other lien on the assets of the Company which is (i) given to
secure all or part of the purchase price of property subject thereto,
whether given to the vendor of such property or to another, or (ii)
existing on property at the time of acquisition thereof);
(b) All indebtedness of the Company evidenced by notes, debentures,
bonds or other securities (including, but not limited to, those which are
convertible or exchangeable for securities of the Company);
(c) All indebtedness of the Company due and owing with respect to
letters of credit (including, but not limited to, reimbursement obligations
with respect thereto);
(d) All lease obligations of the Company which are capitalized on the
books of the Company in accordance with generally accepted accounting
principles and all lease obligations of the Company under any lease or
related document (including a purchase agreement) which provides that the
Company is contractually obligated to purchase or cause a third party to
purchase the leased property, and thereby guarantee a minimum residual
value of the leased property to the lessor and the obligations of the
Company under such lease or related document to purchase or to cause a
third party to purchase such leased property;
(e) All indebtedness consisting of commitment or standby fees due and
payable to lending institutions with respect to credit facilities available
to the Company;
(f) All indebtedness consisting of obligations of the Company due and
payable under interest rate and currency swaps, floors, caps or other
similar arrangements intended
<PAGE>
7
to fix interest rate obligations or hedge foreign currency exposure;
(g) All indebtedness of others of the kinds described in any of the
preceding clauses (a), (b), (c), (e) or (f) and all lease obligations of
the kind described in the preceding clause (d) assumed by or guaranteed in
any manner by the Company or in effect guaranteed by the Company through an
agreement to purchase, contingent or otherwise, and all obligations of the
Company under such guarantee or other arrangements;
(h) All amounts due to the Trustee under Section 8.6 hereunder; and
(i) All renewals, extensions, refundings, deferrals, amendments or
modifications of indebtedness of the kinds described in any of the
preceding clauses (a), (b), (c), (e), (f) or (g) and all renewals or
extensions of lease obligations of the kinds described in any of the
preceding clauses (d) or (g);
unless in the case of any particular indebtedness, lease, renewal, extension,
refunding, amendment, modification or supplement, the instrument, lease or other
document creating or evidencing the same or the assumption or guarantee of the
same expressly provides that such indebtedness, lease, renewal, extension,
refunding, amendment, modification or supplement is not superior in right of
payment to, or pari passu with, the Notes. Notwithstanding the foregoing,
Senior Indebtedness shall not include (i) the Notes, (ii) any indebtedness or
lease obligations of any kind of the Company to any subsidiary of the Company, a
majority of the voting stock of which is owned, directly or indirectly, by the
Company, and (iii) indebtedness for trade payables or constituting the deferred
purchase price of assets or services incurred in the ordinary course of
business.
Significant Subsidiary: The term "Significant Subsidiary" means, with
----------------------
respect to any person, a Subsidiary of such person that would constitute a
"significant subsidiary" as such term is defined under Rule 1.02(w) of
Regulation S-X of the Securities and Exchange Commission.
Subsidiary: The term "Subsidiary" means (i) 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 or (2) any other person (other than a corporation)
more than 50% of the outstanding ownership interest 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
<PAGE>
8
senior class of stock has such voting power by reason of any contingency.
Trust Indenture Act: The term "Trust Indenture Act" shall mean the
-------------------
Trust Indenture Act of 1939, as amended, as it was in force at the date of
execution of this Indenture, except as provided in Sections 11.3 and 15.6;
provided, however, that in the event the Trust Indenture Act of 1939 is amended
- -------- -------
after the date hereof, the term "Trust Indenture Act" shall mean, to the extent
required by such amendment, the Trust Indenture Act of 1939, as so amended.
Trustee: The term "Trustee" shall mean The Chase Manhattan Bank, N.A.
-------
until a successor replaces it pursuant to the applicable provisions of this
Indenture and thereafter shall mean such successor. The foregoing sentence
shall likewise apply to any subsequent such successor or successors.
The definitions of certain other terms are as specified in Article IV,
Article XV and Article XVI.
ARTICLE II
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
Section 2.1 Designation, Amount and Issue of Notes. The Notes shall
--------------------------------------
be designated as " % Convertible Subordinated Notes due 2006". Notes not to
exceed the aggregate principal amount of $115,000,000 (except pursuant to
Sections 2.5, 2.6, 3.3, 15.2 and 16.2) upon the execution of this Indenture, or
from time to time thereafter, may be executed by the Company and delivered to
the Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver said Notes upon the written order of the Company, signed by (a) its
President, any Executive or Senior Vice President or any Vice President and (b)
its Treasurer or any Assistant Treasurer or its Secretary or any Assistant
Secretary, without any further action by the Company hereunder. Subject to
Section 2.5, the Notes will be represented by a Global Note registered in the
name of the Depositary or its nominee.
Section 2.2 Form of Notes. The Notes and the Trustee's certificate
-------------
of authentication to be borne by such Notes shall be in the form set forth in
Exhibit A, which is incorporated in and made a part of this Indenture.
Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officer of
the Company executing the same may approve (execution thereof by such officer to
be conclusive evidence of such approval) and as are not inconsistent with the
provisions of this Indenture, or as may be required to comply
<PAGE>
9
with any law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any securities exchange or automated quotation system on
which the Notes may be listed or designated for issuance, or to conform to
usage.
The terms and provisions contained in the form of Note attached as
Exhibit A hereto shall constitute, and are hereby expressly made, a part of this
Indenture and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Section 2.3 Date and Denomination of Notes; Payments of Interest.
----------------------------------------------------
The Notes shall be issuable in registered form without coupons in denominations
of $1,000 principal amount and integral multiples thereof. Every Note shall be
dated the date of authentication and accrued interest shall be payable
semiannually on each _________ ___ and _________ ___, commencing ________ ___,
1996, at the rate per annum specified in the title of the Notes, accrued from
the _________ ___ or _________ ___, as the case may be, next preceding the date
of such Note to which interest has been paid or duly provided for, unless the
date of such Note is a date to which interest has been paid or duly provided
for, in which case interest shall accrue from the date of such Note, or unless
no interest has been paid or duly provided for on such Note, in which case
interest shall accrue from ________ __, 1996, until payment of the principal sum
of such Note has been made or duly provided for, as further specified on the
face of the form of Note attached as Exhibit A hereto.
The person in whose name any Note (or its Predecessor Note) is
registered at the close of business on any record date with respect to any
interest payment date (including any Note that is converted pursuant to Article
XV after the record date and on or before the interest payment date) shall be
entitled to receive the interest payable on such interest payment date
notwithstanding the cancellation of such Note upon any transfer, exchange or
conversion subsequent to such record date and prior to such interest payment
date; provided that in the case of any Note, or portion thereof, called for
--------
redemption pursuant to Article III on a redemption date, or repurchased by the
Company pursuant to Article XVI on a repurchase date, during the period from the
close of business on such record date to the close of business on the Trading
Day next preceding such interest payment date, interest shall not be paid to
the person in whose name the Note, or the portion thereof, is registered at the
close of business on such record date, and the Company shall have no obligation
to pay interest on such Note or portion thereof except to the extent required to
be paid upon such redemption or repurchase in accordance with Article III or
Article XVI. Interest may, at the option of the Company, be paid by check
mailed to the address of such person on the registry kept for such purposes;
provided that, with respect to any holder of Notes
- --------
<PAGE>
10
with an aggregate principal amount equal to or in excess of $5,000,000, at the
request of such holder in writing to the Company, interest on such holder's
Notes shall be paid by wire transfer in immediately available funds in
accordance with the wire transfer instructions supplied by such holder to the
Trustee and paying agent (if different from the Trustee). The term "record
date" with respect to any interest payment date shall mean the ________ ___ or
________ ___ preceding said ___________ ___ or _________ ___, respectively.
Notwithstanding any other provision of this Article II, if the Note is
in the form of a Global Note, immediately available funds for the payment of the
principal of and premium, if any, and interest on the Note due on any interest
payment date or the maturity date will be made available to the Trustee or the
paying agent to permit the Trustee or the paying agent to pay such funds to the
Depositary on such respective dates. The Depositary will allocate and pay such
funds to the owners of beneficial interests in the Note in accordance with its
existing operating procedures.
Interest on the Notes shall be computed on the basis of a 360 day year
comprised of twelve 30-day months.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any said ________ ___ or _________ ___ (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Noteholder on
the relevant record date by virtue of his having been such Noteholder; and such
Defaulted Interest shall be paid by the Company, at its election in each case,
as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a special record date for
the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest to be paid on each Note and the date of the
payment (which shall be not less than twenty-five (25) days after the
receipt by the Trustee of such notice, unless the Trustee shall consent to
an earlier date), and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount 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 fifteen (15) days and
not less than ten (10) days prior to the date of the proposed payment and
not less than ten (10) days after
<PAGE>
11
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 Noteholder as
of such special record date at his address as it appears in the Note
register, not less than ten (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 Notes (or their respective
Predecessor Notes) were registered at the close of business on such special
record date and shall no longer be payable pursuant to the following clause
(2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Notes may be
listed or designated for issuance, and upon such notice as may be required
by such exchange or automated quotation system, 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.
Section 2.4 Execution of Notes. The Notes shall be signed in the
------------------
name and on behalf of the Company by the facsimile signature of its President,
any of its Executive or Senior Vice Presidents, or any of its Vice Presidents
and attested by the facsimile signature of its Secretary or any of its Assistant
Secretaries (which may be printed, engraved or otherwise reproduced thereon, by
facsimile or otherwise). Only such Notes as shall bear thereon a certificate of
authentication substantially in the form set forth on the form of Note attached
as Exhibit A hereto, manually executed by the Trustee (or an authenticating
agent appointed by the Trustee as provided by Section 17.11), shall be entitled
to the benefits of this Indenture or be valid or obligatory for any purpose.
Such certificate by the Trustee (or such an authenticating agent) upon any Note
executed by the Company shall be conclusive evidence that the Note so
authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the
Notes shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the
Company; and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the
<PAGE>
12
Company, although at the date of the execution of this Indenture any such person
was not such an officer.
Section 2.5 Exchange and Registration of Transfer of Notes;
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Restrictions on Transfer; Depositary. The Company shall cause to be kept at the
- ------------------------------------
Corporate Trust Office of the Trustee a register (the register maintained in
such office and in any other office or agency of the Company designated pursuant
to Section 5.2 being herein sometimes collectively referred to as the "Note
register"), in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Notes and of
transfers of Notes. Such register shall be in written form or in any form
capable of being converted into written form within a reasonable period of time.
The Trustee is hereby appointed "Note registrar" for the purpose of registering
Notes and transfers of Notes as herein provided. The Company may appoint one or
more co-registrars in accordance with Section 5.2.
Upon surrender for registration of transfer of any Note to the Note
registrar or any co-registrar, and satisfaction of the requirements for such
transfer set forth in this Section 2.5, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount.
Notwithstanding any other provision of this Section 2.5, unless and
until it is exchanged in whole or in part for Notes in definitive form, a Global
Note representing all or a portion of the Notes may not be transferred except as
a whole by the Depositary to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor Depositary or a nominee of
such successor Depositary. The Depositary may not sell, assign, transfer or
otherwise convey any beneficial interest in a Global Note evidencing all or part
of the Notes unless such beneficial interest is in an amount equal to an
authorized denomination for the Notes.
If at any time the Depositary notifies the Company that it is
unwilling or unable to continue as a Depositary for the Notes or if at any time
the Depositary shall no longer be registered or in good standing under the
Exchange Act or other applicable statute or regulation, the Company shall
appoint a successor Depositary with respect to the Notes. If a successor
Depositary for the Notes is not appointed by the Company within 90 days after
the Company receives such notice or becomes aware of such condition, the Company
will execute, and the Trustee, upon the written request or authorization of any
officer of the Company, will authenticate and deliver, Notes in definitive form
in an aggregate principal amount equal to the principal amount of the Global
Note representing Notes in exchange for such Global Note.
<PAGE>
13
In the event that the Company at any time and in its sole discretion
determines that the Notes issued in the form of a Global Note shall no longer be
represented by such Global Note, the Company will execute, and the Trustee, upon
the written request or authorization of any officer of the Company, will
authenticate and deliver, Notes in definitive form and in an aggregate principal
amount equal to the principal amount of the Global Note representing the Notes
in exchange for such Global Note.
The Depositary may surrender a Global Note in exchange, in whole or in
part, for Notes in definitive form on such terms as are acceptable to the
Company and the Depositary. Thereupon, the Company shall execute, and the
Trustee shall authenticate and deliver, without charge,
to each Person specified by the Depositary, a new Note or Notes
in definitive form in an aggregate principal amount equal to and in
exchange for such Person's beneficial interest in the surrendered Global
Note; and
to the Depositary, a new Global Note in a denomination equal to
the difference, if any, between the principal amount of the surrendered
Global Note and the aggregate principal amount of Notes delivered in
definitive form to Holders pursuant to clause (1) above.
Upon the exchange of a Global Note for Notes in definitive form, such
Global Note shall be cancelled by the Trustee. Notes issued in definitive form
in exchange for a Global Note pursuant to this Section 2.5 shall be registered
in such names and in such authorized denominations as the Depositary, pursuant
to instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee shall deliver such Notes in definitive form
to the Person in whose names such Notes are so registered.
Notes may be exchanged for other Notes of any authorized denominations
and of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at any such office or agency. Whenever any Notes are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Notes which the Noteholder making the exchange is entitled to
receive, bearing registration numbers not contemporaneously outstanding.
All Notes presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company, the Trustee, the Note registrar
or any co-registrar) be duly endorsed, or be accompanied by a written instrument
or instruments of transfer in form satisfactory to the Company and duly
executed, by the Noteholder thereof or his attorney duly authorized in writing.
<PAGE>
14
No service charge shall be charged to the Noteholder for any exchange
or registration of transfer of Notes, but the Company may require payment of a
sum sufficient to cover any tax, assessments or other governmental charges that
may be imposed in connection therewith.
None of the Company, the Trustee, the Note registrar or any co-
registrar shall be required to exchange or register a transfer of (a) any Notes
for a period of fifteen (15) days next preceding any selection of Notes to be
redeemed or (b) any Notes called for redemption or, if a portion of any Note is
selected or called for redemption, such portion thereof selected or called for
redemption or (c) any Notes surrendered for conversion or, if a portion of any
Note is surrendered for conversion, such portion thereof surrendered for
conversion or (d) any Notes surrendered for repurchase pursuant to Article XVI
or, if a portion of any Note is surrendered for repurchase pursuant to Article
XVI, such portion thereof surrendered for repurchase pursuant to Article XVI.
All Notes issued upon any transfer or exchange of Notes in accordance
with this Indenture shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture as the
Notes surrendered upon such registration of transfer or exchange.
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes. In case any
------------------------------------------
Note shall become mutilated or be destroyed, lost or stolen, the Company in its
discretion may execute, and upon its request the Trustee or an authenticating
agent, appointed by the Trustee, shall authenticate and deliver, a new Note,
bearing a number not contemporaneously outstanding, in exchange and substitution
for the mutilated Note, or in lieu of and in substitution for the Note so
destroyed, lost or stolen. In every case the applicant for a substituted Note
shall furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent such security or indemnity as may be required by them to
save each of them harmless for any loss, liability, cost or expense caused by or
connected with such substitution, and, in every case of destruction, loss or
theft, the applicant shall also furnish to the Company, to the Trustee and, if
applicable, to such authenticating agent evidence to their satisfaction of the
destruction, loss or theft of such Note and of the ownership thereof.
The Trustee or such authenticating agent may authenticate any such
substituted Note and deliver the same upon the receipt of such security or
indemnity as the Trustee, the Company and, if applicable, such authenticating
agent may require. Upon the issuance of any substituted Note, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Note which has matured or is about to mature or has been
called for
<PAGE>
15
redemption or submitted for repurchase or is about to be converted into Common
Stock shall become mutilated or be destroyed, lost or stolen, the Company may,
instead of issuing a substitute Note, pay or authorize the payment of or
repurchase or authorize the repurchase of or convert or authorize the conversion
of the same (without surrender thereof except in the case of a mutilated Note),
as the case may be, if the applicant for such payment, repurchase or conversion
shall furnish to the Company, to the Trustee and, if applicable, to such
authenticating agent such security or indemnity as may be required by them to
save each of them harmless for any loss, liability, cost or expense caused by or
connected with such substitution, and, in case of destruction, loss or theft,
evidence satisfactory to the Company, the Trustee and, if applicable, any paying
agent or conversion agent of the destruction, loss or theft of such Note and of
the ownership thereof.
Every substitute Note issued pursuant to the provisions of this
Section 2.6 by virtue of the fact that any Note is destroyed, lost or stolen
shall constitute an additional contractual obligation of the Company, whether or
not the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of (but shall be subject to all the limitations set
forth in) this Indenture equally and proportionately with any and all other
Notes duly issued hereunder. To the extent permitted by law, all Notes shall be
held and owned upon the express condition that the foregoing provisions are
exclusive with respect to the replacement or payment, repurchase or conversion
of mutilated, destroyed, lost or stolen Notes and shall preclude any and all
other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment,
repurchase or conversion of negotiable instruments or other securities without
their surrender.
Section 2.7 Temporary Notes. Pending the preparation of definitive
---------------
Notes, the Company may execute and the Trustee or an authenticating agent
appointed by the Trustee shall, upon written request of the Company,
authenticate and deliver temporary Notes (printed or lithographed). Temporary
Notes shall be issuable in any authorized denomination, and substantially in the
form of the definitive Notes but with such omissions, insertions and variations
as may be appropriate for temporary Notes, all as may be determined by the
Company. Every such temporary Note shall be executed by the Company and
authenticated by the Trustee or such authenticating agent upon the same
conditions and in substantially the same manner, and with the same effect, as
the definitive Notes. Without unreasonable delay the Company will execute and
deliver to the Trustee or such authenticating agent definitive Notes and
thereupon any or all temporary Notes may be surrendered in exchange therefor, at
each office or agency maintained by the Company pursuant to Section 5.2 and the
Trustee or such authenticating agent shall
<PAGE>
16
authenticate and deliver in exchange for such temporary Notes an equal aggregate
principal amount of definitive Notes. Such exchange shall be made by the
Company at its own expense and without any charge therefor. Until so exchanged,
the temporary Notes shall in all respects be entitled to the same benefits and
subject to the same limitations under this Indenture as definitive Notes
authenticated and delivered hereunder.
