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As filed with the Securities and Exchange Commission on June 3, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ITRON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
WASHINGTON 91-1011792
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
2818 N. SULLIVAN ROAD
P.O. BOX 15288
SPOKANE, WASHINGTON 99216-1897
(509) 924-9900
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
DAVID G. REMINGTON
CHIEF FINANCIAL OFFICER
ITRON, INC.
2818 N. SULLIVAN ROAD
P.O. BOX 15288
SPOKANE, WASHINGTON 99216-1897
(509) 924-9900
(Name, address, including zip code, and telephone number, including area code, of agent for service)
---------------------
Copies to:
LINDA A. SCHOEMAKER
PERKINS COIE
1201 THIRD AVENUE, 40TH FLOOR
SEATTLE, WASHINGTON 98101-3099
(206) 583-8888
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</TABLE>
Approximate date of commencement of proposed sale to the public: FROM TIME TO
TIME, 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. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
6 3/4% Convertible Subordinated Notes Due 2004...... $63,400,000 100%(1) $63,400,000(1) $19,212
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Common Stock, no par value (Conversion Shares)(4)... (2) ---- ---- (3)
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Common Stock, no par value(4)....................... 2,638,600 $25.13(5) $66,308,018(5) $20,093
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(1) Computed in accordance with Rule 457(o) under the Securities Act of 1933.
(2) Such indeterminate number of shares of Common Stock as shall be required
for issuance upon conversion of the Notes being registered hereunder.
(3) No additional consideration will be received for the Common Stock
(Conversion Shares) and, therefore, no registration fee is required
pursuant to fpRule 457(i).
(4) Includes associated Common Stock Purchase Rights.
(5) Computed in accordance with Rule 457(c), based on the average of the high
low sale prices of the Common Stock on May 27, 1997.
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THE REGISTRANT HEREBY UNDERTAKES TO AMEND 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 THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of any 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 JUNE 3, 1997
ITRON, INC.
$63,400,000
-------------------
6 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
AND
SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF
AND
2,638,600 SHARES OF COMMON STOCK
-------------------
This Prospectus relates to the $63,400,000 aggregate principal amount
of 6 3/4% Convertible Subordinated Notes Due 2004 (the "Notes") of Itron, Inc.
("Itron" or the "Company") and the shares of Common Stock, no par value (the
"Common Stock"), of the Company issuable upon the conversion of the Notes (the
"Conversion Shares"). In addition, pursuant to registration rights agreements
entered into between the Company and certain shareholders of the Company, this
Prospectus relates to 2,638,600 shares of Common Stock (the "Shares"). The
Notes, the Conversion Shares and the Shares may be offered from time to time
for the accounts of the holders named herein (the "Selling Securityholders").
The Notes are convertible, in whole or in part, at the option of the
holder (the "Holder") at any time prior to the close of business on the
business day immediately preceding the maturity date, unless previously
redeemed, into shares of Common Stock at a conversion price of $23.70 per share
(equivalent to a conversion rate of 42.194 shares per $1,000 principal amount
of Notes), subject to adjustment in certain circumstances. Interest on the
Notes is payable semiannually on March 31 and September 30 of each year,
commencing on September 30, 1997.
The Notes are redeemable, in whole or in part, at the option of the
Company at any time on or after April 4, 2000 at the redemption prices set
forth herein, plus accrued and unpaid interest to the date of redemption. No
sinking fund is provided for the Notes. If a Change in Control (as defined in
the Indenture) of the Company occurs, Holders of Notes may elect to require the
Company to repurchase their Notes, in whole or in part, at a purchase price
equal to 100% of the principal amount thereof plus accrued interest through the
date of repurchase.
The Notes are general unsecured obligations of the Company,
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness (as defined in the Indenture) of the Company and effectively
subordinated in right of payment to the prior payment in full of all
indebtedness of the Company's subsidiaries. The Indenture does not restrict
the Company's ability to incur Senior Indebtedness or additional indebtedness
of the Company's subsidiaries. See "Description of Notes--Subordination."
The Notes, the Conversion Shares and the Shares may be offered by the
Selling Securityholders from time to time in transactions (which may include
block transactions in the case of the Conversion Shares and the Shares) on any
exchange or market on which such securities are listed or quoted, as
applicable, in negotiated transactions, through a combination of such methods
of sale, or otherwise, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices,
or at negotiated prices. The Selling Securityholders may effect such
transactions by selling the Notes, Conversion Shares or Shares directly or to
or through broker-dealers, who may
<PAGE> 3
receive compensation in the form of discounts, concessions or commissions from
the Selling Securityholders and/or the purchasers of the Notes, Conversion
Shares or Shares for whom such broker-dealers may act as agents or to whom they
may sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The Company will
not receive any of the proceeds from the sale of the Notes, Conversion Shares
or Shares by the Selling Securityholders. The Company has agreed to pay all
expenses incident to the offer and sale of the Notes, the Conversion Shares and
the Shares offered by the Selling Securityholders hereby, except that the
Selling Securityholders will pay all underwriting discounts and selling
commissions, if any. See "Selling Securityholders" and "Plan of Distribution."
The Notes have been designated for trading on the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") Market. Notes sold
pursuant to this Prospectus are not expected to remain eligible for trading on
the PORTAL Market. The Common Stock is traded on the Nasdaq National Market
("Nasdaq") under the symbol "ITRI." On June 2, 1997, the last reported sale
price of the Common Stock on Nasdaq was $26.25 per share.
THE NOTES, CONVERSION SHARES AND SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF
RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________________
The date of this Prospectus is June __, 1997.
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AVAILABLE INFORMATION
Itron, a Washington corporation, 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").
Reports, proxy statements and other information filed by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's Regional Offices located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such materials can be obtained
upon written request from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
the Commission maintains a web site (http://www.sec.gov) that contains certain
reports, proxy statements and other information regarding Itron.
The Company has filed with the Commission a registration statement on
Form S-3 (together with all amendments and exhibits, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"). This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement. The Registration
Statement and any amendments thereto, including exhibits filed as a part
thereof, also are available for inspection and copying as set forth above.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to herein 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, each such statement being
qualified in all respects by such reference.
This Prospectus incorporates documents by reference that are not
presented herein or delivered herewith. Copies of any such documents, other
than exhibits to such documents that are not specifically incorporated by
reference therein, are available without charge to any person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request to the Secretary, Itron, Inc., 2818 N. Sullivan Road, P.O. Box 15288,
Spokane, Washington 99216-1897, telephone number (509) 924-9900.
FORWARD-LOOKING STATEMENTS
When included in this Prospectus or in documents incorporated herein
by reference, the words "expects," "intends," "anticipates," "plans,"
"projects" and "estimates," and analogous or similar expressions, are intended
to identify forward-looking statements. Such statements, which include
statements contained in "The Company" and "Risk Factors," are inherently
subject to a variety of risks and uncertainties that could cause actual results
to differ materially from those reflected in such forward-looking statements.
Such risks and uncertainties include, among others, changes in the utility
regulatory environment, delays or difficulties in introducing new products,
increased competition and various other matters, many of which are beyond the
Company's control. These forward-looking statements speak only as of the date
of this Prospectus. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statement contained herein to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based, other than as expressly required by the
Securities Act and the rules promulgated thereunder.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the
Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
2. The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997;
3. The Company's Current Reports on Form 8-K dated March 18, 1997
and May 2, 1997; and
4. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the
Commission on September 18, 1993.
All other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing such documents.
Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein 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 by reference herein modifies or
supersedes such statement. Any statement so modified shall not be deemed to
constitute a part of this Prospectus except as so modified, and any statement
so superseded shall not be deemed to constitute part of this Prospectus.
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THE COMPANY
Itron is a leading global provider to the utility industry of data
acquisition and wireless communications solutions for collecting, communicating
and analyzing electric, gas and water usage. The Company designs, develops,
manufactures, markets, installs and services hardware, software and integrated
systems for handheld computer-based electronic meter reading ("EMR"), automatic
meter reading ("AMR") and other measurement systems.
Since the early 1980s, Itron has been the leading supplier of EMR
systems to utilities. Today, Itron's EMR systems are installed at over 1,500
utility customers in more than 40 countries and are being used to read
approximately 275 million meters worldwide. Itron's EMR systems are installed
at 80% of the 249 utilities in North America with 50,000 or more meters,
including 21 of the largest 25 utilities. EMR systems and services currently
account for approximately 25% of the Company's total revenues.
In the early 1990s, Itron expanded its product line to include AMR
systems and services. The Company estimates there are approximately 268 million
meters in North America, of which only approximately 12 million, or 5%,
currently have installed AMR technology. Outside North America, the Company
estimates there are two to three times that number of meters and minimal AMR
installations. The Company has shipped over 9.0 million AMR meter modules to
279 utilities as of March 31, 1997, and has thereby established itself as the
world's leading supplier of AMR systems. Sixty-one of these 279 utilities have
made a sizable commitment to Itron AMR products by having installed at least
10,000 Itron AMR meter modules. AMR systems and services now represent
approximately 75% of the Company's total revenues.
The Company's AMR systems and products were initially developed to
enable utilities to reduce operating costs and improve quality of service and
are being expanded to provide a full range of utility- and nonutility-related
data management capabilities and communications-based options. The Company
believes its AMR product offerings are more extensive than those of any other
AMR supplier. The Company's AMR systems and products support electric, gas,
water and combination utilities and include solutions for all classes of
utility customers -- residential, commercial and industrial. The Company's AMR
solutions involve the use of radio and, in some instances, telephone technology
to collect meter data. The Company's radio-based AMR solutions include handheld
("Off-Site"), vehicle-based ("Mobile") and fixed network ("Fixed Network")
reading technology options. Each of the radio-based reading options utilizes
the same AMR meter module technology, which therefore provides a compatible
migration path from basic Off-Site AMR to more advanced Mobile and Fixed
Network systems. This compatibility allows Itron's customers to initiate AMR
installation on a limited number of meters with the flexibility to expand to
full-scale, system-wide implementation on a large number of meters, where
multiple AMR solutions may be required. The range of Itron's AMR product
offerings enables its customers to deploy the solutions that are the most
effective in each portion of the utility's service territory at the appropriate
time.
Regulatory reform initiatives and merger activity are causing
significant changes in the utility industry and have recently caused some
utility customers to delay implementation of AMR technology. The Company
believes that regulatory reform will require more frequent collection of meter
data with a degree of resolution not previously needed and therefore will
increase demand for AMR products. In addition, the Company believes that, over
the long term, regulatory reform in many states will create new AMR
opportunities for the Company such as the development of reconciliation systems
for the supply of power to, and purchase of power from, the electric power
transmission grids, software to support the complex billing for large
commercial and industrial customers, franchise operations, national accounts
and aggregators (power brokers that purchase power on behalf of many
customers), and products to support nontraditional utility applications such as
energy management programs, home automation systems, and premise monitoring
services, such as home security.
The Company believes that its broad offering of AMR products provides
utilities and other industry participants with numerous options for converting
recurring operating expenses of meter reading into strategic investments that
provide high-value communications links with customers. The Company believes
this extensive product portfolio, along with significant experience in
high-volume AMR meter module production, established relationships with over
1,500 utilities worldwide, proven interfaces with numerous utility host billing
systems, and advanced software for large commercial and industrial customers
and power exchanges, positions the Company to take advantage of this
significant AMR market opportunity.
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RECENT EVENTS UPDATE--ENVIRONMENT IN THE UTILITY INDUSTRY
Recent regulatory developments may have an effect on the Company's
business in California. On May 6, 1997, the California Public Utilities
Commission ("CPUC") issued two decisions with respect to the restructuring of
California's electric services industry. Itron has reviewed the decisions and
believes the key points as they relate to Itron's business are as follows: (i)
competition in the supply of electricity ("Direct Access") will commence for all
customer classes on January 1, 1998; (ii) metering, billing and other "revenue
cycle" services for Direct Access customers will become subject to competition
by January 1, 1998 for larger customers, and by January 1, 1999 for all others;
(iii) those larger customers choosing Direct Access must have a meter that, at a
minimum, measures time of day usage in hourly increments; (iv) smaller customers
who elect Direct Access will continue to be metered on a monthly basis without
any equipment upgrade required or may elect to install, at their own expense,
meters capable of measuring time of day usage in hourly increments; and (v) for
smaller customers who choose Direct Access and who continue to rely upon monthly
consumption metering, the May 6, 1997 CPUC decisions contemplate that load
profiling (statistical information concerning time of day usage patterns) will
be used in lieu of actual hourly consumption information and that the
appropriateness of the use of load profiles will be re-evaluated at a later
date. The CPUC has requested industry groups to propose by July 25, 1997 open
architecture standards for metering and meter data communication. No customer
will be required to elect Direct Access. While the decisions hold that a
distribution company will not be entitled to any ratemaking relief associated
with the adoption of AMR (i.e., utility shareholders will be at risk for the
full recovery of the technology's costs), they provide that a utility's revenue
requirement associated with metering will not be lowered for any cost savings
achieved through adoption of AMR, and thus any cost savings resulting from AMR
will accrue to the utility's shareholders. The decisions further provide a
regulatory framework for AMR adoption in California. Although there can be no
assurance as to the effect these decisions will have on Itron's business, Itron
believes that the decisions will have a generally favorable effect on sales of
the Company's products in California. Itron believes it is well-positioned to
serve its core customers (the regulated utility distribution companies) as well
as its emerging potential customers (non-regulated affiliates of regulated
utilities and, as appropriate, energy service providers unaffiliated with
incumbent utilities) in the new California utility industry structure.
Itron's subsidiary Utility Translation Systems, Inc. ("UTS") was
recently awarded a contract by the Independent System Operator in California
(i.e., the new institution that will operate the electric transmission system
in that state) to provide a system to meter the injection of power into and the
withdrawal of power from the transmission grid.
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RISK FACTORS
The securities offered hereby involve a high degree of risk.
Prospective purchasers should consider carefully the following factors, in
addition to the other information contained or incorporated by reference in
this Prospectus.
Dependence on Utility Industry; Uncertainty Resulting From Mergers and
Acquisitions and Regulatory Reform. The Company derives substantially all of
its revenues from sales of its products and services to the utility industry.
The Company has experienced variability of operating results on both an annual
and a quarterly basis due primarily to utility purchasing patterns and delays
of purchasing decisions as a result of mergers and acquisitions in the utility
industry and changes or potential changes to the federal and state regulatory
frameworks within which the electric utility industry operates.
The utility industry, both domestic and foreign, is generally
characterized by long budgeting, purchasing and regulatory process cycles that
can take up to several years to complete. The Company's utility customers
typically issue requests for quotes and proposals, establish committees to
evaluate the purchase, review different technical options with vendors, analyze
performance and cost/benefit justifications and perform a regulatory review, in
addition to applying the normal budget approval process within a utility.
Purchases of the Company's products are, to a substantial extent, deferrable in
the event that utilities reduce capital expenditures as a result of mergers and
acquisitions, pending or unfavorable regulatory decisions, poor revenues due to
weather conditions, rising interest rates or general economic downturns, among
other factors.
The domestic electric utility industry is currently the focus of
regulatory reform initiatives in virtually every state, which initiatives have
resulted in significant uncertainty for industry participants and raised
concerns regarding assets that would not be considered for recovery through
ratepayer charges. Consequently, many utilities are delaying purchasing
decisions that involve significant capital commitments. While the Company
expects some states will act on these regulatory reform initiatives in the near
term, there can be no assurance that the current regulatory uncertainty will be
resolved in the near future or that the advent of new regulatory frameworks
will not have a material adverse effect on the Company's business, financial
condition and results of operations. Moreover, in part as a result of the
competitive pressures in the utility industry arising from the regulatory
reform process, many utility companies are pursuing merger and acquisition
strategies. The Company has experienced considerable delays in purchase
decisions by utilities that have become parties to merger or acquisition
transactions. Typically, such purchase decisions are put on hold indefinitely
when merger negotiations begin. The pattern of merger and acquisition activity
among utilities may continue for the foreseeable future. If such merger and
acquisition activity continues at its current rate or intensifies, the
Company's revenues may continue to be materially adversely affected.
Certain state regulatory agencies are considering the "unbundling" of
metering and certain other services from the basic transport aspects of
electricity distribution. Unbundling includes the identification of the
separate costs of metering and other services and may extend to allowing
competition for metering and other services. For example, in California, for
Direct Access customers the decision has been made to open up metering, billing
and other "revenue cycle" services to competition. See "The Company--Recent
Events Update--Environment in the Utility Industry." The CPUC will issue
standards for metering and meter data communications prior to January 1, 1998.
