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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
------------------------
ITRON, INC.
(NAME OF ISSUER)
------------------------
ITRON, INC.
(NAME OF PERSON FILING STATEMENT)
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6 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004,
CUSIP NOS. 465741-AA-4, U13126-AA-2, 465741-AC-0
(TITLE AND CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
DAVID G. REMINGTON
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
ITRON, INC.
2818 N. SULLIVAN ROAD
SPOKANE, WASHINGTON 99216
(509) 924-9900
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF PERSON FILING STATEMENT)
------------------------
COPIES TO:
LINDA A. SCHOEMAKER
PERKINS COIE
1201 THIRD AVENUE, 40TH FLOOR
SEATTLE, WASHINGTON 98101-3099
(206) 583-8888
------------------------
FEBRUARY 11, 1999
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)
------------------------
CALCULATION OF FILING FEE
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TRANSACTION VALUATION(1) AMOUNT OF FILING FEE(2)
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$22,000,000 $4,400
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(1) Based on the book value of the notes to be received by Itron, Inc., in
accordance with Rule 0-11(b) under the Securities Exchange Act of 1934, as
amended.
(2) Calculated based on the transaction valuation multiplied by one-fiftieth of
one percent, in accordance with Rule 0-11(b) under the Securities Exchange
Act of 1934, as amended.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
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Amount previously paid: $ ------- Filing party: -------
Form or registration no.: ------- Date filed: -------
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ITEM 1. SECURITY AND ISSUER
(a) The name of the issuer is Itron, Inc., a Washington corporation (the
"Company"). The address of its principal executive offices is 2818 N. Sullivan
Road, Spokane, Washington 99216.
(b) The Company is seeking tender of up to $22,000,000 of its outstanding
6 3/4% Convertible Subordinated Notes Due 2004 (the "Original Notes"), in
exchange for up to $15,840,000 of its new 6 3/4% Convertible Subordinated Notes
Due 2004 (the "Exchange Notes"), on the basis of $720 principal amount of
Exchange Notes for $1,000 principal amount of Original Notes. If more than
$22,000,000 aggregate principal amount of the Original Notes are tendered, the
Company will allocate its acceptance of Original Notes among tendering
noteholders on a pro rata basis. The Exchange Offer is not conditioned on any
minimum amount of Original Notes being tendered. The Exchange Offer is subject
to additional conditions, however, and may be amended or withdrawn in certain
circumstances, as described in the Offering Circular under "The Exchange
Offer -- Conditions to and Amendments of the Exchange Offer." As of February 10,
1999, the principal amount of outstanding Original Notes aggregated $63,400,000.
The executive officers and directors of the Company have advised the
Company that they do not hold any Original Notes.
(c) The Company incorporates into this Schedule 13E-4 by reference the
information set forth in the section of the Offering Circular entitled "Price
Range of Common Stock and Dividend Policy."
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) The Company will exchange up to $15,840,000 of the Exchange Notes for
up to $22,000,000 of the Original Notes.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE
(a)-(j) The Company incorporates into this Schedule 13E-4 by reference the
information set forth in the section of the Offering Circular entitled
"Background, Purpose, and Effect of the Exchange Offer."
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER
Not applicable.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES
The Exchange Notes will be issued pursuant an indenture between the Company
and Chase Manhattan Bank and Trust Company, National Association, as Trustee. A
copy of the Form of Indenture is filed as Exhibit (c) to this Schedule 13E-4 and
is incorporated into this Schedule 13E-4 by reference.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company incorporates into this Schedule 13E-4 by reference the
information set forth in the section of the Offering Circular entitled "The
Exchange Offer -- Payment of Expenses."
ITEM 7. FINANCIAL INFORMATION
(a)-(b) The Company incorporates into this Schedule 13E-4 by reference the
information set forth in the section of the Offering Circular entitled "Summary
Selected Consolidated and Pro Forma Financial Data."
2
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ITEM 8. ADDITIONAL INFORMATION
(a) Not applicable.
(b) The Exchange Offer is conditioned upon the qualification under the
Trust Indenture Act of 1939 of the Indenture under which the Exchange Notes will
be issued. There are no other applicable regulatory requirements which must be
complied with or approvals which must be obtained in connection with the
Exchange Offer other than compliance with the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder, including,
without limitation, Rule 13e-4 and the requirements of the state securities or
"Blue Sky" laws.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
(a)(1) Offering Circular dated February 11, 1999.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees, dated February 11, 1999.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees, dated February 11, 1999.
(b) Not applicable.
(c) Form of Indenture by and between the Company and Chase Manhattan Bank
and Trust Company, National Association, as Trustee.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
3
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SIGNATURE
After due inquiry, and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
ITRON, INC.
By: DAVID G. REMINGTON
------------------------------------
David G. Remington
Vice President and Chief Financial
Officer
Dated: February 11, 1999
4
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ITRON, INC.
2818 N. SULLIVAN ROAD
P.O. BOX 15288
SPOKANE, WASHINGTON 99216-1897
To the Holders of Our 6 3/4% Convertible Subordinated Notes Due 2004:
Enclosed are materials relating to our offer to exchange up to $15,840,000
aggregate principal amount of our 6 3/4% Convertible Subordinated Notes Due 2004
(the "Exchange Notes") for up to $22,000,000 aggregate principal amount of our
6 3/4% Convertible Subordinated Notes Due 2004 (the "Original Notes"), as
described in the enclosed Offering Circular dated February 11, 1999 (the
"Exchange Offer"). While the interest rate and maturity of the Exchange Notes is
identical to the Original Notes, other important terms, such as the conversion
price, differ.
This exchange would be made on the following basis:
------------------------
$720 PRINCIPAL AMOUNT OF EXCHANGE NOTES
FOR $1,000 PRINCIPAL AMOUNT OF ORIGINAL NOTES
------------------------
The Exchange Offer will expire on March 12, 1999, unless extended. Interest
on the Exchange Notes will accrue from the expiration date of the Exchange
Offer, and will be payable in cash semiannually on each March 31 and September
30, commencing September 30, 1999, until the Exchange Notes are paid in full.
Except for (1) the conversion price for converting the Exchange Notes into
shares of Common Stock, (2) the date until which the Company may not call the
Exchange Notes, and (3) the absence of a redemption premium, all other terms of
the Exchange Notes being offered hereby are identical to the terms of the
Original Notes previously issued by the Company. The conversion price will be
determined based on the formula described in the enclosed materials.
The principal purpose of the Exchange Offer is to reduce the outstanding
long-term debt of the Company and to reduce the Company's debt service
obligations. The Exchange Offer is not conditioned on any minimum amount of
Original Notes being tendered, but it is conditioned on certain other factors as
described herein.
PLEASE READ THE ENCLOSED MATERIALS CAREFULLY
For further assistance or additional copies of any of the enclosed
materials, please call us at 1-800-635-5461 ext. 3440 (toll free).
Very truly yours,
/s/ JOHNNY M. HUMPHREYS
-------------------------------------
Johnny M. Humphreys
President and Chief Executive Officer
Itron, Inc.
February 11, 1999
Spokane, Washington
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OFFERING CIRCULAR
ITRON, INC.
OFFER TO EXCHANGE UP TO $15,840,000 AGGREGATE
PRINCIPAL AMOUNT OF ITS NEW 6 3/4% CONVERTIBLE SUBORDINATED
NOTES DUE 2004 FOR UP TO $22,000,000 AGGREGATE PRINCIPAL AMOUNT
OF ITS ORIGINAL 6 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
Itron, Inc., a Washington corporation ("Itron" or the "Company"), hereby
offers to exchange, upon the terms and subject to the conditions set forth
herein and in the accompanying Letter of Transmittal (which together constitute
the "Exchange Offer"), up to $15,840,000 aggregate principal amount of its
6 3/4% Convertible Subordinated Notes due 2004 (the "Exchange Notes") for up to
$22,000,000 aggregate principal amount of its 6 3/4% Convertible Subordinated
Notes due 2004 (the "Original Notes") on the basis of $720 principal amount of
Exchange Notes for $1,000 principal amount of Original Notes. The Company has
determined the terms of the Exchange Offer and the Exchange Notes primarily
pursuant to discussions with a significant holder of the Original Notes, and
believes that the terms and conditions of the Exchange Offer and the Exchange
Notes reflect the current fair market value of the Original Notes.
The Exchange Notes are convertible, in whole or in part, at the option of
the Holder, at any time prior to the close of business on the last business day
prior to the maturity date into shares of the Company's Common Stock. The
conversion price per share (the "Conversion Price") will be determined by adding
the Average Market Price (as defined below) to the result of the Average Market
Price multiplied by a percentage amount (the "Conversion Price Premium"), which
the Company currently expects to be in the range of 25% to 30%. The Conversion
Price Premium will be determined by the Company based on market conditions no
later than the tenth business day prior to the expiration date of the Exchange
Offer. The "Average Market Price" will be the arithmetic average (rounded to the
nearest cent) of the closing prices of the Common Stock on the Nasdaq National
Market on each of the five business days ending two business days prior to the
expiration date of the Exchange Offer. The determination of the Conversion Price
Premium, the Average Market Price and the Conversion Price shall be made by the
Company, and its determination shall be final and conclusive on all tendering
noteholders. The Company intends to issue press releases setting forth the
Conversion Price Premium, the Average Market Price and the Conversion Price as
promptly as practicable following the Company's determination thereof. In
addition, the noteholders may obtain the Conversion Price Premium, the Average
Market Price and the Conversion Price by calling the Company at the toll-free
number provided herein.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.
NEW YORK CITY TIME, ON FRIDAY, MARCH 12, 1999,
UNLESS EXTENDED.
The Company does not intend to apply for listing or quotation of the
Exchange Notes on any exchange or automated quotation system. Accordingly, there
can be no assurance that any public market will develop for the Exchange Notes.
The Exchange Notes will be unsecured obligations of the Company, ranking on
parity with the Original Notes, and subordinated and subject in right of payment
to all existing and future senior indebtedness of the Company. The Exchange
Notes will bear interest at 6 3/4% per annum beginning on the expiration date of
the Exchange Offer, payable semiannually on each March 31 and September 30,
commencing September 30, 1999, until the Exchange Notes are paid in full or are
converted. The Company will be required to repay the principal amount of the
Exchange Notes on March 31, 2004 if the Exchange Notes are not converted or
previously redeemed. The Exchange Notes will be redeemable, at the Company's
option, in whole or in part at any time after March 12, 2002, at the principal
amount to be redeemed plus accrued and unpaid interest thereon to the redemption
date. The Exchange Notes will be issued pursuant to an Indenture between the
Company and Chase Manhattan Bank and Trust Company, National Association, as
Trustee (the "Trustee").
The Company will accept up to $22 million aggregate principal amount of the
Original Notes if tendered (representing approximately 35% of the Original
Notes). If more than $22 million aggregate principal amount of the Original
Notes is tendered, the acceptance of Original Notes will be allocated among
tendering noteholders on a pro rata basis. The Exchange Offer is not conditioned
on any minimum amount of Original Notes being tendered, but it is subject to a
number of conditions as described herein and may be amended or withdrawn in
certain circumstances. See "The Exchange Offer -- Conditions to and Amendment of
the Exchange Offer."
THESE SECURITIES ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION"). THE COMMISSION DOES NOT PASS UPON THE MERITS OF ANY SECURITIES
NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR
OTHER SELLING LITERATURE.
For a discussion of certain risks and other factors to be considered in
connection with the Exchange Offer, see "Risk Factors."
THE DATE OF THIS OFFERING CIRCULAR IS FEBRUARY 11, 1999.
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The Company has made no arrangements for, and has no understanding with any
dealer, salesman or other person regarding, the solicitation of tenders
hereunder, and no person has been authorized to give any information or to make
any representation not contained in this Offering Circular in connection with
the Exchange Offer, and, if given or made, such information or representation
must not be relied upon as having been authorized by the Company or any other
person. Neither the delivery of this Offering Circular nor any exchange or sale
made hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the respective dates as
of which information is given herein.
This Offering Circular does not constitute an offer to exchange or sell, or
a solicitation of an offer to exchange or buy, any securities other than the
securities covered by this Offering Circular by the Company or any other person,
or any such offer or solicitation of such securities by the Company or any such
other person in any state or other jurisdiction to any person to whom it is
unlawful to make any such offer or solicitation. In any state or other
jurisdiction where it is required that the securities offered by this Offering
Circular be qualified for offering or that the offering be approved pursuant to
tender offer statutes in such state or jurisdiction, no offer is hereby being
made to, and tenders will not be accepted from, residents of any such state or
jurisdiction unless and until such requirements have been satisfied.
2
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TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION....................................... 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 4
FORWARD LOOKING STATEMENTS.................................. 4
SUMMARY OF EXCHANGE OFFER................................... 5
RISK FACTORS................................................ 10
Risks Relating to Exchange Offer.......................... 10
Risks Relating to Exchange Notes.......................... 10
Risks Relating to the Company's Business.................. 12
Certain United States Federal Income Tax Risks............ 17
THE EXCHANGE OFFER.......................................... 18
General................................................... 18
Expiration Time, Extensions, Termination and Amendments... 18
How to Tender............................................. 18
Withdrawal Rights......................................... 20
Acceptance of Original Notes for Exchange; Delivery of
Exchange Notes......................................... 20
Denominations; Fractional Interests....................... 20
Proration If Original Notes Tendered Exceed Maximum....... 21
Payment of Interest on Tendered Original Notes............ 21
Conditions to and Amendment of the Exchange Offer......... 21
Exchange Agent............................................ 22
Where to Obtain Additional Information.................... 23
No Financial Advisor...................................... 23
Payment of Expenses....................................... 23
BACKGROUND, PURPOSE AND EFFECT OF THE EXCHANGE OFFER........ 24
CAPITALIZATION.............................................. 26
SUMMARY SELECTED CONSOLIDATED AND PRO FORMA FINANCIAL
DATA...................................................... 27
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY............. 30
DESCRIPTION OF THE EXCHANGE NOTES........................... 31
General................................................... 31
Conversion Rights......................................... 32
Optional Redemption....................................... 33
Certain Rights to Require Repurchase of Exchange Notes.... 34
Consolidation, Merger and Sale of Assets.................. 35
Events of Default......................................... 35
Modification and Waiver................................... 36
Subordination............................................. 37
Defeasance................................................ 38
Book Entry................................................ 38
Certificated Exchange Notes............................... 40
Regarding the Trustee..................................... 41
Governing Law............................................. 41
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES....... 41
U.S. Holders.............................................. 42
Certain U.S. Tax Consequences to Non-U.S. Holders......... 46
</TABLE>
3
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AVAILABLE INFORMATION
Itron is subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The Company has also
filed a Schedule 13E-4 (the "Schedule") with the Commission, which Schedule also
contains information with respect to the Exchange Offer and the Company. This
filed material may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, NW,
Washington, D.C. 20549, and at the following regional offices of the Commission:
Seven World Trade Center, Suite 1300, New York, New York 10048, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such materials can be obtained by mail from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, NW, Washington,
D.C. 20549, at prescribed rates. In addition, the Commission maintains a site on
the World Wide Web that contains reports, proxy and information statements and
other information filed electronically by Itron with the Commission that can be
accessed over the Internet at http://www.sec.gov.
Copies of all documents that are incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the information that this Offering Circular
incorporates) will be provided without charge to each person, including any
beneficial owner, to whom this Offering Circular is delivered, upon written or
oral request. Requests should be directed to Itron, Inc., 2818 N. Sullivan Road,
Spokane, Washington 99216, Attention: Investor Relations, or by telephone to
1-800-635-5461, ext. 3440.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated by
reference into this Offering Circular: (i) Itron's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 (as amended on June 16, 1998); (ii)
Itron's Quarterly Reports on Form 10-Q for the quarters ended March 31 (as
amended on June 16, 1998), June 30, and September 30, 1998; (iii) Itron's
Current Reports on Form 8-K dated May 1, 1998 and January 28, 1999; and (iv) for
a description of the Original Notes and the Common Stock, Itron's Registration
Statement on Form S-3 filed on June 3, 1997, Commission File No. 333-28451. If
any statement contained in any of the foregoing documents incorporated by
reference herein is modified or superseded by a statement in this Offering
Circular, the statement in any such foregoing document will be deemed for the
purposes of this Offering Circular to have been modified or superseded by such
statement in this Offering Circular, and the statement in any such foregoing
document is incorporated by reference herein only as modified or to the extent
it is not superseded. All documents subsequently filed by the Company during the
period of the Exchange Offer pursuant to Sections 13, 14 or 15(d) of the
Exchange Act shall be deemed to be incorporated by reference in this Offering
Circular and to be a part hereof from the date of filing such documents.
FORWARD LOOKING STATEMENTS
When included in this Offering Circular 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 "Summary of Exchange Offer -- 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 Offering Circular. 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
Exchange Act and the rules promulgated thereunder.
4
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SUMMARY OF EXCHANGE OFFER
The following is a summary of certain features of the Exchange Offer and
other matters. For a more complete description of the Exchange Offer and the
Exchange Notes, please read this entire Offering Circular.
THE COMPANY
Itron is a leading global provider to the utility industry of integrated
system 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 80% of
the largest utilities in North America. In total, over 1,500 utility customers
in more than 40 countries use these systems to read approximately 275 million
meters. In 1998, EMR systems and services accounted for approximately 22% of the
Company's total revenues. In the early 1990s, Itron expanded its product line to
include AMR systems and services. The Company had shipped over 13.5 million AMR
meter modules to 403 utilities as of December 31, 1998, and has thereby
established itself as the world's leading supplier of AMR systems. In 1998, AMR
systems and services, including outsourcing, represented approximately 78% of
the Company's total revenues.
Recent Events. On February 3, 1999, the Company reported its unaudited
financial results for the fourth quarter and year-ended December 31, 1998. The
Company reported net income of $627,000, or 4 cents per share for the fourth
quarter of 1998. Without restructuring charges of $683,000 for the quarter, the
Company would have reported net income of $1.1 million, or 7 cents per share.
This compares with net income of $3.3 million, or 22 cents per share, for the
fourth quarter of 1997. Net income in the fourth quarter of 1997, excluding a
$1.2 million pre-tax non-recurring gain (net of related expenses), would have
been $2.5 million, or 17 cents per share. For the full year 1998, the Company
reported a net loss of $6.2 million, or 42 cents per share, compared with net
income of $1.0 million, or 7 cents per share in 1997. Excluding the effect of
restructuring charges in 1998 and the non-recurring gain in 1997, the Company
would have reported a net loss in 1998 of $3.7 million, or 26 cents per share,
compared with net income of $464,000, or 3 cents per share, in 1997. Gross
margins were 34% of revenues for the fourth quarter of 1998 compared to 27% in
the preceding quarter and 40% for the fourth quarter of 1997. For the full year
1998, gross margins were 32% of revenues compared to 37% in 1997. Despite the
loss for 1998, the Company used only $898,000 in cash from operations during
1998 as a result of improved receivables collections and inventory turns
throughout the year. The Company invested $3.1 million and $18.1 million in the
fourth quarter and full year 1998, respectively, compared with $8.5 million and
$34.1 million invested in the fourth quarter and full year 1997, respectively.
The lower amounts in 1998 result primarily from investing less in equipment used
in outsourcing.
The mailing address and telephone number of the principal executive offices
of the Company are 2818 N. Sullivan Road, P.O. Box 15288, Spokane, Washington
99216-1897 and (509) 924-9900. The Company was incorporated in Washington in
1977.
BACKGROUND, PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Company issued the Original Notes on March 18, 1997 and April 15, 1997
pursuant to an exemption from registration afforded by Rule 144A and Regulation
S under the Securities Act of 1933, as amended (the "Securities Act"). Pursuant
to a Registration Rights Agreement between the Company and the initial
purchasers of the Original Notes, the Company filed a Registration Statement on
Form S-3, Commission File No. 333-28451, under which the holders of the Original
Notes could resell such notes. At the time of original issuance, the Original
Notes conversion price of $23.70 per share represented a 20% premium above the
average daily trading price of the Common Stock for the five days preceding
March 12, 1997. Since that time, the Company's Common Stock trading price has
generally declined. On February 10, 1999, the closing price of the Common Stock
was $8.88 per share.
The Company intends to effect the Exchange Offer to reduce its outstanding
long-term debt and to reduce the Company's debt service obligations. In
addition, because the interest rate applicable to borrowings
5
<PAGE> 7
under the Company's line of credit is dependent in part on the Company's total
debt, this interest rate may decline. Tendering noteholders will receive the
benefit of a reduced conversion price for the Exchange Notes, which is more
reflective of the current trading price of the underlying Common Stock. See
"Background, Purpose and Effect of the Exchange Offer."
The Company, its Board of Directors and its executive officers make no
recommendations as to whether any noteholders should tender any or all of such
noteholders' Original Notes pursuant to the Exchange Offer. Each noteholder must
make the decision whether to tender the Original Notes held by such noteholder
and, if so, the aggregate principal amount of Original Notes to tender.
Executive officers and directors of the Company have advised the Company that
they do not hold any Original Notes.
THE EXCHANGE OFFER
Expiration Time............... 5:00 p.m., New York City time, on Friday, March
12, 1999, unless extended (the "Expiration
Time").
Exchange Ratio................ $720 principal amount of Exchange Notes for
$1,000 principal amount of Original Notes.
Determination of Conversion
Price......................... The Conversion Price of the Exchange Notes will
be determined by adding the Average Market
Price (as defined below) to the result of the
Average Market Price multiplied by a percentage
amount (the "Conversion Price Premium"), which
the Company currently expects to be in the
range of 25% to 30%. The Conversion Price
Premium will be determined by the Company based
on market conditions no later than the tenth
business day prior to the expiration date of
the Exchange Offer. The "Average Market Price"
will be the arithmetic average (rounded to the
nearest cent) of the closing prices of the
Common Stock on the Nasdaq National Market on
each of the five business days ending two
business days prior to the expiration date of
the Exchange Offer. The determination of the
Conversion Price Premium, the Average Market
Price and the Conversion Price shall be made by
the Company, and its determination shall be
final and conclusive on all tendering
noteholders. The Company intends to issue press
releases setting forth the Conversion Price
Premium, the Average Market Price and the
Conversion Price as promptly as practicable
following the Company's determination thereof.
In addition, noteholders may obtain the
Conversion Price Premium, the Average Market
Price and the Conversion Price by calling the
Company at the toll-free number provided.
Acceptance of Original Notes;
Conditions of the Exchange
Offer....................... The Company will accept up to $22 million
aggregate principal amount of the Original
Notes (representing approximately 35% of the
outstanding aggregate principal amount of the
Original Notes) in the Exchange Offer. If more
than $22 million aggregate principal amount of
the Original Notes are tendered, the Company
will allocate the notes accepted among the
tendering noteholders on a pro rata basis. The
Company will pay to the tendering noteholders
all accrued but unpaid interest on all tendered
and accepted Original Notes to (but not
including) the expiration date of the Exchange
Offer. The Exchange Notes will be issued only
in denominations of $1,000 and integral
multiples thereof. The Company will pay cash
for any fractional interests in the Exchange
Notes. The Exchange Offer is subject to a
number of conditions as
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<PAGE> 8
described herein. See "The Exchange
Offer -- Denominations; Fractional Interests,"
"-- Payment of Interest on the Tendered
Original Notes" and "-- Conditions to and
Amendment of the Exchange Offer."
How to Tender................. A holder of Original Notes wishing to accept
the Exchange Offer must either (a) complete the
accompanying Letter of Transmittal and forward
it and any other required documents to Chase
Manhattan Bank and Trust Company, National
Association (the "Exchange Agent") or (b)
request a broker or bank to effect the
transaction. Holders of Original Notes
registered in the name of a broker, dealer,
bank, trust company, or other nominee must
contact such institution to tender their
Original Notes. See "The Exchange Offer -- How
to Tender."
Delivery of Securities........ The Exchange Notes will be represented by a
Global Note in fully registered form, without
coupons (the "Global Note"), which will be
deposited with a custodian for, and registered
in the name of a nominee of, The Depository
Trust Company ("DTC") in New York City.
Beneficial interests in the Global Note will be
shown on, and transfers thereof will be
effected only through, records maintained by
DTC and its participants. The Company will
cause DTC to transfer interests in the Exchange
Notes in exchange for Original Notes pursuant
to the Exchange Offer as soon as practicable
after the Expiration Time. See "The Exchange
Offer -- Acceptance of Original Notes for
Exchange; Delivery of Exchange Notes."
Withdrawal Rights............. Tenders of Original Notes pursuant to the
Exchange Offer may be withdrawn prior to 5:00
p.m., New York City time, on March 12, 1999,
and if the Company has not previously accepted
such Original Notes for exchange, after April
7, 1999. Except for such rights of withdrawal,
all tenders are irrevocable.
Certain United States Federal
Income Tax Consequences..... See "Certain United States Federal Income Tax
Consequences" for a discussion of certain
federal income tax consequences associated with
the Exchange Offer and the ownership of the
Exchange Notes, and "Risk Factors -- Certain
United States Federal Income Tax Risks."
Listing and Trading of
Securities.................. The Company's Common Stock (symbol: ITRI) is
listed on the Nasdaq National Market. On
February 10, 1999, the last business day before
the announcement of the Exchange Offer, the
closing price for the Common Stock as reported
by Nasdaq was $8.88 per share. The Original
Notes are not listed for trading on any
exchange or automated quotation system, and
trading in the Original Notes is sporadic.
Accordingly, reliable historical trading
information regarding the Original Notes is not
available. No market currently exists with
respect to the Exchange Notes, and the Company
does not intend to list the Exchange Notes for
trading on any exchange or automated quotation
system. Accordingly, there can be no assurance
that any trading market will develop for the
Exchange Notes or, if developed, as to any
price at which they might be traded. See "Risk
Factors -- Absence of
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<PAGE> 9
Market; Illiquidity of Securities" and "Price
Range of Common Stock and Dividend Policy."
Exchange Agent and Trustee.... Chase Manhattan Bank and Trust Company,
National Association will serve as the Exchange
Agent for the Exchange Offer and as Trustee
under the Indenture (as defined herein). See
"The Exchange Offer -- Exchange Agent" and
"Description of the Exchange Notes -- Regarding
the Trustee."
Where to Obtain Additional
Information................. The Company will provide assistance or
additional copies of documents in connection
with the Exchange Offer, telephone no.
1-800-635-5461, ext. 3440 (toll-free). See "The
Exchange Offer -- Where to Obtain Additional
Information."
Common Stock Outstanding...... Approximately 14,762,791 shares of Common Stock
were outstanding as of January 31, 1999.
DESCRIPTION OF THE EXCHANGE NOTES
Securities Offered............ $15,840,000 aggregate principal amount of
6 3/4% Convertible Subordinated Notes Due 2004.
Maturity Date................. March 31, 2004.
Interest Payment Dates........ Interest on the Exchange Notes will accrue from
the expiration date of the Exchange Offer and
will be payable in cash semiannually on each
March 31 and September 30, commencing September
30, 1999.
Transfer Restrictions......... Exchange Notes issued in exchange for certain
Original Notes may have certain transfer
restrictions until April 15, 1999. See
"Background, Purpose and Effect of the Exchange
Offer."
Conversion Rights............. The Exchange Notes are convertible, in whole or
in part, at the option of the holder at any
time prior to the close of business on the last
business day prior to the maturity date, unless
previously redeemed, into shares of Common
Stock at the Conversion Price per share to be
determined pursuant to the formula described
above, subject to adjustment in certain
circumstances. Accrued interest on the Exchange
Notes will not be paid in cash upon their
conversion to Common Stock; any accrued
interest will be deemed paid by the appropriate
portion of the Common Stock received by the
holder of the Exchange Notes upon such
conversion. See "Description of Exchange
Notes -- Conversion Rights."
Sinking Fund.................. None.
Optional Redemption........... The Exchange Notes are redeemable, in whole or
in part, at the option of the Company at any
time after March 12, 2002, at the principal
amount to be redeemed, plus accrued and unpaid
interest to the date of redemption. See
"Description of Exchange Notes -- Optional
Redemption."
Repurchase Right of Holders... Upon the occurrence of a Change in Control,
Holders may elect to require the Company to
repurchase their Exchange 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 repur-
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<PAGE> 10
chase. See "Description of Exchange
Notes -- Certain Rights to Require Repurchase
of Exchange Notes."
Ranking....................... The Exchange Notes are general unsecured
obligations of the Company, ranking on parity
with the Original Notes, and are subordinated
in right of payment to the prior payment in
full of all Senior Indebtedness 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. At September 30, 1998,
Senior Indebtedness and indebtedness of the
Company's subsidiaries were approximately $26.6
million, and the aggregate principal amount of
outstanding Original Notes was $63.4 million.
See "Description of Exchange
Notes -- Subordination."
Denomination and Registration
of Notes.................... The Exchange Notes will be represented by a
Global Note in fully registered form, without
coupons, which will be deposited with a
custodian for, and registered in the name of a
nominee of DTC in New York City. Beneficial
interests in the Global Note will be shown on,
and transfers thereof will be effected only
through, records maintained by DTC and its
participants. Unless certain conditions
specified in the Indenture are met,
certificated Exchange Notes will not be issued
in exchange for beneficial interests in the
Global Note. See "Transfer Restrictions" and
"Description of Exchange Notes -- Book Entry."
Use of Proceeds............... The Company will not receive any proceeds from
the Exchange Notes.
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<PAGE> 11
RISK FACTORS
Investment in the Exchange Notes is subject to certain risks, including
those set forth below. In considering the Exchange Offer, a noteholder should
carefully consider the following risk factors and all other information
appearing in this Offering Circular, as well as such noteholder's particular
financial circumstances, investment objectives and tax situation.
RISKS RELATING TO EXCHANGE OFFER
Exchange Offer Subject to Certain Contingencies. The Exchange Offer is
subject to certain contingencies that are not within the control of the Company.
First, unless the Company amends the Exchange Offer, the Company will accept no
more than $22 million aggregate principal amount of the Original Notes in the
Exchange Offer. If more than $22 million aggregate principal amount of the
Original Notes is validly tendered, the Company will allocate Exchange Notes
among the tendering noteholders on a pro rata basis based on the aggregate
principal amount of Original Notes tendered. In addition, the Exchange Offer
requires qualification of the Indenture under the Trust Indenture Act and may
require certain approvals or consents from government regulatory agencies and
other third parties. There can be no assurance that all required conditions,
consents, or regulatory approvals will be obtained or achieved in a timely
manner. Moreover, the Exchange Offer may be modified or withdrawn in certain
circumstances subject to the discretion of the Company's Board of Directors. See
"The Exchange Offer -- Conditions to and Amendment of the Exchange Offer."
Arbitrary Determination of Terms of the Exchange Notes. The Company has
determined the terms of the Exchange Notes without retaining any independent
financial advisor or investment banking firm to provide advice as to whether the
terms of the Exchange Notes are fair from a financial point of view to tendering
noteholders. In this regard, there can be no assurance that, if the Company were
to issue subordinated debt in the capital markets, the interest rate on such
debt would not be higher than 6 3/4% per annum, or that the financial and other
covenants would not be more restrictive.
Fraudulent Conveyance Considerations. Under applicable provisions of the
Bankruptcy Code or comparable provisions of fraudulent transfer law, the
Exchange Notes could be voided, or claims in respect of the Exchange Notes could
be subordinated to all other debts of the Company if the Company, at the time it
incurred its indebtedness in connection with the Exchange Offer, (i) incurred
such indebtedness with the intent to hinder, delay or defraud a present or
future creditor or (ii) (a) received or receives less than reasonably equivalent
fair value or fair consideration and (b) (1) was or is insolvent or rendered
insolvent by reason of such incurrence or (2) was or is engaged in a business or
transaction for which the assets remaining with it constituted unreasonably
small capital or (3) intended or intends to incur, or believed or believes that
it would incur, debts beyond its ability to pay such debts as they mature or (4)
was a defendant in an action for money damages docketed against it (if, in
either case, after final judgment the judgment is unsatisfied). In addition, the
payment of principal by the Company pursuant to the Exchange Notes could be
voided and be required to be returned to any such present or future creditor, or
to a fund for the benefit of the creditors of the Company or to any judgment
creditor referred to in clause (4) above.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company would be considered insolvent if the
sum of its debts, including contingent liabilities, was greater than the fair
salable value of all of its assets at a fair valuation or if the present fair
salable value of its assets were less than the amount that would be required to
pay its probable liability on its existing debts, including contingent
liabilities, as they became absolute and mature. There can be no assurance,
however, as to what standard a court would apply in making such a determination.
