<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1997
REGISTRATION NO. 333-36997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
TECH DATA CORPORATION
(Exact name of registrant as specified in its charter)
5350 TECH DATA DRIVE
CLEARWATER, FL 33760
(813) 539-7429
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
<TABLE>
<S> <C>
FLORIDA NO. 59-1578329
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
</TABLE>
---------------------
JEFFERY P. HOWELLS
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
TECH DATA CORPORATION
5350 TECH DATA DRIVE, CLEARWATER, FLORIDA 33760
(813) 539-7429
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C>
FRANK N. FLEISCHER, ESQ. ROBERT H. CRAFT, JR.
SCHIFINO & FLEISCHER, P.A. SULLIVAN & CROMWELL
ONE TAMPA CITY CENTER SUITE 2700 1701 PENNSYLVANIA AVENUE, N.W.
TAMPA, FLORIDA 33602 WASHINGTON, D.C. 20006
(813) 223-1535 (202) 956-7530
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALES TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES
AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO
BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 29, 1997
$175,000,000
[TECH DATA LOGO]
% CONVERTIBLE SUBORDINATED NOTES DUE , 2002
The Notes will be convertible at any time prior to maturity, unless
previously redeemed or repurchased, into shares of Common Stock of Tech Data
Corporation at a conversion rate of shares per each $1,000 principal amount
of Notes (equivalent to a conversion price of approximately $ per
share), subject to adjustment in certain circumstances. On September 30, 1997,
the last reported sale price of the Common Stock, which is quoted under the
symbol "TECD" on The Nasdaq National Market, was $46.00 per share.
Interest on the Notes is payable on and of each
year, commencing , 1998. The Notes are redeemable in whole or in
part at the option of the Company at any time on or after , 2000 at
the redemption prices set forth herein, plus accrued interest to the date of
redemption. See "Description of Notes -- Optional Redemption." The Notes are not
entitled to a sinking fund. The Notes will mature on , 2002.
In the event of a Change of Control (as defined herein), each holder of
Notes may require the Company to repurchase its Notes, in whole or in part, for
cash or, at the Company's option, Common Stock (valued at 95% of the average
closing prices for the five trading days ending on and including the third
trading day prior to the repurchase date) at a repurchase price of 100% of the
principal amount of Notes to be repurchased, plus accrued interest to the
repurchase date. See "Description of Notes -- Repurchase at Option of Holders
Upon a Change of Control."
The Notes are unsecured obligations subordinated in right of payment to all
existing and future Senior Indebtedness (as defined herein) of the Company and
will be effectively subordinated in right of payment to all Indebtedness and
other liabilities of the Company's subsidiaries. As of August 31, 1997, the
Company had $485 million of Senior Indebtedness outstanding. After giving effect
to the offering of the Notes and the application of net proceeds thereof, the
Company, as of August 31, 1997, would have had $315 million of Senior
Indebtedness outstanding on such date. The Indenture will not restrict the
Company or its subsidiaries from incurring Senior Indebtedness or other
indebtedness.
Concurrently with the Notes Offering, the Company is offering 3,500,000
shares of its Common Stock by separate prospectuses. The consummation of the
Notes Offering and the Common Stock Offerings are not conditioned upon each
other.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS
IN EVALUATING AN INVESTMENT IN THE CONVERTIBLE SUBORDINATED NOTES OFFERED
HEREBY, SEE "RISK FACTORS" BEGINNING ON PAGE 7.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE (1) DISCOUNT(2) COMPANY(1)(3)
------------------ ------------ -------------
<S> <C> <C> <C>
Per Note................................ % % %
Total(4)................................ $ $ $
</TABLE>
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(1) Plus accrued interest, if any, from , 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $475,000 payable by the Company.
(4) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional $26,250,000 aggregate principal amount of Notes at the
initial public offering price shown above, less the underwriting discount,
solely to cover over-allotments, if any. If such option is exercised in
full, the total initial public offering price, underwriting discount and
proceeds to the Company will be $ , $ and $ ,
respectively. See "Underwriting."
---------------------
The Notes offered hereby are offered by the Underwriters, as specified
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that the Notes will be
ready for delivery in book-entry form only through the facilities of DTC in New
York, New York, on or about , 1997.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
THE ROBINSON-HUMPHREY COMPANY
NATIONSBANC MONTGOMERY SECURITIES, INC.
---------------------
The date of this Prospectus is , 1997.
<PAGE> 3
[GRAPHIC SHOWING APPROXIMATE NUMBER OF THE COMPANY'S SUPPLIERS AND
CUSTOMERS.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CONVERTIBLE NOTES
OR THE COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID IN
CONNECTION WITH THE OFFERING. IN ADDITION, CERTAIN UNDERWRITERS (AND SELLING
GROUP MEMBERS, IF ANY) ALSO MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN
THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET, IN ACCORDANCE WITH RULE 103
UNDER THE SECURITIES AND EXCHANGE ACT OF 1934. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data appearing
elsewhere, or incorporated by reference, in this Prospectus. Unless otherwise
noted, the information and data in this Prospectus does not give effect to the
exercise of the Underwriters' over-allotment options. This Prospectus contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed herein under "Risk Factors."
THE COMPANY
Tech Data Corporation ("Tech Data" or the "Company") is the world's second
largest distributor of microcomputer hardware and software products to
value-added resellers ("VARs"), corporate resellers, retailers and direct
marketers (collectively with VARs, "resellers"). Tech Data distributes products
throughout the United States, Canada, Latin America, Germany, France,
Switzerland and Austria. The Company purchases its products directly from more
than 900 manufacturers of microcomputer hardware and publishers of software in
large quantities, maintains a stocking inventory of more than 45,000 products
and sells to an active base of over 70,000 customers. The Company believes its
broad assortment of vendors and products meets its customers' need for a cost
effective link to such products through a single source.
The Company provides its customers with systems, peripherals, networking
products and software, which accounted for 25%, 40%, 19% and 16%, respectively,
of net sales in the first six months of fiscal 1998. The Company offers products
from manufacturers and publishers such as Apple, Bay Networks, Cisco, Compaq,
Corel, Creative Labs, Digital Equipment, Epson, Hewlett-Packard, IBM, Intel,
Microsoft, Novell, Okidata, Seagate, Symantec, 3Com, Toshiba, Viewsonic and
Western Digital. The Company ships products from regionally located distribution
centers generally the same day the orders are received. The customers are
provided with a high level of service through flexible financing and credit
programs, the Company's pre- and post-sale technical support, electronic
commerce tools (including on-line order entry, access to product specifications
and electronic data interchange ("EDI") services), product configuration
services, customized shipping documents, flexible product return policies and
customer education programs.
The U.S. microcomputer distribution market grew from $17 billion in 1992 to
$33 billion in 1996. This growth represents a compound annual rate of 18%, while
the overall U.S. microcomputer industry grew at a compound annual rate of 13%
during the same period. The Company's U.S. sales grew during this period at a
compound annual rate of 45%. The increase in sales was primarily the result of
the expansion of the Company's product lines, customer base and market share in
North America. In addition, the Company entered the European market in fiscal
1995 through the acquisition of the largest microcomputer distributor in France.
In July 1997, Tech Data further enhanced its market position in Europe with the
acquisition of Macrotron AG, Germany's third largest microcomputer distributor
with operations in Germany, Austria and Switzerland. The Company has also
established export sales into Latin America from its U.S. operations and
recently established a subsidiary in Brazil to serve that market. The Company
increased operating income from $36.0 million in fiscal 1993 to $115.0 million
in fiscal 1997 despite intense competition by focusing on achieving operating
efficiencies through centralized management, stringent cost controls, efficient
handling of product shipments, use of automation and by achieving economies of
scale. Net income increased from $19.8 million to $57.0 million over the same
period.
Management believes that Tech Data's recent increases in sales, operating
income and net income are directly attributable to its strategy of making
significant capital investments to increase efficiency and maintaining operating
cost control. The Company intends to continue to pursue this strategy to take
advantage of future growth and consolidation opportunities in the industry.
3
<PAGE> 5
THE OFFERING
SECURITIES OFFERED......... $175,000,000 aggregate principal amount of %
Convertible Subordinated Notes due ,
2002 (the "Notes" and the offering of such Notes,
"The Notes Offering"). The Company has granted the
Underwriters an option for 30 days to purchase up
to $26,250,000 additional aggregate principal
amount of Notes, solely to cover over-allotments.
INTEREST PAYMENT DATES..... Interest on the Notes is payable at the rate set
forth on the cover page hereof, semi-annually on
each and , commencing ,
1998.
CONVERSION RIGHT........... The Notes are convertible at any time prior to
maturity, unless previously redeemed or
repurchased, into shares of Common Stock at a
conversion rate of shares per $1,000
principal amount of Notes (equivalent to a
conversion price of approximately $ per
share), subject to adjustment in certain
circumstances as described herein. See "Description
of Notes -- Conversion Rights."
SUBORDINATION.............. The Notes are subordinated in right of payment to
all existing and future Senior Indebtedness (as
defined herein) of the Company and will be
effectively subordinated to all indebtedness and
other liabilities of the Company's subsidiaries. As
of August 31, 1997, the Company had $485 million
aggregate principal amount of Senior Indebtedness
outstanding, approximately $170 million of which
will be repaid with the net proceeds from this
offering. The indenture will not restrict the
Company or its subsidiaries from incurring
additional Senior Indebtedness or other
indebtedness. See "Capitalization," "Management's
Discussion and Analysis of Financial Condition and
Results of Operations" and "Description of
Notes -- Subordination."
OPTIONAL REDEMPTION........ The Notes will be redeemable at the Company's
option, in whole or in part, at any time on or
after , 2000 at the redemption prices
set forth herein plus accrued interest to the date
of redemption. See "Description of
Notes -- Optional Redemption."
REPURCHASE AT OPTION OF
HOLDERS UPON A CHANGE
OF CONTROL............... In the event of a Change of Control, each holder of
Notes may require the Company to repurchase its
Notes, in whole or in part, for cash or, at the
Company's option, Common Stock (valued at 95% of
the average closing prices for the five trading
days immediately preceding and including the third
trading day prior to the repurchase date) at a
repurchase price of 100% of the principal amount of
Notes to be repurchased, plus accrued interest to
the repurchase date. See "Description of
Notes -- Repurchase at Option of Holders Upon a
Change of Control."
USE OF PROCEEDS............ The Company intends to use the net proceeds to
repay outstanding borrowings under its revolving
credit facility. See "Use of Proceeds."
LISTING.................... The Notes will not be listed on any securities
exchange or quoted on The Nasdaq Stock Market. The
Underwriters have advised the Company that they
intend to make a market in the Notes. The
4
<PAGE> 6
Underwriters are not obligated, however, to make a
market in the Notes, and any such market making may
be discontinued at any time at the sole discretion
of the Underwriters without notice. See
"Underwriting."
COMMON STOCK............... The Common Stock is quoted on The Nasdaq National
Market under the symbol "TECD."
RISK FACTORS
See "Risk Factors" for certain considerations relevant to an investment in
the securities offered hereby.
CONCURRENT COMMON STOCK OFFERINGS
Concurrent with the Notes Offering, the Company is offering 3,500,000
shares of its Common Stock (the "Common Stock Offerings") by separate
prospectuses. The consummation of the Notes Offering and the Common Stock
Offerings are not conditioned upon each other.
5
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL DATA
The following financial data should be read in conjunction with the
Company's consolidated financial statements, including the notes thereto. The
results of operations for the six months ended July 31, 1997 are not necessarily
indicative of results of operations to be expected for the full year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JANUARY 31, JULY 31,
------------------------------------------------------------ -----------------------
1993 1994 1995 1996 1997 1996 1997
-------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales....................... $978,862 $1,532,352 $2,418,410 $3,086,620 $4,598,941 $2,048,802 $2,921,966
Operating Profit................ 36,014 54,995 71,337 55,604 115,011 47,705 76,511
Net Income...................... 19,782 30,213 34,912 21,541 56,973 22,444 39,686
Net Income Per Common
Share(1)...................... .63 .83 .91 .56 1.35 .57 .88
OTHER DATA:
Ratio of earnings to fixed
charges(2).................... 7.30 8.68 4.61 2.57 4.75 3.98 5.32
</TABLE>
<TABLE>
<CAPTION>
JULY 31, 1997
--------------------------------------
AS AS
ACTUAL ADJUSTED(3) ADJUSTED(4)
---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 296,115 $ 466,480 $ 621,202
Total assets................................................ 1,655,232 1,659,867 1,659,867
Revolving credit loans...................................... 416,428 246,063 91,341
Long-term debt.............................................. 8,791 8,791 8,791
% Convertible subordinated notes due ,
2002...................................................... -- 175,000 175,000
Shareholders' Equity........................................ 490,161 490,161 644,883
</TABLE>
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(1) Amounts have been adjusted to reflect the two-for-one stock split declared
on March 21, 1994.
(2) The ratio of earnings to fixed charges is computed by dividing earnings
before taxes and fixed charges by fixed charges. Fixed charges consist of
interest expense and the estimated interest component of rent expense.
(3) Adjusted to reflect the sale by the Company of the $175,000,000 aggregate
principal amount of the Notes offered hereby, (after deduction of the
estimated underwriting discount and the Company's estimated offering
expenses) and the application of the proceeds thereof. See "Use of
Proceeds."
(4) Adjusted to reflect the sale by the Company of the $175,000,000 aggregate
principal amount of Notes offered hereby and the 3,500,000 shares of Common
Stock at an assumed offering price of $46.00 per share, (after deduction of
the estimated underwriting discounts and the Company's estimated offering
expenses) and the application of the proceeds thereof. See "Use of Proceeds"
and "Concurrent Common Stock Offerings."
6
<PAGE> 8
RISK FACTORS
In evaluating the Company's business, prospective investors should
carefully consider the following factors in addition to the information
contained elsewhere in this Prospectus or incorporated by reference herein.
COMPETITION
The Company operates in a highly competitive environment, both in the
United States and internationally. The computer wholesale distribution industry
is characterized by intense competition, based primarily on product
availability, credit availability, price, speed of delivery, ability to tailor
specific solutions to customer needs, quality and depth of product lines and
pre-sale and post-sale training, service and support. The Company competes with
a variety of regional, national and international wholesale distributors, some
of which have greater financial resources than the Company. In addition, the
Company faces competition from direct sales by vendors which may be able to
offer resellers lower prices than the Company.
NARROW PROFIT MARGINS
As a result of intense price competition in the industry, the Company has
narrow gross profit and operating profit margins. These narrow margins magnify
the impact on operating results of variations in sales and operating costs. The
Company has partially offset the effects of its low gross profit margins by
increasing sales and reducing operating expenses as a percentage of sales;
however, there can be no assurance that the Company will maintain or increase
sales or further reduce operating expenses as a percentage of sales in the
future. Future gross profit margins may be adversely affected by changes in
product mix, vendor pricing actions and competitive and economic pressures.
RISK OF DECLINES IN INVENTORY VALUE
The Company is subject to the risk that the value of its inventory will
decline as a result of price reductions by vendors or technological
obsolescence. It is the policy of most vendors of microcomputer products to
protect distributors, such as the Company, which purchase directly from such
vendors, from the loss in value of inventory due to technological change or the
vendors' price reductions. Some vendors, however, may be unwilling or unable to
pay the Company for products returned to them under purchase agreements.
Moreover, industry practices are sometimes not embodied in written agreements
and do not protect the Company in all cases from declines in inventory value. No
assurance can be given that such practices will continue, that unforeseen new
product developments will not adversely affect the Company, or that the Company
will be able to successfully manage its existing and future inventories.
Some major systems vendors are developing programs which will allow the
Company to assemble systems from components provided by the vendors. While the
Company has developed the ability to configure computer products, the process of
assembling large volumes of systems from components will require new business
practices by the Company. It is also uncertain how the vendors will apply
policies related to price protection, stock rotation and other protections
against the decline in inventory value to components.
DEPENDENCE ON INFORMATION SYSTEMS
The Company is highly dependent upon its internal computer and
telecommunication systems to operate its business. There can be no assurance
that the Company's information systems will not fail, that the Company will be
able to attract and retain qualified personnel necessary for the operation of
such systems, that the Company will be able to expand and improve its
information systems, or that the information systems of acquired companies will
be sufficient to meet the Company's standards or can be successfully converted
into an acceptable information system on a timely and cost-effective basis. Any
of such problems could have an adverse effect on the Company's business.
7
<PAGE> 9
CUSTOMER CREDIT EXPOSURE
The Company sells its products to an active customer base of more than
70,000 value-added resellers, corporate resellers, retailers and direct
marketers. A significant portion of such sales is financed by the Company. As a
result, the Company's business could be adversely affected in the event of the
deterioration of the financial condition of its customers, resulting in the
customers' inability to repay the Company. This risk would be increased in the
event of a general economic downturn affecting a large number of the Company's
customers.
MANAGEMENT OF EXPANSION
The rapid expansion of the Company's business has required the Company to
make significant recent additions in personnel and has significantly increased
the Company's working capital requirements. Although the Company has experienced
rapid expansion in recent years, such expansion should not be considered
indicative of future expansion. Such expansion has resulted in new and increased
responsibilities for management personnel and has placed and continues to place
a strain upon the Company's management, operating and financial systems and
other resources. There can be no assurance that the strain placed upon the
Company's management, operating and financial systems and other resources will
not have an adverse effect on the Company's business, nor can there be any
assurance that the Company will be able to attract or retain sufficient
personnel to continue the expansion of its operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business requires substantial capital to finance accounts
receivable and product inventory that are not financed by trade creditors. The
Company has historically relied upon cash generated from operations, bank credit
lines, trade credit from its vendors and proceeds from public offerings of its
Common Stock to satisfy its capital needs and finance growth. In order to
continue its expansion, the Company will need additional financing, including
debt financing. The inability to obtain such sources of capital could have an
adverse effect on the Company's business.
ACQUISITIONS
As part of its growth strategy, the Company pursues the acquisition of
companies that either complement or expand its existing business. As a result,
the Company regularly evaluates potential acquisition opportunities, which may
be material in size and scope. Acquisitions involve a number of risks and
uncertainties, including expansion into new geographic markets and business
areas, the requirement to understand local business practices, the diversion of
management's attention to the assimilation of the operations and personnel of
the acquired companies, the possible requirement to upgrade the acquired
companies' management information systems to the Company's standards, potential
adverse short-term effects on the Company's operating results and the
amortization of any acquired intangible assets.
FOREIGN CURRENCY EXCHANGE RISKS; EXPOSURE TO FOREIGN MARKETS
The Company conducts business in countries outside of the United States
which exposes the Company to fluctuations in foreign currency exchange rates.
The Company may enter into short-term forward exchange contracts to hedge this
risk according to its outlook on future exchange rates; nevertheless,
fluctuations in foreign currency exchange rates could have an adverse effect on
the Company's business.
The Company's international operations are subject to other risks such as
the imposition of governmental controls, export license requirements,
restrictions on the export of certain technology, political instability, trade
restrictions, tariff changes, difficulties in staffing and managing
international operations, difficulties in collecting accounts receivable and
longer collection periods and the impact of local economic conditions and
practices. As the Company continues to expand its international business, its
success will be dependent, in part, on its ability to anticipate and effectively
manage these and other
8
<PAGE> 10
risks. There can be no assurance that these and other factors will not have an
adverse effect on the Company's business.
PRODUCT SUPPLY SHORTAGES
The Company is dependent upon the supply of products available from its
vendors. The industry is characterized by periods of severe product shortages
due to vendors' difficulty in projecting demand for certain products distributed
by the Company. When such product shortages occur, the Company typically
receives an allocation of product from the vendor. There can be no assurance
that vendors will be able to maintain an adequate supply of products to fulfill
all of the Company's customer orders on a timely basis. Failure to obtain
adequate product supplies, if available to competitors, could have an adverse
effect on the Company's business.
VENDOR RELATIONS
The loss of certain key vendors could have an adverse effect on the
Company's business. In addition, the Company relies on various rebate and
cooperative marketing programs offered by its vendors to defray expenses
associated with distributing and marketing the vendors' products. A reduction by
the Company's vendors in these programs could have an adverse effect on the
Company's business.
GENERAL ECONOMIC CONDITIONS
From time to time the markets in which the Company sells its products
experience weak economic conditions that may negatively affect the Company's
sales. Although the Company does not consider its business to be highly
seasonal, it has experienced seasonally higher sales and earnings in the third
and fourth quarters. To the extent that general economic conditions affect the
demand for products sold by the Company, such conditions could have an adverse
effect on the Company's business.
EXPOSURE TO NATURAL DISASTERS
The Company's headquarters facilities, certain of its distribution centers
as well as certain vendors and customers are located in areas prone to natural
disasters such as floods, hurricanes, tornadoes, earthquakes and other adverse
weather conditions. The Company's business could be adversely affected should
its ability to distribute products be impacted by such an event.
LABOR STRIKES
The Company's labor force is currently non-union. The Company, however,
does business in certain foreign countries where labor disruption is more common
than is experienced in the United States. The majority of the freight carriers
used by the Company are unionized. A labor strike by one of the Company's
freight carriers, one of its vendors, a general strike by civil service
employees, or a governmental shutdown could have an adverse effect on the
Company's business.
VOLATILITY OF COMMON STOCK
Because of the foregoing factors, as well as other variables affecting the
Company's operating results, past financial performance should not be considered
a reliable indicator of future performance, and investors should not use
historical trends to anticipate results or trends in future periods. In
addition, the Company's participation in a highly dynamic industry often results
in significant volatility of the Common Stock price.
SUBORDINATION
The Notes will be unsecured and subordinated in right of payment in full to
all existing and future Senior Indebtedness of the Company. As a result of such
subordination, in the event of the Company's liquidation or insolvency, payment
default with respect to Senior Indebtedness, a covenant default with respect to
Senior Indebtedness, or upon acceleration of the Notes due to an event of
default, the assets
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<PAGE> 11
of the Company will be available to pay obligations on the Notes only after all
Senior Indebtedness has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on any or all of the Notes then outstanding.
The Company may from time to time incur indebtedness constituting Senior
Indebtedness. The Notes are also effectively subordinated in right of payment to
all indebtedness and other liabilities, including trade payables, of the
Company's subsidiaries. The Indenture does not prohibit or limit the incurrence
of Senior Indebtedness or other indebtedness and other liabilities by the
Company or its subsidiaries. The incurrence of additional indebtedness and other
liabilities by the Company or its subsidiaries could adversely affect the
Company's ability to pay its obligations on the Notes. In addition, the cash
flow and ability of the Company to service debt, including the Notes, may in the
future become dependent in part upon the earnings from the business conducted by
the Company through subsidiaries and distribution of those earnings, or upon
loans or other payments of funds by those subsidiaries to the Company. As of
August 31, 1997, after giving effect to the offering of the Notes and the
application of the net proceeds thereof, the Company would have had $315 million
of Senior Indebtedness outstanding. See "Description of Notes -- Subordination."
LIMITATIONS ON REPURCHASE OF NOTES
Upon a Change of Control, each holder of Notes will have the right, at the
holder's option, to require the Company to repurchase all or a portion of such
holder's Notes. If a Change of Control were to occur, there can be no assurance
that the Company would have sufficient funds to pay the repurchase price for all
Notes tendered by the holders thereof. The Company may elect, subject to certain
conditions, to make such payment using shares of Common Stock. In addition, the
Company's repurchase of Notes as a result of the occurrence of a Change of
Control may be prohibited or limited by, or create an event of default under,
the terms of agreements related to borrowings which the Company may enter into
from time to time, including agreements relating to Senior Indebtedness. See
"Description of Notes -- Repurchase at Option of Holders Upon a Change of
Control."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Notes will be a new issue of securities with no established trading
market. Although the Underwriters have advised the Company that they intend to
make a market in the Notes, they are not obligated to do so, and any such market
making may be discontinued at any time at the sole discretion of any such
Underwriter without notice. There can be no assurance that an active market for
the Notes will develop and continue upon completion of the Notes Offering or
that the market price of the Notes will not decline. Various factors could cause
the market price of the Notes to fluctuate significantly, including changes in
prevailing interest rates or changes in perceptions of the Company's
creditworthiness. The trading price of the Notes also could be significantly
affected by the market price of the Common Stock, which could be subject to wide
fluctuations in response to a variety of factors, including quarterly variations
in operating results and general economic and market conditions. The Notes will
not be listed on any securities exchange or quoted on The Nasdaq Stock Market
and will only be traded on the over-the-counter market. See "Underwriting."
10
<PAGE> 12
USE OF PROCEEDS
The net proceeds from the Notes Offering (after deducting the estimated
offering expenses and the estimated underwriting discount) are expected to be
approximately $170 million, which will be used to reduce indebtedness under the
Company's revolving credit loans (which includes the $400 million accounts
receivable securitization program). As of August 31, 1997, the Company had
approximately $476 million outstanding under the available revolving credit
loans at a weighted average interest rate of 5.07%. The Company currently
maintains total committed revolving credit loans of approximately $980 million,
of which $530 million is available in 17 different currencies. See Note 12 of
Notes to Consolidated Financial Statements. The receipt of the proceeds of the
Notes Offering will strengthen the Company's balance sheet further.