Section 2.8 Cancellation of Notes Paid, Etc. All Notes surrendered
--------------------------------
for the purpose of payment, redemption, repurchase, conversion, exchange or
registration of transfer, shall, if surrendered to the Company or any paying
agent or any Note registrar or any conversion agent, be surrendered to the
Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be
promptly canceled by it, and no Notes shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. Upon written
instructions of the Company, the Trustee shall destroy canceled Notes and, after
such destruction, shall deliver a certificate of such destruction to the
Company. If the Company shall acquire any of the Notes, such acquisition shall
not operate as a redemption or satisfaction of the indebtedness represented by
such Notes unless and until the same are delivered to the Trustee for
cancellation.
ARTICLE III
REDEMPTION OF NOTES
Section 3.1 Redemption Prices. The Company may, at its option,
-----------------
redeem all or from time to time any part of the Notes on any date on or after
_____, 1999 and prior to maturity, upon notice as set forth in Section 3.2, and
at the optional redemption prices set forth in the form of Note attached as
Exhibit A hereto, together with accrued interest to the date fixed for
redemption.
Section 3.2 Notice of Redemption; Selection of Notes. In case the
----------------------------------------
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Notes pursuant to Section 3.1, it shall fix a date for
redemption and, in the case of any redemption pursuant to Section 3.1, it or, at
its request (which must be received by the Trustee at least ten (10) Business
Days prior to the date the Trustee is requested to give notice as described
below unless a shorter period is agreed to by the Trustee), the Trustee in the
name of and at the expense of the Company, shall mail or cause to be mailed a
notice of such redemption at least fifteen (15) and not more than sixty (60)
days prior to the date fixed for redemption to the holders of Notes so to be
redeemed as a whole or in part at their last addresses as the same appear on the
Note register (provided that if the Company shall give such notice, it shall
--------
also give such notice, and notice of the Notes to be redeemed, to the Trustee).
Such mailing shall be by first class mail. The notice if mailed
<PAGE>
17
in the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the holder receives such notice. In any case, failure to
give such notice by mail or any defect in the notice to the holder of any Note
designated for redemption as a whole or in part shall not affect the validity of
the proceedings for the redemption of any other Note.
Each such notice of redemption shall specify the aggregate principal
amount of Notes to be redeemed, the date fixed for redemption, the redemption
price at which Notes are to be redeemed, the place or places of payment, that
payment will be made upon presentation and surrender of such Notes, that
interest accrued to the date fixed for redemption will be paid as specified in
said notice, and that on and after said date interest thereon or on the portion
thereof to be redeemed will cease to accrue. Such notice shall also state the
current Conversion Price and the date on which the right to convert such Notes
or portions thereof into Common Stock will expire. If fewer than all the Notes
are to be redeemed, the notice of redemption shall identify the Notes to be
redeemed. In case any Note is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that on and after the date fixed for redemption, upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion thereof will be issued.
On or prior to the last Business Day prior to the redemption date
specified in the notice of redemption given as provided in this Section, the
Company will deposit with the Trustee or with one or more paying agents (or, if
the Company is acting as its own paying agent, set aside, segregate and hold in
trust as provided in Section 5.4) an amount of money sufficient to redeem on the
redemption date all the Notes (or portions thereof) so called for redemption
(other than those theretofore surrendered for conversion into Common Stock) at
the appropriate redemption price, together with accrued interest to the date
fixed for redemption. If any Note called for redemption is converted pursuant
hereto, any money deposited with the Trustee or any paying agent or so
segregated and held in trust for the redemption of such Note shall be paid to
the Company upon its request, or, if then held by the Company shall be
discharged from such trust. If fewer than all the Notes are to be redeemed, the
Company will give the Trustee written notice in the form of an Officers'
Certificate not fewer than thirty (30) days (or such shorter period of time as
may be acceptable to the Trustee) prior to the redemption date as to the
aggregate principal amount of Notes to be redeemed.
If fewer than all the Notes are to be redeemed, the Trustee shall
select the Notes or portions thereof to be redeemed (in principal amounts of
$1,000 or integral multiples thereof), by lot or, in its sole discretion, on a
pro rata basis. If any Note selected for partial redemption is converted in
part after
<PAGE>
18
such selection, the converted portion of such Note shall be deemed (so far as
may be) to be the portion to be selected for redemption. The Notes (or portions
thereof) so selected shall be deemed duly selected for redemption for all
purposes hereof, notwithstanding that any such Note is converted as a whole or
in part before the mailing of the notice of redemption.
Upon any redemption of less than all Notes, the Company and the
Trustee may (but need not) treat as outstanding any Notes surrendered for
conversion during the period of fifteen (15) days next preceding the mailing of
a notice of redemption and may (but need not) treat as not outstanding any Note
authenticated and delivered during such period in exchange for the unconverted
portion of any Note converted in part during such period.
Section 3.3 Payment of Notes Called for Redemption. If notice of
--------------------------------------
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock pursuant to the terms hereof, become due and payable on the date and at
the place or places stated in such notice at the applicable redemption price,
together with interest accrued to the date fixed for redemption, and on and
after said date (unless the Company shall default in the payment of such Notes
at the redemption price, together with interest accrued to said date) interest
on the Notes or portion of Notes so called for redemption shall cease to accrue
and such Notes shall cease after the close of business on the Business Day next
preceding the date fixed for redemption to be convertible into Common Stock and,
except as provided in Sections 8.5 and 13.5, to be entitled to any benefit or
security under this Indenture, and the holders thereof shall have no right in
respect of such Notes except the right to receive the redemption price thereof
and unpaid interest to the date fixed for redemption. On presentation and
surrender of such Notes at a place of payment in said notice specified, the said
Notes or the specified portions thereof to be redeemed shall be paid and
redeemed by the Company at the applicable redemption price, together with
interest accrued thereon to the date fixed for redemption; provided that any
--------
semi-annual payment of interest becoming due on the date fixed for redemption
shall be payable to the holders of such Notes registered as such on the relevant
record date subject to the terms and provisions of Section 2.3 hereof.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the holder thereof, at
the expense of the Company, a new Note or Notes, of authorized denominations, in
principal amount equal to the unredeemed portion of the Notes so presented.
Notwithstanding the foregoing, the Trustee shall not redeem any Notes
or mail any notice of optional redemption during the continuance of a default in
payment of interest or premium on the Notes or of any Event of Default of which,
in the case of any
<PAGE>
19
Event of Default other than under Section 7.1(a) or (b), a Responsible Officer
of the Trustee has knowledge. If any Note called for redemption shall not be so
paid upon surrender thereof for redemption, the principal of and premium, if
any, on such Notes shall, until paid or duly provided for, bear interest from
the date fixed for redemption at the rate borne by the Notes and such Note shall
remain convertible into Common Stock until the principal of and premium, if any,
on such Notes shall have been paid or duly provided for.
Section 3.4 Conversion Arrangement on Call for Redemption. In
---------------------------------------------
connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes by an agreement with one or more investment
bankers or other purchasers to purchase such Notes by paying to the Trustee in
trust for the Noteholders, on or before the date fixed for redemption, an amount
not less than the applicable redemption price, together with interest accrued to
the date fixed for redemption, of such Notes. Notwithstanding anything to the
contrary contained in this Article III, the obligation of the Company to pay the
redemption price of such Notes, together with interest accrued to the date fixed
for redemption, shall be deemed to be satisfied and discharged to the extent
such amount is so paid by such purchasers. If such an agreement is entered
into, a copy of which will be filed with the Trustee prior to the date fixed for
redemption, any Notes not duly surrendered for conversion by the holders thereof
may, at the option of the Company, be deemed, to the fullest extent permitted by
law, acquired by such purchasers from such holders and (notwithstanding anything
to the contrary contained in Article XV) surrendered by such purchasers for
conversion, all as of immediately prior to the close of business on the date
fixed for redemption (and the right to convert any such Notes shall be deemed to
have been extended through such time), subject to payment of the above amount as
aforesaid. At the direction of the Company, the Trustee shall hold and dispose
of any such amount paid to it in the same manner as it would monies deposited
with it by the Company for the redemption of Notes. Without the Trustee's prior
written consent, no arrangement between the Company and such purchasers for the
purchase and conversion of any Notes shall increase or otherwise affect any of
the powers, duties, responsibilities or obligations of the Trustee as set forth
in this Indenture, and the Company agrees to indemnify the Trustee from, and
hold it harmless against, any loss, liability or expense arising out of or in
connection with any such arrangement for the purchase and conversion of any
Notes between the Company and such purchasers to which the Trustee has not
consented in writing, including the costs and expenses incurred by the Trustee
in the defense of any claim or liability arising out of or in connection with
the exercise or performance of any of its powers, duties, responsibilities or
obligations under this Indenture.
<PAGE>
20
ARTICLE IV
SUBORDINATION OF NOTES
Section 4.1 Agreement of Subordination. The Company covenants and
--------------------------
agrees, and each holder of Notes issued hereunder by his acceptance thereof
likewise covenants and agrees, expressly for the benefit of holders of Senior
Indebtedness that all Notes shall be issued subject to the provisions of this
Article IV; and each person holding any Note, whether upon original issue or
upon transfer, assignment or exchange thereof, accepts and agrees to be bound by
such provisions.
The payment of the principal of, premium, if any, and interest on all
Notes issued hereunder shall, to the extent and in the manner hereinafter set
forth, be subordinated and subject in right of payment to the prior payment in
full of all Senior Indebtedness, whether outstanding at the date of this
Indenture or thereafter incurred.
No provision of this Article IV shall prevent the occurrence of any
default or Event of Default hereunder.
Section 4.2 Payments to Noteholders. In the event and during the
-----------------------
continuation of any default in the payment of principal, premium, interest or
any other payment due on any Senior Indebtedness (or, in the case of Senior
Indebtedness for which there is a period of grace, in the event of such a
default that continues beyond the period of grace, if any, specified in the
instrument or lease evidencing such Senior Indebtedness), then, unless and until
such default shall have been cured or waived or shall have ceased to exist, no
payment shall be made by the Company with respect to the principal of, or
premium, if any, or interest on the Notes (including, but not limited to, the
redemption price or repurchase price with respect to the Notes to be redeemed or
repurchased, as provided in this Indenture) except payments made pursuant to
Article XIII from monies deposited with the Trustee pursuant thereto prior to
the happening of such default.
Upon any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due upon all Senior Indebtedness shall first be paid in full, or payment
thereof provided for in money in accordance with its terms, before any payment
is made on account of the principal of (and premium, if any) or interest on the
Notes (except payments made pursuant to Article XIII from monies deposited with
the Trustee pursuant thereto prior to the happening of such dissolution,
winding-up, liquidation or reorganization or
<PAGE>
21
bankruptcy, insolvency, receivership or other such proceedings); and upon any
such dissolution or winding-up or liquidation or reorganization or bankruptcy,
insolvency, receivership or other such proceedings, any payment by the Company,
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, to which the holders of the Notes or the Trustee
under this Indenture would be entitled, except for the provisions of this
Article IV, shall (except as aforesaid) be paid by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the holders of the Notes or by the
Trustee under this Indenture if received by them or it, directly to the holders
of Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders, or as otherwise required by
law or a court order) or their respective representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all Senior Indebtedness in
full after giving effect to any concurrent payment or distribution to or for the
holders of Senior Indebtedness, before any payment or distribution is made to
the holders of the Notes or to the Trustee under this Indenture.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (including, without limitation, by way of set-off or
otherwise), prohibited by the foregoing, shall be received by the Trustee under
this Indenture or by any holders of the Notes before all Senior Indebtedness is
paid in full, or provision is made for such payment in accordance with its
terms, such payment or distribution shall be held by the recipient or recipients
in trust for the benefit of, and shall be paid over or delivered to, the holders
of Senior Indebtedness or their respective representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by the Company, for application to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in accordance with its terms, after giving
effect to any concurrent payment or distribution (or provision therefor) to or
for the holders of such Senior Indebtedness.
For purposes of this Article IV, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated (at least to the extent provided in this Article IV with respect
to the Notes) to the payment of all Senior Indebtedness which may at the time be
outstanding; provided that
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<PAGE>
22
(i) the Senior Indebtedness is assumed by the new corporation, if any, resulting
from such reorganization or adjustment, and (ii) the rights of the holders of
Senior Indebtedness (other than leases which are not assumed by the Company or
by the new corporation, as the case may be) are not, without the consent of such
holders, altered by such reorganization or readjustment. The consolidation of
the Company with, or the merger of the Company into, another corporation or the
liquidation or dissolution of the Company following the conveyance or transfer
of its property as an entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided for in Article XII shall not
be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section 4.2 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions stated
in Article XII. Nothing in this Section 4.2 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 8.6. This Section 4.2
shall be subject to the further provisions of Section 4.5.
Section 4.3 Subrogation of Notes. Subject to the payment in full of
--------------------
all Senior Indebtedness, the rights of the holders of the Notes shall be
subrogated to the extent of the payments or distributions made to the holders of
such Senior Indebtedness pursuant to the provisions of this Article IV (equally
and ratably with the holders of all indebtedness of the Company which by its
express terms is subordinated to other indebtedness of the Company to
substantially the same extent as the Notes are subordinated and is entitled to
like rights of subrogation) to the rights of the holders of Senior Indebtedness
to receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Indebtedness until the principal of (and
premium, if any) and interest on the Notes shall be paid in full; and, for the
purposes of such subrogation, no payments or distributions to the holders of the
Senior Indebtedness of any cash, property or securities to which the holders of
the Notes or the Trustee would be entitled except for the provisions of this
Article IV, and no payment over pursuant to the provisions of this Article IV,
to or for the benefit of the holders of Senior Indebtedness by holders of the
Notes or the Trustee, shall, as between the Company, its creditors other than
holders of Senior Indebtedness, and the holders of the Notes, be deemed to be a
payment by the Company to or on account of the Senior Indebtedness; and no
payments or distributions of cash, property or securities to or for the benefit
of the holders of the Notes pursuant to the subrogation provisions of this
Article IV, which would otherwise have been paid to the holders of Senior
Indebtedness shall be deemed to be a payment by the Company to or for the
account of the Notes. It is understood that the provisions of this Article IV
are and are intended solely for the purposes of defining the relative rights of
the holders of the Notes, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
<PAGE>
23
Nothing contained in this Article IV or elsewhere in this Indenture or
in the Notes is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Notes the principal of (and premium, if any) and interest on the
Notes as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the holders of
the Notes and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or the
holder of any Note from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article IV of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article IV, the Trustee, subject to the provisions of Section 8.1, and
the holders of the Notes shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which such bankruptcy, dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distribution, delivered to the Trustee or
to the holders of the Notes, for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article IV.
Section 4.4 Authorization by Noteholders. Each holder of a Note by
----------------------------
his acceptance thereof authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
provided in this Article IV and appoints the Trustee his attorney-in-fact for
any and all such purposes.
Section 4.5 Notice to Trustee. The Company shall give prompt written
-----------------
notice in the form of an Officers' Certificate to a Responsible Officer of the
Trustee and to any paying agent of any fact known to the Company which would
prohibit the making of any payment of monies to or by the Trustee or any paying
agent in respect of the Notes pursuant to the provisions of this Article IV.
Notwithstanding the provisions of this Article IV or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any Senior Indebtedness or of any default or event of default with respect to
any Senior Indebtedness or of any other facts which would prohibit the making of
any payment of monies to or by the Trustee in respect of the Notes pursuant to
the provisions of this
<PAGE>
24
Article IV, unless and until a Responsible Officer of the Trustee shall have
received written notice thereof at the Corporate Trust Office of the Trustee
from the Company (in the form of an Officers' Certificate) or a holder or
holders of Senior Indebtedness or from any trustee thereof who shall have been
certified by the Company or otherwise established to the reasonable satisfaction
of the Trustee to be such holder or trustee; and before the receipt of any such
written notice, the Trustee, subject to the provisions of Section 8.1, shall be
entitled in all respects to assume that no such facts exist; provided that if on
--------
a date at least two (2) Business Days prior to the date upon which by the terms
hereof any such monies may become payable for any purpose (including, without
limitation, the payment of the principal of, or premium, if any, or interest on
any Note), the Trustee shall not have received with respect to such monies the
notice provided for in this Section 4.5, then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such monies and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it on or after such prior date.
Notwithstanding anything to the contrary hereinbefore set forth,
nothing shall prevent (a) any payment by the Company or the Trustee to the
Noteholders of amounts in connection with a redemption of Notes if (i) notice of
such redemption has been given pursuant to Article III prior to the receipt by
the Trustee of written notice as aforesaid, and (ii) such notice of redemption
is given not earlier than sixty (60) days before the redemption date, (b) any
payment by the Company or the Trustee to the Noteholders of amounts in
connection with a repurchase of Notes if (i) notice of such repurchase has been
given pursuant to Article XVI prior to the receipt by the Trustee of written
notice as aforesaid, and (ii) such notice of repurchase is given not earlier
than thirty (30) days before the repurchase date, or (c) any payment by the
Trustee to the Noteholders of monies deposited with it pursuant to Section 13.1.
The Trustee, subject to the provisions of Section 8.1, shall be
entitled to rely on the delivery to it of a written notice by a person
representing himself to be a holder of Senior Indebtedness (or a trustee on
behalf of such holder) to establish that such notice has been given by a holder
of Senior Indebtedness or a trustee on behalf of any such holder or holders. In
the event that the Trustee determines in good faith that further 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
Article IV, 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, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such person under this Article IV, and if such evidence is not furnished the
Trustee may
<PAGE>
25
defer any payment to such person pending judicial determination as to the right
of such person to receive such payment.
Section 4.6 Trustee's Relation to Senior Indebtedness. The Trustee
-----------------------------------------
and any agent of the Company or the Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article IV in respect of any Senior
Indebtedness at any time held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in Section 8.13 or elsewhere in this Indenture
shall deprive the Trustee or any such agent of any of its rights as such holder.
Nothing in this Article IV shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 8.6.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article IV, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 4.2 and Section 8.1, the Trustee shall not be liable to
any holder of Senior Indebtedness if it shall pay over or deliver to holders of
Notes, the Company or any other person money or assets to which any holder of
Senior Indebtedness shall be entitled by virtue of this Article IV or otherwise.