RISKS RELATING TO EXCHANGE NOTES
Ability to Service Debt; Financial Condition. Although the Exchange Offer
will reduce the Company's annual debt service obligations, the funds generated
by existing operations may not be at levels sufficient to enable the Company to
meet its debt service obligations on the Exchange Notes and the Original Notes
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<PAGE> 12
(which together will be initially approximately $3.9 million annually, assuming
the exchange of the maximum amount of Original Notes pursuant to the Exchange
Offer) 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 remaining Original Notes and the Exchange 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.
Currently, the Company has a revolving credit facility of a maximum of $35
million. Borrowings available under the facility are based on accounts
receivable and inventory, in which the Company has granted the lenders a
security interest. The line of credit expires on September 30, 1999. While the
Company expects the credit facility to be renewed or replaced in the ordinary
course, there can be no assurance that it will be renewed or replaced on terms
acceptable to the Company or at sufficient levels.
Absence of Market; Illiquidity of Securities. There is no established
trading market for the Exchange Notes. The Company does not intend to apply for
listing of the Exchange Notes on any national securities exchange or on the
Nasdaq National Market. There can be no assurance that an active trading market
for the Exchange Notes will develop or, if one does develop, that it will be
maintained. If an active trading market for the Exchange Notes fails to develop
or be sustained, the trading price of such Exchange Notes could be materially
adversely affected, and Holders may experience difficulty in reselling the
Exchange Notes or may be unable to sell them. If a public trading market
develops for the Exchange Notes, future trading prices of the Exchange Notes
will depend upon many factors, including, among other things, prevailing
interest rates and the market price of the Common Stock.
Subordination. The Exchange Notes are general unsecured obligations of the
Company, ranking on parity with the Original Notes, and 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 September 30, 1998, the principal amount of the Company's
outstanding Senior Indebtedness was approximately $26.6 million, and the
outstanding aggregate principal amount of Original Notes was $63.4 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 Exchange
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 Exchange Notes in certain circumstances involving a Change in
Control if at such time the subordination provisions of the Indenture prohibit
the Company from making payments of principal in respect of the Exchange 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.
Limitation on Repurchase of Exchange Notes. In certain circumstances
involving a Change in Control, each Holder may require the Company to repurchase
all or a portion of such Holder's Exchange 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 Exchange 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 Exchange Notes in
the event payment of Senior Indebtedness is accelerated.
Volatility of Share Price. The closing price of the Common Stock has ranged
from $4.63 to $27.44 per share since January 1, 1997. 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
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<PAGE> 13
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. The market price of the Exchange Notes may be materially
adversely affected by declines in the market price of the Common Stock.
RISKS RELATING TO THE COMPANY'S BUSINESS
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 in the state and federal 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 subjecting metering and
other services to competition. For example, in California, the California Public
Utility Commission issued a decision that does subject metering, billing and
related services to competitive supply. The discontinuance of a utility's
metering monopoly could have a significant impact upon the manner in which the
Company markets and sells its products and services. As the customer for the
Company's products and services could change from utilities alone to utilities
and their competitive suppliers of metering services, the Company could also be
required to modify its products and services (or develop new products and
services) to meet the needs of the participants in a competitive meter services
market.
Recent Operating Losses. The Company experienced operating losses in
certain quarters of each of the past three years and may experience quarterly
losses in 1999. There can be no assurance that the Company will 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
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<PAGE> 14
operating expenses, shifts in product or sales channel mix, and increased
competition. The Company's operating margins have been and are currently being
adversely affected by excess manufacturing capacity. The Company 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. For example, the Company has entered into large Fixed Network
Contracts with Duquesne and Virginia Power with margins significantly below the
Company's historical margins due to competitive pressures.
Customer Concentration. In some years, the Company's revenues are
concentrated with a limited number of customers, the identity of which changes
over time. The Company is from time to time dependent on large, multiyear
contracts that 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.
Dependence on New Product Development. The Company has made substantial,
and expects to continue to make, investments 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. This product development will require continued 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.
The Company has previously 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 successfully develop 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 may continue to own in order to provide meter reading and other related
services to utilities and their customers. The Company currently has three
outsourcing contracts. The largest of the contracts, which is with Duquesne
Light Company, involves Fixed Network AMR. The other two contracts involve a
Mobile AMR solution and, in one case, the AMR system has been sold on a turnkey
basis. These 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.
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., Whisper and
Schlumberger, Ltd. 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 may be developing competitive products for
the AMR market. In addition, large meter manufacturers could expand their
current product and services offerings so as to compete directly with the
Company. To
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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, as well as greater 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 has not grown as quickly in recent
years 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 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, and potentially its inventory, 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
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<PAGE> 16
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 has retained an executive search firm to assist
in finding a new CEO and President, a position currently held by Johnny
Humphreys, who is also Chairman. While Mr. Humphreys intends to retain his
current responsibilities until a successor is selected and will be actively
involved in the affairs of the Company for an indefinite period, the Company's
success will be dependent on the selection of a qualified eventual successor to
Mr. Humphreys. 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.
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 65% of its handheld devices from one
vendor located in the United Kingdom. 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 lines 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 in 1997 the
Company completed the project financing of an AMR project, there can be no
assurance that it will be able to effect other project financings. If the
Company is unable to utilize limited recourse, 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 this exposure.
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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.
Antitakeover Considerations. 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.
Year 2000 Compliance. The Company instituted a Year 2000 program in 1997 to
address Year 2000 issues (e.g. issues resulting from the inability of certain
computer and non-information technology systems to properly recognize
date-sensitive information when the year changes from 1999 to 2000). The Company
has identified potential risks related to the Year 2000 problem in three areas:
(1) the Company's suppliers, (2) the internally developed software and hardware
that the Company sells, and (3) the Company's internal software and hardware
systems. The steps that the Company has taken to mitigate the Year 2000 problem
in each of these risk areas is described in the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998. The Company believes that it
will mitigate potential Year 2000 problems by successfully implementing
solutions and developing contingency plans in a timely manner. Some problems,
however, may remain uncorrected, and could materially adversely affect the
Company's business, financial condition, and operating results. The Company may
also experience reduced sales of its products as potential and current customers
reduce their budgets for meter-reading and data management solutions because of
increased expenditures on their own Year 2000 compliance efforts. Any Year
2000-related problem of either the Company or its suppliers could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Regulatory Compliance. The Company is subject to various federal and state
governmental regulations related to occupational safety and health, labor, and
wage practices as well as federal, state, and local governmental regulations
relating to the storage, discharge, handling, emission, generation, manufacture,
and disposal of toxic or other hazardous substances used to produce the
Company's products. The Company believes that it is currently in material
compliance with such regulations. Failure to comply with current or future
environmental regulations could result in the imposition of substantial fines on
the Company,
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suspension of production, alteration of its production processes, cessation of
operations, or other actions which could materially and adversely affect the
Company's business, financial condition, and results of operations. In the
ordinary course of its business, the Company uses metals, solvents, and similar
materials which are stored on site. The waste created by use of these materials
is transported off site on a regular basis by a state-registered waste hauler.
Although the Company is not aware of any material claim or investigation with
respect to these activities, there can be no assurance that such a claim may not
arise in the future or that the cost of complying with governmental regulations
in the future will not have a material adverse effect on the Company.
CERTAIN UNITED STATES FEDERAL INCOME TAX RISKS
Tax Consequences to Holders Tendering Original Notes for Exchange Notes. If
the Exchange Offer constitutes a recapitalization and a reorganization for
federal tax purposes, holders who purchased an Original Note at a cost greater
than the fair market value of the Original Note at the time of the Exchange will
not be able to recognize a loss upon the Exchange. The Exchange should
constitute a reorganization for federal tax purposes. See "Certain United States
Federal Income Tax Consequences to Tendering Holders."
Tax Consequences of Exchange Offer to the Company. The Company will
recognize ordinary income from cancellation of indebtedness to the extent that
the aggregate "adjusted issue price" of the Original Notes exchanged for
Exchange Notes exceeds the aggregate "issue price" of the Exchange Notes.
Generally, the "adjusted issue price" of an Original Note is the first price at
which a substantial amount of the Original Notes were sold for money. The "issue
price" of an Exchange Note will be the fair market value of the Original Note on
the date of the Exchange if the Original Notes or the Exchange Notes are deemed
to be "traded on an established securities market" under the Code and as
provided in Treasury regulations. If a substantial amount of the Exchange Notes
are so traded, it is possible that under Treasury regulations the "issue price"
of an Exchange Note will be the fair market value of the Exchange Note, rather
than that of an Original Note, on the issue date. If neither the Original Notes
nor the Exchange notes so trade, the "issue price" of an Exchange Note will be
its "stated redemption price at maturity," which is the sum of its principal
amount plus all other payments required thereunder, other than payments of
"qualified stated interest" (defined generally as stated interest that is
unconditionally payable in cash or in property (other than debt instruments of
the issuer) at least annually at a single fixed rate). It is uncertain whether
the Original Notes or Exchange Notes would be deemed to be "traded on an
established securities market" under relevant Treasury regulations.
If any Exchange Notes are issued with "bond issuance premium," the
Company's interest deduction on the Exchange Notes will be reduced over the term
of the Exchange Notes. An Exchange Note would be considered to be issued with
"bond issuance premium" if its "issue price" exceeds its stated redemption price
at maturity, but only to the extent such excess is not attributable to
conversion features of the Exchange Note.
Interest on Exchange Notes -- General. In general, interest will be taxable
as ordinary income to a holder of the Exchange Notes at the time such amounts
are accrued or received in accordance with the holder's method of accounting.
See "Certain United States Federal Income Tax Consequences -- U.S. Holders".
NOTEHOLDERS CONTEMPLATING AN EXCHANGE OF ORIGINAL NOTES FOR EXCHANGE NOTES
PURSUANT TO THE EXCHANGE OFFER ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES
OF EXCHANGES MADE BY THEM PURSUANT TO THE EXCHANGE OFFER AS WELL AS THE SPECIFIC
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES ASSOCIATED WITH THE
OWNERSHIP OF EXCHANGE NOTES RECEIVABLE IN THE EXCHANGE.
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<PAGE> 19
THE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth herein and in the accompanying Letter of Transmittal, to exchange up to
$15,840,000 aggregate principal amount of its Exchange Notes for up to
$22,000,000 aggregate principal amount of its Original Notes on the basis of
$720 principal amount of Exchange Notes for each $1,000 principal amount of
Original Notes outstanding.
Unless the Exchange Offer is amended to increase the amount of Original
Notes that can be accepted, the Company will accept for exchange no more than
$22,000,000 aggregate principal amount of the Original Notes. If more than
$22,000,000 aggregate principal amount of the Original Notes is tendered, the
Company will allocate its acceptance of the Original Notes among the tendering
noteholders on a pro rata basis. The Exchange Offer is subject to a number of
additional conditions. See "-- Conditions to and Amendment of the Exchange
Offer."
For a more complete description of the Exchange Notes, see "Description of
the Exchange Notes." See also "Certain United States Federal Income Tax
Consequences."
Tendering noteholders will not be obligated to pay brokerage commissions or
fees or, subject to Instruction 9 of the Letter of Transmittal, transfer taxes
with respect to the exchange of Original Notes for Exchange Notes pursuant to
the Exchange Offer. The Company will pay all charges and expenses of the
Exchange Agent and the Trustee in connection with the Exchange Offer. See
"-- Payment of Expenses."
EXPIRATION TIME, EXTENSIONS, TERMINATION AND AMENDMENTS
The Exchange Offer will terminate at 5:00 p.m., New York City time, on
Friday, March 12, 1999, unless extended by the Company in its sole discretion.
During any extension of the Exchange Offer, all Original Notes previously
tendered and not yet exchanged will remain subject to the Exchange Offer
(subject to withdrawal rights specified herein) and may be accepted for exchange
by the Company. The later of 5:00 p.m., New York City time, on Friday, March 12,
1999, and the latest time and date to which the Exchange Offer may be extended,
is referred to herein as the "Expiration Time."
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time for which the Exchange Offer is to remain open by
giving oral or written notice to Chase Manhattan Bank and Trust Company,
National Association (the "Exchange Agent") of such extension prior to 9:00
a.m., New York City time, on the business day after the previously scheduled
Expiration Time. The Company also expressly reserves the right (i) to terminate
the Exchange Offer and not accept for exchange any Shares not theretofore
accepted for exchange upon the occurrence of any of the events set forth herein
under "-- Conditions to and Amendment of the Exchange Offer" and (ii) to amend
the Exchange Offer. Any such extension, termination or amendment will be
followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Time. Without limiting the manner in which the Company may choose to
make such public announcement, the Company shall not, unless otherwise required
by law, have an obligation to publish, advertise or otherwise communicate any
such public announcement other than by making a release to the Dow Jones News
Service.
HOW TO TENDER
Except as set forth below, for a noteholder to duly tender the Original
Notes pursuant to the Exchange Offer, a properly completed and duly executed
Letter of Transmittal (or facsimile thereof or Agent's Message, as defined in
the Letter of Transmittal, in lieu thereof), with any required signature
guarantees and any other required documents, must be transmitted to and received
by the Exchange Agent on or prior to the Expiration Time at the address
specified below under "-- Exchange Agent." LETTERS OF TRANSMITTAL SHOULD NOT BE
SENT TO ITRON. Because the Original Notes are represented by three global notes
and interests therein remain uncertificated, a tendering noteholder need not
send certificates representing the
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<PAGE> 20
Original Notes. Signatures on Letters of Transmittal need not be guaranteed by a
firm which is a member of a registered national securities exchange or a member
of the National Association of Securities Dealers, Inc. or by a commercial bank
or trust company having an office in the United States ("Eligible Institution"),
provided the Original Notes tendered pursuant thereto are tendered (i) by a
registered holder of the Original Notes who has not completed the box entitled
"Special Registration Instructions" or "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. In all
other cases, signatures must be guaranteed by an Eligible Institution. If
Original Notes are registered in the name of a person other than the signer of
the Letter of Transmittal, the Letter of Transmittal must be accompanied by a
written instrument or instruments of transfer or exchange in form satisfactory
to the Company, duly executed by the registered holder, with the signature
thereon guaranteed as aforesaid.
Tendering noteholders are required under federal income tax law to provide
a correct Taxpayer Identification Number on a Substitute Form W-9, which is
included, together with guidelines relating to the form, with the Letter of
Transmittal. Failure to complete and return this Substitute Form W-9 to the
Exchange Agent may subject a stockholder to a $50 penalty imposed by the
Internal Revenue Service (the "IRS") and will result in backup withholding of
31% on interest and other payments with respect to the Exchange Notes.
The method of delivery of all documents required to duly tender the
Original Notes is at the election and risk of the tendering noteholder but
delivery by registered mail with return receipt requested, properly insured, is
recommended.
If a noteholder desires to tender Original Notes and the procedure for
book-entry transfer cannot be timely completed or time will not permit such
holder's Letter of Transmittal and other required documents to reach the
Exchange Agent before the Expiration Time, such holder's tender may be effected
if
(a) such tender is made through an Eligible Institution;
(b) prior to the Expiration Time, the Exchange Agent has received a
Notice of Guaranteed Delivery, in substantially the form provided by the
Company herewith, from such Eligible Institution setting forth the name and
address of the holder of such Original Notes and the aggregate principal
amount of the Original Notes tendered and stating that the tender is being
made thereby and guaranteeing that, within three Nasdaq trading days after
the date of such telegram, facsimile transmission or letter, the Letter of
Transmittal and any other documents required by the Letter of Transmittal
(or Agent's Message in lieu thereof), will be deposited by such Eligible
Institution with the Exchange Agent; and
(c) such Letter of Transmittal (or Agent's Message in lieu thereof)
and other required documents are received by the Exchange Agent within
three Nasdaq trading days after the date of such telegram, facsimile
transmission or letter.
The acceptance by a noteholder of the Exchange Offer pursuant to one of the
procedures set forth above will constitute an agreement between the noteholder
and the Company in accordance with the terms and subject to the conditions set
forth herein and in the accompanying Letter of Transmittal.
The Company will accept Original Notes by giving notice thereof to the
Exchange Agent.
All questions as to the form of all documents and the validity (including
time of receipt) and acceptance of all tenders will be determined by the
Company, in its sole discretion, which determinations shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
not in proper form or the acceptance of which would, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Exchange Offer or any defect or irregularity
in the tender of any of the Original Notes. The Company's interpretation of the
terms and conditions of the Exchange Offer (including the Letter of Transmittal
and the instructions thereto) will be final. No tender of Original Notes will be
deemed to have been properly made until all defects and irregularities have been
cured or waived. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give
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<PAGE> 21
notification of any defects or irregularities in tenders, nor shall any of them
incur any liability for failure to give such notification.
WITHDRAWAL RIGHTS
All tenders duly and validly made are irrevocable, except that Original
Notes tendered pursuant to the Exchange Offer may be withdrawn prior to the
Expiration Time, and unless theretofore accepted for exchange as provided in the
Exchange Offer, may also be withdrawn after 5:00 p.m., New York City time, on
April 7, 1999.
To be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be received by the Exchange Agent on a timely basis at one of
the addresses specified under "-- Exchange Agent." Any notice of withdrawal must
specify the name of the person having tendered the Original Notes to be
withdrawn, the names in which the Original Notes are registered if different
from that of the tendering noteholder, and the aggregate principal amount of
Original Notes to be withdrawn. All questions as to validity, form and
eligibility (including time of receipt) of notices of withdrawal will be
determined by the Company, in its sole discretion, which determinations shall be
final and binding. Any Original Notes effectively withdrawn will be deemed not
to have been duly tendered for purposes of the Exchange Offer.
Neither the Company nor any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give such notification. However, the Exchange
Agent will attempt to correct any defective tenders by contacting the tendering
noteholder. Withdrawals of tenders of Original Notes may not be rescinded, and
any Original Notes properly withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer. However, withdrawn Original Notes
may be retendered by following one of the procedures described under "-- How to
Tender" at any time prior to the Expiration Time.
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Original Notes validly tendered and not withdrawn
will be made promptly after the Expiration Time. For purposes of the Exchange
Offer, the Company will be deemed to have accepted for exchange validly tendered
Original Notes when, as and if the Company has given oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering noteholders for the purposes of receiving Exchange Notes from the
Company and transmitting such securities to such noteholders. If the Company
should extend the Exchange Offer or be delayed in consummation of the Exchange
Offer for any reason, then, without prejudice to the Company's rights under the
Exchange Offer, the Exchange Agent acting on behalf of the Company may retain
tendered Original Notes, and such Original Notes may not be withdrawn, subject
to the withdrawal rights of tendering noteholders set forth above under
"-- Withdrawal Rights." Tendered Original Notes not accepted for exchange by the
Company because of an invalid tender, the termination of the Exchange Offer as a
result of the existence of a condition set forth below under "-- Conditions to
and Amendment of the Exchange Offer" or for any other reason, will be credited
on the Global Notes maintained within DTC as promptly as practicable following
the expiration or termination of the Exchange Offer.
Delivery of Exchange Notes in exchange for Original Notes tendered pursuant
to the Exchange Offer will be made by the Company to the Exchange Agent, as
agent for the tendering noteholders, only after the Exchange Agent receives
confirmation of the book-entry transfer of such Original Notes into the Exchange
Agent's account at DTC a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) or Agent's Message, and any other required
documents.
DENOMINATIONS; FRACTIONAL INTERESTS
The Exchange Notes will be issued only in denominations of $1,000 and
integral multiples thereof. Fractional interests with respect to the Exchange
Notes will not be distributed to tendering noteholders. The Company will issue
the maximum whole number of Exchange Notes possible for tendered Original Notes.
The Company will pay cash for any fractional interests in the Exchange Notes,
calculated by multiplying the
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<PAGE> 22
principal amount of the Original Notes tendered by .720, and subtracting from
the result the aggregate principal amount of Exchange Notes issued. Cash paid in
lieu of any fractional interests in the Exchange Notes will be paid to tendering
noteholders as soon as practicable after the expiration of the Exchange Offer.
PRORATION IF ORIGINAL NOTES TENDERED EXCEED MAXIMUM
Unless the Exchange Offer is amended, if noteholders validly tender more
than $22 million aggregate principal amount of the Original Notes, the Company
will accept for exchange no more than $22 million aggregate principal amount of
the Original Notes. In such event, Exchange Notes will be allocated to tendering
noteholders on a pro rata basis based on the aggregate principal amount of the
Original Notes tendered by each tendering noteholder. The Company will accept
from each tendering noteholder that aggregate principal amount of the Original
Notes equal to $22 million multiplied by a fraction, the numerator of which is
the aggregate principal amount of the Original Notes validly tendered by such
tendering noteholder and the denominator of which is the total aggregate
principal amount of the Original Notes validly tendered by all tendering
noteholders. The aggregate principal amount of the Original Notes will be
rounded up or down as nearly as practicable to result in the tender of whole
Original Notes rather than fractional Original Notes. Any Original Notes not
accepted by the Company as a result of the allocation described above will be
credited to the tendering noteholders' account.
PAYMENT OF INTEREST ON THE TENDERED ORIGINAL NOTES
The Company will pay all accrued but unpaid interest on all tendered and
accepted Original Notes to the tendering noteholders. Interest on all tendered
and accepted Original Notes will accrue up to but not including the expiration
date of the Exchange Offer. Interest on the tendered and accepted Original Notes
will be paid to the tendering noteholders on March 31, 1999, the same date on
which interest is to be paid on the outstanding Original Notes, pursuant to the
Indenture for the Original Notes dated March 12, 1997 between the Company and
Chase Manhattan Bank and Trust Company, National Association (formerly known as
Chemical Trust Company of California).
CONDITIONS TO AND AMENDMENT OF THE EXCHANGE OFFER
Unless the Exchange Offer is amended, the Company may accept up to $22
million aggregate principal amount of the Original Notes validly tendered
(representing approximately 35% of the outstanding aggregate principal amount of
Original Notes as of February 10, 1999). If more than $22 million aggregate
principal amount of Original Notes is tendered, the Company will accept no more
than $22 million aggregate principal amount of Original Notes to be allocated
among the tendering noteholders on a pro rata basis as described under
"-- Proration if Original Notes Tendered Exceed Maximum." The Exchange Offer is
subject to other conditions described below.
An application will be filed with the Commission for qualification of the
Indenture under which the Exchange Notes will be issued under the Trust
Indenture Act of 1939 (the "Trust Indenture Act"). The Exchange Offer is
conditioned upon the Indenture being qualified under the Trust Indenture Act. In
addition to the foregoing conditions, the Company may decline to accept any
Original Notes in exchange for Exchange Notes and may withdraw the Exchange
Offer as to Original Notes not then accepted if, before the time of acceptance,
there shall have occurred any of the following events which, in the Company's
sole judgment, makes it inadvisable to proceed with such acceptance:
(a) any government agency or other person shall have instituted or
threatened any action or proceeding before any court or administrative
agency (i) challenging the acquisition of Original Notes pursuant to the
Exchange Offer or otherwise in any manner relating to the Exchange Offer or
(ii) otherwise materially adversely affecting the Company, or there shall
have occurred any existing action or proceeding with respect to the
Company;
(b) any statute, rule or regulation shall have been proposed or
enacted, or any action shall have been taken by any governmental authority,
which would or might prohibit, restrict or delay consumma-
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tion of the Exchange Offer or materially impair the contemplated benefits
of the Exchange Offer to the Company;
(c) any state of war, national emergency, banking moratorium or
suspension of payments by banks in the State of New York shall have
occurred, or any currency or exchange control laws or regulations or
general suspension of trading or limitation on prices on Nasdaq shall have
been imposed, or there shall have occurred a material adverse change in the
securities markets generally;
(d) any required consents or approvals from third parties or
government regulatory agencies shall not have been obtained;
(e) the Exchange Offer would result in the Company's Common Stock
being delisted from the Nasdaq National Market; or
(f) any change, or development involving a prospective change, in or
affecting the business or financial affairs of the Company shall have
occurred.
The Company reserves the right to waive any of the foregoing conditions.
The Company also reserves the right to amend the Exchange Offer by public
announcement of any amendment. The Exchange Offer, however, may not be amended
or withdrawn unless the amendment or the circumstances described above regarding
withdrawal occur prior to the Expiration Time.
EXCHANGE AGENT
Chase Manhattan Bank and Trust Company, National Association has been
appointed as Exchange Agent for the Exchange Offer. All correspondence in
connection with the Exchange Offer and the Letter of Transmittal should be
addressed to the Exchange Agent, as follows:
By Mail, Hand or Overnight Delivery:
CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION
c/o Chase Bank of Texas, National Association
Corporate Trust Services
1201 Main Street, 18th Floor
Dallas, TX 75202
Attention: Frank Ivins (CONFIDENTIAL)
By Facsimile Transmission:
(For Eligible Institutions Only)
(214) 672-5746
Confirm by Telephone:
Frank Ivins (214) 672-5678
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA A
FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID
DELIVERY.
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WHERE TO OBTAIN ADDITIONAL INFORMATION
The Company will provide further assistance or additional copies of
documents pursuant to the Exchange Offer. Noteholders with questions regarding
the Exchange Offer should call the Company toll-free at 1-800-635-5461, ext.
3440 or write to the Company at:
Itron, Inc.
2818 N. Sullivan Road
P.O. Box 15288
Spokane, Washington 99216-1897
Attention: Investor Relations
LETTERS OF TRANSMITTAL SHOULD BE SENT ONLY TO THE EXCHANGE AGENT AND NOT TO
THE COMPANY. See "-- How to Tender" and "-- Exchange Agent."
NO FINANCIAL ADVISOR
No financial advisor has been retained to render, and no financial advisor
has rendered, an opinion as to the fairness of the Exchange Offer to holders of
the Original Notes or to solicit exchanges of Original Notes for Exchange Notes.
However, the Company has determined the terms of the Exchange Offer and the
Exchange Notes primarily pursuant to discussions with a significant holder of
the Original Notes, and believes that the terms and conditions of the Exchange
Offer and the Exchange Notes reflect the current fair market value of the
Original Notes.
PAYMENT OF EXPENSES
The Exchange Offer is being made by the Company in reliance on the
exemption from the registration requirements of the Securities Act, afforded by
Section 3(a)(9) thereof. Therefore, the Company will not pay any commission or
other remuneration to any broker, dealer, salesman or other person for
soliciting tenders of the Original Notes. However, regular employees of the
Company (who will not be additionally compensated therefor) may solicit tenders
and will answer inquiries concerning the Exchange Offer.
The Company will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Offering Circular and related
documents to the beneficial owners of the Original Notes held of record by such
persons and in handling or forwarding tenders and consents for their customers.
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<PAGE> 25
BACKGROUND, PURPOSE AND EFFECT OF THE EXCHANGE OFFER
On March 18, 1997, Itron closed a private placement of $60,000,000
aggregate principal amount of Original Notes, pursuant to an exemption from
registration under Rule 144A and Regulation S of the Securities Act, with Credit
Suisse First Boston Corporation and Hambrecht & Quist LLC as the initial
purchasers. An additional $3,400,000 aggregate principal amount of Original
Notes was issued on April 15, 1997 pursuant to the exercise of an over-allotment
option granted to the initial purchasers. The purpose of the private placement
was to raise funds to reduce the Company's outstanding balance on its line of
credit, as well as raise capital for the funding of Itron's business operations,
in particular its outsourcing contracts.
Pursuant to a Registration Rights Agreement dated March 12, 1997, the
Company registered the Original Notes on a Registration Statement on Form S-3
filed June 3, 1997, Commission File No. 333-28451. Holders of the Original Notes
that were named as selling noteholders in the Registration Statement were able
to initiate public resales of the Original Notes by complying with the
prospectus delivery requirements under the Securities Act.
At the time of original issuance, the Original Notes conversion price of
$23.70 per share represented a 20% premium above the average daily trading price
of the Common Stock for the five days preceding March 12, 1997. Since original
issuance and up to and including February 10, 1999, the closing price of the
Company's Common Stock has dropped as low as $4.63 per share as reported on
Nasdaq. Various factors have caused the decline of the Common Stock trading
price, including reported losses by the Company, competitive pressures within
the Company's industry, mergers and consolidations of the electric utility
industry, the general volatility of the stock market, and other factors beyond
the Company's control.
The Company has decided to offer the Exchange Notes to reduce the Company's
outstanding long-term debt and to reduce the Company's debt service obligations.
Outstanding long-term debt will be reduced $6.16 million and the Company expects
to report a pre-tax gain on extinguishment of debt of $5.439 million in the
first quarter of 1999, assuming the Exchange Offer closes by March 31, 1999. In
addition, because the interest rate applicable to borrowings under the Company's
line of credit is dependent in part on the Company's total debt, this interest
rate may decline. The Exchange Offer provides tendering noteholders with an
opportunity to exchange the Original Notes, with a conversion price of $23.70,
for the Exchange Notes, which will have a Conversion Price that is reflective of
the current trading price of the Common Stock.
The lower interest expense associated with the Exchange Notes is expected
to result in higher basic earnings per share. The lower Conversion Price of the
Exchange Notes compared to the conversion price of the Original Notes, and the
corresponding increase in the number of shares which could be issued upon
conversion may result in decreased diluted earnings per share. The impact of the
Original Notes and the Exchange Notes on diluted earnings per share is computed
by assuming all notes are converted and interest on the notes is no longer paid
(the "if converted" method). The result of the if converted computation is anti-
dilutive at low basic earnings per share and dilutive at higher basic earnings
per share. The result of the consummation of the Exchange Offer will be to lower
the point at which there is dilution and to increase the amount of such
dilution. The pro forma information set forth in the section captioned "Summary
Selected and Pro Forma Financial Data" indicates that earnings per share for the
year ended December 31, 1997 would have increased slightly (i.e., the result of
the Exchange Offer would have been anti-dilutive) and the loss per share for the
nine months ended September 30, 1998 would have decreased slightly (i.e., the
result of the Exchange Offer would have been anti-dilutive).
The Exchange Offer is being made by the Company in reliance on the
exemption from the registration requirements of the Securities Act afforded by
Section 3(a)(9) thereof. As a result, restrictions on the transferability of the
Exchange Notes will depend upon the character of the Original Notes tendered by
the noteholders. Original Notes which have been transferred under the resale
Registration Statement described above (which Original Notes have the CUSIP
Number 465741-AC-0) are freely transferable and, accordingly, the Exchange Notes
issued in exchange therefor will be freely transferable upon issuance. Original
Notes that have not been transferred under the resale Registration Statement and
(a) were originally issued under Regulation S (CUSIP Number U13126-AA-2)
("Regulation S Original Notes") will become transferable under Rule 144(k) on
March 18, 1999, or (b) were originally issued under Rule 144A (CUSIP
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Number 465741-AA-4) ("Rule 144A Original Notes") will become transferable under
Rule 144(k) on April 15, 1999. Accordingly, transfers of Exchange Notes issued
in exchange for Regulation S Original Notes or Rule 144A Original Notes may be
made only pursuant to applicable exemptions from registration until March 18,
1999 and April 15, 1999, respectively (which dates are two years from the latest
date of original issuance of the Regulation S Original Notes and the Rule 144A
Original Notes). The Company does not intend to apply for listing or quotation
of the Exchange Notes on any exchange or automated quotation system. As a
result, there can be no guarantee that a market will develop for the Exchange
Notes.
The Company, its Board of Directors and its executive officers make no
recommendations as to whether any noteholders should tender any or all of such
noteholders' Original Notes pursuant to the Exchange Offer. Each noteholder must
make the decision whether to tender the Original Notes held by such noteholder
and, if so, the aggregate principal amount of Original Notes to tender.
Executive officers and directors of the Company have advised the Company that
they do not hold any Original Notes.
Holders of the Original Notes contemplating the Exchange Offer should
consider that the Company has not retained any financial advisor or investment
banking firm to assist the Company in determining the price and terms of the
Exchange Notes or whether the consideration offered in the Exchange Offer is
adequate to tendering noteholders. The Company also has not requested any
report, opinion, or appraisal relating to the fairness of the consideration
being offered pursuant to the Exchange Offer. For a discussion of risk factors
that should be taken into account in considering the Exchange Offer, see "Risk
Factors."