CONCURRENT COMMON STOCK OFFERINGS
Concurrent with the Notes Offering, the Company is offering 3,500,000
shares of Common Stock by separate prospectuses. The consummation of the Notes
Offering and the Common Stock Offerings are not conditioned upon each other. The
net proceeds to the Company from the Common Stock Offerings (after deduction of
the estimated underwriting discount and the Company's estimated offering
expenses) are estimated to be $155 million. If such Common Stock Offerings are
consummated, the Company will use such proceeds to reduce indebtedness under
revolving credit loans and to finance continued growth.
11
<PAGE> 13
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on The Nasdaq National Market under
the symbol "TECD." The following table sets forth the quarterly high and low
sale prices for the Common Stock as reported by The Nasdaq National Market.
<TABLE>
<CAPTION>
RANGE OF
SALES PRICES
------------------
HIGH LOW
------- -------
<S> <C> <C> <C> <C>
FISCAL YEAR 1996
First quarter............................................... $14 1/4 $ 9 5/8
Second quarter.............................................. 15 1/4 8 1/4
Third quarter............................................... 14 3/4 11 1/8
Fourth quarter.............................................. 17 7/8 11 1/4
FISCAL YEAR 1997
First quarter............................................... 19 1/2 13
Second quarter.............................................. 24 3/4 18 1/4
Third quarter............................................... 30 3/8 22 1/8
Fourth quarter.............................................. 36 3/8 21 5/8
FISCAL YEAR 1998
First quarter............................................... 27 1/2 19 3/4
Second quarter.............................................. 39 15/16 22 7/8
Third quarter (through October 28, 1997).................... 51 3/4 36 1/4
</TABLE>
On October 28, 1997, the last reported sale price for the Common Stock was
$43.00 per share. The Company estimates there are approximately 15,000
beneficial holders of the Company's Common Stock.
DIVIDEND POLICY
The Company has not paid cash dividends since fiscal 1983. The Board of
Directors of the Company does not intend to institute a cash dividend payment
policy in the foreseeable future. It is the policy of the Board of Directors to
retain earnings to support the growth and expansion of the Company's business.
The future payment of dividends, if any, on Common Stock will depend upon the
Company's earnings, financial condition and capital requirements. In addition,
the payment of dividends is restricted under the terms of the revolving credit
loans.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the capitalization of the Company at July
31, 1997 and as adjusted as of such date to give effect to: (i) the sale by the
Company of the Notes and (ii) the sale by the Company of the Notes and the
issuance and sale of the Common Stock pursuant to the concurrent Common Stock
Offerings, see "Concurrent Common Stock Offerings." The application of the total
net proceeds of approximately $325 million thereof will be used to reduce
indebtedness under revolving credit loans. See "Use of Proceeds." This table
should be read in conjunction with the Company's consolidated financial
statements, including the notes thereto.
<TABLE>
<CAPTION>
JULY 31, 1997
------------------------------------------
ACTUAL AS ADJUSTED(1) AS ADJUSTED(2)
-------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
SHORT-TERM DEBT:
Revolving credit loans(3)............................. $416,428 $246,063 $ 91,341
Current portion of long-term debt..................... 207 207 207
-------- -------- --------
Total short-term debt....................... 416,635 246,270 91,548
-------- -------- --------
LONG-TERM DEBT:
Mortgage note, interest at 10.25%, monthly
installments of $85, balloon payment due 2005....... 8,726 8,726 8,726
Other long-term debt.................................. 65 65 65
% Convertible Subordinated Notes due ,
2002................................................ -- 175,000 175,000
-------- -------- --------
Total long-term debt........................ 8,791 183,791 183,791
-------- -------- --------
SHAREHOLDERS' EQUITY:
Preferred stock; par value $.02; 226,500 shares
authorized and outstanding.......................... 5 5 5
Common stock; par value $.0015; 200,000,000 shares
authorized; 43,947,402 issued and outstanding;
47,447,402 issued and outstanding as adjusted(4).... 66 66 71
Additional paid-in capital............................ 241,025 241,025 395,742
Retained earnings..................................... 249,969 249,969 249,969
Cumulative translation adjustment..................... (904) (904) (904)
-------- -------- --------
Total shareholders' equity.................. 490,161 490,161 644,883
-------- -------- --------
Total capitalization........................ $915,587 $920,222 $920,222
======== ======== ========
</TABLE>
- ---------------
(1) As adjusted to give effect to the sale by the Company of the Notes and the
application of the proceeds thereof.
(2) As adjusted to give effect of the sale by the Company of the Notes and the
assumed sale of the Common Stock at an assumed offering price of $46.00 per
share pursuant to the concurrent Common Stock Offerings and the application
of the proceeds thereof.
(3) On August 31, 1997, indebtedness outstanding under the revolving credit
loans was approximately $476 million.
(4) Does not include 4,383,000 shares subject to stock options outstanding as of
July 31, 1997.
13
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below for each of the
five years ended January 31, 1997 are derived from the Company's audited
financial statements. The audited financial statements at January 31, 1996 and
1997 and for each of the three years in the period ended January 31, 1997 are
included elsewhere in this Prospectus. The data for the six months ended July
31, 1996 and 1997 have been derived from unaudited consolidated financial
statements also appearing herein and which, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the unaudited interim periods.
The operating results for the six months ended July 31, 1997 are not necessarily
indicative of the operating results for a full fiscal year. This information
should be read in conjunction with the Company's consolidated financial
statements, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
------------------------------------------------------------ -----------------------
1993 1994 1995 1996 1997 1996 1997
-------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................. $978,862 $1,532,352 $2,418,410 $3,086,620 $4,598,941 $2,048,802 $2,921,966
-------- ---------- ---------- ---------- ---------- ---------- ----------
Cost and expenses:
Cost of products sold... 885,292 1,397,967 2,219,122 2,867,226 4,277,160 1,905,488 2,722,811
Selling, general and
administrative
expenses.............. 57,556 79,390 127,951 163,790 206,770 95,609 122,644
-------- ---------- ---------- ---------- ---------- ---------- ----------
942,848 1,477,357 2,347,073 3,031,016 4,483,930 2,001,097 2,845,455
-------- ---------- ---------- ---------- ---------- ---------- ----------
Operating profit.......... 36,014 54,995 71,337 55,604 115,011 47,705 76,511
Interest expense.......... 3,973 5,008 13,761 20,086 21,522 10,802 12,653
-------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes................... 32,041 49,987 57,576 35,518 93,489 36,903 63,858
Provision for income
taxes................... 12,259 19,774 22,664 13,977 36,516 14,459 24,172
-------- ---------- ---------- ---------- ---------- ---------- ----------
Net income................ $ 19,782 $ 30,213 $ 34,912 $ 21,541 $ 56,973 $ 22,444 $ 39,686
======== ========== ========== ========== ========== ========== ==========
Net income per common
share(1)................ $ .63 $ .83 $ .91 $ .56 $ 1.35 $ .57 $ .88
======== ========== ========== ========== ========== ========== ==========
Weighted average common
shares outstanding(1)... 31,402 36,590 38,258 38,138 42,125 39,231 45,122
======== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31,
------------------------------------------------------------ JULY 31,
1993 1994 1995 1996 1997 1997
-------- ---------- ---------- ---------- ---------- ------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........... $ 89,344 $ 165,366 $ 182,802 $ 201,704 $ 351,993 $ 296,115
Total assets.............. 326,885 506,760 784,429 1,043,879 1,545,294 1,655,232
Revolving credit loans.... 89,198 153,105 304,784 283,100 396,391 416,428
Long-term debt............ 9,638 9,467 9,682 9,097 8,896 8,791
Shareholders' equity ..... 115,047 213,326 260,826 285,698 438,381 490,161
</TABLE>
- ---------------
(1) Amounts have been adjusted to reflect the two-for-one stock split declared
on March 21, 1994.
14
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Tech Data is the second largest distributor of microcomputer products in
the world. The Company's net sales have increased from $979 million in fiscal
1993 to $4.6 billion in fiscal 1997. The increase in sales is the result of the
expansion of the Company's product lines, customer base and market share in
North America, as well as the establishment of export sales into Latin America
and the acquisition of the largest microcomputer distributor in France in fiscal
1995. The Company has been able to increase operating income during this period
despite intense competition by focusing on achieving operating efficiencies
through centralized management, stringent cost controls, efficient handling of
product shipments, use of automation and by achieving economies of scale. Net
income has increased from $19.8 million in fiscal 1993 to $57.0 million in
fiscal 1997. Management believes that Tech Data's recent increases in sales and
profitability are directly attributable to its significant capital investments
and its focus on operating efficiencies.
For the periods indicated, the following table sets forth the percentage of
certain income statement items to net sales derived from the Company's
consolidated statement of income.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
-------------------------------------------
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
----------------------- ----------------
1995 1996 1997 1996 1997
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Net sales..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Cost and expenses:
Cost of products sold....................... 91.7 92.9 93.0 93.0 93.2
Selling, general and administrative
expenses................................. 5.3 5.3 4.5 4.7 4.2
----- ----- ----- ----- -----
97.0 98.2 97.5 97.7 97.4
----- ----- ----- ----- -----
Operating profit.............................. 3.0 1.8 2.5 2.3 2.6
Interest expense.............................. .6 .6 .5 .5 .4
----- ----- ----- ----- -----
Income before income taxes.................... 2.4 1.2 2.0 1.8 2.2
Provision for income taxes.................... .9 .5 .8 .7 .8
----- ----- ----- ----- -----
Net income.................................... 1.5% .7% 1.2% 1.1% 1.4%
===== ===== ===== ===== =====
</TABLE>
SIX MONTHS ENDED JULY 31, 1996 AND 1997
Net sales increased 42.6% to $2.92 billion in the first six months of
fiscal 1998 compared to $2.05 billion in the same period of the prior year. This
increase is attributable to the addition of new product lines and the expansion
of existing product lines combined with an increase in the Company's market
share. In the first half of fiscal 1998, U.S. and international sales grew 44.1%
and 32.3%, respectively, compared to the prior year comparable period.
International sales represented approximately 12% of fiscal 1998 first half net
sales compared to 13% for the first half of fiscal 1997.
The cost of products sold as a percentage of net sales increased to 93.2%
in the first half of fiscal 1998 from 93.0% in the prior year. This increase is
the result of competitive market prices and the Company's strategy of lowering
selling prices in order to gain market share and to pass on the benefit of
operating efficiencies to its customers.
Selling, general and administrative expenses increased 28.3% to $122.6
million in the first half of fiscal 1998 compared to $95.6 million last year,
but decreased as a percentage of net sales from 4.7% in the first half of last
year to 4.2% in the current year. The decline in selling, general and
administrative expenses as a percentage of net sales in the first half of fiscal
1998 is attributable to greater economies of scale realized by the Company in
addition to improved operating efficiencies. The dollar value increase
15
<PAGE> 17
in selling, general and administrative expenses is primarily the result of an
expansion in the number of employees and increases in other administrative
expenses needed to support the increased volume of business.
As a result of the factors described above, operating profit increased
60.4% to $76.5 million, or 2.6% of net sales, in the first half of fiscal 1998
compared to $47.7 million, or 2.3% of net sales, for the prior year comparable
period.
Interest expense increased in the first six months of fiscal 1998 due to an
increase in the Company's average outstanding indebtedness.
As a result of the factors described above, net income increased 76.8% to
$39.7 million, or $.88 per share, in the first six months of fiscal 1998
compared to $22.4 million, or $.57 per share, in the prior year comparable
period.
FISCAL YEARS ENDED JANUARY 31, 1996 AND 1997
Net sales increased 49.0% to $4.6 billion in fiscal 1997 compared to $3.1
billion in the prior year. This increase is attributable to the addition of new
product lines and the expansion of existing product lines combined with an
increase in the Company's market share. The rate of growth in fiscal year 1997
was also positively affected by a lower growth rate in the prior year as the
Company was recovering from the effects of the business interruptions caused by
its conversion to a new computer system in December 1994. The Company's U.S. and
international sales grew 51% and 36%, respectively, in fiscal 1997 compared to
the prior year. The Company's international sales in fiscal 1997 were
approximately 13% of consolidated net sales.
The cost of products sold as a percentage of net sales increased from 92.9%
in fiscal 1996 to 93.0% in fiscal 1997. This increase is a result of competitive
market prices and the Company's strategy of lowering selling prices in order to
gain market share and to pass on the benefit of operating efficiencies to its
customers.
Selling, general and administrative expenses increased by 26.2% from $163.8
million in fiscal 1996 to $206.8 million in fiscal 1997, and as a percentage of
net sales decreased to 4.5% in fiscal 1997 from 5.3% in the prior year. This
decline in selling, general and administrative expenses as a percentage of net
sales is attributable to the greater economies of scale that the Company
realized during fiscal 1997 in addition to improved operating efficiencies. The
dollar value increase in selling, general and administrative expenses is
primarily a result of an expansion in the number of employees and increases in
other administrative expenses needed to support the increased volume of
business.
As a result of the factors described above, operating profit in fiscal 1997
increased 106.8% to $115.0 million, or 2.5% of net sales, compared to $55.6
million, or 1.8% of net sales, in fiscal 1996.
Interest expense increased due to an increase in the Company's average
outstanding indebtedness, partially offset by decreases in short-term interest
rates on the Company's floating rate indebtedness. Interest expense was further
moderated in fiscal 1997 by the receipt of net proceeds of approximately $83.3
million from the Company's July 1996 Common Stock offering, which proceeds were
used to reduce indebtedness.
Net income in fiscal 1997 increased 164.5% to $57.0 million, or $1.35 per
share, compared to $21.5 million, or $.56 per share, in the prior year.
FISCAL YEARS ENDED JANUARY 31, 1995 AND 1996
Net sales increased 27.6% to $3.1 billion in fiscal 1996 compared to $2.4
billion in the prior year. This increase is attributable to the addition of new
product lines and the expansion of existing product lines combined with
increases in the Company's market share. The rate of growth in fiscal year 1996
was lower than the rate of growth in the prior year as the Company continued to
recover from the effects of the business interruptions caused by its computer
system conversion in December 1994. The Company's
16
<PAGE> 18
international sales in fiscal 1996 were approximately 14% of consolidated net
sales compared to 13% in fiscal 1995.
The cost of products sold as a percentage of net sales increased from 91.7%
in fiscal 1995 to 92.9% in fiscal 1996. This increase was a result of
competitive market prices, the Company's strategy of lowering selling prices in
order to gain market share and to pass on the benefit of operating efficiencies
to its customers, as well as certain freight concessions made with customers in
order to ensure timely delivery of products during the first and second quarters
of fiscal 1996.
Selling, general and administrative expenses increased from $128.0 million
in fiscal 1995 to $163.8 million in fiscal 1996, and as a percentage of net
sales were 5.3% in fiscal 1996 and fiscal 1995. The dollar value increase in
selling, general and administrative expenses was primarily a result of an
expansion in the number of employees and increases in other administrative
expenses needed to support the increased volume of business, as well as expenses
associated with the Company's new computer system.
As a result of the factors discussed above, operating profit in fiscal 1996
decreased 22.1% to $55.6 million, or 1.8% of net sales, compared to $71.3
million, or 3.0% of net sales, in fiscal 1995.
Interest expense increased due to an increase in the Company's average
outstanding indebtedness, combined with increases in short-term interest rates
on the Company's floating rate indebtedness.
Net income in fiscal 1996 decreased 38.3% to $21.5 million, or $.56 per
share, compared to $34.9 million, or $.91 per share, in the prior year.
17
<PAGE> 19
QUARTERLY FINANCIAL DATA
The following table sets forth certain unaudited data regarding the
Company's results of operations for the preceding eight fiscal quarterly
periods. Such data is derived from the unaudited interim consolidated financial
statements of the Company and, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the information contained therein.
Any trends that may be reflected in the following table are not necessarily
indicative of the Company's future operations.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------------
OCTOBER 31, JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 31, APRIL 30, JULY 31,
1995 1996 1996 1996 1996 1997 1997 1997
----------- ----------- --------- ---------- ----------- ----------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Net sales............ $843,286 $901,038 $985,574 $1,063,228 $1,236,650 $1,313,489 $1,370,146 $1,551,820
Cost and expenses:
Cost of products
sold............. 784,601 836,658 916,562 988,926 1,150,695 1,220,977 1,274,969 1,447,842
Selling, general
and
administrative
expenses......... 42,179 44,093 46,285 49,324 54,023 57,138 59,484 63,160
Operating profit..... 16,506 20,287 22,727 24,978 31,932 35,374 35,693 40,818
Net income........... 7,042 9,202 10,428 12,016 16,748 17,781 18,222 21,464
Net income per common
share.............. .18 .24 .27 .30 .38 .40 .41 .47
PERCENTAGE OF NET
SALES:
Net sales............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost and expenses:
Cost of products
sold............. 93.0 92.9 93.0 93.0 93.0 93.0 93.1 93.3
Selling, general
and
administrative
expenses......... 5.0 4.9 4.7 4.6 4.4 4.4 4.3 4.1
Operating profit..... 2.0 2.2 2.3 2.3 2.6 2.7 2.6 2.6
Net income........... 0.8 1.0 1.1 1.1 1.4 1.4 1.3 1.4
NET SALES GROWTH:
Year-over-year....... 28.1% 36.5% 55.6% 50.0% 46.6% 45.8% 39.0% 46.0%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities of $85.7 million during the first
six months of fiscal 1998 was primarily attributable to income from operations
of $39.7 million combined with a decrease in inventories and an increase in
accounts payable.
Net cash used in investing activities of $49.5 million during the first six
months of fiscal 1998 was attributable to the payment of $35.4 million related
to the acquisition of the common and preferred stock of Macrotron AG (see Note
12 of Notes to Consolidated Financial Statements) combined with the Company's
continuing investment of $14.1 million in its management information systems,
office facilities and its distribution center facilities. The Company expects to
make capital expenditures of approximately $50 million during fiscal 1998 to
further expand its management information systems capability, office facilities
and distribution centers.
Net cash used in financing activities of $34.8 million during the first six
months of fiscal 1998 reflects a loan of $60.0 million to Macrotron AG, net of
borrowings under its revolving credit loans of $20.0 million and proceeds of
$5.3 million from issuance of Common Stock.
18
<PAGE> 20
In July 1997, the Company increased its accounts receivable securitization
program from $325 million to $400 million and in August 1997 entered into a new
$550 million three-year multi-currency revolving credit loan agreement with 20
banks. The Company currently maintains domestic and foreign revolving credit
agreements which provide maximum short-term borrowings of approximately $980
million (including local country credit lines), of which $416 million was
outstanding at July 31, 1997. The Company believes that the proceeds from the
Common Stock Offerings and the Notes Offering, if consummated, along with cash
from operations, available and obtainable bank credit lines and trade credit
from its vendors will be sufficient to satisfy its working capital and capital
expenditure needs through fiscal 1998.
ASSET MANAGEMENT
The Company manages its inventories by maintaining sufficient quantities to
achieve high order fill rates while attempting to stock only those products in
high demand with a rapid turnover rate. Inventory balances fluctuate as the
Company adds new product lines and, when appropriate, makes large purchases
including cash purchases from manufacturers and publishers when the terms of
such purchases are considered advantageous. The Company's contracts with most of
its vendors provide price protection and stock rotation privileges to reduce the
risk of loss due to manufacturer price reductions and slow moving or obsolete
inventory. In the event of a vendor price reduction, the Company generally
receives a credit for the impact on products in inventory. In addition, the
Company has the right to rotate a certain percentage of purchases, subject to
certain limitations. Historically, price protection and stock rotation
privileges, as well as the Company's inventory management procedures, have
helped to reduce the risk of loss of carrying inventory.
The Company attempts to control losses on credit sales by closely
monitoring customers' creditworthiness through evaluating detailed information
on customer payment history and other relevant information. In addition, the
Company participates in a national credit association which exchanges credit
information on mutual customers. The Company has credit insurance which insures
a percentage of the credit extended by the Company to certain of its larger
domestic and international customers against possible loss. Customers who
qualify for credit terms are typically granted net 30 day payment terms. The
Company also sells product on a prepay or credit card basis or through
commercial finance companies.
IMPACT OF INFLATION
The Company has not been adversely affected by inflation as technological
advances and competition within the microcomputer industry have generally caused
prices of the products purchased by the Company to decline. Management believes
that any price increases could be passed on to its customers, as prices charged
by the Company are not set by long-term contracts.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), which is effective for the Company's fiscal year
ended January 31, 1997. FAS 123 encourages, but does not require, companies to
recognize compensation expense based on the fair value of grants of stock, stock
options and other equity investments to employees. Although expense recognition
for employee stock-based compensation is not mandatory, FAS 123 requires that
companies not adopting must disclose the pro forma effect on net income and
earnings per share. The Company will continue to apply prior accounting rules
and make pro forma disclosures as required. See Note 6 of Notes to Consolidated
Financial Statements for the pro forma effect on net income and earnings per
share.
19
<PAGE> 21
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128")
which is effective for financial statements issued for periods ending after
December 15, 1997. SFAS 128 simplifies the previous standards for computing
earnings per share and requires the disclosure of basic and diluted earnings per
share. For the year ended January 31, 1997 and for the subsequent interim
periods reported, the amount reported as net income per common share is not
materially different than that which would have been reported for basic and
diluted earnings per share in accordance with SFAS 128.
20
<PAGE> 22
BUSINESS
Tech Data is the world's second largest distributor of microcomputer
hardware and software products to value-added resellers, corporate resellers,
retailers and direct marketers. Tech Data distributes products throughout the
United States, Canada, Latin America, Germany, France, Switzerland and Austria.
The Company purchases its products directly from more than 900 manufacturers of
microcomputer hardware and publishers of software in large quantities, maintains
a stocking inventory of more than 45,000 products and sells to an active base of
over 70,000 customers. The Company believes its broad assortment of vendors and
products meets its customers' need for a cost effective link to such products
through a single source.
The Company provides its customers with systems, peripherals, networking
products and software, which accounted for 25%, 40%, 19% and 16%, respectively,
of net sales in the first six months of fiscal 1998. The Company offers products
from manufacturers and publishers such as Apple, Bay Networks, Cisco, Compaq,
Corel, Creative Labs, Digital Equipment, Epson, Hewlett-Packard, IBM, Intel,
Microsoft, Novell, Okidata, Seagate, Symantec, 3Com, Toshiba, Viewsonic and
Western Digital. The Company ships products from regionally located distribution
centers generally the same day the orders are received. The customers are
provided with a high level of service through flexible financing and credit
programs, the Company's pre- and post-sale technical support, electronic
commerce tools (including on-line order entry, access to product specifications
and electronic data interchange services), product configuration services,
customized shipping documents, flexible product return policies and customer
education programs.
INDUSTRY
The wholesale distribution model, like that of the Company, has proven to
be well-suited for both manufacturers and publishers of microcomputer products
("vendors") and resellers of those products. The large number and diversity of
resellers makes it cost efficient for vendors to rely on wholesale distributors,
which can leverage distribution costs across multiple vendors, to outsource a
portion of their distribution, credit, marketing and support services.
Similarly, due to the large number of vendors and products, resellers often
cannot or choose not to establish direct purchasing relationships with vendors.
Instead they rely on wholesale distributors, which can leverage purchasing costs
across multiple resellers, to satisfy a significant portion of their product
procurement and delivery, financing, marketing and technical support needs.
The U.S. microcomputer distribution market grew from $17 billion in 1992 to
$33 billion in 1996. This growth represents a compound annual rate of 18%, while
the overall U.S. microcomputer industry grew at a compound annual rate of 13%
during the same period. The Company's U.S. sales grew during this period at a
compound annual rate of 45%. The Company believes that the rates of growth of
the Company and the wholesale distribution segment of the microcomputer industry
have outpaced that of the microcomputer industry as a whole for three principal
reasons. First, as a result of the use of open systems and off-the-shelf
components, hardware and software products are viewed as commodities. The
resulting price competition, coupled with rising selling costs and shorter
product life cycles, make it difficult for manufacturers and publishers to
efficiently sell directly to resellers and has prompted them to rely on more
cost-efficient methods of distribution. Second, resellers have increasingly
relied on wholesale distributors such as Tech Data for product availability and
flexible financing alternatives rather than stocking large inventories
themselves and maintaining credit lines to finance working capital needs. Third,
restrictions by certain major manufacturers on sales through wholesale
distributors have eased gradually. Since the beginning of 1995, the Company has
been able to sell certain of those manufacturers' products under more
competitive terms and conditions ("open-sourcing"). Historically, these
previously restricted product lines were sold by master resellers, or
aggregators (whose business model was similar to wholesale distributors, but
focused on relatively few product lines), to a network of franchise dealers.
Open-sourcing has virtually eliminated any advantage that these aggregators
enjoyed as a result of their exclusive sourcing arrangements.