The customer for the Company's products and services could change from
utilities alone, to utilities and their competitive suppliers of metering
services, which change could have a significant impact on the manner in which
the Company markets and sells its products and services. The Company might
also have to modify its products and services (or develop new products and
services) to meet the new standards established for metering or meter data
communications.
Recent Operating Losses. The Company experienced operating losses in
each of the past three quarters and may experience losses in the second quarter
of 1997. There can be no assurance that the Company will thereafter achieve or
maintain consistent profitability on a quarterly or annual basis. The Company
has experienced variability of quarterly results and believes its quarterly
results will continue to fluctuate as a result of factors such as size and
timing of significant customer orders, delays in customer purchasing decisions,
timing and levels of operating expenses, shifts in product or sales channel
mix, and increased competition. Beginning in 1996, the Company increased its
rate of spending on its Fixed Network AMR operations, which has left the
Company subject to net operating losses caused by fluctuations in revenues.
Recently, the Company's operating margins have been adversely affected by
excess manufacturing capacity. The Company
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<PAGE> 9
expects competition in the AMR market to increase as current competitors and
new market entrants introduce competitive products. Operating margins also may
be affected by other factors.
Customer Concentration. The Company's revenues in any particular year
tend to be concentrated with a limited number of customers, the identity of
which changes from year to year. In 1996, the Company had ten multi-year AMR
contracts (excluding outsourcing contracts), which accounted for 44% of AMR
revenues, or 33% of total Company revenues. One of these contracts was with
Public Service Company of Colorado, and accounted for 22% of the Company's
revenues in 1996. These contracts are subject to cancellation or rescheduling
by customers. Cancellation or postponement of one or more of these contracts
would have a material adverse effect on the Company. For example, beginning in
the third quarter of 1996, the Company's revenues were adversely affected by an
indefinite delay by a large customer in taking delivery of the Company's
products pursuant to a multi-year contract.
Volatility of Share Price. The price of the Common Stock has traded
in the range of $14.50 to $60.00 per share since January 1, 1996. The price of
the Common Stock could continue to fluctuate significantly as a result of
factors such as the Company's quarterly operating results, announcements by the
Company or its competitors, changes in general conditions in the economy, the
introduction of new products or technology, changes in earnings estimates by
analysts or changes in the financial markets or the utility industry. In
addition, in future quarters the Company's results of operations may be below
the expectations of equity research analysts and investors, in which event the
price of the Common Stock would likely be materially adversely affected.
Further, in recent years the stock market has experienced significant price and
volume fluctuations. These broad market fluctuations may materially adversely
affect the market price of the Common Stock.
Dependence on New Product Development. The Company has made and
expects to continue to make a substantial investment in technology development.
The Company's future success will depend in part on its ability to continue to
design and manufacture new competitive products and to enhance its existing
products and achieve large-scale implementation for its Fixed Network AMR
products. This product development will require continued substantial
investment in order to maintain the Company's market position. There can be no
assurance that unforeseen problems will not occur with respect to the
development, performance or market acceptance of the Company's technologies or
products. Development schedules for high-technology products are subject to
uncertainty, and there can be no assurance that the Company will meet its
product development schedules. During 1996, and in previous years, the Company
has experienced significant delays and cost overruns in the development of new
products, and there can be no assurance that delays or cost overruns will not
be experienced in the future. Delays in new product development, including
software, can result from a number of causes, including changes in product
definition during the development stage, changes in customer requirements,
initial failures of products or unexpected behavior of products under certain
conditions, failure of third-party supplied components to meet specifications
or lack of availability of such components, unplanned interruptions caused by
problems with existing products that can result in reassignment of product
development resources, and other factors. Delays in the availability of new
products or the inability to develop successfully products that meet customer
needs could result in the loss of revenue or increased service and warranty
costs, any of which would have a material adverse effect on the Company's
business, financial condition and results of operations.
Dependence on the Installation, Operations and Maintenance of AMR
Systems Pursuant to Outsourcing Contracts. A portion of the Company's business
consists of outsourcing, wherein the Company installs, operates and maintains
AMR systems that it continues to own in order to provide meter reading and
other related services to utilities and their customers. The Company's
long-term outsourcing contracts are subject to cancellation or termination in
certain circumstances in the event of a material and continuing failure on the
Company's part to meet contractual performance standards on a consistent basis
over agreed time periods. The Company currently has three outsourcing
contracts. The largest of the contracts (the "Duquesne Contract"), which is
with Duquesne Light Company ("Duquesne"), involves Fixed Network AMR; the other
two utilize a Mobile AMR solution.
The Duquesne Fixed Network AMR system is at this time only partially
installed. Of a total of approximately 615,000 meter modules to be installed,
approximately 400,000 will be installed as of May 31, 1997. With respect to the
Mobile AMR outsourcing contracts, installation of meter modules has been
completed under one contract and has just commenced under the other contract.
There can be no assurance that the Company will complete current installation
requirements under the Duquesne Contract, the uncompleted Mobile AMR contract
and any future outsourcing contracts.
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<PAGE> 10
The Company has experienced delays in performing its obligations under
the Duquesne Contract. These delays relate primarily to the development of
certain advanced meter reading functions and the software needed to complete
these functions. While the Company is currently providing daily consumption
meter data and tamper alarm capabilities for approximately 30,000 meters in
Duquesne's service territory using its Fixed Network products, and has
demonstrated additional advanced metering functions required under the Duquesne
Contract, these additional functions are in a late development stage. While
the Company believes that the next version of its Fixed Network AMR software
will provide remaining advanced functions on a basis acceptable to Duquesne,
and that it will complete the development of requisite capabilities to complete
the installation of the AMR system specified in the Duquesne Contract in all
material respects, there can be no assurance that it will be able to do so.
By the terms of the Duquesne Contract, the Company has not achieved a
defined Phase I milestone. The Company is currently negotiating various
amendments to the Duquesne Contract pertaining to Phase I and other matters.
Meter modules beyond the 5,000 modules originally specified in the Duquesne
Contract for Phase I have been and are being installed without the benefit of
Duquesne Contract amendments. Given the large investment already made by the
Company in meter modules and network equipment now installed at Duquesne, and
the amount of revenues expected under the contract over its 15-year term, which
is approximately $150 million, the Company's financial condition would be
materially adversely affected if Duquesne were to terminate the Duquesne
Contract.
Increasing Competition. The Company faces competitive pressures from
a variety of companies in each of the markets it serves. In the radio-based
fixed network AMR market, companies such as CellNet Data Systems, Inc.
("CellNet") currently offer alternative solutions to the utility industry and
compete aggressively with the Company. The emerging market for fixed network
AMR systems for the utility industry, together with the potential market for
other applications once such fixed network systems are in place, have led
communications, electronics and utility companies to begin developing various
systems, some of which currently compete, and others of which may in the future
compete, with the Company's Fixed Network AMR system. These competitors can be
expected to offer a variety of technologies and communications approaches, as
well as meter reading, installation and other services to utilities and other
industry participants.
The Company believes that several large suppliers of equipment,
services or technology to the utility industry have developed or are currently
developing competitive products for the AMR market. For example, Schlumberger
Ltd. ("Schlumberger") offers a competitive electric meter module for its newly
manufactured meters and has entered into a joint venture with Motorola, Inc.
for AMR product development. In addition, other large meter manufacturers could
expand their current product and services offerings so as to compete directly
with the Company. To stimulate demand, and due to increasing competition in
the AMR market, the Company has from time to time lowered prices on its AMR
products and may continue to do so in the future. The Company also anticipates
increasing competition with respect to the features and functions of such
products. In the handheld systems market, Itron has encountered competition
from a number of companies, resulting in margin pressures in the maturing
domestic handheld systems business.
Many of the Company's present and potential future competitors have
substantially greater financial, marketing, technical and manufacturing
resources, name recognition and experience than the Company. The Company's
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements or to devote greater resources to the
development, promotion and sale of their products and services than the
Company. In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
third parties that increase their ability to address the needs of the Company's
prospective customers. Accordingly, it is possible that new competitors or
alliances among current and new competitors may emerge and rapidly gain
significant market share. There can be no assurance that the Company will be
able to compete successfully against current and future competitors, and any
failure to do so would have a material adverse effect on the Company's
business, financial condition, results of operations and cash flow.
Uncertainty of Market Acceptance of New Technology. The AMR market is
evolving, and it is difficult to predict the future growth rate and size of
this market with any assurance. The AMR market did not grow as quickly in 1996
as the Company expected. Further market acceptance of the Company's new AMR
products and systems, such as its Fixed Network products, will depend in part
on the Company's ability to demonstrate cost effectiveness, and strategic and
other benefits, of the Company's products and systems, the utilities' ability
to justify such expenditures and the direction and pace
-9-
<PAGE> 11
of federal and state regulatory reform actions. In the event that the utility
industry does not adopt the Company's technology or does not adopt it as
quickly as the Company expects, the Company's future results will be materially
and adversely affected. International market demand for AMR systems varies by
country based on such factors as the regulatory and business environment, labor
costs and other economic conditions.
Rapid Technological Change. The telecommunications industry,
including the data transmission segment thereof, currently is experiencing
rapid and dramatic technology advances. The advent of computer-linked
electronic networks, fiber optic transmission, advanced data digitization
technology, cellular and satellite communications capabilities, and private
communications networks have greatly expanded communications capabilities and
market opportunities. Many companies from diverse industries are actively
seeking solutions for the transmission of data over traditional communications
media, including radio-based and cellular telephone networks. Competitors may
be capable of offering significant cost savings or other benefits to the
Company's customers. There can be no assurance that technological advances
will not cause the Company's technology to become obsolete or uneconomical.
Availability and Regulation of Radio Spectrum. A significant portion
of the Company's products use radio spectrum and in the United States are
subject to regulation by the U.S. Federal Communications Commission (the
"FCC"). In the past, the FCC has adopted changes to the requirements for
equipment using radio spectrum, and there can be no assurance that the FCC or
Congress will not adopt additional changes in the future. Licenses for radio
frequencies must be renewed, and there can be no assurance that any license
granted to the Company or its customers will be renewed on acceptable terms, if
at all. The Company has committed, and will continue to commit, significant
resources to the development of products that use particular radio frequencies.
Action by the FCC could require modifications to the Company's products, and
there can be no assurance that the Company would be able to modify its products
to meet such requirements, that it would not experience delays in completing
such modifications or that the cost of such modifications would not have a
material adverse effect on the Company's future financial condition and results
of operations.
The Company's radio-based products currently employ both licensed and
unlicensed radio frequencies. There must be sufficient radio spectrum
allocated by the FCC for the use the Company intends. As to the licensed
frequencies, there is some risk that there may be insufficient available
frequencies in some markets to sustain the Company's planned operations. The
unlicensed frequencies are available for a wide variety of uses and are not
entitled to protection from interference by other users. In the event that the
unlicensed frequencies become unacceptably crowded or restrictive, and no
additional frequencies are allocated, the Company's business will be materially
adversely affected.
The Company is also subject to regulatory requirements in
international markets that vary by country. To the extent the Company wishes
to introduce products designed for use in the United States or another country
into a new market, such products may require significant modification or
redesign in order to meet frequency requirements and power specifications.
Further, in some countries, limitations on frequency availability or the cost
of making necessary modifications may preclude the Company from selling its
products.
Dependence on Key Personnel. The Company's success depends in large
part upon its ability to retain highly qualified technical and management
personnel, the loss of one or more of whom could have a material adverse effect
on the Company's business. The Company's success also depends upon its ability
to continue to attract and retain highly qualified personnel in all
disciplines. There can be no assurance that the Company will be successful in
hiring or retaining the requisite personnel.
Intellectual Property. While the Company believes that its patents,
trademarks and other intellectual property have significant value, there can be
no assurance that these patents and trademarks, or any patents or trademarks
issued in the future, will provide meaningful competitive advantages. There
can be no assurance that the Company's patents or pending applications will not
be challenged, invalidated or circumvented by competitors or that rights
granted thereunder will provide meaningful proprietary protection. Despite the
Company's efforts to safeguard and maintain its proprietary rights, there can
also be no assurance that such rights will remain protected or that the
Company's competitors will not independently develop patentable technologies
that are substantially equivalent or superior to the Company's technologies.
On October 3, 1996, the Company brought an action in the United Stated District
Court for the District of Minnesota against CellNet claiming infringement of
one of Itron's patents. This action is pending, and the discovery phase thereof
has commenced. On April 29, 1997, CellNet brought an action against the
Company in the United States District Court for the
-10-
<PAGE> 12
District of Northern California claiming infringement of one of CellNet's
patents. Itron management has reviewed the complaint and believes it to be
without merit. There can be no assurance that the Company will prevail in
either action or, even if it prevails, that the legal costs incurred by the
Company in connection with these actions will not have a material adverse
effect on the Company's financial condition or results of operations. See
"Legal Proceedings."
Dependence on Key Vendors and Internal Manufacturing Capabilities.
Certain of the Company's products, subassemblies and components are procured
from a single source, and others are procured only from limited sources. In
particular, the Company currently obtains approximately 50% of its handheld
devices from one vendor located in the United Kingdom and obtains all the
microcontrollers for its AMR meter modules from a single source, National
Semiconductor. The Company's reliance on such components or on these sole- or
limited-source vendors or subcontractors involves certain risks, including the
possibility of shortages and reduced control over delivery schedules,
manufacturing capability, quality and costs. In addition, Itron may be
affected by worldwide shortages of certain components, such as memory chips. A
significant price increase in certain of such components or subassemblies could
have a material adverse effect on the Company's results of operations.
Although the Company believes alternative suppliers of these products,
subassemblies and components are available, in the event of supply problems
from the Company's sole- or limited-source vendors or subcontractors, the
Company's inability to develop alternative sources of supply quickly or
cost-effectively could materially impair the Company's ability to manufacture
its products and, therefore, could have a material adverse effect on the
Company's business, financial condition and results of operations. In the
event of a significant interruption in production at the Company's
manufacturing facilities, considerable time and effort could be required to
establish an alternative production line. Depending on which production line
were affected, such a break in production would have a material adverse effect
on the Company's business, financial condition and results of operations.
Dependence on Outsourcing Financing. The Company intends to utilize
limited recourse, long-term, fixed-rate project financing for its future
outsourcing contracts. It has established Itron Finance, Inc. as a wholly owned
Delaware subsidiary and plans to establish bankruptcy remote, single and
special purpose subsidiaries of Itron Finance, Inc. for this purpose. Although
on May 9, 1997, the Company completed the closing of an $8 million AMR project
financing, there can be no assurance that it will be able to effect other
project financings. If the Company is unable to utilize limited resource,
long-term, fixed-rate project financing for its outsourcing contracts, its
borrowing capacity will be reduced and it may be subject to the negative
effects of floating interest rates if it cannot hedge its exposure on such
contracts.
Ability to Service Debt; Financial Condition. The funds generated by
existing operations may not be at levels sufficient to enable the Company to
meet its debt service obligations on the Notes (which initially will be $4.3
million annually) and other fixed charges. If the Company fails to achieve and
maintain sufficient cash flows from operations, its ability to make payments
required with respect to the Notes, including interest and principal payments,
will depend on its ability to secure funds from other sources. There can be no
assurance that cash flows from future operations of the Company, together with
funds from such other sources, if any, will be sufficient to enable the Company
to meet its debt service obligations. In January 1997, the Company increased
its line of credit from $50 million to $75 million. The line of credit expires
on June 30, 1997. While the Company expects the credit facility to be renewed
in the ordinary course, there can be no assurance that it will be renewed or
will be renewed on terms acceptable to the Company or at sufficient levels.
International Operations. International sales and operations may be
subject to risks such as the imposition of government controls, political
instability, export license requirements, restrictions on the export of
critical technology, currency exchange rate fluctuations, generally longer
receivables collection periods, trade restrictions, changes in tariffs,
difficulties in staffing and managing international operations, potential
insolvency of international dealers and difficulty in collecting accounts
receivable. In addition, the laws of certain countries do not protect the
Company's products to the same extent as do the laws of the United States.
There can be no assurance that these factors will not have a material adverse
effect on the Company's future international sales and, consequently, on the
Company's business, financial condition and results of operations.
Absence of Market; Illiquidity of Securities. There is no established
trading market for the Notes other than the PORTAL Market,and Notes sold
pursuant to this Prospectus are not expected to remain eligible for trading on
the PORTAL Market. The Company does not intend to apply for listing of the
Notes on any national securities exchange or on The Nasdaq Stock Market. There
can be no assurance that an active trading market for the Notes will develop
or, if one does develop, that it will be maintained. If an active trading
market for the Notes fails to develop or be sustained, the trading
-11-
<PAGE> 13
price of such Notes could be materially adversely affected and Holders may
experience difficulty in reselling the Notes or may be unable to sell them. If
a public trading market develops for the Notes, future trading prices of the
Notes will depend upon many factors, including, among other things, prevailing
interest rates and the market price of the Common Stock.