Section 4.7 No Impairment of Subordination. No right of any present
------------------------------
or future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Section 4.8 Certain Conversions Deemed Payment. For the purposes of
----------------------------------
this Article only, (1) the issuance and delivery of junior securities upon
conversion of Notes in accordance with Article XV shall not be deemed to
constitute a payment or distribution on account of the principal of (or premium,
if any) or interest on Notes or on account of the purchase or other acquisition
of Notes, and (2) the payment, issuance or delivery of cash, property or
securities (other than junior securities) upon conversion of a Note shall be
deemed to constitute payment on account of the principal of such Note. For the
purposes of this Section, the term "junior securities" means (a) shares of any
stock of any class of the Company, (b) securities of the Company which are
subordinated in right of payment to all Senior Indebtedness which may be
outstanding at the time of issuance or delivery of such securities to
substantially the same extent as, or to a greater extent than, the Notes are so
subordinated as
<PAGE>
26
provided in this Article and (c) securities into which the Notes become
convertible pursuant to Article XV. Nothing contained in this Article or
elsewhere in this Indenture or in the Notes is intended to or shall impair, as
among the Company, its creditors other than holders of Senior Indebtedness and
the Holders of the Notes, the right, which is absolute and unconditional, of the
Holder of any Note to convert such Note in accordance with Article XV.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 Payment of Principal, Premium and Interest. The Company
------------------------------------------
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest on each of the Notes at the
places, at the respective times and in the manner provided herein and in the
Notes. Each installment of interest on the Notes due on any semi-annual
interest payment date may be paid by mailing checks for the interest payable to
or upon the written order of the holders of Notes entitled thereto as they shall
appear on the registry books of the Company, provided that, with respect to any
--------
holder of Notes with an aggregate principal amount equal to or in excess of
$5,000,000, at the request of such holder in writing to the Trustee at least 10
days prior to the date of payment, interest on such holder's Notes shall be paid
by wire transfer in immediately available funds in accordance with the wire
transfer instructions supplied by such holder to the Trustee and paying agent
(if different from the Trustee).
If the Notes are represented by one or more Global Notes, an
installment of interest shall be considered paid on the date due if the Trustee
or paying agent (other than the Company or any Subsidiary) holds on that date
money in immediately available funds designated for and sufficient to pay such
installment.
Section 5.2 Maintenance of Office or Agency. The Company will
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or agency
where the Notes may be surrendered for registration of transfer or exchange or
for presentation for payment or for conversion or redemption and where notices
and demands to or upon the Company in respect of the Notes 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 not
designated or appointed by the Trustee. 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 or
the office of the Trustee in the Borough of Manhattan, The City of New York.
<PAGE>
27
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided
--------
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. 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.
The Company hereby initially designates the Trustee as paying agent,
Note registrar and conversion agent and [each of] the Corporate Trust Office of
the Trustee at 1 Chase Manhattan Plaza, Level 1B, Institutional Trust Window,
New York, New York 10081, as one such office or agency of the Company for each
of the aforesaid purposes.
So long as the Trustee is the Note registrar, the Trustee agrees to
mail, or cause to be mailed, the notices set forth in Section 8.10(a) and the
third paragraph of Section 8.11.
Section 5.3 Appointments to Fill Vacancies in Trustee's Office. The
--------------------------------------------------
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.4 Provisions as to Paying Agent.
-----------------------------
(a) If the Company shall appoint a paying agent other than the
Trustee or an Affiliate of the Trustee, or if the Trustee shall appoint
such a paying agent, it will cause such paying agent to execute and deliver
to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section 5.4:
(1) that it will hold all sums held by it as such agent for the
payment of the principal of and, premium, if any, and interest on the
Notes (whether such sums have been paid to it by the Company or by any
other obligor on the Notes) in trust for the benefit of the holders of
the Notes;
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Notes) to make any payment of
the principal of or, premium, if any, or interest on the Notes when
the same shall be due and payable; and
(3) that at any time during the continuance of an Event of
Default, upon request of the Trustee, it will forthwith pay to the
Trustee all sums so held in trust.
<PAGE>
28
The Company shall, before each due date of the principal of or,
premium, if any, or interest on the Notes, deposit with the paying agent a
sum sufficient to pay such principal, premium, if any, or interest, and
(unless such paying agent is the Trustee) the Company will promptly notify
the Trustee of any failure to take such action.
(b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of or, premium, if any, or interest
on the Notes, set aside, segregate and hold in trust for the benefit of the
holders of the Notes a sum sufficient to pay such principal, premium, if
any, or interest so becoming due and will notify the Trustee of any failure
to take such action and of any failure by the Company (or any other obligor
under the Notes) to make any payment of the principal of or, premium, if
any, or interest on the Notes when the same shall become due and payable.
(c) Anything in this Section 5.4 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be
paid to the Trustee all sums held in trust by the Company or any paying
agent hereunder as required by this Section 5.4, such sums to be held by
the Trustee upon the trusts herein contained and upon such payment by the
Company or any paying agent to the Trustee, the Company or such paying
agent shall be released from all further liability with respect to such
sums.
(d) Anything in this Section 5.4 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 5.4 is subject
to Sections 13.3 and 13.4.
Section 5.5 Existence. Subject to Article XII, 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 it 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 5.6 Stay, Extension and Usury Laws. The Company covenants
------------------------------
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of or
interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Indenture;
<PAGE>
29
and the Company (to the extent it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not, by
resort to any such law, 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 has been enacted.
Section 5.7 Compliance Certificate. The Company shall deliver to the
----------------------
Trustee within 90 days after the end of each fiscal year of the Company an
Officers' Certificate stating whether or not the signers know of any default or
Event of Default that exists as of the end of such fiscal year. If they do
know of such a default or Event of Default, the certificate shall describe the
default or Event of Default and its status. The certificate need not comply with
Section 17.5 hereof. The first certificate to be delivered by the Company
pursuant to this Section shall be for the fiscal year ending March 2, 1997.
Section 5.8 Further Instruments and Acts. Upon request of the
----------------------------
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY
Section 6.1 Noteholders' Lists. The Company covenants and agrees
------------------
that it will furnish or cause to be furnished to the Trustee, semi-annually, not
more than fifteen (15) days after each ____________ ___ and ____________ ___ in
each year beginning with ____________ ___, 1996, and at such other times as the
Trustee may request in writing, within thirty (30) days after receipt by the
Company of any such request (or such lesser time as the Trustee may reasonably
request in order to enable it to timely provide any notice to be provided by it
hereunder), a list in such form as the Trustee may reasonably require of the
names and addresses of the holders of Notes as of a date not more than fifteen
(15) days (or such other date as the Trustee may reasonably request in order to
so provide any such notices) prior to the time such information is furnished,
except that no such list need be furnished so long as the Trustee is acting as
Note registrar or co-registrar.
Section 6.2 Preservation and Disclosure of Lists.
------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders
of Notes contained in the most recent list furnished to it as provided in
Section 6.1 or maintained by the Trustee in its capacity as Note registrar,
if so acting. The Trustee may destroy any list
<PAGE>
30
furnished to it as provided in Section 6.1 upon receipt of a new list so
furnished.
(b) The rights of Noteholders to communicate with other holders of
Notes with respect to their rights under this Indenture or under the Notes,
and the corresponding rights and duties of the Trustee, shall be as
provided by the Trust Indenture Act.
(c) Every holder of a Note, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of holders of Notes
made pursuant to the Trust Indenture Act.
Section 6.3 Reports by Trustee.
------------------
(a) Within 60 days after May 15 of each year commencing with the year
1996, the Trustee shall transmit to holders of Notes such reports dated as
of May 15 of the year in which such reports are made concerning the Trustee
and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant
thereto.
(b) A copy of such report shall, at the time of such transmission to
holders of Notes, be filed by the Trustee with each stock exchange upon
which the Notes are listed, with the Commission and with the Company. The
Company will notify the Trustee within a reasonable time when the Notes are
listed on any stock exchange.
Section 6.4 Reports by Company. The Company shall file with the
------------------
Trustee and the Commission, and transmit to holders of Notes, such information,
documents and other reports and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant to such Act; provided that any such information, documents or reports
--------
required to be filed with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act shall be filed with the Trustee within 15 days after the same is so
required to be filed with the Commission.
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.1 Events of Default. In case one or more of the following
-----------------
Events of Default (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of
<PAGE>
31
any administrative or governmental body) shall have occurred and be continuing,
whether or not payment is prohibited by the provisions of Article IV:
(a) default in the payment of any installment of interest upon any of
the Notes as and when the same shall become due and payable, and
continuance of such default for a period of thirty (30) days; or
(b) default in the payment of the principal of and premium, if any,
on any of the Notes as and when the same shall become due and payable
either at maturity or in connection with any redemption, by declaration or
otherwise; or
(c) a default in the payment of the Repurchase Price in respect of
any Note on the repurchase date therefor in accordance with the provisions
of Article XVI; or
(d) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the
Notes or in this Indenture (other than a covenant or agreement a default in
whose performance or whose breach is elsewhere in this Section specifically
dealt with) and continuance of such failure for a period of sixty (60) days
after the date on which written notice of such failure, requiring the
Company to remedy the same, shall have been given to the Company by the
Trustee, or to the Company and a Responsible Officer of the Trustee by the
holders of at least 25% in aggregate principal amount of the outstanding
Notes at the time outstanding determined in accordance with Section 9.4; or
(e) failure by the Company or any Significant Subsidiary to make any
payment at maturity, including any applicable grace period, in respect of
indebtedness, which term as used herein means obligations (other than the
Notes or non-recourse obligations) of, or guaranteed or assumed by, the
Company, or any Significant Subsidiary, for borrowed money or evidenced by
bonds, debentures, notes or other similar instruments ("Indebtedness") in
an amount in excess of $25,000,000 or the equivalent thereof in any other
currency or composite currency and such failure shall have continued for
sixty (60) days after written notice thereof shall have been given to the
Company by the Trustee or to the Company and a Responsible Officer of the
Trustee by the holders of at least 25% in aggregate principal amount of the
outstanding Notes at the time outstanding determined in accordance with
Section 9.4; or
(f) a default by the Company or any Significant Subsidiary with
respect to any Indebtedness, which default results in the acceleration of
Indebtedness in an amount in excess of $25,000,000 or the equivalent
thereof in any other
<PAGE>
32
currency or composite currency without such Indebtedness having been
discharged or such acceleration having been cured, waived, rescinded or
annulled for a period of sixty (60) days after written notice thereof shall
have been given to the Company by the Trustee or to the Company and a
Responsible Officer of the Trustee by the holders of at least 25% in
aggregate principal amount of the outstanding Notes at the time outstanding
determined in accordance with Section 9.4; or
(g) the Company or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due; or
(h) an involuntary case or other proceeding shall be commenced
against the Company or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of ninety (90) consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(g) or (h)), unless the principal of all of the Notes shall have
already become due and payable, either the Trustee or the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding hereunder
determined in accordance with Section 9.4, by notice in writing to the Company
(and to the Trustee if given by Noteholders), may declare the principal of and
premium, if any, on all the Notes and the interest accrued thereon to be due and
payable immediately, and upon any such declaration the same shall become and
shall be immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of Default specified in
Section 7.1(g) or (h) occurs and is continuing, the principal of all the Notes
and the interest accrued thereon shall be immediately due and payable. This
provision, however, is subject to the conditions that if, at any time after the
principal of the Notes shall have been so declared due and payable, and before
any judgment or decree for the payment of the monies due shall have
<PAGE>
33
been obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments of
interest upon all Notes and the principal of and premium, if any, on any and all
Notes which shall have become due otherwise than by acceleration (with interest
on overdue installments of interest (to the extent that payment of such interest
is enforceable under applicable law) and on such principal and premium, if any,
at the rate borne by the Notes, to the date of such payment or deposit) and
amounts due to the Trustee pursuant to Section 8.6, and if any and all defaults
under this Indenture, other than the nonpayment of principal of and premium, if
any, and accrued interest on Notes which shall have become due by acceleration,
shall have been cured or waived pursuant to Section 7.7, then and in every such
case the holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Company and to the Trustee, may waive all
defaults or Events of Default and rescind and annul such declaration and its
consequences; but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or Event of Default, or shall impair any
right consequent thereon. The Company shall notify a Responsible Officer of the
Trustee, promptly upon becoming aware thereof, of any Event of Default.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such waiver or rescission and annulment or for any other reason or
shall have been determined adversely to the Trustee, then and in every such case
the Company, the holders of Notes, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Notes, and the Trustee shall
continue as though no such proceeding had been instituted.
Section 7.2 Payments of Notes on Default; Suit Therefor. The Company
-------------------------------------------
covenants that (a) in case default shall be made in the payment by the Company
of any installment of interest upon any of the Notes as and when the same shall
become due and payable, and such default shall have continued for a period of
thirty (30) days, or (b) in case default shall be made in the payment of the
principal of or premium, if any, on any of the Notes as and when the same shall
have become due and payable, whether at maturity of the Notes or in connection
with any redemption or repurchase, by declaration under this Indenture or
otherwise, then, upon demand of the Trustee, the Company will pay to the
Trustee, for the benefit of the holders of the Notes, the whole amount that then
shall have become due and payable on all such Notes for principal and premium,
if any, or interest, or both, as the case may be, with interest upon the overdue
principal and premium, if any, and (to the extent that payment of such interest
is enforceable under applicable law) upon the overdue installments of interest
at the rate borne by the Notes; and, in addition thereto, such further amount as
shall be
<PAGE>
34
sufficient to cover the costs and expenses of collection, including reasonable
compensation to the Trustee, its agents, attorneys and counsel, and any expenses
or liabilities incurred by the Trustee hereunder other than through its
negligence or bad faith. Until such demand by the Trustee, the Company may pay
the principal of and premium, if any, and interest on the Notes to the
registered holders, whether or not the Notes are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Notes under Title
11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes 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 pursuant to the provisions of this Section 7.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest owing and unpaid in respect of the Notes, and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
of the Noteholders allowed in such judicial proceedings relative to the Company
or any other obligor on the Notes, its or their creditors, or its or their
property, and to collect and receive any monies or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of any amounts due the Trustee under Section 8.6; and any receiver, assignee or
trustee in bankruptcy or reorganization, liquidator, custodian or similar
official is hereby authorized by each of the Noteholders 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 Noteholders, to pay to the Trustee any amount
due it for reasonable compensation, expenses, advances and disbursements,
<PAGE>
35
including counsel fees incurred by it up to the date of such distribution and
any other amounts due the Trustee under Section 8.6. To the extent that such
payment of reasonable compensation, expenses, advances and disbursements out of
the estate in any such proceedings shall be denied for any reason, payment of
the same shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, monies, securities and other property which the
holders of the Notes may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or adopt on behalf of any Noteholder any plan of
reorganization or arrangement affecting the Notes or the rights of any
Noteholder, or to authorize the Trustee to vote in respect of the claim of any
Noteholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes, or the production thereof on any trial or other proceeding
relative thereto, and any such suit or 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 holders of the Notes.
In any proceedings brought by the Trustee (and in any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Notes, and it shall not be necessary to make any holders of the Notes
parties to any such proceedings.
Section 7.3 Application of Monies Collected by Trustee. Any monies
------------------------------------------
or other property collected by the Trustee pursuant to this Article VII shall be
applied in the order following, at the date or dates fixed by the Trustee for
the distribution of such monies, upon presentation of the several Notes, and
stamping thereon the payment, if only partially paid, and upon surrender
thereof, if fully paid:
First: To the payment of all amounts due the Trustee under Section
8.6;
Second: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall not have become due and be unpaid,
to the payment of interest on the Notes in default in the order of the
maturity of the installments of such interest, with interest (to the extent
that such interest has been collected by the Trustee) upon the overdue
installments of interest at the rate borne by
<PAGE>
36
the Notes, such payments to be made ratably to the persons entitled
thereto; and
Third: Subject to the provisions of Article IV, in case the principal
of the outstanding Notes shall have become due, by declaration or
otherwise, and be unpaid, to the payment of the whole amount then owing and
unpaid upon the Notes for principal and premium, if any, and interest, with
interest on the overdue principal and premium, if any, and (to the extent
that such interest has been collected by the Trustee) upon overdue
installments of interest at the rate borne by the Notes; and in case such
monies shall be insufficient to pay in full the whole amounts so due and
unpaid upon the Notes, then to the payment of such principal and premium,
if any, and interest without preference or priority of principal and
premium, if any, over interest, or of interest over principal and premium,
if any, or of any installment of interest over any other installment of
interest, or of any Note over any other Note, ratably to the aggregate of
such principal and premium, if any, and accrued and unpaid interest.
Section 7.4 Proceedings by Noteholder. No holder of any Note shall
-------------------------
have any right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding shall have made written request
upon the Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for sixty (60) days after its
receipt of such notice, request and offer of indemnity, shall have neglected or
refused to institute any such action, suit or proceeding and no direction
inconsistent with such written request shall have been given to the Trustee
pursuant to Section 7.7; it being understood and intended, and being expressly
covenanted by the taker and holder of every Note with every other taker and
holder and the Trustee, that no one or more holders of Notes 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 holder of
Notes, or to obtain or seek to obtain priority over or preference to any other
such holder, or to enforce any right under this Indenture, except in the manner
herein provided and for the equal, ratable and common benefit of all holders of
Notes (except as otherwise provided herein). For the protection and enforcement
of this Section 7.4, each and
<PAGE>
37
every Noteholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Notwithstanding any other provision of this Indenture and any
provision of any Note, the right of any holder of any Note to receive payment of
the principal of and premium, if any, and interest on such Note, on or after the
respective due dates expressed in such Note, or to institute suit for the
enforcement of any such payment on or after such respective dates against the
Company shall not be impaired or affected without the consent of such holder.
Anything in this Indenture or the Notes to the contrary
notwithstanding, the holder of any Note, without the consent of either the
Trustee or the holder of any other Note, in his own behalf and for his own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, his rights of conversion as provided herein.
Section 7.5 Proceedings by Trustee. In case an Event of Default
----------------------
shall have occurred and be continuing, the Trustee may in its discretion proceed
to protect and enforce the rights vested in it by this Indenture by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any of such rights, either by suit in equity or by action at
law or by proceeding in bankruptcy or otherwise, whether for the specific
enforcement of any covenant or agreement contained in this Indenture or in aid
of the exercise of any power granted in this Indenture, or to enforce any other
legal or equitable right vested in the Trustee by this Indenture or by law.
Section 7.6 Remedies Cumulative and Continuing. Except as provided
----------------------------------
in Section 2.6, all powers and remedies given by this Article VII to the Trustee
or to the Noteholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any thereof or of any other powers and remedies
available to the Trustee or the holders of the Notes, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture, and no delay or omission of the Trustee
or of any holder of any of the Notes to exercise any right or power accruing
upon any default or Event of Default occurring and continuing as aforesaid shall
impair any such right or power, or shall be construed to be a waiver of any such
default or any acquiescence therein; and, subject to the provisions of Section
7.4, every power and remedy given by this Article VII or by law to the Trustee
or to the Noteholders may be exercised from time to time, and as often as shall
be deemed expedient, by the Trustee or by the Noteholders.