25
<PAGE> 27
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1998, and pro forma to give effect to the issuance of Exchange
Notes assuming the maximum number of Original Notes were tendered as if such
exchange had occurred on September 30, 1998.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
---------------------
ACTUAL PRO FORMA
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Bank line of credit......................................... $ 11,590 $ 11,590
Current leases payable...................................... 467 467
Long-term debt:
Mortgage notes payable.................................... 6,281 6,281
Leases payable............................................ 430 430
Project financing......................................... 7,843 7,843
Original 6 3/4% Convertible Subordinated Notes Due 2004... 63,400 41,400
Exchange 6 3/4% Convertible Subordinated Notes Due 2004... -- 15,840
-------- --------
Total long-term debt.............................. 77,954 71,794
-------- --------
Total debt........................................ 90,011 83,851
Shareholder's equity:
Common Stock, no par value: 75,000,000 shares authorized,
14,633,110 shares outstanding.......................... 105,618 105,618
Retained earnings......................................... 9,463 12,959(1)
Other..................................................... (1,147) (1,147)
-------- --------
Total shareholders' equity........................ 113,934 117,430
-------- --------
Total capitalization.............................. $203,945 $201,281
======== ========
</TABLE>
- ---------------
(1) Retained earnings has been adjusted to reflect an extraordinary gain on
extinguishment of debt, net of income tax, of $3.496 million which the
Company will recognize in the first quarter of 1999, assuming the Exchange
Offer closes by March 31, 1999.
26
<PAGE> 28
SUMMARY SELECTED CONSOLIDATED AND
PRO FORMA FINANCIAL DATA
The selected historical data presented below as of December 31, 1995, 1996
and 1997 and for each of the three years in the period ended December 31, 1997,
are derived from the consolidated financial statements of the Company. The
consolidated financial statements of the Company as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997,
audited by Deloitte & Touche LLP, independent auditors, have been incorporated
herein by reference. The selected historical data presented below for the
nine-month periods ended September 30, 1998 and 1997, and as of September 30,
1998 and 1997, are derived from the unaudited consolidated financial statements
of the Company. In the opinion of management, such unaudited data reflect all
adjustments, consisting only of normally recurring adjustments, necessary to
fairly present the Company's financial position and results of operations for
the periods presented. The results of operations of any interim period are not
necessarily indicative of results to be expected for a full fiscal year.
The unaudited consolidated pro forma statement of operations data and per
share data for the year ended December 31, 1997 and for the nine months ended
September 30, 1998 set forth the effect of the issuance of the Original Notes,
adjusted for the issuance of the Exchange Notes, assuming the maximum number of
the Original Notes were tendered, as if these transactions had occurred on
January 1, 1997.
The unaudited consolidated pro forma balance sheet data as of September 30,
1998 sets forth the effect of the issuance of the Exchange Notes assuming the
maximum number of the Original Notes were tendered, as if such exchange had
occurred on September 30, 1998.
The unaudited consolidated pro forma data are not necessarily indicative of
what the Company's actual statement of operations data, per share data, balance
sheet data or other data would have been as of the date or for the periods
indicated, nor do they purport to represent such data for the Company or for any
future period or date.
For additional information, see the Consolidated Financial Statements and
notes thereto of the Company included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997 (as amended), and the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1998, which are
incorporated in this Offering Circular by reference.
27
<PAGE> 29
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ -------------------------------
PRO FORMA PRO FORMA
1995 1996 1997 1997 1997 1998 1998
-------- -------- -------- --------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues....................................
AMR systems................................. $ 98,724 $129,576 $143,472 $143,472 $ 96,655 $130,102 $130,102
Handheld systems............................ 60,952 45,084 49,409 49,409 35,714 33,226 33,226
Outsourcing................................. 1,659 2,924 23,236 23,236 19,373 15,988 15,988
-------- -------- -------- -------- -------- -------- --------
Total revenues.............................. 161,335 177,584 216,117 216,117 151,742 179,316 179,316
Cost of revenues............................ 89,596 104,708 135,359 135,359 96,732 123,522 123,522
-------- -------- -------- -------- -------- -------- --------
Gross profit................................ 71,739 72,876 80,758 80,758 55,010 55,794 55,794
Operating expenses..........................
Sales and marketing......................... 20,054 28,847 29,613 29,613 21,385 20,211 20,211
Product development......................... 27,080 33,285 32,220 32,220 23,481 26,354 26,354
General and administrative.................. 7,589 10,970 12,064 12,064 8,568 9,423 9,423
Restructuring charges....................... -- -- -- -- -- 3,247 3,247
Amortization of intangibles................. 2,336 1,542 2,190 2,190 1,611 1,776 1,776
-------- -------- -------- -------- -------- -------- --------
Total operating expenses.................... 57,059 74,644 76,087 76,087 55,045 61,011 61,011
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)..................... 14,680 (1,768) 4,671 4,671 (35) (5,217) (5,217)
Other income (expense):
Equity in affiliates...................... -- (50) (1,120) (1,120) (355) (1,224) (1,224)
Gain on sale of business interest......... -- -- 2,000 2,000 -- -- --
Interest, net............................. 1,721 (316) (3,916) (3,759)(1) (3,206) (4,611) (4,299)(2)
-------- -------- -------- -------- -------- -------- --------
Total other income (expense)................ 1,721 (366) (3,036) (2,879) (3,561) (5,835) (5,523)
Income (loss) before taxes.................. 16,401 (2,134) 1,635 1,792 (3,596) (11,052) (10,740)
Income tax (provision) benefit.............. (5,250) 670 (625) (685) 1,305 4,200 4,082
-------- -------- -------- -------- -------- -------- --------
Net income (loss)........................... $ 11,151 $ (1,464) $ 1,010 $ 1,107 $ (2,291) $ (6,852) $ (6,658)
======== ======== ======== ======== ======== ======== ========
PER SHARE DATA
Basic earnings (loss) per share............. $ .85 $ (.11) $ .07 $ .08 $ (.16) $ (.47) $ (.45)
Diluted earnings (loss) per share........... .81 (.11) .07 .08(3) (.16) (.47) (.45)(3)
Weighted average shares outstanding......... 13,095 13,297 14,118 14,118 13,959 14,660 14,660
Diluted shares outstanding.................. 13,775 13,297 14,562 14,118(3) 13,959 14,660 14,660(3)
BALANCE SHEET DATA
Working capital............................. $ 64,536 $ 26,239 $ 68,307 $ 59,419 $ 60,066 $ 51,552(4)
Total assets................................ 149,718 186,671 240,211 224,371 240,552 234,392(5)
Total debt.................................. 5,668 39,502 73,814 71,326 89,114 83,851(6)
Shareholders' equity........................ 11,273 114,222 120,427 116,548 113,934 117,430(7)
OTHER DATA
Ratio of earnings to fixed charges(8)....... 84.3x -- 1.1x 1.1x -- -- --
EBITDA(9)................................... $ 24,968 $ 9,311 $ 22,607 $ 23,370 $ 12,465 $ 8,637 $ 8,637
Ratio of EBITDA to fixed charges(10)........ 126.7x 64x 4.4x 4.0x 3.4x 1.9x 2.0x
Capital Expenditures:
Equipment used in outsourcing............. 2,396 17,254 27,478 27,478 22,308 9,296 9,296
Other plant and equipment................. 16,594 27,500 9,329 9,329 7,863 5,202 5,202
</TABLE>
- ---------------
(1) Interest, net has been adjusted as follows:
(a) Interest expense has been increased $511,000 to reflect 12 months of
interest expense on $57.24 million aggregate principal outstanding in
lieu of historical interest expense of $3.353 million on $63.4 million
aggregate principal outstanding since issuance of the Original Notes
in March and April 1997.
(b) Amortization of debt issuance costs has been increased by a net amount
of $94,000 to reflect 12 months in lieu of nine months of amortization
and lower costs for the issuance of Exchange Notes.
28
<PAGE> 30
(c) Interest income has been increased $285,000 to reflect the assumption
that approximately $22 million of proceeds in excess of the Company's
outstanding line of credit at January 1, 1997 (approximately $33
million) would have been invested at 6.2% for 2 1/2 months.
(d) Interest expense has been decreased by $477,000 to reflect the
assumption that the proceeds from the issuance of the notes were used
to reduce the Company's outstanding line of credit from January 1,
1997 to date of issuance of the Original Notes.
(2) Interest, net has been decreased by $312,000 to reflect application of the
6 3/4% interest rate on a lower aggregate principal balance.
(3) Pro forma diluted earnings per share for the year ended December 31, 1997
and nine months ended September 30, 1998 have been calculated by dividing
pro forma net income by 14,118,000 and 14,660,000 shares outstanding,
respectively. Shares outstanding have been determined assuming the Exchange
Notes are issued with a Conversion Price based on a 25% premium on an
assumed common share price of $8.125. Using the "if converted" method, the
effect of the Exchange Offer is anti-dilutive in both periods.
(4) Working capital has been decreased to reflect the $6.16 million reduction
in proceeds, net of a $185,000 reduction in debt issuance costs and income
taxes of $2.143 million.
(5) Total assets have been reduced to reflect lower proceeds offset by lower
debt issuance costs.
(6) Total debt has been reduced to reflect $6.16 million of reduced principal
outstanding.
(7) Shareholders' equity has been increased to reflect an extraordinary gain on
extinguishment of debt, net of income tax, of $3.496 million resulting from
the Exchange Offer.
(8) 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 for the year ended December 31, 1996 was $1.3 million and $422,000,
$6.513 million and $6.513 million for the nine-month periods ended
September 30, 1997 and 1998 and pro forma September 30, 1998, respectively.
(9) EBITDA (earnings before interest expense, taxes, depreciation and
amortization) is presented because the Company believes that it allows for
a more complete analysis of the Company's results of operations. This
information should not be considered as an alternative to, nor is there any
implication that this information is more meaningful than, any measure of
performance or liquidity as promulgated under generally accepted accounting
principles (such as operating income (loss), net income (loss) or cash
provided by or used in operating, investing and financing activities). This
information should not be considered as an indicator of the Company's
overall financial performance. Additionally, EBITDA as reported herein may
not be comparable to similarly titled measures reported by other companies.
(10) For the purposes of this calculation, fixed charges consist of interest on
indebtedness, whether expensed or capitalized.
29
<PAGE> 31
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock trades on the Nasdaq National Market under the
symbol "ITRI." The high and low closing sales prices of the Common Stock as
reported by Nasdaq since January 1, 1997, are set forth below.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997
First Quarter.............................................. $24.75 $16.75
Second Quarter............................................. 27.44 19.25
Third Quarter.............................................. 27.00 22.13
Fourth Quarter............................................. 26.63 15.25
YEAR ENDED DECEMBER 31, 1998
First Quarter.............................................. $21.69 $15.69
Second Quarter............................................. 20.63 12.75
Third Quarter.............................................. 13.50 6.38
Fourth Quarter............................................. 9.50 4.63
YEAR ENDING DECEMBER 31, 1999
First Quarter (through February 10, 1999).................. $ 9.40 $ 7.19
</TABLE>
On February 10, 1999, the closing price per share of the Common Stock as
reported by Nasdaq was $8.88. On January 31, 1999, there were approximately 600
holders of record of the Company's Common Stock.
Cash dividends have never been paid on Itron's Common Stock. The Company
presently intends to retain earnings and does not anticipate that cash dividends
will be paid on its Common Stock in the foreseeable future. The Company acquired
Utility Translation Systems, Inc. ("UTS") on March 25, 1996 in a pooling-of-
interests business combination. Accordingly, the Company's historical financial
statements reflect dividends paid by UTS in 1996 and prior periods.
The Original Notes are not traded on an established securities market, and
accordingly no reliable historical trading information is available. The Company
is aware that certain investment banking firms make a market in the Original
Notes, and that there have been trades in the Original Notes from time to time.
The Company believes that the Original Notes have traded at a discount to their
principal amount since early 1998, and that bid and ask prices for the Original
Notes during the second half of 1998 and early 1999 have ranged from
approximately $650 to $720 per $1,000 principal amount of Original Notes.
However, there may not have been any actual trades of Original Notes in this
range, and trades of Original Notes may have taken place at prices higher or
lower than this range.
30
<PAGE> 32
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes will be issued under an indenture (the "Indenture"),
between the Company and Chase Manhattan Bank and Trust Company, National
Association (the "Trustee"). The following summary of certain provisions of the
Indenture and description of the Exchange Notes is a summary of the material
terms of the Exchange Notes. However, such summary 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
Offering Circular. Whenever particular Sections or defined terms of the
Indenture (or of the form of the Exchange Note that is a part thereof) are
referred to, such Sections or defined terms are incorporated in their entirety
herein by reference.
GENERAL
The Exchange Notes in an aggregate principal amount of up to $15,840,000
are unsecured, subordinated general obligations of the Company, and will mature
on March 31, 2004. The Exchange Notes will bear interest at a rate of 6 3/4% per
annum commencing on March 12, 1999, 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,
1999, to the Person in whose name the Exchange Note (or any predecessor Exchange
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 Exchange 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 Exchange Notes. In such capacities, the Trustee will be
responsible for, among other things, (i) maintaining a record of the aggregate
holdings of Exchange Notes represented by one or more global Exchange Notes (the
"Global Exchange Notes") and accepting Exchange Notes for exchange and
registration of transfer, (ii) ensuring that payments of principal and interest
with respect to the Exchange 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 Exchange 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 Exchange Notes
will be made only against surrender of such Exchange 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 Exchange 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
Exchange Note will be made to the Person in whose name such Exchange 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 Exchange 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 the relevant
Record Date. Unless such designation is revoked, any such designation made by
such Person with respect to such Exchange Note will remain in effect with
respect to any future payments with respect to such Exchange 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 Exchange 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.
31
<PAGE> 33
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.
CONVERSION RIGHTS
The Exchange 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 determined as indicated on the cover
page of this Offering Circular. The right to convert the Exchange 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 Exchange 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 Exchange Note is converted that portion of the evidences of
indebtedness, shares of capital stock, cash and other property so distributed
which is 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 Exchange 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
32
<PAGE> 34
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 Exchange 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 Exchange Notes will not be subject to
adjustment on account of any declaration, distribution or exercise of such
rights or warrants.
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 Exchange 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 that would have been received by such Holder immediately prior to
such transaction if such Holder had converted its Exchange 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. Exchange 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 Exchange 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 Exchange Notes is reduced, such
reduction may be deemed to be the receipt of taxable income to Holders of
Exchange 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 Exchange 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 after March 12, 2002 at 100% of the principal
amount thereof, 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 of the Exchange Notes are to be
redeemed, the Trustee will select or cause to be selected the Exchange 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 will be provided for the Exchange Notes.
33
<PAGE> 35
CERTAIN RIGHTS TO REQUIRE REPURCHASE OF EXCHANGE 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 Exchange Notes on the date (the "Repurchase Date") fixed by the Company
that is not less than 30 days or 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 Exchange Notes which is to be paid on the
Repurchase Date.
The Company may not repurchase any Exchange 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 Exchange Notes. Failure by the Company to repurchase the Exchange
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
that 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 Exchange 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 any
certificates evidencing the Exchange 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
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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 Exchange 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 Exchange Notes, or otherwise acquire the Exchange 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 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 Exchange 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
Exchange 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 Exchange 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 Exchange 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 Exchange 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 in Control or default in the payment of the repurchase price in respect
of any Exchange 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 Exchange 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
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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 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 next preceding paragraph) shall have occurred
and is continuing, either the Trustee or the Holders of at least 25% in
principal amount of the Outstanding Exchange Notes may declare the principal
amount of all Exchange 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 next preceding paragraph shall have
occurred, the principal amount of the Outstanding Exchange 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 Exchange 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 Exchange 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 Exchange 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 Exchange Notes, to enter into one or more supplemental
indentures adding any provisions to, or changing in any manner or eliminating
any of the
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provisions of, the Indenture or modifying in any manner the rights of the
Holders of the Exchange Notes, except that no such modification or amendment
may, without the consent of the Holders of each of the Outstanding Exchange
Notes affected thereby, among other things, (i) change the Stated Maturity of
the principal of, or any installment of interest on, any Exchange 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
Exchange 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
Exchange Notes upon a Change in Control in a manner adverse to the Holders; (ix)
reduce the percentage in principal amount of the Outstanding Exchange 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 Exchange
Notes may, on behalf of the Holders of all Exchange Notes, waive compliance by
the Company with certain restrictive provisions of the Indenture. The Holders of
a majority in principal amount of the Outstanding Exchange Notes may, on behalf
of the Holders of all Exchange 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 Exchange 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
Exchange 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 Exchange Notes. No payments on account of principal
of (or premium, if any), or interest on, the Exchange Notes or on account of the
purchase or acquisition of Exchange 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 Exchange 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 Exchange Notes, and other than the Original 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
Exchange Notes or any other indebtedness of the Company or (ii) ranks pari passu
in right of payment to the Exchange Notes. For the purposes of certainty, the
Exchange Notes will rank pari passu in right of payment to the Original 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, Exchange 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
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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 September 30, 1998, Senior Indebtedness and indebtedness of the
Company's Subsidiaries were approximately $26.6 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 Exchange
Notes (except for certain obligations to register the transfer or exchange of
Exchange Notes; to replace stolen, lost or mutilated Exchange Notes, to provide
for conversion of the Exchange Notes; to maintain Paying Agents and hold moneys
for payment in trust; and to repurchase Exchange 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 Exchange Notes or repurchase Exchange 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 Exchange 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 (and premium, if
any), and each installment of interest on, the Outstanding Exchange 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 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 "IRS") 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 Exchange Notes will be 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 Exchange Notes are evidenced
by the Global Note 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 Note 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 Note will be limited to Persons
who maintain
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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
Note 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 the Global
Note, DTC or such nominee, as the case may be, will be considered the sole owner
and holder of the Exchange Notes represented by such Global Note for all
purposes under the Indenture and the Exchange 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 Exchange Notes," owners of beneficial interests
in the 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 Exchange Notes in certificated form and will not be considered the
owners or holders of the Global Note (or any Exchange Notes represented thereby)
under the Indenture or the Exchange 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 Exchange Notes in definitive form, such Exchange 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 Note will be made to
DTC or its nominee as the registered owner thereof. Neither 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 Note 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 Exchange
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 such Exchange 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 Note 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
Exchange 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
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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 Exchange Notes for exchange as
described below) only at the direction of one or more participants to whose
account with DTC interests in the Global Note are credited and only in respect
of such portion of the aggregate principal amount of the Exchange Notes as to
which such participant or participants has or have given such direction.
However, if there is an Event of Default under the Exchange Notes, DTC reserves
the right to exchange the Global Note for legended certificated Exchange Notes
in definitive form, and to distribute such Exchange 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 Note 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 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 EXCHANGE 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 Exchange Notes in definitive, fully registered form,
without interest coupons, in exchange for the Global Note. In addition, upon
request, the Company will issue certificates for Exchange 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 Exchange 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
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evidencing Exchange 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 Exchange Notes and the conversion shares
is declared effective by the Commission, or as DTC, Euroclear or Cedel may
require.
REGARDING THE TRUSTEE
Chase Manhattan Bank and Trust Company, National Association is the Trustee
under the Indenture.
GOVERNING LAW
The Indenture and the Exchange Notes will be governed by, and are to be
construed in accordance with, the laws of the State of New York.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal income tax
consequences of the Exchange Offer and the ownership and disposition of the
Exchange Notes. This discussion is a summary for general information only and
does not consider all aspects of U.S. federal income tax that may be relevant to
the Exchange Offer or the ownership or disposition of the Exchange Notes by any
Holder in light of such Holder's particular circumstances.
This discussion is limited to the U.S. federal income tax consequences
relevant to a Holder who exchanges an Original Note for an Exchange Note and,
except as otherwise described herein, who is (i) a citizen or resident (as
defined in Section 7701(b)(1) of the Internal Revenue Code of 1986, as amended
(the "Code")) of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof or therein, (iii) an estate, the income of which
is subject to U.S. federal income tax regardless of its source, or (iv) a trust
the administration of which is subject to the primary supervision of a court
within the United States and for which one or more persons have the authority to
control all substantial decisions (a "U.S. Holder"). Except as expressly
described herein, this discussion does not address the tax consequences to a
Holder that is not a U.S. Holder (a "Non-U.S. Holder"). This discussion also
does not address the U.S. federal income tax consequences of ownership of
Original Notes or Exchange Notes not held as capital assets within the meaning
of Section 1221 of the Code, or the U.S. federal income tax consequences to U.S.
Holders subject to special treatment under the U.S. federal income tax laws,
such as dealers in securities or foreign currency, tax-exempt entities, banks,
thrift institutions, insurance companies or other financial institutions,
persons who hold the Original Notes or Exchange Notes as part of a "straddle," a
"hedge" against currency risk or a "conversion transaction," persons who have a
"functional currency" other than the U.S. dollar, and investors in pass-through
entities. Moreover, the effect of any applicable state, local or foreign tax
laws is not discussed.
This discussion is based on the Code, existing and proposed regulations
thereunder, and current administrative rulings and court decisions. All of the
foregoing is subject to change, possibly on a retroactive basis, and any such
change could affect the continuing validity of this discussion.
EACH PERSON CONSIDERING TENDERING AN ORIGINAL NOTE FOR AN EXCHANGE NOTE IS
STRONGLY URGED TO CONSULT ITS OWN TAX ADVISOR CONCERNING THE APPLICATION OF
FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF ANY STATE, LOCAL OR FOREIGN
TAXING JURISDICTION, TO ITS PARTICULAR SITUATION. THE CONTENTS OF THIS OFFERING
CIRCULAR ARE NOT TO BE CONSTRUED AS LEGAL, BUSINESS OR TAX ADVICE. EACH
PROSPECTIVE PURCHASER SHOULD CONSULT ITS OWN ATTORNEY, BUSINESS ADVISOR AND/OR
TAX ADVISOR AS TO LEGAL, BUSINESS OR TAX ADVICE.
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U.S. HOLDERS
Treatment of Loss or Gain Upon Exchange
The exchange of the Exchange Notes for the Original Notes will be
considered a recapitalization that qualifies as a reorganization for federal
income tax purposes if the Exchange Notes and the Original Notes are
"securities" for U.S. federal income tax purposes. Although the determination of
the status of the Original Notes and Exchange Notes as "securities" is not
entirely certain because the term of the Exchange Notes and the Original Notes
is relatively short, both the Original Notes and Exchange Notes should be
treated as "securities" for U.S. federal income tax purposes. Accordingly, the
exchange of Original Notes for Exchange Notes should constitute a
recapitalization and a reorganization for federal income tax purposes and, as a
result, exchanging U.S. Holders should not recognize any loss or gain (except to
the extent that Exchange Notes are attributable to accrued but unpaid interest
on the Original Notes, in which event the U.S. Holders would generally be
required to treat such amounts as payment of interest includible in income in
accordance with the U.S. Holder's method of accounting for tax purposes). A U.S.
Holder's adjusted tax basis in an Exchange Note will equal the U.S. Holder's
adjusted tax basis in the Original Note for which such Exchange Note was
exchanged.
If the exchange were determined not to constitute a recapitalization for
U.S. federal income tax purposes, then an exchanging U.S. Holder would recognize
loss or gain equal to the difference between (i) the issue price of the Exchange
Notes and (ii) the U.S. Holder's adjusted tax basis in the Original Notes
exchanged therefor. Any such loss or gain would generally be long-term capital
loss or gain if the Original Notes had been held for more than one year, subject
to characterization of any accrued market discount income as ordinary income.
Stated Interest
This discussion assumes that the Exchange Notes will be treated as debt,
not equity, for federal income tax purposes. Each U.S. Holder of an Exchange
Note and the Company must report the Exchange Note as debt for such purposes.
The stated interest on an Exchange Note therefore will be taxable to a U.S.
Holder as ordinary interest income at the time it either accrues or is received,
depending on such U.S. Holder's method of accounting for federal income tax
purposes. For this purpose, interest will be deemed to accrue without regard to
conversion of the Exchange Notes.
Original Issue Discount
Generally, an Exchange Note will bear original issue discount ("OID") if
and to the extent of any excess of the Exchange Note's "stated redemption price
at maturity" over its "issue price." The "stated redemption price at maturity"
of a debt instrument is the sum of its principal amount plus all other payments
required thereunder, other than payments of "qualified stated interest" (defined
generally as stated interest that is unconditionally payable in cash or in
property (other than debt instruments of the issuer) at least annually at a
single fixed rate). The "issue price" of an Exchange Note will be the fair
market value of the Original Note on the date of the Exchange if the Original
Notes or the Exchange Notes are deemed to be "traded on an established
securities market" under the Code and as provided in Treasury regulations. If a
substantial amount of the Exchange Notes are so traded, it is possible that
under Treasury regulations the "issue price" of an Exchange Note will be the
fair market value of the Exchange Note, rather than that of an Original Note, on
the issue date. If neither the Original Notes nor the Exchange notes so trade,
the "issue price" of an Exchange Note will be its "stated redemption price at
maturity." It is uncertain whether the Original Notes or Exchange Notes would be
deemed to be "traded on an established securities market" under relevant
Treasury regulations.
OID would not be includible in a U.S. Holder's income, however, if the U.S.
Holder "purchased" the Exchange Note at a "premium." In this context, "purchase"
would include the exchange of the Exchange Notes for the Original Notes.
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A U.S. Holder will have purchased the Exchange Note at a "premium" if the
adjusted basis of the Exchange Note in the hands of the U.S. Holder immediately
after the exchange exceeds the sum of all amounts payable on the Exchange Note
other than payments of qualified stated interest. Generally, in the absence of
any adjustments to a U.S. Holder's basis in an Original Note, a U.S. Holder will
have purchased an Exchange Note at a premium if the U.S. Holder paid more for
the Original Note than the principal amount of the Exchange Note.
For any U.S. Holder who purchased an Original Note for less than or equal
to the principal amount of the Exchange Note, the results will vary. If the U.S.
Holder's adjusted basis in the Exchange Note immediately after the exchange is
less than or equal to the sum of all amounts payable on the Exchange Note after
the exchange excluding qualified stated interest, but greater than the Exchange
Note's "adjusted issue price," the U.S. Holder must include OID in income, but
would reduce the daily portion of OID by an amount equal to the amount which
would otherwise be the daily portion for such day multiplied by a fraction the
numerator of which is, generally, the excess (if any) of the cost of the
Exchange Note incurred by the purchaser over the issue price of the Exchange
Note, and the denominator of which is the sum of the daily portions for such
Exchange note for all days after the date of purchase and ending on the stated
maturity date.
If a U.S. Holder's adjusted basis in an Exchange Note immediately after the
exchange is less than or equal to the Exchange Note's adjusted issue price, the
U.S. Holder must include OID in income as it accrues. The amount of accrued OID
includible in income by such a U.S. Holder would be the sum of the "daily
portions" of OID with respect to the Exchange Note for each day during the
taxable year or portion of the taxable year in which such U.S. Holder held such
Exchange Note ("accrued OID"). The daily portion is determined by allocating to
each day in any "accrual period" a pro rata portion of the OID allocable to that
accrual period. The "accrual period" for a Note may be of any length and may
vary in length over the term of the Exchange Note, provided that each accrual
period is no longer than one year and each scheduled payment of principal or
interest occurs on the first day or the final day of an accrual period. The
amount of OID allocable to any accrual period is an amount equal to the excess,
if any, of (i) the product of the Exchange Note's adjusted issue price at the
beginning of such accrual period and its yield to maturity (determined on the
basis of compounding at the close of each accrual period and properly adjusted
for the length of the accrual period) over (ii) the amount of any qualified
stated interest allocable to the accrual period. OID allocable to a final
accrual period is the difference between the amount payable at maturity (other
than a payment of qualified stated interest) and the adjusted issue price at the
beginning of the final accrual period. The "adjusted issue price" of an Exchange
Note at the beginning of any accrual period is equal to its issue price
increased by the accrued OID for each prior accrual period (determined without
regard to the amortization of any acquisition or bond premium) and reduced by
any payments made on such Note (other than qualified stated interest) on or
before the first day of the accrual period. Special rules will apply for
calculating OID for an initial short accrual period.
Market Discount
Generally, the market discount rules discussed below will apply to any
Exchange Note if the Original Note bore accrued market discount that was not
recognized upon the exchange, or if the U.S. Holder's tax basis in the Exchange
Note is less than the Exchange Note's "issue price," and to any Exchange Note
purchased after original issue at a price less than its stated redemption price
at maturity.
Gain recognized on the disposition (including a redemption) of an Exchange
Note that has accrued market discount will be treated as ordinary income, not
capital gain, to the extent of the accrued market discount, provided that the
amount of market discount exceeds a statutory de minimis amount. "Market
discount" is defined as the excess, if any, of (i) the stated redemption price
at maturity over (ii) the tax basis of the debt obligation in the hands of the
U.S. Holder immediately after its acquisition.
Unless a U.S. Holder elects otherwise, the accrued market discount would be
the amount calculated by multiplying the market discount by a fraction, the
numerator of which is the number of days the obligation has been held by the
U.S. Holder and the denominator of which is the number of days after the U.S.
Holder's acquisition of the obligation up to and including its maturity date. A
U.S. Holder of a Exchange Note acquired
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<PAGE> 45
at market discount may also be required to defer the deduction of all or a
portion of the interest on any indebtedness incurred or maintained to carry the
Exchange Note until it is disposed of in a taxable transaction.
If a U.S. Holder of an Exchange Note acquired at market discount disposes
of such Exchange Note in any transaction other than a sale, exchange or
involuntary conversion, even though otherwise nontaxable (e.g., a gift), such
U.S. Holder will be deemed to have realized an amount equal to the fair market
value of the Exchange Note and would be required to recognize as ordinary income
any accrued market discount to the extent of the deemed gain.
A U.S. Holder of an Exchange Note acquired at market discount may elect to
include the market discount in income as it accrues, either on a straight-line
basis or, if elected, on a constant interest rate basis. The current income
inclusion election would apply to all market discount obligations acquired by
the electing U.S. Holder on or after the first day of the first taxable year to
which the election applies. The election may be revoked only with the consent of
the IRS. If a U.S. Holder of an Exchange Note so elects to include market
discount in income currently, the rules discussed above with respect to ordinary
income recognition resulting from sales and certain other disposition
transactions and to deferral of interest deductions would not apply.
Amortizable Bond Premium
Generally, a U.S. Holder who acquires an Exchange Note in the exchange of
Original Notes for Exchange Notes will have amortizable bond premium to the
extent of the excess, if any, of its basis in the Exchange Note over the amount
payable on maturity of the Exchange Note (or on an earlier call date if use of
the earlier call date results in a smaller amortizable bond premium). For this
purpose, the U.S. Holder's basis in the Exchange Note is generally the same as
the U.S. Holder's basis in the Original Note less any amount attributable to the
value of any conversion features of the Exchange Note. If the Exchange Note were
determined not to have been acquired in a reorganization as described above, the
U.S. Holder's basis in the bond may not exceed its fair market value immediately
after the exchange.
A U.S. Holder may elect to amortize any bond premium under Section 171 of
the Code on a constant yield basis over the period from the acquisition date to
the maturity date of the Exchange Note (or, in certain circumstances, until an
earlier call date) and, except as future Treasury regulations may otherwise
provide, reduce the amount of interest included in income in respect of the
Exchange Note by such amount. A U.S. Holder who elects to amortize bond premium
must reduce its adjusted basis in the Exchange Note by the amount of such
allowable amortization. An election to amortize the bond premium would apply to
all amortizable bond premium on all taxable bonds held at or acquired after the
beginning of the U.S. Holder's taxable year as to which the election is made,
and may be revoked only with the consent of the IRS.
The amount of amortizable bond premium does not include any amount
attributable to the conversion feature of the Note. The value of the conversion
feature for purposes of the amortization of bond premium may be determined under
any reasonable method.
The amortized bond premium deduction is treated as an offset to interest
income on the related security for federal income tax purposes and is limited to
the purchaser's investment income from the debt instrument for the year. No
deduction of unamortized bond premium will be allowed on conversion of an
Exchange Note into Common Stock. Each U.S. Holder is urged to consult its tax
advisors as to the consequences of the treatment of such premium as an offset to
interest income for federal income tax purposes. If an election to amortize the
bond premium is not made, a U.S. Holder must include the full amount of each
interest payment in income in accordance with its regular method of accounting
and will generally receive a tax benefit from the bond premium only upon
computing its gain or loss upon the sale or other disposition or payment of the
principal amount of the Exchange Note.
Sale or Redemption
Unless a nonrecognition provision applies, the sale, exchange, redemption
(including pursuant to an offer by the Company) or other disposition of an
Exchange Note will be a taxable event for federal income tax purposes. In such
event, a U.S. Holder will recognize gain or loss equal to the difference between
(i) the
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amount of cash plus the fair market value of any property received upon such
sale, exchange, redemption or other taxable disposition (other than in respect
of accrued and unpaid interest thereon) and (ii) the U.S. Holder's adjusted tax
basis therein (as increased by any market discount previously included in income
by the U.S. Holder and decreased by any amortizable bond premium deducted over
the term of the Note by the U.S. Holder). Subject to the discussion under
"-- Market Discount," such gain or loss should be capital gain or loss and will
be long-term capital gain or loss if the Exchange Note had been held by the U.S.
Holder for more than one year at the time of such sale, exchange, redemption or
other disposition.