Increased Leverage. Primarily as a result of the sale of the Notes,
the Company's ratio of total debt to total capitalization increased from
approximately 25.7% at December 31, 1996 to approximately 36.6% at March 31,
1997. As a result of this increased debt level, the Company's principal and
interest obligations increased substantially. The degree to which the Company
has borrowed funds pursuant to the Notes could limit the amount of additional
financing the Company may obtain, and/or may result in terms and conditions for
any additional financing less favorable than the Company's current borrowing
terms and conditions. Increased borrowings could make the Company more
vulnerable to economic downturns and competitive pressures. The Company's
increased leverage could also materially and adversely affect its liquidity, as
a substantial portion of available cash from operations may have to be applied
to meet debt service requirements, and, in the event of a cash shortfall, the
Company could be forced to reduce other expenditures to be able to meet such
requirements.
Subordination. The Notes are general unsecured obligations of the
Company, subordinated to all existing and future Senior Indebtedness and
effectively subordinated in right of payment to the prior payment in full of
all indebtedness of the Company's subsidiaries. As of March 31, 1997, the
principal amount of the Company's outstanding Senior Indebtedness was
approximately $6.4 million. The Indenture does not limit the amount of
indebtedness, including Senior Indebtedness and indebtedness of the Company's
subsidiaries, which the Company can incur or guarantee. Upon any distribution
of assets of the Company pursuant to any insolvency, bankruptcy, dissolution,
winding up, liquidation or reorganization, the payment of the principal of and
interest on the Notes will be subordinated to the extent provided in the
Indenture to the prior payment in full of all Senior Indebtedness. In
addition, the Company may not repurchase any Notes in certain circumstances
involving a Change of Control if at such time the subordination provisions of
the Indenture prohibit the Company from making payments of principal in respect
of the Notes. The failure to repurchase the Notes when required would result in
an Event of Default under the Indenture and might constitute a default under
the terms of other indebtedness of the Company. See "Description of Notes."
Limitation on Repurchase of Notes. In certain circumstances involving
a Change of Control, each Holder may require the Company to repurchase all or a
portion of such Holder's Notes. In such event, there can be no assurance that
the Company would have sufficient financial resources or would be able to
arrange financing to pay the repurchase price. The Company's ability to
repurchase the Notes in such event may be limited by law, the Indenture and the
terms of other agreements relating to borrowings that constitute Senior
Indebtedness, as such indebtedness or agreements may be entered into, replaced,
supplemented or amended at any time or from time to time. The Company may be
required to refinance Senior Indebtedness in order to make any such payment.
The Company may not have the financial ability to repurchase the Notes in the
event payment of Senior Indebtedness is accelerated. See "Description of Notes
- -- Certain Rights to Require Repurchase of Notes."
Control by Existing Shareholders and Antitakeover Considerations.
Current executive officers and directors and their affiliates own or control in
the aggregate approximately 27% of the outstanding Common Stock. As a result of
such ownership, such persons may have significant influence over all matters
requiring approval by the Company's shareholders, including the election of the
Company's Board of Directors. The Company has the authority to issue 10
million shares of preferred stock in one or more series and to fix the powers,
designations, preferences and relative, participating, optional or other rights
thereof without any further vote or action by the Company's shareholders. The
issuance of preferred stock could dilute the voting power of holders of Common
Stock and could have the effect of delaying or preventing a change in control
of the Company. Certain provisions of the Company's Restated Articles of
Incorporation, Restated Bylaws, shareholder rights plan and employee benefit
plans, as well as Washington law, may operate in a manner that could discourage
or render more difficult a takeover of the Company or the removal of management
or may limit the price certain investors may be willing to pay in the future
for shares of Common Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale by the Selling
Securityholders of the Notes, Conversion Shares or Shares.
-12-
<PAGE> 14
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratio of
earnings to fixed charges for the periods shown.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1996 1997
------------------------------------------------------------------------------------------------
Ratio of earnings to
fixed charges 2.5x 8.4x 18.2x 20x -- 17.3x --
</TABLE>
For purposes of this calculation, earnings consist of income (loss)
before income taxes plus fixed charges less capitalized interest. Fixed
charges consist of interest on indebtedness, whether expensed or capitalized.
The deficiency for purposes of calculating the ratio of earnings to fixed
charges was $267,000 for the year ended December 31, 1996 and $4.2 million
for the quarter ended March 31, 1997.
LEGAL PROCEEDINGS
On October 3, 1996, Itron filed a patent infringement suit against
CellNet in the United States District Court for the District of Minnesota,
claiming that CellNet is infringing on the Company's United States Patent No.
5,553,094, entitled "Radio Communication Network for Remote Data Generating
Stations," issued on September 3, 1996. The Company is seeking injunctive
relief as well as monetary damages, costs and attorneys' fees. CellNet filed a
motion for a change of venue of the suit to the Northern District of
California, which was denied in January 1997. The discovery phase of this
lawsuit has commenced.
On April 29, 1997, Itron was served with a complaint for patent
infringement by CellNet in the United States District Court for the Northern
District of California. Itron's management has reviewed the complaint and
believes it to be without merit. The patent in question was issued in 1988.
Itron's management is unaware of any previous assertion by CellNet of any claim
of patent infringement by Itron. Itron intends to vigorously defend this suit.
The complaint seeks injunctive relief as well as monetary damages, costs and
attorneys' fees.
On May 29, 1997, Itron and its Chief Executive Officer and President,
Johnny M. Humphreys, received a complaint alleging securities fraud filed by
Mark G. Epstein, on his own behalf and on behalf of all others similarly
situated, in the U.S. District Court for the Eastern District of Washington.
The complaint seeks class action status on behalf of all persons who purchased
the common stock of the Company during the period of September 11, 1995 through
October 22, 1996, and lost money. Itron's management is reviewing the
complaint and intends to vigorously defend this suit. The complaint seeks
injunctive relief as well as monetary damages, costs and attorneys' fees and
unspecified equitable or injunctive relief.
There can be no assurance that the Company will prevail in any of the
above actions or, even if it does prevail, that the legal costs incurred by the
Company in connection therewith will not have a material adverse effect on the
Company's financial condition.
-13-
<PAGE> 15
SELLING SECURITYHOLDERS
The Notes were originally issued by the Company in a private placement
and were resold by the initial purchasers thereof to qualified institutional
buyers (within the meaning of Rule 144A under the Securities Act) in
transactions exempt from registration under the Securities Act, and in sales
outside the United States to persons other than U.S. persons in reliance upon
Regulation S under the Securities Act. The Shares were originally issued in
transactions between the Company and Arkla, Inc., Centra Gas, Inc., UTS and
Design Concepts, Inc. ("DCI"), or were or will be issued upon exercise of
warrants that were issued in connection with a research and development
partnership. The Notes, the Conversion Shares and the Shares offered pursuant
to this Prospectus will be offered by the Selling Securityholders. The
following table sets forth certain information as of May 23, 1997 concerning
the principal amount of Notes beneficially owned by each Selling Securityholder
and the number of Conversion Shares, or, in the case of Selling Securityholders
selling only Shares, the number of Shares beneficially owned by each Selling
Securityholder that may be offered from time to time pursuant to this
Prospectus.
<TABLE>
<CAPTION>
NOTES AND CONVERSION SHARES SHARES
--------------------------- ----------
PRINCIPAL
AMOUNT OF
NOTES NUMBER OF SHARES NUMBER OF
BENEFICIALLY PERCENTAGE CONVERSION BENEFICIALLY SHARES TO
OWNED THAT OF NOTES SHARES THAT MAY OWNED PRIOR THAT MAY
NAME MAY BE SOLD OUTSTANDING BE SOLD (1) TO OFFERING BE SOLD
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Arkansas PERS $830,000 1.3 35,021
Arkla Finance 1,502,547 1,502,547
Corporation(3)
Bank of America 225,000 .4 9,493
Convertible Securities
Fund
BG Holdings, Inc.(4) 125,000 125,000
Val Burton 3,752 375
Centra Gas, Inc.(5) 608,340 608,340
Champion International 600,000 1.0 25,316
Corporation Master
Retirement Trust
Credit Suisse First 4,000,000 6.3 168,776
Boston Corp.
Christian Science 200,000 .3 8,438
Trustees for Gifts and
Endowments
Declaration of Trust for 695,000 1.1 29,324
the Defined Benefit Plan
of ICI American
Holdings, Inc.
Declaration of Trust for 475,000 .8 20,042
the Defined Benefit Plan
of ZENECA Holdings, Inc,
Delaware State Employees 2,265,000 3.6 95,569
Retirement Fund
Delaware State 725,000 1.1 30,590
Retirement Fund -
Froley, Revy
Delta Airlines 1,300,000 2.1 54,852
Master Trust
The Dow Chemical 830,000 1.3 35,021
Company Employees'
Retirement Plan
Employee Benefit 120,000 .2 5,063
Convertible Fund
First Church of Christ, 225,000 .4 9,493
Scientist - Endowment
Franklin Investors 750,000 1.2 31,645
Securities Trust -
Convertible Securities
Fund
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
SECURITIES BENEFICIALLY
OWNED AFTER OFFERING
-----------------------
SECURITIES TO
BE SOLD--
PERCENTAGE OF PERCENTAGE OF
COMMON STOCK COMMON STOCK
NAME OUTSTANDING (2) AMOUNT OUTSTANDING
---- --------------- ------ -------------
<S> <C> <C> <C>
Arkansas PERS * 0 --
Arkla Finance 10.6 0 --
Corporation(3)
Bank of America * 0 --
Convertible Securities
Fund
BG Holdings, Inc.(4) * 0 --
Val Burton * 3,377 *
Centra Gas, Inc.(5) 4.3 0 --
Champion International * 0 --
Corporation Master
Retirement Trust
Credit Suisse First 1.2 0 --
Boston Corp.
Christian Science * 0 --
Trustees for Gifts and
Endowments
Declaration of Trust for * 0 --
the Defined Benefit Plan
of ICI American
Holdings, Inc.
Declaration of Trust for * 0 --
the Defined Benefit Plan
of ZENECA Holdings, Inc,
Delaware State Employees * 0 --
Retirement Fund
Delaware State * 0 --
Retirement Fund -
Froley, Revy
Delta Airlines * 0 --
Master Trust
The Dow Chemical Company * 0 --
Employees' Retirement Plan
Employee Benefit * 0 --
Convertible Fund
First Church of Christ, * 0 --
Scientist - Endowment
Franklin Investors * 0 --
Securities Trust -
Convertible Securities
Fund
</TABLE>
-14-
<PAGE> 17
<TABLE>
<CAPTION>
NOTES AND CONVERSION SHARES SHARES
--------------------------- ----------
PRINCIPAL
AMOUNT OF
NOTES NUMBER OF SHARES NUMBER OF
BENEFICIALLY PERCENTAGE CONVERSION BENEFICIALLY SHARES TO
OWNED THAT OF NOTES SHARES THAT MAY OWNED PRIOR THAT MAY
NAME MAY BE SOLD OUTSTANDING BE SOLD (1) TO OFFERING BE SOLD
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
General Motors Employees 8,230,000 13.0 347,257
Domestic Group Trust
Eldon Hattervig 59,352 5,935
Steven Hodges 183,601 18,360
Donald Grundhauser 202,077 20,208
Hillside Capital 235,000 .4 9,915
Incorporated Corporate
Account
ICI American Holdings 285,000 .5 12,025
Pension Trust
Ralph Langer 27,251 2,725
NALCO Chemical 100,000 .2 4,219
Retirement Trust
Oregon Equity Fund 2,500,000 3.9 105,485
Pacific Horizon Capital 3,000,000 4.7 126,582
Income Fund
Pacific Innovation Trust 55,000 .1 2,320
Capital Income Fund
Alan Poole 202,077 20,208
Port Authority of 700,000 1.1 29,535
Allegheny County
Retirement And Disability
Allowance Plan For
Employees Represented By
Local 85 of The Amalgamated
Transit Union
PRIM Board 1,100,000 1.7 46,413
RJR Nabisco, Inc. 570,000 .9 24,050
Defined Benefit
Master Trust
Brian J. Schumaker 11,800 1,180
Shepherd Investment 1,525,000 2.4 64,345
International Ltd.
Victoria Stagi 300 30
Stark International 1,525,000 2.4 64,345
Starvest Discretionary 175,000 2.8 7,383
The J.W. McConnell 525,000 .8 22,151
Family Foundation
Thermo Electron Balanced 650,000 1.0 27,426
Investment Fund
Ronald Van Auker 74,075 7,407
Westar Limited Partners
(FKA KPL Limited
Partners)(4) 200,000
Stuart Edward White(6) 631,428 200,000
ZENECA Holdings Pension 285,000 .5 12,025 126,285
Trust
Any other holder of
Notes or future
transferee, pledgee,
donee or successor of
or from any such other
holder.(7)(8) 28,700,000 45.3 1,210,970
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SECURITIES BENEFICIALLY
OWNED AFTER OFFERING
-----------------------
SECURITIES TO
BE SOLD--
PERCENTAGE OF PERCENTAGE OF
COMMON STOCK COMMON STOCK
NAME OUTSTANDING (2) AMOUNT OUTSTANDING
---- --------------- ------ -------------
<S> <C> <C> <C>
General Motors Employees 2.4 0 --
Domestic Group Trust
Eldon Hattervig * 53,417 *
Steven Hodges * 165,241 1.2
Donald Grundhauser * 181,869 1.3
Hillside Capital * 0 --
Incorporated Corporate
Account
ICI American Holdings * 0 --
Pension Trust
Ralph Langer * 24,526 *
NALCO Chemical * 0 --
Retirement Trust
Oregon Equity Fund * 0 --
Pacific Horizon Capital * 0 --
Income Fund
Pacific Innovation Trust * 0 --
Capital Income Fund
Alan Poole * 181,869 1.3
Port Authority of * 0 --
Allegheny County Retirement
And Disability Allowance
Plan For Employees
Represented By Local 85
Of The Amalgamated
Transit Union
PRIM Board * --
RJR Nabisco, Inc. * 0 --
Defined Benefit
Master Trust
Brian J. Schumaker * 10,620 *
Shepherd Investment * 0 --
International Ltd.
Victoria Stagi * 270 *
Stark International * 0 --
Starvest Discretionary * 0 --
The J.W. McConnell * 0 --
Family Foundation
Thermo Electron Balanced * 0 --
Investment Fund
Ronald Van Auker * 66,668 *
Westar Limited Partners 1.4 0 --
(FKA KPL Limited
Partners)(4)
Stuart Edward White(6) * 505,143 3.6
ZENECA Holdings Pension * 0 --
Trust
Any other holder of 7.9 0 --
Notes or future
transferee, pledgee,
donee or successor of or
from any such other
holder.(7)(8)
- -----------------------------------------------------------------------
</TABLE>
* Less than 1%.
(1) Assumes conversion of the full amount of Notes held by such Selling
Securityholder at the initial conversion price of $23.70 per share; such
conversion price is subject to adjustment as described under "Description of
Notes--Conversion." Accordingly, the number of shares of Common Stock issuable
upon conversion of the Notes may increase or decrease from time to time. Under
the terms of the Indenture, fractional shares will not be issued upon
conversion of the Notes; cash will be paid in lieu of fractional shares, if
any.
-15-
<PAGE> 18
(2) Computed in accordance with Rule 13d-3(d)(i) promulgated under the Exchange
Act, and based upon 14,205,065 shares of Common Stock outstanding as of May 23,
1997, treating as outstanding the number of Conversion Shares issuable upon the
assumed conversion by the named Selling Securityholder of the full amount of
such Selling Securityholder's Notes, but not assuming the conversion of the
Notes or the exercise of warrants of any other Selling Securityholder. For
warrants, the percentage is calculated by treating as outstanding the number of
Shares issuable upon the assumed exercise of the full amount of the warrants by
the Selling Securityholder, but not assuming the exercise of the warrants or the
conversion of the Notes of any other Selling Securityholder.
(3) Arkla Finance Corporation ("Arkla Finance") held 1,502,547 (10.6%) of the
Shares as of May 23, 1997. Michael B. Bracy, a director of the Company, is also
a director of Arkla Finance. Mr. Bracy disclaims beneficial ownership of Shares
held by Arkla Finance.