Section 7.7 Direction of Proceedings and Waiver of Defaults by
--------------------------------------------------
Majority of Noteholders. The holders of a majority in aggregate principal
- -----------------------
amount of the Notes at the time
<PAGE>
38
outstanding determined in accordance with Section 9.4 shall have the right to
direct the time, method, and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee; provided, however, that (a) such direction shall not be in conflict
-------- -------
with any rule of law or with this Indenture, and (b) the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction. The holders of a majority in aggregate principal amount of the Notes
at the time outstanding determined in accordance with Section 9.4 may on behalf
of the holders of all of the Notes waive any past default or Event of Default
hereunder and its consequences except (i) a default in the payment of interest
or premium, if any, on, or the principal of, the Notes, (ii) a failure by the
Company to convert any Notes into Common Stock in accordance with Article XV,
(iii) a failure by the Company to pay any amount due upon a redemption or
repurchase of Notes in accordance with the terms of the Notes or Article XVI or
(iv) a default in respect of a covenant or provisions hereof which under Article
XI cannot be modified or amended without the consent of the holders of all Notes
then outstanding. Upon any such waiver the Company, the Trustee and the holders
of the Notes shall be restored to their former positions and rights hereunder;
but no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon. Whenever any default or Event
of Default hereunder shall have been waived as permitted by this Section 7.7,
said default or Event of Default shall for all purposes of the Notes and this
Indenture be deemed to have been cured and to be not continuing; but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
Section 7.8 Notice of Defaults. The Trustee shall, within ninety
------------------
(90) days after the occurrence of a default, mail to all Noteholders, as the
names and addresses of such holders appear upon the Note register, notice of all
defaults known to a Responsible Officer, unless such defaults shall have been
cured or waived before the giving of such notice; and provided that, except in
--------
the case of default in the payment of the principal of, or premium, if any, or
interest on any of the Notes, the Trustee shall be protected in withholding such
notice if and so long as a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interests of the Noteholders.
Section 7.9 Undertaking to Pay Costs. All parties to this Indenture
------------------------
agree, and each holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may, in its discretion, require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken 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
<PAGE>
39
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;
provided that the provisions of this Section 7.9 shall not apply to any suit
- --------
instituted by the Trustee, to any suit instituted by any Noteholder, or group of
Noteholders, holding in the aggregate more than 10% in principal amount of the
Notes at the time outstanding determined in accordance with Section 9.4, or to
any suit instituted by any Noteholder for the enforcement of the payment of the
principal of or premium, if any, or interest on any Note on or after the due
date expressed in such Note or to any suit for the enforcement of the right to
convert any Note in accordance with the provisions of Article XV.
Section 7.10 Delay or Omission Not Waiver. No delay or omission of
----------------------------
the Trustee or of any holder of any Note 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 any acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
holders of Notes may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the holders of Notes, as the case may be.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.1 Duties and Responsibilities of Trustee. The Trustee,
--------------------------------------
prior to the occurrence of an Event of Default and after the curing of all
Events of Default which may have occurred, undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture. In case an
Event of Default has occurred (which has not been cured or waived) the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture and the
Trust Indenture Act, and the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
<PAGE>
40
forth in this Indenture and no implied covenants or obligations shall
be read into this Indenture and the Trust Indenture Act against the
Trustee; and
(2) in the absence of bad faith and willful misconduct on the
part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Trustee
and conforming to the requirements of this Indenture; but, in the case
of any such certificates or opinions which by any provisions 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) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Officers of the Trustee, unless it
shall be proved that the Trustee was negligent in ascertaining the
pertinent facts;
(c) the Trustee shall not be liable to any Noteholder with respect to
any action taken or omitted to be taken by it in good faith in accordance
with the direction of the holders of not less than a majority in principal
amount of the Notes at the time outstanding determined as provided in
Section 9.4 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
(d) whether or not therein 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.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Section 8.2 Reliance on Documents, Opinions, Etc. Except as
------------------------------------
otherwise provided in Section 8.1:
(a) the Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, note, coupon or other paper or document
<PAGE>
41
believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless
other evidence in respect thereof be herein specifically prescribed); and
any resolution of the Board of Directors may be evidenced to the Trustee by
a copy thereof certified by the Secretary or an Assistant Secretary of the
Company;
(c) the Trustee may consult with counsel and any advice or Opinion of
Counsel shall be full and complete authorization and protection in respect
of any action taken or omitted by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Noteholders pursuant to the provisions of this
Indenture, unless such Noteholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture 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; provided, however, that if the payment within a reasonable time
-------- -------
to the Trustee of the costs, expenses or liabilities likely to be incurred
by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to
it by the terms of this Indenture, the Trustee may require reasonable
indemnity from the Noteholders against such expenses or liability as a
condition to so proceeding; the reasonable expenses of every such
examination shall be paid by the Company or, if paid by the Trustee or any
predecessor Trustee, shall be repaid by the Company upon demand; and
(f) 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 by it with due
care hereunder.
<PAGE>
42
Section 8.3 No Responsibility for Recitals, Etc. The recitals
-----------------------------------
contained herein and in the Notes (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
Section 8.4 Trustee, Paying Agents, Conversion Agents or Registrar
------------------------------------------------------
May Own Notes. The Trustee, any paying agent, any conversion agent or Note
- -------------
registrar, in its individual or any other capacity, may become the owner or
pledgee of Notes with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Note registrar.
Section 8.5 Monies to Be Held in Trust. Subject to the provisions of
--------------------------
Section 13.4, all monies received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received.
Money held by the Trustee in trust hereunder need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as may be
agreed from time to time by the Company and the Trustee.
Section 8.6 Compensation and Expenses of Trustee. The Company
------------------------------------
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation for all services rendered by it
hereunder in any capacity (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust), and the Company
will pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or bad faith. The Company also
covenants to indemnify the Trustee in any capacity under this Indenture and its
agents and any authenticating agent for, and to hold them harmless against, any
loss, liability or expense incurred without negligence, willful misconduct,
recklessness or bad faith on the part of the Trustee or such agent or
authenticating agent, as the case may be, and arising out of or in connection
with the acceptance or administration of this trust or in any other capacity
hereunder, including the costs and expenses of defending themselves against any
claim of liability in the premises. The obligations of the Company under this
Section 8.6 to compensate or indemnify the Trustee and to pay or reimburse the
Trustee for expenses, disbursements and advances shall be secured by a lien
prior to
<PAGE>
43
that of the Notes upon all property and funds held or collected by the Trustee
as such, except funds held in trust for the benefit of the holders of particular
Notes. The obligation of the Company under this Section shall survive the
satisfaction and discharge of this Indenture.
When the Trustee and its agents and any authenticating agent incur
expenses or render services after an Event of Default specified in Section
7.1(g) or (h) occurs, the expenses and the compensation for the services are
intended to constitute expenses of administration under any bankruptcy,
insolvency or similar laws.
Section 8.7 Officers' Certificate as Evidence. Except as otherwise
---------------------------------
provided in Section 8.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence, willful misconduct, recklessness
and bad faith on the part of the Trustee, be deemed to be conclusively proved
and established by an Officers' Certificate delivered to the Trustee, and such
Officers' Certificate, in the absence of negligence, willful misconduct,
recklessness and bad faith on the part of the Trustee, shall be full warrant to
the Trustee for any action taken or omitted by it under the provisions of this
Indenture upon the faith thereof.
Section 8.8 Conflicting Interests of Trustee. If the Trustee has or
--------------------------------
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.
Section 8.9 Eligibility of Trustee. There shall at all times be a
----------------------
Trustee hereunder which shall be a person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000. If such person publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 8.10 Resignation or Removal of Trustee.
---------------------------------
(a) The Trustee may at any time resign by giving written notice of
such resignation to the Company and the
<PAGE>
44
Company shall mail, or cause to be mailed, notice thereof to the holders of
Notes at their addresses as they shall appear on the Note register. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor trustee by written instrument, in duplicate, executed by order of
the Board of Directors, one copy of which instrument shall be delivered to
the resigning Trustee and one copy to the successor trustee. If no
successor trustee shall have been so appointed and have accepted
appointment sixty (60) days after the mailing of such notice of resignation
to the Noteholders, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee, or any
Noteholder who has been a bona fide holder of a Note or Notes for at least
six months may, subject to the provisions of Section 7.9, on behalf of
himself and all others similarly situated, petition any such court for the
appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8 after
written request therefor by the Company or by any Noteholder who has
been a bona fide holder of a Note or Notes for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.9 and shall fail to resign after written
request therefor by the Company or by any such Noteholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of
the Board of Directors, one copy of which instrument shall be delivered to
the Trustee so removed and one copy to the successor trustee, or, subject
to the provisions of Section 7.9, any Noteholder who has been a bona fide
holder of a Note or Notes for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon, after such notice, if any,
as it may deem proper
<PAGE>
45
and prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the Notes
at the time outstanding may at any time remove the Trustee and nominate a
successor trustee which shall be deemed appointed as successor trustee
unless within ten (10) days after notice to the Company of such nomination
the Company objects thereto, in which case the Trustee so removed or any
Noteholder, upon the terms and conditions and otherwise as in Section
8.10(a) provided, may petition any court of competent jurisdiction for an
appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.10
shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 8.11
Section 8.11 Acceptance by Successor Trustee. Any successor trustee
-------------------------------
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of that
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amounts then due it pursuant to the provisions of Section
8.6, execute and deliver an instrument transferring to such successor trustee
all the rights and powers of the trustee so ceasing to act. Upon request of
any such successor trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property and funds held or collected by
such trustee as such, except for funds held in trust for the benefit of holders
of particular Notes, to secure any amounts then due it pursuant to the
provisions of Section 8.6.
No successor trustee shall accept appointment as provided in this
Section 8.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as provided in
this Section 8.11, the Company shall mail or cause to be mailed notice of the
succession of such trustee hereunder to the holders of Notes at their addresses
as they shall appear
<PAGE>
46
on the Note register. If the Company fails to mail such notice within ten (10)
days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of the Company.
Section 8.12 Succession by Merger, Etc. Any corporation into which
-------------------------
the Trustee may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Trustee shall be a party, or any corporation succeeding to all or
substantially all of the trust business of the Trustee, shall be the successor
to the Trustee hereunder, provided such corporation shall be qualified under the
provisions of Section 8.8 and eligible under the provisions of Section 8.9
without the execution or filing of any papers or any further act on the part of
any of the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trust created by this Indenture, any of the Notes shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor trustee or authenticating agent appointed
by such predecessor trustee, and deliver such Notes so authenticated; and in
case at that time any of the Notes shall not have been authenticated, any
successor to the Trustee or an authenticating agent appointed by such successor
trustee may authenticate such Notes either in the name of any predecessor
trustee hereunder or in the name of the successor trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have;
provided, however, that the right to adopt the certificate of authentication of
- -------- -------
any predecessor Trustee or to authenticate Notes in the name of any predecessor
Trustee shall apply only to its successor or successors by merger, conversion or
consolidation.
Section 8.13 Limitation on Rights of Trustee as Creditor. If and
-------------------------------------------
when the Trustee shall be or become a creditor of the Company (or any other
obligor upon the Notes), the Trustee shall be subject to the provisions of the
Trust Indenture Act regarding the collection of the claims against the Company
(or any such other obligor).
ARTICLE IX
CONCERNING THE NOTEHOLDERS
Section 9.1 Action by Noteholders. Whenever in this Indenture it is
---------------------
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such
<PAGE>
47
action, the holders of such specified percentage have joined therein may be
evidenced (a) by any instrument or any number of instruments of similar tenor
executed by Noteholders in person or by agent or proxy appointed in writing, or
(b) by the record of the holders of Notes voting in favor thereof at any meeting
of Noteholders duly called and held in accordance with the provisions of Article
X, or (c) by a combination of such instrument or instruments and any such record
of such a meeting of Noteholders. Whenever the Company or the Trustee solicits
the taking of any action by the holders of the Notes, the Company or the Trustee
may fix in advance of such solicitation, a date as the record date for
determining holders entitled to take such action. The record date shall be not
more than fifteen (15) days prior to the date of commencement of solicitation of
such action.
Section 9.2 Proof of Execution by Noteholders. Subject to the
---------------------------------
provisions of Sections 8.1, 8.2 and 10.5, proof of the execution of any
instrument by a Noteholder or his agent or proxy shall be sufficient if made in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
holding of Notes shall be proved by the Note register or by a certificate of the
Note registrar.
The record of any Noteholders' meeting shall be proved in the manner
provided in Section 10.6
Section 9.3 Who Are Deemed Absolute Owners. The Company, the
------------------------------
Trustee, any paying agent, any conversion agent and any Note registrar may deem
the person in whose name such Note shall be registered upon the Note register to
be, and may treat him as, the absolute owner of such Note (whether or not such
Note shall be overdue and notwithstanding any notation of ownership or other
writing thereon) for the purpose of receiving payment of or on account of the
principal of and, premium, if any, and interest on such Note, for conversion of
such Note and for all other purposes; and neither the Company nor the Trustee
nor any paying agent nor any conversion agent nor any Note registrar shall be
affected by any notice to the contrary. All such payments so made to any holder
for the time being, or upon his order, shall be valid, and, to the extent of the
sum or sums so paid, effectual to satisfy and discharge the liability for monies
payable upon any such Note.
Section 9.4 Company-Owned Notes Disregarded. In determining whether
-------------------------------
the holders of the requisite aggregate principal amount of Notes have concurred
in any direction, consent, waiver or other action under this Indenture, Notes
which are owned by the Company or any other obligor on the Notes or by any
person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company or any other obligor on the Notes shall
be disregarded and deemed not to be outstanding for the purpose of any such
determination; provided that for the purposes of determining whether the Trustee
--------
<PAGE>
48
shall be protected in relying on any such direction, consent, waiver, or other
action only Notes which a Responsible Officer knows are so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 9.4 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Notes and that the pledgee is not the Company, any other obligor on the
Notes or a person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other obligor. In
the case of a dispute as to such right, any decision by the Trustee taken upon
the advice of counsel shall be full protection to the Trustee. Upon request of
the Trustee, the Company shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Notes, if any, known by the Company to
be owned or held by or for the account of any of the above described persons;
and, subject to Section 8.1, the Trustee shall be entitled to accept such
Officers' Certificate as conclusive evidence of the facts therein set forth and
of the fact that all Notes not listed therein are outstanding for the purpose of
any such determination.
Section 9.5 Revocation of Consents; Future Holders Bound. At any
--------------------------------------------
time prior to (but not after) the evidencing to the Trustee, as provided in
Section 9.1, of the taking of any action by the holders of the percentage in
aggregate principal amount of the Notes specified in this Indenture in
connection with such action, any holder of a Note which is shown by the evidence
to be included in the Notes the holders of which have consented to such action
may, by filing written notice with the Trustee at its Corporate Trust Office and
upon proof of holding as provided in Section 9.2, revoke such action so far as
concerns such Note. Except as aforesaid, any such action taken by the holder of
any Note shall be conclusive and binding upon such holder and upon all future
holders and owners of such Note and of any Notes issued in exchange or
substitution therefor, irrespective of whether any notation in regard thereto is
made upon such Note or any Note issued in exchange or substitution therefor.
ARTICLE X
NOTEHOLDERS' MEETINGS
Section 10.1 Purpose of Meetings. A meeting of Noteholders may be
-------------------
called at any time and from time to time pursuant to the provisions of this
Article X for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or to give
any directions to the Trustee permitted under this Indenture, or to consent
to the waiving of any default or Event of Default hereunder and its
consequences,
<PAGE>
49
or to take any other action authorized to be taken by Noteholders pursuant
to any of the provisions of Article VII;
(2) to remove the Trustee and nominate a successor trustee pursuant
to the provisions of Article VIII;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2;
(4) to take any other action authorized to be taken by or on behalf
of the holders of any specified aggregate principal amount of the Notes
under any other provision of this Indenture or under applicable law; or
(5) to take any other action authorized by this Indenture or under
applicable law.
Section 10.2 Call of Meetings by Trustee. The Trustee may at any
---------------------------
time call a meeting of Noteholders to take any action specified in Section 10.1,
to be held at such time and at such place in the Borough of Manhattan, The City
of New York, as the Trustee shall determine. Notice of every meeting of the
Noteholders, setting forth the time and the place of such meeting and in general
terms the action proposed to be taken at such meeting and the establishment of
any record date pursuant to Section 9.1, shall be mailed to holders of Notes at
their addresses as they shall appear on the Note register. Such notice shall
also be mailed to the Company. Such notices shall be mailed not less than
twenty (20) nor more than ninety (90) days prior to the date fixed for the
meeting.
Any meeting of Noteholders shall be valid without notice if the
holders of all Notes then outstanding are present in person or by proxy or if
notice is waived before or after the meeting by the holders of all Notes
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.
Section 10.3 Call of Meetings by Company or Noteholders. In case at
------------------------------------------
any time the Company pursuant to a resolution of its Board of Directors, or the
holders of at least 10% in aggregate principal amount of the Notes then
outstanding, shall have requested the Trustee to call a meeting of Noteholders,
by written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have mailed the notice of such
meeting within twenty (20) days after receipt of such request, then the Company
or such Noteholders may determine the time and the place for such meeting and
may call such meeting to take any action authorized in Section 10.1, by mailing
notice thereof as provided in Section 10.2.
<PAGE>
50
Section 10.4 Qualifications for Voting. To be entitled to vote at
-------------------------
any meeting of Noteholders a person shall (a) be a holder of one or more Notes
on the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes. The only
persons who shall be entitled to be present or to speak at any meeting of
Noteholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
Section 10.5 Regulations. Notwithstanding any other provisions of
-----------
this Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 9.4, at any meeting each
Noteholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Notes held or represented by him; provided, however, that no
-------- -------
vote shall be cast or counted at any meeting in respect of any Note challenged
as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Notes held by him or instruments in writing as aforesaid duly
designating him as the proxy to vote on behalf of other Noteholders. Any
meeting of Noteholders duly called pursuant to the provisions of Section 10.2 or
10.3 may be adjourned from time to time by the holders of a majority of the
aggregate principal amount of Notes represented at the meeting, whether or not
constituting a quorum, and the meeting may be held as so adjourned without
further notice.