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A recent trend in wholesale distribution is the expansion of electronic
commerce. The increasing utilization of electronic ordering and information
delivery systems, including the ability to transact business over the World Wide
Web, has had, and is expected to continue to have, a significant impact on the
cost efficiency of the wholesale distribution industry. Distributors, such as
Tech Data, with the financial and technical resources to develop, implement and
operate state-of-the-art management information systems have been able to reduce
both their customers' and their own transaction costs through more efficient
purchasing and lower selling costs.
In addition, a trend has emerged whereby the final assembly of certain
products is performed by distributors. In order to compete more effectively and
lower their costs, major computer systems manufacturers that rely on the
wholesale distribution model have announced their intention to reduce their own
inventories and the inventories of their distributors and resellers by
implementing a build-to-order manufacturing process. These major manufacturers
have also begun to develop programs whereby final assembly will be performed at
the distribution level ("channel assembly") as compared to the current
build-to-forecast methodology employed by these manufacturers. Tech Data has
been selected by Compaq, Hewlett-Packard and IBM to participate in their
respective channel assembly programs.
The wholesale distribution industry is undergoing significant consolidation
as economies of scale and access to financial resources become more critical.
Large distributors, like the Company, that have been able to utilize economies
of scale to lower costs and pass on the savings to their customers in the form
of reduced prices have continued to take market share.
BUSINESS STRATEGY
Tech Data, as the world's second largest distributor of microcomputer
products, believes that its infrastructure and the size of its operations
position it to gain share in its current markets as well as to continue to
expand into new geographic markets. The Company provides a broad array of
products and services for its customers, which allows them to satisfy their
needs from a single source. The Company's size and performance have allowed it
to make significant investments in personnel, management information systems,
distribution centers and other capital resources.
To maintain and enhance its leadership position in wholesale distribution,
the Company's business strategy includes the following main elements:
MAINTAIN LOW COST AND EFFICIENT OPERATIONS. The Company has pursued a
strategy of profitable revenue growth by providing its customers with the
benefit of operating efficiencies achieved through centralized management
and operations, stringent cost controls and automation. The Company
strictly regulates selling, general and administrative expenses; utilizes
its highly automated order placement and processing systems to efficiently
manage inventory and shipments and to reduce transaction costs; and
realizes economies of scale in product purchasing, financing and working
capital management. The Company has been successful in reducing selling,
general and administrative expenses as a percentage of net sales from 5.9%
in fiscal 1993 to 4.5% in fiscal 1997 and 4.2% for the first six months of
fiscal 1998.
LEVERAGE MANAGEMENT INFORMATION SYSTEMS. In order to further improve
its operating efficiencies and services to its customers, the Company
invested approximately $30 million in a scalable, state-of-the-art computer
information system which commenced operations in December 1994. This
system, which currently supports the Company's U.S. and Canadian operations
and Latin American export operations, allows the Company to improve
operating efficiencies and to offer additional services such as expanded
electronic commerce capabilities, including electronic data interchange and
Tech Data On-Line electronic ordering and information systems. The
Company's ordering system will be available on its World Wide Web site in
the near future. The Company believes that growth in its electronic
commerce capabilities will provide incremental economies of scale and
further reduce transaction costs.
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OFFER A BROAD AND BALANCED PRODUCT MIX. The Company offers its
customers a broad assortment of leading technology products. Currently, the
Company offers more than 45,000 products from more than 900 manufacturers
and publishers. By offering a broad product assortment, the Company enables
its customers to procure product more efficiently by reducing the number of
their direct vendor relationships. The Company is continually broadening
its product assortment and has recently expanded its offerings of
communication products as a result of the convergence of the computing and
telecommunications markets. The Company maintains a balanced product line
of systems, peripherals, networking products and software to minimize the
effects of fluctuation in supply and demand
FOSTER CUSTOMER LOYALTY THROUGH SUPERIOR CUSTOMER SERVICE. Tech
Data's sales force provides superior customer service through a dedicated
team approach in order to differentiate itself from its competitors and
foster customer loyalty. The Company believes its strategy of not competing
with its customer base, unlike many of its competitors, also promotes
customer loyalty.
BROADEN GEOGRAPHIC COVERAGE THROUGH INTERNATIONAL EXPANSION. The
Company plans to take advantage of its strong financial position, vendor
relationships and distribution expertise to continue to expand its business
in the markets it currently serves and additional strategic geographic
markets. The Company's expansion strategy focuses on identifying companies
with significant market positions and quality management teams in markets
where there is developed or emerging demand for microcomputer products.
Following expansion into a new market, Tech Data enhances its market share
by providing capital, adding new product lines, delivering value-added
services and providing operational expertise. The Company's operations have
expanded from its North American focus to include Europe with the
acquisition in fiscal 1995 of France's largest wholesale microcomputer
distributor and the acquisition in July 1997 of a majority interest in
Macrotron AG, Germany's third largest wholesale microcomputer distributor.
During the current fiscal year, the Company also continued its
international expansion through the development of an in-country subsidiary
in Brazil, which stocks and distributes products locally.
VENDOR RELATIONS
The Company's strong financial and industry positions have enabled it to
obtain contracts with most leading manufacturers and publishers. The Company
purchases products directly from more than 900 manufacturers and publishers,
generally on a nonexclusive basis. The Company's vendor agreements are believed
to be in the form customarily used by each manufacturer and typically contain
provisions which allow termination by either party upon 60 days notice.
Generally, the Company's vendor agreements do not require it to sell a specified
quantity of products or restrict the Company from selling similar products
manufactured by competitors. Consequently, the Company has the flexibility to
terminate or curtail sales of one product line in favor of another product line
as a result of technological change, pricing considerations, product
availability, customer demand and vendor distribution policies. Vendor
agreements generally contain stock rotation and price protection provisions
which, along with the Company's inventory management policies and practices,
reduce the Company's risk of loss due to slow-moving inventory, vendor price
reductions, product updates or obsolescence. Under the terms of most of the
Company's distribution agreements, vendors will credit the Company for declines
in inventory value resulting from the vendors' price reductions if the Company
complies with certain conditions. In addition, under most vendor agreements, the
Company has the right to return for credit or exchange for other products a
portion of those inventory items purchased, within a designated period of time.
A vendor who elects to terminate a distribution agreement generally will
repurchase from the Company the vendor's products carried in the Company's
inventory. While the industry practices discussed above are sometimes not
embodied in written agreements and do not protect the Company in all cases from
declines in inventory value, management believes that these practices provide a
significant level of protection from such declines. See "Risk Factors -- Risk of
Declines in Inventory Value."
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Major computer systems manufacturers have begun to re-engineer their
manufacturing processes whereby final assembly will also be performed by the
Company as compared to the current "build-to-forecast" methodology employed by
these manufacturers. Tech Data has been selected by Compaq, Hewlett-Packard and
IBM to participate in their respective channel assembly programs. The Company
currently performs configuration services at its South Bend, Indiana
distribution center which has been ISO 9002 certified and plans to expand its
configuration and final assembly service capabilities into its new Fontana,
California and Swedesboro, New Jersey distribution centers later this year.
In addition to providing manufacturers and publishers with one of the
largest bases of resellers in the United States, Canada, Latin America, Germany,
France, Switzerland and Austria, the Company also offers manufacturers and
publishers the opportunity to participate in a number of special promotions,
training programs and marketing services targeted to the needs of its customers.
No single vendor accounted for more than 10% of the Company's net sales
during fiscal 1997, 1996 or 1995, except sales of Compaq products which
accounted for 12% of net sales in fiscal 1997. For the first six months of
fiscal 1998, only Compaq and Hewlett-Packard accounted for more than 10% of net
sales, representing 14% and 11% of net sales, respectively.
CUSTOMERS, PRODUCTS AND SERVICES
The Company sells more than 45,000 microcomputer products including
systems, peripherals, networking and software purchased directly from
manufacturers and publishers in large quantities for sale to an active customer
base of more than 70,000 VARs, corporate resellers, retailers and direct
marketers.
VARs typically do not have the resources to establish a large number of
direct purchasing relationships or stock significant product inventories. This
market segment is attractive because VARs, which currently constitute
approximately 60% of Tech Data's net sales, generally rely on distributors as
their principal source of computer products and financing. Corporate resellers,
retailers and direct marketers may establish direct relationships with
manufacturers and publishers for their more popular products, but utilize
distributors as the primary source for other product requirements and the
alternative source for products acquired direct.
The Company has established the Tech Data Elect Program, which includes
cost-plus pricing on certain high volume products, primarily computer systems
and printers, and other special terms to target corporate resellers and other
resellers that prior to open-sourcing, purchased products from aggregators.
Corporate resellers currently constitute approximately 23% of the Company's net
sales. Tech Data also has developed special programs to meet the unique needs of
retail and direct marketers, which customers currently constitute approximately
17% of the Company's net sales. No single customer accounted for more than 5% of
the Company's net sales during fiscal 1997, 1996 or 1995 nor for the first six
months of fiscal 1998.
The Company pursues a strategy of expanding its product line to offer its
customers a broad assortment of products. If demand for certain products sold by
the Company exceeds the supply available from the vendors, the Company generally
receives an allocation of the products available. Management believes that the
Company's ability to compete is not adversely affected by these periodic
shortages and the resulting allocations.
Tech Data provides customers a high-level of service through flexible
customer financing and credit programs, the Company's pre-and post-sale
technical support, electronic commerce tools (including on-line order entry,
access to product specifications and EDI services), customized shipping
documents, product configuration services, flexible product return policies and
customer education programs.
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The Company believes that providing its customers with the proper level of
credit is essential to sales growth. Tech Data devotes significant resources to
proactively review customer credit balances, provide a variety of credit
programs and monitor customer credit status.
The Company delivers products throughout the United States, Canada, Latin
America, Germany, France, Switzerland and Austria from its fourteen distribution
centers in Miami, Florida; Atlanta, Georgia; Paulsboro, New Jersey; Ft. Worth,
Texas; South Bend, Indiana; Ontario, California; Union City, California;
Mississauga, Ontario (Canada); Richmond, British Columbia (Canada); Sao Paulo,
Brazil; Munich, Germany; Bobigny (Paris), France; Hunenberg, Switzerland and
Vienna, Austria. Locating distribution centers near its customers enables the
Company to efficiently deliver products on a timely basis, thereby reducing
customers' need to invest in inventory.
The Company recently completed the expansion of three of its seven U.S.
distribution centers and is in the process of expanding two others. The Company
will have a total of 1.8 million square feet of distribution space later this
year as compared to the previous capacity of 700,000 square feet. Four of the
new U.S. distribution center locations include adjacent land which provide
enough space to double the capacity of each of these locations to meet future
growth requirements.
SALES AND ELECTRONIC COMMERCE
Currently, the Company's sales force consists of approximately 60 field
sales representatives and 1,065 inside telemarketing sales representatives.
Field sales representatives are located in major metropolitan areas. Each field
representative is supported by inside telemarketing sales teams covering a
designated territory. The Company's team concept provides a stronger personal
relationship between representatives of the customers and Tech Data. Territories
with no field representation are serviced exclusively by the inside
telemarketing sales teams. Customers typically call their inside sales teams on
dedicated toll-free numbers to place orders. If the product is in stock and the
customer has available credit, customer orders received by 5:00 p.m. local time
are generally shipped the same day from the distribution facility nearest the
customer.
Customers rely upon the Company's electronic ordering and information
systems, World Wide Web site, product catalogs and frequent mailings as sources
for product information, including prices. The Company's on-line computer system
allows the inside sales teams to check for current stocking levels in each of
the seven United States distribution centers. Likewise, inside sales teams in
Canada, Brazil, Germany, France, Switzerland and Austria can check on stocking
levels in their respective distribution centers. Through "Tech Data On-Line,"
the Company's proprietary electronic on-line system, U.S. customers can gain
remote access to the Company's data processing system to check product
availability and pricing and to place an order. Certain of the Company's larger
customers have available EDI services whereby orders, order acknowledgments,
invoices, inventory status reports, customized pricing information and other
industry standard EDI transactions are consummated on-line which improves
efficiency and timeliness for both the Company and the customers. Customers
currently can check product availability and pricing via the Company's World
Wide Web site. The Company's ordering system will be available on the World Wide
Web site in the near future. During the first six months of fiscal 1998, the
Company received orders accounting for approximately 20% of its U.S. net sales
and approximately 50% of its total order lines through its electronic ordering
systems.
The Company provides comprehensive training to its field and inside sales
representatives regarding technical characteristics of products and the
Company's policies and procedures. Each new domestic sales representative
attends a four to six-week course provided in-house by the Company. In addition,
the Company's ongoing training program is supplemented by product seminars
offered daily by vendors.
COMPETITION
The Company operates in a market characterized by intense competition.
Competition within the industry is based on product availability, credit
availability, price, delivery and various services and support provided by the
distributor to the customer. The Company believes that it is positioned to
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compete effectively with other distributors in these areas. Major competitors
include Ingram Micro, Inc. and Merisel, Inc. in North America; Computer 2000 and
CHS Electronics, Inc. in Europe; and a variety of local and regional
distributors in all geographic markets in which the Company operates. The only
competitor larger than the Company, based on worldwide sales, is Ingram Micro,
Inc.
The Company also competes with manufacturers and publishers who sell
directly to resellers and end-users. The Company nevertheless believes that in
the majority of cases, manufacturers and publishers choose to sell products
though distributors rather than directly because of the relatively small volume
and high selling costs associated with numerous small orders. Management also
believes that the Company's prompt delivery of products and efficient handling
of returns provide an important competitive advantage over manufacturers' and
publishers' efforts to market their products directly.
EMPLOYEES
On July 31, 1997, the Company had approximately 4,580 full-time employees,
which includes approximately 800 employees of Macrotron AG. The Company enjoys
excellent relations with its employees, all of whom are non-union.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
The geographic areas in which the Company operates are the United States
(including exports to Latin America and the Caribbean), France and Canada. On
July 1, 1997, the Company entered into Germany, Austria and Switzerland through
the acquisition of a majority interest of the voting stock in Macrotron AG. See
Note 10 and Note 12 of Notes to Consolidated Financial Statements regarding the
geographical distribution of the Company's net sales, operating income and
identifiable assets and the recent acquisition of Macrotron AG.
MANAGEMENT
The executive officers of the Company, their ages, and their present
positions with the Company as of October 1, 1997 are as follows:
<TABLE>
<S> <C> <C>
Steven A. Raymund...................... 41 Chairman of the Board of Directors and
Chief Executive Officer
Anthony A. Ibarguen.................... 38 President and Chief Operating Officer
Jeffery P. Howells..................... 40 Executive Vice President of Finance and
Chief Financial Officer
Peggy K. Caldwell...................... 52 Senior Vice President of Marketing
Timothy J. Curran...................... 45 Senior Vice President of Sales
Lawrence W. Hamilton................... 40 Senior Vice President of Human
Resources
Yuda Saydun............................ 44 Senior Vice President and General
Manager -- Latin America
Theodore F. Augustine.................. 50 Vice President of Distribution and
Logistics
Patrick O. Connelly.................... 51 Vice President of Worldwide Credit
Services
Charles V. Dannewitz................... 42 Vice President of Taxes
Arthur W. Singleton.................... 36 Vice President, Treasurer and Secretary
Joseph B. Trepani...................... 37 Vice President and Worldwide Controller
David R. Vetter........................ 38 Vice President and General Counsel
</TABLE>
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<PAGE> 28
EXECUTIVE OFFICERS
STEVEN A. RAYMUND, CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE
OFFICER, has been employed by the Company since 1981, serving as Chief Executive
Officer since January 1986 and as Chairman of the Board of Directors since April
1991. He has a B.S. Degree in Economics from the University of Oregon and a
Masters Degree from the Georgetown University School of Foreign Service.
ANTHONY A. IBARGUEN, PRESIDENT AND CHIEF OPERATING OFFICER, joined the
Company in September 1996 as President of the Americas and was appointed
President and Chief Operating Officer in March 1997. Prior to joining the
Company, he was employed by ENTEX Information Services, Inc. from August 1993 to
August 1996 as Executive Vice President of Sales and Marketing. From June 1990
to August 1993, he was employed by JWP, Inc. most recently as a Vice President.
Mr. Ibarguen holds a B.S. Degree in Marketing from Boston College and a Masters
in Business Administration Degree from Harvard University.
JEFFERY P. HOWELLS, EXECUTIVE VICE PRESIDENT OF FINANCE AND CHIEF FINANCIAL
OFFICER, joined the Company in October 1991 as Vice President of Finance and
assumed the responsibilities of Chief Financial Officer in March 1992. In March
1993, he was promoted to Senior Vice President of Finance and Chief Financial
Officer and was promoted to Executive Vice President of Finance and Chief
Financial Officer in March 1997. From June 1991 through September 1991, he was
employed as Vice President of Finance of Inex Vision Systems. From 1979 to May
1991, he was employed by Price Waterhouse, most recently as a Senior Audit
Manager. Mr. Howells is a Certified Public Accountant and holds a B.B.A. Degree
in Accounting from Stetson University.
PEGGY K. CALDWELL, SENIOR VICE PRESIDENT OF MARKETING, joined the Company
in May 1992. Prior to joining the Company, she was employed by International
Business Machines Corporation for 25 years, most recently serving in a variety
of senior management positions in the National Distribution Division. Ms.
Caldwell holds a B.S. Degree in Mathematics and Physics from Bucknell
University.
TIMOTHY J. CURRAN, SENIOR VICE PRESIDENT OF SALES, joined the Company in
April 1997. Prior to joining the Company, he was employed by Panasonic
Communications and Systems Company (including various other Panasonic
affiliates) from 1983 to 1997 serving in a variety of senior management
positions. Mr. Curran holds a B.A. Degree in History from the University of
Notre Dame and a Ph.D. in International Relations from Columbia University.
LAWRENCE W. HAMILTON, SENIOR VICE PRESIDENT OF HUMAN RESOURCES, joined the
Company in August 1993 as Vice President of Human Resources and was promoted to
Senior Vice President in March 1996. Prior to joining the Company, he was
employed by Bristol-Myers Squibb Company from 1985 to August 1993, most recently
as Vice President -- Human Resources and Administration of Linvatec Corporation
(a division of Bristol-Myers Squibb Company). Mr. Hamilton holds a B.A. Degree
in Political Science from Fisk University and a Masters of Public
Administration, Labor Policy from the University of Alabama.
YUDA SAYDUN, SENIOR VICE PRESIDENT AND GENERAL MANAGER -- LATIN AMERICA,
joined the Company in May 1993 as Vice President and General Manager -- Latin
America. In March 1997, he was promoted to Senior Vice President and General
Manager -- Latin America. Prior to joining the Company, he was employed by
American Express Travel Related Services Company, Inc. from 1982 to May 1993,
most recently as Division Vice President, Cardmember Marketing. Mr. Saydun holds
a B.S. Degree in Political and Diplomatic Sciences from University Libre de
Bruxelles and a Masters of Business Administration Degree, Finance/Marketing
from U.C.L.A.
THEODORE F. AUGUSTINE, VICE PRESIDENT OF DISTRIBUTION AND LOGISTICS, joined
the Company in July 1996. Prior to joining the Company he served as President of
M-Group Logistics, Inc. from June 1995 to July 1996. From 1989 to June 1995, he
was employed by The Eli Witt Company as Executive Vice President and Chief
Operations Officer. Mr. Augustine holds a Masters of Business Administration
Degree from Loyola College.
PATRICK O. CONNELLY, VICE PRESIDENT OF WORLDWIDE CREDIT SERVICES, joined
the Company in August 1994. Prior to joining the Company, he was employed by
Unisys Corporation for nine years as
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<PAGE> 29
Worldwide Director of Credit. Mr. Connelly holds a B.A. Degree in History and
French from the University of Texas at Austin.
CHARLES V. DANNEWITZ, VICE PRESIDENT OF TAXES, joined the Company in
February 1995. Prior to joining the Company, he was employed by Price Waterhouse
for 13 years, most recently as a Tax Partner. Mr. Dannewitz is a Certified
Public Accountant and holds a B.S. Degree in Accounting from Illinois Wesleyan
University.
ARTHUR W. SINGLETON, VICE PRESIDENT, TREASURER AND SECRETARY, joined the
Company in January 1990 as Director of Finance and was appointed Treasurer and
Secretary in April 1991. In February 1995, he was promoted to Vice President,
Treasurer and Secretary. Prior to joining the Company, Mr. Singleton was
employed by Price Waterhouse from 1982 to December 1989, most recently as an
Audit Manager. Mr. Singleton is a Certified Public Accountant and holds a B.S.
Degree in Accounting from Florida State University.
JOSEPH B. TREPANI, VICE PRESIDENT AND WORLDWIDE CONTROLLER, joined the
Company in March 1990 as Controller and held the position of Director of
Operations from October 1991 through January 1995. In February 1995, he was
promoted to Vice President and Worldwide Controller. Prior to joining the
Company, Mr. Trepani was Vice President of Finance for Action Staffing, Inc.
from July 1989 to February 1990. From 1982 to June 1989, he was employed by
Price Waterhouse. Mr. Trepani is a Certified Public Accountant and holds a B.S.
Degree in Accounting from Florida State University.
DAVID R. VETTER, VICE PRESIDENT AND GENERAL COUNSEL, joined the Company in
June 1993. Prior to joining the Company, he was employed by the law firm of
Robbins, Gaynor & Bronstein, P.A. from 1984 to June 1993, most recently as a
partner. Mr. Vetter is a member of the Florida Bar and holds a B.A. Degree in
English and Economics from Bucknell University and a J.D. Degree from the
University of Florida.
DESCRIPTION OF CAPITAL STOCK
PREFERRED STOCK
The Company has authorized and outstanding 226,500 shares of Preferred
Stock, par value $.02. The Preferred Stock pays no dividends, has no pre-emptive
rights, and no redemption, sinking fund, or conversion provisions. It does have
a liquidation preference over the Company's Common Stock to the extent of all
distributions in the event of liquidation, not to exceed $.20 per share. Each
outstanding share of Preferred Stock is entitled to one vote on all matters
submitted to a vote of shareholders. Shares of Preferred Stock have equal voting
rights with the shares of Common Stock in certain specified events. See "Class
Voting and Classified Board of Directors."
COMMON STOCK
The Company has authorized 200,000,000 shares of Common Stock, par value
$.0015. Holders of the common stock have no pre-emptive rights. Each outstanding
share of Common Stock is entitled to one vote on all matters submitted to a vote
of the Company's shareholders. Holders of Common Stock are entitled to receive
such dividends as may be declared by the Board of Directors out of funds legally
available therefor. The holders of Common Stock are entitled to share
proportionately in any liquidating distribution to shareholders after provisions
for payment of creditors and after the payment of the liquidation preference on
any shares of Preferred Stock then outstanding. All outstanding shares of Common
Stock are, and the shares to be sold hereunder by the Company will be when
issued, fully paid and nonassessable. The transfer agent and registrar for the
Company's Common Stock is Chase Mellon Shareholder Services, LLC.
CLASS VOTING AND CLASSIFIED BOARD OF DIRECTORS
The Company's Restated and Amended Articles of Incorporation require that
certain mergers, sale of substantially all the assets of the Company, amendments
to the Company's Restated and Amended
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<PAGE> 30
Articles of Incorporation and exchanges of Company stock for stock of another
corporation pursuant to a vote of shareholders be approved by a majority of each
class of capital stock entitled to vote. Thus, any person that controls at least
one-half of any class of stock can block an attempt to merge or sell
substantially all the assets of the Company or defeat the approval of certain
other transactions. Edward C. Raymund, a director of the Company, beneficially
owns 113,260 shares of Preferred Stock (which, with the 113,240 shares owned by
Annette L. Raymund, is all of the Preferred Stock outstanding), each share of
which is entitled to one vote. In connection with the terms of an Employment
Agreement dated as of January 31, 1991, between Edward C. Raymund and the
Company, providing for Mr. Raymund's employment from February 1, 1991 through
January 31, 2001, Mr. Raymund entered into an irrevocable proxy and escrow
agreement (the "Irrevocable Proxy"). (In connection with an amendment to the
employment agreement dated November 13, 1992, Annette L. Raymund also entered
into the Irrevocable Proxy.) Under the terms of the Irrevocable Proxy, directors
of the Company, Charles E. Adair, Daniel M. Doyle, John Y. Williams and Donald
F. Dunn (in their capacity as "outside" directors of the Company), have been
granted full power and authority to vote the 226,500 shares of Preferred Stock.
The Irrevocable Proxy has a three-year term in accordance with Section 607.0722
of the Florida Business Corporation Act. For the Employment Agreement to remain
in effect, successive three-year Irrevocable Proxies must be executed by Mr.
Raymund through January 31, 2001. Mr. Raymund has renewed the Irrevocable Proxy
in accordance with the Employment Agreement.
The Company's Amended and Restated Articles of Incorporation also divide
the Board of Directors into three classes serving staggered three-way terms.
These provisions may discourage attempts to acquire control of the Company.