Conversion of Exchange Note Into Common Stock
No gain or loss will be recognized for federal income tax purposes on
conversion of Exchange Notes solely into shares of Common Stock except with
respect to any cash received in lieu of a fractional share or, in the case of
both cash and accrual basis taxpayers, any accrued interest not previously
included in income. To the extent the conversion is not treated as resulting in
the payment of interest, the tax basis for the shares of Common Stock received
upon conversion will be equal to the tax basis of the Exchange Notes converted
into Common Stock, and the holding period of the shares of Common Stock will
include the holding period of the Exchange Notes converted. Any accrued market
discount not previously included in income as of the date of the conversion of
the Notes and not recognized upon the conversion (e.g., as a result of the
receipt of cash in lieu of a fractional interest in a Note) should carry over to
the Common Stock received on conversion and be treated as ordinary income upon
the subsequent disposition of such Common Stock. A U.S. Holder will recognize
taxable gain or loss on cash received in lieu of fractional shares of Common
Stock in an amount equal to the difference between the amount of cash received
and the U.S. Holder's tax basis in such fractional shares. Subject to the market
discount rules discussed above, such gain or loss should be capital gain or loss
if the fractional shares are capital assets in the hands of the U.S. Holder and
long-term capital gain or loss if the fractional shares have been deemed held
for more than one year.
Constructive Dividends on Notes
If at any time (i) the Company makes a distribution of cash or property to
its stockholders or purchases Common Stock and such distribution or purchase
would be taxable to such stockholders as a dividend for U.S. 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 Common
Stock and, pursuant to the antidilution provisions, the conversion price of the
Exchange Notes is increased, or (ii) the conversion price of the Exchange Notes
is increased at the discretion of the Company, such increase in conversion price
may be deemed to be the payment of a taxable dividend (to the extent of the
Company's current or accumulated earnings and profits) to U.S. Holders of Notes
(pursuant to Section 305 of the Code). Such U.S. Holders of Exchange Notes could
therefore have taxable income as a result of an event pursuant to which they
received no cash or property.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on an Exchange Note, payments of
dividends on Common Stock, payments of the proceeds of the sale of an Exchange
Note and payments of the proceeds of the sale of Common Stock to certain
noncorporate U.S. Holders. The payer will be required to withhold backup
withholding tax at the rate of 31% if (i) the payee fails to furnish a taxpayer
identification number ("TIN") to the payer or establish an exemption from backup
withholding, (ii) the IRS notifies the payer that the TIN furnished by the payee
is incorrect, (iii) there has been a notified payee underreporting with respect
to interest, dividends or original issue discount described in Section 3406(c)
of the Code or (iv) there has been a failure of the payee to certify under the
penalty of perjury that the payee is not subject to backup withholding under the
code. Certain U.S. Holders, including all corporations, will be exempt from such
backup withholding. Any amounts withheld under the backup withholding rules from
a payment to a U.S. Holder will be allowed as a credit against such U.S.
Holder's United States federal income tax and may entitle a U.S. Holder to a
refund, provided that the required information is furnished to the IRS.
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Treasury Regulations (the "Final Withholding Regulations") that are
generally effective with respect to payments made after December 31, 1999,
modify the currently effective information reporting and backup withholding
procedures and requirements, and provide certain presumptions regarding the
status of U.S. Holders when payments to the U.S. Holders cannot be reliably
associated with appropriate documentation provided to the payer. With respect to
payments made after December 31, 1999, U.S. Holders will be required to provide
certification, if applicable, that conforms to the requirements of the Final
Withholding Regulations, subject to certain transitional rules which may apply,
to extend until December 31, 1999 certification given in accordance with prior
Treasury Regulations. Because the application of the Final Withholding
Regulations will vary depending on the U.S. Holder's particular circumstances,
U.S. Holders are urged to consult their tax advisors regarding the application
of the Final Withholding Regulations.
CERTAIN U.S. TAX CONSEQUENCES TO NON-U.S. HOLDERS
General
The following is a summary of the material U.S. federal income tax
consequences of the exchange of the Original Notes for the Exchange Notes and
the ownership and disposition of the Exchange Notes and Common Stock by a
Non-U.S. Holder and certain estate tax consequences of the ownership of the
Exchange Notes. This discussion does not address tax consequences arising under
the laws of any foreign, state or local jurisdiction. The tax treatment of
Non-U.S. Holders of the Exchange Notes may vary depending on their particular
situations. Certain Non-U.S. Holders (including insurance companies, tax-exempt
organizations, financial institutions and broker-dealers) may be subject to
special rules not discussed below. Prospective investors who are Non-U.S.
Holders are urged to consult their tax advisors regarding the U.S. federal tax
consequences of acquiring, holding and disposing of the Exchange Notes, as well
as any tax consequences that may arise under the laws of any foreign, state,
local or other taxing jurisdiction.
Treatment of Loss or Gain Upon Exchange
A Non-U.S. Holder generally will not recognize loss or gain upon the
exchange of the Exchange Notes for the Original Notes even if the exchange does
not constitute a recapitalization for US. federal income tax purposes. A U.S.
Holder's adjusted tax basis in an Exchange Note in that case will equal the U.S.
Holder's adjusted tax basis in the Original Note for which such Exchange Note
was exchanged. If the exchange were not to qualify as a recapitalization, gain
or loss might under certain circumstances be recognized for certain more than 5%
shareholders. See "-- Gain on Disposition of Exchange Notes or Common Stock".
Interest and OID on Notes
Neither interest paid by the Company to a Non-U.S. Holder nor any original
issue discount will be subject to U.S. federal income or withholding tax if (i)
such interest is not effectively connected with the conduct of a trade or
business within the United States by such Non-U.S. Holder, (ii) the Non-U.S.
Holder does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote, (iii) the
Non-U.S. Holder is not a controlled foreign corporation with respect to which
the Company is a "related person" within the meaning of the Code, and (iv)
either (a) the Non-U.S. Holder certifies to the Company, under penalties of
perjury, that the Non-U.S. Holder is not a U.S. person and provides the
beneficial owner's name and address on a U.S. Treasury Form W-8 (or suitable
substitute form) or (b) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business and holds the Note certifies, under penalties of perjury,
that such Form W-8 (or suitable substitute form) has been received from the
Non-U.S. Holder by it or by such a financial institution between it and the
Non-U.S. Holder and furnishes the payor with a copy thereof.
Conversion of Notes
A Non-U.S. Holder generally will not recognize gain or loss upon any
conversion of an Exchange Note solely into Common Stock.
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Dividends on Common Stock
In the event that dividends are paid on shares of Common Stock, except as
described below, such dividends paid to a Non-U.S. Holder of Common Stock will
be subject to withholding of U.S. federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty, unless the
dividends are effectively connected with the conduct of a trade or business of
the Non-U.S. Holder within the United States. If the dividend is effectively
connected with the conduct of a trade or business of the Non-U.S. Holder within
the United States, the dividend would be subject to U.S. federal income tax on a
net income basis at applicable graduated individual or corporate rates and would
be exempt from the 30% withholding tax described above. Any such effectively
connected dividends received by a foreign corporation may, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty.
Under current U.S. Treasury regulations, dividends paid to an address
outside the United States are presumed to be paid to a resident of such country
for purposes of the withholding discussed above, and under the current
interpretation of the U.S. Treasury regulations, for purposes of determining the
applicability of a tax treaty rate. Certain certification and disclosure
requirements must be complied with in order to be exempt from withholding under
the effectively connected income exemption discussed above. The IRS has issued
regulations effective after December 31, 1999, that will impose requirements to
certify foreign status in order to obtain reduced withholding rates under tax
treaties and modify some of the reporting and disclosure requirements described
above.
A Non-U.S. Holder of Common Stock that is eligible for a reduced U.S.
withholding tax pursuant to a tax rate treaty may obtain a refund of any excess
amounts currently withheld by filing an appropriate claim for refund with the
IRS.
Gain on Disposition of Exchange Notes or Common Stock
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
on any gain recognized on a disposition of an Exchange Note or a share of Common
Stock unless (i) subject to the exception discussed below, the Company is or has
been a "United States real property holding corporation" (a "USRPHC") within the
meaning of Section 897(c)(2) of the Code at any time within the shorter of (a)
the Non-U.S. Holder's holding period for the Common Stock or (b) the five-year
period ending on the date of disposition (the "Required Holding Period"), (ii)
the gain is effectively connected with the conduct of a trade or business within
the United States of the Non-U.S. Holder and, if a tax treaty applies,
attributable to a permanent establishment maintained by the Non-U.S. Holder, or
(iii) the Non-U.S. Holder is an individual who holds the Exchange Note or Common
Stock as a capital asset and is present in the United States for 183 days or
more in the taxable year of the disposition and certain other conditions are
met. If an individual Non-U.S. Holder falls under clause (iii) above, he or she
will be subject to a flat 30% tax on the gain derived from the sale, which may
be offset by U.S. capital losses (notwithstanding the fact that he or she is not
considered a resident of the United States). If a Non-U.S. Holder that is a
foreign corporation falls under clause (ii) above, it will be taxed on its gain
under regular graduated U.S. federal income tax rates and will, under certain
circumstances, be subject to branch profits tax at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty.
A corporation is generally a USRPHC if the fair market value of its U.S.
real property interests equals or exceeds 50% of the sum of the fair market
value of its worldwide real property interests plus its other assets used or
held for use in a trade or business. While not free from doubt, the Company
believes that it currently is not a USRPHC. Even if it were, a Non-U.S. Holder
would generally not be subject to tax or withholding in respect of such tax on
gain from a sale or other disposition of an Exchange Note or a share of Common
Stock by reason of the Company's USRPHC status if the Common Stock is regularly
traded on an established securities market ("regularly traded") during the
calendar year in which such sale or other disposition of the Note or Common
Stock occurs, provided that such Non-U.S. Holder is not a "5% Holder" (i.e., the
Non-U.S. Holder beneficially owns or upon conversion would own more than 5% of
the Common Stock). The Company believes that the Common Stock will be treated as
regularly traded.
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If the Company is or has been a USRPHC within the Required Holding Period,
and if the Common Stock were not treated as regularly traded, a Non-U.S. Holder
of Exchange Notes or Common Stock (without regard to the Non-U.S. Holder's
ownership percentage) generally would be subject to tax on gain recognized on a
sale or other disposition of Exchange Notes or of such Common Stock. In
addition, the Non-U.S. Holder generally would be subject to withholding in
respect of tax at a rate of 10% of the amount realized on a sale or other
disposition of the Exchange Notes or Common Stock. Any amount withheld pursuant
to such withholding tax would be credited against such Non-U.S. Holder's U.S.
federal income tax liability. Non-U.S. Holders are urged to consult their tax
advisors concerning the potential applicability of these provisions.
Federal Estate Taxes
If interest on the Exchange Notes is exempt from withholding of U.S.
federal income tax under the rules described above, the Exchange Notes will not
be included in the estate of a deceased Non-U.S. Holder for U.S. federal estate
tax purposes. Common Stock owned, or treated as owned, by a Non-U.S. Holder (as
specifically determined for U.S. federal estate tax purposes) at the time of
death will be included in such Non-U.S. Holder's gross estate for U.S. federal
income tax liability. Non-U.S. Holders are urged to consult their tax advisors
concerning the potential applicability of these provisions.
Information Reporting and Backup Withholding
The Company generally must report annually to the IRS and to each Non-U.S.
Holder the amount of interest, OID, and dividends paid to such Non-U.S. Holder
and the amount of any tax withheld unless the beneficial owner satisfies the
statement requirement set forth in Section 871(h) and Section 881(c) of the Code
and the regulations thereunder and the payer does not have actual knowledge that
the beneficial owner is a United States person.
Backup withholding at a 31% rate generally will apply to stated interest,
OID, and dividends for noncorporate Non-U.S. Holders unless such payments are
paid or collected by a custodian, nominee or agent on behalf of the beneficial
owner of such Exchange Note if such custodian, nominee or agent has documentary
evidence in its records that the beneficial owner is not a U.S. person and
certain other conditions are met, or the beneficial owner otherwise establishes
an exemption.
Payments on the sale, exchange or other disposition of an Exchange Note or
Common Stock made to or through a foreign office of a broker generally will not
be subject to backup withholding. However, payments made by a broker that is a
United States person, a controlled foreign corporation for United States federal
income tax purposes, a foreign person 50% or more of whose gross income is
effectively connected with a United States trade or business for a specified
three-year period, or (with respect to payments after December 31, 1999) a
foreign partnership with certain connections to the United States, will be
subject to information reporting unless the broker has in its records
documentary evidence that the beneficial owner is not a United States person and
certain other conditions are met, or the beneficial owner otherwise establishes
an exemption. Backup withholding may apply to any payment that such broker is
required to report if the broker has actual knowledge that the payee is a United
States person. Payments to or through the United States office of a broker will
be subject to information reporting and backup withholding unless the Holder
certifies, under penalties of perjury, that it is not a United States person or
otherwise establishes an exemption.
For payments made after December 31, 1999, with respect to Exchange Notes
or Common Stock held by foreign partnerships, IRS regulations require that the
certification described in the first paragraph of this section be provided by
the partners, rather than by the foreign partnership, and that the partnership
provide certain information, including a United States TIN. A look-through rule
will apply in the case of tiered partnerships.
Non-U.S. Holders should consult their tax advisors regarding the
application of information reporting and backup withholding in their particular
situations, the availability of an exemption therefrom, and the procedures for
obtaining such an exemption, if available. Backup withholding is not an
additional tax. Any amounts withheld under the backup withholding rules may be
refunded or credited against the Non-U.S. Holder's U.S. federal income tax
liability, provided that the required information is furnished to the IRS.
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<PAGE> 1
LETTER OF TRANSMITTAL
FOR OFFER TO EXCHANGE UP TO $15,840,000 OF NEW
6 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
FOR UP TO $22,000,000 OF OUTSTANDING
6 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
ITRON, INC.
PURSUANT TO THE OFFERING CIRCULAR DATED FEBRUARY 11, 1999
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON FRIDAY, MARCH 12, 1999, UNLESS THE OFFER IS EXTENDED. TENDERS MAY
BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer Is:
CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION
By Mail, Hand or Overnight Delivery:
CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION
c/o Chase Bank of Texas, National Association
Corporate Trust Services
1201 Main Street, 18th Floor
Dallas, TX 75202
Attention: Frank Ivins (CONFIDENTIAL)
By Facsimile Transmission:
(For Eligible Institutions Only)
(214) 672-5746
Confirm by Telephone:
Frank Ivins (214) 672-5678
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA A FACSIMILE NUMBER
OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE
INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY
BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meanings
given them in the Offering Circular (as defined below).
This Letter of Transmittal is to be completed by holders (which term, for
purposes of this Letter of Transmittal, includes any participant in The
Depository Trust Company ("DTC")) when tenders are to be made pursuant to the
procedures for tender by book-entry transfer set forth under "The Exchange
Offer -- How to Tender" in the Offering Circular and an Agent's Message (as
defined below) is not delivered. On or prior to the Expiration Time, the
Exchange Agent must receive (at its address set forth herein) book-entry
confirmation of a book-entry transfer of the Original Notes into the Exchange
Agent's account at DTC as well as this Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and any other documents required by this Letter of Transmittal.
Tenders by book-entry transfer may also be made by delivering an Agent's Message
in lieu of this Letter of Transmittal. The term "book-entry confirmation" means
a timely confirmation of a book-entry transfer of Original Notes into the
Exchange Agent's account at DTC. The term "Agent's Message" means a message,
transmitted by DTC to and received by the Exchange Agent and forming part of a
book-entry confirmation, that states that DTC has received an express
acknowledgment from the tendering participant, which acknowledgment states that
such participant has received and agrees to be bound by this Letter of
Transmittal and that Itron, Inc. may enforce this Letter of Transmittal against
such participant.
<PAGE> 2
Holders of Original Notes who cannot deliver all required documents to the
Exchange Agent on or prior to the Expiration Time, or cannot complete the
procedures for book-entry transfer on or prior to the Expiration Time must
tender their Original Notes according to the guaranteed delivery procedures set
forth in "The Exchange Offer -- How to Tender" in the Offering Circular.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
THE UNDERSIGNED HAS COMPLETED THE APPROPRIATE BOXES BELOW AND SIGNED THIS
LETTER OF TRANSMITTAL TO INDICATE THE ACTION THE UNDERSIGNED DESIRES TO TAKE
WITH RESPECT TO THE EXCHANGE OFFER.
DESCRIPTION OF ORIGINAL NOTES TENDERED
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF AGGREGATE
REGISTERED HOLDER PRINCIPAL AMOUNT OF ORIGINAL
PLEASE FILL IN, IF BLANK NOTES TENDERED (IF LESS THAN ALL)*
<S> <C>
$
- ----------------------------------------------------------- -----------------------------------------------------------
- -----------------------------------------------------------
- -----------------------------------------------------------
</TABLE>
- ------------------------
* Need not be completed if tendering for exchange all Original Notes held.
Original Notes may be tendered in whole or in part in denominations of $1,000
and integral multiples of $1,000 in excess thereof, provided that if any
Original Notes are tendered for exchange in part, the untendered principal
amount thereof must be $1,000 or any integral multiple of $1,000 in excess
thereof. Any fractional interests in the Exchange Notes will be paid in cash
by the Company, as more fully set forth in the Offering Circular. All Original
Notes held shall be deemed tendered unless a lesser number is specified in
this column.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS
(DEFINED IN INSTRUCTION 1) ONLY)
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution
------------------------------
DTC Account Number
-----------------------------------------
Transaction Code Number
-------------------------------------
By crediting the Original Notes to the Exchange Agent's account at DTC in
accordance with DTC's Automated Tender Offer Program ("ATOP") and by complying
with applicable ATOP procedures with respect to the Exchange Offer, including
transmitting an Agent's Message to the Exchange Agent in which the holder of the
Original Notes acknowledges and agrees to be bound by the terms of this Letter
of Transmittal, the participant in ATOP confirms on behalf of itself and the
beneficial owners of such Original Notes all provisions of this Letter of
Transmittal applicable to it and such beneficial owners as fully as if it had
completed the information required herein and executed and transmitted this
Letter of Transmittal to the Exchange Agent.
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
GUARANTEED DELIVERY IS TO BE MADE BY BOOK-ENTRY TRANSFER:
Name of Tendering Institution
------------------------------
DTC Account Number
-----------------------------------------
Transaction Code Number
-------------------------------------
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to Itron, Inc., a Washington corporation
(the "Company"), the above-described aggregate principal amount of its 6 3/4%
Convertible Subordinated Notes Due 2004 (the "Original Notes") in exchange for
6 3/4% Convertible Subordinated Notes Due 2004 (the "Exchange Notes"), upon the
terms and subject to the conditions set forth in the Offering Circular dated
February 11, 1999 (as the same may be amended or supplemented from time to time,
the "Offering Circular") and in this Letter of Transmittal (which, together with
the Offering Circular, constitutes the "Exchange Offer"), receipt of which is
hereby acknowledged.
Subject to and effective upon the acceptance for exchange of all or any
portion of the Original Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Original Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of the Company in connection with the
Exchange Offer) with respect to the tendered Original Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), subject only to the right of withdrawal described in
the Offering Circular, to do the following: (i) cause DTC to make any transfers
of Original Notes into Exchange Notes, effective upon receipt of a duly signed
and properly transmitted Letter of Transmittal (or an Agent's Message in lieu
thereof); (ii) deliver to the Company's DTC account book-entry transfer of the
Original Notes together with all accompanying evidences of transfer and
authenticity to, or upon the order of, the Company, upon receipt by the Exchange
Agent, as the undersigned's agent, of book-entry transfer of the Exchange Notes
to be issued in exchange for such Original Notes, and (iii) receive for the
account of the Company all benefits and otherwise exercise all rights of
beneficial ownership of such Original Notes, all in accordance with the terms
and conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE
ORIGINAL NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR
EXCHANGE, THE COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE
THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES,
AND THAT THE ORIGINAL NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE
CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY
ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY
OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE ORIGINAL
NOTES TENDERED HEREBY. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS
OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) (which term, for
the purposes of this Letter of Transmittal, shall include any participant in
DTC) of the Original Notes tendered hereby should be printed above, if they are
not already set forth above, as they appear on the register of holders of
Original Notes maintained by the Trustee or on a security position listing.
If any tendered Original Notes are not exchanged pursuant to the Exchange
Offer for any reason, such nonexchanged Original Notes will be credited to an
account maintained at DTC without expense to the tendering holder, promptly
following the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Original Notes pursuant to any
one of the procedures described under "The Exchange Offer -- How to Tender" in
the Offering Circular and in the instructions herein will, upon the Company's
acceptance for exchange of such tendered Original Notes, constitute a binding
agreement between the undersigned and the Company upon the terms and subject to
the conditions of the Exchange Offer. The undersigned recognizes that, under
certain circumstances set forth in the Offering Circular, the Company may not be
required to accept for exchange any of the Original Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange Notes be
credited to the account indicated above maintained at DTC. If applicable,
Original Notes not exchanged will be credited to the account indicated above
maintained
<PAGE> 4
at DTC. Similarly, unless otherwise indicated under "Special Delivery
Instructions" below, please deliver the evidence of DTC book-entry transfer of
the Exchange Notes to the undersigned at the address shown below the
undersigned's signature. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Issuance Instructions" or the "Special
Delivery Instructions" to transfer any Original Notes from the name of the
registered holder if the Company does not accept for exchange any of the
Original Notes.
Holders of Original Notes which are accepted for exchange will receive
interest payments on such Original Notes as set forth in the Offering Circular,
and the undersigned waives the right to receive any interest payments on such
Original Notes accumulated after March 11, 1999. Holders of Exchange Notes as of
the record date for the payment of interest on September 30, 1999 will be
entitled to receive interest accumulated from and after March 12, 1999.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Original Notes tendered hereby. All
authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Offering Circular, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF ORIGINAL
NOTES" ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE
TENDERED THE ORIGINAL NOTES AS SET FORTH IN SUCH BOX.
<PAGE> 5
HOLDERS SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
Must be signed by registered holder(s) (which term, for purposes of this Letter
of Transmittal, shall include any participant in DTC) exactly as name(s)
appear(s) on the register of holders of Original Notes maintained by the Trustee
or on a security position listing, or by any person authorized to become the
registered holder by endorsements and documents transmitted herewith (including
such opinions of counsel, certifications and other information as may be
required by the Company for the Original Notes to comply with the restrictions
on transfer applicable to the Original Notes). If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary or representative capacity, please
set forth the signer's full title. See Instruction 5.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE OF HOLDER(S) OR AUTHORIZED SIGNATORY)
Date: ________________ , 1999
Name(s) ________________________________________________________________________
(PLEASE PRINT)
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number _________________________________________________
Tax Identification or Social Security Number(s) ________________________________
SIGNATURE(S) GUARANTEE
(IF REQUIRED -- SEE INSTRUCTIONS 2 AND 5)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
Date: ________________ , 1999
Name of Eligible Institution Guaranteeing Signatures ___________________________
Capacity (full title) __________________________________________________________
(PLEASE PRINT)
Address ________________________________________________________________________
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number _________________________________________________
<PAGE> 6
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the Exchange Notes or any Original Notes that are
not exchanged are to be entered on the register of holders of Exchange Notes or
Original Notes, as applicable, maintained by the Trustee, or on a security
position listing, in the name of someone other than the registered holder of the
Original Notes whose name appears above.
Issue
[ ] Exchange Notes and/or
[ ] Original Notes not exchanged
to:
Name __________________________________
Address _______________________________
________________________________________________________________
(INCLUDE ZIP CODE)
________________________________________________________________
AREA CODE AND TELEPHONE NUMBER
________________________________________________________________
TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the evidence of DTC book entry transfer of Exchange
Notes or the evidence of any Original Notes that are not exchanged is to be sent
to someone other than the registered holder of the Original Notes whose name
appears above, or to such registered holder at an address other than that shown
above.
Mail evidence of
[ ] Exchange Notes and/or
[ ] Original Notes not exchanged
to:
Name __________________________________
Address _______________________________
________________________________________________________________
(INCLUDE ZIP CODE)
________________________________________________________________
AREA CODE AND TELEPHONE NUMBER
________________________________________________________________
TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES.
This Letter of Transmittal is to be completed when tenders are to be made
pursuant to the procedures for tender by book-entry transfer set forth under
"The Exchange Offer -- How to Tender" in the Offering Circular and an Agent's
Message is not delivered. On or prior to the Expiration Time, the Exchange Agent
must receive (at its address set forth herein) book-entry confirmation of a
book-entry transfer of the Original Notes into the Exchange Agent's account at
DTC, as well as this Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message in lieu thereof, and any other documents required by this Letter
of Transmittal. Original Notes may be tendered in whole or in part in the
principal amount of $1,000 and in integral multiples of $1,000 in excess
thereof, provided that, if any Original Notes are tendered for exchange in part,
the untendered principal amount thereof must be $1,000 or any integral multiple
of $1,000 in excess thereof. Any fractional interests in the Exchange Notes will
be paid in cash by the Company, as more fully set forth in the Offering
Circular.
Holders who wish to tender their Original Notes who cannot deliver this
Letter of Transmittal and all other required documents to the Exchange Agent on
or prior to the Expiration Time, or who cannot complete the procedures for
book-entry transfer on or prior to the Expiration Time, may tender their
Original Notes by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedures set forth under "The
Exchange Offer -- How to Tender" in the Offering Circular. Pursuant to such
procedures: (a) such tender must be made by or through an Eligible Institution
(as defined below); (b) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by the Company,
must be received by the Exchange Agent on or prior to the Expiration Time; and
(c) a book-entry confirmation (as defined in the Offering Circular) representing
all tendered Original Notes, in proper form for transfer, together with a Letter
of Transmittal (or facsimile thereof or Agent's Message in lieu thereof),
properly completed and duly executed, with any required signature guarantees and
any other documents required by this Letter of Transmittal, must be received by
the Exchange Agent within three Nasdaq Stock Market trading days after the date
of execution of such Notice of Guaranteed Delivery, all as provided in "The
Exchange Offer -- How to Tender" in the Offering Circular. A "trading day" is
any day on which the Nasdaq National Market is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Original Notes to
be properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Time. As used herein and in the Offering Circular, "Eligible Institution" means
a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as "an
eligible guarantor institution," including (as such terms are defined therein)
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association recognized program.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY
INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY ON OR PRIOR TO THE
EXPIRATION TIME. NO DOCUMENTS SHOULD BE SENT TO THE COMPANY.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by executing a Letter of Transmittal (or
facsimile thereof or Agent's Message in lieu thereof), waives any right to
receive any notice of the acceptance of such tender.
<PAGE> 8
2. GUARANTEE OF SIGNATURES.
No signature guarantee on this Letter of Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this Letter of Transmittal, shall include any
participant in DTC whose name appears on the register of holders of
Original Notes maintained by the Trustee or on a security position listing
as the owner of the Original Notes) of Original Notes tendered herewith,
unless such holder has completed either the box entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions" above, or
(ii) such Original Notes are tendered for the account of a firm that
is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature on
this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE.
If the space provided in the box captioned "Description of Original Notes"
is inadequate, the principal amount of Original Notes and any other required
information should be listed on a separate signed schedule that is attached to
this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS.
Tenders of Original Notes will be accepted only in the principal amount of
$1,000 and in integral multiples of $1,000 in excess thereof, provided that if
any Original Notes are tendered for exchange in part, the untendered principal
amount thereof must be $1,000 or any integral multiple of $1,000 in excess
thereof. Any fractional interests in the Exchange Notes will be paid in cash by
the Company, as set forth in the Offering Circular. Nontendered Original Notes
will be credited to an account maintained at DTC, and the holder's name entered
on the register of holders of Original Notes maintained by the Trustee or on a
security position listing, promptly after the Expiration Time, unless the
appropriate boxes on this Letter of Transmittal are completed.
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time on or prior to the Expiration Time. In order for a
withdrawal to be effective on or prior to that time, a written or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at its address set forth above or in the Offering Circular on or
prior to the Expiration Time. Any such notice of withdrawal must specify (i) the
name of the person who tendered the Original Notes to be withdrawn, (ii) the
aggregate principal amount of Original Notes to be withdrawn, and (iii) the name
and number of the account at DTC to be credited with the withdrawal of Original
Notes. A notice of withdrawal will be effective if delivered to the Exchange
Agent by written or facsimile transmission on or prior to the Expiration Time.
Withdrawals of tenders of Original Notes may not be rescinded. Original Notes
properly withdrawn will not be deemed validly tendered for purposes of the
Exchange Offer, but may be retendered at any subsequent time on or prior to the
Expiration Time by following any of the procedures described in the Offering
Circular under "The Exchange Offer -- How to Tender."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, which determination shall be final and binding on all parties.
None of the Company, any affiliates or assigns of the Company, the Exchange
Agent or any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Original Notes that have been
tendered but are withdrawn on or prior to the Expiration Time will be returned
to the holder thereof without cost to such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder(s) of the
Original Notes tendered hereby, the signature(s) must correspond exactly with
the name(s) as written on the register of holders of Original
<PAGE> 9
Notes maintained by the Trustee or on a security position listing without
alteration, enlargement or any change whatsoever.
If any of the Original Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If this Letter of Transmittal or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and must submit proper evidence
satisfactory to the Company, in its sole discretion, of such persons' authority
to so act.
When this Letter of Transmittal is signed by the registered owner of the
Original Notes listed and transmitted hereby, no endorsement of separate bond
powers are required unless Exchange Notes are to be issued in the name of a
person other than the registered holder. Signatures on such bond powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner of the Original Notes listed, it must be accompanied by such
opinions of counsel, certifications and other information as the Company or the
Exchange Agent may require in accordance with the restrictions on transfer
applicable to the Original Notes.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
If Exchange Notes are to be entered on the register of holders maintained
by the Trustee or on a security position listing in the name of a person other
than the signer of this Letter of Transmittal, or if the evidence of DTC
book-entry transfer of the Exchange Notes is to be sent to someone other than
the signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Unless the appropriate boxes on this Letter of Transmittal are completed,
Original Notes not exchanged will be returned by crediting the account indicated
above maintained at DTC. See Instruction 4.
7. IRREGULARITIES.
The Company will determine, in its sole discretion, all questions as to the
form of documents, validity, eligibility (including time of receipt) and
acceptance for exchange of any tender of Original Notes, which determination
shall be final and binding on all parties. The Company reserves the absolute
right to reject any and all tenders determined by it not to be in proper form or
the acceptance of which, or exchange for, may, in the view of counsel to the
Company, be unlawful. The Company also reserves the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer set forth
in the Offering Circular under "The Exchange Offer -- Conditions to and
Amendment of Exchange Offer," or any conditions or irregularities in any tender
of Original Notes of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders. The Company's
interpretation of the terms and conditions of the Exchange Offer (including this
Letter of Transmittal and the instructions hereto) will be final and binding. No
tender of Original Notes will be deemed to have been validly made until all
irregularities with respect to such tender have been cured or waived. The
Company, any affiliates or assigns of the Company, the Exchange Agent, or any
other person shall not be under a duty to give notification of any
irregularities in tenders or incur any liability for failure to give such
notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES.
Questions and requests for assistance may be directed to the Exchange Agent
at its address and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Offering Circular, the Notice of
Guaranteed Delivery and this Letter of Transmittal may be obtained from the
Exchange Agent, the Company, or from the holder's broker, dealer, commercial
bank, trust company or other nominee.
<PAGE> 10
9. SECURITY TRANSFER TAXES.
Holders who tender their Original Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith. If, however, Exchange Notes
are to be entered on the register of holders maintained by the Trustee or on a
security position listing in the name of any person other than the registered
holder of the Original Notes tendered, or if a transfer tax is imposed for any
reason other than the exchange of Original Notes in connection with the Exchange
Offer, then the amount of any such transfer tax (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
The amount of such transfer taxes will be billed directly to such tendering
holder if satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with this Letter of Transmittal.
10. INCORPORATION OF LETTER OF TRANSMITTAL.
This Letter of Transmittal shall be deemed to be incorporated in and
acknowledged and accepted by any tender through the DTC's ATOP procedures by any
participant in DTC on behalf of itself and the beneficial owners of any Original
Notes so tendered.
11. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Offering Circular.
12. NO CONDITIONAL TENDERS.
No alternative, conditional or contingent tenders will be accepted. All
tendering holders of Original Notes, by executing this Letter of Transmittal,
shall waive any right to receive notice of the acceptance of Original Notes for
exchange.
None of the Company, the Exchange Agent or any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Original
Notes nor shall any of them incur any liability for failure to give any such
notice.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF OR AN AGENT'S
MESSAGE IN LIEU HEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
EXCHANGE AGENT AT OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE, OR THE TENDERING NOTEHOLDER MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED
DELIVERY.