(4) Issuable upon exercise of outstanding warrants.
(5) Graham M. Wilson, a director of the Company, is a director of Centra Gas,
Inc. Mr. Wilson disclaims beneficial ownership of the Shares held by Centra Gas,
Inc.
(6) Mr. White, President of UTS, has been a director of the Company since 1996.
(7) Information concerning other Selling Securityholders will be set forth in
supplements to this Prospectus from time to time, if required.
(8) Assumes that any other holders of Notes, or any further transferees,
plegees, donees or successors of or from any such other holders of Notes, do not
beneficially own any Common Stock other than the Common Stock issuable upon
conversion of the Notes at the initial conversion rate.
The preceding table has been prepared based, in part, upon the
information furnished to the Company by The Depository Trust Company ("DTC")
and upon information furnished by the Selling Securityholders.
The Selling Securityholders identified above may have sold,
transferred or otherwise disposed of, in transactions exempt from the
requirements of the Securities Act, all or a portion of their Notes or Shares
since the date as of which the information in the preceding table is presented.
Information concerning the Selling Securityholders may change from time to
time, which changed information will be set forth in supplements to this
Prospectus if and when necessary. Because the Selling Securityholders may
offer all or some of the Notes or Shares that they hold and/or Conversion
Shares pursuant to the offering contemplated by this Prospectus, no estimate
can be given as to the amount of Shares, Notes or Conversion Shares that will
be held by the Selling Securityholders upon the termination of this offering.
See "Plan of Distribution."
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<PAGE> 19
DESCRIPTION OF NOTES
The Notes have been issued under an indenture, dated as of March 12,
1997 (the "Indenture"), between the Company and Chase Trust Company of
California (formerly Chemical Trust Company of California) (the"Trustee"). The
following summary of certain provisions of the Indenture and description of the
Notes does not purport to be complete and is subject to, and qualified in its
entirety by reference to, all the provisions of the Indenture, including the
definitions therein of certain terms that are not otherwise defined in this
Prospectus. Whenever particular Sections or defined terms of the Indenture (or
of the form of the Note that is a part thereof) are referred to, such Sections
or defined terms are incorporated in their entirety herein by reference.
GENERAL
The Notes in an aggregate principal amount of $63,400,000 are
unsecured, subordinated general obligations of the Company, and will mature on
March 31, 2004. The Notes bear interest at a rate of 6-3/4% per annum from
March 18, 1997, or from the most recent Interest Payment Date on which interest
has been paid or provided for. Interest is payable semiannually on March 31
and September 30 of each year, commencing September 30, 1997, to the Person in
whose name the Note (or any predecessor Note) is registered at the close of
business on the preceding March 15 or September 15 (whether or not a Business
Day (as defined below)), as the case may be. Interest on the Notes will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
The Company has appointed the Trustee as registrar, Paying Agent and
transfer agent of the Notes. In such capacities, the Trustee will be
responsible for, among other things, (i) maintaining a record of the aggregate
holdings of Notes represented by one or more global Notes (the "Global Notes")
and accepting Notes for exchange and registration of transfer, (ii) ensuring
that payments of principal and interest with respect to the Notes received by
the Trustee from the Company are duly paid to the depositories or their
respective nominees, and (iii) transmitting to the Company any notices from
Holders.
Payments of principal of and interest on the Notes will be made at the
office of the Trustee or its agent in New York, New York or, at the option of
the Holder and subject to any fiscal or other laws and regulations applicable
thereto, at the corporate trust office of the Trustee or any Paying Agent
outside New York, New York. Payment in respect of principal on Notes will be
made only against surrender of such Notes and will be made by U.S. dollar check
drawn on a bank in New York City or, for Holders of at least $2,000,000 of
Notes, by wire transfer to an account maintained by the payee with a bank in
the United States or Europe, provided that a written request from such Holder
to such effect is received by the Trustee or any Paying Agent no later than 15
days prior to the relevant payment date. Payment in respect of interest on
each Interest Payment Date with respect to any such Note will be made to the
Person in whose name such Note is registered on the relevant Record Date by
U.S. dollar check drawn on a bank in New York, New York or, for Holders of at
least $2,000,000 of Notes, by wire transfer to an account maintained by the
payee with a bank in the United States, provided that a written request from
such Holder to such effect is received by the Trustee or any Paying Agent no
later than the relevant Record Date. Unless such designation is revoked, any
such designation made by such Person with respect to such Note will remain in
effect with respect to any future payments with respect to such Note payable to
such Person. The Company will pay any administrative costs imposed by banks in
connection with remitting payments by wire transfer.
If the due date for payment of any amount in respect of principal or
interest on any Note is not a Business Day at the place in which it is
presented for payment, the Holder thereof shall not be entitled to payment of
the amount due until the next succeeding Business Day at such place and shall
not be entitled to any further interest or other payment in respect of any such
delay. As used in the Indenture regarding payment, "Business Day" means a day
on which banks are open for business and carrying out transactions in U.S.
dollars in the relevant place of payment.
Subject to certain limitations set forth in the Indenture, the Company
reserves the right at any time to vary or terminate the appointment of the
Trustee or any Paying Agent with or without cause and to appoint another
Trustee or additional or other Paying Agents and to approve any change in the
specified offices through which any Paying Agent acts.
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<PAGE> 20
CONVERSION RIGHTS
The Notes are convertible, in whole or in part, into Common Stock at
the option of the Holder at any time prior to the close of business on the
Business Day immediately preceding the maturity date, unless previously
redeemed, initially at the conversion price stated on the cover page of this
Prospectus. The right to convert the Notes called for redemption will terminate
at the close of business on the Business Day immediately preceding the
Redemption Date unless the Company defaults in making the payment due on the
Redemption Date. For information as to notices of redemption, see " --
Optional Redemption."
If the Company, by means of dividend or otherwise, declares or makes a
distribution in respect of the Common Stock referred to in clause (iv) or (v)
below, the Holder of each Note, upon the conversion thereof subsequent to the
close of business on the date fixed for the determination of shareholders
entitled to receive such distribution and prior to the effectiveness of the
conversion price adjustment in respect of such distribution pursuant to clause
(iv) or (v) below, will be entitled to receive for each share of Common Stock
into which such Note is converted that portion of the evidences of
indebtedness, shares of capital stock, cash and other property so distributed
applicable to one share of Common Stock; provided, however, that the Company
may, with respect to all Holders so converting, in lieu of distributing any
portion of such distribution not consisting of cash or securities of the
Company, pay such Holder cash equal to the fair market value thereof.
The conversion price is subject to adjustment upon the occurrence of
certain events, including (i) the payment of dividends (and other
distributions) of Common Stock on any class of capital stock of the Company;
(ii) the issuance to all holders of Common Stock of rights, warrants or options
entitling them to subscribe for or purchase Common Stock at less than the
current market price (as defined) thereof; (iii) subdivisions and combinations
of Common Stock; (iv) distributions to all holders of Common Stock of evidences
of indebtedness of the Company, shares of capital stock, securities, cash or
property (excluding any rights, warrants or options referred to in clause (ii)
above and any dividend or distribution paid exclusively in cash and any
dividend or distribution referred to in clause (i) above); (v) distributions
consisting exclusively of cash to all holders of Common Stock in an aggregate
amount that, together with (a) other all-cash distributions made within the
preceding 12 months and (b) any cash and the fair market value, as of the
expiration of the tender or exchange offer referred to below, of consideration
payable in respect of any tender or exchange offer by the Company or a
Subsidiary for the Common Stock concluded within the preceding 12 months,
exceeds 10% of the Company's aggregate market capitalization (such aggregate
market capitalization being the product of the current market price of the
Common Stock multiplied by the number of shares of Common Stock then
outstanding) on the date of such distribution; and (vi) the successful
completion of a tender or exchange offer made by the Company or any Subsidiary
for the Common Stock which involves an aggregate consideration that, together
with (a) any cash and the fair market value of other consideration payable in
respect of any tender or exchange offer by the Company or a Subsidiary for
Common Stock concluded within the preceding 12 months and (b) the aggregate
amount of any all-cash distributions to all holders of Common Stock made within
the preceding 12 months, exceeds 10% of the Company's aggregate market
capitalization on the expiration of such tender or exchange offer. No
adjustment of the conversion price will be required to be made until cumulative
adjustments amount to 1% or more of the conversion price as last adjusted.
In the event that the Company distributes rights or warrants (other
than those referred to in clause (ii) of the preceding paragraph) pro rata to
holders of Common Stock, so long as any such rights or warrants have not
expired or been redeemed by the Company, the Holder of any Note surrendered for
conversion will be entitled to receive upon such conversion, in addition to the
Conversion Shares, a number of rights or warrants to be determined as follows:
(i) if such conversion occurs on or prior to the date for the distribution to
the holders of rights or warrants of separate certificates evidencing such
rights or warrants (the "Distribution Date"), the same number of rights or
warrants to which a holder of a number of shares of Common Stock equal to the
number of Conversion Shares is entitled to at the time of such conversion in
accordance with the terms and provisions of and applicable to the rights or
warrants, and (ii) if such conversion occurs after such Distribution Date, the
same number of rights or warrants to which a holder of the number of shares of
Common Stock into which such Note was convertible immediately prior to such
Distribution Date would have been entitled on such Distribution Date in
accordance with the terms and provisions of and applicable to the rights or
warrants. The conversion price of the Notes will not be subject to adjustment
on account of any declaration, distribution or exercise of such rights or
warrants.
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<PAGE> 21
In the case of certain reclassifications, consolidations, mergers,
sales or transfers of assets or other transactions pursuant to which the Common
Stock is converted into the right to receive other securities, cash or other
property, each Note then outstanding would, without the consent of any Holders,
become convertible only into the kind and amount of securities, cash and other
property receivable upon the transaction by a Holder of the number of shares of
Common Stock which would have been received by such Holder immediately prior to
such transaction if such Holder had converted its Note.
Fractional shares of Common Stock will not be issued upon conversion,
but, in lieu thereof, the Company will pay a cash adjustment based upon market
price.
Except as described in this paragraph, no Holder will be entitled,
upon conversion thereof, to any actual payment or adjustment on account of
accrued and unpaid interest (although such accrued and unpaid interest will be
deemed paid by the appropriate portion of the Common Stock received by the
Holders upon such conversion) or on account of dividends on shares of Common
Stock issued in connection therewith. Notes surrendered for conversion during
the period from the close of business on any Regular Record Date to the opening
of business on the corresponding Interest Payment Date (except Notes called for
redemption on a Redemption Date within such period between and including such
Regular Record Date and such Interest Payment Date) must be accompanied by
payment to the Company of an amount equal to the interest payable on such
Interest Payment Date on the principal amount converted.
If at any time the Company makes a distribution of property to its
shareholders that would be taxable to such shareholders as a dividend for
federal income tax purposes (e.g., distributions of evidences of indebtedness
or assets of the Company, but generally not stock dividends or rights to
subscribe for capital stock) and, pursuant to the conversion price adjustment
provisions of the Indenture, the conversion price of the Notes is reduced, such
reduction may be deemed to be the receipt of taxable income to Holders of
Notes.
In addition, the Company may make such reductions in the conversion
price as the Company's Board of Directors deems advisable to avoid or diminish
any income tax to holders of shares 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 or for any other reasons.
OPTIONAL REDEMPTION
The Notes may be redeemed at the Company's option, in whole or in
part, on at least 20 but not more than 60 days' notice by mail to the
registered Holders thereof, at any time on or after April 4, 2000, at the
following Redemption Prices (expressed as percentages of principal amount), if
redeemed during the 12-month period beginning on April 4 of the years set forth
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2000 103.375
2001 102.250
2002 101.125
</TABLE>
and thereafter at 100% of the principal amount thereof, in each case together
with accrued and unpaid interest to (but not including) the Redemption Date
(subject to the rights of Holders of record on any Regular Record Date to
receive interest due on any Interest Payment Date that is on or prior to such
Redemption Date). If less than all the Notes are to be redeemed, the Trustee
will select or cause to be selected the Notes by such method as it deems fair
and appropriate and which may provide for selection for redemption of portions
of the principal amount of any Note of a denomination larger than $1,000.
No sinking fund is provided for the Notes.
CERTAIN RIGHTS TO REQUIRE REPURCHASE OF NOTES
In the event a Change in Control occurs, each Holder will have the
right, at its option, to require the Company to repurchase all or any part of
such Holder's Notes on the date (the "Repurchase Date") fixed by the Company
that is not less
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<PAGE> 22
than 30 days nor more than 45 days after the date the Company gives notice of
the Change in Control, at a price (the "Repurchase Price") equal to 100% of the
principal amount thereof, together with accrued and unpaid interest through the
Repurchase Date. On or prior to the Repurchase Date, the Company shall deposit
with a Paying Agent an amount of money sufficient to pay the aggregate
Repurchase Price of the Notes which is to be paid on the Repurchase Date.
The Company may not repurchase any Note pursuant to the preceding
paragraph at any time when the subordination provisions of the Indenture
otherwise would prohibit the Company from making payments of principal in
respect of the Notes. Failure by the Company to repurchase the Notes when
required under the preceding paragraph will constitute an Event of Default
under the Indenture whether or not such repurchase is permitted by the
subordination provisions of the Indenture.
On or before the 15th day after the Company knows or reasonably should
know a Change in Control has occurred, the Company will be required to mail to
all Holders a notice (the "Company Notice") of the occurrence of such Change in
Control, the date by which the repurchase right must be exercised, the
Repurchase Price for the Notes and the procedures which the Holder must follow
to exercise such right. To exercise the repurchase right, the Holder will be
required to deliver, on or before the 30th day after the date of the Company
Notice, written notice to the Company (or an agent designated by the Company
for such purpose) of the Holder's exercise of such right, together with the
certificates evidencing the Note or Notes with respect to which the right is
being exercised, duly endorsed for transfer.
The term "Beneficial Owner" shall be determined in accordance with
Rules 13d-3 and 13d-5 promulgated by the Commission under the Exchange Act or
any successor provision thereto, except that a Person shall be deemed to have
"beneficial ownership" of all shares that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time.
A "Change in Control" shall be deemed to have occurred at such time as
(i) any Person, or any Persons acting together in a manner which would
constitute a "group" (a "Group") for purposes of Section 13(d) of the Exchange
Act, or any successor provision thereto, together with any Affiliates thereof,
(a) become the Beneficial Owners, directly or indirectly, of capital stock of
the Company, entitling such Person or Persons and its or their Affiliates to
exercise more than 50% of the total voting power of all classes of the
Company's capital stock entitled to vote generally in the election of the
Company's directors or (b) shall succeed in having sufficient of its or their
nominees (who are not supported by a majority of the then current Board of
Directors of the Company) elected to the Board of Directors of the Company such
that such nominees, when added to any existing directors remaining on the Board
of Directors of the Company after such election who are Affiliates of or acting
in concert with such Persons, shall constitute a majority of the Board of
Directors of the Company, (ii) the Company shall be a party to any transaction
pursuant to which the Common Stock is converted into the right to receive other
securities (other than common stock), cash and/or property (or the Company, by
dividend, tender or exchange offer or otherwise, distributes other securities,
cash and/or property to holders of Common Stock) and the value of all such
securities, cash and/or property distributed in such transaction and any other
transaction effected within the 12 months preceding consummation of such
transaction (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) is more
than 50% of the average of the daily Closing Prices for the five consecutive
trading days ending on the Trading Day immediately preceding the date of such
transaction (or, if earlier, the trading day immediately preceding the "ex"
date for such transaction), or (iii) the Company shall consolidate with or
merge into any other Person or sell, convey, transfer or lease its properties
and assets substantially as an entirety to any Person other than a Subsidiary,
or any other Person shall consolidate with or merge into the Company (other
than, in the case of this clause (iii), pursuant to any consolidation or merger
where Persons who are shareholders of the Company immediately prior thereto
become the Beneficial Owners of shares of capital stock of the surviving
company entitling such Persons to exercise more than 50% of the total voting
power of all classes of such surviving company's capital stock entitled to vote
generally in the election of directors).
The effect of these provisions granting the Holders the right to
require the Company to repurchase the Notes upon the occurrence of a Change in
Control may make it more difficult for any Person or Group to acquire control
of the Company or to effect a business combination with the Company. Moreover,
under the Indenture, the Company will not be permitted to pay principal of or
interest on the Notes, or otherwise acquire the Notes (including any repurchase
at the election of the Holders upon the occurrence of a Change in Control) if a
payment default on Senior Indebtedness has occurred and is continuing, or in
the event of the insolvency, bankruptcy, reorganization, dissolution or other
winding up of
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<PAGE> 23
the Company where Senior Indebtedness is not paid in full. The Company's
ability to pay cash to Holders following the occurrence of a Change in Control
may be limited by the Company's then existing financial resources. There can be
no assurance that sufficient funds will be available when necessary to make any
required repurchases.