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<PAGE> 31
DESCRIPTION OF NOTES
The Notes will be issued under an Indenture, to be dated as of
, 1997 (the "Indenture"), between the Company and Bankers Trust Company, as
Trustee (the "Trustee"), a copy of which is filed as an exhibit to the
Registration Statement. Wherever particular defined terms of the Indenture
(including the Notes) are referred to, such defined terms are incorporated
herein by reference (the Notes being referred to in the Indenture as
"Securities"). The following summaries of certain provisions of the Indenture do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, the detailed provisions of the Notes and the
Indenture, including the definitions therein of certain terms.
GENERAL
The Notes will be general unsecured subordinated obligations of the
Company, will be limited to $201,250,000 aggregate principal amount and will
mature on , 2002. Payment in full of the principal amount of the
Notes will be due on , 2002 at a price of 100% of the principal
amount thereof.
The Notes will bear interest at the rate per annum set forth on the front
cover of this Prospectus from , 1997 or from the most recent
Interest Payment Date to which interest has been paid or provided for, payable
semi-annually on and of each year, commencing , 1998 until
the principal thereof is paid or made available for payment, to the Person in
whose name the Note is registered at the close of business on the preceding
or , as the case may be. Interest on the Notes at such rate will
be computed on the basis of a 360-day year, comprised of twelve 30-day months.
The Notes will be convertible into shares of Common Stock initially at the
conversion rate stated on the front cover of this Prospectus, subject to
adjustment upon the occurrence of certain events described under "-- Conversion
Rights," at any time prior to the close of business on , 2002,
unless previously redeemed or repurchased.
The Notes are redeemable at the option of the Company, at any time on or
after , 2000, in whole or in part, at the redemption prices set
forth below under "-- Optional Redemption," plus accrued interest to the
redemption date. The Notes also are subject to repurchase by the Company at the
option of the Holders, as described below under "-- Repurchase at Option of
Holders Upon a Change of Control."
The principal of, premium, if any, and interest on the Notes will be
payable, and the Notes may be surrendered for registration of transfer, exchange
and conversion, at the office or agency of the Trustee in The Borough of
Manhattan, The City of New York. In addition, payment of interest may, at the
option of the Company, be made by check mailed to the address of the Person
entitled thereto as it appears in the Security Register. See "-- Payment and
Conversion." Payments, transfers, exchanges and conversions relating to
beneficial interests in Notes issued in book-entry form will be subject to the
procedures applicable to Global Notes described below.
The Company initially will appoint the Trustee at its Corporate Trust
Office as paying agent, transfer agent, registrar and conversion agent for the
Notes. In such capacities, the Trustee will be responsible for, among other
things, (i) maintaining a record of the aggregate holdings of Notes represented
by the Global Note (as defined below) and accepting Notes for exchange and
registration of transfer, (ii) ensuring that payments of principal, premium, if
any, and interest received by the Company from the Trustee in respect of the
Notes are duly paid to DTC or its nominees, (iii) transmitting to the Company
any notices from Holders of the Notes, (iv) accepting conversion notices and
related documents and transmitting the relevant items to the Company and (v)
delivering certificates for Common Stock issued upon conversion of the Notes.
The Company will cause the transfer agent to act as a registrar and will
cause to be kept at the office of such transfer agent a register in which,
subject to such reasonable regulations as it may prescribe, the Company will
provide for registration of transfers of the Notes. The Company may vary or
terminate the appointment of any paying agent, transfer agent or conversion
agent, or appoint additional or other such agents or approve any change in the
office through which any such agent acts, provided that there shall
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<PAGE> 32
at all times be maintained by the Company, a paying agent, a transfer agent and
a conversion agent in the Borough of Manhattan, The City of New York. The
Company will cause notice of any resignation, termination or appointment of the
Trustee or any paying agent, transfer agent or conversion agent, and of any
change in the office through which any such agent will act, to be provided to
Holders of the Notes.
No service charge will be made for any registration of transfer or exchange
of Notes, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
Notes will be issued only in fully registered form, without interest
coupons, in minimum denominations of $1,000 and integral multiples in excess
thereof. Notes sold in the Offering will be issued only against payment therefor
in immediately available funds.
The Notes initially will be represented by one or more Notes in registered,
global form without interest coupons (collectively, the "Global Notes" or
"Global Note"). The Global Notes will be deposited upon issuance with the
Trustee as custodian for DTC, in New York, New York, and registered in the name
of DTC or its nominee, in each case for credit to an account of a direct or
indirect participant in DTC as described below.
Transfers of beneficial interests in the Global Notes will be subject to
the applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time.
Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below under
"-- Exchanges of Book-Entry Notes for Certificated Notes."
EXCHANGES OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES. A beneficial
interest in a Global Note may not be exchanged for a Note in certificated form
unless (i) DTC (x) notifies the Company that it is unwilling or unable to
continue as Depositary for the Global Note or (y) has ceased to be a clearing
agency registered under the Exchange Act and in either case the Company
thereupon fails to appoint a successor Depositary, (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
the Notes in certificated form or (iii) there shall have occurred and be
continuing an Event of Default or any event which after notice or lapse of time
or both would be an Event of Default with respect to the Notes. In all cases,
certificated 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 or on behalf of the Depositary (in accordance with
its customary procedures).
CERTAIN BOOK-ENTRY PROCEDURES FOR GLOBAL NOTES. The descriptions of the
operations and procedures of DTC, that follow are provided solely as a matter of
convenience. These operations and procedures are solely within the control of
DTC and are subject to changes by them from time to time. The Company takes no
responsibility for these operations and procedures and urges investors to
contact DTC or its participants directly to discuss these matters.
DTC has advised the Company as follows: 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 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 ("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").
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<PAGE> 33
DTC has advised the Company that its current practice, upon the issuance of
a Global Note, is to credit, on its internal system, the respective principal
amount of the individual beneficial interests represented by such Global Note to
the accounts with DTC of the participants through which such interests are to be
held. Ownership of beneficial interests in the Global Note will be shown on, and
the transfer of that ownership will be affected only through, records maintained
by DTC or its nominees (with respect to interests of participants) and the
records of participants and indirect participants (with respect to interests of
persons other than participants).
AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL NOTE,
DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE OWNER AND
HOLDER OF THE NOTES REPRESENTED BY SUCH GLOBAL NOTE FOR ALL PURPOSES UNDER THE
INDENTURE AND THE NOTES. Except in the limited circumstances described above
under "-- Exchanges of Book-Entry Notes for Certificated Notes," owners of
beneficial interests in a Global Note will not be entitled to have any portions
of such Global Note registered in their names, will not receive or be entitled
to receive physical delivery of Notes in definitive form and will not be
considered the owners or Holders of the Global Note (or any Notes represented
thereby) under the Indenture or the Notes.
Investors may hold their interests in the Global Note directly through DTC,
if they are participants in such system, or indirectly through organizations
that are participants in such system. All interests in a Global Note will be
subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons may be limited to
that extent. Because DTC can act only on behalf of its participants, which in
turn act on behalf of indirect participants and certain banks, the ability of a
person having beneficial interests in a Global Note to pledge such interest to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.
Payments of the principal of, premium, if any, and interest on the Note
will be made to DTC or its nominee, as the case may be, as the registered owner
of the Global Note. 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 a
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 in respect of a Global Note representing any Notes held by
it or its nominee, will immediately credit participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of such Global Note for such Notes as shown on the records of
DTC or its nominee. The Company also expects that payments by participants to
owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in "street name." Such payments will be the responsibility of such participants.
Interests in the Global Note will trade in DTC's Same-Day Funds Settlement
System, and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants. Transfers between participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below and the conversion of Notes) only at the direction of one or
more participants to whose account with DTC interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of the Notes as to which such participant or participants has or have given such
direction. However, if there is an Event of Default (as defined below) under the
Notes, DTC reserves the right to exchange the Global Notes for Notes in
certificated form, and to distribute such Notes to its participants.
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<PAGE> 34
None of the Company, the Trustee nor any of their respective agents will
have any responsibility for the performance by DTC, its participants or indirect
participants of its respective obligations under the rules and procedures
governing its operations, including maintaining, supervising or reviewing the
records relating to, or payments made on account of, beneficial ownership
interests in Global Notes.
PAYMENT AND CONVERSION
The principal of the Notes will be payable in U.S. dollars, against
surrender thereof at the office or agency of the Company designated by it for
such purpose in the Borough of Manhattan, The City of New York, and at any other
office or agency of the Company maintained for such purpose, in U.S. currency by
dollar check or by transfer to a dollar account (such a transfer to be made only
to a Holder of an aggregate principal amount of Notes in excess of $5,000,000
and only if such Holder shall have furnished wire instructions to the Trustee in
writing no later than 15 days prior to the relevant payment date) maintained by
the Holder with a bank in the United States. Payment of interest on a Note may
be made by dollar check mailed to the address of the person entitled thereto as
such address shall appear in the Security Register, or, upon written application
by the Holder to the Security Registrar setting forth instructions not later
than the relevant Record Date, by transfer to a dollar account (such a transfer
to be made only to a Holder of an aggregate principal amount of Notes in excess
of $5,000,000 and only if such Holder shall have furnished wire instructions in
writing to the Trustee no later than 15 days prior to the relevant payment date)
maintained by the Holder with a bank in the United States.
Any payment on a Note due on any day that is not a Business Day need not be
made on such day, but may be made on the next succeeding Business Day with the
same force and effect as if made on such due date. and no interest shall accrue
on such payment for the period from and after such date. "Business Day," when
used with respect to any place of payment, place of conversion or any other
place, as the case may be, means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in such place of payment,
place of conversion or other place, as the case may be, are authorized or
obligated by law or executive order to close.
Notes may be surrendered for conversion at the office or agency of the
Trustee in the Borough of Manhattan, The City of New York, at any other office
or agency of the Trustee maintained for such purpose and at the office or agency
of any additional conversion agent appointed by the Company. In the case of
Global Notes, conversion will be effected by DTC upon notice from the holder of
a beneficial interest in a Global Note in accordance with its rules and
procedures. Notes surrendered for conversion must be accompanied by a conversion
notice and any payments in respect of interest, as applicable, as described
below under "-- Conversion Rights."
CONVERSION RIGHTS
The Holder of any Note will have the right, at the Holder's option, to
convert any portion of the principal amount of a Note that is an integral
multiple of $1,000 into shares of Common Stock, unless previously redeemed or
repurchased, at a conversion rate of the number of shares per $1,000 principal
amount of Notes shown on the front cover of this Prospectus (the "Conversion
Rate"), subject to adjustment as described below. The right to convert a Note
called for redemption or delivered for repurchase will terminate at the close of
business on the Redemption Date or Repurchase Date for such Note, unless the
Company defaults in making the payment due upon redemption or repurchase, as the
case may be.
The right of conversion attaching to any Note may be exercised by the
Holder by delivering the Note at the office or agency of the Company in The
Borough of Manhattan, The City of New York, at any other office or agency of the
Company maintained for such purpose and at the office or agency of any
additional conversion agent appointed by the Company, accompanied by a duly
signed and completed notice of conversion, a copy of which may be obtained from
the Trustee and any conversion agent. The conversion date will be the date on
which the Note and the duly signed and completed notice of conversion are so
delivered. As promptly as practicable on or after the conversion date, the
Company will
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<PAGE> 35
issue and deliver to the Trustee 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 or, at the Company's option, rounded up to the
next whole number of shares; such certificate will be sent by the Trustee to the
Conversion Agent for delivery to the Holder. Such shares of Common Stock
issuable upon conversion of the Notes, in accordance with the provisions of the
Indenture, will be fully paid and nonassessable and will also rank pari passu
with the other shares of the Common Stock outstanding from time to time.
Holders that surrender Notes for conversion on a date that is not an
Interest Payment Date are not entitled to receive any interest for the period
from the next preceding Interest Payment Date to the date of conversion, except
as described below. However, Holders of Notes on a Regular Record Date,
including Notes surrendered for conversion after the Regular Record Date, will
receive the interest payable on such Notes on the next succeeding Interest
Payment Date. Accordingly, any Note surrendered for conversion during the period
from the close of business on a Regular Record Date to the opening of business
on the next succeeding Interest Payment Date must be accompanied by payment of
an amount equal to the interest payable on such Interest Payment Date on the
principal amount of Notes being surrendered for conversion; provided, however,
that no such payment will be required upon the conversion of any Note (or
portion thereof) that has been called for redemption or that is eligible to be
delivered for repurchase if, as a result, the right to convert such Note would
terminate during the period between such Regular Record Date and the next
succeeding Interest Payment Date.
No other payment or adjustment for interest, or for any dividends in
respect of Common Stock, will be made upon conversion. Holders of Common Stock
issued upon conversion will not be entitled to receive any dividends payable to
holders of Common Stock as of any record date before the close of business on
the conversion date. No fractional shares will be issued upon conversion but, in
lieu thereof, the Company will calculate an appropriate amount to be paid in
cash on the basis set forth in the Indenture or, at its option, round up to the
next whole number of shares.
A Holder delivering a Note for conversion will not be required to pay any
taxes or duties in respect of the issue or delivery of Common Stock on
conversion. However, the Company shall not be required to pay any tax or duty
that may be payable in respect of any transfer involved in the issue or delivery
of the Common Stock in a name other than that of the Holder of the Note.
Certificates representing shares of Common Stock will not be issued or delivered
unless the person requesting such issue has paid to the Company the amount of
any such tax or duty or has established to the satisfaction of the Company that
such tax or duty has been paid.
The Conversion Rate is subject to adjustment in certain events, including
(a) dividends (and other distributions) payable in Common Stock on shares of
capital stock of the Company, (b) the issuance to all holders of Common Stock of
certain rights, options or warrants entitling them to subscribe for or purchase
Common Stock at less than the then current market price (determined as provided
in the Indenture) of Common Stock as of the record date for holders entitled to
receive such rights, options or warrants, (c) subdivisions, combinations and
reclassifications of Common Stock, (d) distributions to all holders of Common
Stock of evidences of indebtedness of the Company, shares of capital stock or
other property (including securities, but excluding those dividends, rights,
options, warrants and distributions referred to in clauses (a) and (b) above,
dividends and distributions paid exclusively in cash and distributions upon
mergers or consolidations to which the next succeeding paragraph applies), (e)
distributions consisting exclusively of cash (excluding any cash portion of
distributions referred to in (d) above, or cash distributed upon a merger or
consolidation to which the next succeeding paragraph applies) to all holders of
Common Stock in an aggregate amount that, combined together with (i) other such
all-cash distributions made within the preceding 12 months in respect of which
no adjustment has been made and (ii) any cash and the fair market value of other
consideration payable in respect of any tender offer by the Company or any of
its Subsidiaries for Common Stock, to the extent that the cash and value of any
other consideration included in such payment per share of Common Stock exceeds
the current market price per share of Common Stock on the trading day next
succeeding the date of payment (the "Current Market Price"), concluded within
the preceding 12 months in respect of which no adjustment has been made, exceeds
10% of the Company's market capitalization (being the
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<PAGE> 36
product of the then current market price of the Common Stock and the number of
shares of Common Stock then outstanding) on the record date for such
distribution and (f) the successful completion of a tender offer made by the
Company or any of its subsidiaries for Common Stock, to the extent that the cash
and value of any other consideration included in such payment per share of
Common Stock exceeds the Current Market Price at such time, the aggregate amount
of which, together with (i) any cash and other consideration in excess of the
then current market price paid in a tender offer by the Company or any of its
Subsidiaries for Common Stock expiring within the 12 months preceding the
expiration of such tender offer in respect of which no adjustment has been made
and (ii) the aggregate amount of any such all-cash distributions referred to in
(a) above to all holders of Common Stock within the 12 months preceding the
expiration of such tender offer in respect of which no adjustments have been
made, exceeds 10% of the Company's market capitalization on the expiration of
such tender offer. The Company reserves the right to make such increases in the
conversion rate in addition to those required in the foregoing provisions as it
considers to be advisable in order that any event treated for income tax
purposes as a dividend or distribution of stock or issuance of rights or
warrants to purchase or subscribe for stock will not be taxable to the
recipients. No adjustment of the conversion rate will be required to be made
until the cumulative adjustments amount to 1.0% or more of the conversion rate.
The Company shall compute any adjustments to the conversion price pursuant to
this paragraph and will give notice to the Holders of any such adjustments.
In case of any consolidation or merger of the Company with or into another
Person or any merger of another Person into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock), or in the case of any conveyance, sale,
transfer or lease of all or substantially all of the properties and assets of
the Company, each Note then outstanding will, without the consent of the Holder
of any Note, become convertible only into the kind and amount of securities,
cash and other property receivable upon such consolidation, merger, sale,
conveyance, lease or other transfer by a holder of the number of shares of
Common Stock into which such Note was convertible immediately prior thereto
(assuming such holder of Common Stock failed to exercise any rights of election
and that such Note was then convertible).
The Company from time to time may increase the Conversion Rate by any
amount for any period of at least 20 days, in which case the Company shall give
at least 15 days' notice of such increase, if the Board of Directors has made a
determination that such increase would be in the best interests of the Company,
which determination shall be conclusive. No such increase shall be taken into
account for purposes of determining whether the closing price of the Common
Stock exceeds the Conversion Price (as defined below) by 105% in connection with
an event which otherwise would be a Change of Control.
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 on Common Stock or
rights to subscribe for Common Stock) and, pursuant to the anti-dilution
provisions of the Indenture, the number of shares into which Notes are
convertible is increased, such increase may be deemed for federal income tax
purposes to be the payment of a taxable dividend to Holders of Notes. See
"Certain United States Federal Tax Considerations -- United States Holders."
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the Notes
(including amounts payable on any redemption or repurchase) will be subordinated
in right of payment to the extent set forth in the Indenture to the prior full
and final payment of all Senior Debt of the Company. "Senior Debt" or "Senior
Indebtedness" means the principal of (and premium, if any) and interest
(including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) on, and all fees and
other amounts (including collection expenses, attorney's fees and late charges)
owing with respect to, the following, whether direct or indirect, absolute or
contingent, secured or unsecured, due or to become due, outstanding at the date
of execution of the Indenture or thereafter incurred, created or assumed:
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(a) indebtedness of the Company for money borrowed or evidenced by bonds,
debentures, notes or similar instruments, (b) reimbursement obligations of the
Company with respect to letters of credit, bankers' acceptances and similar
facilities issued for the account of the Company, (c) every obligation of the
Company issued or assumed as the deferred purchase price of property or services
purchased by the Company, excluding any trade payables and other accrued current
liabilities incurred in the ordinary course of business, (d) obligations of the
Company as lessee under leases required to be capitalized on the balance sheet
of the lessee under United States generally accepted accounting principles, (e)
obligations of the Company under interest rate and currency swaps, caps, floors,
collars or similar arrangements intended to protect the Company against
fluctuations in interest or currency exchange rates, (f) indebtedness of others
of the kinds described in the preceding clauses (a) through (e) that the Company
has assumed, guaranteed or otherwise assured the payment thereof, directly or
indirectly, and/or (g) deferrals, renewals, extensions and refundings of, or
amendments, modifications or supplements to, any indebtedness or obligation
described in the preceding clauses (a) through (e) whether or not there is any
notice to or consent of the Holders of Notes; provided, however, that the
following shall not constitute Senior Debt: (i) any particular indebtedness or
obligation that is owed by the Company to any of its direct and indirect
Subsidiaries and (ii) any particular indebtedness, deferral, renewal, extension
or refunding if it is expressly stated in the governing terms or in the
assumption thereof that the indebtedness involved is not senior in right of
payment to the Notes or that such indebtedness is pari passu with or junior to
the Notes.
No payment on account of principal of or premium, if any, or interest on
the Notes may be made if (a) there shall have occurred and be continuing (i) a
default in the payment of any Senior Debt or (ii) any other default with respect
to any Senior Debt permitting the holders thereof to accelerate the maturity
thereof, provided that, in the case of this clause (ii), such default shall not
have been cured or waived or ceased to exist after written notice of such
default shall have been given to the Company and the Trustee by any holder of
Senior Debt, or (b) in the event any judicial proceeding shall be pending with
respect to any such default in payment or event of default. Upon any
acceleration of the principal due on the Notes or payment or distribution of
assets of the Company to creditors upon any dissolution, winding up, liquidation
or reorganization, whether voluntary or involuntary, or in bankruptcy,
insolvency, receivership or other proceedings, all amounts due on all Senior
Debt must be paid in full before the Holders of the Notes are entitled to
receive any payment. By reason of such subordination, in the event of insolvency
of the Company, creditors of the Company who are holders of Senior Debt may
recover more, ratably, than the Holders of the Notes, and such subordination may
result in a reduction or elimination of payments to the Holders of the Notes. As
of August 31, 1997 the Company had approximately $485 million of Senior Debt
outstanding.
In addition, the Notes will be effectively subordinated to all indebtedness
and other liabilities (including trade payables and lease obligations) of the
Company's subsidiaries.
The Indenture does not limit the ability of the Company or any of its
subsidiaries to incur indebtedness, including Senior Debt.
OPTIONAL REDEMPTION
The Notes may not be redeemed prior to the close of business on
, 2000. Thereafter, the Notes may be redeemed, in whole or in part, at the
option of the Company, upon not less than 30 nor more than 60 days' prior notice
as provided under "-- Notices" below, at the redemption prices set forth below.
Such redemption prices (expressed as a percentage of principal amount) are as
follows for the 12-month period beginning on of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2000........................................................ %
2001........................................................
</TABLE>
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<PAGE> 38
and thereafter at a redemption price equal to 100% of the principal amount, in
each case together with accrued interest to the redemption date.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE OF CONTROL
If a Change of Control (as defined below) occurs, each Holder of Notes
shall have the right, at the Holder's option, to require the Company to
repurchase all of such Holder's Notes, or any portion of the principal amount
thereof that is equal to $1,000 or an integral multiple of $1,000 in excess
thereof, on the date (the "Repurchase Date") that is 45 days after the date of
the Company Notice (as defined below), at a price in cash equal to 100% of the
principal amount of the Notes to be repurchased, together with interest accrued
to the Repurchase Date (the "Repurchase Price").
The Company may, at its option, in lieu of paying the Repurchase Price in
cash, pay the Repurchase Price by issuing shares of Common Stock. The number of
shares of Common Stock tendered in payment shall be determined by dividing the
Repurchase Price by the value of the Common Stock, which for this purpose shall
be equal to 95% of the average of the closing sale prices of the Common Stock
for the five consecutive Trading Days ending on and including the third Trading
Day preceding the Repurchase Date. Such payment may not be made in Common Stock
unless the Company satisfies certain conditions with respect thereto prior to
the Repurchase Date as provided in the Indenture.
On or before the 30th day after the occurrence of a Change of Control, the
Company is obligated to give to all Holders of the Notes notice, as provided in
the Indenture (the "Company Notice"), of the occurrence of such Change of
Control and of the repurchase right arising as a result thereof. To exercise the
repurchase right, a Holder of Notes must deliver on or before the fifth day
prior to the Repurchase Date irrevocable written notice to the Trustee of the
Holder's exercise of such right, together with the Notes with respect to which
the right is being exercised.
A Change of Control shall be deemed to have occurred at such time after the
original issuance of the Notes as there shall occur:
(i) the acquisition by any Person of beneficial ownership, directly or
indirectly, through a purchase, merger or other acquisition transaction or
series of transactions, of shares of capital stock of the Company entitling
such Person to exercise 50% or more of the total voting power of all shares
of capital stock of the Company entitled to vote generally in elections of
directors, other than any such acquisition by the Company or any employee
benefit plan of the Company; or
(ii) any consolidation or merger of the Company with or into any other
Person, any merger of another Person into the Company, or any conveyance,
transfer, sale, lease or other disposition of all or substantially all of
the properties and assets of the Company to another Person (other than (a)
any such transaction (x) that does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock
and (y) pursuant to which holders of Common Stock immediately prior to such
transaction have the entitlement to exercise, directly or indirectly, 50%
or more of the total voting power of all shares of capital stock entitled
to vote generally in the election of directors of the continuing or
surviving person immediately after such transaction and (b) any merger that
is effected solely to change the jurisdiction of incorporation of the
Company and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock solely into shares of common stock of
the surviving entity);
provided, however, that a Change of Control shall not be deemed to have occurred
if the closing sale price per share of the Common Stock for any five Trading
Days within the period of 10 consecutive Trading Days ending immediately after
the later of the date of the Change of Control or the date of the public
announcement of the Change of Control (in the case of a Change of Control under
clause (i) above) or ending immediately before the Change of Control (in the
case of a Change of Control under clause (ii) above) shall equal or exceed 105%
of the Conversion Price of the Notes in effect on each such Trading Day, The
"Conversion Price" is equal to $1,000 divided by the Conversion Rate.
"Beneficial owner" shall be determined in accordance with Rule 13d-3 promulgated
by the Commission
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under the Exchange Act. "Person" includes any syndicate or group which would be
deemed to be a "person" under Section 13(d)(3) of the Exchange Act.
The Company may, to the extent permitted by applicable law, at any time
purchase Notes in the open market or by tender at any price or by private
agreement. Subject to certain limitations imposed by the Underwriting Agreement
with the Underwriters, any Note so purchased by the Company may be reissued or
resold or may, at the Company's option, be surrendered to the Trustee for
cancellation. Any Notes surrendered as aforesaid may not be reissued or resold
and will be canceled promptly.