Section 10.6 Voting. The vote upon any resolution submitted to any
------
meeting of Noteholders shall be by written ballot on which shall be subscribed
the signatures of the holders of Notes or of their representatives by proxy and
the principal amount of the Notes held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any
<PAGE>
51
resolution and who shall make and file with the secretary of the meeting their
verified written reports in duplicate of all votes cast at the meeting. A
record in duplicate of the proceedings of each meeting of Noteholders shall be
prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
facts setting forth a copy of the notice of the meeting and showing that said
notice was mailed as provided in Section 10.2. The record shall show the
principal amount of the Notes voting in favor of or against any resolution. The
record shall be signed and verified by the affidavits of the permanent chairman
and secretary of the meeting and one of the duplicates shall be delivered to the
Company and the other to the Trustee to be preserved by the Trustee, the latter
to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7 No Delay of Rights by Meeting. Nothing in this Article
-----------------------------
X contained shall be deemed or construed to authorize or permit, by reason of
any call of a meeting of Noteholders or any rights expressly or impliedly
conferred hereunder to make such call, any hindrance or delay in the exercise of
any right or rights conferred upon or reserved to the Trustee or the Noteholders
under any of the provisions of this Indenture or of the Notes.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1 Supplemental Indentures Without Consent of Noteholders.
------------------------------------------------------
The Company, when authorized by the resolutions of the Board of Directors, and
the Trustee may from time to time and at any time, enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to make provision with respect to the conversion rights of the
holders of Notes pursuant to the requirements of Section 15.6;
(b) subject to Article IV, to convey, transfer, assign, mortgage or
pledge to the Trustee as security for the Notes, any property or assets;
(c) to evidence the succession of another corporation to the Company
or successive successions, and the assumption by the successor corporation
of the covenants, agreements and obligations of the Company pursuant to
Article XII;
<PAGE>
52
(d) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Notes, and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however, that in
-------- -------
respect of any such additional covenant, restriction or condition such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the
case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default;
(e) to provide for the issuance under this Indenture of Notes in
coupon form (including Notes registrable as to principal only) and to
provide for exchangeability of such Notes with the Notes issued hereunder
in fully registered form and to make all appropriate changes for such
purpose;
(f) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any
supplemental indenture, or to make such other provisions in regard to
matters or questions arising under this Indenture which shall not
materially adversely affect the interests of the holders of the Notes;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(h) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualifications of this
Indenture under the Trust Indenture Act, or under any similar federal
statute hereafter enacted.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer and assignment of any property thereunder, but the Trustee
shall not be obligated to, but may in its discretion, enter into any
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section 11.1 may be executed by the Company and the Trustee without the consent
of the holders of any of the Notes at
<PAGE>
53
the time outstanding, notwithstanding any of the provisions of Section 11.2.
Section 11.2 Supplemental Indentures with Consent of Noteholders.
---------------------------------------------------
With the consent (evidenced as provided in Article IX) of the holders of not
less than a majority in aggregate principal amount of the Notes at the time
outstanding (determined in accordance with Section 9.4), the Company, when
authorized by the resolutions of the Board of Directors, and the Trustee may
from time to time and at any time 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 any
supplemental indenture or of modifying in any manner the rights of the holders
of the Notes; provided, however, that no such supplemental indenture shall (i)
-------- -------
extend the fixed maturity of any Note, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof or premium,
if any, thereon, or reduce any amount payable on redemption or repurchase
thereof, change the obligation of the Company to repurchase any Note at the
option of the holder upon the happening of a Fundamental Change in a manner
adverse to the Noteholders, or impair or affect the right of any Noteholder to
institute suit for the payment thereof, or make the principal thereof or
interest or premium, if any, thereon payable in any coin or currency other than
that provided in the Notes, or impair the right to convert the Notes into Common
Stock subject to the terms set forth herein, including Section 15.6, or modify
the provisions of this Indenture with respect to the subordination of the Notes
in a manner adverse to the Noteholders, without the consent of the holder of
each Note so affected, or (ii) reduce the aforesaid percentage of Notes, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of all Notes then outstanding.
Upon the request of the Company, accompanied by a copy of the
resolutions of the Board of Directors certified by its Secretary or any
Assistant Secretary authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of the consent of
Noteholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Noteholders under
this Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 11.3 Effect of Supplemental Indentures. Any supplemental
---------------------------------
indenture executed pursuant to the provisions of
<PAGE>
54
this Article XI shall comply with the Trust Indenture Act, as then in effect.
Upon the execution of any supplemental indenture pursuant to the provisions of
this Article XI, this Indenture shall be and be deemed to be modified and
amended in accordance therewith and the respective rights, limitation of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Notes shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments
and all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
Section 11.4 Notation on Notes. Notes authenticated and delivered
-----------------
after the execution of any supplemental indenture pursuant to the provisions of
this Article XI may 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 Notes so modified as to conform, in the opinion
of the Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may, at the Company's expense, be
prepared and executed by the Company, authenticated by the Trustee (or an
authenticating agent duly appointed by the Trustee pursuant to Section 17.11)
and delivered in exchange for the Notes then outstanding, upon surrender of such
Notes then outstanding.
Section 11.5 Evidence of Compliance of Supplemental Indenture to Be
------------------------------------------------------
Furnished Trustee. The Trustee, subject to the provisions of Sections 8.1 and
- -----------------
8.2, shall receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Indenture and that all conditions
precedent have been complied with.
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1 Company May Consolidate, Etc. on Certain Terms. Subject
----------------------------------------------
to the provisions of Section 12.2, nothing contained in this Indenture or in any
of the Notes shall prevent any consolidation or merger of the Company with or
into any other corporation or corporations (whether or not affiliated with the
Company), or successive consolidations or mergers in which the Company or its
successor or successors shall be a party or parties, or shall prevent any sale,
conveyance or lease (or successive sales, conveyances or leases) of all or
substantially all of the property of the Company, to any other corporation
(whether or not affiliated with the Company), authorized to acquire and operate
the same and which shall be organized under the laws of the United States of
America, any state thereof or the District of Columbia; provided, however, and
-------- -------
the Company
<PAGE>
55
hereby covenants and agrees, that upon any such consolidation, merger, sale,
conveyance or lease, the due and punctual payment of the principal of and
premium, if any, and interest on all of the Notes, according to their tenor, and
the due and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed by the Company, shall be expressly
assumed, by supplemental indenture satisfactory in form to the Trustee, executed
and delivered to the Trustee by the corporation (if other than the Company)
formed by such consolidation, or into which the Company shall have been merged,
or by the corporation which shall have acquired or leased such property, and
such supplemental indenture shall provide for the applicable conversion rights
set forth in Section 15.6 and the repurchase rights set forth in Article XVI.
Section 12.2 Successor Corporation to Be Substituted. In case of any
---------------------------------------
such consolidation, merger, sale, conveyance or lease and upon the assumption by
the successor corporation, by supplemental indenture, executed and delivered to
the Trustee and satisfactory in form to the Trustee, of the due and punctual
payment of the principal of and premium, if any, and interest on all of the
Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
corporation shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein as the party of the first part. Such
successor corporation thereupon may cause to be signed, and may issue in its own
name or in the name of Park Electrochemical Corp. any or all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the order of such successor corporation
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver,
or cause to be authenticated and delivered, any Notes which previously shall
have been signed and delivered by the officers of the Company to the Trustee for
authentication, and any Notes which such successor corporation thereafter shall
cause to be signed and delivered to the Trustee for that purpose. All the Notes
so issued shall in all respects have the same legal rank and benefit under this
Indenture as the Notes theretofore or thereafter issued in accordance with the
terms of this Indenture as though all of such Notes had been issued at the date
of the execution hereof. In the event of any such consolidation, merger, sale,
conveyance or lease, the person named as the "Company" in the first paragraph of
this Indenture or any successor which shall thereafter have become such in the
manner prescribed in this Article XII may be dissolved, wound up and liquidated
at any time thereafter and such person shall be released from its liabilities as
obligor and maker of the Notes and from its obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form (but
<PAGE>
56
not in substance) may be made in the Notes thereafter to be issued as may be
appropriate.
Section 12.3 Opinion of Counsel to Be Given Trustee. The Trustee,
--------------------------------------
subject to Sections 8.1 and 8.2, shall receive an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance or lease and any such assumption complies with the provisions
of this Indenture.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1 Discharge of Indenture. When (a) the Company shall
----------------------
deliver to the Trustee for cancellation all Notes theretofore authenticated
(other than any Notes which have been destroyed, lost or stolen and in lieu of
or in substitution for which other Notes shall have been authenticated and
delivered) and not theretofore canceled, or (b) all the Notes not theretofore
canceled or delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and the Company shall
deposit with the Trustee, in trust, funds sufficient to pay at maturity or upon
redemption of all of the Notes (other than any Notes which shall have been
mutilated, destroyed, lost or stolen and in lieu of or in substitution for which
other Notes shall have been authenticated and delivered) not theretofore
canceled or delivered to the Trustee for cancellation, including principal,
premium, if any, and interest due or to become due to such date of maturity or
redemption date, as the case may be, and if in either case the Company shall
also pay or cause to be paid all other sums payable hereunder by the Company,
then this Indenture shall cease to be of further effect (except as to (i)
remaining rights of registration of transfer, substitution and exchange and
conversion of Notes, (ii) rights hereunder of Noteholders to receive payments of
principal of and premium, if any, and interest on, the Notes and the other
rights, duties and obligations of Noteholders, as beneficiaries hereof with
respect to the amounts, if any, so deposited with the Trustee and (iii) the
rights, obligations and immunities of the Trustee hereunder), and the Trustee,
on demand of the Company accompanied by an Officers' Certificate and an Opinion
of Counsel as required by Section 17.5 and at the cost and expense of the
Company, shall execute proper instruments acknowledging satisfaction of and
discharging this Indenture; the Company, however, hereby agreeing to reimburse
the Trustee for all amounts due the Trustee under Section 8.6 and for any costs
or expenses thereafter reasonably and properly incurred by the Trustee and to
compensate the Trustee for any services thereafter reasonably and properly
<PAGE>
57
rendered by the Trustee in connection with this Indenture or the Notes.
Section 13.2 Deposited Monies to Be Held in Trust by Trustee.
-----------------------------------------------
Subject to Section 13.4, all monies deposited with the Trustee pursuant to
Section 13.1 shall be held in trust and applied by it to the payment,
notwithstanding the provisions of Article IV, either directly or through any
paying agent (including the Company if acting as its own paying agent), to the
holders of the particular Notes for the payment or redemption of which such
monies have been deposited with the Trustee, of all sums due and to become due
thereon for principal and interest and premium, if any.
Section 13.3 Paying Agent to Repay Monies Held. Upon the
---------------------------------
satisfaction and discharge of this Indenture, all monies then held by any paying
agent of the Notes (other than the Trustee) shall, upon demand of the Company,
be repaid to it or paid to the Trustee, and thereupon such paying agent shall be
released from all further liability with respect to such monies.
Section 13.4 Return of Unclaimed Monies. Subject to the requirements
--------------------------
of applicable law, any monies deposited with or paid to the Trustee for payment
of the principal of or, premium, if any, or interest on Notes and not applied
but remaining unclaimed by the holders of Notes for two years after the date
upon which the principal of or, premium, if any, or interest on such Notes, as
the case may be, shall have become due and payable, shall be repaid to the
Company by the Trustee on demand and all liability of the Trustee shall
thereupon cease with respect to such monies; and the holder of any of the Notes
shall thereafter look only to the Company for any payment which such holder may
be entitled to collect unless an applicable abandoned property law designates
another person.
Section 13.5 Reinstatement. If (i) the Trustee or the paying agent
-------------
is unable to apply any money in accordance with Section 13.2 by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application and (ii) the holders of at least 51%
in principal amount of the then outstanding Notes so request by written notice
to the Trustee, the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 13.1 until such time as the Trustee or the paying agent is permitted to
apply all such money in accordance with Section 13.2; provided, however, that if
-------- -------
the Company makes any payment of interest or premium, if any, on or principal of
any Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the holders of such Notes to receive such payment
from the money held by the Trustee or paying agent.
<PAGE>
58
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1 Indenture and Notes Solely Corporate Obligations. No
------------------------------------------------
recourse for the payment of the principal of or premium, if any, or interest on
any Note, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
this Indenture or in any supplemental indenture or in any Note, or because of
the creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer or director or subsidiary,
as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Notes.
ARTICLE XV
CONVERSION OF NOTES
Section 15.1 Right to Convert. Subject to and upon compliance with
----------------
the provisions of this Indenture, the holder of any Note shall have the right,
at his option, at any time prior to the close of business on ___________ __,
2006 (except that, with respect to any Note or portion of a Note which shall be
called for redemption, such right shall terminate, except as provided in the
third paragraph of Section 15.2, at the close of business on the last Trading
Day prior to the date fixed for redemption of such Note or portion of a Note
unless the Company shall default in payment due upon redemption thereof) to
convert the principal amount of any such Note, or any portion of such principal
amount which is $1,000 or an integral multiple thereof, into that number of
fully paid and non-assessable shares of Common Stock (as such shares shall then
be constituted) obtained by dividing the principal amount of the Note or portion
thereof surrendered for conversion by the Conversion Price in effect at such
time, by surrender of the Note so to be converted in whole or in part in the
manner provided in Section 15.2; provided, however, that in the event, at any
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time a Note is surrendered for conversion in whole or in part pursuant to this
Section 15.1, the Company does not have available for issuance upon such
conversion as authorized and unissued shares or in its treasury at least the
number of shares of Common Stock required to be issued pursuant thereto, then
such Note (or portion thereof as to which conversion has been requested), to the
extent that sufficient
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59
shares of Common Stock are not then available for issuance upon conversion,
shall be converted into the right to receive from the Company, in lieu of the
shares of Common Stock into which the Note would otherwise be converted and
which the Company is unable to issue, a payment equal to the number of shares of
Common Stock which the Company is unable to issue multiplied by the average of
the Closing Price (as defined in Section 15.5(g)(1)) for the Company's Common
Stock during the five (5) Trading Days (as defined in Section 15.5(g)(5))
immediately prior to the date on which such Note (or specified portion thereof)
is deemed to have been converted pursuant to this Article, such calculations to
be made by the Company. Any such payment shall, for all purposes of this
Indenture and the Note, be deemed to be a payment of principal plus a premium
equal to the total amount payable less the principal portion of any such Note
surrendered for conversion as to which such payment is required to be made
because shares of Common Stock are not then available for issuance upon such
conversion. A holder of Notes is not entitled to any rights of a holder of
Common Stock until such holder has converted his Notes to Common Stock, and only
to the extent such Notes are deemed to have been converted to Common Stock under
this Article XV. For purposes of Sections 15.5 and 15.6, whenever a provision
references the shares of Common Stock into which a Note (or a portion thereof)
is convertible or the shares of Common Stock issuable upon conversion of a Note
(or a portion thereof) or words of similar import, any determination required by
such provision shall be made as if a sufficient number of shares of Common Stock
were then available for issuance upon conversion of all outstanding Notes.
Section 15.2 Exercise of Conversion Privilege; Issuance of Common
----------------------------------------------------
Stock on Conversion; No Adjustment for Interest or Dividends. In order to
- ------------------------------------------------------------
exercise the conversion privilege with respect to any Note, the holder of any
such Note to be converted in whole or in part shall surrender such Note, duly
endorsed, at an office or agency maintained by the Company pursuant to Section
5.2, accompanied by the funds, if any, required by the last paragraph of this
Section 15.2, and shall give written notice of conversion in the form provided
on the Notes (or such other notice which is acceptable to the Company) to the
office or agency at which the holder elects to convert such Note or such portion
thereof specified in said notice. Such notice shall also state the name or
names (with address) in which the certificate or certificates for shares of
Common Stock which shall be issuable on such conversion shall be issued, and
shall be accompanied by transfer taxes, if required pursuant to Section 15.7.
Each such Note surrendered for conversion shall, unless the shares issuable on
conversion are to be issued in the same name as the registration of such Note,
be duly endorsed by, or be accompanied by instruments of transfer in form
satisfactory to the Company duly executed by, the holder or his duly authorized
attorney.
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60
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, if shares issuable on conversion are to be issued in
a name other than that of the Noteholder (as if such transfer were a transfer of
the Note or Notes (or portion thereof) so converted), the Company shall issue
and shall deliver to such holder at the office or agency maintained by the
Company for such purpose pursuant to Section 5.2, a certificate or certificates
for the number of full shares of Common Stock issuable upon the conversion of
such Note or portion thereof in accordance with the provisions of this Article
and a check or cash in respect of any fractional interest in respect of a share
of Common Stock arising upon such conversion, as provided in Section 15.3 and,
if applicable, any cash payment required pursuant to the proviso to the first
sentence of Section 15.1 (which payment, if any, shall be paid no later than
five Business Days after satisfaction of the requirements for conversion set
forth above). In case any Note of a denomination greater than $1,000 shall be
surrendered for partial conversion, and subject to Section 2.3, the Company
shall execute and the Trustee shall authenticate and deliver to the holder of
the Note so surrendered, without charge to him, a new Note or Notes in
authorized denominations in an aggregate principal amount equal to the
unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to any such
Note (or portion thereof) on the date on which the requirements set forth above
in this Section 15.2 have been satisfied as to such Note (or portion thereof),
and the person in whose name any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
provided, however, that any such satisfaction of the requirements of Section
- -------- -------
15.2 on any date when the stock transfer books of the Company shall be closed
shall constitute the person in whose name the certificates are to be issued as
the record holder thereof for all purposes on the next succeeding day on which
such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date upon which such satisfaction shall occur.
Upon conversion of any Note or any portion thereof, the accrued and unpaid
interest on the Note or portion thereof surrendered for conversion to (but
excluding) the date on which the conversion of such Note or portion thereof
shall be deemed to have been effected shall be deemed to be paid to the holder
of the Note so surrendered through receipt of such number of shares of Common
Stock issued upon conversion of such Note or portion thereof as shall have an
aggregate Market Value equal to a current market value equal to the amount of
such accrued and unpaid interest. The current market value of a share of Common
Stock shall be the Closing Price of a share of Common Stock on the first Trading
Day
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61
immediately preceding the date on which the conversion of such Note or
portion thereof shall be deemed to have been effected, and the Closing Price
shall be determined as provided in Section 15.5(g).
Any Note or portion thereof surrendered for conversion during the
period from the close of business on the record date for any interest payment
date through the close of business on the Trading Day next preceding such
interest payment date shall (unless such Note or portion thereof being converted
shall have been called for redemption on a date in such period) be accompanied
by payment, in funds acceptable to the Company, of an amount equal to the
interest otherwise payable on such interest payment date on the principal amount
being converted; provided, however, that no such payment need be made if there
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shall exist at the time of conversion a default in the payment of interest on
the Notes. An amount equal to such payment shall be paid by the Company on such
interest payment date to the holder of such Note at the close of business on
such record date; provided, however, that if the Company shall default in the
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payment of interest on such interest payment date, such amount shall be paid to
the person who made such required payment. Except as provided above in this
Section 15.2, no adjustment shall be made for interest accrued on any Note
converted or for dividends on any shares issued upon the conversion of such Note
as provided in this Article.