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder whose tendered Original Notes are
accepted for exchange is required by law to provide the Exchange Agent with such
holder's correct taxpayer identification number ("TIN") on the Substitute Form
W-9 included herein or otherwise establish a basis for exemption from backup
withholding. If such holder is an individual, the TIN is his or her social
security number. If the Exchange Agent is not provided with the correct TIN, the
Internal Revenue Service may subject the holder or transferee to a $50 penalty.
In addition, book-entry transfer of such holder's Exchange Notes may be subject
to backup withholding. Failure to comply truthfully with the backup withholding
requirements also may result in the imposition of severe criminal and/or civil
fines and penalties.
Certain holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt holders should furnish their TIN, write "Exempt" on the
face of the Substitute Form W-9, and sign, date and return the Substitute Form
W-9 to the Exchange Agent. A foreign person, including entities, may qualify as
an exempt recipient by submitting to the Exchange Agent a properly completed
Internal Revenue Service Form W-8, signed under penalties of perjury, attesting
to that holder's foreign status. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the holder or other transferee. Backup withholding
is not an additional federal income tax. Rather, the federal
<PAGE> 11
income tax liability of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to Original
Notes exchanged in the Exchange Offer, the holder is required to provide the
Exchange Agent with either:
(i) the holder's correct TIN by completing the form included herein,
certifying that the TIN provided on Substitute Form W-9 is correct (or that
such holder is awaiting a TIN) and that (A) the holder has not been
notified by the Internal Revenue Service that the holder is subject to
backup withholding as a result of failure to report all interest or
dividends or (B) the Internal Revenue Service has notified the holder that
the holder is no longer subject to backup withholding; or
(ii) an adequate basis for exemption.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60-day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60-day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60-day period,
amounts withheld will be remitted to the Internal Revenue Service as backup
withholding. In addition, 31% of all payments made thereafter will be withheld
and remitted to the Internal Revenue Service until a correct TIN is provided.
NUMBER TO GIVE THE EXCHANGE AGENT
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered holder of
the Original Notes or of the last transferee appearing on the register of the
Original Notes. If the Original Notes are held in more than one name or are held
not in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
<PAGE> 12
<TABLE>
<S> <C> <C>
TO BE COMPLETED BY ALL TENDERING SECURITYHOLDERS
PAYOR'S NAME: CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION
- -----------------------------------------------------------------------------------------------------------------------
SUBSTITUTE FORM W-9 DEPARTMENT OF PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX Social Security Number or
THE TREASURER INTERNAL REVENUE AT RIGHT AND CERTIFY BY SIGNING AND DATING Employer
SERVICE BELOW. Identification Number
TIN:
----------------------------------------------------------------------------------
PART 2 -- Awaiting TIN [ ]
----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
CERTIFICATION -- UNDER PENALTIES OF PERJURY, I
CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer
Identification
Number (or am waiting for a number to be issued to me)
and
(2) I am not subject to backup withholding either because
(i) I am exempt from backup withholding, (ii) I have not
been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a
result of a
failure to report all interest or dividends, (iii) or
the IRS has notified
me that I am no longer subject to backup withholding.
(3) Any other information provided in this form is true and
correct.
PAYER'S REQUEST FOR CERTIFICATION INSTRUCTIONS -- You must cross out item (2)
TAXPAYER above if you have been notified by the IRS that you are
IDENTIFICATION currently subject to backup withholding because of
NUMBER ("TIN") underreporting interest or dividends on your tax
return. However, if after being notified by the IRS
that you were subject to backup withholding you
received another notification from the IRS that you are
no longer subject to backup withholding, do not cross
out such item (2).
SIGNATURE _______________________________ DATE ____________
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered
an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all reportable payments
made to me will be withheld, but that such amounts will be refunded to me if
I then provide a Taxpayer Identification Number within 60 days.
Signature _______________________________ Date ____________, 1999
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY FOR TENDER
OF ORIGINAL 6 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
OF ITRON, INC.
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i) the
Letter of Transmittal (or Agent's Message in lieu thereof) and all other
required documents cannot be delivered to Chase Manhattan Bank and Trust
Company, National Association (the "Exchange Agent") on or prior to the
Expiration Time (as defined in the Offering Circular, defined below), or (ii)
the procedures for delivery by book-entry transfer cannot be completed on a
timely basis. This Notice of Guaranteed Delivery may be delivered by hand,
overnight courier or mail, or transmitted by facsimile transmission, to the
Exchange Agent. See "The Exchange Offer -- How to Tender" in the Offering
Circular. In addition, in order to utilize the guaranteed delivery procedure to
tender the Company's (as defined below) 6 3/4% Convertible Subordinated Notes
Due 2004 (the "Original Notes") pursuant to the Exchange Offer, a completed,
signed and dated Letter of Transmittal relating to the Original Notes (or
facsimile thereof or Agent's Message in lieu thereof) must also be received by
the Exchange Agent on or prior to the Expiration Time. Capitalized terms used
but not defined herein have the meanings assigned to them in the Offering
Circular.
The Exchange Agent for the Exchange Offer is:
CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION
By Mail, Hand or Overnight Delivery:
CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION
c/o Chase Bank of Texas, National Association
Corporate Trust Services
1201 Main Street, 18th Floor
Dallas, TX 75202
Attention: Frank Ivins (CONFIDENTIAL)
By Facsimile Transmission:
(For Eligible Institutions Only)
(214) 672-5746
Confirm by Telephone:
Frank Ivins (214) 672-5678
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Itron, Inc., a Washington corporation
(the "Company"), upon the terms and subject to the conditions set forth in the
Offering Circular dated February 11, 1999 (as the same may be amended or
supplemented from time to time, the "Offering Circular"), and the related Letter
of Transmittal (which together constitute the "Exchange Offer"), receipt of
which is hereby acknowledged, the aggregate principal amount of Original Notes
set forth below pursuant to the guaranteed delivery procedures set forth in the
Offering Circular under the caption "The Exchange Offer -- How to Tender."
Aggregate Principal Amount
- -----------------------
Name(s) of Registered Holder(s):
- ----------------
- ------------------------------------------------------
- ------------------------------------------------------
Amount Tendered: $
- ------------------------------*
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
To tender Original Notes by book-entry transfer, provide the following
information:
DTC Account Number:
- ---------------------------
Date:
- -----------------------------------------------
*Must be in denominations of $1,000 and in any integral multiple of $1,000 in
excess thereof.
All authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
PLEASE SIGN HERE
X
- ----------------------------------------------------
X
- ----------------------------------------------------
SIGNATURE(S) OF OWNER(S) OR AUTHORIZED SIGNATORY
- ------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER
Must be signed by the holder(s) of the Original Notes as their name(s) appear(s)
on the register of holders of Original Notes maintained by the Trustee or on a
security position listing, or by person(s) authorized to become registered
holder(s) by endorsement and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below.
Please print name(s) and address(es)
(Name(s):
- -----------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
Capacity:
- -------------------------------------------
Address(es):
- ---------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
2
<PAGE> 3
The undersigned, a firm or other entity identified in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker or dealer or government securities
broker or dealer; (iii) a credit union; (iv) a national securities exchange,
registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association
recognized program, hereby guarantees to deliver to the Exchange Agent, at its
address set forth above, confirmation of the book-entry transfer of the Original
Notes to the Exchange Agent's account at The Depository Trust Company, pursuant
to the procedures for book-entry transfer set forth in the Offering Circular,
together with one or more properly completed and duly executed Letter(s) of
Transmittal (or facsimile thereof or Agent's Message in lieu thereof) and any
other required documents within three business days after the date of execution
of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must communicate the guarantee and
deliver the Letter(s) of Transmittal (or Agent's Message in lieu thereof) to the
Exchange Agent within the time period set forth above and that failure to do so
could result in a financial loss to the undersigned.
(PLEASE TYPE OR PRINT)
Name of Firm:
- -------------------------------------
- ------------------------------------- ----------------------------
AUTHORIZED SIGNATURE
Address: Title:
----------------------------- ----------------------
- -------------------------------------
Dated:
- ------------------------------------- ----------------------
- -------------------------------------
ZIP CODE
- -------------------------------------
AREA CODE AND TELEPHONE NO.
3
<PAGE> 1
ITRON, INC.
2818 N. SULLIVAN ROAD
P.O. BOX 15288
SPOKANE, WASHINGTON 99216-1897
RE: ITRON, INC. OFFER TO EXCHANGE NEW 6 3/4% CONVERTIBLE
SUBORDINATED NOTES DUE 2004 FOR ORIGINAL 6 3/4% CONVERTIBLE
SUBORDINATED NOTES DUE 2004
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Itron, Inc. (the "Company") is offering, upon and subject to the terms and
conditions set forth in an Offering Circular dated February 11, 1999 (the
"Offering Circular"), and the enclosed letter of transmittal (the "Letter of
Transmittal"), to exchange (the "Exchange Offer") up to $15,840,000 of its new
6 3/4% Convertible Subordinated Notes Due 2004 (the "Exchange Notes") for up to
$22,000,000 of its outstanding 6 3/4% Convertible Subordinated Notes Due 2004
(the "Original Notes"). The Exchange Offer is being made in order to reduce the
outstanding long-term debt of the Company and to reduce the Company's debt
service obligations. As set forth in the Offering Circular, while the interest
rate and maturity of the Exchange Notes are identical to the Original Notes,
other important terms, such as the conversion price, differ. The Exchange Offer
is subject to certain conditions that are described in the Offering Circular
under "The Exchange Offer -- Conditions to and Amendment of Exchange Offer."
We are requesting that you contact your clients for whom you hold Original
Notes regarding the Exchange Offer. For your information and for forwarding to
your clients for whom you hold Original Notes registered in your name or in the
name of your nominee, or who hold Original Notes registered in their own names,
we are enclosing the following documents:
1. Offering Circular dated February 11, 1999;
2. The Letter of Transmittal for your use and for the information (or
the use, where relevant) of your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if time will not permit all required documents to reach the Exchange
Agent prior to the Expiration Time (as defined below) or if the procedure
for book-entry transfer cannot be completed on a timely basis;
4. A form of letter that may be sent to your clients for whose account
you hold Original Notes registered in your name or the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to Chase Manhattan Bank and Trust
Company, National Association, the Exchange Agent for the Original Notes.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON FRIDAY, MARCH 12, 1999, UNLESS EXTENDED BY THE
COMPANY (THE "EXPIRATION TIME"). THE ORIGINAL NOTES TENDERED PURSUANT TO THE
EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION TIME. PLEASE
FURNISH COPIES OF THE ENCLOSED MATERIALS TO THOSE OF YOUR CLIENTS FOR WHOM YOU
HOLD ORIGINAL NOTES IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE OR WHO HOLD
ORIGINAL NOTES REGISTERED IN THEIR OWN NAMES AS QUICKLY AS POSSIBLE.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof or an Agent's Message (as
defined in the Letter of Transmittal) in lieu thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent, all in accordance with the instructions set forth in the Letter
of Transmittal and in the Offering Circular under the heading "The Exchange
Offer -- How to Tender." The Exchange Offer is not being made to, nor will
tenders be accepted from or on behalf of, holders of Original Notes residing in
any jurisdiction in which the making of an Exchange Offer or the acceptance
hereof would not be in compliance with the laws of such jurisdiction.
<PAGE> 2
If holders of Original Notes wish to tender but it is impracticable for
them to comply with the book-entry transfer procedures on a timely basis, a
tender may be effected by following the guaranteed delivery procedures described
in the Offering Circular under "The Exchange Offer -- How to Tender."
The Company will not pay any fees or commissions to any broker or dealer or
other person for soliciting tenders of Original Notes. The Company will, upon
request, reimburse brokers, dealers, commercial banks and trust companies for
reasonable and necessary costs and expenses incurred by them in forwarding the
Offering Circular and the related documents to the beneficial owners of the
Original Notes held by them as nominee or in a fiduciary capacity. The Company
will pay or cause to be paid all stock transfer taxes applicable to the exchange
of Original Notes pursuant to the Exchange Offer, except as set forth in
Instruction 9 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to the
Company, at the address and telephone number set forth in the Offering Circular
under "The Exchange Offer -- Where to Obtain Additional Information."
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE OFFERING CIRCULAR OR THE LETTER OF TRANSMITTAL.
Very truly yours,
Itron, Inc.
Enclosures
2
<PAGE> 1
RE: ITRON, INC. OFFER TO EXCHANGE NEW 6 3/4% CONVERTIBLE
SUBORDINATED NOTES DUE 2004 FOR ORIGINAL 6 3/4% CONVERTIBLE
SUBORDINATED NOTES DUE 2004
To Our Clients:
Enclosed for your consideration is an Offering Circular dated February 11,
1999 (the "Offering Circular"), and the related letter of transmittal (the
"Letter of Transmittal"), relating to the offer (the "Exchange Offer") of Itron,
Inc. (the "Company") to exchange up to $15,840,000 of new 6 3/4% Convertible
Subordinated Notes Due 2004 (the "Exchange Notes") for up to $22,000,000 of its
outstanding 6 3/4% Convertible Subordinated Notes Due 2004 (the "Original
Notes"), upon the terms and subject to the conditions described in the Offering
Circular and the Letter of Transmittal. The Exchange Offer is being made in
order to reduce the outstanding long-term debt of the Company and to reduce the
Company's debt service obligations.
This material is being forwarded to you as the beneficial owner of the
Original Notes carried by us in your account but not registered in your name. A
TENDER OF SUCH ORIGINAL NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Original Notes held by us for your account, pursuant to the
terms and conditions set forth in the enclosed Offering Circular and Letter of
Transmittal. We encourage you to read the Offering Circular carefully before
instructing us as to whether or not to tender your Original Notes.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Original Notes on your behalf in accordance
with the provisions of the Exchange Offer. The Exchange Offer will expire at
5:00 p.m., New York City time, on Friday, March 12, 1999, unless extended by the
Company. Any Original Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time before the Expiration Time.
If a Noteholder desires to tender Original Notes but time will not permit
all required documents to reach the Exchange Agent (as defined in the Offering
Circular) prior to the Expiration Time or the procedure for book-entry transfer
cannot be completed on a timely basis, the Original Notes may be tendered
according to the guaranteed delivery procedures set forth in the Offering
Circular.
Your attention is directed to the following:
1. The Exchange Offer is for up to $22,000,000 of Original Notes, of
which $63,400,000 aggregate principal amount was outstanding as of February
10, 1999.
2. The Exchange Offer is subject to certain conditions set forth in
the Offering Circular in the section captioned "The Exchange
Offer -- Conditions to and Amendment of the Exchange Offer."
3. Holders who tender Original Notes will not be obligated to pay
brokerage commissions or solicitation fees. Any transfer taxes incident to
the transfer of Original Notes from the holder to the Company will be paid
by the Company, except as otherwise provided in the Instructions in the
Letter of Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time, on
Friday, March 12, 1999, unless extended by the Company.
5. The Exchange Offer is not being made to, nor will tenders be
accepted from or on behalf of, holders of Original Notes residing in any
jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction.
If you wish to have us tender your Original Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. If we do not receive written instructions in accordance with the
procedures presented in the Offering Circular and the Letter of Transmittal, we
will not tender any Original Notes for your account. THE LETTER OF TRANSMITTAL
IS FURNISHED TO YOU FOR INFORMATION ONLY AND MAY NOT BE USED DIRECTLY BY YOU TO
TENDER ORIGINAL NOTES.
<PAGE> 2
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Itron, Inc.
with respect to its Original Notes.
This will instruct you to tender the Original Notes held by you for the
account of the undersigned, upon and subject to the terms and conditions set
forth in the Offering Circular and the related Letter of Transmittal.
[ ] Please tender the Original Notes held by you for my account as indicated
below.
6 3/4% Original Notes: $___________________ Aggregate
Principal Amount of Original Notes Tendered
[ ] Please do not tender any Original Notes held by you for my account.
Dated: ____________________________, 1999
Signature(s) ___________________________________________________________________
Please print name(s) here ______________________________________________________
Address(es) ____________________________________________________________________
Area Code and Telephone Number(s) ______________________________________________
Tax Identification or Social Security Number(s) ________________________________
NONE OF THE ORIGINAL NOTES HELD BY US FOR YOUR ACCOUNT WILL BE TENDERED
UNLESS WE RECEIVE WRITTEN INSTRUCTIONS FROM YOU TO DO SO. UNLESS A SPECIFIC
CONTRARY INSTRUCTION IS GIVEN IN THE SPACE PROVIDED, YOUR SIGNATURE(S) HEREON
SHALL CONSTITUTE AN INSTRUCTION TO US TO TENDER ALL THE ORIGINAL NOTES HELD BY
US FOR YOUR ACCOUNT.
2
<PAGE> 1
INDENTURE
ITRON, INC.
TO
CHASE MANHATTAN BANK AND TRUST COMPANY, N.A., TRUSTEE
6 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
DATED AS OF MARCH __, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 1
SECTION 1.01. Definitions 1
SECTION 1.02. Compliance Certificates and Opinions 7
SECTION 1.03. Form of Documents Delivered to Trustee 7
SECTION 1.04. Acts of Holders; Record Dates 7
SECTION 1.05. Notices, Etc., to Trustee and Company 9
SECTION 1.06. Notice to Holders; Waiver 9
SECTION 1.07. Conflict with Trust Indenture Act 10
SECTION 1.08. Effect of Headings and Table of Contents 10
SECTION 1.09. Successors and Assigns 10
SECTION 1.10. Separability Clause 10
SECTION 1.11. Benefits of Indenture 10
SECTION 1.12. Governing Law 10
SECTION 1.13. Legal Holidays 10
ARTICLE II. SECURITY FORMS 10
SECTION 2.01. Forms Generally 10
SECTION 2.02. Form of Face of Security 11
SECTION 2.03. Form of Reverse of Security 13
SECTION 2.04. Form of Trustee's Certificate of Authentication 15
SECTION 2.05. Form of Conversion Notice 15
ARTICLE III. THE SECURITIES 16
SECTION 3.01. Title and Terms; Issuable in Series 16
SECTION 3.02. Denominations 17
SECTION 3.03. Execution, Authentication, Delivery and Dating 17
SECTION 3.04. Global Securities 17
SECTION 3.05. Registration; Registration of Transfer and Exchange 19
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Securities 20
SECTION 3.07. Payment of Interest; Interest Rights Preserved 20
SECTION 3.08. Persons Deemed Owners 21
SECTION 3.09. Cancellation 21
SECTION 3.10. Computation of Interest 22
ARTICLE IV. Satisfaction and Discharge 22
SECTION 4.01. Satisfaction and Discharge of Indenture 22
SECTION 4.02. Application of Trust Money 23
ARTICLE V. Remedies 23
SECTION 5.01. Events of Default 23
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment 24
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee 25
SECTION 5.04. Trustee May File Proofs of Claim 25
SECTION 5.05. Trustee May Enforce Claims Without Possession of Securities 26
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 5.06. Application of Money Collected 26
SECTION 5.07. Limitation on Suits 26
SECTION 5.08. Unconditional Right of Holders to Receive Principal, Premium and
Interest and to Convert 27
SECTION 5.09. Restoration of Rights and Remedies 27
SECTION 5.10. Rights and Remedies Cumulative 27
SECTION 5.11. Delay or Omission Not Waiver 27
SECTION 5.12. Control by Holders 27
SECTION 5.13. Waiver of Past Defaults 27
SECTION 5.14. Undertaking for Costs 28
SECTION 5.15. Waiver of Usury, Stay or Extension Laws 28
ARTICLE VI. THE TRUSTEE 28
SECTION 6.01. Certain Duties and Responsibilities 28
SECTION 6.02. Notice of Defaults 29
SECTION 6.03. Certain Rights of Trustee 29
SECTION 6.04. Not Responsible for Recitals or Issuance of Securities 30
SECTION 6.05. May Hold Securities 30
SECTION 6.06. Money Held in Trust 30
SECTION 6.07. Compensation and Reimbursement 30
SECTION 6.08. Disqualification; Conflicting Interests 31
SECTION 6.09. Corporate Trustee Required; Eligibility 31
SECTION 6.10. Resignation and Removal; Appointment of Successor 31
SECTION 6.11. Acceptance of Appointment by Successor 32
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business 32
SECTION 6.13. Preferential Collection of Claims Against Company 32
SECTION 6.14. Appointment of Authenticating Agent 32
SECTION 6.15. Appointment of Co-Trustee 34
ARTICLE VII. HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY 34
SECTION 7.01. Company To Furnish Trustee Names and Addresses of Holders 34
SECTION 7.02. Preservation of Information; Communications to Holders 34
SECTION 7.03. Reports by Trustee 35
SECTION 7.04. Reports by Company 35
ARTICLE VIII. Consolidation, Merger, Conveyance, Transfer or Lease 35
SECTION 8.01. Company May Consolidate, Etc., Only on Certain Terms 35
SECTION 8.02. Successor Substituted 36
ARTICLE IX. SUPPLEMENTAL INDENTURES 36
SECTION 9.01. Supplemental Indentures Without Consent of Holders 36
SECTION 9.02. Supplemental Indentures with Consent of Holders 36
SECTION 9.03. Execution of Supplemental Indentures 37
SECTION 9.04. Effect of Supplemental Indentures 37
SECTION 9.05. Conformity with Trust Indenture Act 37
SECTION 9.06. Reference in Securities to Supplemental Indentures 37
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE X. Covenants 37
SECTION 10.01. Payment of Principal, Premium and Interest 37
SECTION 10.02. Maintenance of Office or Agency 38
SECTION 10.03. Money for Security Payments To Be Held in Trust 38
SECTION 10.04. Statement by Officers as to Default 39
SECTION 10.05. Existence 39
SECTION 10.06. Maintenance of Properties 39
SECTION 10.07. Payment of Taxes and Other Claims 39
SECTION 10.08. Waiver of Certain Covenants 39
ARTICLE XI. Redemption of Securities 40
SECTION 11.01. Right of Redemption 40
SECTION 11.02. Applicability of Article 40
SECTION 11.03. Election To Redeem; Notice to Trustee 40
SECTION 11.04. Selection by Trustee of Securities To Be Redeemed 40
SECTION 11.05. Notice of Redemption 40
SECTION 11.06. Deposit of Redemption Price 41
SECTION 11.07. Securities Payable on Redemption Date 41
SECTION 11.08. Securities Redeemed in Part 41
SECTION 11.09. Conversion Arrangement on Call for Redemption 42
ARTICLE XII. SUBORDINATION OF SECURITIES 42
SECTION 12.01. Securities Subordinate to Senior Indebtedness 42
SECTION 12.02. Payment Over of Proceeds upon Dissolution, Etc. 42
SECTION 12.03. No Payment When Senior Indebtedness in Default 43
SECTION 12.04. Payment Permitted If No Default 43
SECTION 12.05. Subrogation to Rights of Holders of Senior Indebtedness 44
SECTION 12.06. Provisions Solely To Define Relative Rights 44
SECTION 12.07. Trustee To Effectuate Subordination 44
SECTION 12.08. No Waiver of Subordination Provisions 44
SECTION 12.09. Notice to Trustee 45
SECTION 12.10. Reliance on Judicial Order or Certificate of Liquidating Agent 45
SECTION 12.11. Trustee Not Fiduciary for Holders of Senior Indebtedness 46
SECTION 12.12. Rights of Trustee as Holder of Senior Indebtedness; Preservation of
Trustee's Rights 46
SECTION 12.13. Article Applicable to Paying Agents 46
SECTION 12.14. Certain Conversions Deemed Payment 46
ARTICLE XIII. Conversion of Securities 46
SECTION 13.01. Conversion Privilege and Conversion Price 46
SECTION 13.02. Exercise of Conversion Privilege 47
SECTION 13.03. Fractions of Shares 48
SECTION 13.04. Adjustment of Conversion Price 48
SECTION 13.05. Notice of Adjustments of Conversion Price 52
SECTION 13.06. Notice of Certain Corporate Action 52
SECTION 13.07. Company to Reserve Common Stock 53
SECTION 13.08. Taxes on Conversions 53
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
SECTION 13.09. Covenant as to Common Stock 53
SECTION 13.10. Cancellation of Converted Securities 53
SECTION 13.11. Provisions in Case of Reclassification, Consolidation, Merger or
Sale of Assets 53
ARTICLE XIV. RIGHT TO REQUIRE REPURCHASE 54
SECTION 14.01. Right to Require Repurchase 54
SECTION 14.02. Notice; Method of Exercising Repurchase Right 54
SECTION 14.03. Deposit of Repurchase Price 55
SECTION 14.04. Securities Not Repurchased on Repurchase Date 55
SECTION 14.05. Securities Repurchased in Part 55
SECTION 14.06. Certain Definitions 55
ARTICLE XV. DEFEASANCE AND COVENANT DEFEASANCE 56
SECTION 15.01. Company's Option To Effect Defeasance or Covenant Defeasance 56
SECTION 15.02. Defeasance and Discharge 56
SECTION 15.03. Covenant Defeasance 56
SECTION 15.04. Conditions to Defeasance or Covenant Defeasance 56
SECTION 15.05. Deposited Money and U.S. Government Obligations To Be Held in Trust;
Other Miscellaneous Provisions 58
SECTION 15.06. Reinstatement 58
ARTICLE XVI. Immunity 59
SECTION 16.01. Personal Immunity of Incorporators, Shareholders,
Directors and Officers 59
</TABLE>
TESTIMONIUM
SIGNATURES AND SEALS
ACKNOWLEDGMENTS
<PAGE> 6
INDENTURE, dated as of March __, 1999, between ITRON, INC., a
corporation duly organized and existing under the laws of the State of
Washington (herein called the "Company"), having its principal office at 2818 N.
Sullivan Road, Spokane, Washington 99216, and CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION, a national banking association, as Trustee
(herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of its 6 3/4% Convertible Subordinated
Notes Due 2004 (herein called the "Securities"), to be issued as in this
Indenture provided.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of any series thereof,
as follows:
ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. DEFINITIONS. For all purposes of this Indenture, except
as otherwise expressly provided or unless the context otherwise requires:
1. the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the singular;
2. all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
3. all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as are
generally accepted at the date of such computation;
4. unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or Section, as the case may be, of
this Indenture; and
5. the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms used in Article XIV have the meanings specified therein.
"Act," when used with respect to any Holder, has the meaning specified
in Section 1.04.
"Affiliate" of any specified Person means any other Person who
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management
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<PAGE> 7
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of Euroclear and CEDEL, and of the Depositary for such
Security, in each case to the extent applicable to such transaction and as in
effect from time to time.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities.
"Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means a day on which banking institutions are open for
business and carrying out transactions in Dollars at the relevant place of
payment.
"CEDEL" means Cedel Bank, societe anonyme (or any successor securities
clearing agency).
"Change in Control" has the meaning specified in Section 14.06.
"Closing Price" on any Trading Day with respect to the per share price
of Common Stock means the last reported sales price regular way or, in case no
such reported sale takes place on such Trading Day, the average of the reported
closing bid and asked prices regular way, in either case on the New York Stock
Exchange or, if the Common Stock is not listed or admitted to trading on the New
York Stock Exchange, on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, on The Nasdaq Stock Market
("Nasdaq") or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or Nasdaq, the average of the closing bid and asked
prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm that is selected from time to time by the Company for that
purpose and is reasonably acceptable to the Trustee.
"Commencement Date" has the meaning specified in Section 13.04.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" includes any stock of any class of the Company which has
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Company
and which is not subject to redemption by the Company. However, subject to the
provisions of Section 13.11, shares issuable on conversion of Securities shall
include only shares of the class designated as Common Stock of the Company at
the date of this instrument or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no preference in
respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company and which are
not subject to redemption by the Company; provided that if at any time there
shall be more than one such resulting class, the shares of each such class then
so issuable shall be substantially in the proportion which the total
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<PAGE> 8
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee in
the city at which at any particular time its corporate trust business shall be
administered. As of the date hereof, the Corporate Trust Office of the Trustee
is located at 101 California Street, Suite 2725, San Francisco, California
94111.
"corporation" means a corporation, association, company, joint-stock
company or business trust.
"Defaulted Interest" has the meaning specified in Section 3.07.
"Definitive Security" means a certificated Security in the form set
forth in Section 2.02 and 2.03.
"Depositary" means, with respect to the Securities issued in whole or
in part in the form of one or more Global Securities, a clearing agency
registered under the Exchange Act that is designated to act as Depositary for
such Securities as contemplated by Section 2.01 (or any successor securities
clearing agency so registered).
"Distribution Date" has the meaning specified in Section 13.04.
"Dollar" or "U.S.$" means a Dollar or other equivalent unit in such
coin or currency of the United States as at the time shall be legal tender for
the payment of public and private debts.
"DTC" means The Depository Trust Company, a New York corporation.
"Euroclear" means the Euroclear Systems (or any successor securities
clearing agency).
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934 as it may be
amended from time to time, and any successor act thereto, and the rules and
regulations of the Commission promulgated thereunder.
"Expiration Date" has the meaning specified in Section 1.04.
"Expiration Time" has the meaning specified in Section 13.04.
"Global Security" means a Security that is registered in the Security
Register in the name of a Depositary or a nominee thereof.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
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<PAGE> 9
"Institutional Accredited Investor" means an institutional "accredited
investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Issue Date" means the date of first issuance of the Securities under
this Indenture.
"Maturity," when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption, exercise of the repurchase
right or otherwise.
"Non-Recourse Obligation" means indebtedness or other obligation or
that portion of indebtedness or other obligation 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; and (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 that were acquired with the
proceeds of such transaction or the project financed with the proceeds of such
transaction (and the proceeds thereof).
"Notice of Default" means a written notice of the kind specified in
Section 5.01(4) or 5.01(5).
"Officers' Certificate" means a certificate signed by any of the
Chairman of the Board, a Vice Chairman of the Board, the President or a Vice
President, and by any of the Treasurer, an Assistant Treasurer, the Secretary or
an Assistant Secretary, of the Company, and delivered to the Trustee. One of the
officers signing an Officers' Certificate given pursuant to Section 10.04 shall
be the principal executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company.
"Original Notes" means the Company's 6 3/4% Convertible Subordinated
Notes due 2004 issued pursuant to that certain Indenture dated March 12, 1997 by
the Company to Chase Manhattan Bank and Trust Company, National Association
(formerly known as Chemical Trust Company of California).
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any Paying
Agent (other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the Holders
of such Securities; provided that, if such Securities are to be redeemed, notice
of such redemption shall have been duly given pursuant to this Indenture or
provision therefor satisfactory to the Trustee shall have been made;
(iii) Securities which have been paid pursuant to Section 3.06
or in exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
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<PAGE> 10
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser in
whose hands such Securities are valid obligations of the Company; and
(iv) Securities which have been defeased pursuant to Section
15.02;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent, waiver or other
action, only Securities which the Trustee knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.06 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Purchased Shares" has the meaning specified in Section 13.04.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed as set forth in the
Securities.
"Reference Date" has the meaning specified in Section 13.04.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the March 15 or September 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Repurchase Date" has the meaning specified in Section 14.01.
"Repurchase Price" has the meaning specified in Section 14.01.
"Responsible Officer," when used with respect to the Trustee, means the
President or any Vice President, Assistant Vice President or Trust Officer of
the Trustee to whom any matter has been referred because of such officer's
knowledge and familiarity with the particular subject.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture and "Security" means one of such Securities.
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"Securities Act" means the Securities Act of 1933 as it may be amended
from time to time, and any successor act thereto, and the rules and regulations
of the Commission promulgated thereunder.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.05.
"Senior Indebtedness" means the principal of and premium, if any, and
interest on all indebtedness of the Company for money borrowed, other than the
Securities and other than the Original 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 Securities or any
other indebtedness of the Company for borrowed money or (ii) ranks pari passu in
right of payment to the Securities. For the purposes of certainty, the
Securities will rank pari passu in right of payment to the Original Notes. The
term "indebtedness for money borrowed" when used with respect to the Company is
defined to mean (i) 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, (ii) all obligations of the
Company with respect to interest rate hedging agreements to hedge interest rates
relating to Senior Indebtedness of the Company, (iii) 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 (iv) 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.
"Significant Subsidiary" means any Subsidiary that would be a
"Significant Subsidiary" as defined in Rule 1-02 of Regulation S-X under the
Securities Act and the Exchange Act (as such regulation may from time to time be
amended).
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.07.
"Stated Maturity," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday, other than any day on which securities are not traded on the applicable
securities exchange or in the applicable securities market.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed and the rules and
regulations thereunder; provided, however, that in the event the Trust Indenture
Act of 1939 or such rules and regulations are amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 and such rules and regulations as so amended.