The foregoing provisions would not necessarily afford Holders of the Notes
protection in the event of highly leveraged or other transactions involving the
Company that may adversely effect Holders.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company shall not consolidate with or merge into any other Person or,
directly or indirectly, convey, transfer, sell or lease 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
or lease all or substantially all of its properties and assets to the Company,
unless (a) the Person formed by such consolidation or into or with which the
Company is merged or the Person to which the properties and assets of the
Company are so conveyed, transferred, sold or leased, is a corporation, limited
liability company, partnership or trust organized and existing under the laws of
the United States, any State thereof or the District of Columbia and shall
expressly assume the due and punctual payment of the principal and of, premium,
if any, and interest on the Notes and the performance of the other covenants of
the Company under the Indenture and shall have provided for conversion rights as
described above under "-- Conversion Rights", (b) immediately after giving
effect to such transaction, no Event of Default, and no event which, after
notice or lapse of time or both, would become an Event of Default, shall have
occurred and be continuing and (c) the Company shall have provided to the
Trustee an Officer's Certificate and Opinion of Counsel as provided in the
Indenture.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of or premium, if any, on any Note when due, whether or not such
payment is prohibited by the subordination provisions of the Indenture, (b)
failure to pay any interest on any Note when due, continuing for 30 days,
whether or not such payment is prohibited by the subordination provisions of the
Indenture; (c) default in the Company's obligation to provide notice of a Change
of Control; (d) failure to perform any other material covenant or warranty of
the Company in the Indenture, continuing for 60 days after written notice to the
Company by the Trustee or the Holders of at least 25% in aggregate principal
amount of Outstanding Notes; (e) failure to pay when due the principal of, or
acceleration of, any indebtedness for money borrowed by the Company in excess of
$25 million if such indebtedness is not discharged, or such acceleration is not
annulled, within 30 days after written notice to the Company by the Trustee or
the Holders of at least 25% in aggregate principal amount of Outstanding Notes;
and (f) certain events of bankruptcy, insolvency or reorganization of the
Company. Subject to the provisions of the Indenture relating to the duties of
the Trustee in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the Outstanding Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee.
If an Event of Default (other than an Event of Default specified in clause
(f) above) occurs and is continuing, either the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Outstanding Notes may
accelerate the maturity of all Notes. If an Event of Default specified in clause
(f) occurs and is continuing, the principal of and any accrued interest on all
of the Notes then
38
<PAGE> 40
Outstanding shall ipso facto become due and payable immediately without any
declaration or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made but before a
judgment or decree based on acceleration has been issued, the Holders of a
majority in aggregate principal amount of Outstanding Notes may, under certain
circumstances as set forth in the Indenture, rescind and annul such acceleration
if all Events of Default, other than the nonpayment of accelerated principal and
interest, have been cured or waived as provided in the Indenture. For
information as to waiver of defaults, See "-- Modification and Waiver."
No Holder of any Note 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 also the Holders of at least 25% in aggregate principal
amount of the Outstanding Notes shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as trustee,
and the Trustee shall not have received from the Holders of a majority in
aggregate principal amount of the Outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instituted by a Holder of
a Note for the enforcement of payment of the principal of or 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 Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MODIFICATION AND WAIVER
The Indenture will contain provisions permitting the Company and the
Trustee to enter into a supplemental indenture for certain limited purposes
without the consent of the Holders. Generally, modifications and amendments of
the Indenture can only be made with the written consent of the Holders of not
less than a majority in principal amount of the Notes at the time Outstanding.
However, no such modification or amendment may, without the consent of the
Holder of each Outstanding Note affected thereby, (a) change the Stated Maturity
of the principal of, or any installment of interest on, any Note, (b) reduce the
principal amount of, or the premium, if any, or rate of interest on, any Note,
(c) modify the provisions with respect to the repurchase right of the Holders in
a manner adverse to the Holders, (d) change the place or currency of payment of
principal of, premium, if any, or interest on any Note, (e) impair the right to
institute suit for the enforcement of any payment on or with respect to, or the
right to convert, any Note, (f) except as otherwise permitted or contemplated by
provisions concerning consolidation, merger, conveyance, transfer, sale or lease
of all or substantially all of the property and assets of the Company, adversely
effect the right to convert Notes, (g) modify the subordination provisions in a
manner adverse to the Holders of the Notes or (h) reduce the above-stated
percentage of aggregate principal amount of Outstanding Notes necessary for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults.
The Holders of a majority in aggregate principal amount of Outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture. The Holders of a majority in aggregate principal amount of the
Outstanding Notes may waive any past default by the Company under the Indenture,
except a default in the payment of principal, premium, if any, or interest or a
default in any covenant or provision that under the Indenture cannot be modified
or amended without the consent of each Holder of Outstanding Notes.
NOTICES
Notice to Holders of the Notes will be given by mail to the addresses of
such Holders as they appear in the Security Register. Such notices will be
deemed to have been given on the date of mailing of the notice.
39
<PAGE> 41
Notice of a redemption of Notes will be given at least once not less than
30 nor more than 60 days prior to the Redemption Date (which notice shall be
irrevocable) and will specify the Redemption Date and the Redemption Price.
PAYMENT OF STAMP AND OTHER TAXES
The Company shall pay all stamp and other duties, if any, that may be
imposed by the United States or any political subdivision thereof or taxing
authority thereof or therein with respect to the issuance of the Notes. The
Company will not be required to make any payment with respect to any other tax,
assessment or governmental charge imposed by any government or any political
subdivision thereof or taxing authority therein.
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York.
THE TRUSTEE
The Trustee for the holders of Notes issued under the Indenture will be
Bankers Trust Company.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material United States federal income
tax considerations relating to the purchase, ownership and disposition of the
Notes and of Common Stock into which Notes may be converted, but does not
purport to be a complete analysis of all the potential tax considerations
relating thereto. This summary is based on laws, regulations, rulings and
decisions now in effect, all of which are subject to change, possibly on a
retroactive basis. This summary deals only with holders that will hold Notes and
Common Stock into which Notes may be converted as "capital assets" (within the
meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the
"Code"), and does not address tax considerations applicable to investors that
may be subject to special tax rules, such as banks, tax-exempt organizations,
insurance companies, broker-dealers, traders in securities that elect to mark to
market, persons that will hold Notes as a position in a hedging transaction,
"straddle" or "conversion transaction" for tax purposes or persons who have a
"functional currency" other than the U.S. dollar. As used herein, the term
"United States Holder" means (1) a citizen or resident of the United States, (2)
a corporation organized under the laws of the United States or any State, (3) an
estate the income of which is subject to the United States federal income
taxation regardless of its source or (4) a trust if (i) a court within the
United States is able to exercise primary supervision over the trust's
administration and (ii) one or more U.S. persons have the authority to control
all of the trust's substantial decisions. This summary discusses the tax
considerations applicable to an initial purchaser of the Notes who purchases the
Notes at their "issue price" as defined in Section 1273 of the Code and does not
discuss the tax considerations applicable to subsequent purchasers of the Notes.
The Company has not sought any ruling from the Internal Revenue Service (the
"IRS") with respect to the statements made and the conclusions reached in the
following summary, and there can be no assurance that the IRS will agree with
such statements and conclusions.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX
LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING
UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY
APPLICABLE TAX TREATY.
40
<PAGE> 42
PAYMENT OF INTEREST
Interest on a Note generally will be includable in the income of a United
States Holder as ordinary income at the time such interest is received or
accrued, in accordance with such holder's method of accounting for United States
federal income tax purposes.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange or redemptions of a Note (excluding conversion), a
United States Holder generally will recognize capital gain or loss equal to the
difference between (i) the amount of cash proceeds and the fair market value of
any property received on the sale, exchange or redemption (except to the extent
such amount is attributable to accrued interest income not previously included
in income which is taxable as ordinary income) and (ii) such holder's adjusted
tax basis in the Note. A United States Holder's adjusted tax basis in a Note
generally will equal the cost of the Note to such holder. Generally, such gain
or loss will be capital gain or loss and will be long-term capital gain or loss
if the United States Holder's holding period in the Note is more than one year
at the time of sale, exchange or redemption. Long-term capital gain of a
non-corporate United States Holder is generally subject to a minimum tax rate of
28% in respect of property held for more than one year and to a maximum tax rate
of 20% in respect of property held in excess of 18 months.
CONVERSION OF THE NOTES
A United States Holder generally will not recognize any income, gain or
loss upon conversion of a Note into Common Stock except with respect to cash
received in lieu of a fractional share of Common Stock. A holder's tax basis in
the Common Stock received on conversion of a Note will be the same as such
holder's adjusted tax basis in the Note at the time of conversion (reduced by
any basis allocable to a fractional share interest), and the holding period for
the Common Stock received on conversion will generally include the holding
period of the Note converted.
Cash received in lieu of a fractional share of Common Stock upon conversion
will be treated as a payment in exchange for the fractional share of Common
Stock. Accordingly, the receipt of cash in lieu of a fractional share of Common
Stock generally will result in capital gain or loss (measured by the difference
between the cash received for the fractional share and the United States
Holder's adjusted tax basis in the fractional share).
CONSTRUCTIVE DISTRIBUTIONS
If at any time (i) the Company makes a distribution of cash or property to
its stockholders (including distributions of evidences of indebtedness or
assets, but generally not stock dividends or rights to subscribe for Common
Stock) or purchases Common Stock and such distribution or purchase would be
taxable to such stockholders as a dividend for United States federal income tax
purposes and, pursuant to the antidilution provisions of the Indenture, the
conversion price of the Notes is decreased or (ii) the conversion price of the
Notes is decreased at the discretion of the Company, such decrease in conversion
price may be deemed to be the payment of a taxable dividend to Holders of Notes
(pursuant to Section 305 of the Code). Holders of Notes might therefore be
required to recognize taxable income as a result of an event pursuant to which
they received no cash or property.
DIVIDENDS
Dividends paid on the Common Stock generally will be includable in the
income of a United States Holder as ordinary income to the extent of the
Company's current or accumulated earnings and profits. Subject to certain
limitations, a corporate taxpayer holding Common Stock that receives dividends
thereon generally will be eligible for a dividends-received deduction equal to
50% of the dividends received.
41
<PAGE> 43
SALE OF COMMON STOCK
Upon the sale or exchange of Common Stock, a United States Holder generally
will recognize capital gain or loss equal to the difference between (i) the
amount of cash and the fair market value of any property received upon the sale
or exchange and (ii) such holder's adjusted tax basis in the Common Stock. Such
capital gain or loss will be subject to the rules discussed above under "Sale,
Exchange or Redemption of the Notes". A United States Holder's basis and holding
period in Common Stock received upon conversion of a Note are determined as
discussed above under "Conversion of the Notes."
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a Note, payments of dividends on
Common Stock, payments of the proceeds of the sale of a Note and payments of the
proceeds of the sale of Common Stock to certain noncorporate United States
Holders, and a 31% backup withholding tax may apply to such payments if the
United States Holder (i) fails to furnish or certify his correct taxpayer
identification number to the payor in the manner required, (ii) is notified by
the IRS that he has failed to report payments of interest and dividends
properly, or (iii) does not otherwise establish his entitlement to an exemption.
Any amounts withheld under the backup withholding rules from a payment to a
United States Holder will be allowed as a credit against such holders's United
States federal income tax and may entitle the United States Holder to a refund,
provided that the required information is furnished to the IRS.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"), all
of which may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 7 World Trade Center,
Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material also can be obtained at
prescribed rates by writing to the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. Reports, proxy and information
statements and other information concerning the Company can also be inspected at
The Nasdaq National Market at 1735 K Street, N.W., Washington, D.C. 20006 or
from the Commission's World Wide Web site at http://www.sec.gov.
This Prospectus constitutes part of a Registration Statement filed by the
Company with the Commission under the Securities Act. This Prospectus omits
certain of the information contained in the Registration Statement in accordance
with the rules and regulations of the Commission. Reference is hereby made to
the Registration Statement and related exhibits for further information with
respect to the Company and the Common Stock. Statements contained herein
concerning the provisions of any document are not necessarily complete and, in
each instance, where a copy of such document has been filed as an exhibit to the
Registration Statement or otherwise has been filed with the Commission,
reference is made to the copy so filed. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
pursuant to the Exchange Act, File No. 0-14625, and are incorporated herein by
reference:
1. Annual Report on Form 10-K for the fiscal year ended January 31, 1997.
2. Quarterly Report on Form 10-Q for the quarter ended April 30, 1997.
3. Quarterly Report on Form 10-Q for the quarter ended July 31, 1997.
42
<PAGE> 44
4. Proxy Statement for the Annual Meeting of Shareholders held on June 10,
1997.
5. The Registration Statement on Form 8-A under the Exchange Act as filed
with the Commission on May 14, 1986.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Notes offered hereby shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the documents
incorporated herein by reference (not including the exhibits to such documents,
unless such exhibits are specifically incorporated by reference into such
documents). Requests for such copies should be directed to Mr. Arthur W.
Singleton, Vice President, Treasurer and Secretary of the Company, at Tech Data
Corporation, 5350 Tech Data Drive, Clearwater, Florida 37760.
VALIDITY OF THE SECURITIES
The validity of the Notes offered hereby and of the shares of Common Stock
issuable upon conversion thereof will be passed upon for the Company by Schifino
& Fleischer, P.A., Tampa, Florida, and for the Underwriters by Sullivan &
Cromwell, New York, New York.
EXPERTS
The financial statements as of January 31, 1997 and 1996 and for each of
the three years in the period ended January 31, 1997 included in this Prospectus
have been so included in reliance on the report of Price Waterhouse LLP,
independent certified public accountants, given on the authority of said firm as
experts in auditing and accounting.
43
<PAGE> 45
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Consolidated Balance Sheet.................................. F-3
Consolidated Statement of Income............................ F-4
Consolidated Statement of Changes in Shareholders' Equity... F-5
Consolidated Statement of Cash Flows........................ F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 46
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Tech Data Corporation:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Tech Data Corporation and its subsidiaries at January 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended January 31, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Tampa, Florida
March 18, 1997
F-2
<PAGE> 47
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JANUARY 31,
------------------------ JULY 31,
1996 1997 1997
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 1,154 $ 661 $ 2,125
Accounts receivable, less allowance of $22,669,
$23,922 and $28,079........................... 445,202 633,579 700,806
Inventories...................................... 465,422 759,974 705,636
Prepaid and other assets......................... 39,010 55,796 43,828
---------- ---------- ----------
Total current assets..................... 950,788 1,450,010 1,452,395
Property and equipment, net........................ 61,610 65,597 69,999
Investment in and advances to Macrotron AG......... 104,567
Excess of cost over acquired net assets, net....... 6,376 5,922 5,696
Other assets, net.................................. 25,105 23,765 22,575
---------- ---------- ----------
$1,043,879 $1,545,294 $1,655,232
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit loans........................... $ 283,100 $ 396,391 $ 416,428
Current portion of long-term debt................ 519 201 207
Accounts payable................................. 433,374 658,732 696,297
Accrued expenses................................. 32,091 42,693 43,348
---------- ---------- ----------
Total current liabilities................ 749,084 1,098,017 1,156,280
Long-term debt..................................... 9,097 8,896 8,791
---------- ---------- ----------
758,181 1,106,913 1,165,071
---------- ---------- ----------
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred stock, par value $.02; 226,500 shares
authorized and issued; liquidation preference
$.20 per share................................ 5 5 5
Common stock, par value $.0015; 100,000,000,
100,000,000 and 200,000,000 shares authorized;
37,930,655, 43,291,423 and 43,947,402 issued
and outstanding............................... 57 65 66
Additional paid-in capital....................... 130,045 226,577 241,025
Retained earnings................................ 153,310 210,283 249,969
Cumulative translation adjustment................ 2,281 1,451 (904)
---------- ---------- ----------
Total shareholders' equity............... 285,698 438,381 490,161
---------- ---------- ----------
$1,043,879 $1,545,294 $1,655,232
========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
F-3
<PAGE> 48
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
------------------------------------ -----------------------
1995 1996 1997 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales...................... $2,418,410 $3,086,620 $4,598,941 $2,048,802 $2,921,966
---------- ---------- ---------- ---------- ----------
Cost and expenses:
Cost of products sold........ 2,219,122 2,867,226 4,277,160 1,905,488 2,722,811
Selling, general and
administrative expenses... 127,951 163,790 206,770 95,609 122,644
---------- ---------- ---------- ---------- ----------
2,347,073 3,031,016 4,483,930 2,001,097 2,845,455
---------- ---------- ---------- ---------- ----------
Operating profit............... 71,337 55,604 115,011 47,705 76,511
Interest expense............... 13,761 20,086 21,522 10,802 12,653
---------- ---------- ---------- ---------- ----------
Income before income taxes..... 57,576 35,518 93,489 36,903 63,858
Provision for income taxes..... 22,664 13,977 36,516 14,459 24,172
---------- ---------- ---------- ---------- ----------
Net income..................... $ 34,912 $ 21,541 $ 56,973 $ 22,444 $ 39,686
========== ========== ========== ========== ==========
Net income per common share.... $ .91 $ .56 $ 1.35 $ .57 $ .88
========== ========== ========== ========== ==========
Weighted average common shares
outstanding.................. 38,258 38,138 42,125 39,231 45,122
========== ========== ========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
F-4
<PAGE> 49
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
--------------- --------------- PAID-IN RETAINED TRANSLATION SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT EQUITY
------ ------ ------ ------ ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance -- January 31, 1994.... 227 $5 36,547 $54 $126,091 $ 87,176 $-- $213,326
Issuance of common stock in
business combination....... 1,144 3 9,681 9,684
Issuance of common stock for
stock options exercised and
related tax benefit........ 117 1,856 1,856
Net income................... 34,912 34,912
Translation adjustments...... 1,048 1,048
--- -- ------ --- -------- -------- ------- --------
Balance -- January 31, 1995.... 227 5 37,808 57 127,947 131,769 1,048 260,826
Issuance of common stock for
stock options exercised and
related tax benefit........ 123 2,098 2,098
Net income................... 21,541 21,541
Translation adjustments...... 1,233 1,233
--- -- ------ --- -------- -------- ------- --------
Balance -- January 31, 1996.... 227 5 37,931 57 130,045 153,310 2,281 285,698
Issuance of common stock for
stock options exercised and
related tax benefit........ 760 1 13,223 13,224
Issuance of common stock net
of offering costs.......... 4,600 7 83,309 83,316
Net income................... 56,973 56,973
Translation adjustments...... (830) (830)
--- -- ------ --- -------- -------- ------- --------
Balance -- January 31, 1997.... 227 5 43,291 65 226,577 210,283 1,451 438,381
Issuance of common stock in
business acquisition
(unaudited)................ 407 1 9,198 9,199
Issuance of common stock for
stock options exercised and
related tax benefit
(unaudited)................ 249 5,250 5,250
Net income (unaudited)....... 39,686 39,686
Translation adjustments
(unaudited)................ (2,355) (2,355)
--- -- ------ --- -------- -------- ------- --------
Balance -- July 31, 1997
(unaudited).................. 227 $5 43,947 $66 $241,025 $249,969 $ (904) $490,161
=== == ====== === ======== ======== ======= ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
F-5
<PAGE> 50
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
--------------------------------------- -------------------------
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers.................. $ 2,326,613 $ 2,933,831 $ 4,390,916 $ 1,975,983 $ 2,844,302
Cash paid to suppliers and employees.......... (2,382,799) (2,854,653) (4,513,309) (1,983,984) (2,713,420)
Interest paid................................. (13,584) (20,276) (21,122) (10,788) (12,967)
Income taxes paid............................. (27,974) (11,628) (45,037) (17,064) (32,184)
----------- ----------- ----------- ----------- -----------
Net cash (used in) provided by operating
activities............................ (97,744) 47,274 (188,552) (35,853) 85,731
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Acquisition of business, net of cash
acquired.................................... (35,368)
Expenditures for property and equipment....... (21,351) (23,596) (19,229) (4,663) (12,847)
Software development costs.................... (18,696) (2,826) (2,024) (1,029) (1,240)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities... (40,047) (26,422) (21,253) (5,692) (49,455)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock........ 1,859 2,098 96,540 88,576 5,250
Net borrowings (repayments) from revolving
credit loans................................ 136,019 (21,684) 113,291 (47,129) 20,037
Loans to Macrotron AG......................... (60,000)
Principal payments on long-term debt.......... (1,058) (608) (519) (259) (99)
Proceeds from long-term debt.................. 789
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities............................ 137,609 (20,194) 209,312 41,188 (34,812)
----------- ----------- ----------- ----------- -----------
Net (decrease) increase in cash and cash
equivalents........................... (182) 658 (493) (357) 1,464
Cash and cash equivalents at beginning of
year.......................................... 678 496 1,154 1,154 661
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of year........ $ 496 $ 1,154 $ 661 $ 797 $ 2,125
=========== =========== =========== =========== ===========
Reconciliation of net income to net cash (used
in) provided by operating activities:
Net income.................................. $ 34,912 $ 21,541 $ 56,973 $ 22,444 $ 39,686
----------- ----------- ----------- ----------- -----------
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization................. 9,110 17,364 20,011 9,515 11,101
Provision for losses on accounts receivable... 17,768 17,433 19,648 9,422 10,437
Loss on disposal of fixed assets.............. 1,237 603 446
Deferred income taxes......................... (1,739) (5,603) (5,051)
Changes in assets and liabilities:
(Increase) in accounts receivable........... (90,600) (152,789) (208,025) (72,819) (77,664)
(Increase) decrease in inventories.......... (132,940) (100,891) (294,552) 25,032 54,338
Decrease (increase) in prepaid and other
assets.................................... 2,645 (7,254) (13,962) (309) 9,613
Increase (decrease) in accounts payable..... 62,132 239,161 225,358 (28,043) 37,565
(Decrease) increase in accrued expenses..... (269) 17,709 10,602 (1,095) 655
----------- ----------- ----------- ----------- -----------
Total adjustments......................... (132,656) 25,733 (245,525) (58,297) 46,045
----------- ----------- ----------- ----------- -----------
Net cash (used in) provided by operating
activities.............................. $ (97,744) $ 47,274 $ (188,552) $ (35,853) $ 85,731
=========== =========== =========== =========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these financial statements.
F-6
<PAGE> 51
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Tech Data
Corporation and its subsidiaries (the "Company"), all of which are wholly-owned.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
METHOD OF ACCOUNTING
The Company prepares its financial statements in conformity with generally
accepted accounting principles. These principles require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Sales are recorded upon shipment. The Company allows its customers to
return product for exchange or credit subject to certain limitations. Provision
for estimated losses on such returns are recorded at the time of sale (see
product warranty below). Funds received from vendors for marketing programs and
product rebates are accounted for as a reduction of selling, general and
administrative expenses or product cost according to the nature of the program.
INVENTORIES
Inventories (consisting of computer related hardware and software products)
are stated at the lower of cost or market, cost being determined on the
first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed over
the estimated economic lives using the following methods:
<TABLE>
<CAPTION>
METHOD YEARS
--------------- ---------
<S> <C> <C>
Buildings and improvements.............................. Straight-line 31.5-39
Furniture, fixtures and equipment....................... Accelerated and 3-7
straight-line
</TABLE>
Expenditures for renewals and improvements that significantly add to
productive capacity or extend the useful life of an asset are capitalized.
Expenditures for maintenance and repairs are charged to operations when
incurred. When assets are sold or retired, the cost of the asset and the related
accumulated depreciation are eliminated from the accounts and any gain or loss
is recognized at such time.
EXCESS OF COST OVER ACQUIRED NET ASSETS
The excess of cost over acquired net assets is being amortized on a
straight-line basis over 15 years. Amortization expense was $602,000, $646,000
and $682,000 in 1997, 1996 and 1995, respectively. The accumulated amortization
of goodwill is approximately $2,264,000 and $1,727,000 at January 31, 1997 and
1996, respectively. In fiscal year 1996, the Company settled a liability related
to a previous acquisition and therefore recorded a $3,000,000 reduction in
goodwill. The Company evaluates, on a regular basis, whether events and
circumstances have occurred that indicate the carrying amount of
F-7
<PAGE> 52
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
goodwill may warrant revision or may not be recoverable. At January 31, 1997,
the net unamortized balance of goodwill is not considered to be impaired.
CAPITALIZED DEFERRED SOFTWARE COSTS
Deferred software costs are included in other assets and represent internal
development costs and payments to vendors for the design, purchase and
implementation of the computer software for the Company's operating and
financial systems. Such deferred costs are being amortized over three to seven
years with amortization expense of $4,611,000, $4,253,000 and $329,000 in 1997,
1996 and 1995, respectively. The accumulated amortization of such costs was
$9,193,000 and $4,582,000 at January 31, 1997 and 1996, respectively.