Section 15.3 Cash Payments in Lieu of Fractional Shares. No
------------------------------------------
fractional shares of Common Stock or scrip representing fractional shares shall
be issued upon conversion of Notes. If more than one Note shall be surrendered
for conversion at one time by the same holder, the number of full shares which
shall be issuable upon conversion shall be computed on the basis of the
aggregate principal amount of the Notes (or specified portions thereof to the
extent permitted hereby) so surrendered for conversion. If any fractional share
of stock otherwise would be issuable upon the conversion of any Note or Notes,
the Company shall make an adjustment therefor in cash at the current market
value thereof. The current market value of a share of Common Stock shall be the
Closing Price of a share of Common Stock on the first Trading Day immediately
preceding the day on which the Notes (or specified portions thereof) are deemed
to have been converted and such Closing Price shall be determined as provided in
Section 15.5(g).
Section 15.4 Conversion Price. The conversion price shall be as
----------------
specified in the form of Note (herein called the "Conversion Price") attached as
Exhibit A hereto, subject to adjustment as provided in this Article XV.
Section 15.5 Adjustment of Conversion Price. The Conversion Price
------------------------------
shall be adjusted from time to time by the Company as follows:
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62
(a) In case 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 15.5(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 15.5(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) In case the Company shall hereafter issue rights or warrants
(other than any rights or warrants (including the Rights) referred to in
Section 15.5(d)) to all holders of its outstanding shares of Common Stock
entitling them (for a period expiring within forty-five (45) days after the
date fixed for the determination of stockholders entitled to receive such
rights or warrants) to subscribe for or purchase shares of Common Stock at
a price per share less than the Current Market Price (as defined in Section
15.5(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 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 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 on 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 be
readjusted to 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
<PAGE>
63
of only the number of shares of Common Stock actually delivered. In the
event that 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, the value of such consideration, if other than cash, to
be determined by the Board of Directors.
(c) In case the outstanding shares of Common Stock shall hereafter 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, in case 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 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) In case the Company shall hereafter, 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 15.5(a) applies) or evidences of its indebtedness, cash or
other assets (including securities, but excluding any rights or warrants
referred to in Section 15.5(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 15.6 applies) (the foregoing hereinafter in this Section
15.5(d) called the "Securities")), then, in each such case, subject to the
second paragraph of this Section 15.5(d), 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 15.5(g)) with respect
to such distribution by a fraction of which the numerator shall be the
Current Market Price (determined as provided in Section 15.5(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 Board
Resolution) on such date of the portion of the Securities so distributed
applicable to one share of Common Stock and the
<PAGE>
64
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 Noteholder shall
have the right to receive upon conversion of a Note (or any portion
thereof) the amount of Securities such holder would have received had such
holder converted such Note (or portion thereof) immediately prior to such
Record Date. In the event that 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. If the Board of Directors determines
the fair market value of any distribution for purposes of this Section
15.5(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 15.5(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
not be deemed to have been distributed for purposes of this Section 15.5
(and no adjustment to the Conversion Price under this Section 15.5) will be
required until the occurrence of the earliest Trigger Event. If any such
rights or warrants, including any such existing rights or warrants
distributed prior to the date of this Indenture (including the Rights), are
subject to Trigger Events, upon the satisfaction 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 Trigger 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) (so that, by way of illustration and not limitation, the
dates of issuance of any Rights shall be deemed to be the dates on which
such Rights become exercisable to purchase capital stock of the Company,
and not the date on which such Rights may be issued, or may become
evidenced by separate certificates, if such Rights are not then so
exercisable). In addition, in
<PAGE>
65
the event of any distribution of rights or warrants, or any Trigger Event
with respect thereto (including the Rights), that was counted for purposes
of calculating a distribution amount for which an adjustment to the
Conversion Price under this Section 15.5 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 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 (including the
Rights) 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.
For purposes of this Section 15.5(d) and Sections 15.5(a) and (b), any
dividend or distribution to which this Section 15.5(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 15.5(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 15.5(b) applies (and any Conversion Price reduction required
by this Section 15.5(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 reduction required by Sections 15.5(a) and (b) with
respect to such dividend or distribution shall then be made, except (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 15.5(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 15.5(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 15.5(a).
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66
(e) In case the Company shall hereafter, 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 15.6 applies
or as part of a distribution referred to in Section 15.5(d)) in an
aggregate amount that, combined with (1) the aggregate amount of any other
such distributions to all holders of its Common Stock made exclusively in
cash within the twelve (12) months preceding the date of payment of such
distribution, and in respect of which no adjustment pursuant to this
Section 15.5(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 set forth in a Board Resolution) 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 twelve (12) months preceding the date of payment of such
distribution, and in respect of which no adjustment pursuant to Section
15.5(f) has been made, exceeds 15% of the product of the Current Market
Price (determined as provided in Section 15.5(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, unless the Company elects to reserve
such cash for distribution to the holders of the Notes upon the conversion
of the Notes (and shall have made adequate provision) so that any such
holder converting Notes will receive upon such conversion, in addition to
the shares of Common Stock to which such holder is entitled, the 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 Notes
into Common Stock, the Conversion Price shall be reduced so that the same
shall equal the price determined by multiplying the 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 15% 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 the Record Date;
provided, however, that in the event the portion of the cash so distributed
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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
Noteholder shall have the right to receive upon conversion of a Note (or
any portion thereof) the amount of cash such holder would have received had
such holder converted such Note (or portion thereof) immediately prior to
such Record Date. In the event that such dividend or distribution is not
so paid or made, the Conversion Price shall again be adjusted to be the
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67
Conversion Price which would then be in effect if such dividend or
distribution had not been declared.
(f) In case a tender offer hereafter made by the Company or any of its
subsidiaries for all or any portion of the Common Stock shall expire and
such tender offer (as amended upon the expiration thereof) shall require
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 Board Resolution) 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 Board Resolution), 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 portion of the Common
Stock expiring within the twelve (12) months preceding the expiration of
such tender offer and in respect of which no adjustment pursuant to this
Section 15.5(f) has been made and (2) the aggregate amount of any
distributions to all holders of the Company's Common Stock made exclusively
in cash within twelve (12) months preceding the expiration of such tender
offer and in respect of which no adjustment pursuant to Section 15.5(e) has
been made, exceeds 15% of the product of the Current Market Price
(determined as provided in Section 15.5(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 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) on
the Expiration Time and the Current Market Price
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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. In the event
that 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 this Section 15.5(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 15.5(f).
(g) For purposes of this Section 15.5, the following terms shall have
the meaning indicated:
(1) "Closing Price" with respect to any securities on any day
shall mean the closing sale price regular way on such day or, in case
no such sale takes place on such day, the average of the reported
closing bid and asked prices, regular way, in each case on the Nasdaq
National Market or 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 security 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
closing bid and asked 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 Board Resolution.
(2) "Current Market Price" shall mean the average of the daily
Closing Prices per share of Common Stock for the ten (10) consecutive
Trading Days immediately prior to the date in question; provided,
--------
however, that (1) 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 15.5(a), (b), (c), (d), (e) or (f) occurs during
such ten (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
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69
the same fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, (2) 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 15.5(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 (3) 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 (1) or (2) 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 15.5(d) or (f),
whose determination shall be conclusive and described in a Board
Resolution) 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 15.5(f), the Current Market
Price of the Common Stock 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
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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 15.5(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 Price is so required to be
adjusted as a result of such other event. For purposes of this
paragraph, the term "ex" date, (1) 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, (2) when used with respect to
any subdivision or combination of shares of Common Stock, means the
first date on which the Common
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Stock trades regular way on such exchange or in such market after the
time at which such subdivision or combination becomes effective, and
(3) 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 15.5, such
adjustments shall be made to the Current Market Price as may be
necessary or appropriate to effectuate the intent of this Section 15.5
and to avoid unjust or inequitable results as determined in good faith
by the Board of Directors.
(3) "fair market value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's length transaction.
(4) "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).
(5) "Trading Day" shall mean (x) if the applicable security is
listed or admitted for trading on the New York Stock Exchange or
another national security exchange, a day on which the New York Stock
Exchange or another national security exchange is open for business or
(y) if the applicable security is quoted on the Nasdaq National
Market, a day on which trades may be made thereon or (z) 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 15.5(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.
<PAGE>
71
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 twenty (20) days, the reduction is irrevocable
during the period and the Board of Directors shall have made a
determination that such reduction would be in the best interests of the
Company, which determination shall be conclusive and described in a Board
Resolution. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Company shall mail to the holder of each Note at
his last address appearing on the Note register provided for in Section 2.5
a notice of the reduction at least fifteen (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 15.5(i) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Article XV shall be made by the Company and shall be 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
(other than in the case of an adjustment pursuant to the second paragraph
of Section 15.5(h) for which the notice required by such paragraph has been
provided), the Company shall promptly file with the Trustee and any
conversion agent other than 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 the holder of each Note at
his last address appearing on the Note register provided for in Section
2.5, within twenty (20) days of the effective date of such adjustment.
Failure to deliver such notice shall not effect the legality or validity of
any such adjustment.
(k) In any case in which this Section 15.5 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 (i) issuing to the
holder of any
<PAGE>
72
Note 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 and (ii) paying to such holder any amount in cash in lieu of any
fraction pursuant to Section 15.3.
(l) For purposes of this Section 15.5, 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 will not pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Company other than (i) dividends
or distributions payable only in shares of Common Stock and (ii) Rights.
Section 15.6 Effect of Reclassification, Consolidation, Merger or
----------------------------------------------------
Sale. If any of the following events occur, namely (i) any reclassification
- ----
or change of the outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture if such supplemental indenture is then required
to so comply) providing that such Note shall be convertible into the kind and
amount of shares of stock and other securities or property or assets (including
cash) receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by a holder of a number of shares of Common
Stock issuable upon conversion of such Notes (assuming, for such purposes, a
sufficient number of authorized shares of Common Stock available to convert all
such Notes) immediately prior to such reclassification, change, consolidation,
merger, combination, sale or conveyance assuming such holder of Common Stock did
not exercise his rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance (provided that, if the kind or amount of
--------
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance is not the same
<PAGE>
73
for each share of Common Stock in respect of which such rights of election shall
not have been exercised ("non-electing share"), then for the purposes of this
Section 15.6 the kind and amount of securities, cash or other property
receivable upon such consolidation, merger, statutory exchange, sale or
conveyance for 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). Such
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Article. If, in the case of any such reclassification, change, consolidation,
merger, combination, sale or conveyance, the stock or other securities and
assets receivable thereupon by a holder of shares of Common Stock includes
shares of stock or other securities and assets of a corporation other than the
successor or purchasing corporation, as the case may be, in such
reclassification, change, consolidation, merger, combination, sale or
conveyance, then such supplemental indenture shall also be executed by such
other corporation and shall contain such additional provisions to protect the
interests of the holders of the Notes as the Board of Directors shall reasonably
consider necessary by reason of the foregoing, including, to the extent
practicable, the provisions providing for the repurchase rights set forth in
Article XVI herein.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each holder of Notes, at his address appearing on the
Note register provided for in Section 2.5 of this Indenture, within twenty (20)
days after execution thereof. Failure to deliver such notice shall not affect
the legality or validity of such supplemental indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 15.6 applies to any event or occurrence, Section 15.5
shall not apply.
Section 15.7 Taxes on Shares Issued. The issue of stock certificates
----------------------
on conversions of Notes shall be made without charge to the converting
Noteholder for any tax in respect of the issue thereof. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of stock in any name other than that
of the holder of any Note converted, and the Company shall not be required to
issue or deliver any such stock certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
Section 15.8 Reservation of Shares; Shares to Be Fully Paid; Listing
-------------------------------------------------------
of Common Stock. The Company shall provide,
- ---------------
<PAGE>
74
free from preemptive rights, out of its authorized but unissued shares or shares
held in treasury, sufficient shares to provide for the conversion of the Notes
from time to time as such Notes are presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that all shares of Common Stock issued upon
conversion of Notes will be fully paid and non-assessable by the Company and
free from all taxes, liens and charges with respect to the issue thereof.
The Company covenants that if any shares of Common Stock to be
provided for the purpose of conversion of Notes hereunder require registration
with or approval of any governmental authority under any federal or state law
before such shares may be validly issued upon conversion, the Company will in
good faith and as expeditiously as possible endeavor to secure such registration
or approval, as the case may be.
The Company further covenants that if at any time the Common Stock
shall be listed on the Nasdaq National Market, the New York Stock Exchange or
any other national securities exchange the Company will, if permitted by the
rules of such exchange, shall obtain and, so long as the Common Stock shall be
so listed on such market or exchange, maintain approval for listing thereon of
all Common Stock issuable upon conversion of the Notes.
Section 15.9 Responsibility of Trustee. The Trustee and any other
-------------------------
conversion agent shall not at any time be under any duty or responsibility
to any holder of Notes to determine whether any facts exist which may require
any adjustment of the Conversion Price, or with respect to the nature or extent
or calculation 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. The Trustee and any other conversion agent shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, which may at any time
be issued or delivered upon the conversion of any Note; and the Trustee and any
other conversion agent make no representations with respect thereto. Subject to
the provisions of Section 8.1, neither the Trustee nor any conversion agent
shall be responsible for any failure of the Company to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any note for the purpose of conversion or
to comply with any of the duties, responsibilities or covenants of the
<PAGE>
75
Company contained in this Article. Without limiting the generality of the
foregoing, neither the Trustee nor any conversion agent shall be under any
responsibility to determine the correctness of any provisions contained in any
supplemental indenture entered into pursuant to Section 15.6 relating either to
the kind or amount of shares of stock or securities or property (including cash)
receivable by Noteholders upon the conversion of their Notes after any event
referred to in such Section 15.6 or to any adjustment to be made with respect
thereto, but, subject to the provisions of Section 8.1, may accept as conclusive
evidence of the correctness of any such provisions, and shall be protected in
relying upon, the Officers' Certificate (which the Company shall be obligated to
file with the Trustee prior to the execution of any such supplemental indenture)
with respect thereto.
Section 15.10 Notice to Holders Prior to Certain Actions. In case
------------------------------------------
hereafter:
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock (other than in cash out of retained earnings); 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 share
of any class or any other rights or warrants; or
(c) of any reclassification of the Common Stock of the Company (other
than a subdivision or combination of its outstanding Common Stock, or a
change in par value, or from par value to no par value, or from no par
value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any shareholders of the Company is
required, or of the sale or transfer of all or substantially all of the
assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the Note register provided for in
Section 2.5 of this Indenture, as promptly as possible but in any event at least
ten days 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 or rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution or rights 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 or occur, and the date
as of which it is
<PAGE>
76
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of such dividend, distribution,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up.
ARTICLE XVI
REPURCHASE UPON A FUNDAMENTAL CHANGE
Section 16.1 Repurchase Right. If there shall occur a Fundamental
----------------
Change, then each Noteholder shall have the right, at such holder's option, to
require the Company to repurchase all of such holder's Notes, or any portion
thereof (in principal amounts of $1,000 or integral multiples thereof), on the
repurchase date that is forty (40) days after the date of the Company Notice (as
defined in Section 16.2 below) of such Fundamental Change (or, if such 40th day
is not a Business Day, the next succeeding Business Day). Such repurchase shall
be made at the following prices (expressed as percentages of the principal
amount), together in each case with accrued interest to the date fixed for
repurchase, in the event of a Fundamental Change occurring during the 12-month
period beginning ___________ ___ (the "Repurchase Price"):
Year Percentage Year Percentage
---- ------------ ---- ----------
1996 1999
1997 2000
1998
and 100% at _________ ___, 2001 and thereafter; provided that if such repurchase
--------
date is ________ ___ or _________ ___, then the interest payable on such date
shall be paid to the holder of record of the Note on the next preceding ________
___ or _________ ___, respectively.
Section 16.2 Notices; Method of Exercising Repurchase Right, Etc.
----------------------------------------------------
(a) Unless the Company shall have theretofore called for redemption all of the
outstanding Notes, on or before the fifteenth (15th) calendar day after the
occurrence of a Fundamental Change, the Company or, at the request of the
Company, the Trustee, shall mail to all holders a notice (the "Company Notice")
of the occurrence of the Fundamental Change and of the repurchase right set
forth herein arising as a result thereof. The Company shall also deliver a copy
of such notice of
<PAGE>
77
a repurchase right to the Trustee and cause a copy of such notice of a
repurchase right, or a summary of the information contained therein, to be
published in a newspaper of general circulation in The City of New York. Such
notice shall set forth:
(1) the repurchase date,
(2) the date by which the repurchase right must be exercised,
(3) the Repurchase Price,
(4) a description of the procedure which a holder must follow to
exercise a repurchase right, and
(5) the Conversion Price then in effect, the date on which the
right to convert the principal amount of the Notes to be repurchased
will terminate and the place or places where Notes may be surrendered
for conversion.
No failure of the Company to give the foregoing notices or defect
therein shall limit any holder's right to exercise a repurchase right or affect
the validity of the proceedings for the repurchase of Notes.
If any of the foregoing provisions are inconsistent with applicable
law, such law shall govern.
(b) To exercise a repurchase right, a holder shall deliver to the
Trustee on or before the thirtieth (30th) day after the Company Notice (i)
irrevocable written notice to the Company (or an agent designated by the Company
for such purpose) of the holder's exercise of such right, which notice shall set
forth the name of the holder, the principal amount of the Notes to be
repurchased, a statement that an election to exercise the repurchase right is
being made thereby, and (ii) the Notes with respect to which the repurchase
right is being exercised, duly endorsed for transfer to the Company. Such
written notice shall be irrevocable, and, subject to Section 16.2(c), upon the
exercise by the holder of the repurchase right in accordance with this Section
16.2(b), the holder's right to convert the Notes (or portion thereof) as to
which the repurchase right has been exercised shall terminate.
(c) If the Company fails to repurchase on the repurchase date any
Notes (or portions thereof) as to which the repurchase right has been properly
exercised, then the principal of such Notes shall, until paid, bear interest to
the extent permitted by applicable law from the repurchase date at the rate
borne by the Note and each such Note shall be convertible into Common Stock in
accordance with this Indenture (without giving effect to Section 16.2(b)) until
the principal of such Note shall have been paid or duly provided for.