In the event a Change in Control occurs and the Holders exercise their
rights to require the Company to repurchase Notes, the Company intends to
comply with applicable tender offer rules under the Exchange Act, including
Rules 13e-4 (other than Commission filing requirements, if not then applicable)
and 14e-1, as then in effect, with respect to any such purchase.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Company, without the consent of the
Holders, may consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person or may permit any Person to consolidate with or merge into, or transfer
or lease its properties substantially as an entirety to, the Company, provided
that (i) the successor, transferee or lessee is organized under the laws of any
United States jurisdiction; (ii) the successor, transferee or lessee, if other
than the Company, expressly assumes the Company's obligations under the
Indenture and the Notes by means of a supplemental indenture entered into with
the Trustee; (iii) after giving effect to the transaction, no Event of Default
and no event which, with notice or lapse of time, or both, would constitute an
Event of Default shall have occurred and be continuing; and (iv) certain other
conditions are met.
Under any consolidation by the Company with, or merger by the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety as described in the
preceding paragraph, the successor resulting from such consolidation or into
which the Company is merged or the transferee or lessee to which such
conveyance, transfer or lease is made will succeed to, and be substituted for,
and may exercise every right and power of, the Company under the Indenture, and
thereafter, except in the case of a lease, the predecessor (if still in
existence) will be released from its obligations and covenants under the
Indenture and the Notes.
EVENTS OF DEFAULT
An Event of Default is defined in the Indenture to be a (i) default in
the payment of any interest upon any of the Notes for 30 days or more after
such payment is due, whether or not such payment is prohibited by the
subordination provisions of the Indenture; (ii) default in the payment of the
principal of and premium, if any, on any of the Notes when due, whether or not
such payment is prohibited by the subordination provisions of the Indenture;
(iii) default in the Company's obligation to provide notice of a Change of
Control or default in the payment of the repurchase price in respect of any
Note on the repurchase date therefor (whether or not such payment is prohibited
by the subordination provisions of the Indenture); (iv) default by the Company
in the performance or breach of any of its other covenants in the Indenture
which will not have been remedied by the end of a 60-day period after written
notice to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in principal amount of the Outstanding Notes; (v)
failure to pay when due upon final maturity or acceleration thereof any
indebtedness for money borrowed by the Company or a Subsidiary (other than
Non-Recourse Obligations) in an outstanding principal amount in excess of
$5,000,000, if such indebtedness is not discharged, or such acceleration is not
waived or annulled, within ten days after written notice as provided in the
Indenture; and (vi) certain events of bankruptcy, insolvency or reorganization
of the Company.
"Non-Recourse Obligation" is defined in the Indenture as indebtedness
or other obligations or that portion of indebtedness or other obligations
incurred by a Subsidiary (the "Non-Recourse Subsidiary") with respect to the
acquisition of assets not previously owned by the Company or any Subsidiary or
the financing of a project involving the development or expansion of properties
of the Company or any Subsidiary (i) as to which neither the Company nor any of
its Subsidiaries (other than the Non-Recourse Subsidiary) (a) provides credit
support (including any undertaking, agreement or instrument that would
constitute indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; (ii) no default with respect to
which would permit (upon notice, lapse of time, or both) any holder of any
other indebtedness of the Company or any of its Subsidiaries to declare a
default under such other indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any Subsidiary other than the assets
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<PAGE> 24
that were acquired with the proceeds of such transaction or the project
financed with the proceeds of such transaction (and the proceeds thereof).
The Indenture provides that if an Event of Default (other than of a
type referred to in clause (vi) of the preceding paragraph) shall have occurred
and is continuing, either the Trustee or the Holders of at least 25% in
principal amount of the Outstanding Notes may declare the principal amount of
all Notes to be immediately due and payable. Such declaration may be rescinded
if certain conditions are satisfied. If an Event of Default of the type
referred to in clause (vi) of the preceding paragraph shall have occurred, the
principal amount of the Outstanding Notes shall automatically become
immediately due and payable.
The Indenture also provides that the Holders of not less than a
majority in principal amount of the Outstanding Notes may direct the time,
method and place of conducting any proceedings for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, provided
that such direction is not in conflict with any rule of law or with the
Indenture. The Trustee may take any other action deemed proper by it that is
not inconsistent with such direction.
The Indenture contains provisions entitling the Trustee, subject to
its duty during the continuance of an Event of Default to act with the required
standard of care, to be indemnified by the Holders before proceeding to
exercise any right or power under the Indenture at the request of the Holders.
No Holder will have any right to institute any proceeding with respect
to the Indenture or for any remedy thereunder, unless such Holder shall have
previously given to the Trustee written notice of a continuing Event of Default
and unless the Holders of at least 25% in aggregate principal amount of the
Outstanding Notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee, and the
Trustee shall not have received from the Holders of a majority in aggregate
principal amount of the Outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a Holder of a
Note for enforcement of payment of the principal of and premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note or of the right to convert such Note in accordance with the Indenture.
The Indenture requires the Company to file annually with the Trustee a
certificate, executed by a designated officer of the Company, stating to the
best of his knowledge that the Company is not in default under certain
covenants under the Indenture or, if he has knowledge that the Company is in
such default, specifying such default.
MODIFICATION AND WAIVER
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
principal amount of the Outstanding Notes, to enter into one or more
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or modifying in any manner
the rights of the Holders of the Notes, except that no such modification or
amendment may, without the consent of the Holders of each of the Outstanding
Notes affected thereby, among other things, (i) change the Stated Maturity of
the principal of or any installment of interest on any Note; (ii) reduce the
principal amount thereof or any premium thereon or the rate of interest
thereon; (iii) adversely affect the right of any Holder to convert any Note as
provided in the Indenture; (iv) change the place of payment where, or the coin
or currency in which, the principal of any Note or any premium or interest
thereon is payable; (v) impair the right to institute suit for the enforcement
of any such payment on or with respect to any Note on or after the Stated
Maturity (or, in the case of redemption, on or after the Redemption Date); (vi)
modify the subordination provisions of the Indenture in a manner adverse to the
Holders; (vii) modify the redemption provisions of the Indenture in a manner
adverse to the Holders; (viii) modify the provisions of the Indenture relating
to the Company's requirement to offer to repurchase Notes upon a Change in
Control in a manner adverse to the Holders; (ix) reduce the percentage in
principal amount of the Outstanding Notes the consent of whose Holders is
required for any such modification or amendment of the Indenture or for any
waiver of compliance with certain provisions of, or of certain defaults under,
the Indenture; or (x) modify the foregoing requirements.
The Holders of a majority in principal amount of the Outstanding Notes
may, on behalf of the Holders of all Notes, waive compliance by the Company
with certain restrictive provisions of the Indenture. The Holders of a majority
in
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<PAGE> 25
principal amount of the Outstanding Notes may, on behalf of the Holders of all
Notes, waive any past default under the Indenture and its consequences, except
a default in the payment of the principal of or any premium or interest on any
Note or in respect of a provision which under the Indenture cannot be modified
or amended without the consent of the Holders of each Outstanding Note
affected.
SUBORDINATION
The payment of the principal of and premium, if any, and interest on
the Notes will, to the extent set forth in the Indenture, be subordinated in
right of payment to the prior payment in full of all Senior Indebtedness. When
there is a payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency or similar
proceedings of the Company, the holders of all Senior Indebtedness will first
be entitled to receive payment in full of all amounts due or to become due
thereon, or provision for such payment in money or money's worth, before the
Holders will be entitled to receive any payment in respect of the principal of
or premium, if any, or interest on the Notes. No payments on account of
principal of, premium, if any, or interest on the Notes or on account of the
purchase or acquisition of Notes may be made if there has occurred and is
continuing a default in any payment with respect to Senior Indebtedness or if
any judicial proceeding is pending with respect to any such default.
By reason of such subordination, in the event of insolvency, creditors
of the Company who are not holders of Senior Indebtedness or of the Notes may
recover less, ratably, than holders of Senior Indebtedness and may recover
more, ratably, than the Holders.
"Senior Indebtedness" is defined in the Indenture as the principal of
and premium, if any, and interest on all indebtedness for money borrowed by the
Company, other than the Notes, whether outstanding on the date of execution of
the Indenture or thereafter created, incurred, guaranteed or assumed, except
such indebtedness that by the terms of the instrument or instruments by which
such indebtedness was created or incurred expressly provides that it (i) is
junior in right of payment to the Notes or any other indebtedness of the
Company or (ii) ranks pari passu in right of payment to the Notes. The term
"indebtedness for money borrowed" when used with respect to the Company is
defined to mean (a) any obligation of, or any obligation guaranteed by, the
Company for the repayment of borrowed money, whether or not evidenced by bonds,
debentures, notes or other written instruments, (b) all obligations of the
Company with respect to interest rate hedging arrangements to hedge interest
rates relating to Senior Indebtedness of the Company, (c) any deferred payment
obligation of, or any such obligation guaranteed by, the Company for the
payment of the purchase price of property or assets evidenced by a note or
similar instrument, and (d) any obligation of, or any such obligation
guaranteed by, the Company for the payment of rent or other amounts under a
lease of property or assets, which obligation is required to be classified and
accounted for as a capitalized lease on the balance sheet of the Company under
generally accepted accounting principles.
At March 31, 1997, Senior Indebtedness and indebtedness of the
Company's Subsidiaries were approximately $6.4 million. The Company and its
Subsidiaries expect from time to time to incur additional indebtedness. The
Indenture does not limit or prohibit the incurrence of additional Senior
Indebtedness or additional indebtedness of the Company's Subsidiaries.
DEFEASANCE
The Indenture provides that (i) if applicable, the Company will be
discharged from any and all obligations in respect of the Outstanding Notes
(except for certain obligations to register the transfer or exchange of Notes,
to replace stolen, lost or mutilated Notes, to provide for conversion of the
Notes, to maintain Paying Agents and hold moneys for payment in trust and to
repurchase Notes in the event of a Change in Control) or (ii) if applicable,
the Company may decide not to comply with certain restrictive covenants, but
not including the obligation to provide for conversion of the Notes or
repurchase Notes in the event of a Change in Control, and that such decision
will not be deemed to be an Event of Default under the Indenture and the Notes,
in either of case (i) or (ii) upon irrevocable deposit with the Trustee, in
trust, of money and/or U.S. Government Obligations that will provide money in
an amount sufficient in the opinion of a nationally recognized firm of
independent public accountants expressed in written opinions thereof to pay the
principal of, premium, if any, and each installment of interest on the
Outstanding Notes. With respect to clause (ii), the obligations under the
Indenture other than with respect to such covenants and the Events of Default
other than the Event of Default relating to
-23-
<PAGE> 26
such covenants will remain in full force and effect. Such trust may only be
established if, among other things (a) with respect to clause (i), the Company
has delivered to the Trustee an Opinion of Counsel to the effect that the
Company has received from, or there has been published by, the U.S. Internal
Revenue Service (the "Service") a ruling or there has been a change in law
which, in the opinion of counsel to the Company, provides that Holders will not
recognize gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred; or, with
respect to clause (ii), the Company has delivered to the Trustee an Opinion of
Counsel to the effect that the Holders will not recognize gain or loss for
federal income tax purposes as a result of such deposit and defeasance and will
be subject to federal income tax on the same amount, in the same manner and at
the same times as would have been the case if such deposit and defeasance had
not occurred; (b) no Event of Default (or event that with notice or lapse of
time, or both, would constitute an Event of Default) shall have occurred or be
continuing; (c) the Company has delivered to the Trustee an Opinion of Counsel
to the effect that such deposit shall not cause the Trustee or the trust so
created to be subject to the Investment Company Act of 1940, as amended; and
(d) certain other customary conditions precedent are satisfied.
BOOK-ENTRY
The Notes have been issued in fully registered form, without coupons,
in denominations of $1,000 principal amount and multiples thereof. Except as
otherwise provided in the Indenture, the Notes are evidenced by the Global
Notes deposited with the Trustee as custodian for The Depository Trust Company
("DTC") and registered in the name of Cede & Co. as DTC's nominee. Record
ownership of the Global Notes may be transferred, in whole or in part, only to
another nominee of DTC or to a successor of DTC or its nominee.
DTC or its custodian will credit, on its internal system, the
respective principal amount of the individual beneficial interests represented
by such Global Notes to the accounts of Persons who have accounts with such
depository. Ownership of beneficial interests in the Global Notes will be
limited to Persons who maintain accounts with DTC ("participants") or Persons
who hold interests through participants, through the Euroclear System
("Euroclear") or Cedel Bank, societe anonyme ("Cedel"), if they are
participants in such systems, or through indirect participants (as defined
below). Ownership of beneficial interests in the Global Notes will be shown
on, and the transfer of that ownership will be effected only through, records
maintained by DTC or its nominee (with respect to interests of participants)
and the records of participants (with respect to interests of Persons other
than participants).
So long as DTC, or its nominee, is the registered holder of a Global
Note, DTC or such nominee, as the case may be, will be considered the sole
owner and holder of the Notes represented by such Global Note for all purposes
under the Indenture and the Notes. Unless DTC notifies the Company that it is
unwilling or unable to continue as depository for a Global Note, or ceases to
be a "Clearing Agency" registered under the Exchange Act, or an Event of
Default has occurred and is continuing with respect to such Note, or unless a
request for certificates is made upon 60 days' prior written notice as
described under " -- Certificated Notes," owners of beneficial interests in a
Global Note will not be entitled to have any portions of such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Notes in certificated form and will not be considered the owners or
holders of the Global Note (or any Notes represented thereby) under the
Indenture or the Notes. In addition, no beneficial owner of an interest in a
Global Note will be able to transfer that interest except in accordance with
DTC's applicable procedures (in addition to those under the Indenture referred
to herein and, if applicable, those of Euroclear and Cedel). In the event that
owners of beneficial interests in a Global Note become entitled to receive
Notes in definitive form, such Notes will be issued only in registered form in
denominations of $1,000 and integral multiples thereof.
Payments of principal of and interest on the Global Notes will be made
to DTC or its nominee as the registered owner thereof. None of the Company,
the Trustee nor any of their respective agents will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that DTC or its nominee, upon receipt of any
payment of principal or interest with respect to the Global Note representing
any Notes held by it or its nominee, will immediately credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note for
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<PAGE> 27
such Notes as shown on the records of DTC or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in such
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 registered in "street name." Such payments will
be the responsibility of such participants.
Transfers between participants in DTC will be effected in accordance
with DTC's procedures, and will be settled in same-day funds. The laws of some
U.S. states require that certain Persons take physical delivery of securities
in definitive form. Consequently, the ability to transfer beneficial interests
in the Global Notes to such Persons may be limited. Because DTC can only act
on behalf of participants who, in turn, act on behalf of indirect participants
and certain banks, the ability of a Person having a beneficial interest in a
Global Note to pledge such interest to Persons that do not participate in the
DTC system, or otherwise take actions in respect of such interest, may be
affected by the lack of a physical certificate evidencing such interest.
Transfers between participants in Euroclear and Cedel will be effected in the
ordinary course in accordance with their respective rules and operating
procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes described above, cross-market transfers between DTC, on the one hand, and
directly or indirectly through Euroclear and Cedel participants, on the other
hand, will be effected in DTC in accordance with its rules on behalf of
Euroclear or Cedel, as the case may be, by its respective depositary; however,
such cross-market transactions will require delivery of instructions to
Euroclear or Cedel, as the case may be, by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(Brussels time). Euroclear or Cedel, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf
by delivering or receiving interests in the relevant Global Note in DTC, and
making or receiving payments in accordance with normal procedures for same-day
funds settlement applicable to DTC. Cedel participants and Euroclear
participants may not deliver instructions directly to the depositaries for
Cedel or Euroclear, respectively.
Because of time zone differences, the securities account of a
Euroclear or Cedel participant purchasing an interest in a Global Note from a
DTC participant will be credited during the securities settlement processing
day (which must be a Business Day for Euroclear and Cedel) immediately
following the DTC settlement date, and such credit of any transactions in
interests in a Global Note settled during such processing day will be reported
to the relevant Euroclear or Cedel participant on such day. Cash received in
Euroclear or Cedel as a result of sales of interests in a Global Note by or
through a Euroclear or Cedel participant to a DTC participant will be received
with value on the DTC settlement date but will be available in the relevant
Euroclear or Cedel cash account only as of the Business Day for Euroclear or
Cedel following the DTC settlement date.