PRODUCT WARRANTY
The Company does not offer warranty coverage. However, to maintain customer
goodwill, the Company facilitates vendor warranty policies by accepting for
exchange (with the Company's prior approval) defective products within 60 days
of invoicing. Defective products received by the Company are subsequently
returned to the vendor for credit or replacement.
INCOME TAXES
Income taxes are accounted for under the liability method. Deferred taxes
reflect the tax consequences on future years of differences between the tax
bases of assets and liabilities and their financial reporting amounts.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of foreign operations are translated at the
exchange rates in effect at the balance sheet date, with the related translation
gains or losses reported as a separate component of shareholders' equity. The
results of foreign operations are translated at the weighted average exchange
rates for the year. Gains or losses resulting from foreign currency transactions
are included in the statement of income.
CONCENTRATION OF CREDIT RISK
The Company sells its products to a large base of value-added resellers
("VARs"), corporate resellers and retailers throughout the United
States,France,Canada, Latin America and the Caribbean. The Company performs
ongoing credit evaluations of its customers and generally does not require
collateral. The Company makes provisions for estimated credit losses at the time
of sale.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments that are subject to fair value disclosure
requirements are carried in the consolidated financial statements at amounts
that approximate fair value.
NET INCOME PER COMMON SHARE
Net income per common share is based on the weighted average number of
shares of common stock and common stock equivalents outstanding during each
period. Fully diluted and primary earnings per share are the same amounts for
each of the periods presented.
F-8
<PAGE> 53
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CASH MANAGEMENT SYSTEM
Under the Company's cash management system, disbursements cleared by the
bank are reimbursed on a daily basis from the revolving credit loans. As a
result, checks issued but not yet presented to the bank are not considered
reductions of cash or accounts payable. Included in accounts payable are
$111,826,000 and $69,789,000 at January 31, 1997 and 1996, respectively, for
which checks are outstanding.
STATEMENT OF CASH FLOWS
Short-term investments which have an original maturity of ninety days or
less are considered cash equivalents in the statement of cash flows. The effect
of changes in foreign exchange rates on cash balances is not material. See Note
9 of Notes to Consolidated Financial Statements regarding the non-cash exchange
of common stock in connection with a business combination.
FISCAL YEAR
The Company and its subsidiaries operate on a fiscal year that ends on
January 31, except for the Company's French subsidiary which operates on a
fiscal year that ends on December 31.
INTERIM FINANCIAL DATA
The interim financial data at July 31, 1997 and for the six months ended
July 31, 1996 and 1997 are unaudited; however, in the opinion of management,
such interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results of the interim
periods.
NOTE 2 -- PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
JANUARY 31,
-------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 3,898 $ 3,898
Buildings and improvements.................................. 27,802 29,155
Furniture, fixtures and equipment........................... 58,721 75,982
Construction in progress.................................... 1,778 629
-------- --------
92,199 109,664
Less -- accumulated depreciation............................ (30,589) (44,067)
-------- --------
$ 61,610 $ 65,597
======== ========
</TABLE>
NOTE 3 -- REVOLVING CREDIT LOANS:
The Company has an agreement (the "Receivables Securitization Program")
with a financial institution that allows the Company to transfer an undivided
interest in a designated pool of accounts receivable on an ongoing basis to
provide borrowings up to a maximum of $300,000,000 (increased from $250,000,000
in January 1997 and subsequently increased to $325,000,000 in February 1997). As
collections reduce accounts receivable balances included in the pool, the
Company may transfer interests in new receivables to bring the amount available
to be borrowed up to the $300,000,000 maximum. The Company pays interest on
advances under the Receivables Securitization Program at a designated commercial
paper rate, plus an agreed-upon spread. At January 31, 1997, the Company had a
$215,000,000 outstanding balance under this program which is included in the
balance sheet caption "Revolving Credit Loans". This agreement expires December
31, 1997.
F-9
<PAGE> 54
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1996, the Company entered into a new three-year unsecured $290
million multi-currency revolving credit facility replacing its former domestic,
French and Canadian credit agreements. The Company and its wholly-owned
subsidiaries are able to borrow funds in sixteen major foreign currencies under
this agreement.
As of January 31, 1997, the Company maintained domestic and foreign
revolving credit loan agreements (including the Receivables Securitization
Program) with a total of twelve financial institutions which provide for maximum
short-term borrowings of approximately $600,000,000 ($625,000,000 as of February
28, 1997). At January 31, 1997, the weighted average interest rate on all
short-term borrowings was 5.37%. The Company can fix the interest rate for
periods of 30 to 180 days under various interest rate options. The credit
agreements contain warranties and covenants that must be complied with on a
continuing basis, including the maintenance of certain financial ratios. At
January 31, 1997, the Company was in compliance with all such covenants. See
Note 12 of Notes to Consolidated Financial Statements.
NOTE 4 -- LONG-TERM DEBT:
<TABLE>
<CAPTION>
JANUARY 31,
---------------
1996 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Mortgage note payable, interest at 10.25%, principal and
interest of $85,130 payable monthly, balloon payment due
2005...................................................... $9,005 $8,902
Mortgage note payable funded through Industrial Revenue
Bond, interest at 7.3%, principal and interest payable
quarterly, through 1999................................... 282 195
Other note payable.......................................... 329
------ ------
9,616 9,097
Less -- current maturities.................................. (519) (201)
------ ------
$9,097 $8,896
====== ======
</TABLE>
Principal maturities of long-term debt at January 31, 1997 for the
succeeding five fiscal years are as follows: 1998 -- $201,000; 1999 -- $213,000;
2000 -- $162,000; 2001 -- $155,000; 2002 -- $172,000.
Mortgage notes payable are secured by property and equipment with an
original cost of approximately $12,000,000. The Industrial Revenue Bond contains
covenants which require the Company to maintain certain financial ratios with
which the Company was in compliance at January 31, 1997.
F-10
<PAGE> 55
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- INCOME TAXES (IN THOUSANDS):
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
JANUARY 31,
-----------------
1996 1997
------- -------
<S> <C> <C>
Deferred tax liabilities:
Accelerated depreciation.................................. $ 4,046 $ 6,863
Deferred revenue.......................................... 3,164 2,811
Other -- net.............................................. 1,378 3,525
------- -------
Total deferred tax liabilities..................... 8,588 13,199
------- -------
Deferred tax assets:
Accruals not currently deductible......................... 2,947 5,092
Reserves not currently deductible......................... 14,774 21,340
Capitalized inventory costs............................... 1,144 2,220
Other -- net.............................................. 338 213
------- -------
Total deferred tax assets.......................... 19,203 28,865
------- -------
Net deferred tax assets (included in prepaid and other
assets)................................................... $10,615 $15,666
======= =======
</TABLE>
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
---------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Current:
Federal................................................... $19,670 $15,107 $32,485
State..................................................... 3,748 2,932 5,897
Foreign................................................... 985 1,541 3,185
------- ------- -------
Total current...................................... 24,403 19,580 41,567
------- ------- -------
Deferred:
Federal................................................... (1,677) (4,656) (3,490)
State..................................................... (62) (625) (451)
Foreign................................................... (322) (1,110)
------- ------- -------
Total deferred..................................... (1,739) (5,603) (5,051)
------- ------- -------
$22,664 $13,977 $36,516
======= ======= =======
</TABLE>
The reconciliation of income tax attributable to continuing operations
computed at the U.S. federal statutory tax rates to income tax expense is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Tax at U.S. statutory rates................................. 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit.............. 4.2 4.2 3.8
Other -- net................................................ .2 .2 .3
---- ---- ----
39.4% 39.4% 39.1%
==== ==== ====
</TABLE>
F-11
<PAGE> 56
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of pretax earnings are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
---------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
United States........................................... $55,155 $33,164 $88,536
Foreign................................................. 2,421 2,354 4,953
------- ------- -------
$57,576 $35,518 $93,489
======= ======= =======
</TABLE>
NOTE 6 -- EMPLOYEE BENEFIT PLANS:
STOCK COMPENSATION PLANS
At January 31, 1997, the Company had four stock-based compensation plans,
an employee stock ownership plan and a retirement savings plan, which are
described below. The Company applies APB Opinion 25 and related Interpretations
in accounting for its plans. Accordingly, no compensation cost has been
recognized for its fixed stock option plans and its stock purchase plan.
FIXED STOCK OPTION PLANS
In August 1985, the Board of Directors adopted the 1985 Incentive Stock
Option Plan (the "1985 Plan"), which covers an aggregate of 1,050,000 shares of
common stock. The options were granted to certain officers and key employees at
or above fair market value; accordingly, no compensation expense has been
recorded with respect to these options. Options are exercisable beginning two
years from the date of grant only if the grantee is an employee of the Company
at that time. No options may be granted under the 1985 Plan after July 31, 1995.
In June 1990, the shareholders approved the 1990 Incentive and
Non-Statutory Stock Option Plan (the "1990 Plan") which covers an aggregate of
5,000,000 shares (as amended in June 1994) of common stock. The 1990 Plan
provides for the granting of incentive and non-statutory stock options, stock
appreciation rights ("SARs") and limited stock appreciation rights ("Limited
SARs") at prices determined by the stock option committee, except for incentive
stock options which are granted at the fair market value of the stock on the
date of grant. Incentive options granted under the 1990 Plan become exercisable
over a five year period while the date of exercise of non-statutory options is
determined by the stock option committee. As of January 31, 1997, no SARs or
Limited SARs had been granted under the 1990 Plan. Options granted under the
1985 Plan and the 1990 Plan expire 10 years from the date of grant, unless a
shorter period is specified by the stock option committee.
In June 1995, the shareholders approved the 1995 Non-Employee Director's
Non-Statutory Stock Option Plan. Under this plan, the Company grants
non-employee members of its Board of Directors stock options upon their initial
appointment to the board and then annually each year thereafter. Stock options
granted to members upon their initial appointment vest and become exercisable at
a rate of 20% per year. Annual awards vest and become exercisable one year from
the date of grant. The number of shares subject to options under this plan
cannot exceed 100,000 and the options expire 10 years from the date of grant.
F-12
<PAGE> 57
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the status of the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31, JANUARY 31,
1995 1996 1997
-------------------- --------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year... 1,515,956 $11.02 2,644,056 $15.62 3,081,110 $13.31
Granted............... 1,372,500 19.94 1,683,450 12.91 1,112,000 16.27
Exercised............. (116,900) 5.83 (79,800) 8.53 (675,492) 13.11
Canceled.............. (127,500) 15.02 (1,166,596) 18.45 (231,800) 13.72
--------- ---------- ---------
Outstanding at year
end................. 2,644,056 15.62 3,081,110 13.31 3,285,818 14.31
========= ========== =========
Options exercisable at
year end............ 180,660 494,460 576,862
Available for grant at
year end............ 2,351,000 1,785,000 905,000
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------- ----------------------------
WEIGHTED AVERAGE
NUMBER REMAINING WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING CONTRACTUAL LIFE AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES AT 1/31/97 (YEARS) EXERCISE PRICE AT 1/31/97 EXERCISE PRICE
--------------- ----------- ------------------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 1.50-$10.00........ 139,500 4.9 $ 7.38 84,700 $ 6.31
11.00- 15.00........ 2,644,150 8.3 13.23 406,800 13.30
16.00- 30.00........ 502,168 8.2 21.83 85,362 20.19
--------- -------
3,285,818 8.2 14.31 576,862 13.29
========= =======
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
Under the 1995 Employee Stock Purchase Plan, approved in June 1995, the
Company is authorized to issue up to 1,000,000 shares of common stock to
eligible employees. Under the terms of the plan, employees can choose to have a
fixed dollar amount deducted from their compensation to purchase the Company's
common stock and/or elect to purchase shares once per calendar quarter. The
purchase price of the stock is 85% of the market value on the exercise date and
employees are limited to a maximum purchase of $25,000 fair market value each
calendar year. Since plan inception, the Company has sold 88,253 shares. All
shares purchased under this plan must be retained for a period of one year.
PRO FORMA EFFECT OF STOCK COMPENSATION PLANS
Had the compensation cost for the Company's stock option plans and employee
stock purchase plan been determined based on the fair value at the grant dates
for awards under the plans consistent with the method prescribed by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", the Company's net income and net income per common share on a pro
forma basis would have been (in thousands, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------
1996 1997
--------- ---------
<S> <C> <C>
Net income.................................................. $19,937 $55,059
Net income per common share................................. $ .52 $ 1.31
</TABLE>
F-13
<PAGE> 58
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The preceding pro forma results were calculated with the use of the Black
Scholes option-pricing model. The following assumptions were used for the years
ended January 31, 1997 and 1996, respectively: (1) risk-free interest rates of
6.08% and 6.96%; (2) dividend yield of 0.0% and 0.0%; (3) expected lives of 5.08
and 5.08 years; and (4) volatility of 56% and 39%. Results may vary depending on
the assumptions applied within the model.
STOCK OWNERSHIP AND RETIREMENT SAVINGS PLANS
In February 1984, the Company established an employee stock ownership plan
(the "ESOP") covering substantially all U.S. employees. The ESOP provides for
distribution of vested percentages of the Company's common stock to
participants. Such benefit becomes fully vested after seven years of qualified
service. The Company also offers its U.S. employees a retirement savings plan
pursuant to section 401(k) of the Internal Revenue Code which provides for the
Company to match 50% of the first $1,000 of each participant's deferrals
annually. Contributions to these plans are made in amounts approved annually by
the Board of Directors. Aggregate contributions made by the Company to these
plans were $2,090,000, $1,659,000 and $1,268,000 for 1997, 1996 and 1995,
respectively.
NOTE 7 -- CAPITAL STOCK:
Each outstanding share of preferred stock is entitled to one vote on all
matters submitted to a vote of shareholders, except for matters involving
mergers, the sale of all Company assets, amendments to the Company's charter and
exchanges of Company stock for stock of another company which require approval
by a majority of each class of capital stock. In such matters, the preferred and
common shareholders will each vote as a separate class.
In July 1996, the Company completed a public offering of 4,600,000 shares
of common stock resulting in net proceeds to the Company of approximately
$83,316,000.
NOTE 8 -- COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company leases distribution facilities and certain equipment under
noncancelable operating leases which expire at various dates through 2005.
Future minimum lease payments under all such leases for the succeeding five
fiscal years are as follows: 1998 -- $9,036,000; 1999 -- $9,502,000; 2000 --
$8,824,000; 2001 -- $8,364,000; 2002 -- $3,795,000 and $4,596,000 thereafter.
Rental expense for all operating leases amounted to $10,160,000, $7,547,000 and
$6,500,000 in 1997, 1996 and 1995, respectively.
NOTE 9 -- ACQUISITIONS:
On March 24, 1994 the Company completed the non-cash exchange of 1,144,000
shares of its common stock for all of the outstanding capital stock of Softmart
International, S.A. (subsequently named Tech Data France, SNC), a privately-held
distributor of microcomputer products based in Paris, France. The acquisition
was accounted for as a pooling-of-interests effective February 1, 1994, however,
due to the immaterial size of the acquisition in relation to the consolidated
financial statements, prior period financial statements were not restated. In
connection with the issuance of the 1,144,000 shares of common stock, the
Company recorded an adjustment of $9,681,000 to beginning retained earnings.
NOTE 10 -- SEGMENT INFORMATION:
The Company is engaged in one business segment, the wholesale distribution
of microcomputer hardware and software products. The geographic areas in which
the Company operates are the United
F-14
<PAGE> 59
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
States (United States including exports to Latin America and the Caribbean) and
International (France and Canada). The geographical distribution of net sales,
operating income and identifiable assets are as follows (in thousands):
<TABLE>
<CAPTION>
UNITED STATES INTERNATIONAL ELIMINATIONS CONSOLIDATED
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
FISCAL YEAR 1995
- -------------------
Net sales to unaffiliated
customers.......................... $2,104,637 $313,773 $ -- $2,418,410
========== ======== ======= ==========
Operating income..................... $ 65,349 $ 5,988 $ -- $ 71,337
========== ======== ======= ==========
Identifiable assets.................. $ 677,910 $109,703 $(3,184) $ 784,429
========== ======== ======= ==========
FISCAL YEAR 1996
- -------------------
Net sales to unaffiliated
customers.......................... $2,654,750 $431,870 $ -- $3,086,620
========== ======== ======= ==========
Operating income..................... $ 48,419 $ 7,185 $ -- $ 55,604
========== ======== ======= ==========
Identifiable assets.................. $ 868,910 $174,969 $ -- $1,043,879
========== ======== ======= ==========
FISCAL YEAR 1997
- -------------------
Net sales to unaffiliated
customers.......................... $4,009,924 $589,017 $ -- $4,598,941
========== ======== ======= ==========
Operating income..................... $ 105,330 $ 9,681 $ -- $ 115,011
========== ======== ======= ==========
Identifiable assets.................. $1,327,156 $218,138 $ -- $1,545,294
========== ======== ======= ==========
</TABLE>
NOTE 11 -- UNAUDITED INTERIM FINANCIAL INFORMATION:
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------
APRIL 30 JULY 31 OCTOBER 31 JANUARY 31
-------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
FISCAL YEAR 1996
- -------------------
Net sales............................ $633,460 $ 708,836 $ 843,286 $ 901,038
Gross profit......................... 46,216 50,113 58,685 64,380
Net income........................... 1,849 3,448 7,042 9,202
Net income per common share.......... .05 .09 .18 .24
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------
APRIL 30 JULY 31 OCTOBER 31 JANUARY 31
-------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
FISCAL YEAR 1997
- -------------------
Net sales............................ $985,574 $1,063,228 $1,236,650 $1,313,489
Gross profit......................... 69,012 74,302 85,955 92,512
Net income........................... 10,428 12,016 16,748 17,781
Net income per common share.......... .27 .30 .38 .40
</TABLE>
NOTE 12 -- UNAUDITED SUBSEQUENT EVENTS:
ACQUISITION
On July 1, 1997 the Company acquired approximately 77% of the voting common
stock and 7% of the non-voting preferred stock of Macrotron AG ("Macrotron"), a
leading publicly held distributor of personal computer products based in Munich,
Germany. The initial acquisition was completed through an exchange of
approximately $26,000,000 in cash and 406,586 shares of the Company's common
stock,
F-15
<PAGE> 60
TECH DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
for a combined total value of $35,000,000. On July 10, 1997, the Company
commenced a tender offer for the remaining shares of Macrotron common and
preferred stock at a price per share of DM730 and DM600, respectively. As of
July 31, 1997, the Company owned or had under option approximately 94% and 18%
of Macrotron's common and preferred stock, respectively. The tender offer period
ended on September 5, 1997. The cash portion of the initial acquisition and the
related tender offer were funded from the Company's revolving credit loan
agreements.
The acquisition of Macrotron will be accounted for under the purchase
method. Consistent with the Company's accounting policy for foreign
subsidiaries, Macrotron's operations will be consolidated into the Company's
consolidated financial statements on a calendar year basis. Consequently, the
Company's fiscal quarter ending October 31, 1997 will include Macrotron's
operations for the three month period beginning July 1, 1997 and ending
September 30, 1997.
The following pro forma unaudited results of operations reflects the effect
on the Company's operations, as if the above described acquisition had occurred
at the beginning of each of the periods presented below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
Net sales................................................... $2,465,276 $3,489,199
Net income.................................................. $ 22,926 $ 40,759
Net income per common share................................. $ .58 $ .90
</TABLE>
The unaudited pro forma information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have
occurred had the Macrotron acquisition been consummated as of the beginning of
the periods above, nor are they necessarily indicative of future operating
results.
REVOLVING CREDIT LOANS
In July 1997, the Company increased its accounts receivable securitization
program from $325,000,000 to $400,000,000 and on August 28, 1997 entered into a
new $550,000,000 three-year multi-currency revolving credit loan agreement with
twenty banks. The Company currently maintains domestic and foreign revolving
credit agreements which provide maximum short-term borrowings of approximately
$980,000,000 (including local country credit lines), of which $416,000,000 was
outstanding at July 31, 1997.
CAPITAL STOCK
At the June 10, 1997 Annual Meeting of Shareholders, a proposal to increase
the Company's authorized common stock from 100,000,000 shares to 200,000,000 was
approved.
F-16
<PAGE> 61
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of such Underwriters named
below, and each of the Underwriters has severally agreed to purchase, the
principal amount of the Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
CONVERTIBLE
UNDERWRITER NOTES
----------- ------------
<S> <C>
Goldman, Sachs & Co. .....................................
Bear, Stearns & Co. Inc. .................................
The Robinson-Humphrey Company, LLC .......................
NationsBanc Montgomery Securities, Inc....................
------------
Total........................................... $175,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus and in part to certain securities dealers at such price less a
concession of % of the principal amount of the Notes. The Underwriters may
allow, and such dealers may reallow, a concession not to exceed % of the
principal amount of the Notes to certain brokers and dealers. After the Notes
are released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Underwriters.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of $26,250,000
principal amount of Notes solely to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the principal amount of the Notes to be purchased
by each of them, as shown in the foregoing table, bears to the $175,000,000
principal amount of Notes offered. The consummation of the Notes Offering and
the Common Stock Offerings are not conditioned upon each other.
The Company has agreed that, during the period beginning from the date of
this Prospectus and continuing to and including the date 90 days after the date
of this Prospectus, it will not offer, sell, contract to sell or otherwise
dispose of any securities of the Company (other than pursuant to employee stock
option plans existing, or on the conversion or exchange of convertible or
exchangeable securities outstanding, on the date of this Prospectus) which are
substantially similar to the shares of the Common Stock or which are convertible
or exchangeable into securities which are substantially similar to the shares of
the Common Stock without the prior written consent of the Underwriters, except
for the shares of Common Stock offered in connection with the concurrent U.S.
and international Common Stock Offerings, and the shares of Common Stock
issuable upon conversion of the Notes offered hereby.
In connection with the Notes Offering and the Common Stock Offerings, the
Underwriters may purchase and sell the Notes and the Common Stock in the open
market. These transactions may include over-allotment and stabilizing
transactions, "passive" market making (see below) and purchases to cover short
positions created by the Underwriters in connection with the Notes Offering or
by the syndicate in the Common Stock Offerings. Stabilizing transactions consist
of certain bids or purchases for the purpose of preventing or retarding a
decline in the market price of the Notes or the Common Stock, and short
positions involve the sale by the Underwriters or the syndicate, as the case may
be, of a greater number of Notes or shares of Common Stock than they are
required to purchase from the Company in the Notes Offering or the Common Stock
Offerings, respectively. The Underwriters also may impose a penalty bid, whereby
selling concessions allowed to syndicate members or other broker-dealers in
respect of the Notes or Common Stock sold in the Notes Offering and the Common
Stock Offerings, respectively, may be reclaimed by the syndicate or the
Underwriters if such Notes or Common Stock are repurchased by
U-1
<PAGE> 62
the Underwriters or syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Notes or Common Stock, which may be higher than the price that might otherwise
prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on The Nasdaq
National Market, in the over-the-counter market or otherwise.
As permitted by Rule 103 under the Exchange Act, certain Underwriters (and
selling group members, if any) that are market makers ("passive market makers")
in the Common Stock may make bids for or purchases of the Common Stock in The
Nasdaq National Market until such time, if any, when a stabilizing bid for such
securities has been made. Rule 103 generally provides that (1) a passive market
maker's net daily purchases of the Common Stock may not exceed 30% of its
average daily trading volume in such securities for the two full consecutive
calendar months (or any 60 consecutive days ending within the 10 days)
immediately preceding the filing date of the registration statement of which
this Prospectus forms a part, (2) a passive market maker may not effect
transactions or display bids for the Common Stock at a price that exceeds the
highest independent bid for the Common Stock by persons who are not passive
market makers and (3) bids made by passive market makers must be identified as
such.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that they intend to make a
market in the Notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the Notes.
An affiliate of NationsBanc Montgomery Securities, Inc. provides certain
commercial banking services to the Company.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act. In
addition, the Underwriters have agreed to reimburse the Company for certain
expenses associated with the Notes Offering and the Common Stock Offerings.
U-2
<PAGE> 63
==========================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 7
Use of Proceeds.......................... 11
Concurrent Common Stock Offerings........ 11
Price Range of Common Stock.............. 12
Dividend Policy.......................... 12
Capitalization........................... 13
Selected Consolidated Financial Data..... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 15
Business................................. 21
Management............................... 26
Description of Capital Stock............. 28
Description of Notes..................... 30
Certain Federal Income Tax
Considerations......................... 40
Available Information.................... 42
Incorporation of Certain Documents by
Reference.............................. 42
Validity of the Securities............... 43
Experts.................................. 43
Index to Consolidated Financial
Statements............................. F-1
Underwriting............................. U-1
</TABLE>
==========================================================
==========================================================
$175,000,000
[TECH DATA LOGO]
% CONVERTIBLE
SUBORDINATED NOTES
DUE , 2002
-----------------------
PROSPECTUS
-----------------------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
THE ROBINSON-HUMPHREY COMPANY
NATIONSBANC MONTGOMERY
SECURITIES, INC.