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"United States" means the United States of America (including the
States thereof and the District of Columbia), its territories, its possessions
and other areas subject to its jurisdiction.
"U.S. Government Obligation" has the meaning specified in Section
15.04.
"Vice President," when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
SECTION 1.02. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.03. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.04. ACTS OF HOLDERS; RECORD DATES. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Indenture to be given or taken by Holders may
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be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by an agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient. The ownership of Securities
shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given or taken by Holders
of Securities; provided that the Company may not set a record date for, and the
provisions of this paragraph shall not apply with respect to, the giving or
making of any notice, declaration, request or direction referred to in the next
paragraph. If any record date is set pursuant to this paragraph, the Holders of
Outstanding Securities on such record date, and no other Holders, shall be
entitled to take the relevant action, whether or not such Holders remain Holders
after such record date; provided that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite principal amount of Outstanding Securities on such record date;
and provided, further, that for the purpose of determining whether Holders of
the requisite principal amount of such Securities have taken such action, no
Security shall be deemed to have been Outstanding on such record date unless it
is also Outstanding on the date such action is to become effective. Nothing in
this paragraph shall prevent the Company from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be cancelled and of no effect), nor shall anything in
this paragraph be construed to render ineffective any action taken by Holders of
the requisite principal amount of Outstanding Securities on the date such action
is taken. Promptly after any record date is set pursuant to this paragraph, the
Company, at its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to be given to the
Trustee in writing and to each Holder of Securities in the manner set forth in
Section 1.06.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 5.02, (iii) any request to institute proceedings referred
to in Section 5.07(2) or (iv) any direction referred to in Section 5.12. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities on such record date, and no other Holders, shall be entitled to join
in such notice, declaration, request or direction, whether or not such Holders
remain Holders after such record date; provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
by Holders of the requisite principal amount of Outstanding Securities on such
record date; and provided, further, that for the purpose of determining
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whether Holders of the requisite principal amount of such Securities have taken
such action, no Security shall be deemed to have been Outstanding on such record
date unless it is also Outstanding on the date such action is to become
effective. Nothing in this paragraph shall be construed to prevent the Trustee
from setting a new record date for any action (whereupon the record date
previously set shall automatically and without any action by any Person be
cancelled and of no effect), nor shall anything in this paragraph be construed
to render ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities on the date such action is taken. Promptly
after any record date is set pursuant to this paragraph, the Trustee, at the
Company's expense, shall cause notice of such record date, the proposed action
by Holders and the applicable Expiration Date to be given to the Company in
writing and to each Holder of Securities in the manner set forth in Section
1.06.
With respect to any record date set pursuant to this Section, the party
hereto that sets such record date may designate any day as the "Expiration Date"
and from time to time may change the Expiration Date to any earlier or later
day, provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities in the manner set forth in Section 1.06, on or
before the existing Expiration Date. Notwithstanding the foregoing, no
Expiration Date shall be later than the 180th day after the applicable record
date and, if an Expiration Date is not designated with respect to any record
date set pursuant to this Section, the party hereto that set such record date
shall be deemed to have designated the 180th day after such record date as the
Expiration Date with respect thereto.
Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard to
all or any part of the principal amount of such Security or by one or more duly
appointed agents, each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
SECTION 1.05. NOTICES, ETC., TO TRUSTEE AND COMPANY. Any request,
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficiently given if made, given, furnished or filed in writing to or with the
Trustee at its Corporate Trust Office, Attention: Corporate Trust Department, or
at any other address previously furnished in writing to the Company by the
Trustee, or
(2) the Company by the Trustee or by any Holder shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class postage prepaid, to the Company, addressed to it at the
address of its principal office specified in the first paragraph of this
instrument or at any other address previously furnished in writing to the
Trustee by the Company.
SECTION 1.06. NOTICE TO HOLDERS; WAIVER. Where this Indenture provides
for notice to Holders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date
(if any), and not earlier than the earliest date (if any), prescribed for the
giving of such notice. In any case where notice to Holders is given by mail,
neither the failure to mail such notice, nor any defect in any notice so mailed,
to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Where this Indenture provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
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<PAGE> 15
SECTION 1.07. CONFLICT WITH TRUST INDENTURE ACT. If any provision
hereof limits, qualifies or conflicts with a provision of the Trust Indenture
Act which is required under such Act to be a part of and govern this Indenture,
the latter provision shall control. If any provision of this Indenture modifies
or excludes any provision of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be. To the extent a Security
conflicts with a provision in the Indenture, the Indenture governs.
SECTION 1.08. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 1.09. SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 1.10. SEPARABILITY CLAUSE. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1.11. BENEFITS OF INDENTURE. Nothing in this Indenture or in
the Securities, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, the holders of Senior
Indebtedness and the Holders of Securities, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 1.12. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
SECTION 1.13. LEGAL HOLIDAYS. In any case where any Interest Payment
Date, Redemption Date, Repurchase Date or Stated Maturity of any Security or the
last date on which a Holder has the right to convert his Securities shall not be
a Business Day then (notwithstanding any other provision of this Indenture or of
the Securities) payment of interest or principal (and premium, if any) or
conversion of the Securities need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date, Redemption Date, Repurchase Date or at the Stated
Maturity, or on such last day for conversion, provided that no interest shall
accrue for the period from and after such Interest Payment Date, Redemption
Date, Repurchase Date or Stated Maturity, as the case may be.
ARTICLE II. SECURITY FORMS
SECTION 2.01. FORMS GENERALLY. The Securities, the conversion notice
and the Trustee's certificates of authentication shall be in substantially the
forms set forth in this Article, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or Depositary therefor or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution of
such Securities.
Upon their original issuance, the Securities shall be issued in the
form of a single Global Security in definitive, fully registered form without
interest coupons, substantially in the form of Security set forth in Section
2.02, with such applicable legends as are provided for in Section 2.02, except
as otherwise permitted herein. Such Global Security shall be registered in the
name of DTC, as Depositary, or its nominee, duly executed by the Company and
authenticated by the Trustee as hereinafter provided, and deposited with the
Trustee, as custodian for
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<PAGE> 16
DTC, for credit by DTC to the respective accounts of beneficial owners of the
Securities represented thereby (or such other accounts as they may direct). Such
Global Security, together with its successor Securities which are Global
Securities, are collectively herein called the "Global Security."
Except as provided in Section 3.05, owners of beneficial interests in
the Global Security will not be entitled to receive physical delivery of
certificated Securities.
Neither the Company nor the Trustee shall have any responsibility for
any defect in the CUSIP number that appears on any Security, check, advice of
payment or redemption or repurchase notice, and any such document may contain a
statement to the effect that CUSIP or ISIN numbers have been assigned by an
independent service for convenience of reference and that neither the Company
nor the Trustee shall be liable for any inaccuracy in such numbers.
SECTION 2.02. FORM OF FACE OF SECURITY.
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL BECAUSE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
ITRON, INC.
6 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
No. __________ U.S.$ _______
CUSIP No. _______________
Itron, Inc., a corporation duly organized and existing under the laws
of Washington (herein called the "Company," which term includes any successor
Person under the Indenture hereinafter referred to), for value received, hereby
promises to pay to __________, or registered assigns, the principal sum of
___________ United States Dollars (U.S.$ _______) which principal amount may
from time to time be increased or decreased to such other principal amounts
(which, taken together with the principal amounts of all other Outstanding
Securities, shall not exceed U.S.$15,840,000 in the aggregate at any time) by
adjustments made on the records of the Trustee hereinafter referred to in
accordance with the Indenture) on March 31, 2004, and to pay interest thereon
from March __, 1999, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually on March 31 and
September 30 in each year, commencing September 30, 1999, at the rate of 6 3/4%
per annum, until the principal hereof is paid or made available for payment. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular
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<PAGE> 17
Record Date for such interest, which shall be the March 15 or September 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for will forthwith cease to be payable to the Holder on such Regular Record Date
and may either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of, premium, if any, and interest on this
Security will be made at the Corporate Trust Office, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts by a Dollar check drawn on an account
maintained with a bank in the Borough of Manhattan, The City of New York or San
Francisco, California; provided, however, that upon written application by the
Holder to the Security Registrar setting forth wire instructions not later than
15 days prior to the relevant payment date (in the case of payment of principal)
or not later than the relevant record date (in the case of payment of interest),
such Holder may receive payment by wire transfer of Dollars to a Dollar account
(such transfers to be made only to Holders of an aggregate principal amount in
excess of U.S.$2,000,000) maintained by the payee with a bank in the United
States or in Europe and designated by the payee to the Security Registrar.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: ____________________
ITRON, INC.,
By _____________________________________
Name:___________________________________
Title:__________________________________
Attest:
__________________________________
Name:
Title:
SECTION 2.03. FORM OF REVERSE OF SECURITY. This Security is one of a
duly authorized issue of Securities of the Company designated as its 6 3/4%
Convertible Subordinated Notes Due 2004 (herein called the "Securities"),
limited in aggregate principal amount to U.S.$15,840,000, issued and to be
issued under an Indenture, dated as of March 12, 1999 (herein called the
"Indenture"), between the Company and Chase Manhattan Bank and
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<PAGE> 18
Trust Company, National Association, as Trustee for the Holders of Securities
issued under said Indenture (herein called the "Trustee," which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee, the holders of Senior Indebtedness and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered.
Subject to and upon compliance with the provisions of the Indenture,
the Holder of this Security is entitled, at his option, at any time on or before
the close of business on the Business Day immediately preceding March 31, 2004,
or in case this Security or a portion hereof is called for redemption, then in
respect of this Security or such portion hereof until and including, but (unless
the Company defaults in making the payment due upon redemption or repurchase)
not after, the close of business on the Business Day immediately preceding the
Redemption Date or Repurchase Date, as the case may be, to convert this Security
(or any portion of the principal amount hereof which is U.S.$1,000 or an
integral multiple thereof), at the principal amount hereof, or of such portion,
into fully paid and non-assessable shares of Common Stock of the Company at a
conversion price equal to U.S.$_____ aggregate principal amount of Securities
for each share of Common Stock (or at the current adjusted conversion price if
an adjustment has been made as provided in Article XIII of the Indenture) by
surrender of this Security, duly endorsed or assigned to the Company or in
blank, to the Company at its office or agency in the Borough of Manhattan, The
City of New York or San Francisco, California accompanied by the conversion
notice hereon executed by the Holder hereof evidencing such Holder's election to
convert this Security, or if less than the entire principal amount hereof is to
be converted, the portion hereof to be converted, and, in case such surrender
shall be made during the period from the close of business on any Regular Record
Date to the opening of business on the corresponding Interest Payment Date
(unless this Security or the portion hereof being converted has been called for
redemption on a Redemption Date within such period between and including such
Regular Record Date and such Interest Payment Date), also accompanied by payment
in funds acceptable to the Company of an amount equal to the interest payable on
such Interest Payment Date on the principal amount of this Security then being
converted. Subject to the aforesaid requirement for payment of interest and, in
the case of a conversion after the close of business on any Regular Record Date
and on or before the corresponding Interest Payment Date, to the right of the
Holder of this Security (or any Predecessor Security) of record at such Regular
Record Date to receive an installment of interest (even if the Security has been
called for redemption on a Redemption Date within such period), no payment or
adjustment is to be made on conversion for interest accrued hereon or for
dividends on the Common Stock issued on conversion. No fractions of shares or
scrip representing fractions of shares will be issued on conversion, but instead
of any fractional interest the Company shall pay a cash adjustment or round up
to the next higher whole share as provided in Article XIII of the Indenture. The
conversion price is subject to adjustment as provided in Article XIII of the
Indenture. In addition, the Indenture provides that in 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, the Indenture shall
be amended, without the consent of any Holders of Securities, so that this
Security, if then outstanding, will be convertible thereafter, during the period
this Security shall be convertible as specified above, 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 into which this Security might
have been converted immediately prior to such transaction (assuming such holder
of Common Stock failed to exercise any rights of election and received per share
the kind and amount received per share by a plurality of non-electing shares).
The Company will furnish to any Holder, upon request and without
charge, copies of the Certificate of Incorporation and By-laws of the Company
then in effect. Any such request may be addressed to the Company or to the
Security Registrar.
The Securities are subject to redemption upon not less than 20 days or
more than 60 days notice by mail, at any time on or after March __, 2002, as a
whole or in part, at the election of the Company, at a Redemption Price equal to
100% of the principal amount thereof, together with accrued interest to (but not
including) the Redemption Date, but interest installments whose Stated Maturity
is on or prior to such Redemption Date will be payable to the
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<PAGE> 19
Holders of such Securities, or one or more Predecessor Securities, of record at
the close of business on the relevant record dates referred to on the face
hereof, all as provided in the Indenture.
In certain circumstances involving a Change in Control, each Holder
shall have the right to require the Company to redeem all or part of its
Securities at a repurchase price equal to 100% of the principal amount thereof,
together with accrued and unpaid interest through the Repurchase Date.
The Securities do not have the benefit of any sinking fund.
In the event of redemption, conversion or repurchase of this Security
in part only, a new Security or Securities for the unredeemed, unconverted or
unrepurchased portion hereof will be issued in the name of the Holder hereof
upon the cancellation hereof.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided, and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Securities may be declared due and payable in the manner and with the
effect provided in Article V of the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Security shall be conclusive and binding upon such Holder
and upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed or to convert this Security as provided in the
Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
Corporate Trust Office duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities are issuable only in registered form without coupons in
denominations of U.S.$1,000 and any integral multiple thereof. As provided in
the Indenture and subject to certain limitations therein set forth, Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
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<PAGE> 20
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not payment of or on this Security is overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
Interest on this Security shall be computed on the basis of a 360-day
year of twelve 30-day months.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 2.04. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. This is
one of the Securities referred to in the within-mentioned Indenture.
Dated: __________
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION, as Trustee
By _____________________________________
Authorized Signatory
SECTION 2.05. FORM OF CONVERSION NOTICE.
CONVERSION NOTICE
To: Itron, Inc. CUSIP NO. _____________
The undersigned Holder of this Security hereby irrevocably exercises
the option to convert this Security, or the portion hereof (which is U.S.$1,000
or an integral multiple thereof) below designated into shares of Common Stock in
accordance with the terms of the Indenture referred to in this Security, and
directs that the shares issuable and deliverable upon conversion, together with
any check in payment for a fractional share and any Security representing any
unconverted principal amount hereof, be issued and delivered to the registered
owner hereof unless a different name has been provided below. If shares or any
portion of this Security not converted are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith a certificate in proper form
certifying that the applicable restrictions on transfer have been complied with.
Any amount required to be paid by the undersigned on account of interest
accompanies this Security.
The Applicant hereby agrees that, promptly after request of the
Company, he or it will furnish such proof in support of this certification as
the Company or the Security Registrar for the Common Stock may, from time to
time, request.
Dated: __________
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<PAGE> 21
________________________________________
Signature*
IF SHARES OR SECURITIES ARE TO BE
REGISTERED IN THE NAME OF A PERSON
OTHER THAN THE HOLDER, PLEASE PRINT PRINCIPAL AMOUNT TO BE CONVERTED
SUCH PERSON'S NAME AND ADDRESS:* (IF LESS THAN ALL):
$_______,000
<TABLE>
<S> <C>
__________________________________ _________________________________________________
Name Social Security or Taxpayer Identification Number
__________________________________
Street Address
__________________________________
City, State and Zip Code
</TABLE>
* Signature(s) must be guaranteed by an eligible guarantor institution (banks,
stock brokers, savings and loan associations and credit unions with membership
in an approved signature guarantee medallion program) pursuant to Securities and
Exchange Commission Rule 17Ad-15 if shares of Common Stock are to be delivered,
or unconverted Securities are to be issued, other than to and in the name of the
registered owner.
ARTICLE III. THE SECURITIES
SECTION 3.01. TITLE AND TERMS; ISSUABLE IN SERIES. The aggregate
principal amount of Securities which may be authenticated and delivered under
this Indenture is limited to U.S.$15,840,000, except for Securities
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Securities of the series pursuant to Section 3.04,
3.05, 3.06, 9.06, 11.08, 13.02 or 14.05 and except for Securities which,
pursuant to Section 3.03, are deemed never to have been authenticated and
delivered hereunder.
The Stated Maturity of the Securities shall be March 31, 2004, and they
shall bear interest at the rate of 6 3/4% per annum, payable semi-annually on
March 31 and September 30, commencing September 30, 1999, until the principal
thereof is paid or made available for payment.
Payment of the principal of, premium, if any, and interest on this
Security will be made at the Corporate Trust Office, in such coin or currency of
the United States as at the time of payment is legal tender for payment of
public and private debts by a Dollar check drawn on an account maintained with a
bank in the Borough of Manhattan, The City of New York or San Francisco,
California; provided, however, that upon written application by the Holder to
the Security Registrar setting forth wire instructions not later than 15 days
prior to the relevant payment date (in the case of payment of principal) or not
later than the relevant record date (in the case of payment of interest), such
Holder may receive payment by wire transfer of Dollars to a Dollar account (such
transfers to be made only to Holders of an aggregate principal amount in excess
of U.S.$2,000,000) maintained by the payee with a bank in the United States or
in Europe and designated by the payee to the Security Registrar.
The Securities shall be redeemable by the Company as provided in
Article XI.
The Securities shall be subordinated in right of payment to the prior
payment in full of Senior Indebtedness as provided in Article XII.
The Securities shall be convertible as provided in Article XIII.
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<PAGE> 22
The Securities shall be subject to purchase by the Company at the
option of the Holder as provided in Article XIV.
SECTION 3.02. DENOMINATIONS. The Securities shall be issuable only in
registered form without coupons and only in denominations of U.S.$1,000 and any
integral multiple thereof.
SECTION 3.03. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The
Securities shall be executed on behalf of the Company by any of its Chairman of
the Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon and attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder.
SECTION 3.04. GLOBAL SECURITIES.
(i) Each Global Security authenticated under this Indenture
shall be registered in the name of the Depositary designated by the Company for
such Global Security or a nominee thereof and delivered to such Depositary or a
nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(ii) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in part may be registered, in
the name of any Person other than the Depositary for such Global Security or a
nominee thereof unless (A) such Depositary (1) has notified the Company that it
is unwilling or unable to continue as Depositary for such Global Security or (2)
has ceased to be a clearing agency registered as such under the Exchange Act or
announces an intention permanently to cease business or does in fact do so, (B)
there shall have occurred and be continuing an Event of Default with respect to
such Global Security, or (C) a request for certificates has been made upon 60
days' prior written notice given to the Trustee in accordance with the
Depositary's customary procedures and a copy of such notice has been received by
the Company from the Trustee. Any Global Security exchanged pursuant to clause
(i) above shall be so exchanged in whole and not in part and any Global Security
exchanged pursuant to clause (ii) or (iii) above may be exchanged in whole or
from time to time in part as directed by the Depositary. Any Security issued in
exchange for a Global Security or any portion thereof shall be a Global
Security; provided that any such Security so issued that is registered in the
name of a Person other than the Depositary or a nominee thereof shall not be a
Global Security.
(iii) If any Global Security is to be exchanged for other
Securities or canceled in whole, it shall be surrendered by or on behalf of the
Depositary or its nominee to the Trustee, as Security Registrar, for exchange or
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<PAGE> 23
cancellation as provided in this Article III. If any Global Security is to be
exchanged for other Securities or canceled in part, or if another Security is to
be exchanged in whole or in part for a beneficial interest in any Global
Security, in each case, as provided in Section 3.05, then either (i) such Global
Security shall be so surrendered for exchange or cancellation as provided in
this Article III or (ii) the principal amount thereof shall be reduced or
increased by an amount equal to the portion thereof to be so exchanged or
cancelled, or equal to the principal amount of such other Security to be so
exchanged for a beneficial interest therein, as the case may be, by means of an
appropriate adjustment made on the records of the Trustee, as Security
Registrar, whereupon the Trustee, in accordance with the Applicable Procedures,
shall instruct the Depositary or its authorized representative to make a
corresponding adjustment to its records. Upon any such surrender or adjustment
of a Global Security, the Trustee shall, except as otherwise provided in this
Article III, authenticate and deliver any Securities issuable in exchange for
such Global Security (or any portion thereof) to or upon the order of, and
registered in such names as may be directed by, the Depositary or its authorized
representative. Upon the request of the Trustee in connection with the
occurrence of any of the events specified in the preceding paragraph, the
Company shall promptly make available to the Trustee a reasonable supply of
Securities that are not in the form of Global Securities. The Trustee shall be
entitled to rely upon any order, direction or request of the Depositary or its
authorized representative which is given or made pursuant to this Article III if
such order, direction or request is given or made in accordance with the
Applicable Procedures.
(iv) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global Security
or any portion thereof, whether pursuant to this Article III or otherwise, shall
be authenticated and delivered in the form of, and shall be, a Global Security,
unless such Security is registered in the name of a Person other than the
Depositary for such Global Security or a nominee thereof, in which case such
Security shall be authenticated and delivered in definitive, fully registered
form, without interest coupons.
(v) The Depositary or its nominee, as registered owner of a
Global Security, shall be the Holder of such Global Security for all purposes
under the Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global Security will be
shown only on, and the transfer of such interest shall be effected only through,
records maintained by the Depositary or its nominee or its Agent Members and
such owners of beneficial interests in a Global Security will not be considered
the owners or holders thereof. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or such nominee, as the case may be,
or impair, as between the Depositary, its Agent Members and any other person on
whose behalf an Agent Member may act, the operation of customary practices of
such Persons governing the exercise of the rights of a holder of any Security.
SECTION 3.05. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. (a)
The Company shall cause to be kept at the Corporate Trust Office of the Trustee
a register (the register maintained in such office and in any other office or
agency designated pursuant to Section 10.02 being herein sometimes collectively
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers and exchanges thereof. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers and exchanges thereof as herein provided. Upon surrender for
registration of transfer or exchange of any Security at an office or agency of
the Company designated pursuant to Section 10.02 for such purpose, accompanied
by a written instrument of transfer or exchange in the form provided by the
Company, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of the same series, of any authorized denominations and of a like
aggregate principal amount.
(b) Notwithstanding any other provisions of this Indenture or the
Securities, transfers and exchanges of Securities and beneficial interests in a
Global Security of the kinds specified in this Section 3.05(b) shall be made
only in accordance with this Section 3.05(b).
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(i) Transfer of Global Security. Other than as set
forth in Section 3.04(a), a Global Security may not be transferred, in whole or
in part, to any Person other than the Depositary or a nominee thereof, and no
such transfer to any such other Person may be registered; provided that this
Section 3.05(b)(i) shall not prohibit any transfer of a Security that is issued
in exchange for a Global Security but is not itself a Global Security. No
transfer of a Security to any Person shall be effective under this Indenture or
the Securities unless and until such Security has been registered in the name of
such Person. Nothing in this Section 3.05(b)(i) shall prohibit or render
ineffective any transfer of a beneficial interest in a Global Security effected
in accordance with the other provisions of this Section 3.05(b).
(ii) Other Exchanges. In the event that a Global
Security or any portion thereof is exchanged for Securities other than Global
Securities, such other Securities may in turn be exchanged (on transfer or
otherwise) for Securities that are not Global Securities or for beneficial
interests in a Global Security (if any is then outstanding) only in accordance
with such procedures, which shall be substantially consistent with the
provisions of Section 3.05(b)(i) and any Applicable Procedures, as may be from
time to time adopted by the Company and the Trustee.
(iii) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Security Registrar
with a request:
(A) to register the transfer of such Definitive Securities; or
(B) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized denominations, the
Security Registrar shall register the transfer or make the exchange as requested
if its reasonable requirements for such transaction are met; provided, however,
that the Definitive Securities surrendered for transfer or exchange:
(x) shall be duly endorsed or accompanied by a
written instrument of transfer in form reasonably satisfactory to the Company
and the Security Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing; and
(c) No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.04, 9.06, 11.08, 13.02 or 14.05 not involving
any transfer.
(d) The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Securities selected for redemption under Section 11.04 and ending at the close
of business on the day of such mailing, or (ii) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
SECTION 3.06. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES. If any
mutilated Security is surrendered to the Trustee, the Company shall execute and
the Trustee shall authenticate and deliver in exchange therefor a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of like tenor and principal amount and bearing a number not contemporaneously
outstanding.
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In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion, but
subject to any conversion rights, may, instead of issuing a new Security, pay
such Security.
Upon the issuance, authentication and delivery by the Trustee of any
new Security under this Section, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith.
Every new Security issued, authenticated and delivered by the Trustee
pursuant to this Section in lieu of any destroyed, lost or stolen Security shall
constitute an original additional contractual obligation of the Company, whether
or not the destroyed, lost or stolen Security shall be at any time enforceable
by anyone, and shall be entitled to all the benefits of this Indenture equally
and proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.07. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Interest
on any Security which is payable, and is punctually paid or duly provided for,
on any Interest Payment Date shall be paid to the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for payment of such interest.
If the Company shall be required by law to deduct any taxes from any
sum of interest payable hereunder to a Holder, (i) the Company shall make such
deductions and shall pay the full amount deducted to the relevant taxing
authority in accordance with applicable law and (ii) the amount of such
deduction shall be treated for purposes hereof as a payment of interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security and the date
of the proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this clause (1) provided. Thereupon, the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days prior to
the date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address as it appears in the
Security Register, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be paid to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on such Special Record Date
and shall no longer be payable pursuant to the following clause (2).
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(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this Clause (2), such manner of payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
In the case of any Security which is converted after any Regular Record
Date and on or prior to the corresponding Interest Payment Date, interest on
such Security whose Stated Maturity is on such Interest Payment Date shall be
deemed to continue to accrue and shall be payable on such Interest Payment Date
notwithstanding such conversion and notwithstanding that such Security may have
been called for redemption on a Redemption Date within such period, and such
interest (whether or not punctually paid or duly provided for) shall be paid to
the Person in whose name that Security (or one or more Predecessor Securities)
is registered at the close of business on such Regular Record Date. Except as
otherwise expressly provided in the immediately preceding sentence, in the case
of any Security which is converted, interest whose Stated Maturity is after the
date of conversion of such Security shall not be payable (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).
SECTION 3.08. PERSONS DEEMED OWNERS. Prior to due presentment of a
Security for registration of transfer, the Company, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name such Security is
registered as the owner of such Security for the purpose of receiving payment of
principal of, premium, if any, and (subject to Section 3.07) interest on such
Security and for all other purposes whatsoever, whether or not such Security be
overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary.
SECTION 3.09. CANCELLATION. All Securities surrendered for payment,
redemption, repurchase, registration of transfer or exchange or conversion
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly canceled by it. The Company may at any time
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Securities so delivered shall be promptly canceled by the
Trustee. No Securities shall be authenticated in lieu of or in exchange for any
Securities canceled as provided in this Section, except as expressly permitted
by this Indenture. All cancelled Securities held by the Trustee shall be
disposed of as directed by a Company Order.
SECTION 3.10. COMPUTATION OF INTEREST. Interest on the Securities of
each series shall be computed on the basis of a 360-day year of twelve 30-day
months.
ARTICLE IV. SATISFACTION AND DISCHARGE
SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall upon Company request cease to be of further effect (except as to any
surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 3.06 and (ii)
Securities for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the
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Company and thereafter repaid to the Company or discharged from such trust, as
provided in Section 10.03) have been delivered to the Trustee for cancellation;
or
(B) all such Securities not theretofore delivered to
the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company,
and the Company, in the case of clause (i), (ii) or (iii) above, has deposited
or caused to be deposited irrevocably with the Trustee as trust funds in trust
for the benefit of Holders of Outstanding Securities in an amount sufficient to
pay and discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal (and premium, if any)
and interest to the date of such deposit (in the case of Securities which have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company;
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with; and
(4) no Event of Default which, with notice or lapse of time,
or both, would become an Event of Default with respect to the Securities shall
have occurred and be continuing on the date of such deposit.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.07, the obligations of
the Trustee to any Authenticating Agent under Section 6.14 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 4.02 and the last
paragraph of Section 10.03 shall survive.
SECTION 4.02. APPLICATION OF TRUST MONEY. Subject to the provisions of
the last paragraph of Section 10.03, all money deposited with the Trustee
pursuant to Section 4.01 shall be held in trust and applied by it, in accordance
with the provisions of the Securities and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of
the principal (and premium, if any) and interest for whose payment such money
has been deposited with the Trustee. All moneys deposited with the Trustee
pursuant to Section 4.01 (and held by it or any Paying Agent) for the payment of
Securities subsequently converted shall be returned to the Company upon Company
Request.
ARTICLE V. REMEDIES
SECTION 5.01. EVENTS OF DEFAULT. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be occasioned by the provisions of Article
XII or be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security
when it becomes due and payable, and continuance of such default for a period of
30 days; or
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(2) default in the payment of the principal of (or premium, if
any, on) any Security at its Maturity; or
(3) failure by the Company to provide the notice of a Change
of Control in accordance with Section 14.02 or notice of a Change of Control or
default in the payment of the Repurchase Price in respect of any Security on the
Repurchase Date therefor (whether or not such payment is prohibited by the
provisions of Article XII); or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach for a period
of 60 days after there has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 25% in principal amount of the Outstanding Securities a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or
(5) a default under any bonds, debentures, notes or other
evidences of indebtedness for money borrowed by the Company or a Subsidiary or
under any mortgages, indentures or instruments under which there may be issued
or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company or a Subsidiary, whether such indebtedness now exists or
shall hereafter be created, other than under a Non-Recourse Obligation, which
indebtedness, individually or in the aggregate, has a principal amount
outstanding in excess of U.S.$5,000,000, which default shall constitute a
failure to pay any portion of the principal of such indebtedness when due and
payable after the expiration of any applicable grace or cure period with respect
thereto or shall have resulted in such indebtedness becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable, without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled, within a period of 10 days after
there shall have been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities a written notice specifying such
default and requiring the Company to cause such indebtedness to be discharged or
cause such acceleration to be rescinded or annulled and stating that such notice
is a "Notice of Default" hereunder; or
(6) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company or a Significant
Subsidiary in an involuntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company or a Significant Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or a
Significant Subsidiary under any applicable Federal or State law, or appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or a Significant Subsidiary or of any
substantial part of their respective properties, or ordering the winding up or
liquidation of the affairs of the Company or a Significant Subsidiary, and the
continuance of any such decree or order for relief or any such other decree or
order unstayed and in effect for a period of 60 consecutive days; or
(7) the commencement by the Company or a Significant
Subsidiary of a voluntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by either the Company or a Significant Subsidiary to the entry of a
decree or order for relief in respect of the Company or a Significant Subsidiary
in an involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against either
the Company or a Significant Subsidiary, or the filing by either the Company or
a Significant Subsidiary of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law, or the
consent by either the Company or a Significant Subsidiary to the filing of such
petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other
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similar official of the Company or a Significant Subsidiary or of any
substantial part of their respective properties, or the making by either the
Company or a Significant Subsidiary of an assignment for the benefit of
creditors, or the admission by either the Company or a Significant Subsidiary in
writing of an inability to pay the debts of either the Company or a Significant
Subsidiary generally as they become due, or the taking of corporate action by
the Company or a Significant Subsidiary in furtherance of any such action.
SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an
Event of Default (other than an Event of Default specified in Section 5.01(1),
5.01(2), 5.01(6) or 5.01(7)) occurs and is continuing, then in every such case
the Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities may declare the principal of all the Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration such principal and
any accrued interest thereon shall become immediately due and payable. If an
Event of Default specified in Sections 5.01(1) or 5.01(2) occurs and is
continuing, a Holder may, by notice in writing to the Company (with a copy to
the Trustee), declare the principal of such Security and any accrued interest
thereon immediately due and payable. If an Event of Default specified in Section
5.01(6) or 5.01(7) occurs, the principal of, and accrued interest on, all the
Securities shall automatically, and without any declaration or other action on
the part of the Trustee or any Holder, become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article V provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any
Securities which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by the Securities, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel; and
(2) all Events of Default, other than the nonpayment of the
principal of Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE. If
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default continues
for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof, the Trustee is
authorized to recover judgment in its own name and as trustee of an express
trust against the Company for the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
borne by the Securities, and, in addition
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<PAGE> 30
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.04. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of any judicial
proceeding relative to the Company (or any other obligor upon the Securities),
its property or its creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(1) to file and prove a claim for the whole amount of
principal and interest owing and unpaid in respect of the Securities and to file
such other papers or documents as may be necessary or advisable in order to have
the claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding, and
(2) to collect and receive any moneys or other property
payable or deliverable on any such claim and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 6.07.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.