DTC has advised the Company that it will take any action permitted to
be taken by a Holder (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account with DTC interests in the Global Notes are credited and only in respect
of such portion of the aggregate principal amount of the Notes as to which such
participant or participants has or have given such direction. However, if
there is an Event of Default under the Notes, DTC reserves the right to
exchange the Global Notes for legended certificated Notes in definitive form,
and to distribute such Notes to its participants.
DTC has advised the Company that DTC is a limited purpose trust
company organized under the laws of the State of New York; a member of the
Federal Reserve System; a "clearing corporation" within the meaning of the
Uniform Commercial Code, as amended; and a "Clearing Agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participants and facilitate the clearance and
settlement of securities transactions between participants through electronic
book entry changes in accounts of its participants, thereby eliminating the
need for physical transfer and delivery of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to
the DTC system is available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a participant, either directly or indirectly ("indirect participants").
Although DTC, Cedel and Euroclear have agreed to the foregoing
procedures to facilitate transfers of interests in the Global Notes among their
respective participants, they are under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
Neither the Company nor the Trustee will have any
-25-
<PAGE> 28
responsibility for the performance by DTC, Cedel or Euroclear or their
respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED NOTES
If any depository is at any time unwilling or unable to continue as a
depository for the reasons set forth under "--Book-Entry," the Company will
issue certificates for the Notes in definitive, fully registered form, without
interest coupons, in exchange for the Global Notes. In addition, upon request,
the Company will issue certificates for Notes in definitive, fully registered
form, without interest coupons, in exchange for beneficial interests of like
principal amount in the Global Note, but only upon at least 60 days' prior
written notice given to the Trustee in accordance with DTC's customary
procedures. Upon receipt of such notice from the Trustee, the Company will
cause the requested certificates to be prepared for delivery. In all cases,
certificates for Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by DTC.
Notwithstanding any statement herein, the Company and the Trustee
reserve the right to impose such transfer, certification, exchange or other
requirements, and to require such restrictive legends on certificates
evidencing Notes, as they may determine are necessary to ensure compliance with
the securities laws of the United States and the states therein and any other
applicable laws, to ensure that the registration statement or any
post-effective amendment covering the Notes and the Conversion Shares is
declared effective by the Commission, or as DTC, Euroclear or Cedel may
require.
REGARDING THE TRUSTEE
Chase Trust Company of California (formerly Chemical Trust Company of
California) is the Trustee under the Indenture.
GOVERNING LAW
The Indenture and the Notes are governed by and are to be construed in
accordance with the laws of the State of New York.
-26-
<PAGE> 29
PLAN OF DISTRIBUTION
NOTES AND CONVERSION SHARES
Pursuant to a Registration Rights Agreement dated March 12, 1997 (the
"Notes Registration Rights Agreement") between the Company and the initial
purchasers named therein entered into in connection with the initial offering
of the Notes by the Company, the Registration Statement of which this
Prospectus forms a part was filed with the Commission covering the resale of
the Notes and the Common Stock issuable upon conversion of the Notes (the
"Securities"). The Company has agreed to use all reasonable efforts to keep
the Registration Statement effective until two years from the effective date of
the Registration Statement (or such earlier date when the holders of Securities
are able to sell all such Securities immediately without restriction pursuant
to Rule 144(k) under the Securities Act or any successor rule thereto or
otherwise). The Company will be permitted to suspend the use of this
Prospectus (which is a part of the Registration Statement) in connection with
sales of Securities by holders during certain periods of time under certain
circumstances relating to pending corporate developments and public filings
with the Commission and similar events. The specific provisions relating to
the registration rights described above are contained in the Notes Registration
Rights Agreement, and the foregoing summary is qualified in its entirety by the
provisions of such agreement.
Sales of the Notes and the Conversion Shares may be effected by or for
the account of the Selling Securityholders from time to time in transactions
(which may include block transactions in the case of the Conversion Shares) on
any exchange or market on which such securities are listed or quoted, as
applicable, in negotiated transactions, through a combination of such methods
of sale, or otherwise, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices,
or at negotiated prices. The Selling Securityholders may effect such
transactions by selling the Notes or Conversion Shares directly to purchasers,
through broker-dealers acting as agents for the Selling Securityholders, or to
broker-dealers who may purchase Notes or Conversion Shares as principals and
thereafter sell the Notes or Conversion Shares from time to time in
transactions (which may include block transactions in the case of the
Conversion Shares) on any exchange or market on which such securities are
listed or quoted, as applicable, in negotiated transactions, through a
combination of such methods of sale, or otherwise. In effecting sales,
broker-dealers engaged by Selling Securityholders may arrange for other
broker-dealers to participate. Such broker-dealers, if any, may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders and/or the purchasers of the Notes or Conversion Shares
for whom such broker-dealers may act as agents or to whom they may sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions).
The Selling Securityholders and any broker-dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Notes or Conversion Shares may be deemed to be
"underwriters" within the meaning of the Securities Act. Any commissions paid
or any discounts or concessions allowed to any such persons, and any profits
received on the resale of the Notes or Conversion Shares offered hereby may be
deemed to be underwriting commissions or discounts under the Securities Act.
At the time a particular offering of the Notes and/or the Conversion
Shares is made and to the extent required, the aggregate principal amount of
Notes and number of Conversion Shares being offered, the name or names of the
Selling Securityholders, and the terms of the offering, including the name or
names of any underwriters, broker-dealers or agents, any discounts, concessions
or commissions and other terms constituting compensation from the Selling
Securityholders, and any discounts, concessions or commissions allowed or
reallowed or paid to broker-dealers, will be set forth in an accompanying
Prospectus Supplement.
Pursuant to the Notes Registration Rights Agreement, the Company has
agreed to pay all expenses incident to the offer and sale of the Notes and
Conversion Shares offered by the Selling Securityholders hereby, except that
the Selling Securityholders will pay all underwriting discounts and selling
commissions, if any. The Company has agreed to indemnify the Selling
Securityholders against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Selling Securityholders may
be required to make in respect thereof.
To comply with the securities laws of certain jurisdictions, if
applicable, the Notes and Conversion Shares offered hereby will be offered or
sold in such jurisdictions only through registered or licensed brokers or
dealers.
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<PAGE> 30
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Notes or the Conversion Shares may be
limited in its ability to engage in market activities with respect to such
Notes or Conversion Shares. In addition and without limiting the foregoing,
each Selling Securityholder will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchase and sales of any of the Notes and Conversion
Shares by the Selling Securityholders. The foregoing may affect the
marketability of the Notes and Conversion Shares.
SHARES
The Shares offered hereby have been registered pursuant to (i) an
Amended and Restated Registration Rights Agreement dated as of March 25, 1996
(the "Shares Registration Rights Agreement") between the Company and certain
individuals and entities named therein and (ii) the Registration Rights
Agreement dated as of May 2, 1997 among the Company and certain individuals
named therein (the "DCI Registration Rights Agreement"). The Shares have been
registered to remove their restricted status under the Securities Act.
Pursuant to this registration Selling Securityholders may choose to sell all or
any of the Shares from time to time in transactions on the Nasdaq National
Market or otherwise at prices and on terms then prevailing at the time of sale,
at prices related to the then-current market price or in negotiated
transactions. In addition, the Selling Securityholders may effect
distributions of the Common Stock by means of short sales "against the box," in
which a Selling Securityholder's obligation to deliver shares of Common Stock
at a date subsequent to the short sale is fulfilled by delivery of Shares
referred to in this Prospectus. The Company may suspend the use of this
Prospectus for sales of Shares under certain circumstances.
The Shares may be sold in one or more of the following transactions:
(a) block trades in which the broker or dealer so engaged will attempt to sell
the Shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction, (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus, and (c) ordinary brokerage transactions and transactions in which
the broker solicits purchasers. In effecting sales, brokers and dealers
engaged by Selling Securityholders may arrange for other brokers or dealers to
participate. Brokers or dealers will receive commissions or discounts from
Selling Securityholders in amounts to be negotiated (and, if such broker-dealer
acts as agent for the purchase of such shares, from such purchaser).
Broker-dealers may agree with the Selling Securityholders to sell a specified
number of Shares at a stipulated price per Share, and, to the extent such
broker-dealer is unable to do so acting as agent for a Selling Securityholder,
to purchase as principal any unsold Shares at the price required to fulfill the
broker-dealer commitment to such Selling Securityholder. Broker-dealers who
acquire Shares as principal may thereafter resell such Shares from time to time
in transactions (which may involve crosses and block transactions and sales to
and through other broker-dealers, including transactions of the nature
described above) in the over-the-counter market or otherwise at prices and on
terms then prevailing at the time of sale, at prices then related to the
then-current market price or in negotiated transactions and, in connection with
such resales, may pay to or receive from the purchasers of such Shares
commissions as described above.
Pursuant to the Shares Registration Rights Agreement and the DCI
Registration Rights Agreement, the Company has agreed to pay all expenses
incident to the offer and sale of the Shares offered by the Selling
Securityholders hereby, except that the Selling Securityholders will pay all
underwriting discounts and selling commissions, if any. The Company has agreed
to indemnify the Selling Securityholders against certain liabilities, including
liabilities under the Securities Act, and to contribute to payments the Selling
Securityholders may be required to make in respect thereof.
LEGAL MATTERS
The legality of the securities being offered hereby is being passed
upon for the Company by Perkins Coie, Seattle, Washington.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company incorporated in this Prospectus by reference from the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by
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<PAGE> 31
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
-29-
<PAGE> 32
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information and representations must not be relied upon as having
been authorized by the Company. This Prospectus does not constitute an offer to
sell or solicitation of any offer to buy the securities described herein by
anyone in any jurisdiction in which such offer or solicitation is not
authorized, or in which the person making the offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation. Under no circumstances shall the delivery of this Prospectus or
any sale made pursuant to this Prospectus create any implication that the
information contained in this Prospectus is correct as of any time subsequent to
the date of this Prospectus.
------------------------
TABLE OF CONTENTS
PAGE
----
Available Information ....................................... 3
Forward-Looking Statements .................................. 3
Incorporation of
Certain Documents by Reference ......................... 4
The Company ................................................. 5
Risk Factors ................................................ 7
Use of Proceeds ............................................. 12
Ratio of Earnings to Fixed Charges .......................... 13
Legal Proceedings ........................................... 13
Selling Securityholders ..................................... 14
Description of Notes ........................................ 17
Plan of Distribution ........................................ 27
Legal Matters ............................................... 28
Experts ..................................................... 28
ITRON, INC.
$63,400,000
6 3/4% CONVERTIBLE SUBORDINATED
NOTES DUE 2004
AND
SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF
AND
2,638,600 SHARES OF COMMON STOCK
PROSPECTUS
June __, 1997
<PAGE> 33
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses by Registrant in
connection with the sale of the securities being registered. Normal brokerage
commissions and fees are payable individually by the Selling Securityholders.
All amounts are estimates except the Securities and Exchange Commission ("SEC")
registration fee.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee ........................................ $39,305
Printing and engraving expenses ............................. 3,000
Legal fees and expenses ..................................... 20,000
Accounting fees and expenses ................................ 3,000
Blue sky fees and expenses .................................. 1,000
Transfer agent fees ......................................... 2,000
Miscellaneous fees and expenses ............................. 1,695
-------
Total .................................................. $70,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act (the "WBCA") authorize a court to award, or a corporation's
board of directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Section 10 of the Registrant's Restated Bylaws provides for
indemnification of the Registrant's directors and officers to the maximum extent
permitted by Washington law.
Section 23B.08.320 of the Washington Business Corporation Act
authorizes a corporation to limit a director's liability to the corporation or
its shareholders for monetary damages for acts or omissions as a director,
except in certain circumstances involving intentional misconduct, self-dealing
or illegal corporate loans or distributions, or any transaction from which the
director personally receives a benefit in money, property or services to which
the director is not legally entitled. Article 9 of the Registrant's Restated
Articles of Incorporation contains provisions implementing, to the fullest
extent permitted by Washington law, such limitations on a director's liability
to the Registrant and its shareholders. Certain of the directors of the
Registrant, who are affiliated with principal shareholders of the Registrant,
also may be indemnified by such shareholders against liability they may incur in
their capacity as a director of the Registrant, including pursuant to a
liability insurance policy for such purpose.
The Registrant has entered into an Indemnification Agreement with each
of its executive officers and directors in which the Registrant agrees to hold
harmless and indemnify the officer or director to the full extent permitted by
Washington law. In addition, the Registrant agrees to indemnify the officer or
director against any and all losses, claims, damages, liabilities or expenses
incurred in connection with any actual, pending or threatened action, suit,
claim or proceeding, whether civil, criminal, administrative or investigative
and whether formal or informal, in which the officer or director is, was or
becomes involved by reason of the fact that the officer or director is or was a
director, officer, employee or agent of the Registrant, or that being or having
been such a director, officer, employee or agent, such director is or was
serving at the request of the Registrant as a director, officer, employee,
trustee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan, whether the basis of such proceeding is alleged action (or inaction) by
the officer or director in an official capacity as a director, officer,
employee, trustee or agent or in any other capacity while serving as a director,
officer, employee, trustee or agent. The officer or director is not indemnified
for any action, suit, claim or proceeding instituted by or at the direction of
the officer or director unless such action, suit, claim or proceeding is or was
authorized by the Registrant's Board of Directors or unless the action is to
enforce the provisions of the Indemnification Agreement.
II-1
<PAGE> 34
No indemnity pursuant to the Indemnification Agreements may be provided
by the Registrant on account of any suit in which a final, unappealable judgment
is rendered against an officer or director for an accounting of profits made
from the purchase or sale by the officer or director of securities of the
Registrant in violation of the provisions of Section 16(b) of the Exchange Act,
or for damages that have been paid directly to the officer or director by an
insurance carrier under a policy of directors' and officers' liability insurance
maintained by the Registrant.
Officers and directors of the Registrant are covered by insurance (with
certain exceptions and certain limitations) that indemnifies them against losses
and liabilities arising from certain alleged "wrongful acts," including alleged
errors or misstatements, or certain other alleged wrongful acts or omissions
constituting neglect or breach of duty.
The above discussion of the WBCA and the Registrant's Bylaws and
Amended and Restated Articles of Incorporation is not intended to be exhaustive
and is qualified in its entirety by reference to such statute, the Bylaws and
the Amended and Restated Articles of Incorporation.
ITEM 16. EXHIBITS
4.1 Indenture, dated as of March 12, 1997, between the Company and
Chemical Trust Company of California, as Trustee, including the
form of the Note (filed as Exhibit 4.1 to the Registrant's
Current Report on Form 8-K dated March 18, 1997 and incorporated
herein by reference).
4.2 Registration Rights Agreement, dated March 12, 1997, between the
Registrant, Credit Suisse First Boston Corporation and Hambrecht
& Quist LLC.
5.1 Opinion of Perkins Coie, counsel to the registrant, regarding
the legality of the Securities
12.1 Statement regarding computation of ratios
23.1 Consent of Deloitte & Touche LLP, independent auditors
(contained on page II-5)
23.2 Consent of Perkins Coie (contained in Exhibit 5.1)
24.1 Power of attorney (contained on signature page)
25.1 Statement of Eligibility and Qualification Under the Trust
Indenture Act of 1939 of a Corporation Designated to Act as
Trustee on Form T-1.
ITEM 17. UNDERTAKINGS
A. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described in Item 15, or otherwise,
the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the 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 of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
B. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
II-2
<PAGE> 35
(b) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of the securities
offered would not exceed that which was registered) and any deviation from the
low or high and of the estimated maximum offering range may be reflected in the
form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(c) To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act, 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.
(3) To remove from registration by means of a post-offering
amendment any of the securities being registered which remain unsold at the
termination of the offering.
C. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE> 36
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, thereunder duly
authorized, in the City of Spokane, State of Washington, on the 30th day of May,
1997.
ITRON, INC.