==========================================================
<PAGE> 64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 60,985
NASD Filing Fee............................................. 20,625
Printing and Engraving...................................... 75,000
Fees of Trustee............................................. 10,000
Accountants Fees and Expenses............................... 15,000
Legal Fees and Expenses of Registrant's Counsel............. 30,000
Rating Agencies............................................. 175,000
Blue Sky Fees and Expenses.................................. 6,000
Miscellaneous............................................... 82,390
--------
Total............................................. $475,000
========
</TABLE>
Except for SEC registration fee and NASD filing fee, the foregoing fees are
estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's By-Laws include the following provisions:
ARTICLE NINE
INDEMNIFICATION
"9.1 Under the circumstances prescribed in Section 9.3 and 9.4, the
Corporation shall indemnify and hold harmless any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the Corporation) by reason of the fact that he is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (include
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the
person did not act in a manner which he reasonably believed to be in or not
opposed to the best interest of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that this
conduct was unlawful.
9.2 Under the circumstances prescribed in Section 9.3 and 9.4, the
Corporation shall indemnify and hold harmless any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action
if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be
II-1
<PAGE> 65
liable for negligence or misconduct in the performance of his duty to the
Corporation, unless and only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the
case, such person if fairly and reasonably entitled to indemnity for such
expenses that the court shall deem proper.
9.3 To the extent that a Director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections 9.1 and 9.2, or in
defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
9.4 Except as provided in Section 9.3 and except as may be ordered by
a court, any indemnification under Sections 9.1 and 9.2 shall be made by
the Corporation only as authorized in the specific case upon a
determination that indemnification of the Director, officer, employee or
agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in Sections 9.1 and 9.2. Such a determination
shall be made (1) by the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, or (3) by the affirmative vote of a
majority of the shares entitled to vote thereon owned by persons who were
not parties to such action, suit or proceeding.
9.5 Expenses, including attorneys' fees, incurred in defending a
civil or criminal action, suit, or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit, or
proceeding upon a preliminary determination following one of the procedures
set forth in Section 9.4 that the Director, officer, employee or agent met
the applicable standard of conduct set forth in Section 9.1 or Section 9.2
or as authorized by the Board of Directors in the specific case and, in
either event, upon receipt of an undertaking by or on behalf of the
Director, officer, employee, or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Section.
9.6 The Corporation shall have the power to make any other or further
indemnification of any of its Directors, officers employees, or agents,
under any By-Law, agreement, vote of shareholders or disinterested
Directors, or otherwise, both as to action in his official capacity and as
to action in another capacity while holding such office, except an
indemnification against gross negligence or willful misconduct.
9.7 The indemnification provided by this Article Nine shall continue
as to a person who has ceased to be a Director, employee or agent and shall
inure to the benefit of the heirs, executors or administrators of such a
person.
9.8 The Corporation may purchase and maintain insurance on behalf of
any person who is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted
against himself and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article
Nine.
9.9 If any expenses or other amounts are paid by way of
indemnification, otherwise than by court order or action by the shareholder
or by an insurance carrier pursuant to insurance maintained by the
Corporation, the Corporation shall, no later than the next annual meeting
of shareholders unless such a meeting is held within three months from the
date of such payment, and, in any event, within 15 months from the date of
such payment, deliver personally or send by first class mail to its
shareholders of record at the time entitled to vote for the election of
Directors a statement specifying the persons paid, the amounts paid, and
the nature and status at the time of such payment of the litigation or
threatened litigation."
II-2
<PAGE> 66
Chapter 607 of the General Statutes of the State of Florida permits a
corporation to indemnify its officers and directors against certain liabilities
and provides for the conditions thereof.
Reference is made to the Underwriting Agreement filed as part of Exhibit 1
to this Registration Statement, which contains provisions pursuant to which each
Underwriter agrees to indemnify the Company, each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act of 1933, as
amended, each director of the Company and each officer of the Company who signs
this Registration Statement against losses, liabilities, and reasonable
expenses, including attorneys' fees, arising out of claims under the Securities
Act of 1933 based upon material misstatements or omissions of material facts in
any Preliminary Prospectus, the Prospectus, or this Registration Statement, but
only to the extent that such misstatement or omission was made in any
Preliminary Prospectus, the Prospectus, or this Registration Statement in
reliance upon and in conformity with written information furnished to the
Company by the Underwriters expressly for use therein.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company, the Company has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company undertakes, unless in the opinion of
its counsel the matter has been settled by controlling precedent, to submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and agrees to be governed by
the final adjudication of such issue.
ITEM 16. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES
(a) The exhibit numbers on the following list correspond to the numbers in
the exhibit table required pursuant to Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------
<S> <C> <C>
1** -- Form of Underwriting Agreement.
4-A(1) -- Articles of Incorporation of the Company as amended to April
23, 1986.
4-B(2) -- Articles of Amendment to Articles of Incorporation of the
Company filed on August 27, 1987.
4-C(3) -- By-laws of the Company as amended to November 28, 1995.
4-D(4) -- Articles of Amendment to Articles of Incorporation of the
Company filed on July 15, 1993.
4-E(5) -- Articles of Amendment to Articles of Incorporation of the
Company filed on June 25, 1997.
4-F* -- Trust Indenture relating to the % Convertible Subordinated
Notes.
5* -- Opinion of Schifino & Fleischer, P.A.
10-TT(5) -- Amendment Number 2 to Amended and Restated Transfer and
Administration Agreement dated July 29, 1997.
10-UU(5) -- Revolving Credit and Reimbursement Agreement dated August
28, 1997.
23-A* -- Consent of Schifino & Fleischer, P.A., as (Included in
Exhibit 5).
23-B* -- Consent of Price Waterhouse LLP.
24** -- Power of Attorney.
25* -- Statement of eligibility of trustee.
</TABLE>
II-3
<PAGE> 67
- ---------------
* Filed herewith.
** Previously filed.
(1) Incorporated by reference to the Exhibits included in the Company's
Registration Statement on Form S-1, File No. 33-4135.
(2) Incorporated by reference to the Exhibits included in the Company's
Registration Statement on Form S-1, File No. 33-21997.
(3) Incorporated by reference to the Exhibits included in the Company's Form
10-K for the year ended January 31, 1996, File No. 0-14625.
(4) Incorporated by reference to the Exhibits included in the Company's Form
10-K for the year ended January 31, 1994, File No. 0-14625.
(5) Incorporated by reference to the Exhibits included in the Company's
Registration Statement on Form S-3, File No. 333-36999.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
II-4
<PAGE> 68
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to provide the Underwriters at
the closing specified in the underwriting documents, certificates in such
denominations and registered in such names are required by the Underwriters to
permit prompt delivery to each purchaser.
II-5
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Clearwater, State of Florida, on
October 29th, 1997.
TECH DATA CORPORATION
By: /s/ STEVEN A. RAYMUND
------------------------------------
Steven A. Raymund,
Chairman of the Board of Directors;
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ STEVEN A. RAYMUND Chairman of the Board of October 29, 1997
- ----------------------------------------------------- Directors; Chief Executive
Steven A. Raymund Officer
/s/ JEFFERY P. HOWELLS Executive Vice President of October 29, 1997
- ----------------------------------------------------- Finance and Chief Financial
Jeffery P. Howells Officer; (principal
financial officer)
* Vice President and Worldwide October 29, 1997
- ----------------------------------------------------- Controller; (principal
Joseph B. Trepani accounting officer)
* Director October 29, 1997
- -----------------------------------------------------
Charles E. Adair
* Director October 29, 1997
- -----------------------------------------------------
Daniel M. Doyle
* Director October 29, 1997
- -----------------------------------------------------
Donald F. Dunn
* Director; Chairman Emeritus October 29, 1997
- -----------------------------------------------------
Edward C. Raymund
* Director October 29, 1997
- -----------------------------------------------------
John Y. Williams
*By: /s/ JEFFERY P. HOWELLS October 29, 1997
------------------------------------------------
Jeffery P. Howells
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 1
EXHIBIT 4-F
-----------------------------------------------------------------------
TECH DATA CORPORATION
as Issuer
TO
BANKERS TRUST COMPANY,
as Trustee
----------------
Indenture
Dated as of October [ ,] 1997
----------------
$ 201,250,000
[ ]% Convertible Subordinated Notes
due [ ,] 2002
-----------------------------------------------------------------------
<PAGE> 2
TECH DATA CORPORATION
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO
SECTIONS 310 THROUGH 318, INCLUSIVE, OF THE
TRUST INDENTURE ACT OF 1939:
<TABLE>
<CAPTION>
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
<S> <C>
ss. 310(a)(1) ............................................. 6.9
(a)(2) ............................................. 6.9
(a)(3) ............................................. Not Applicable
(a)(4) ............................................. Not Applicable
(b) ............................................. 6.8
6.10
ss. 311(a) ............................................. 6.13
(b) ............................................. 6.13
ss. 312(a) ............................................. 7.1
7.2
(b) ............................................. 7.2
(c) ............................................. 7.2
ss. 313(a) ............................................. 7.3
(b) ............................................. 7.3
(c) ............................................. 7.3
(d) ............................................. 7.3
ss. 314(a) ............................................. 7.4
(a)(4) ............................................. 1.1
10.4
(b) ............................................. Not Applicable
(c)(1) ............................................. 1.2
(c)(2) ............................................. 1.2
(c)(3) ............................................. Not Applicable
(d) ............................................. Not Applicable
(e) ............................................. 1.2
ss. 315(a) ............................................. 6.1
(b) ............................................. 6.2
(c) ............................................. 6.1
(d) ............................................. 6.1
(e) ............................................. 5.14
ss. 316(a) ............................................. 1.1
(a)(1)(A) ............................................. 5.2
5.12
(a)(1)(B) ............................................. 5.13
(a)(2) ............................................. Not Applicable
(b) ............................................. 5.8
(c) ............................................. 1.4
ss. 317(a)(1) ............................................. 5.3
(a)(2) ............................................. 5.4
(b) ............................................. 10.3
ss. 318(a) ............................................. 1.7
</TABLE>
- -------------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
-----------
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS OF THE COMPANY..........................................6
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1. Definitions........................................2
Act ...............................................2
Affiliate...............................................2
Agent Member............................................2
Applicable Procedures...................................2
Authenticating Agent....................................2
Board of Directors......................................2
Board Resolution........................................2
Business Day............................................2
Cash Distribution.......................................3
Change of Control.......................................3
Closing Price...........................................3
Commission..............................................3
Common Stock............................................3
common stock............................................3
Company ...............................................3
Company Notice..........................................4
Company Request" or "Company Order......................4
Constituent Person......................................4
Conversion Rate.........................................4
Corporate Trust Office..................................4
Corporation.............................................4
Defaulted Interest......................................4
Depositary..............................................4
Determination Date......................................4
Dollar" or "U.S.$.......................................4
DTC ...............................................4
Event of Default........................................4
Exchange Act............................................4
Excess Purchase Payment.................................4
Expiration Date.........................................5
Global Security.........................................5
Holder ...............................................5
</TABLE>
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
i--
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Indenture................................................5
Interest Payment Date....................................5
Market Capitalization....................................5
Maturity ................................................5
Non-electing Share.......................................5
Officers' Certificate....................................5
Opinion of Counsel.......................................5
Outstanding..............................................5
Paying Agent.............................................6
Person ................................................6
Predecessor Security.....................................6
Record Date..............................................6
Record Date Period.......................................6
Redemption Date..........................................7
Redemption Price.........................................7
Regular Record Date......................................7
Repurchase Date..........................................7
Repurchase Price.........................................7
Responsible Officer......................................7
Securities...............................................7
Securities Act...........................................7
Security Register" and "Security Registrar...............7
Senior Debt..............................................7
Special Record Date......................................8
Stated Maturity..........................................8
Subsidiary...............................................8
Successor Security.......................................8
Trading Day..............................................8
Trust Indenture Act......................................9
Trustee ................................................9
Vice President...........................................9
SECTION 1.2. Compliance Certificates and Opinions................9
SECTION 1.3. Form of Documents Delivered to the Trustee..........9
SECTION 1.4. Acts of Holders of Securities......................10
SECTION 1.5. Notices, Etc., to Trustee and Company..............12
SECTION 1.6. Notice to Holders of Securities; Waiver............12
SECTION 1.7. Effect of Headings and Table of Contents...........13
SECTION 1.8. Successors and Assigns.............................13
SECTION 1.9. Separability Clause................................13
SECTION 1.10. Benefits of Indenture.............................13
SECTION 1.11. Governing Law.....................................13
SECTION 1.12. Legal Holidays....................................13
SECTION 1.13. Conflict with Trust Indenture Act.................14
</TABLE>
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ARTICLE TWO
SECURITY FORMS
SECTION 2.1. Forms Generally.......................................14
SECTION 2.2. Forms of Securities...................................15
SECTION 2.3. Form of Trustee's Certificate of Authentication......22
SECTION 2.4. Form of Conversion Notice.............................23
ARTICLE THREE
THE SECURITIES
SECTION 3.1. Title and Terms.......................................24
SECTION 3.2. Denominations.........................................24
SECTION 3.3. Execution, Authentication, Delivery and Dating........24
SECTION 3.4. Temporary Securities..................................25
SECTION 3.5. Global Securities; Non-Global Securities..............25
SECTION 3.6. Registration, Registration of Transfer and Exchange...27
SECTION 3.7. Mutilated, Destroyed, Lost or Stolen Securities.......28
SECTION 3.8. Payment of Interest; Interest Rights Preserved........28
SECTION 3.9. Persons Deemed Owners.................................30
SECTION 3.10. Cancellation.........................................30
SECTION 3.11. Computation of Interest..............................30
SECTION 3.12. CUSIP and ISIN Numbers...............................30
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture...............31
SECTION 4.2. Application of Trust Money............................32
ARTICLE FIVE
REMEDIES
SECTION 5.1. Events of Default.....................................32
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment....34
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement
by Trustee......................................35
SECTION 5.4. Trustee May File Proofs of Claim......................35
SECTION 5.5. Trustee May Enforce Claims Without Possession
of Securities...................................36
SECTION 5.6. Application of Money Collected........................36
SECTION 5.7. Limitation on Suits...................................36
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SECTION 5.8. Unconditional Right of Holders to Receive
Principal, Premium and Interest and to Convert..37
SECTION 5.9. Restoration of Rights and Remedies....................37
SECTION 5.10. Rights and Remedies Cumulative.......................37
SECTION 5.11. Delay or Omission Not Waiver.........................38
SECTION 5.12. Control by Holders of Securities.....................38
SECTION 5.13. Waiver of Past Defaults..............................38
SECTION 5.14. Undertaking for Costs................................39
SECTION 5.15. Waiver of Stay, Usury or Extension Laws..............39
ARTICLE SIX
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities...................39
SECTION 6.2. Notice of Defaults....................................40
SECTION 6.3. Certain Rights of Trustee.............................40
SECTION 6.4. Not Responsible for Recitals or Issuance
of Securities...................................42
SECTION 6.5. May Hold Securities...................................42
SECTION 6.6. Money Held in Trust...................................42
SECTION 6.7. Compensation and Reimbursement........................42
SECTION 6.8. Disqualification; Conflicting Interests...............43
SECTION 6.9. Corporate Trustee Required; Eligibility...............43
SECTION 6.10. Resignation and Removal; Appointment of Successor....43
SECTION 6.11. Acceptance of Appointment by Successor...............44
SECTION 6.12. Merger, Conversion, Consolidation or Succession
to Business.....................................45
SECTION 6.13. Preferential Collection of Claims Against Company....45
SECTION 6.14. Appointment of Authenticating Agent..................45
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1. Company to Furnish Trustee Names and
Addresses of Holders............................47
SECTION 7.2. Preservation of Information; Communications
to Holders......................................47
SECTION 7.3. Reports by Trustee....................................48
SECTION 7.4. Reports by Company....................................48
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Company May Consolidate, Etc., Only
on Certain Terms................................48
SECTION 8.2. Successor Substituted.................................49
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures Without Consent
of Holders of Securities........................49
SECTION 9.2. Supplemental Indentures with Consent of
Holders of Securities...........................50
SECTION 9.3. Execution of Supplemental Indentures..................51
SECTION 9.4. Effect of Supplemental Indentures.....................51
SECTION 9.5. Conformity with Trust Indenture Act...................51
SECTION 9.6. Reference in Securities to Supplemental Indentures....51
ARTICLE TEN
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest...........52
SECTION 10.2. Maintenance of Office or Agency......................52
SECTION 10.3. Money for Security Payments to Be Held in Trust......52
SECTION 10.4. Statement by Officers as to Default..................53
SECTION 10.5. Existence............................................54
SECTION 10.6. Maintenance of Properties............................54
SECTION 10.7. Payment of Taxes and Other Claims....................54
SECTION 10.8. Registration and Listing.............................54
SECTION 10.9. Waiver of Certain Covenants..........................55
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 11.1. Right of Redemption..................................55
SECTION 11.2. Applicability of Article.............................55
SECTION 11.3. Election to Redeem; Notice to Trustee................55
SECTION 11.4. Selection by Trustee of Securities to Be Redeemed....56
SECTION 11.5. Notice of Redemption.................................56
SECTION 11.6. Deposit of Redemption Price..........................57
SECTION 11.7. Securities Payable on Redemption Date................57
SECTION 11.8. Securities Redeemed in Part..........................58
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ARTICLE TWELVE
CONVERSION OF SECURITIES
SECTION 12.1. Conversion Privilege and Conversion Rate............58
SECTION 12.2. Exercise of Conversion Privilege....................58
SECTION 12.3. Fractions of Shares.................................59
SECTION 12.4. Adjustment of Conversion Rate.......................60
SECTION 12.5. Notice of Adjustments of Conversion Rate............63
SECTION 12.6. Notice of Certain Corporate Action..................64
SECTION 12.7. Company to Reserve Common Stock.....................65
SECTION 12.8. Taxes on Conversions................................65
SECTION 12.9. Covenant as to Common Stock.........................65
SECTION 12.10. Cancellation of Converted Securities................65
SECTION 12.11. Provision in Case of Consolidation, Merger
or Sale of Assets...............................65
SECTION 12.12. Responsibility of Trustee for Conversion
Provisions......................................67
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
SECTION 13.1. Securities Subordinate to Senior Debt................67
SECTION 13.2. Payment Over of Proceeds Upon Dissolution, Etc.......67
SECTION 13.3. Prior Payment to Senior Debt Upon
Acceleration of Securities......................68
SECTION 13.4. No Payment When Senior Debt in Default...............69
SECTION 13.5. Payment Permitted If No Default......................69
SECTION 13.6. Subrogation to Rights of Holders of Senior Debt......70
SECTION 13.7. Provisions Solely to Define Relative Rights..........70
SECTION 13.8. Trustee to Effectuate Subordination..................70
SECTION 13.9. No Waiver of Subordination Provisions................70
SECTION 13.10. Notice to Trustee...................................71
SECTION 13.11. Reliance on Judicial Order or Certificate of
Liquidating Agent...............................72
SECTION 13.12. Trustee Not Fiduciary for Holders of Senior Debt....72
SECTION 13.13. Rights of Trustee as Holder of Senior Debt;
Preservation of Trustee's Rights................72
SECTION 13.14. Article Applicable to Paying Agents.................72
SECTION 13.15. Certain Conversions and Repurchases
Deemed Payment..................................73
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ARTICLE FOURTEEN
REPURCHASE OF SECURITIES AT THE OPTION OF THE
HOLDER UPON A CHANGE OF CONTROL
SECTION 14.1. Right to Require Repurchase.......................... 73
SECTION 14.2. Conditions to the Company's Election to Pay the
Repurchase Price in Common Stock............ 74
SECTION 14.3. Notices; Method of Exercising Repurchase Right, Etc.. 74
SECTION 14.4. Certain Definitions.................................. 77
</TABLE>
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of the Indenture.
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<PAGE> 10
INDENTURE, dated as of [October ,] 1997, between TECH DATA
CORPORATION, a corporation duly organized and existing under the laws of
Florida, having its principal executive office at 5350 Tech Data Drive,
Clearwater, Florida 37760 (herein called the "Company"), and BANKERS TRUST
COMPANY, a New York banking corporation, as Trustee hereunder (herein called
the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
its [ ]% Convertible Subordinated Notes due [ ,] 2002 (herein called the
"Securities") of substantially the tenor and amount hereinafter set forth, and
to provide therefor the Company has duly authorized the execution and delivery
of this Indenture.
All things necessary to make the Securities, when the
Securities are executed by the Company and authenticated and delivered
hereunder, 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. Further, all things necessary to duly authorize the issuance of the
Common Stock of the Company issuable upon the conversion of the Securities, and
to duly reserve for issuance the number of shares of Common Stock issuable upon
such conversion, 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 covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1. 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) unless the context otherwise requires, any reference to a
statute, rule or regulation refers to the same (including any successor
statute, rule or regulation thereto) as it may be amended from time to
time; and
<PAGE> 11
(4) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles in the United States, 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; 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.
"Act", when used with respect to any Holder of a Security, has
the meaning specified in Section 1.4.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"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 the Depositary for such Security, to the extent
applicable to such transaction and as in effect from time to time.
"Authenticating Agent" means any Person authorized 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 vote duly adopted by the Board of
Directors, a copy of which, 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, shall have been
delivered to the Trustee.
"Business Day", when used with respect to any place of
payment, place of conversion or any other place, as the case may be, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in such place of payment, place of conversion or other
place, as the case may be, are authorized or obligated by law or executive order
to close; provided, however, that a day on which banking institutions in New
York, New York are authorized or obligated by law or executive order to close
shall not be a Business Day for purposes of Sections 10.1, 10.3 or 11.7.
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"Cash Distribution" means the distribution by the Company to
all holders of its Common Stock of cash, other than any cash that is distributed
upon a merger or consolidation to which Section 12.11 applies or as part of a
distribution referred to in paragraph (4) of Section 12.4.
"Change of Control" has the meaning specified in Section 14.4.
"Closing Price" means, with respect to the Common Stock of the
Company, for any day, the reported last sale price per share on the New York
Stock Exchange or, if the Common Stock is not listed on the New York Stock
Exchange, on the principal national securities exchange or inter-dealer
quotation system on which the Common Stock is listed or admitted to trading, or
if not listed on the New York Stock Exchange or listed or admitted to trading on
any national securities exchange or inter-dealer quotation system, the average
of the closing bid and asked prices per share in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from time to time
by the Company for that purpose.
"Commission" means the United States 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" means the Common Stock, par value $.0015 per
share, of the Company authorized at the date of this instrument as originally
executed. Subject to the provisions of Section 12.11, shares issuable on
conversion or repurchase of Securities shall include only shares of Common Stock
or shares of any class or classes of common stock resulting from any
reclassification or reclassifications thereof; provided, however, that if at any
time there shall be more than one such resulting class, the shares so issuable
on conversion of Securities shall include shares of all such classes, and the
shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassifi cations bears to the total number of shares of all such classes
resulting from all such reclassifications.
"common stock" includes any stock of any class of capital
stock 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 issuer thereof and which is not subject to redemption by the issuer
thereof.
"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 Notice" has the meaning specified in Section 14.3.
"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
Chief Executive Officer, its President or a Vice President, and by its principal
financial officer, Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee.
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"Constituent Person" has the meaning specified in Section
12.11.
"Conversion Rate" has the meaning specified in Section 12.1.
"Corporate Trust Office" shall mean the principal office of
the Trustee at which at any particular time its corporate trust business shall
be administered which office at the date of the execution of the Indenture is
located at Four Albany Street, New York, New York 10006, Attention: Corporate
Trust and Agency Group or at any other time at such other address as the Trustee
may designate from time to time by notice to the Noteholders.
"Corporation" means a corporation, company, association,
joint-stock company or business trust.
"Defaulted Interest" has the meaning specified in Section 3.8.
"Depositary" means, with respect to any Security, a clearing
agency that is registered as such under the Exchange Act and is designated by
the Company to act as Depositary for such Security (or any successor securities
clearing agency so registered).
"Determination Date" means, in the case of a dividend or other
distribution, including the issuance of rights, options or warrants, to
shareholders, the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution and, in the case of a tender offer,
the last time that tenders could have been made pursuant to such tender offer.
"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.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the United States Securities Exchange Act
of 1934, as amended from time to time.
"Excess Purchase Payment" means the excess, if any, of (i) the
amount of cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) of any non-cash consideration required to be paid with respect to
one share of Common Stock acquired or to be acquired in a tender offer made by
the Company or any Subsidiary for all or any portion of the Common Stock over
(ii) the current market price per share as of the last time that tenders could
have been made pursuant to such tender offer.
"Expiration Date" has the meaning specified in Section 1.4.
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<PAGE> 14
"Global Security" means a Security that is registered in the
Security Register in the name of a Depositary or a nominee thereof.
"Holder" means the 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.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Market Capitalization" means, with respect to a specified
date, the product of (i) the current market price per share (determined as
provided in paragraph (8) of Section 12.4) of the Common Stock as of such date
times (ii) the number of shares of Common Stock outstanding on such date.
"Maturity", when used with respect to any Security, means the
date on which the principal of such Security 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 set forth in
Article Fourteen or otherwise.