SECTION 5.05. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES. All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 5.06. APPLICATION OF MONEY COLLECTED. Any money collected by
the Trustee pursuant to this Article V shall be applied in the following order,
at the date or dates fixed by the Trustee and, in case of the distribution of
such money on account of principal (or premium, if any) or interest, upon
presentation of the Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: to the payment of all amounts due the Trustee under
Section 6.07;
SECOND: Subject to Article XII to the payment of the amounts
then due and unpaid for first, interest (including Additional Interest) on, and,
second, for principal of (and premium, if any, on) the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of
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<PAGE> 31
any kind, according to the amounts due and payable on such Securities for
interest and principal (and premium, if any) respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto, as their interest may appear or as a court of competent jurisdiction
shall direct.
SECTION 5.07. LIMITATION ON SUITS. No Holder of any Security shall have
any right to institute any proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 5.08. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST AND TO CONVERT. Notwithstanding any other provision in this
Indenture, the Holder of any Security shall have the right, which is absolute
and unconditional, to receive payment of the principal of (and premium, if any)
and (subject to Section 3.07) interest on such Security on the respective Stated
Maturities expressed in such Security (or, in the case of redemption or
repurchase, on the Redemption Date or Repurchase Date, as the case may be) and
to convert such Security in accordance with Article XIII and to institute suit
for the enforcement of any such payment and right to convert, and such rights
shall not be impaired without the consent of such Holder.
SECTION 5.09. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then and in
every such case, subject to any determination in such proceeding, the Company,
the Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
SECTION 5.10. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities in the last paragraph of Section 3.06, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The
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assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 5.11. DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any Holder of any Securities to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article V or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
SECTION 5.12. CONTROL BY HOLDERS. The Holders of a majority in
principal amount of the Outstanding Securities shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee;
provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 5.13. WAIVER OF PAST DEFAULTS. The Holders of not less than a
majority in principal amount of the Outstanding Securities may on behalf of the
Holders of all the Securities waive any past default hereunder and its
consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security, or
(2) in respect of a covenant or provision hereof which under
Article IX cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14. UNDERTAKING FOR COSTS. In any suit for the enforcement of
any right or remedy under this Indenture, or in any suit against the Trustee for
any action taken, suffered or omitted by it as Trustee, a court may require any
party litigant in such suit to file an undertaking to pay the costs of such
suit, and may assess costs against any such party litigant, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
provided, that this Section 5.14 shall not be deemed to authorize any court to
require such an undertaking or to make such an assessment in any suit instituted
by the Company or in any suit for the enforcement of the right to convert any
Security in accordance with Article XIII.
SECTION 5.15. WAIVER OF USURY, STAY OR EXTENSION LAWS. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any usury, stay or extension law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VI. THE TRUSTEE
SECTION 6.01. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Event of Default,
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(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the Trustee;
and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but in the case of
any such certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the requirements of
this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that (1) this paragraph (c) shall
not be construed to limit the effect of paragraph (a) of this Section; (2) the
Trustee shall not be liable for any error of judgment made in good faith by a
Responsible Officer, unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; (3) the Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a majority in principal amount
of the Outstanding Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this Indenture; and (4) no
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee (as Trustee, Paying Agent, Authenticating
Agent or Security Registrar) shall be subject to the provisions of this Section.
SECTION 6.02. NOTICE OF DEFAULTS. Within 90 days after the
occurrence of any default hereunder, the Trustee shall give the Holders, in the
manner provided in Section 1.06, notice of any default hereunder actually known
to a Responsible Officer of the Trustee; provided, however, that in the case of
any default of the character specified in Section 5.01(3), no such notice to
Holders shall be given until at least 30 days after the occurrence thereof. The
Trustee shall not be deemed to have notice of a default unless (i) the Trustee
has received written notice thereof from the Company or any Holder or (ii) a
Responsible Officer of the Trustee shall have actual knowledge thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default.
SECTION 6.03. CERTAIN RIGHTS OF TRUSTEE. Subject to the
provisions of Section 6.01:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors shall be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
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evidence be herein specifically prescribed) may require and, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Company, personally or by agent
or attorney; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 6.04. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.
SECTION 6.05. MAY HOLD SECURITIES. The Trustee, any Authenticating
Agent, any Paying Agent, any Security Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Securities and, subject to Section 6.08 and Section 6.13, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such
other agent.
SECTION 6.06. MONEY HELD IN TRUST. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Company.
SECTION 6.07. COMPENSATION AND REIMBURSEMENT. The Company agrees:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which compensation shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
and
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(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence, willful
misconduct or bad faith on its part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The Trustee shall
notify the Company of any claim asserted against it for which it may seek
indemnity.
(4) All indemnifications and releases from liability granted
hereunder to the Trustee shall extend to its officers, directors, employees,
agents, successors and assigns.
(5) When the Trustee incurs expenses or renders services after
the occurrence of any Event of Default specified in Section 5.01, the expenses
and the compensation for the services are intended to constitute expenses of
administration under any bankruptcy, insolvency or similar laws.
(6) The obligations of the Company under this Section shall
survive the satisfaction and discharge of this Indenture.
SECTION 6.08. DISQUALIFICATION; CONFLICTING INTERESTS. If the Trustee
has or shall acquire a conflicting interest within the meaning of the Trust
Indenture Act, the Trustee shall either eliminate such interest or resign, to
the extent and in the manner provided by, and subject to the provisions of, the
Trust Indenture Act and this Indenture.
SECTION 6.09. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at
all times be a Trustee hereunder which shall be a corporation organized and
doing business under the laws of the United States, authorized under such laws
to exercise corporate trust powers, which shall have (or, in the case of a
corporation included in a bank holding company system, the related bank holding
company shall have) a combined capital and surplus of at least U.S.$50,000,000,
subject to supervision or examination by federal or state authority, in good
standing and having an established place of business or agency in the Borough of
Manhattan, The City of New York. If such corporation or related bank holding
company publishes reports of condition at least annually, pursuant to law or to
the requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
or related bank holding company shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 6.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.11.
(b) The Trustee may resign at any time by giving written notice thereof
to the Company. If the instrument of acceptance by a successor Trustee required
by Section 6.11 shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.08 after
written request therefor by the Company or by any Holder who has been a bona
fide Holder of a Security for at least six months, or
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(2) the Trustee shall cease to be eligible under Section 6.09
and shall fail to resign after written request therefor by the Company or by any
such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 6.11, become the successor Trustee
and to that extent supersede the successor Trustee appointed by the Company. If
no successor Trustee shall have been so appointed by the Company or the Holders
and accepted appointment in the manner required by Section 6.11, any Holder who
has been a bona fide Holder of a Security for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 1.06. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 6.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on the request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder. Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
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SECTION 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. If and
when the Trustee shall be or become a creditor of the Company (or any other
obligor upon the Securities), the Trustee shall be subject to the provisions of
the Trust Indenture Act regarding the collection of claims against the Company
(or any such other obligor).
SECTION 6.14. APPOINTMENT OF AUTHENTICATING AGENT. The Trustee may
appoint an Authenticating Agent or Agents which shall be authorized to act on
behalf of the Trustee to authenticate Securities issued upon original issue and
upon exchange, registration of transfer, partial conversion, partial redemption,
or partial repurchase or pursuant to Section 3.06, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Indenture to the authentication
and delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent shall be acceptable to the Company and shall at all
times be a corporation organized and doing business under the laws of the United
States, authorized under such laws to act as Authenticating Agent, which shall
have (or, in the case of a corporation included in a bank holding company
system, the related bank holding company shall have) a combined capital and
surplus of not less than U.S.$50,000,000 and subject to supervision or
examination by Federal or State authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Authenticating Agent
or related bank holding company shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time an Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders as their
names and addresses appear in the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 6.07.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities described in the within-mentioned
Indenture.
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_______________________________________,
As Trustee
By ____________________________________,
As Authenticating Agent
By ____________________________________,
Authorized Signatory
SECTION 6.15. APPOINTMENT OF CO-TRUSTEE. Subject to the qualifications
set forth in Section 6.09, the Trustee may appoint an additional institution as
a separate trustee or co-trustee. If the Trustee appoints an additional
institution as a separate trustee or co-trustee, each and every remedy, power,
right, claim, demand, cause of action, immunity, estate, duty, obligation,
title, interest and lien expressed or intended by this Indenture to be exercised
by, vested in and conveyed by the Trustee with respect thereto shall be
exercisable by, vested in and conveyed to such separate trustee or co-trustee,
but only to the extent necessary to enable such separate trustee or co-trustee
to exercise such powers, rights and remedies, and every covenant and obligation
necessary for the exercise thereby by such separate trustee or co-trustee shall
run to and be enforceable by either of them. Should any instrument in writing
from the Company be required by the separate trustee or co-trustee so appointed
by the Trustee for more fully vesting in and confirming to them such properties,
rights, powers, trusts, duties and obligations, any and all such instruments in
writing shall, on request, be executed, acknowledged and delivered by the
Company. If any separate trustee or co-trustee, or a successor to either, shall
become incapable of acting or not qualified to act, resign or be removed, all
the estate, properties, rights, powers, trusts, duties and obligations of such
separate trustee or co-trustee, so far as permitted by law, shall vest in and be
exercised by the Trustee until the appointment of a successor to such separate
trustee or co-trustee. The appointment of any separate trustee or co-trustee
shall be subject to written approval of the Company so long as no Event of
Default has occurred and is continuing under this Indenture.
ARTICLE VII. HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.01. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
HOLDERS. The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the time
such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.01 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.01 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
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(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 7.03. REPORTS BY TRUSTEE.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission, if applicable, and with the Company.
The Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 7.04. REPORTS BY COMPANY.
(a) The Company shall file with the Trustee and the Commission, if
applicable, and transmit to Holders, such information, documents and other
reports, and such summaries thereof, as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant to such Act;
provided that any such information, documents or reports required to be filed
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be
filed with the Trustee within 15 days after the same is so required to be filed
with the Commission. Notwithstanding anything to the contrary contained herein,
the Trustee shall have no duty to review such documents for the purpose of
determining compliance with this Indenture.
(b) The Company shall provide the Trustee with at least 30 days' prior
notice of any change in location of its principal executive offices or other
principal place of business.
ARTICLE VIII. CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.01. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The
Company shall not consolidate with or merge into any other Person or, directly
or indirectly, convey, transfer, sell, lease or otherwise dispose of all or
substantially all of its properties and assets to any Person, and the Company
shall not permit any Person to consolidate with or merge into the Company or
convey, transfer, sell, lease or otherwise dispose of all or substantially all
of its properties and assets to the Company, unless:
(1) in case the Company shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which acquires
by conveyance or transfer, or which leases, the properties and assets of the
Company substantially as an entirety shall be a corporation, partnership or
trust, shall be organized and validly existing under the laws of the United
States, any State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual payment of
the principal of (and premium, if any) and interest (including Additional
Interest) on all the Securities and the performance or observance of every
covenant of this Indenture on the part of the Company to be performed or
observed and shall have provided for conversion rights in accordance with
Article XIII;
(2) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture
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is required in connection with such transaction, such supplemental indenture
comply with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
SECTION 8.02. SUCCESSOR SUBSTITUTED. Upon any consolidation of the
Company with, or merger of the Company into, any other Person or any conveyance,
transfer or lease of the properties and assets of the Company substantially as
an entirety in accordance with Section 8.01, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
released from its obligations and covenants under this Indenture and the
Securities.
ARTICLE IX. SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
(2) to add to the covenants of the Company for the equal and
ratable benefit of the Holders, or to surrender any right or power herein
conferred upon the Company; or
(3) to secure the Company's obligations in respect of the
Securities; or
(4) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Article XIII; or
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision herein, to
correct or supplement any provision herein which limits, qualifies or conflicts
with a provision of the Trust Indenture Act which is required under such Act to
be a part of and govern this Indenture, in any case to the extent necessary to
qualify this Indenture under the Trust Indenture Act, or to make any other
provisions with respect to matters or questions arising under this Indenture
which shall not be inconsistent with the provisions of this Indenture; provided
that such action pursuant to this clause (5) shall not adversely affect the
interests or legal rights of the Holders in any material respect.
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities, by the Act of said Holders delivered to the Company and
the Trustee, the Company, when authorized by a Board Resolution, and the Trustee
may enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount thereof
or the rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or currency in which,
any Security or any premium or interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption or repurchase, on or after the
Redemption Date or Repurchase Date, as the case may be), or adversely affect the
right to convert any Security as provided in Article XIII (except as permitted
by Section 9.01(4)), or modify the provisions of this Indenture with respect to
the
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subordination of the Securities in a manner adverse to the Holders, or modify
the redemption provisions in a manner adverse to the Holders, or modify the
provisions relating to the Company's requirement to offer to repurchase
Securities upon a Change in Control in a manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
(3) modify the obligation of the Company to maintain an office
or agency in the Borough of Manhattan, The City of New York or San Francisco,
California pursuant to Section 10.02, or
(4) modify any of the provisions of this Section 9.02, Section
5.13 or Section 10.08, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article IX or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
6.01 and Section 6.03) shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture, complies with its terms and will, upon the
execution and delivery thereof, be valid and binding upon the Company in
accordance with its terms. The Trustee may, but shall not be obligated to, enter
into any such supplemental indenture which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of
any supplemental indenture under this Article, this Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act.
SECTION 9.06. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company shall so determine, new Securities
so modified as to conform, in the judgment of the Trustee and the Company, to
any such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities.
ARTICLE X. COVENANTS
SECTION 10.01.PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company
will duly and punctually pay the principal of (and premium, if any) and interest
on the Securities in accordance with the terms of the Securities and this
Indenture.
SECTION 10.02.MAINTENANCE OF OFFICE OR AGENCY. The Company will
maintain in the Borough of Manhattan, The City of New York or San Francisco,
California an office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration of transfer or
exchange,
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where Securities may be surrendered for conversion and where notices and demands
to or upon the Company in respect of the Securities and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee or the office or agency of the Trustee in the Borough of
Manhattan, The City of New York, and the Company hereby appoints the Trustee as
its agent to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York or San Francisco, California) where the Securities may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, The City of New York or San Francisco, California
for such purposes. The Company will give prompt written notice to the Trustee of
any such designation or rescission and of any change in the location of any such
other office or agency.
SECTION 10.03.MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST. If the
Company shall at any time act as its own Paying Agent, it will, on or before
each due date of the principal of (and premium, if any) or interest on any of
the Securities, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee of
its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of (and premium, if any) or interest on
any Securities, deposit with a Paying Agent a sum sufficient to pay such amount,
such sum to be held in trust for the benefit of the Persons entitled to such
principal, premium, if any, or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 10.03,
that such Paying Agent will
(1) hold all sums held by it for the payment of the principal
of, premium, if any, or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities) in the making of any payment of
principal, premium, if any, or interest; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction and
discharge of this Indenture or for any other purpose, pay, or by Company Order
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on
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Company Request, or (if then held by the Company) shall be discharged from such
trust; and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the Borough of Manhattan, The City of
New York, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to the Company.
SECTION 10.04.STATEMENT BY OFFICERS AS TO DEFAULT. The Company will
deliver to the Trustee, within 120 days after the end of each fiscal year of the
Company ending after the date hereof, an Officers' Certificate, stating whether
or not to the best knowledge of the signers thereof the Company is in default in
the performance and observance of any of the terms, provisions and conditions of
this Indenture (without regard to any period of grace or requirement of notice
provided hereunder) and, if the Company shall be in default, specifying all such
defaults and the nature and status thereof of which they may have knowledge.
SECTION 10.05.EXISTENCE. Subject to Article VIII, the Company will do
or cause to be done all things necessary to preserve and keep in full force and
effect its existence, rights (charter and statutory) and franchises; provided,
however, that the Company shall not be required to preserve any such right or
franchise if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
that the loss thereof is not disadvantageous in any material respect to the
Holders.
SECTION 10.06.MAINTENANCE OF PROPERTIES. The Company will cause all
properties used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section shall prevent the
Company from discontinuing the operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposition
is, in the judgment of the Company, desirable in the conduct of its business or
the business of any Subsidiary and not disadvantageous in any material respect
to the Holders.
SECTION 10.07.PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (1) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary, and (2) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Company or any Subsidiary; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings.
SECTION 10.08.WAIVER OF CERTAIN COVENANTS. The Company may omit in any
particular instance to comply with any covenant or condition set forth in
Sections 10.05 to 10.07, inclusive, if before the time for such compliance the
Holders of at least a majority in principal amount of the Outstanding Securities
shall, by Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such covenant or condition, but no such waiver
shall extend to or affect such covenant or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Company and the duties of the Trustee in respect of any such covenant or
condition shall remain in full force and effect.
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ARTICLE XI. REDEMPTION OF SECURITIES
SECTION 11.01.RIGHT OF REDEMPTION. The Securities may be redeemed at
the election of the Company, as a whole or from time to time in part, at any
time on or after March 31, 2002, at the Redemption Prices specified in the form
of Security hereinbefore set forth, together with accrued interest to the
Redemption Date.
SECTION 11.02.APPLICABILITY OF ARTICLE. Redemption of Securities at the
election of the Company or otherwise, as permitted or required by any provision
of this Indenture, shall be made in accordance with such provision and this
Article XI.
SECTION 11.03.ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of
the Company to redeem any Securities pursuant to Section 11.01 shall be
evidenced by a Board Resolution. In case of any redemption at the election of
the Company, the Company shall, at least 60 days prior to the Redemption Date
fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date and of the principal amount
of Securities to be redeemed.
SECTION 11.04.SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED. If
less than all the Securities are to be redeemed, the particular Securities to be
redeemed shall be selected not less than 20 days or more than 60 days prior to
the Redemption Date by the Trustee, from the Outstanding Securities not
previously called for redemption, by such method as the Trustee shall deem fair
and appropriate in the circumstances and which may provide for the selection for
redemption of portions (equal to U.S.$1,000 or any integral multiple thereof) of
the principal amount of Securities of a denomination larger than U.S.$1,000.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed shall be treated
by the Trustee as Outstanding for the purpose of such selection.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 11.05.NOTICE OF REDEMPTION. Notice of redemption shall be given
by first-class mail, postage prepaid, mailed not less than 20 or more than 60
days prior to the Redemption Date, to each Holder of Securities to be redeemed,
at his address appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be
redeemed, the identification (and, in the case of partial redemption of any
Securities, the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date,
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(5) the conversion price, the date on which the right to
convert the Securities to be redeemed will terminate and the place or places
where such Securities may be surrendered for conversion, and
(6) the place or places where such Securities are to be
surrendered for payment of the Redemption Price. Notice of redemption of
Securities to be redeemed at the election of the Company shall be given by the
Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company, and shall be irrevocable.
SECTION 11.06.DEPOSIT OF REDEMPTION PRICE. On or prior to any
Redemption Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 10.03) an amount of money sufficient to pay the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on, all the Securities which are to be redeemed
on that date other than any Securities called for redemption on that date which
have been converted prior to the date of such deposit.
If any Security called for redemption is converted, any money deposited
with the Trustee or with any Paying Agent or so segregated and held in trust for
the redemption of such Security shall (subject to any right of the Holder of
such Security or any Predecessor Security to receive interest as provided in the
last paragraph of Section 3.07) be paid to the Company upon Company Request or,
if then held by the Company, shall be released from such trust.
SECTION 11.07.SECURITIES PAYABLE ON REDEMPTION DATE. Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear or accrue any interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to (but not including) the Redemption Date; provided, however, that installments
of interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant record
dates according to their terms and the provisions of Section 3.07.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear and accrue interest from the Redemption Date at the rate borne
by the Security.
SECTION 11.08.SECURITIES REDEEMED IN PART. Any Security which is to be
redeemed only in part shall be surrendered at an office or agency of the Company
designated for that purpose pursuant to Section 10.02 (with, if the Company or
the Trustee so requires, due endorsement by, or a written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney-in-fact duly authorized in writing), and the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder of
such Security without service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal
amount of the Security so surrendered.
SECTION 11.09.CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION. In
connection with any redemption of Securities, the Company may arrange for the
purchase and conversion of any Securities by an agreement with one or more
investment bankers or other purchasers to purchase such Securities by paying to
the Trustee in trust for the Holders, on or before the Redemption Date, an
amount not less than the applicable Redemption Price, together with interest
accrued to the Redemption Date, of such Securities. Notwithstanding anything to
the contrary contained in this Article XI, the obligation of the Company to pay
the Redemption Price of such Securities, together with interest accrued to, but
excluding, the date fixed for redemption, shall be deemed to be satisfied and
discharged to the extent such amount is so paid by such purchasers. If such an
agreement is entered into, a copy of which will be filed with the Trustee prior
to the Redemption Date, any Securities not duly surrendered
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for conversion by the holders thereof may, at the option of the Company, be
deemed, to the fullest extent permitted by law, acquired by such purchasers from
such holders and (notwithstanding anything to the contrary contained in Article
XIII) surrendered by such purchasers for conversion, all as of immediately prior
to the close of business on the Redemption Date (and the right to convert any
such Securities shall be deemed to have been extended through such time),
subject to payment of the above amount as aforesaid. At the direction of the
Company, the Trustee shall hold and dispose of any such amount paid to it in the
same manner as it would monies deposited with it by the Company for the
redemption of Securities. Without the Trustee's prior written consent, no
arrangement between the Company and such purchasers for the purchase and
conversion of any Securities shall increase or otherwise affect any of the
powers, duties, responsibilities or obligations of the Trustee as set forth in
this Indenture, and the Company agrees to indemnify the Trustee from, and hold
it harmless against, any loss, liability or expense arising out of or in
connection with any such arrangement for the purchase and conversion of any
Securities between the Company and such purchasers to which the Trustee has not
consented in writing, including the costs and expenses incurred by the Trustee
in the defense of any claim or liability arising out of or in connection with
the exercise or performance of any of its powers, duties, responsibilities or
obligations under this Indenture. Nothing in the preceding sentence shall be
deemed to limit the rights and protections afforded to the Trustee in Article
VI, including, but not limited to, the right to indemnification pursuant to
Section 6.07.
ARTICLE XII. SUBORDINATION OF SECURITIES
SECTION 12.01.SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS. The
Company covenants and agrees, and each Holder of a Security, by his acceptance
thereof, likewise covenants and agrees, that, to the extent and in the manner
hereinafter set forth in this Article XII, the indebtedness represented by the
Securities and the payment of the principal of (and premium, if any) and
interest on each and all of the Securities and all obligations of the Company
under this Indenture are hereby expressly made subordinate and subject in right
of payment to the prior payment in full of all Senior Indebtedness.
SECTION 12.02.PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. In the
event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to its creditors, as such, or
to its assets, or (b) any liquidation, dissolution or other winding up of the
Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event the holders of Senior Indebtedness shall be entitled to receive
payment in full of all amounts due or to become due on or in respect of all
Senior Indebtedness, or provision shall be made for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior
Indebtedness, before the Holders of the Securities are entitled to receive any
payment on account of principal of (or premium, if any) or interest on the
Securities, and to that end the holders of Senior Indebtedness shall be entitled
to receive, for application to the payment thereof, any payment or distribution
of any kind or character, whether in cash, property or securities, which may be
payable or deliverable in respect of the Securities in any such case,
proceeding, dissolution, liquidation or other winding up or event.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company prohibited by the foregoing
paragraph of any kind or character, whether in cash, property or securities,
before all Senior Indebtedness is paid in full or payment thereof provided for,
and if such fact shall, at or prior to the time of such payment or distribution,
have been made actually known to a Responsible Officer of the Trustee or, as the
case may be, such Holder, then and in such event such payment or distribution
shall be paid over or delivered forthwith to the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee, agent or other Person making
payment or distribution of assets of the Company for application to the payment
of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all
Senior Indebtedness in full, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
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For purposes of this Article XII only, the words "cash, property or
securities" shall not be deemed to include shares of capital stock of the
Company as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment which in
either case are subordinated in right of payment to all Senior Indebtedness
which may at the time be outstanding to substantially the same extent as, or to
a greater extent than, the Securities are so subordinated as provided in this
Article XII. The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the Company following
the conveyance or transfer of its properties and assets substantially as an
entirety to another Person upon the terms and conditions set forth in Article
VIII shall not be deemed a dissolution, winding up, liquidation, reorganization,
assignment for the benefit of creditors or marshalling of assets and liabilities
of the Company for the purposes of this Section 12.02 if the Person formed by
such consolidation or into which the Company is merged or which acquires by
conveyance or transfer such properties and assets substantially as an entirety,
as the case may be, shall, as a part of such consolidation, merger, conveyance
or transfer, comply with the conditions set forth in Article VIII.
SECTION 12.03.NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT.
(a) In the event and during the continuation of any default in the
payment of principal of (or premium, if any) or interest on any Senior
Indebtedness beyond any applicable grace period with respect thereto (unless and
until such payment default shall have been cured or waived in writing by the
holders of such Senior Indebtedness); or
(b) in the event any judicial proceeding shall be pending with respect
to any such default, then no payment shall be made by the Company on account of
principal of (or premium, if any) or interest on the Securities or on account of
the purchase or other acquisition of Securities (including pursuant to Articles
XI and XIII).
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section 12.03, and if such fact shall, at or prior
to the time of such payment, have been made actually known to a Responsible
Officer of the Trustee or, as the case may be, such Holder, then and in such
event such payment shall be paid over and delivered forthwith to the Company.
The provisions of this Section 12.03 shall not apply to any payment
with respect to which Section 12.02 would be applicable.
SECTION 12.04.PAYMENT PERMITTED IF NO DEFAULT. Nothing contained in
this Article XII or elsewhere in this Indenture or in any of the Securities
shall prevent (a) the Company, at any time except during the pendency of any
case, proceeding, dissolution, liquidation or other winding up, assignment for
the benefit of creditors or other marshalling of assets and liabilities of the
Company referred to in Section 12.02 or under the conditions described in
Section 12.03, from making payments at any time of principal of (and premium, if
any) or interest on the Securities, or (b) the application by the Trustee of any
money deposited with it hereunder to the payment of or on account of the
principal of (and premium, if any) or interest on the Securities or the
retention of such payment by the Holders, if, at the time of such application by
the Trustee, a Responsible Officer of the Trustee did not have actual knowledge
that such payment would have been prohibited by the provisions of this Article
XII.
SECTION 12.05.SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.
Subject to the payment in full of all Senior Indebtedness, and until the
Securities are paid in full, the Holders of the Securities shall be subrogated
(equally and ratably with the holders of all indebtedness of the Company which
by its express terms is subordinated to indebtedness of the Company to
substantially the same extent as the Securities are subordinated and is entitled
to like rights of subrogation) to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness to the extent that payments and
distributions otherwise payable to Holders of Securities have been applied to
the payment of Senior Indebtedness as provided by this Article XII. For purposes
of such subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders of the
Securities or the Trustee would be
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entitled, except for the provisions of this Article XII, and no payments over
pursuant to the provisions of this Article XII to the holders of Senior
Indebtedness by Holders of the Securities or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Indebtedness and the Holders
of the Securities, be deemed to be a payment or distribution by the Company to
or on account of the Senior Indebtedness.
SECTION 12.06.PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The
provisions of this Article XII are and are intended solely for the purpose of
defining the relative rights of the Holders of the Securities on the one hand
and the holders of Senior Indebtedness on the other hand. Nothing contained in
this Article XII or elsewhere in this Indenture or in the Securities is intended
to or shall (a) impair, as among the Company, its creditors other than holders
of Senior Indebtedness and the Holders of the Securities, the obligation of the
Company, which is absolute and unconditional (and which, subject to the rights
under this Article XII of the holders of Senior Indebtedness, is intended to
rank equally with all other general obligations of the Company), to pay to the
Holders of the Securities the principal of (and premium, if any) and interest on
the Securities as and when the same shall become due and payable in accordance
with their terms; or (b) affect the relative rights against the Company of the
Holders of the Securities and creditors of the Company other than the holders of
Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security
from exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article XII of
the holders of Senior Indebtedness to receive cash, property and securities
otherwise payable or deliverable to the Trustee or such Holder.
SECTION 12.07.TRUSTEE TO EFFECTUATE SUBORDINATION. Each holder of a
Security by his acceptance thereof authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article XII and appoints the Trustee his
attorney-in-fact for any and all such purposes.
SECTION 12.08.NO WAIVER OF SUBORDINATION PROVISIONS. No right of any
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any non-compliance by the Company
with the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
XII or the obligations hereunder of the Holders of the Securities to the holders
of Senior Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; (iv) exercise or refrain from exercising any rights
against the Company and any other Person; or (v) apply any and all sums received
from time to time to the Senior Indebtedness.
SECTION 12.09.NOTICE TO TRUSTEE. The Company shall give prompt written
notice to the Trustee of any fact known to the Company which would prohibit the
making of any payment to or by the Trustee in respect of the Securities.
Notwithstanding the provisions of this Article XII or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts which would prohibit the making of any payment to or by the Trustee
in respect of the Securities, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior Indebtedness or
from any trustee therefor; and, prior to the receipt of any such written notice,
the Trustee, subject to the provisions of Section 6.01, shall be entitled in all
respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 12.09 at
least two Business Days prior to the date upon which by the terms hereof any
money may become
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payable for any purpose (including, without limitation, the payment of the
principal of (and premium, if any) or interest on any Security), then, anything
herein contained to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such money and to apply the same to the purpose
for which such money was received and shall not be affected by any notice to the
contrary which may be received by it within two Business Days prior to such
date.
Subject to the provisions of Section 6.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Indebtedness (or a trustee therefor). In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article XII, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article XII, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 12.10.RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT. Upon any payment or distribution of assets of the Company referred to in
this Article XII, the Trustee, subject to the provisions of Section 6.01, and
the Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
XII.
SECTION 12.11.TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness and shall not be liable to any such holders if it shall in
good faith mistakenly pay over or distribute to Holders of Securities or to the
Company or to any other Person cash, property or securities to which any holders
of Senior Indebtedness shall be entitled by virtue of this Article XII or
otherwise.
SECTION 12.12.RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS;
PRESERVATION OF TRUSTEE'S RIGHTS. The Trustee in its individual capacity shall
be entitled to all the rights set forth in this Article XII with respect to any
Senior Indebtedness which may at any time be held by it, to the same extent as
any other holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article XII shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.07.
SECTION 12.13.ARTICLE APPLICABLE TO PAYING AGENTS. In case at any time
any Paying Agent other than the Trustee shall have been appointed by the Company
and be then acting hereunder, the term "Trustee" as used in this Article XII
shall in such case (unless the context otherwise requires) be construed as
extending to and including such Paying Agent within its meaning as fully for all
intents and purposes as if such Paying Agent were named in this Article XII in
addition to or in place of the Trustee; provided, however, that Section 12.12
shall not apply to the Company or any Affiliate of the Company if it or such
Affiliate acts as Paying Agent.
SECTION 12.14.CERTAIN CONVERSIONS DEEMED PAYMENT. For the purposes of
this Article XII only, (1) the issuance and delivery of junior securities upon
conversion of Securities in accordance with Article XIII shall not be deemed to
constitute a payment or distribution on account of the principal of or premium
or interest on
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Securities or on account of the purchase or other acquisition of Securities, and
(2) the payment, issuance or delivery of cash, property or securities (other
than junior securities) upon conversion of a Security shall be deemed to
constitute payment on account of the principal of such Security. For the
purposes of this Section 12.14, the term "junior securities" means (a) shares of
any stock of any class of the Company and (b) securities of the Company which
are subordinated in right of payment to the prior payment in full of all Senior
Indebtedness which may be outstanding at the time of issuance or delivery of
such securities to substantially the same extent as, or to a greater extent
than, the Securities are so subordinated as provided in this Article XII.
Nothing contained in this Article XII or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Company, its creditors
other than holders of Senior Indebtedness and the Holders of the Securities, the
right, which is absolute and unconditional, of the Holder of any Security to
convert such Security in accordance with Article XIII.
ARTICLE XIII. CONVERSION OF SECURITIES
SECTION 13.01.CONVERSION PRIVILEGE AND CONVERSION PRICE. Subject to and
upon compliance with the provisions of this Article XIII, at the option of the
Holder thereof, any Security or any portion of the principal amount thereof
which is U.S.$1,000 or an integral multiple of U.S.$1,000 may be converted at
the principal amount thereof, or of such portion thereof, into fully paid and
nonassessable shares of Common Stock of the Company at any time at the
conversion price, determined as hereinafter provided, in effect at the time of
conversion. Such conversion right shall expire at the close of business on the
Business Day immediately preceding March 31, 2004, subject, in the case of
conversion of any Global Security, to any Applicable Procedures. In case a
Security or portion thereof is called for redemption at the election of the
Company or the Holder thereof exercised his right to require the Company to
repurchase the Security, such conversion right in respect of the Security or
portion so called shall expire at the close of business, New York time, on the
Business Day immediately preceding the corresponding Redemption Date or
Repurchase Date, as the case may be, unless the Company defaults in making the
payment due upon redemption or repurchase, as the case may be (in each case
subject as aforesaid to any Applicable Procedures with respect to any Global
Security).