/S/ JOHNNY M. HUMPHREYS
------------------------------------------
By: JOHNNY M. HUMPHREYS
President, Chief Executive Officer,
and Director
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
Johnny M. Humphreys and David G. Remington, or either of them, as
attorneys-in-fact with full power of substitution, to execute in the name and on
the behalf of each person, individually and in each capacity stated below, and
to file, any and all amendments to this Registration Statement, including any
and all post-effective amendments, and any related Rule 462(b) Registration
Statement and any amendment thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the 30th day of May, 1997
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE TITLE
--------- -----
/S/ PAUL A. REDMOND Chairman of the Board
- ------------------------------------
Paul A. Redmond
/S/ JOHNNY M. HUMPHREYS President, Chief Executive Officer and Director
- ------------------------------------ (Principal Executive Officer)
Johnny M. Humphreys
/S/ DAVID G. REMINGTON Chief Financial Officer (Principal Financial and
- ------------------------------------ Accounting Officer)
David G. Remington
/s/ MICHAEL B. BRACY Director
- ------------------------------------
Michael B. Bracy
/s/ TED C. DEMERRITT Director
- ------------------------------------
Ted C. DeMerritt
/s/ JON E. ELIASSEN Director
- ------------------------------------
Jon E. Eliassen
/s/ MARY ANN PETERS Director
- ------------------------------------
Mary Ann Peters
/s/ STUART EDWARD WHITE Director
- ------------------------------------
Stuart Edward White
/s/ GRAHAM M. WILSON Director
- ------------------------------------
Graham M. Wilson
</TABLE>
II-4
<PAGE> 37
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Itron, Inc.'s
Registration Statement on Form S-3 of our report dated February 7, 1997,
appearing in the Annual Report on Form 10-K of Itron, Inc. for the year ended
December 31, 1996 and to the reference to us under the heading "Experts" in the
Prospectus which is a part of this Registration Statement.
DELOITTE & TOUCHE LLP
Seattle, Washington
May 30, 1997
II-5
<PAGE> 38
EXHIBIT INDEX
EXHIBIT
NUMBER
4.1 Indenture, dated as of March 12, 1997, between the Registrant
and Chemical Trust Company of California, as Trustee, including
the form of the Note (filed as Exhibit 4.1 to the Registrant's
Current Report on Form 8-K dated March 18, 1997 and incorporated
herein by reference).
4.2 Registration Rights Agreement, dated March 12, 1997, between the
Company, Credit Suisse First Boston Corporation and Hambrecht &
Quist LLC.
5.1 Opinion of Perkins Coie, counsel to the registrant, regarding
the legality of the Securities
12.1 Statement regarding computation of ratios
23.1 Consent of Deloitte & Touche LLP, independent auditors
(contained on page II-5)
23.2 Consent of Perkins Coie (contained in Exhibit 5.1)
24.1 Power of attorney (contained on signature page)
25.1 Statement of Eligibility and Qualification Under the Trust
Indenture Act of 1939 of a Corporation Designated to Act as
Trustee on Form T-1.
<PAGE> 1
EXHIBIT 4.2
ITRON, INC.
6 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
REGISTRATION RIGHTS AGREEMENT
March 12, 1997
Credit Suisse First Boston Corporation
Hambrecht & Quist LLC
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8728
Attention: Transactions Advisory Group
Ladies and Gentlemen:
Itron, Inc., a Washington corporation (the "Company"),
proposes to issue and sell to Credit Suisse First Boston Corporation and
Hambrecht & Quist LLC (together, the "Initial Purchasers"), upon the terms set
forth in a purchase agreement of even date herewith (the "Purchase Agreement"),
$60,000,000 aggregate principal amount (plus an additional $9,000,000 principal
amount to cover over-allotments, if any) of 6 3/4% Convertible Subordinated
Notes Due 2004 (the "Notes") of the Company. The Notes will be convertible into
shares of Common Stock, no par value, of the Company (the "Common Stock") at the
conversion price set forth in the Confidential Offering Circular dated March 12,
1997. The Notes will be issued pursuant to an Indenture, dated as of March 12,
1997 (the "Indenture"), between the Company and Chemical Trust Company of
California (the "Trustee"). As an inducement to the Initial Purchasers to enter
into the Purchase Agreement and in satisfaction of a condition to the Initial
Purchasers' obligations thereunder, the Company agrees with the Initial
Purchasers, (i) for the benefit of the Initial Purchasers and (ii) for the
benefit of the holders of the Notes and the Common Stock issuable upon
conversion of the Notes (collectively, the "Securities") from time to time until
such time as such Securities have been sold pursuant to a Shelf Registration
Statement (as defined below) (each of the foregoing a "Holder" and together the
"Holders"), as follows:
1. Shelf Registration. The Company shall take the following
actions:
(a) The Company shall, at its cost, prepare and, as promptly
as practicable (but in no event more than 90 days after the date of the initial
closing under the Purchase Agreement)
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<PAGE> 2
file with the Securities and Exchange Commission (the "Commission") and
thereafter shall use its best efforts to cause to be declared effective as soon
as practicable a registration statement on Form S-3 (the "Shelf Registration
Statement") covering the offer and sale of the Transfer Restricted Securities
(as defined in Section 5 hereof) by the Holders thereof from time to time in
accordance with the methods of distribution set forth in the Shelf Registration
Statement and Rule 415 under the Securities Act of 1933, as amended (the
"Securities Act") (hereinafter, the "Shelf Registration"); provided, however,
that no Holder (other than an Initial Purchaser) shall be entitled to have the
Securities held by it covered by such Shelf Registration Statement unless such
Holder agrees in writing to be bound by all the provisions of this Agreement
applicable to such Holder.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective, in order to permit the prospectus
included therein to be lawfully delivered by the Holders of the relevant
Securities, for a period of two years from the date of its effectiveness or such
shorter period that will terminate when all the Securities covered by the Shelf
Registration Statement have been sold pursuant thereto or may be sold pursuant
to Rule 144(k) under the Securities Act (or any successor rule thereof) (in any
such case, such period being called the "Shelf Registration Period"). The
Company shall be deemed not to have used its best efforts to keep the Shelf
Registration Statement effective during the requisite period if it voluntarily
takes any action that would result in Holders of Securities covered thereby not
being able to offer and sell such Securities during that period, unless such
action is required by applicable law.
(c) Notwithstanding any other provisions of this Agreement to
the contrary, the Company shall cause (other than information required to be
supplied by the selling Holders pursuant to this Agreement) (i) the Shelf
Registration Statement and the related prospectus and any amendment or
supplement thereto to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission thereunder, (ii) the Shelf Registration Statement and any amendment
thereto not to contain, when it becomes effective, an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming a part of the Shelf Registration Statement, and any amendment or
supplement to such prospectus, not to contain, as of the date of such prospectus
or amendment or supplement, any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
2. Registration Procedures. In connection with the Shelf
Registration contemplated by Section 1 hereof the following provisions shall
apply:
(a) The Company shall (i) furnish to each Initial Purchaser,
prior to the filing thereof with the Commission, a copy of the Shelf
Registration Statement and each amendment thereof and each amendment or
supplement, if any, to the prospectus included therein and, in the event that an
Initial Purchaser (with respect to any portion of an unsold allotment from the
original offering) is participating in the Shelf Registration Statement, shall
use its best efforts to reflect in each such document, when so filed with the
Commission, such comments as such
-2-
<PAGE> 3
Initial Purchaser reasonably may propose and (ii) include the names of the
Holders, who propose to sell Securities pursuant to the Shelf Registration
Statement, as selling security holders.
(b) The Company shall give written notice to the Initial
Purchasers and the Holders (which notice pursuant to clauses (ii)-(v) hereof
shall be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
(i) when the Shelf Registration Statement or any amendment
thereto has been filed with the Commission and when the Shelf
Registration Statement or any post-effective amendment thereto has
become effective;
(ii) of any request by the Commission for amendments or
supplements to the Shelf Registration Statement or the prospectus
included therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to
make changes in the Shelf Registration Statement or the prospectus in
order that the Shelf Registration Statement or the prospectus do not
contain an untrue statement of a material fact nor omit to state a
material fact required to be stated therein or necessary to make the
statements therein (in the case of the prospectus, in the light of the
circumstances under which they were made) not misleading.
(c) The Company shall make every reasonable effort to obtain
the withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Shelf Registration Statement.
(d) The Company shall furnish to each Holder of Securities
included within the coverage of the Shelf Registration, without charge, one copy
of the Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).
(e) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Securities included within the coverage of the Shelf
Registration Statement, without charge, as many copies of the prospectus
(including each preliminary prospectus) included in the Shelf Registration
Statement and any amendment or supplement thereto as such person may reasonably
request. The Company consents, subject to the provisions of this Agreement, to
the use of the prospectus or any amendment or supplement thereto by each of the
selling Holders in
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<PAGE> 4
connection with the offering and sale of the Securities covered by the
prospectus, or any amendment or supplement thereto, included in the Shelf
Registration Statement.
(f) Prior to any public offering of the Securities, pursuant
to the Shelf Registration Statement, the Company shall register or qualify or
cooperate with the Holders of the Securities included therein and their
respective counsel in connection with the registration or qualification of such
Securities for offer and sale under the securities or "blue sky" laws of such
states of the United States as any such Holder reasonably requests in writing
and do any and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the Securities covered by the Shelf
Registration Statement; provided, however, that the Company shall not be
required to (i) qualify generally to do business in any jurisdiction where it is
not then so qualified or (ii) take any action which would subject it to general
service of process or to taxation in any jurisdiction where it is not then so
subject.
(g) The Company shall cooperate with the Holders of the
Securities to facilitate the timely preparation and delivery of certificates
representing the Securities to be sold pursuant to the Shelf Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as the Holders may request a reasonable period of time
prior to sales of the Securities pursuant to the Shelf Registration Statement.
(h) Upon the occurrence of any event contemplated by
paragraphs (ii) through (v) of Section 2(b) above during the period for which
the Company is required to maintain an effective Shelf Registration Statement,
the Company shall promptly prepare and file a post-effective amendment to the
Shelf Registration Statement or an amendment or supplement to the related
prospectus and any other required document so that, as thereafter delivered to
Holders or purchasers of Securities, the prospectus will not contain an 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, in the light of the
circumstances under which they were made, not misleading. If the Company
notifies the Initial Purchasers or the Holders in accordance with paragraphs
(ii) through (v) of Section 2(b) above to suspend the use of the prospectus
until the requisite changes to the prospectus have been made, then the Initial
Purchasers and the Holders shall suspend use of such prospectus.
(i) Not later than the effective date of the Shelf
Registration Statement, the Company will provide CUSIP numbers for the Notes and
the Common Stock registered under the Shelf Registration Statement, and provide
the Trustee with printed certificates for such Notes, in form eligible for
deposit with The Depository Trust Company.
(j) The Company will comply with all rules and regulations of
the Commission to the extent and so long as they are applicable to the Shelf
Registration and will make generally available to its security holders (or
otherwise provide in accordance with Section 11(a) of the Securities Act) an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of a 12-month period (or 90 days, if
such period is a fiscal year) beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of the Shelf
Registration Statement, which statement shall cover such 12-month period.
-4-
<PAGE> 5
(k) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"),
in a timely manner and containing such changes, if any, as shall be necessary
for such qualification. In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Company shall appoint a
new trustee thereunder pursuant to the applicable provisions of the Indenture.
(l) The Company shall enter into such customary agreements
(including if requested an underwriting agreement in customary form) and take
all such other action, if any, as any Holder of the securities shall reasonably
request in order to facilitate the disposition of the Securities pursuant to the
Shelf Registration Statement.
(m) The Company may require each Holder of Securities to be
sold pursuant to the Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of the Securities as the
Company may from time to time reasonably require for inclusion in the Shelf
Registration Statement, and the Company may exclude from such registration the
Securities of any Holder that fails to furnish such information within a
reasonable time after receiving such request.
(n) The Company shall (i) make reasonably available for
inspection by the Holders of the Securities, any underwriter participating in
any disposition pursuant to the Shelf Registration Statement, and any attorney,
accountant or other agent retained by the Holders of the Securities or any
underwriter all relevant financial and other records, pertinent corporate
documents and properties of the Company and (ii) cause the Company's officers,
directors, employees, accountants and auditors to supply all relevant
information reasonably requested by the Holders of the Securities or any such
underwriter, attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be reasonably necessary to enable
such persons to conduct a reasonable investigation within the meaning of Section
11 of the Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated by one counsel (the "Designated
Counsel"). Pillsbury Madison & Sutro LLP shall be the Designated Counsel for all
purposes hereof until another Designated Counsel shall have been chosen by the
Holders of a majority in principal amount of the Securities covered by the Shelf
Registration Statement (provided that Holders of Common Stock issued upon the
conversion of the Notes shall be deemed to be Holders of the aggregate principal
amount of Notes from which such Common Stock was converted).
(o) The Company, if requested by any Holder of Securities
covered by the Shelf Registration Statement, shall cause (i) its counsel to
deliver an opinion and updates thereof relating to the Securities in customary
form addressed to such Holders and the managing underwriters, if any, thereof,
and dated, in the case of the initial opinion, the effective date of such Shelf
Registration Statement (it being agreed that the matters to be covered by such
opinion shall include, without limitation, the due incorporation and good
standing of the Company and its subsidiaries; the qualification of the Company
and its subsidiaries to transact business as foreign corporations; the due
authorization, execution and delivery of the relevant agreement of the type
referred to in Section (l) above; the due authorization, execution,
-5-
<PAGE> 6
authentication and issuance, and the validity and enforceability, of the
applicable Securities; the absence of material legal or governmental proceedings
involving the Company and its subsidiaries; the absence of governmental
approvals required to be obtained in connection with the Shelf Registration
Statement, the offering and sale of the applicable Securities, or any agreement
of the type referred to in Section 2(l) hereof; the compliance as to form of
such Shelf Registration Statement and any documents incorporated by reference
therein and of the Indenture with the requirements of the Securities Act and the
Trust Indenture Act, respectively; and, as of the date of the opinion and as of
the effective date of the Shelf Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence from such
Shelf Registration Statement and the prospectus included therein, as then
amended or supplemented, and from any documents incorporated by reference
therein of an untrue statement of a material fact or the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any such documents, in the
light of the circumstances existing at the time that such documents were filed
with the Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), (ii) its officers to execute and deliver all customary
documents and certificates and updates thereof requested by the Designated
Counsel or any underwriters of the applicable Securities, and (iii) its
independent public accountants and the independent public accountants with
respect to any other entity for which financial information is provided in the
Shelf Registration Statement to provide to the selling Holders of the applicable
Securities a comfort letter in customary form and covering matters of the type
customarily covered in comfort letters in connection with primary underwritten
offerings, subject to receipt of appropriate documentation as contemplated, and
only if permitted, by Statement of Auditing Standards No. 72.
(p) The Company will use its reasonable efforts to, if the
Notes have been rated prior to the initial sale of such Notes, confirm such
ratings will apply to the Notes covered by a Registration Statement.
(q) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution" (within
the meaning of the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, assist such broker-dealer in complying with the
requirements of such Rules, including, without limitation, by (i) if such Rules,
including Rule 2720, shall so require, engaging a "qualified independent
underwriter" (as defined in such Rule) to participate in the preparation of the
Registration Statement relating to such Securities, to exercise usual standards
of due diligence in respect thereto and, if any portion of the offering
contemplated by such Registration Statement is an underwritten offering or is
made through a placement or sales agent, to recommend the yield of such
Securities, (ii) indemnifying any such qualified independent underwriter to the
extent of the indemnification of underwriters provided in Section 5 hereof and
(iii) providing such information to such broker-dealer as may be required in
order for such broker-dealer to comply with the requirements of the NASD Conduct
Rules.
-6-
<PAGE> 7
(r) The Company shall use its best efforts to take all other
steps necessary to effect the registration of the Securities covered by the
Shelf Registration Statement contemplated hereby.
3. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance of its obligations under
Sections 1 through 2 hereof, whether or not the Shelf Registration Statement is
filed or becomes effective, and shall bear or reimburse the Holders of the
Securities covered by the Shelf Registration for the reasonable fees and
disbursements of the Designated Counsel (provided that Holders of Common Stock
issued upon the conversion of the Notes shall be deemed to be Holders of the
aggregate principal amount of Notes from which such Common Stock was converted)
to act as counsel for the Holders in connection therewith.
4. Indemnification. (a) The Company agrees to indemnify and
hold harmless each Holder and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (each Holder and
such controlling persons are referred to collectively as the "Indemnified
Parties") from and against any losses, claims, damages or liabilities, joint or
several, or any actions in respect thereof (including, but not limited to, any
losses, claims, damages, liabilities or actions relating to purchases and sales
of the Securities) to which each Indemnified Party becomes subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the Shelf
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to the Shelf Registration, or arise
out of, or are based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse, as incurred, the Indemnified
Parties for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof; provided, however, that (i) the Company
shall not be liable in any such case to the extent that such loss, claim, damage
or liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in the Shelf Registration
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to the Shelf Registration in reliance upon and
in conformity with written information pertaining to such Holder and furnished
to the Company by or on behalf of such Holder specifically for inclusion therein
and (ii) with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus relating to the Shelf
Registration Statement, the indemnity agreement contained in this subsection (a)
shall not inure to the benefit of any Holder from whom the person asserting any
such losses, claims, damages or liabilities purchased the Securities concerned,
to the extent that a prospectus relating to such Securities was required to be
delivered by such Holder under the Securities Act in connection with such
purchase and any such loss, claim, damage or liability of such Holder results
from the fact that there was not sent or given to such person, at or prior to
the written confirmation of the sale of such Securities to such person, a copy
of the final prospectus if the Company had previously furnished copies thereof
to such Holder; provided further, however, that this indemnity agreement will be
in addition to any liability which the Company may otherwise have to such
Indemnified Party.