<PAGE>
78
(d) Any Note which is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the holder of such Note without service
charge, a new Note or Notes, containing identical terms and conditions, of any
authorized denomination as requested by such holder in aggregate principal
amount equal to and in exchange for the unrepurchased portion of the principal
of the Note so surrendered.
(e) 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 5.4) an amount of
money sufficient to pay the Repurchase Price of the Notes that are to be repaid
on the repurchase date.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
Section 17.1 Provisions Binding on Company's Successors. All the
------------------------------------------
covenants, stipulations, promises and agreements of the Company in this
Indenture contained shall bind its successors and assigns whether so expressed
or not.
Section 17.2 Official Acts by Successor Corporation. Any act or
--------------------------------------
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
Section 17.3 Addresses for Notices. Any notice or demand which by
---------------------
any provision of this Indenture is required or permitted to be given or served
by the Trustee or by the holders of Notes on the Company shall be deemed to have
been sufficiently given or made, for all purposes if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Park Electrochemical Corp., 5 Dakota Drive, Lake Success, New York
11042, Attention: Chief Financial Officer. Any notice, direction, request or
demand hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or served by being
deposited postage prepaid by registered or certified mail in a post office
letter box addressed to the Corporate Trust
<PAGE>
79
Office of the Trustee, which office is, at the date as of which this Indenture
is dated, located at 4 Chase Metro Tech Center, 3rd Floor, Institutional Trust
Department, Brooklyn, New York 11245, Attention: Vice President.
The Trustee, by notice to the Company, may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication mailed to a Noteholder shall be mailed to
him by first class mail, postage prepaid, at his address as it appears on the
Note register and shall be sufficiently given to him if so mailed within the
time prescribed.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 17.4 Governing Law. This Indenture and each Note shall be
-------------
deemed to be a contract made under the laws of New York, and for all purposes
shall be construed in accordance with the laws of New York.
Section 17.5 Evidence of Compliance with Conditions Precedent;
-------------------------------------------------
Certificates to Trustee. Upon any application or demand by the Company to the
- -----------------------
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statement or opinion contained in such certificate or opinion is
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Section 17.6 Legal Holidays. In any case where the date of payment
--------------
of principal of or premium, if any, on the Notes or the date fixed for
redemption or repurchase of, or
<PAGE>
80
payment of interest on, any Note will not be a Business Day, then payment of
such principal, premium, redemption or repurchase price or interest 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 date fixed for redemption, repurchase or
such payment, as the case may be, and no interest shall accrue for the period
from and after such date.
Section 17.7 No Security Interest Created. Nothing in this
----------------------------
Indenture or in the Notes, expressed or implied, shall be construed to
constitute a security interest under the Uniform Commercial Code or similar
legislation, as now or hereafter enacted and in effect, in any jurisdiction.
Section 17.8 Trust Indenture Act to Control. If and to the extent
------------------------------
that any provision of this Indenture limits, qualifies or conflicts with another
provision included in this Indenture which is required to be included in this
Indenture by any of Sections 310 to 317, inclusive, of the Trust Indenture Act,
such required provision shall control.
Section 17.9 Benefits of Indenture. Nothing in this Indenture or in
---------------------
the Notes, expressed or implied, shall give to any person, other than the
parties hereto, any paying agent, any authenticating agent, any Note registrar
and their successors hereunder, the holders of Notes, in their capacities as
such, and the holders of Senior Indebtedness, in their capacities as such, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 17.10 Table of Contents, Headings, Etc. The table of
---------------------------------
contents and the titles and headings of the articles and sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 17.11 Authenticating Agent. The Trustee may appoint an
--------------------
authenticating agent which shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7 and 3.3, as fully to all intents and
purposes as though the authenticating agent had been expressly authorized by
this Indenture and those Sections to authenticate and deliver Notes. For all
purposes of this Indenture, the authentication and delivery of Notes by the
authenticating agent shall be deemed to be authentication and delivery of such
Notes "by the Trustee" and a certificate of authentication executed on behalf of
the Trustee by an authenticating agent shall be deemed to satisfy any
requirement hereunder or in the Notes for the Trustee's certificate of
authentication. Such authenticating agent shall at all times be a person
eligible to serve as trustee hereunder pursuant to Section 8.9.
<PAGE>
81
Any corporation into which any authenticating agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any paper or any further act on the
part of the parties hereto or the authenticating agent or such successor
corporation.
Any authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any authenticating agent by giving written notice
of termination 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
any authenticating agent shall cease to be eligible under this Section, the
Trustee shall promptly appoint a successor authenticating agent (which may be
the Trustee), shall give written notice of such appointment to the Company and
shall mail notice of such appointment to all holders of Notes as the names and
addresses of such holders appear on the Note register.
The Trustee agrees to pay to the authenticating agent from time to
time reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the Trustee shall be entitled to be reimbursed for such
pre-approved payments, subject to Section 8.6.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 17.11
shall be applicable to any authenticating agent.
Section 17.12 Execution in Counterparts. This Indenture may be
-------------------------
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
The Chase Manhattan Bank, N.A., hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions hereinabove set
forth.
<PAGE>
82
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed, and their respective corporate seals to be hereunto affixed and
attested, all as of the date first written above.
PARK ELECTROCHEMICAL CORP.
By:__________________________
Title:
Attest:
- --------------------
THE CHASE MANHATTAN BANK, N.A.
By:_________________________
Title:
Attest:
- --------------------
<PAGE>
EXHIBIT A - FORM OF NOTE
[FORM OF FACE OF NOTE]
No. ________________ $ ________________
PARK ELECTROCHEMICAL CORP.
% Convertible Subordinated Note due 2006
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO SUCH DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO
A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
PARK ELECTROCHEMICAL CORP., a corporation duly organized and validly
existing under the laws of the State of New York (herein called the "Company"),
which term includes any successor corporation under the Indenture referred to on
the reverse hereof, for value received hereby promises to pay to
______________________________________, or registered assigns, the principal sum
of __________________ Dollars on __________ ___, 2006, and to pay interest on
said principal sum semi-annually on ________ ___ and __________ ___ of each
year, commencing ________ ___, 1996, at the rate per annum specified in the
title of this Note, accrued from the _________ ___ or _________ ___, as the case
may be, next preceding the date of this Note to which interest has been paid or
duly provided for, unless the date of this Note is a date to which interest has
been paid or duly provided for, in which case interest shall accrue from the
date of this Note, or unless no interest has been paid or duly provided for on
this Note, in which case interest shall accrue from ________ __, 1996, until
payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after any __________ ___ or
___________ ___, as the case may be, and before the following ___________ ___ or
___________ ___, this Note shall bear interest from such _________ ___ or
___________ ___, respectively; provided, however, that if the Company shall
-------- -------
default in the payment of interest due on such _________ ___ or _________ ___,
then this Note shall bear interest from the next preceding __________ ___ or
_________ ___ to which interest has
<PAGE>
2
been paid or duly provided for or, if no interest has been paid or duly provided
for on this Note, from ________ __, 1996. The interest so payable on any
________ ___ or _________ ___ will be paid to the person in whose name this Note
(or one or more Predecessor Notes) is registered at the close of business on the
record date, which shall be the __________ ___ or __________ ___ (whether or not
a Business Day) next preceding such __________ ___ or __________ ___,
respectively (other than with respect to the Note or portion thereof called for
redemption on a redemption date, or repurchased in connection with a Fundamental
Change on a repurchase date, during the period from a record date to (but
excluding) the next succeeding interest payment date (in which case accrued
interest shall be payable (unless the Note or portion thereof is converted) to
the holder of the Note or portion thereof redeemed or repurchased)); provided
--------
that any such interest not punctually paid or duly provided for shall be payable
as provided in the Indenture. Payment of the principal of and, premium, if any,
and interest accrued on this Note shall be made at the office or agency of the
Company maintained for that purpose in the Borough of Manhattan, The City of New
York, or, at the option of the holder of this Note, at the Corporate Trust
Office of the Trustee, in such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment of public and
private debts. Interest may, at the option of the Company, be paid by check
mailed to the address of the person entitled thereto on the registry kept for
such purposes; provided that, with respect to any holder of Notes with an
--------
aggregate principal amount equal to or in excess of $5,000,000, at the request
of such holder in writing to the Company at least 10 days prior to an interest
payment date, interest on such holder's Notes shall be paid by wire transfer in
immediately available funds in accordance with the wire transfer instructions
supplied by such holder to the Trustee and paying agent (if different from the
Trustee).
Reference is made to the further provisions of this Note set forth on
the reverse hereof, including, without limitation, provisions subordinating the
payment of principal of and premium, if any, and interest on this Note to the
prior payment in full of all Senior Indebtedness as defined in the Indenture and
provisions giving the holder of this Note the right to convert this Note into
Common Stock of the Company on the terms and subject to the limitations referred
to on the reverse hereof and as more fully specified in the Indenture. Such
further provisions shall for all purposes have the same effect as though fully
set forth at this place.
This Note shall be deemed to be a contract made under the laws of the
State of New York, and for all purposes shall be construed in accordance with
and governed by the laws of said State.
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall
<PAGE>
3
have been manually signed by the Trustee or a duly authorized authenticating
agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its corporate seal.
PARK ELECTROCHEMICAL CORP.
Dated: __________________ By: _______________________________
Title:
Attest:
___________________________________
Secretary
<PAGE>
4
[FORM OF CERTIFICATE OF AUTHENTICATION]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
THE CHASE MANHATTAN BANK, N.A., as Trustee
By: _______________________________
Authorized Signatory
FORM OF REVERSE OF NOTE
PARK ELECTROCHEMICAL CORP.
% Convertible Subordinated Note due 2006
This Note is one of a duly authorized issue of Notes of the Company,
designated as its __% Convertible Subordinated Notes due 2006 (herein called the
"Notes"), limited to the aggregate principal amount of $115,000,000 all issued
or to be issued under and pursuant to an Indenture dated as of _______ __, 1996
(herein called the "Indenture"), between the Company and The Chase Manhattan
Bank, N.A. (herein called the "Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Notes.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of and accrued interest on all Notes
may be declared, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority of the
aggregate principal amount of the Notes at the time outstanding, evidenced as in
the Indenture provided, to execute supplemental indentures adding any provisions
to or changing in any manner or eliminating any of the provisions of the
Indenture or of any supplemental indenture or modifying in any manner the rights
of the holders of the Notes; provided, that no such supplemental indenture shall
--------
(i) extend the fixed maturity of any Note, or reduce the rate or extend the time
of payment of interest thereon, or reduce the principal amount thereof or
premium, if any, thereon, or reduce any amount
<PAGE>
5
payable on redemption or repurchase thereof, change the obligation of the
Company to repurchase any Note upon the happening of a Fundamental Change in a
manner adverse to the Noteholders, or impair or affect the right of any
Noteholder to institute suit for the payment thereof, or make the principal
thereof or interest or premium, if any, thereon payable in any coin or currency
other than that provided in the Notes, or impair the right to convert the Notes
into Common Stock subject to the terms set forth in the Indenture, including
Section 15.6 thereof, or modify the provisions of the Indenture with respect to
the subordination of the Notes in a manner adverse to the Noteholders, without
the consent of the holder of each Note so affected or (ii) reduce the aforesaid
percentage of Notes, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Notes then
outstanding. It is also provided in the Indenture that, prior to any declaration
accelerating the maturity of the Notes, the holders of a majority in aggregate
principal amount of the Notes at the time outstanding may on behalf of the
holders of all of the Notes waive any past default or Event of Default under the
Indenture and its consequences except a default in the payment of interest or
any premium on or the principal of or any redemption price or repurchase price
of any of the Notes or a failure by the Company to convert any Notes into Common
Stock of the Company or a default in respect of a covenant or provisions of the
Indenture which under the terms of the Indenture cannot be modified or amended
without the consent of the holders of all Notes then outstanding. Any such
consent or waiver by the holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such holder and upon all future
holders and owners of this Note and any Notes which may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is made
upon this Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, expressly subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the Company,
as defined in the Indenture, whether outstanding at the date of the Indenture or
thereafter incurred, and this Note is issued subject to the provisions of the
Indenture with respect to such subordination. Each holder of this Note, by
accepting the same, agrees to and shall be bound by such provisions and
authorizes the Trustee on his behalf to take such actions as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
his attorney in fact for such purpose.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Note at the place, at the respective times, at the rate and in the coin
or currency herein prescribed.
<PAGE>
6
Interest on the Notes shall be computed on the basis of a 360 day year
comprised of twelve 30-day months.
The Notes are issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. At the
office or agency of the Company referred to on the face hereof, and in the
manner and subject to the limitations provided in the Indenture, without payment
of any service charge but with payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration or exchange of Notes, Notes may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations.
The Notes will not be redeemable at the option of the Company prior to
___________ __, 1999. On or after such date and prior to maturity the Notes may
be redeemed at the option of the Company as a whole, or from time to time in
part, upon mailing a notice of such redemption not less than 15 nor more than 60
days before the date fixed for redemption to the holders of Notes at their last
registered addresses, all as provided in the Indenture, at the following
redemption prices (expressed as percentages of the principal amount), together
in each case with accrued interest to the date fixed for redemption; provided
--------
that if the date fixed for redemption is a ___________ ___ or ___________ ___,
then the interest payable on such date shall be paid to the holder of record on
the next preceding __________ ___ or _____________ ___, respectively.
If redeemed during the 12-month period beginning __________ __:
Year Percentage
---- ----------
1999
2000
and 100% at _________ __, 2001 and thereafter.
Upon the occurrence of a "Fundamental Change" prior to __________ __,
2006, the Notes will be repurchased on the 40th day after notice thereof at the
option of the holder. Such payment shall be made at the following repurchase
prices (expressed as percentages of the principal amount), together in each case
with accrued interest to the date fixed for redemption, in the event of a
Fundamental Change occurring during the 12-month period beginning ___________
___:
Year Percentage Year Percentage
---- ---------- ---- ----------
1996 1999
1997 2000
1998
<PAGE>
7
and 100% at ________ __, 2001 and thereafter; provided that if such repurchase
--------
date is _________ ___ or _________ ___, then the interest payable on such date
shall be paid to the holder of record of the Note on the next preceding
___________ ___ or ___________ ___, respectively. The Company shall mail to all
holders of record of the Notes a notice of the occurrence of a Fundamental
Change and of the repurchase right arising as a result thereof 15 calendar days
after the occurrence of such Fundamental Change.
Subject to the provisions of the Indenture, the holder hereof has the
right, at its option, at any time prior to the close of business on ____________
__, 2006, or, as to all or any portion hereof called for redemption, prior to
the close of business on the Trading Day next preceding the date fixed for
redemption (unless the Company shall default in payment due upon redemption
thereof), to convert the principal hereof or any portion of such principal which
is $1,000 or an integral multiple thereof, into that number of fully paid and
non-assessable shares of Company's Common Stock, as said shares shall be
constituted at the date of conversion, obtained by dividing the principal amount
of this Note or portion thereof to be converted by the conversion price of
$______ or such conversion price as adjusted from time to time as provided in
the Indenture, upon surrender of this Note, together with a conversion notice as
provided in the Indenture and this Note, to the Company at the office or agency
of the Company maintained for that purpose in the Borough of Manhattan, The City
of New York, or at the option of such holder, the Corporate Trust Office of the
Trustee, and, unless the shares issuable on conversion are to be issued in the
same name as this Note, duly endorsed by, or accompanied by instruments of
transfer in form satisfactory to the Company duly executed by, the holder or by
his duly authorized attorney; provided, however, that in the event, at any time
-------- -------
this Note is surrendered for conversion in whole or in part, the Company does
not have available for issuance upon such conversion at least the number of
shares of authorized Common Stock required to be issued pursuant hereto, then
this Note (or portion thereof as to which conversion has been requested), to the
extent and only to the extent sufficient shares of authorized Common Stock are
not available, shall be converted into the right to receive a payment from the
Company in lieu of the shares of Common Stock into which this Note would
otherwise be converted and which the Company is unable to issue, equal to the
number of shares of Common Stock which the Company is unable to issue multiplied
by the average of the Closing Price (as defined in the Indenture) for the
Company's Common Stock (determined as set forth in the Indenture) during the
five Trading Days immediately prior to the date on which the holder of such Note
(or specified portion thereof) is deemed to have been converted pursuant to the
Indenture. No adjustment in respect of
<PAGE>
8
interest or dividends will be made upon any conversion except that if this Note
shall be surrendered for conversion other than during the period from the close
of business on any record date for the payment of interest through the close of
business on the Trading Day next preceding the following interest payment date,
on such conversion accrued and unpaid interest on the principal amount of this
Note being converted shall be deemed to be paid through receipt of such number
of shares of Common Stock issued on such conversion having a current market
value (determined as provided in the Indenture) equal to the amount of such
accrued and unpaid interest; provided, however, that if this Note shall be
-------- -------
surrendered for conversion during the period from the close of business on any
record date for the payment of interest through the close of business on the
Trading Day next preceding the following interest payment date, this Note
(unless it or the portion being converted shall have been called for redemption
on a date in such period) must be accompanied by an amount, in funds acceptable
to the Company, equal to the interest payable on such interest payment date on
the principal amount being converted. No fractional shares will be issued upon
any conversion, but an adjustment in cash will be made, as provided in the
Indenture, in respect of any fraction of a share which would otherwise be
issuable upon the surrender of any Note or Notes for conversion.
Any Notes called for redemption, unless surrendered for conversion on
or before the close of business on the date fixed for redemption, may be deemed
to be purchased from the holder of such Notes at an amount equal to the
applicable redemption price, together with accrued interest to the date fixed
for redemption, by one or more investment bankers or other purchasers who may
agree with the Company to purchase such Notes from the holders thereof and
convert them into Common Stock of the Company and to make payment for such Notes
as aforesaid to the Trustee in trust for such holders.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, or at the option of the holder of this Note, at the Corporate Trust Office
of the Trustee, a new Note or Notes of authorized denominations for an equal
aggregate principal amount will be issued to the transferee in exchange thereof,
subject to the limitations provided in the Indenture, without charge except for
any tax or other governmental charge imposed in connection therewith.
The Company, the Trustee, any authenticating agent, any paying agent,
any conversion agent and any Note registrar may deem and treat the registered
holder hereof as the absolute owner of this Note (whether or not this Note shall
be overdue and notwithstanding any notation of ownership or other writing hereon
made by anyone other than the Company or any Note registrar), for the purpose of
receiving payment hereof, or on account hereof, for the conversion hereof and
for all other purposes, and neither the Company nor the Trustee nor any other
authenticating agent
<PAGE>
9
nor any paying agent nor any other conversion agent nor any Note registrar shall
be affected by any notice to the contrary. All payments made to or upon the
order of such registered holder shall, to the extent of the sum or sums paid,
satisfy and discharge liability for monies payable on this Note.