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "conversion price") shall be initially U.S.____$
per share of Common Stock. The conversion price shall be adjusted in certain
instances as provided in Section 13.04.
In case the Company shall, by dividend or otherwise, declare or make a
distribution on its Common Stock referred to in paragraph (4) or (5) of Section
13.04 (including, without limitation, dividends or distributions referred to in
the last sentence of paragraph (4) of Section 13.04), the Holder of each
Security, upon the conversion thereof pursuant to this Article XIII 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
paragraph (4) or (5) of Section 13.04, shall also be entitled to receive for
each share of Common Stock into which such Security is converted, the portion of
the evidences of indebtedness, shares of capital stock, securities, cash and
assets so distributed applicable to one share of Common Stock, provided that, at
the election of the Company (whose election shall be evidenced by a Board
Resolution) with respect to all Holders so converting, the Company may, in lieu
of distributing to such Holder any portion of such distribution not consisting
of cash or securities of the Company, pay such Holder an amount in cash equal to
the fair market value thereof (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution). If any conversion of a Security described in the immediately
preceding sentence occurs prior to the payment date for a distribution to
holders of Common Stock which the Holder of the Security so converted is
entitled to receive in accordance with the immediately preceding sentence, the
Company may elect (such election to be evidenced by a Board Resolution) to
distribute to such Holder a due bill for the evidences of indebtedness, shares
of capital stock, securities, cash or assets to which such Holder is so
entitled, provided that such due bill (i) meets any applicable requirements of
the principal national securities exchange or other market on which the Common
Stock is then traded and (ii) requires payment or delivery of such evidences of
indebtedness, shares of capital stock, securities,
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cash or assets no later than the date of payment or delivery thereof to holders
of Common Stock receiving such distribution.
SECTION 13.02.EXERCISE OF CONVERSION PRIVILEGE. In order to exercise
the conversion privilege, the Holder of any Security to be converted shall
surrender such Security, duly endorsed or assigned to the Company or in blank,
at any office or agency maintained by the Company pursuant to Section 10.02,
accompanied by written notice (as set forth in Section 2.05) to the Company at
such office or agency that the Holder elects to convert such Security or, if
less than the entire principal amount thereof is to be converted, the portion
thereof to be converted.
Except as described in the last paragraph of Section 3.07, no Holder of
Securities will be entitled upon conversion thereof to any payment or adjustment
on account of accrued and unpaid interest thereon (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 the shares of Common Stock issued in connection therewith. Securities
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 Securities 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 in New York
Clearing House Funds or other funds acceptable to the Company of an amount equal
to the interest payable on such Interest Payment Date on the principal amount
converted.
Securities shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of such Securities for conversion
in accordance with the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person or Persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common Stock at such
time. As promptly as practicable on or after the conversion date, the Company
shall issue and shall deliver at such office or agency a certificate or
certificates for the number of full shares of Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share as provided
in Section 13.03.
In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Security. Any
requirements for notice, surrender or delivery of Securities pursuant to this
Article XIII shall, with respect to any Global Security, be subject to any
Applicable Procedures.
SECTION 13.03.FRACTIONS OF SHARES. No fractional shares of Common Stock
shall be issued upon conversion of Securities. If more than one Security shall
be surrendered for conversion at one time by the same Holder, the number of full
shares which shall be issuable upon conversion thereof shall be computed on the
basis of the aggregate principal amount of the Securities (or specified portions
thereof) so surrendered. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of any Security or Securities (or
specified portions thereof), the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the Closing Price
per share of the Common Stock at the close of business on the day of conversion
(or, if such day is not a Trading Day, on the Trading Day immediately preceding
such day) or, alternatively, the Company shall round up to the next higher whole
share.
SECTION 13.04.ADJUSTMENT OF CONVERSION PRICE.
(1) In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in Common Stock or shall pay or
make a dividend or other distribution on any other class of capital stock of the
Company which dividend or distribution includes Common Stock, the conversion
price in effect at the opening of business on the day next following the date
fixed for the determination of shareholders entitled to receive such dividend or
other distribution shall be reduced by multiplying such conversion price by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for
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such determination and the denominator shall be the sum of such number of shares
and the total number of shares constituting such dividend or other distribution,
such reduction to become effective immediately after the opening of business on
the day next following the date fixed for such determination. For the purposes
of this paragraph (1), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Company shall not pay any dividend or
make any distribution on shares of Common Stock held in the treasury of the
Company.
(2) In case the Company shall pay or make a dividend or other
distribution on its Common Stock consisting exclusively of, or shall otherwise
issue to all holders of its Common Stock, rights, warrants or options entitling
the holders thereof to subscribe for or purchase shares of Common Stock at a
price per share less than the current market price per share (determined as
provided in paragraph (7) of this Section 13.04) of the Common Stock on the date
fixed for the determination of shareholders entitled to receive such rights,
warrants or options, the conversion price in effect at the opening of business
on the day following the date fixed for such determination shall be reduced by
multiplying such conversion price by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such
current market price and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (2), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
shall not issue any rights, warrants or options in respect of shares of Common
Stock held in the treasury of the Company.
(3) In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the conversion price in effect at
the opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the conversion price in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(4) Subject to the last sentence of this paragraph (4), in case the
Company shall, by dividend or otherwise, distribute to all holders of its Common
Stock evidences of its indebtedness, shares of any class of capital stock,
securities, cash or property (excluding any rights, warrants or options referred
to in paragraph (2) of this Section 13.04, any dividend or distribution paid
exclusively in cash and any dividend or distribution referred to in paragraph
(1) of this Section 13.04), the conversion price shall be reduced so that the
same shall equal the price determined by multiplying the conversion price in
effect immediately prior to the effectiveness of the conversion price reduction
contemplated by this paragraph (4) by a fraction of which the numerator shall be
the current market price per share (determined as provided in paragraph (7) of
this Section 13.04) of the Common Stock on the date of such effectiveness less
the fair market value (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a Board Resolution and
shall, in the case of securities being distributed for which prior thereto there
is an actual or when issued trading market, be no less than the value determined
by reference to the average of the closing prices in such market over the period
specified in the succeeding sentence), on the date of such effectiveness, of the
portion of the evidences of indebtedness, shares of capital stock, securities,
cash and property so distributed applicable to one share of Common Stock and the
denominator shall be such current market price per share of the Common Stock,
such reduction to become effective immediately prior to the opening of business
on the day next following the later of (a) the date fixed for the payment of
such distribution and (b) the date 20 days after the notice relating to such
distribution is given pursuant to Section 13.06(a) (such later date of (a) and
(b) being
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referred to as the "Reference Date"). If the Board of Directors determines the
fair market value of any distribution for purposes of this paragraph (4) by
reference to the actual or when issued trading market for any securities
comprising such distribution, it must in doing so consider the prices in such
market over the same period used in computing the current market price per share
pursuant to paragraph (7) of this Section. For purposes of this paragraph (4),
any dividend or distribution that includes shares of Common Stock or rights,
warrants or options to subscribe for or purchase shares of Common Stock shall be
deemed instead to be (a) a dividend or distribution of the evidences of
indebtedness, cash, property, shares of capital stock or securities other than
such shares of Common Stock or such rights, warrants or options (making any
conversion price reduction required by this paragraph (4)) immediately followed
by (b) a dividend or distribution of such shares of Common Stock or such rights,
warrants or options (making any further conversion price reduction required by
paragraph (1) or (2) of this Section 13.04, except (i) the Reference Date of
such dividend or distribution as defined in this paragraph (4) shall be
substituted as "the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution," "the date fixed for the
determination of shareholders entitled to receive such rights, warrants or
options" and "the date fixed for such determination" within the meaning of
paragraphs (1) and (2) of this Section 13.04 and (ii) any shares of Common Stock
included in such dividend or distribution shall not be deemed "outstanding at
the close of business on the date fixed for such determination" within the
meaning of paragraph (1) of this Section 13.04).
(5) In case the Company shall, by dividend or otherwise, make a
distribution to all holders of its Common Stock exclusively in cash in an
aggregate amount that, together with (i) the aggregate amount of any other
distributions to all holders of its Common Stock made exclusively in cash within
the 12 months preceding the date of payment of such distribution and in respect
of which no conversion price adjustment pursuant to this paragraph (5) has been
made and (ii) the aggregate of any cash plus the fair market value (as
determined in good faith by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution), 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 all or any
portion of the Common Stock concluded within the 12 months preceding the date of
payment of such distribution and in respect of which no conversion price
adjustment pursuant to paragraph (6) of this Section 13.04 has been made,
exceeds 10% of the product of the current market price per share (determined as
provided in paragraph (7) of this Section 13.04) of the Common Stock on the date
fixed for shareholders entitled to receive such distribution times the number of
shares of Common Stock outstanding on such date, the conversion price shall be
reduced so that the same shall equal the price determined by multiplying the
conversion price in effect immediately prior to the effectiveness of the
conversion price reduction contemplated by this paragraph (5) by a fraction of
which the numerator shall be the current market price per share (determined as
provided in paragraph (7) of this Section 13.04) of the Common Stock on the date
of such effectiveness less the amount of cash so distributed applicable to one
share of Common Stock and the denominator shall be such current market price per
share of the Common Stock, such reduction to become effective immediately prior
to the opening of business on the later of (a) the day following the date fixed
for the payment of such distribution and (b) the date 20 days after the notice
relating to such distribution is given pursuant to Section 13.06(a).
(6) In case a tender or exchange offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall expire and such
tender or exchange offer shall involve an aggregate consideration having a fair
market value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) at the
last time (the "Expiration Time") tenders or exchanges may be made pursuant to
such tender or exchange offer (as it may be amended) that, together with (i) the
aggregate of the cash plus the fair market value (as determined in good faith by
the Board of Directors, whose determination shall be conclusive and described in
a Board Resolution), as of the expiration of the other tender or exchange offer
referred to below, of consideration payable in respect of any other tender or
exchange offer by the Company or a Subsidiary for all or any portion of the
Common Stock concluded within the preceding 12 months and in respect of which no
conversion price adjustment pursuant to this paragraph (6) has been made and
(ii) the aggregate amount of any distributions to all holders of the Common
Stock made exclusively in cash within the preceding 12 months and in respect of
which no conversion price adjustment pursuant to paragraph (5) of this Section
13.04 has been made, exceeds 10% of the product of the current market price per
share (determined as provided in paragraph (7) of this Section 13.04) of the
Common Stock on the Expiration Time times the number of shares of Common Stock
outstanding (including any tendered shares) on the Expiration Time, the
conversion price shall be reduced (but not increased) so that the same shall
equal the price determined by multiplying the conversion price in effect
immediately prior to the Expiration Time by a fraction of which the numerator
shall be (i) the product of the current market price per share (determined as
provided in paragraph (7) of this Section 13.04) of the
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Common Stock at the Expiration Time times the number of shares of Common Stock
outstanding (including any tendered or exchanged shares) at the Expiration Time
minus (ii) the fair market value (determined as aforesaid) of the aggregate
consideration payable to shareholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares validly
tendered or exchanged and not withdrawn as of the Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the "Purchased
Shares") and the denominator shall be the product of (i) such current market
price per share at the Expiration Time times (ii) such number of outstanding
shares at the Expiration Time less the number of Purchased Shares, such
reduction to become effective immediately prior to the opening of business on
the day following the Expiration Time.
(7) For the purpose of any computation under this paragraph and
paragraphs (2), (4) and (5) of this Section 13.04, the current market price per
share of Common Stock on any date in question shall be deemed to be the average
of the daily Closing Prices for the five consecutive Trading Days selected by
the Company commencing not more than 20 Trading Days before, and ending not
later than, the date in question; provided, however, that (i) if the "ex" date
(as hereinafter defined) for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the conversion price
pursuant to paragraph (1), (2), (3), (4), (5) or (6) above ("Other Event")
occurs on or after the 20th Trading Day prior to the date in question and prior
to the "ex" date for the issuance or distribution requiring such computation
(the "Current Event"), the Closing Price for each Trading Day prior to the "ex"
date for such Other Event shall be adjusted by multiplying such Closing Price by
the same fraction by which the conversion price is so required to be adjusted as
a result of such Other Event, (ii) if the "ex" date for any Other Event occurs
after the "ex" date for the Current Event and on or prior to the date in
question, the Closing Price for each Trading Day on and after the "ex" date for
such Other Event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the conversion price is so required to be
adjusted as a result of such Other Event, (iii) if the "ex" date for any Other
Event occurs on the "ex" date for the Current Event, one of those events shall
be deemed for purposes of clauses (i) and (ii) of this proviso to have an "ex"
date occurring prior to the "ex" date for the other event, and (iv) if the "ex"
date for the Current Event is on or prior to the date in question, after taking
into account any adjustment required pursuant to clause (ii) of this proviso,
the Closing Price for each Trading Day on or after such "ex" date shall be
adjusted by adding thereto the amount of any cash and the fair market value on
the date in question (as determined in good faith by the Board of Directors in a
manner consistent with any determination of such value for purposes of paragraph
(4) or (5) of this Section 13.04, whose determination shall be conclusive and
described in a Board Resolution) of the portion of the rights, warrants,
options, evidences of indebtedness, shares of capital stock, securities, cash or
property being distributed applicable to one share of Common Stock. For the
purpose of any computation under paragraph (6) of this Section 13.04, the
current market price per share of Common Stock on any date in question shall be
deemed to be the average of the daily Closing Prices for the five consecutive
Trading Days selected by the Company commencing on or after the latest (the
"Commencement Date") of (i) the date 20 Trading Days before the date in
question, (ii) the date of commencement of the tender or exchange offer
requiring such computation and (iii) the date of the last amendment, if any, of
such tender or exchange offer involving a change in the maximum number of shares
for which tenders are sought or a change in the consideration offered, and
ending not later than the date of the Expiration Time of such tender or exchange
offer (or, if such Expiration Time occurs before the close of trading on a
Trading Day, not later than the Trading Day immediately preceding the date of
such Expiration Time); provided, however, that if the "ex" date for any Other
Event (other than the tender or exchange offer requiring such computation)
occurs on or after the Commencement Date and on or prior to the date of the
Expiration Time for the tender or exchange offer requiring such computation, the
Closing Price for each Trading Day prior to the "ex" date for such Other Event
shall be adjusted by multiplying such Closing Price by the same fraction by
which the conversion price is so required to be adjusted as a result of such
other event. For purposes of this paragraph, the term "ex" date, (i) when used
with respect to any issuance or distribution, means the first date on which the
Common Stock trades regular way on the
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relevant exchange or in the relevant market from which the Closing Price was
obtained without the right to receive such issuance or distribution, (ii) when
used with respect to any subdivision or combination of shares of Common Stock,
means the first date on which the Common Stock trades regular way on such
exchange or in such market after the time at which such subdivision or
combination becomes effective, and (iii) when used with respect to any tender or
exchange offer means the first date on which the Common Stock trades regular way
on such exchange or in such market after the Expiration Time of such tender or
exchange offer.
(8) The Company may make such reductions in the conversion price, in
addition to those required by paragraphs (1), (2), (3), (4), (5) and (6) of this
Section 13.04, as it considers to be advisable in order that any event treated
for Federal income tax purposes as a dividend of stock or stock rights shall not
be taxable to the recipients.
(9) No adjustment in the conversion price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
conversion price; provided, however, that any adjustments which by reason of
this paragraph (9) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
(10) In the event that the Company distributes rights or warrants
(other than those referred to in paragraph (2) above) 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 Company shall make proper provision so that the
Holder of any Security surrendered for conversion will be entitled to receive
upon such conversion, in addition to the conversion shares, a number of rights
and 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 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 the principal amount of such
Security so converted 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.
SECTION 13.05.NOTICE OF ADJUSTMENTS OF CONVERSION PRICE. Whenever the
conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price in
accordance with Section 13.04 and shall prepare a certificate signed by the
Treasurer of the Company setting forth the adjusted conversion price and showing
in reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed (with a copy to the Trustee) at each office
or agency maintained for the purpose of conversion of Securities pursuant to
Section 10.02; and
(b) a notice stating that the conversion price has been
adjusted and setting forth the adjusted conversion price shall forthwith be
required, and as soon as practicable after it is required, such notice shall be
mailed by the Company to all Holders at their last addresses as they shall
appear in the Security Register.
SECTION 13.06.NOTICE OF CERTAIN CORPORATE ACTION. In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable (i) otherwise than exclusively in cash
or (ii) exclusively in cash in an amount that would require a conversion price
adjustment pursuant to paragraph (5) of Section 13.04; or
(b) the Company shall authorize the granting to the holders of
its Common Stock of rights, warrants or options to subscribe for or purchase any
shares of capital stock of any class or of any other rights (excluding employee
stock options); or
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(c) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding shares of Common
Stock), or of any consolidation or merger to which the Company is a party and
for which approval of any shareholders of the Company is required, or of the
sale or transfer of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(e) the Company or any Subsidiary of the Company shall
commence a tender or exchange offer for all or a portion of the Company's
outstanding shares of Common Stock (or shall amend any such tender or exchange
offer);
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Securities pursuant to Section 10.02, and shall
cause to be mailed to all Holders at their last addresses as they shall appear
in the Security Register, at least 20 days (or 10 days in any case specified in
clause (a) or (b) above) prior to the applicable record, effective or expiration
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution or granting of
rights, warrants or options, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to such dividend,
distribution, rights, warrants or options are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up, or (z) the date on which such
tender offer commenced, the date on which such tender offer is scheduled to
expire unless extended, the consideration offered and the other material terms
thereof (or the material terms of any amendment thereto).
SECTION 13.07.COMPANY TO RESERVE COMMON STOCK. The Company shall at all
times reserve and keep available, free from preemptive rights, out of its
authorized but unissued Common Stock, solely for the purpose of effecting the
conversion of Securities, the whole number of shares of Common Stock then
issuable upon the conversion in full of all outstanding Securities.
SECTION 13.08.TAXES ON CONVERSIONS. The Company will pay any and all
taxes that may be payable in respect of the issue or delivery of shares of
Common Stock on conversion of Securities pursuant hereto. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that of the Holder of the Security or Securities to be converted, and
no such issue or delivery shall be made unless and until the Person requesting
such issue has paid to the Company the amount of any such tax, or has
established to the satisfaction of the Company that such tax has been paid.
SECTION 13.09.COVENANT AS TO COMMON STOCK. The Company covenants that
all shares of Common Stock which may be issued upon conversion of Securities
will upon issue be newly issued (and not treasury shares) and be duly
authorized, validly issued, fully paid and nonassessable and, except as provided
in Section 13.08, the Company will pay all taxes, liens and charges with respect
to the issue thereof.
SECTION 13.10.CANCELLATION OF CONVERTED SECURITIES. All Securities
delivered for conversion shall be delivered to the Trustee to be canceled by or
at the direction of the Trustee, which shall dispose of the same as provided in
Section 3.09.
SECTION 13.11.PROVISIONS IN CASE OF RECLASSIFICATION, CONSOLIDATION,
MERGER OR SALE OF ASSETS. In the event that the Company shall be a party to any
transaction (including without limitation any (i) recapitalization or
reclassification of the Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination of the Common Stock), (ii) any consolidation of the
Company with, or merger of the Company into, any other person, any merger of
another person into the
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Company (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company), (iii) any sale or transfer of all or substantially all of the
assets of the Company, or (iv) any compulsory share exchange) pursuant to which
the Common Stock is converted into the right to receive other securities, cash
or other property, then lawful provision shall be made as part of the terms of
such transaction whereby the Holder of each Security then outstanding shall have
the right thereafter to convert such Security only into (subject to funds being
legally available for such purpose under applicable law at the time of such
conversion) the kind and amount of securities, cash and other property
receivable upon such transaction by a holder of the number of shares of Common
Stock into which such Security might have been converted immediately prior to
such transaction. The Company or the person formed by such consolidation or
resulting from such merger or which acquired such assets or which acquired the
Company's shares, as the case may be, shall execute and deliver to the Trustee a
supplemental indenture establishing such rights. Such supplemental indenture
shall provide for adjustments which, for events subsequent to the effective date
of such supplemental indenture, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article. The above
provisions of this Section 13.11 shall similarly apply to successive
transactions of the foregoing type.
ARTICLE XIV. RIGHT TO REQUIRE REPURCHASE
SECTION 14.01. RIGHT TO REQUIRE REPURCHASE. In the event that there
shall occur a Change in Control (as defined in Section 14.06), then each Holder
shall have the right, at such Holder's option, to require the Company, subject
to the provisions of Section 12.03, to purchase all or any designated part of
such Holder's Securities on the date (the "Repurchase Date") fixed by the
Company that is not less than 30 days or more than 45 days after the date the
Company gives notice of the Change in Control as contemplated in Section
14.02(a) at a price (the "Repurchase Price") equal to 100% of the principal
amount thereof, together with accrued and unpaid interest through the Repurchase
Date. Such right to require the repurchase of Securities shall not continue
after a discharge of the Company from its obligations with respect to the
Securities in accordance with Article IV. Any requirements for notice, surrender
or delivery of Securities pursuant to this Article XIV shall, with respect to
any Global Security, be subject to any Applicable Procedures.
SECTION 14.02.NOTICE; METHOD OF EXERCISING REPURCHASE RIGHT.
(a) On or before the 15th day after the Company knows or
reasonably should know a Change in Control has occurred, the Company, or at the
written request of the Company, the Trustee (in the name and at the expense of
the Company), shall give notice of the occurrence of the Change in Control and
of the repurchase right set forth herein arising as a result thereof by
first-class mail, postage prepaid, or by telefacsimile with written
acknowledgement of transmittal to each Holder of the Securities at such Holder's
address appearing in the Security Register. The Company shall also deliver a
copy of such notice of a repurchase right to the Trustee.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the date by which the repurchase right must be exercised,
(3) the Repurchase Price, and
(4) the instructions a Holder must follow to exercise its
repurchase right.
No failure of the Company to give the foregoing notice shall limit any
Holder's right to exercise a repurchase right. The Trustee shall have no
affirmative obligation to determine if there shall have occurred a Change in
Control.
(b) To exercise a repurchase right, a Holder shall deliver to
the Company (or an agent designated by the Company for such purpose in the
notice referred to in (a) above) and to the Trustee on or before the
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30th day after the date of transmittal of the notice referred to in (a) above
(i) written notice of the Holder's exercise of such right, which notice shall
set forth the name of the Holder, the principal amount of the Security or
Securities (or portion of a Security) to be repurchased, and a statement that an
election to exercise the repurchase right is being made thereby, and (ii) the
Security or Securities with respect to which the repurchase right is being
exercised, duly endorsed for transfer to the Company. Such written notice shall
be irrevocable. If the Repurchase Date falls between any Regular Record Date and
the corresponding succeeding Interest Payment Date, Securities to be repurchased
must be accompanied by payment from the Holder of an amount equal to the
interest thereon which the registered Holder thereof is to receive on such
Interest Payment Date.
(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall on the Repurchase Date pay
or cause to be paid in cash to the Holder thereof the Repurchase Price of the
Security or Securities as to which the repurchase right had been exercised.
SECTION 14.03.DEPOSIT OF REPURCHASE PRICE. On or prior to the
Repurchase Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 10.03) an amount of money sufficient to pay the
Repurchase Price of the Securities which are to be repaid on the Repurchase
Date.
SECTION 14.04.SECURITIES NOT REPURCHASED ON REPURCHASE DATE. If any
Security surrendered for repurchase shall not be so paid on the Repurchase Date,
the principal of such Security shall, until paid, bear interest from the
Repurchase Date at a rate borne by such Security.
SECTION 14.05.SECURITIES REPURCHASED IN PART. Any Security which is to
be repurchased only in part shall be surrendered at any office or agency of the
Company designated for that purpose pursuant to Section 10.02 (with, if the
Company or the Trustee so requires, due endorsement by, or written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing), and the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder of
such Security without service charge, a new Security or Securities of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unrepurchased portion of the principal
of the Security so surrendered.
SECTION 14.06.CERTAIN DEFINITIONS. For purposes of this Article: 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
(a) any Person, or any Persons acting together in a manner which would
constitute a "group" for purposes of Section 13(d) of the Exchange Act, or any
successor provision thereto, together with any Affiliates thereof, (i) 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 directors or (ii) 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 any such Persons, shall
constitute a majority of the Board of Directors of the Company, (b) 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
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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 (as defined in paragraph (7)
of Section 13.04) for such transaction), or (c) 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 (c), 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).
ARTICLE XV. DEFEASANCE AND COVENANT DEFEASANCE
SECTION 15.01.COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT
DEFEASANCE. The Company may at its option by Board Resolution, at any time,
elect to have either Section 15.02 or Section 15.03 applied to the Outstanding
Securities upon compliance with the conditions set forth below in this Article
XV.
SECTION 15.02.DEFEASANCE AND DISCHARGE. Upon the Company's exercise of
the option provided in Section 15.01 applicable to this Section, the Company
shall be deemed to have been discharged from its obligations with respect to the
Outstanding Securities (other than those specified below), and the provisions of
Article XII shall cease to be effective, on the date the conditions set forth
below are satisfied (hereinafter, "defeasance"). For this purpose, such
defeasance means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by the Outstanding Securities and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of such Securities to receive, solely from
the trust fund described in Section 15.04 and as more fully set forth in such
Section, payments in respect of the principal of, premium, if any and interest
on such Securities when such payments are due, (B) the Company's obligations
with respect to such Securities under Sections 3.04, 3.05, 3.06, 10.02, 10.03,
Article XIII and Article XIV, (C) the rights, powers, trusts, duties and
immunities of the Trustee hereunder, and (D) this Article XV. Subject to
compliance with this Article XV, the Company may exercise its option under this
Section 15.02 notwithstanding the prior exercise of its option under Section
15.03.
SECTION 15.03.COVENANT DEFEASANCE. Upon the Company's exercise of the
option provided in Section 15.01 applicable to this Section, (i) the Company
shall be released from its obligations under Section 10.06 and Section 10.07,
(ii) the occurrence of an event specified in Section 5.01(3) (with respect to
either of Section 10.06 or Section 10.07) and 5.01(4) shall not be deemed to be
an Event of Default and (iii) the provisions of Article XII hereof shall cease
to be effective on and after the date the conditions set forth below are
satisfied (hereinafter, "covenant defeasance"). For this purpose, such covenant
defeasance means that the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
Section or Article, whether directly or indirectly by reason of any reference
elsewhere herein to any such Section or Article or by reason of any reference in
any such Section or Article to any other provision herein or in any other
document, but the remainder of this Indenture and such Securities shall be
unaffected thereby.
SECTION 15.04.CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The
following shall be the conditions to application of either Section 15.02 or
Section 15.03 to the then Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the requirements of
Section 6.09 who shall agree to comply with the provisions of this Article XV
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities;
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(A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with their
terms will provide, not later than one day before the due date of any payment,
money in an amount, or
(C) a combination thereof, sufficient, in the written opinion
of a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge,
and which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, the principal of, premium, if any, and each installment of
interest on the Securities on the Stated Maturity of such principal or
installment of interest in accordance with the terms of this Indenture and of
such Securities.
For this purpose, "U.S. Government Obligations" means securities that
are (x) direct obligations of the United States for the payment of which its
full faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depository receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act of 1933, as amended) as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal of or interest on the U.S. Government Obligation evidenced by such
depository receipt.
(2) In the case of an election under Section 15.02, the
Company shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the date of this Indenture there has been
a change in the applicable Federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of the
Outstanding Securities 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.
(3) In the case of an election under Section 15.03, the
Company shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Securities will not recognize gain or loss
for Federal income tax purposes as a result of such deposit and covenant
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 covenant defeasance had not occurred.
(4) The Company shall have delivered to the Trustee an
Officers' Certificate to the effect that the Securities, if then listed on any
securities exchange, will not be delisted as a result of such deposit.
(5) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest as defined in Section 6.08 and for
purposes of the Trust Indenture Act with respect to any securities of the
Company.
(6) At the time of such deposit: (A) no default in the payment
of all or a portion of principal of (or premium, if any) or interest on or other
obligations in respect of any Senior Indebtedness shall have occurred and be
continuing, and no event of default with respect to any Senior Indebtedness
shall have occurred and be continuing and shall have resulted in such Senior
Indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable and (B) no other event with
respect to any Senior Indebtedness shall have occurred and be continuing
permitting (after notice or the lapse of time, or both) the holders
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of such Senior Indebtedness (or a trustee on behalf of the holders thereof) to
declare such Senior Indebtedness due and payable prior to the date on which it
would otherwise have become due and payable, or, in the case of either clause
(A) or clause (B) above, each such default or event of default shall have been
cured or waived or shall have ceased to exist.
(7) No Event of Default or event which with notice or lapse of
time or both would become an Event of Default shall have occurred and be
continuing on the date of such deposit or, insofar as Sections 5.01(6) and (7)
are concerned, at any time during the period ending on the 121st day after the
date of such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period).
(8) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, any other agreement or
instrument to which the Company is a party or by which it is bound.
(9) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance under
Section 15.02 or the covenant defeasance under Section 15.03 (as the case may
be) have been complied with.
(10) Such defeasance or covenant defeasance shall not result
in the trust arising from such deposit constituting an investment company as
defined in the Investment Company Act of 1940, as amended, or such trust shall
be qualified under such act or exempt from regulation thereunder.
SECTION 15.05.DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions of the
last paragraph of Section 10.03, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee--collectively, for purposes of this Section 15.05, the "Trustee")
pursuant to Section 15.04 in respect of the Securities shall be held in trust
and applied by the Trustee, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal, premium, if any, and interest. Money so held in
trust shall not be subject to the provisions of Article XII.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 15.04 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities.
Anything in this Article XV to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 15.04 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance.
SECTION 15.06.REINSTATEMENT. If the Trustee or the Paying Agent is
unable to apply any money in accordance with Section 15.02 or 15.03 by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the Company's
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to this Article XV until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 15.02 or 15.03; provided, however, that if the Company
makes any payment of principal of, premium, if any, or interest on any Security
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money held by the Trustee or the Paying Agent.
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ARTICLE XVI. IMMUNITY
SECTION 16.01. PERSONAL IMMUNITY OF INCORPORATORS, SHAREHOLDERS,
DIRECTORS AND OFFICERS. No recourse for the payment of the principal of or
interest on the Securities, and no recourse under or upon any obligation,
covenant or agreement contained in this Indenture or in any indenture
supplemental hereto, or in the Securities, or because of any indebtedness
evidenced thereby, shall be had against any incorporator, or against any past,
present or future shareholder, officer or director, as such, of the Company or
any successor corporation, either directly or through the Company or any
successor corporation, under any rule of law, statute or constitutional
provision or by the enforcement of any assessment or by any legal or equitable
proceeding or otherwise, all such liability being expressly waived and released
by the acceptance of the Securities by the Holders thereof and as part of the
consideration for the issue of the Securities. Each and every Holder of the
Securities, by receiving and holding the same, agrees to the provisions of this
Section 16.01 and waives and releases any and all such recourse, claim and
liability.
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THIS INSTRUMENT MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS, EACH OF WHICH SO
EXECUTED SHALL BE DEEMED TO BE AN ORIGINAL, BUT ALL SUCH COUNTERPARTS SHALL
TOGETHER CONSTITUTE BUT ONE AND THE SAME INSTRUMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
ITRON, INC.,
By: ____________________________________
Name: David G. Remington
Title: Vice President and Chief
Financial Officer
Attest:
By: _________________
Name:
CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION
By: __________________
Name: Chii Ling Lei
Title: Assistant Vice President
Attest:
By: ___________________
Name:
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STATE OF WASHINGTON )
) ss:
COUNTY OF SPOKANE )
On the _____ day of March, 1999, before me personally came David G.
Remington, to me known, who, being by me duly sworn, did depose and say that he
is Vice President & Chief Financial Officer of ITRON, Inc., one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
__________________________________________
Notary Public
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STATE OF CALIFORNIA )
) ss:
CITY AND COUNTY OF SAN FRANCISCO )
On the _____ day of March, 1999, before me personally came Chii Ling
Lei, to me known, who, being by me duly sworn, did depose and say that she is
Assistant Vice President of Chase Manhattan Bank and Trust Company, National
Association, one of the corporations described in and which executed the
foregoing instrument; that she knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that she signed her
name thereto by like authority.
__________________________________________
Notary Public
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