-7-
<PAGE> 8
(b) Each Holder, severally and not jointly, will indemnify and
hold harmless the Company and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act from and against
any losses, claims, damages or liabilities or any actions in respect thereof, to
which the Company or any such controlling person becomes subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a Shelf
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading, but in
each case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Company by or
on behalf of such Holder specifically for inclusion therein; and, subject to the
limitation set forth immediately preceding this clause, and to subsection (c)
below, shall reimburse, as incurred, the Company for any legal or other expenses
reasonably incurred by the Company or any such controlling person in connection
with investigating or defending any loss, claim, damage, liability or action in
respect thereof. This indemnity agreement will be in addition to any liability
which such Holder may otherwise have to the Company or any of its controlling
persons.
(c) Promptly after receipt by an indemnified party under this
Section 4 of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 4,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in subsections (a) or (b) above. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 4 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section 4 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a
-8-
<PAGE> 9
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to in subsections (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
registration of the Securities, pursuant to the Shelf Registration, or (ii) if
the allocation provided by the foregoing clause (i) 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 indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof) as well
as any other relevant equitable considerations. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or such Holder or such other indemnified party, as the case may
be, on the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this subsection (d)
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any action
or claim which is the subject of this subsection (d). Notwithstanding any other
provision of this Section 4(d), the Holders shall not be required to contribute
any amount in excess of the amount by which the net proceeds received by such
Holders from the sale of the Securities pursuant to the Shelf Registration
Statement exceeds the amount of damages which such Holders have otherwise been
required to pay by reason of such 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. For purposes of this paragraph (d), each person, if any, who
controls such indemnified party within the meaning of the Securities Act or the
Exchange Act shall have the same rights to contribution as such indemnified
party and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.
(e) The agreements contained in this Section 4 shall survive
the sale of the Securities pursuant to the Shelf Registration Statement and
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
indemnified party.
5. Additional Interest Under Certain Circumstances. (a)
Additional interest (the "Additional Interest") with respect to the Notes shall
be assessed as follows if any of the following events occur (each such event in
clauses (i) through (iii) below being herein called a "Registration Default"):
(i) if on or prior to the 90th day after the first date of
original issuance of the Notes, the Shelf Registration Statement has
not been filed with the Commission;
-9-
<PAGE> 10
(ii) if on or prior to the 120th day after the first date of
original issuance of the Notes, the Shelf Registration Statement has
not been declared effective by the Commission; or
(iii) if after the Shelf Registration Statement is declared
effective (A) the Shelf Registration Statement thereafter ceases to be
effective; or (B) the Shelf Registration Statement or the related
prospectus ceases to be usable (in each case except as permitted in
paragraph (b) below) in connection with resales of Transfer Restricted
Securities in accordance with and during the periods specified herein
because either (1) any event occurs as a result of which the related
prospectus forming part of such Shelf Registration Statement would
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the light of
the circumstances under which they were made not misleading, or (2) it
shall be necessary to amend such Shelf Registration Statement or
supplement the related prospectus, to comply with the Securities Act or
the Exchange Act or the respective rules thereunder.
Additional Interest shall accrue on the Notes over and above
the interest set forth in the title of the Notes from and including the date on
which any such Registration Default shall occur, to but excluding the date on
which all such Registration Defaults have been cured, at a rate of 0.50% per
annum.
(b) A Registration Default referred to in Section 5(a)(iii)(B)
shall be deemed not to have occurred and be continuing in relation to the Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to the Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events with respect
to the Company that would need to be described in the Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Company proceeds promptly and in good faith to amend or supplement the Shelf
Registration Statement and related prospectus to describe such events; provided,
however, that in any case if such Registration Default occurs for a continuous
period in excess of 30 days, Additional Interest shall be payable in accordance
with the above paragraph from the day such Registration Default occurs until
such Registration Default is cured.
(c) Any amounts of Additional Interest due pursuant to clauses
(a)(i), (ii) or (iii) of this Section 5 will be payable in cash on the regular
interest payment dates with respect to the Notes. The amount of Additional
Interest will be determined by multiplying the applicable Additional Interest
rate by the principal amount of the Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360. The
indebtedness represented by the Additional Interest shall be subordinated in
right of payment to all existing and future Senior Indebtedness (as defined in
the Indenture) as and to the same extent as the Notes.
-10-
<PAGE> 11
(d) "Transfer Restricted Securities" means each Security until
(i) the date on which such Security has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (ii) the date on which such Security is distributed to the public
pursuant to Rule 144 under the Securities Act or is salable pursuant to Rule
144(k) under the Securities Act.
6. Rules 144 and 144A. The Company shall use its best efforts
to file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any Holder of Transfer
Restricted Securities, make publicly available other information so long as
necessary to permit sales of their securities pursuant to Rules 144 and 144A.
The Company covenants that it will take such further action as any Holder of
Transfer Restricted Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Transfer Restricted
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rules 144 and 144A (including the requirements of
Rule 144A(d)(4)). The Company will provide a copy of this Agreement to
prospective purchasers of Securities identified to the Company by the Initial
Purchasers upon request. Upon the request of any Holder of Transfer Restricted
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
nothing in this Section 6 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
7. Underwritten Registrations. If any of the Transfer
Restricted Securities covered by any Shelf Registration are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering ("Managing Underwriters") will be
selected by the Holders of a majority in aggregate principal amount of such
Transfer Restricted Securities to be included in such offering.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
8. Miscellaneous. (a) Amendments and Waivers. The provisions
of this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, except by
the Company and the written consent of the Holders of a majority in principal
amount of the Securities (provided that Holders of Common Stock issued upon
conversion of Notes shall be deemed to be Holders of the aggregate principal
amount of Notes from which such Common Stock was converted) affected by such
amendment, modification, supplement, waiver or consents.
(b) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, first-class
mail, facsimile transmission, or air courier that guarantees overnight delivery:
-11-
<PAGE> 12
(1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
8(b), which address initially is, with respect to each Holder, the
address of such Holder to which confirmation of the sale of the Notes
to such Holder was first sent by the Initial Purchasers, with a copy in
like manner to you as follows:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8728
Attention: Transactions Advisory Group
with a copy to the Designated Counsel:
Pillsbury Madison & Sutro LLP
2700 Sand Hill Road
Menlo Park, CA 94025
Fax No.: (415) 233-4545
Attention: Katharine A. Martin
(or such other firm as shall have been chosen by a majority of in
principal amount of the Securities covered by the Shelf Registration
Statement in accordance with Section 2(n));
(2) if to the Initial Purchasers, at the addresses specified
in Section 8(b)(1);
(3) if to the Company, at its address as follows:
Itron, Inc.
2818 North Sullivan Road
Spokane, WA 99216
Fax No.: (206) 891-3334
Attention: Chief Financial Officer
with a copy to:
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, WA 98101
Fax No.: (206) 583-8500
Attention: Linda A. Schoemaker
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged by recipient's facsimile
-12-
<PAGE> 13
machine operator, if sent by facsimile transmission; and on the day delivered,
if sent by overnight air courier guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the
date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders herein or otherwise conflicts with the provisions
hereof.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Securities. The Company hereby agrees
to extend the benefits of this Agreement to any Holder of Securities and any
such Holder may specifically enforce the provisions of this Agreement as if an
original party hereto.
(e) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
By the execution and delivery of this Agreement, the Company
submits to the nonexclusive jurisdiction of any federal or state court in the
State of New York.
(h) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
-13-
<PAGE> 14
(i) Securities Held by the Company. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
is required hereunder, Securities held by the Company or its affiliates (other
than subsequent Holders of Securities if such subsequent Holders are deemed to
be affiliates solely by reason of their holdings of such Securities) shall not
be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement among the several Initial Purchasers and the Company in accordance
with its terms.
Very truly yours,
ITRON, INC.
By /s/ David G. Remington
------------------------------
Name: David G. Remington
Title: Vice President and CFO
The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
HAMBRECHT & QUIST LLC
by: Credit Suisse First Boston Corporation
By /s/ Robert A. Hansen
-----------------------
Name: Robert A. Hansen
Title: Director
-14-
<PAGE> 1
EXHIBIT 5.1
May 30, 1997
Itron, Inc.
2818 N Sullivan Rd
Spokane, WA 99216
Gentlemen and Ladies:
We have acted as counsel to you in connection with the registration
under the Securities Act of 1933, as amended, by Itron, Inc. (the "Company") of
(i) $63,400,000 aggregate principle amount of 6 3/4% Convertible Subordinated
Notes due 2004 (the "Notes"), and such indeterminable number of shares of Common
Stock, no par value (the "Common Stock"), of the Company, as may be required for
issuance upon conversion of the Notes (the "Conversion Shares"); and (ii)
2,638,600 shares of Common Stock (the "Shares"). The Notes, the Conversion
Shares and the Shares are to be offered and sold by certain securityholders of
the Company. In this regard, we have participated in the preparation of a
Registration Statement on Form S-3 relating to the Notes, the Conversion Shares
and the Shares (the "Registration Statement") which you are filing with the
Securities and Exchange Commission.
We have examined the Registration Statement and such documents and
records of the Company and other documents as we have deemed necessary for the
purpose of this opinion. Based upon the foregoing, we are of the opinion that
the Notes and the Shares have been duly authorized and validly issued and are
fully paid and nonassessable and upon conversion of the Notes in accordance
with their terms and the terms of the Indenture pursuant to which they were
issued, the Conversion Shares will be duly authorized, validly issued, fully
paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and any amendment thereto, including any and all
post-effective amendments, and to the reference to our firm in the Prospectus of
the Registration Statement under the heading "Legal Matters." 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,
Perkins Coie
<PAGE> 1
EXHIBIT 12.1 - STATEMENT REGARDING COMPUTATION OF RATIOS
<TABLE>
<CAPTION>
(in thousands) QUARTER ENDED
YEAR ENDED DECEMBER 31, MARCH 31
----------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
Income (loss) before income taxes $2,072 $9,146 $14,193 $16,401 $(2,134) $4,498 $(5,259)
Fixed Charges
Interest capitalized 0 0 0 0 533 0 217
Interest expense 854 618 139 262 835 151 742
Interest portion of rentals 536 626 688 603 499 125 125
Total fixed charges 1,390 1,244 827 865 1,867 276 1,084
Total earnings and fixed charges $3,462 $10,390 $15,020 $17,266 $ (267) $4,774 $(4,175)
Ratio of earnings to fixed charges 2.5 8.4 18.2 20.0 n/a 17.3 n/a
Deficiency n/a n/a n/a n/a (267) n/a (4,175)
</TABLE>
<PAGE> 1
EXHIBIT 25.1
------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM T-l
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)_________
------------------------
CHASE TRUST COMPANY OF CALIFORNIA
(formerly Chemical Trust Company of California)
(Exact name of trustee as specified in its charter)
CALIFORNIA 94-2926573
(State of incorporation I.R.S. employer
if not a national bank) identification No.)
101 California Street
San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
------------------------
ITRON, INC.
(Exact name of obligor as specified in its charter)
WASHINGTON 91-1011792
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
2818 North Sullivan Road
Spokane, Washington 99215
(Address of principal executive offices) (Zip Code)
------------------------
Convertible Subordinated Notes Due 2004
(Title of the indenture securities)
------------------------
<PAGE> 2
GENERAL
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.
Superintendent of Banks of the State of California, 235
Montgomery Street, San Francisco, California
94104-2980.
Board of Governors of the Federal Reserve System,
Washington, D.C. 20551
(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.
None.
ITEM 16. LIST OF EXHIBITS
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Incorporation of the Trustee as now in
effect, including the Restated Articles of Incorporation dated December 23, 1986
and the Certificate of Amendment dated March 26, 1992 and March 27, 1997 (see
Exhibit 1 to Form T-1 filed in connection with Registration Statement No.
33-55136, which is incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (See Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-55136, which is incorporated by reference).
3. Authorization to exercise corporate trust powers (Contained in
Exhibit 2).
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 33-55136, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 21(b) of the Act (See
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-55136, which is incorporated by reference).
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.
8. Not applicable.
9. Not applicable.
2
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, Chase Trust Company of California (formerly Chemical Trust Company of
California), a corporation organized and existing under the laws of the State of
California, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of San
Francisco and State of California, on the 29th day of May, 1997.
CHASE TRUST COMPANY OF CALIFORNIA
By /s/ CHII LING LEI
--------------------------------
CHII LING LEI
Assistant Vice President
3
<PAGE> 4
<TABLE>
<CAPTION>
EXHIBIT 7. Report of Condition of the Trustee.
- --------------------------------------------------------------------------------------------------------------
TRUST COMPANY
CONSOLIDATED REPORT OF CONDITION OF Chemical Trust Company of California
----------------------------------------------------------------------
(Legal Title)
LOCATED AT San Francisco San Francisco CA 94111
----------------------------------------------------------------------------------------------------
(City) (County) (State) (Zip)
AS OF CLOSE OF BUSINESS ON March 31, 1997 BANK NO. 1476
----------------------------------- ----------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
ASSETS DOLLAR AMOUNT IN THOUSANDS
<S> <C>
1. Cash and due from banks 11,768
2. U.S. Treasury securities 10,025
3. Obligations of other U.S. Government agencies and corporations
4. Obligations of States and political subdivisions
5. Other securities (including $ corporate stock
(a) Loans
(b) Less: Reserve for possible loan losses
(c) Loans (Net)
7. Bank Premises, furniture and fixtures and other assets representing bank
premises (including $ -0- capital leases) 120
---------------------
8. Real estate owned other than bank premises
9. Investments in subsidiaries not consolidated
10. Other assets (complete schedule on reverse) (including $ intangibles) 851
---------------
11. TOTAL ASSETS 22,764
======
LIABILITIES
12. Liabilities for borrowed money
13. Mortgage indebtedness (including $ capital leases)
-------------------------
14. Other liabilities (complete on schedule on reverse 2,941
15. TOTAL LIABILITIES 2,941
=====
16. Capital notes and debentures
SHAREHOLDERS EQUITY
17. Preferred stock--
(Number shares outstanding ) Amount $
---------------------------------
18. Common stock-- 10
(Number shares authorized 100 ) Amount $ 100
--------------------------------
(Number shares outstanding 100 ) Amount $ 100
------------------------------
19. Surplus Amount $ 9,990
20. TOTAL CONTRIBUTED CAPITAL 10,000
21. Retained earnings and other capital reserves 9,823
22. TOTAL SHAREHOLDERS EQUITY 19,823
23. TOTAL LIABILITIES AND CAPITAL ACCOUNTS 22,764
======
</TABLE>
4
<PAGE> 5
<TABLE>
MEMORANDA
<S> <C> <C>
1. Assets deposited with State Treasurer to qualify for exercise of fiduciary
powers (market value) 630
- --------------------------------------------------------------------------------------------------------------
The undersigned, Francis J. Farrell, VP & Manager and C. Scott Boone, Senior Vice President
- --------------------------------------------------------------------------------------------------------------
(Name and Title) (Name and Title)
of the above named trust company, each declares, for himself alone and not for
the other: I have a personal knowledge of the matters contained in this report
(including the reverse side hereof), and I believe that each statement in said
report is true. Each of the undersigned, for himself alone and not for the
other, certifies under penalty of perjury that the foregoing is true and
correct.
Executed on 4/22/97 , at San Francisco , California
------------------------- ---------------------------
(Date) (City)
s/Francis J. Farrell s/C. Scott Boone
----------------------------------- -----------------------------------
(Signature) (Signature)
</TABLE>
<TABLE>
<S> <C>
SCHEDULE OF OTHER ASSETS
Accounts Receivable $326
Deferred Taxes 396
Other 129
------
Total (same as Item 10) $851
SCHEDULE OF OTHER LIABILITIES
Accrued Income Taxes $1,738
Accrued Expenses & A/P 47
Accrued Pension & Benefits 771
Accrued Incentive Expense 23
All Other Liabilities 362
------
Total (same as Item 14) $2,941
</TABLE>
5