No recourse for the payment of the principal of or any premium or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, employee, agent, officer, director
or subsidiary, as such, past, present or future, of the Company or of any
successor corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
Terms used in this Note and defined in the Indenture and not otherwise
defined herein are used herein as therein defined.
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face
of this Note, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT
TEN ENT as tenants by the
entireties ____________________ Custodian
(Cust)
JT TEN - as joint tenants with _________________________under
right of survivorship (Minor)
and not as tenants in
common
Uniform Gifts to
Minors Act
____________________
(State)
Additional abbreviations may also be used
though not in the above list.
<PAGE>
10
{FORM OF CONVERSION NOTICE}
CONVERSION NOTICE
To: Park Electrochemical Corp.
The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion hereof (which is
$1,000 principal amount or an integral multiple thereof) below designated, into
shares of Common Stock in accordance with the terms of the Indenture referred to
in this Note, and directs that the shares issuable and deliverable upon such
conversion, together with any check in payment for fractional shares and any
Notes representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If shares or any portion of this Note not converted are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto. Any amount required to be
paid by the undersigned on account of interest accompanies this Note.
Dated:
___________________
______________________________
______________________________
Signature(s)
<PAGE>
11
Signature(s) must be guaranteed by an eligible Guarantor Institution (banks,
stock brokers, savings and loan associations and credit unions) with membership
in an approved signature guarantee medallion program pursuant to Securities and
Exchange Commission Rule 17Ad-15 if shares of Common Stock are to be issued, or
Notes to be delivered, other than to and in the name of the registered holder.
_______________________________
Signature Guarantee
Fill in for registration of shares if to be issued, and Notes if to be
delivered, other than to and in the name of the registered holder:
________________________________
(Name)
________________________________
(Street Address)
________________________________
(City, State and Zip Code)
Please print name and address
Principal amount to be converted (if less than
all):
$_______________
_______________________________
Social Security or Other Taxpayer Identification
Number
<PAGE>
12
{FORM OF OPTION TO ELECT TO REPURCHASE
UPON A FUNDAMENTAL CHANGE}
To: Park Electrochemical Corp.
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Park Electrochemical Corp. (the "Company")
as to the occurrence of a Fundamental Change with respect to the Company and
requests and instructs the Company to repay the entire principal amount of this
Note, or the portion thereof (which is $1,000 principal amount or an integral
multiple thereof) below designated, in accordance with the terms of the
Indenture referred to in this Note, together with accrued interest to such date,
to the registered holder hereof.
Dated:
_______________________
______________________________
______________________________
Signature(s)
______________________________
Social Security or Other
Taxpayer Identification Number
Principal amount to be repaid (if
less than all): $_________
NOTICE: The above signatures of the
holder(s) hereof must correspond with
the name as written upon the face of
the Note in every particular without
alteration or enlargement or any
change whatever.
<PAGE>
13
{FORM OF ASSIGNMENT}
For value received ______________________________ hereby sell(s),
assign(s) and transfer(s) unto _________________
________________________________________________________ (Please insert social
security or other identifying number of assignee) the within Note, and hereby
irrevocably constitutes and appoints ____________________________ attorney to
transfer the said Note on the books of the Company, with full power of
substitution in the premises.
Dated:
_________________________
______________________________
______________________________
Signature(s)
Signature(s) must be guaranteed
by an eligible Guarantor
Institution (banks, stock
brokers, savings and loan
associations and credit unions)
with membership in an approved
signature guarantee medallion
program pursuant to Securities
and Exchange Commission Rule
17Ad-15.
________________________________
Signature Guarantee
NOTICE: The signature on the conversion notice, the option to elect payment
upon a Fundamental Change or the assignment must correspond with the name as
written upon the face of the Note in every particular without alteration or
enlargement or any change whatever.
<PAGE>
EXHIBIT 5.01
LAW OFFICES OF
BRIAN W PUSCH
ATTORNEYS AT LAW
PENTHOUSE SUITE
29 WEST 57TH STREET
NEW YORK, NY 10019
TELEPHONE (212) 980-0408
FACSIMILE (212) 980-7055
January 16, 1996
Park Electrochemical Corp.
5 Dakota Drive
Lake Success, New York 11042
PARK ELECTROCHEMICAL CORP.
REGISTRATION ON FORM S-3 RELATING TO
__% CONVERTIBLE SUBORDINATED NOTES DUE 2006
AND 500,000 SHARES OF COMMON STOCK, $.10 PAR VALUE
-------------------------------------------------
Ladies and Gentlemen:
We are acting as special counsel to Park Electrochemical Corp., a New
York corporation (the "Company"), in connection with the filing by the Company
with the U.S. Securities and Exchange Commission (the "SEC") pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), of a Registration
Statement on Form S-3 (the "Registration Statement"), relating to an aggregate
of $115,000,000 principal amount of __% Convertible Subordinated Notes Due 2006
(the "Notes") to be offered by the Company and 500,000 shares (the "Shares") of
Common Stock, $.10 par value (the "Common Stock"), of the Company to be offered
by Mr. Jerry Shore, as selling shareholder (the "Selling Shareholder"). The
Notes will be convertible into shares (the "Conversion Shares") of Common Stock.
This opinion is being furnished pursuant to the requirements
applicable to Item 16 of Part II of the Registration Statement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of such documents as we
have deemed necessary or appropriate as a basis for the opinions set forth
herein, including (i) the Registration Statement as proposed to be filed with
the SEC, (ii) a proposed form of Underwriting Agreement relating to the Notes to
be filed as an exhibit to the Registration Statement, (iii) a proposed form of
Underwriting Agreement relating to the Shares to be filed as an exhibit to the
Registration Statement, (iv) a proposed form of Indenture to be filed as an
exhibit to the Registration Statement, (v) the Restated Certificate of
Incorporation and the By-Laws of the Company, as each is currently in effect,
(vi) resolutions of the Board of Directors of the Company relating to the Notes
and the Conversion Shares and the proposed registration and issuance of the
Notes and the Conversion Shares and the proposed registration of the Shares, and
(vii) such other documents and certificates of public officials, officers of the
Company and the Selling Shareholder and information as we have deemed necessary
or appropriate as a basis for this opinion.
<PAGE>
Park Electrochemical Corp.
January 16, 1996
Page 2
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to any facts
material to the opinions expressed herein which were not independently
established or verified, we have relied upon statements and representations of
officers and other representatives of the Company and others.
We are admitted to practice in the State of New York and we do not
purport to express an opinion herein concerning any laws other than the laws of
the State of New York.
Based on and subject to the foregoing, we are of the opinion that:
1. When (a) the Registration Statement shall have become effective
and the Indenture covering the Notes (the "Indenture") between the Company
and The Chase Manhattan Bank, N.A., as Trustee (the "Trustee"), shall have
been qualified under the Trust Indenture Act of 1939, as amended, (b) the
Indenture shall have been duly executed and delivered by the Company and
the Trustee, (c) the applicable provisions of securities and blue sky laws
of certain jurisdictions shall have been complied with, (d) the Notes shall
have been duly issued, executed and authenticated in accordance with the
terms of the Indenture, and (e) the Notes shall have been duly delivered
against payment of the consideration therefor as contemplated in the
Underwriting Agreement relating to the Notes referred to in the
Registration Statement, the Notes will be legally issued by the Company and
will be valid and binding obligations of the Company enforceable in
accordance with their terms, subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditor's rights generally from time to time in effect, and
subject, as to enforceability, to general principles of equity, regardless
of whether enforceability is sought in a proceeding in equity or at law;
2. The Conversion Shares have been duly authorized and when (a) the
Registration Statement shall have become effective, (b) the applicable
provisions of securities and blue sky laws of certain jurisdictions shall
have been complied with, and (c) the Conversion Shares shall have been duly
issued on conversion of the Notes in accordance with the terms of the
Indenture and the Notes, the Conversion Shares will be validly issued,
fully paid and non-assessable (subject to the provisions of Section 630 of
the New York Business Corporation Law (the "BCL")); and
3. The Shares have been duly authorized and validly issued and are
fully paid and non-assessable (subject to the provisions of Section 630 of
the BCL).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the Prospectus forming part of the Registration Statement. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ Brian W. Pusch
-------------------
BRIAN W. PUSCH
<PAGE>
EXHIBIT 12
PARK ELECTROCHEMICAL CORP. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------ -----------------
MAR. 3, MAR. 1, FEB. 28, FEB. 27, FEB. 26, NOV. 26,
1991 1992 1993 1994 1995 1995
------- ------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Earnings before income
taxes and extraordinary
item................... $2,907 $1,923 $3,075 $12,845 $27,501 $27,207
Add:
Interest on
indebtedness.......... 2,866 2,758 2,203 2,595 552 91
Portion of rent
representative of
interest factor....... 472 488 585 714 742 567
------ ------ ------ ------- ------- -------
Earnings as adjusted.... $6,245 $5,169 $5,863 $16,154 $28,795 $27,865
====== ====== ====== ======= ======= =======
Fixed Charges:
Interest on
indebtedness.......... $3,116 $2,915 $2,626 $ 2,588 $ 431 $ --
Portion of rent
representative of
interest factor....... 472 488 585 714 742 567
------ ------ ------ ------- ------- -------
Total fixed charges..... $3,588 $3,403 $3,211 $ 3,302 $ 1,173 $ 567
====== ====== ====== ======= ======= =======
Ratio of earnings to
fixed charges (1)...... 1.74 1.52 1.83 4.89 24.55 49.14
====== ====== ====== ======= ======= =======
</TABLE>
- --------
(1) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of consolidated earnings before income taxes plus fixed
charges and (ii) fixed charges consist of interest expense incurred and
the portion of rental expense under leases deemed by the Company to be
representative of the interest factor.
<PAGE>
EXHIBIT 23.02
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Experts" in the
Prospectus constituting part of the Registration Statement on Form S-3 for the
registration of Convertible Subordinated Notes due 2006 and 500,000 shares of
its common stock ("Registration Statement"), and to the use of our report
dated April 17, 1995 in the Registration Statement and related Prospectus of
Park Electrochemical Corp. (the "Company").
We also consent to the incorporation by reference in the Registration
Statement of our report dated April 17, 1995 with respect to the financial
statement schedule of the Company and its subsidiaries for the years ended
February 26, 1995 and February 27, 1994 included in the Annual Report (Form
10-K) for 1995 filed with the Securities and Exchange Commission.
Ernst & Young LLP
New York, NY
January 16, 1996
<PAGE>
EXHIBIT 23.03
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Park Electrochemical Corp. on Form S-3 of our report dated May 7, 1993 (October
8, 1993 as to Note 14) (which contains an explanatory paragraph relating to a
restatement), included in the Annual Report on Form 10-K of Park
Electrochemical Corp. for the fiscal year ended February 26, 1995, and to the
use of our report dated May 7, 1993 (October 8, 1993 as to Note 14) (which
contains an explanatory paragraph relating to a restatement), appearing in the
Prospectus, which is a part of this Registration Statement. We also consent to
the reference to us under the headings "Selected Financial Data" and "Experts"
in such Prospectus.
Deloitte & Touche
New York, New York
January 15, 1996
<PAGE>
EXHIBIT 23.04
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in the Prospectus constituting part of this
Registration Statement on Form S-3 (the "Registration Statement") of Park
Electrochemical Corp. (the "Company") of our reports dated May 1, 1993 (the
"Reports") relating to the financial statements of New England Laminates (UK)
Limited, Technocharge Limited and Tweedbank P.C.B. Supplies Limited, wholly
owned subsidiaries of the Company, which Reports appear in such Prospectus. We
also consent to the reference to our firm under the caption "Experts" in the
Prospectus constituting part of the Registration Statement.
Arthur Andersen
Chartered Accountants and Registered Auditors
Manchester, England
January 15, 1996
<PAGE>
EXHIHIT 25
SECURITIES ACT OF 1933 FILE NO.
(IF APPLICATION TO DETERMINE
ELIGIBILITY OF TRUSTEE
FOR DELAYED OFFERING PURSUANT TO
SECTION 305 (B) (2))
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)
----------------
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
13-2633612
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
1 CHASE MANHATTAN PLAZA, NEW YORK, NEW YORK
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
10081
(ZIP CODE)
----------------
PARK ELECTROCHEMICAL CORP.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
NEW YORK
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
11-1734643
(I.R.S. EMPLOYER IDENTIFICATION NO.)
5 DAKOTA DRIVE LAKE SUCCESS, NEW YORK
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
11042
(ZIP CODE)
% CONVERTIBLE SUBORDINATED NOTES DUE 2006
(TITLE OF THE INDENTURE SECURITIES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Comptroller of the Currency, Washington, D.C.
Board of Governors of The Federal Reserve System, Washington, D. C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The Trustee is not the obligor, nor is the Trustee directly or indirectly
controlling, controlled by, or under common control with the obligor.
(See Note on Page 2.)
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as a part of this statement of eligibility.
<TABLE>
<C> <S>
*1. --A copy of the articles of association of the trustee as now in effect.
(See Exhibit T-1 (Item 12), Registration No. 33-55626.)
*2. --Copies of the respective authorizations of The Chase Manhattan Bank
(National Association) and The Chase Bank of New York (National
Association) to commence business and a copy of approval of merger of
said corporations, all of which documents are still in effect. (See
Exhibit T-1 (Item 12), Registration No. 2-67437.)
*3. --Copies of authorizations of The Chase Manhattan Bank (National
Association) to exercise corporate trust powers, both of which
documents are still in effect. (See Exhibit T-1 (Item 12),
Registration No. 2-67437).
*4. --A copy of the existing by-laws of the trustee. (See Exhibit T-1 (Item
12(a)), Registration No. 33-60809.)
*5. --A copy of each indenture referred to in Item 4, if the obligor is in
default. (Not applicable).
*6. --The consents of United States institutional trustees required by
Section 321(b) of the Act.
(See Exhibit T-1, (Item 12), Registration No. 22-19019.)
7. --A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
</TABLE>
- --------
* The Exhibits thus designated are incorporated herein by reference. Following
the description of such Exhibits is a reference to the copy of the Exhibit
heretofore filed with the Securities and Exchange Commission, to which there
have been no amendments or changes.
1
<PAGE>
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base a responsive answer to Item 2 the answer to said
Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an amendment
to this Form T-1.
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939, THE
TRUSTEE, THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), A CORPORATION
ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA, HAS
DULY CAUSED THIS STATEMENT OF ELIGIBILITY TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ALL IN THE CITY OF NEW YORK, AND THE
STATE OF NEW YORK, ON THE 4TH DAY OF JANUARY, 1996
The Chase Manhattan Bank
(National Association)
James D. Heaney
By: _________________________________
James D. Heaney, Vice President
2
<PAGE>
EXHIBIT 7
REPORT OF CONDITIONConsolidating domestic and foreign subsidiaries of the
THE CHASE MANHATTAN BANK, N.A.
of New York in the State of New York, at the close of business on September
30, 1995, published in response to call made by Comptroller of the Currency,
under title 12, United States Code, Section 161.
CHARTER NUMBER 2370 COMPTROLLER OF THE CURRENCY NORTHEASTERN DISTRICT
STATEMENT OF RESOURCES AND LIABILITIES
<TABLE>
<CAPTION>
THOUSANDS
OF DOLLARS
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin................ $ 5,081,000
Interest-bearing balances......................................... 5,957,000
Held to maturity securities........................................ 1,678,000
Available-for-sale securities...................................... 5,303,000
Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and of its Edge and
Agreement subsidiaries, and in IBFs:
Federal funds sold................................................ 1,806,000
Securities purchased under agreements to resell................... 23,000
Loans and lease financing receivable:
Loans and leases, net of unearned income.......... $ 55,682,000
LESS: Allowance for loan and lease losses......... 1,112,000
LESS: Allocated transfer risk reserve............. 0
--------------
Loans and leases, net of unearned income, allowance, and reserve.. 54,570,000
Assets held in trading accounts.................................... 12,551,000
Premises and fixed assets (including capitalized leases)........... 1,755,000
Other real estate owned............................................ 400,000
Investments in unconsolidated subsidiaries and associated
companies......................................................... 30,000
Customers'liability to this bank on acceptances outstanding........ 1,091,000
Intangible assets.................................................. 1,344,000
Other assets....................................................... 6,322,000
-----------
TOTAL ASSETS....................................................... $97,911,000
===========
LIABILITIES
Deposits:
In domestic offices............................................... $31,007,000
Noninterest-bearing............................... $ 12,166,000
Interest-bearing.................................. 18,841,000
--------------
In foreign offices, Edge and Agreement subsidiaries, and IBFs..... 36,015,000
Noninterest-bearing............................... $ 3,258,000
Interest-bearing.................................. 32,757,000
--------------
Federal funds purchased and securities sold under agreements to
repurchase in domestic offices of the bank and of its Edge and
Agreement subsidiaries, and in IBFs:
Federal funds purchased........................................... 1,673,000
Securities sold under agreements to repurchase.................... 233,000
Demand notes issued to the U.S. Treasury........................... 25,000
Trading liabilities................................................ 9,105,000
Other borrowed money:
With original maturity of one year or less........................ 2,783,000
With original maturity of more than one year...................... 395,000
Mortgage indebtedness and obligations under capitalized leases..... 40,000
Bank's liability on acceptances executed and outstanding........... 1,100,000
Subordinated notes and debentures.................................. 1,960,000
Other liabilities.................................................. 5,747,000
-----------
TOTAL LIABILITIES.................................................. 90,083,000
-----------
Limited-life preferred stock and related surplus................... 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus...................... 0
Common stock....................................................... 921,000
Surplus............................................................ 5,244,000
Undivided profits and capital reserves............................. 1,695,000
Net unrealized holding gains (losses) on available-for-sale
securities........................................................ (43,000)
Cumulative foreign currency translation adjustments................ 11,000
-----------
TOTAL EQUITY CAPITAL............................................... 7,828,000
-----------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK, AND EQUITY
CAPITAL........................................................... $97,911,000
===========
</TABLE>
I, Lester J. Stephens, Jr., Senior Vice President and Controller of the above
named bank do hereby declare that this Report of Condition is true and correct
to the best of my knowledge and belief.
(Signed) Lester J. Stephens, Jr.
We the undersigned directors, attest to the correctness of this statement of
resources and liabilities. We declare that it has been examined by us, and to
the best of our knowledge and belief has been prepared in conformance with the
instructions and is true and correct.
(Signed) Thomas G. Labrecque
(Signed) Donald Trautlein
Directors
(Signed) Richard J. Boyle