"Non-electing Share" has the meaning specified in Section
12.11.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, the Chief Executive Officer, the President or a Vice
President and by the principal financial officer, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered
to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company and who shall be reasonably acceptable to the
Trustee.
"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 the payment or redemption of which 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 has been duly
given
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<PAGE> 15
pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 3.7 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or 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 or waiver, only Securities which a Responsible Officer of the Trustee
actually 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 such other
obligor.
"Paying Agent" means any Person authorized by the Company to
pay the principal of or interest on any Securities on behalf of the Company.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, trust, estate, 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 3.7 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.
"Record Date" means any Regular Record Date or Special Record
Date.
"Record Date Period" means the period from the close of
business of any Regular Record Date next preceding any Interest Payment Date to
the opening of business on such Interest Payment Date.
"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 pursuant to this
Indenture.
"Regular Record Date" for interest payable in respect of any
Security on any Interest Payment Date means the [ or ] (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
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"Repurchase Date" has the meaning specified in Section 14.1.
"Repurchase Price" has the meaning specified in Section 14.1.
"Responsible Officer" shall mean when used with respect to the
Trustee any officer within the Corporate Trust Office including any Vice
President, Managing Director, Assistant Vice President, Secretary, Assistant
Secretary, Treasurer or Assistant Treasurer or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge and
familiarity with the particular subject.
"Securities" has the meaning ascribed to it in the first
paragraph under the caption "Recitals of the Company".
"Securities Act" means the United States Securities Act of
1933, as amended from time to time.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 3.6.
"Senior Debt" means the principal of (and premium, if any) and
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) on, and all fees and
other amounts (including collection expenses, attorney's fees and late charges)
owing with respect to, the following, whether direct or indirect, absolute or
contingent, secured or unsecured, due or to become due, outstanding at the date
of execution of this Indenture or thereafter incurred, created or assumed: (a)
indebtedness of the Company for money borrowed or evidenced by bonds,
debentures, notes or similar instruments, (b) reimbursement obligations of the
Company with respect to letters of credit, bankers' acceptances and similar
facilities issued for the account of the Company, (c) every obligation of the
Company issued or assumed as the deferred purchase price of property or services
purchased by the Company, excluding any trade payables and other accrued current
liabilities incurred in the ordinary course of business, (d) obligations of the
Company as lessee under leases required to be capitalized on the balance sheet
of the lessee under United States generally accepted accounting principles or
can be capitalized under the United States Internal Revenue Code, (e)
obligations of the Company under interest rate and currency swaps, caps, floors,
collars or similar arrangements intended to protect the Company against
fluctuations in interest or currency exchange rates, (f) indebtedness of others
of the kinds described in the preceding clauses (a) through (e) that the Company
has assumed, guaranteed or otherwise assured the payment thereof, directly or
indirectly, and/or (g) deferrals, renewals, extensions and refundings of, or
amendments, modifications or supplements to, any indebtedness or obligation
described in the preceding clauses (a) through (f) whether or not there is any
notice to or consent of the Holders; provided, however, that the following shall
not constitute Senior Debt: (i) any particular indebtedness or obligation that
is owed by the Company to any of its direct and indirect Subsidiaries and (ii)
any particular indebtedness, deferral, renewal, extension or refunding if it is
expressly stated in the governing terms or in the assumption thereof that the
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<PAGE> 17
indebtedness involved is not senior in right of payment to the Securities or
that such indebtedness is pari passu with or junior to the Securities.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Company pursuant to Section 3.8.
"Stated Maturity", when used with respect to any Security or
any installment of interest thereon, means the date specified in such Security
as the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" means a corporation, limited liability company,
partnership or other entity 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 or other equity
interests in the corporation, limited liability company, partnership or other
entity which ordinarily has or have voting power for the election of directors,
or persons performing similar functions, whether at all times or only so long as
no senior class of stock or other interests has or have such voting power by
reason of any contingency.
"Successor Security" of any particular Security means every
Security issued after, and 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 3.7 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.
"Trading Day" means (i) if the Common Stock is listed or
admitted for trading on the New York Stock Exchange or any other national
securities exchange, a day on which such exchange is open for business; (ii) if
the Common Stock is quoted on the Nasdaq National Market or any other system of
automated dissemination of quotations of securities prices, a day on which
trades may be effected through such system; or (iii) if the Common Stock is not
listed or admitted for trading on any national securities exchange or quoted on
the Nasdaq National Market or any other system of automated dissemination of
quotation of securities prices, a day on which the Common Stock is traded
regular way in the over-the-counter market and for which a closing bid and a
closing asked price for the Common Stock are available.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed; provided,
however, that in the event the Trust Indenture Act of 1939 is amended after such
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Vice President", when used with respect to the Company, means
any vice president, whether or not designated by a number or a word or words
added before or after the title "vice president".
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<PAGE> 18
SECTION 1.2. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture 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 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 1.3. Form of Documents Delivered to the 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 such 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.
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<PAGE> 19
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 1.4. Acts of Holders of Securities.
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 may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such Holders in
person or by an agent or proxy duly appointed in writing; and except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instr uments or record is delivered to the Trustee and, where it
is hereby expressly required, to the Company. The Trustee shall promptly deliver
to the Company copies of all such instruments and records delivered to the
Trustee. Such instrument or instruments and record (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Holders of Securities signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent or
proxy, or of the holding by any Person of a Security, shall be sufficient for
any purpose of this Indenture and 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 acknowledgements 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 execution of any such instrument or
writing and 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, regardless of whether 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, make or
take any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Indenture to be given, made or taken
by Holders, 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, regardless of whether such Holders remain
Holders after such record date; provided that no such action shall be effective
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<PAGE> 20
hereunder unless taken on or prior to the applicable Expiration Date, if any, by
Holders of the requisite principal amount of Outstanding Securities on such
record date. Nothing in this paragraph shall be construed to 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), and nothing in this paragraph shall 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 1.6.
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 5.2, (iii) any request to institute
proceedings referred to in Section 5.7(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, regardless
of whether 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, if any, by Holders of the requisite principal amount
of Outstanding Securities on such record date. 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 1.6.
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
1.6, on or prior to the existing Expiration Date. 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 initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
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.
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<PAGE> 21
SECTION 1.5. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice,
consent, election, waiver or other Act of Holders of Securities 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
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee and received at its Corporate
Trust Office, Attention: Corporate Market Services, Fax (212)
250-6392/6961, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing, mailed, first-class postage prepaid,
or telecopied and confirmed by mail, first-class postage prepaid, or
delivered by hand or overnight courier, addressed to the Company at
5350 Tech Data Drive, Clearwater, Florida, telecopy no.: (813)
538-5860, Attention: Arthur W. Singleton, Secretary or at any other
address previously furnished in writing to the Trustee by the Company.
SECTION 1.6. Notice to Holders of Securities; 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.
SECTION 1.7. 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.
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<PAGE> 22
SECTION 1.8. 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 1.9. Separability Clause.
In case any provision in this Indenture or 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 1.10. 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 Debt and the Holders of Securities,
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
SECTION 1.11. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, THE UNITED
STATES OF AMERICA WITHOUT REGARD TO ITS CONFLICTS OF LAW PRINCIPLES.
SECTION 1.12. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
Repurchase Date or Stated Maturity of any Security or the last day on which a
Holder of a Security has a right to convert his Security shall not be a Business
Day at a place of payment or place of conversion, as the case may be, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of principal of, premium, if any, or interest on, or conversion of, such
Security need not be made on such day, but may be made on or by the next
succeeding Business Day with the same force and effect as if made on the
Interest Payment Date, Redemption Date or Repurchase Date, or at the Stated
Maturity or on such last day for conversion; provided, however, that in the case
that payment is made on such succeeding Business Day, no interest shall accrue
for the period from and after such Interest Payment Date, Redemption Date,
Repurchase Date, Stated Maturity or last day for conversion, as the case may be,
to such succeeding Business Day.
SECTION 1.13. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such act to be a
part of and govern this Indenture, the latter provision of the Trust Indenture
Act shall control. If any provision of this Indenture modifies or excludes any
provision of the Trust Indenture Act that may be so modified or excluded, the
latter provision of the Trust Indenture Act shall be deemed to apply to this
Indenture as so modified or to be excluded, as the case may be.
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<PAGE> 23
ARTICLE TWO
SECURITY FORMS
SECTION 2.1. Forms Generally.
The Securities 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 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 or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner provided that it is permitted by
the rules of any securities exchange on which the Securities may be listed, all
as determined by the officers executing such Securities, as evidenced by their
execution thereof.
Upon their original issuance, the Securities shall be issued
in the form of one or more Global Securities registered in the name of DTC, as
Depositary, or its nominee and deposited with the Trustee, as custodian for 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).
SECTION 2.2. Forms of Securities.
[FORM OF FACE]
[IF THE SECURITY IS A GLOBAL SECURITY, THEN INSERT -- 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.]
[IF THE SECURITY IS A GLOBAL SECURITY AND THE DEPOSITORY TRUST
COMPANY IS TO BE THE DEPOSITARY THEREFOR, THEN INSERT -- UNLESS THIS CERTIFICATE
IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION ("DTC"), TO THE ISSUER 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
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<PAGE> 24
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
TECH DATA CORPORATION
[ ]% CONVERTIBLE SUBORDINATED NOTE DUE[ ,] 2002
No. $
------------------- --------
[CUSIP NO. ]
TECH DATA CORPORATION, a corporation duly organized and
existing under the laws of Florida (herein called the "Company", which term
includes any successor Person under the Indenture referred to on the reverse
hereof), for value received, hereby promises to pay to _______________, or
registered assigns, the principal sum of _____________ Dollars ($_____) [IF THIS
SECURITY IS A GLOBAL SECURITY, THEN INSERT -- (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 $201,250,000 in the aggregate at any time) by adjustments made
on the records of the Trustee hereinafter referred to in accordance with the
Indenture)] on [ ,] 2002 and to pay interest thereon, from [ ,] 1997, or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, semi-annually on[ and ] in each year, commencing [ ,]
1998, at the rate of [ ] % per annum, until the principal hereof is due, and at
the rate of [ ] % per annum on any overdue principal and premium, if any, and,
to the extent permitted by law, on any overdue interest. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in the 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 Record Date for such interest, which shall be the
[ or ] (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Except as otherwise provided in the Indenture, 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 Company, 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 the Indenture. Payment of the principal
of (and premium, if any, on) this Security shall be made upon the surrender of
this Security at the option of the Holder at the office or agency of the Company
as may be designated by it for such purpose in the Borough of Manhattan, The
City of New York, in such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of public and private
debts, or at such other offices or agencies as the Company may designate, by
Dollar check or by transfer to a Dollar
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<PAGE> 25
account (such a transfer to be made only to a Holder of an aggregate principal
amount of Securities in excess of $5,000,000, and only if such Holder shall have
furnished wire instructions in writing to the Trustee no later than 15 days
prior to the relevant payment date) maintained by the payee with a bank in the
United States of America. Payment of interest on this Security may be made by
Dollar check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register, or, upon written application by
the Holder to the Security Registrar setting forth wire instructions not later
than the relevant Record Date, by transfer to a Dollar account (such a transfer
to be made only to a Holder of an aggregate principal amount of Securities in
excess of $5,000,000 and only if such Holder shall have furnished wire
instructions in writing to the Trustee no later than 15 days prior to the
relevant payment date) maintained by the payee with a bank in the United States
of America.
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 Security to be
duly executed under its corporate seal.
Dated:
TECH DATA CORPORATION
By:
--------------------
Name:
Title:
Attest:
- ------------------------
Name:
Title:
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<PAGE> 26
[FORM OF REVERSE]
This Security is one of a duly authorized issue of securities
of the Company designated as its "[ ]% Convertible Subordinated Notes due [ ,]
2002" (herein called the "Securities"), limited in aggregate principal amount to
$201,250,000, issued and to be issued under an Indenture, dated as of [ ,]
1997 (herein called the "Indenture"), between the Company and Bankers Trust
Company, as Trustee, (herein called the "Trustee"), which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee, the holders of Senior Debt and the Holders of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered.
The Securities are subject to redemption upon not less than 30
nor more than 60 days' notice by mail, at any time on or after [ ,] 2000, as a
whole or in part, at the election of the Company, at the following Redemption
Prices (expressed as percentages of the principal amount) if redeemed during the
12-month period beginning [ ]of the years indicated:
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
2000 ............................................. %
2001 ............................................. %
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount,
together in the case of any such redemption with accrued interest to the
Redemption Date, but interest installments whose Stated Maturity is on or prior
to such Redemption Date will be payable to the Holders of such 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.
Subject to and upon compliance with the provisions of the
Indenture, the Holder of this Security is entitled at any time before the close
of business on [ ,] 2002 (or, in case this Security or a portion hereof is
called for redemption or the Holder hereof has exercised his right to require
the Company to repurchase this Security or a portion hereof, then in respect of
this Security or such portion hereof, as the case may be, until and including,
but (unless the Company defaults in making the payment due upon redemption or
repurchase, as the case may be) not after, the close of business on the
Redemption Date or the Repurchase Date, as the case may be) to convert this
Security (or any portion of the principal amount hereof that is an integral
multiple of $1,000), into fully paid and nonassessable shares (calculated as to
each conversion to the nearest 1/100 of a share) of Common Stock of the Company
at the rate of [ ] shares of Common Stock for each $1,000 principal amount of
Security (or at the current adjusted rate if an adjustment has been made as
provided in the Indenture) by surrender of this Security, duly endorsed or
assigned to the Company or in blank to the Company at the Corporate Trust Office
of the Trustee, at the office or agency of the Company in the Borough of
Manhattan, The City of New York, at any other office or agency of the Company
maintained for such purpose and at the
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<PAGE> 27
office or agency of any additional conversion agent appointed by the Company,
accompanied by written notice to the Company that the Holder hereof elects to
convert this Security (or if less than the entire principal amount hereof is to
be converted, specifying the portion hereof to be converted). Holders that
surrender Securities for conversion on a date that is not an Interest Payment
Date are not entitled to receive any interest for the period from the next
preceding Interest Payment Date to the date of conversion, except as described
below. However, Holders of Securities on a Regular Record Date, including
Securities surrendered for conversion after the Regular Record Date, will
receive the interest payable on such Securities on the next succeeding Interest
Payment Date. Accordingly, any Security surrendered for conversion during the
period from the close of business on a Regular Record Date to the opening of
business on the next succeeding Interest Payment Date must be accompanied by
payment of an amount equal to the interest payable on such Interest Payment Date
on the principal amount of Securities being surrendered for conversion;
provided, however, that no such payment will be required upon the conversion of
any Security (or portion thereof) that has been called for redemption or that is
eligible to be delivered for repurchase if, as a result, the right to convert
such Security would terminate during the period between such Regular Record Date
and the next succeeding Interest Payment Date. No fractions of shares or scrip
representing fractions of shares will be issued on conversion, but instead of
any fractional interest, the Company shall pay a cash adjustment as provided in
the Indenture or, at its option, the Company shall round up to the next higher
whole share.
The Conversion Rate is subject to adjustment as provided in
the Indenture. The Indenture also provides that in case of certain
consolidations or mergers to which the Company is a party or the conveyance,
transfer, sale or lease of all or substantially all of the properties and assets
of the Company, 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 such consolidation, merger, conveyance, transfer, sale
or lease (including any Common Stock retainable) by a holder of the number of
shares of Common Stock of the Company into which this Security could have been
converted immediately prior to such consolidation, merger, conveyance, transfer,
sale or lease (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 and further assuming, if such
consolidation, merger, conveyance, transfer, sale or lease is prior to the first
date on which this Security may be converted as provided above, that this
Security was convertible immediately prior to the time of such occurrence at the
initial Conversion Rate specified above as adjusted from the first original
issue date of the Securities to such time as provided in the Indenture). No
adjustment in the Conversion Rate will be made until such adjustment would
require an increase or decrease of at least one percent of such rate, provided
that any adjustment that would otherwise be made will be carried forward and
taken into account in the computation of any subsequent adjustment.
If a Change of Control occurs, the Holder of this Security, at
the Holder's option, shall have the right, in accordance with the provisions of
the Indenture, to require the Company to repurchase this Security (or any
portion of the principal amount hereof that is an integral multiple of $1,000)
at a Repurchase Price equal to 100% of the principal amount thereof plus
interest accrued to the Repurchase Date. At the option of the Company, the
Repurchase Price may
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<PAGE> 28
be paid in cash or, subject to the conditions provided in the Indenture, by
delivery of shares of Common Stock having a fair market value equal to the
Repurchase Price. For purposes of this paragraph, the fair market value of
shares of Common Stock shall be determined by the Company and shall be equal to
95% of the average of the Closing Price for the five consecutive Trading Days
ending on and including the third Trading Day immediately preceding the
Repurchase Date. Whenever in this Security there is a reference, in any context,
to the principal of any Security as of any time, such reference shall be deemed
to include reference to the Repurchase Price payable in respect of such Security
to the extent that such Repurchase Price is, was or would be so payable at such
time, and express mention of the Repurchase Price in any provision of this
Security shall not be construed as excluding the Repurchase Price so payable in
those provisions of this Security where such express mention is not made;
provided, however, that for the purposes of the second succeeding paragraph
(regarding subordination), such reference shall be deemed to include reference
to the Repurchase Price only if the Repurchase Price is payable in cash.
[IF NOT A GLOBAL SECURITY INSERT -- In the event of
redemption, repurchase or conversion of this Security in part only, a new
Security or Securities for the unredeemed, unrepurchased or unconverted portion
hereof will be issued in the name of the Holder hereof.]
[IF A GLOBAL SECURITY INSERT -- In the event of a deposit or
withdrawal of an interest in this Security (including upon an exchange,
transfer, redemption, repurchase or conversion of this Security in part only)
effected in accordance with the Applicable Procedures, the Security Registrar,
upon receipt of notice of such event from the Depositary's custodian for this
Security, shall make an adjustment on its records to reflect an increase or
decrease of the Outstanding principal amount of this Security resulting from
such deposit or withdrawal, as the case may be.]
The indebtedness evidenced by this Security is, to the extent
and in the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Debt of the Company, and this
Security is issued subject to such 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 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 principal amount of the Securities at the time Out
standing. The Indenture also contains provisions permitting the Holders of
specified percentages in 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
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<PAGE> 29
Holders of this Security and of any Security issued in exchange herefor or in
lieu hereof, whether or not notation of such consent or waiver is made upon this
Security or such other Security.
As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities, the Holders of not less than 25% in principal amount of the
Securities at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities at the
time Outstanding a direction inconsistent with such request and shall have
failed to institute any such proceeding for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to certain
suits described in the Indenture, including any suit instituted by the Holder of
this Security for the enforcement of any payment of principal hereof or any
premium, if any, or interest hereon on or after the respective due dates
expressed herein or for the enforcement of the right to convert this Security as
provided in the Indenture.
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, places 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 Securities is registrable on the
Security Register upon surrender of a Security for registration of transfer at
the office or agency of the Company in the Borough of Manhattan, The City of New
York, and at such other offices or agencies as the Company may designate, 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 thereof 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 $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.
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
recover any tax or other governmental charge payable in connection therewith.
Prior to due presentation 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
thereof for all purposes, whether or not such Security be
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<PAGE> 30
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF
AMERICA WITHOUT REGARD TO ITS CONFLICTS OF LAW PRINCIPLES.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
ELECTION OF HOLDER TO REQUIRE REPURCHASE
1. Pursuant to Section 14.1 of the Indenture, the undersigned
hereby elects to have all or a portion of this Security repurchased by the
Company.
2. The undersigned hereby directs the Trustee or the Company
to pay [choose one] (a) it or (b) Name: __________________; address:
__________________; Social Security or Other Taxpayer Identification Number, if
any: ____________, an amount in cash or, at the Company's election, Common Stock
valued as set forth in the Indenture, equal to 100% of the principal amount to
be repurchased (as set forth below), plus interest accrued to the Repurchase
Date, as provided in the Indenture.
Dated:
------------------------
-----------------------
Signature
Signature must be guaranteed by an eligible Guarantor Institution (banks,
stockbrokers, savings and loan associations and credit unions) with membership
in an approved signature medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15 if cash or Common Stock is to be delivered other than
to, and in the name of, the registered Holder.
-----------------------
Signature Guarantee
Principal amount to be repurchased
(an integral multiple of $1,000):
-----------------------
Remaining principal amount following such repurchase (not less than $1,000):
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<PAGE> 31
NOTICE: The signature to the foregoing Election must correspond to the name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.
SECTION 2.3. Form of Trustee's Certificate of Authentication.
This is one of the Securities referred to in the
within-mentioned Indenture.
BANKERS TRUST COMPANY,
as Trustee
By:
------------------------
Authorized Signatory
SECTION 2.4. Form of Conversion Notice.
CONVERSION NOTICE
The undersigned Holder of this Security hereby irrevocably
exercises the option to convert this Security, or any portion of the principal
amount hereof (which is an integral multiple of $1,000) below designated, into
shares of Common Stock in accordance with the terms of the Indenture referred to
in this Security, and directs that such shares, together with a check in payment
for any fractional share and any Securities representing any unconverted
principal amount hereof, be delivered to and be registered in the name of the
undersigned unless a different name has been indicated below. If shares of
Common Stock or Securities are to be registered in the name of a Person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto. Any amount required to be paid by the undersigned on account of
interest accompanies this Security.
Dated:
------------------------
---------------------------
Signature
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<PAGE> 32
If shares or Securities are to be registered in the name of a Person other than
the Holder, please print such Person's name and address:
If only a portion of the Securities is to be converted, please indicate:
1. Principal amount to be converted:
- --------------------------------- $
Name -------------
2. Principal amount and denomination
of Securities representing uncon-
verted principal amount to be issued:
- ---------------------------------
Address
Amount: $
-------------
Denominations: $
(any integral -----------
- --------------------------------- multiple of $1,000)
Social Security or other Taxpayer
Identification Number, if any
Signature must be guaranteed by an eligible Guarantor Institution (banks,
stockbrokers, savings and loan associations and credit unions) with membership
in an approved signature medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15 if cash or Common Stock is to be delivered other than
to, and in the name of, the registered Holder.
[Signature Guarantee]
ARTICLE THREE
THE SECURITIES
SECTION 3.1. Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $201,250,000,
except for Securities authenticated and delivered in exchange for, or in lieu
of, other Securities pursuant to Section 3.4, 3.5, 3.6, 3.7, 9.6, 11.8, 12.2 or
14.3.
The Securities shall be known and designated as the "[ ]%
Convertible Subordinated Notes due [ ], 2002" of the Company. Their Stated
Maturity shall be [ ,] 2002, and they shall bear interest at the rate of
[ %] per annum, from [ , 1997] or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, as the case
may be, payable semi-annually on [ ] and [ ,] commencing
[ ,] 1998, until the principal thereof is paid or made available for
payment.
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<PAGE> 33
The principal of, premium, if any, and interest on the
Securities shall be payable as provided in the forms of Securities set forth in
Section 2.2.
The Securities shall be redeemable as provided in Article
Eleven.
The Securities shall be convertible as provided in Article
Twelve.
The Securities shall be subordinated in right of payment to
Senior Debt as provided in Article Thirteen.
The Securities shall be subject to repurchase by the Company
at the option of the Holders as provided in Article Fourteen.
SECTION 3.2. Denominations.
The Securities shall be issuable only in registered form,
without coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 3.3. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by
its Chairman of the Board, its Chief Executive Officer, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. Any such signature may be manual
or facsimile.
Securities bearing the manual or facsimile signature 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 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 make available for delivery 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.
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<PAGE> 34
SECTION 3.4. Temporary Securities.
Pending the preparation of definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to Section
10.2, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 3.5. Global Securities; Non-Global Securities.
(a) 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.
(b) 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 (i) such Depositary (A) has notified the Company that it
is unwilling or unable to continue as Depositary for such Global Security or (B)
has ceased to be a clearing agency registered as such under the Exchange Act,
and in either case the Company thereupon fails to appoint a successor
Depositary, (ii) there shall have occurred and be continuing an Event of Default
with respect to such Global Security or (iii) the Company executes and delivers
to the Trustee a Company Order stating that all Global Securities shall be
exchanged in whole for Securities that are not Global Securities (in which case
such exchange shall be effected by the Trustee).
(c) 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
cancellation as provided in this Article Three. 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 3.6, then either (i) such Global
Security shall be so surrendered for exchange or cancellation as provided in
this Article Three or (ii) the principal amount thereof shall be reduced or
increased by an amount equal to the portion thereof to be so exchanged or
canceled, or equal to the principal amount of such other Security to be so
exchanged for a beneficial interest
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<PAGE> 35
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,
subject to Section 3.6(c) and as otherwise provided in this Article Three,
authen ticate 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 conclusively rely upon any order, direction or request of the
Depositary or its authorized representative which is given or made pursuant to
this Article Three if such order, direction or request is given or made in
accordance with the Applicable Procedures.
(d) 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 Three 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.
(e) 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 of such Global Security for any purpose of this Indenture
or the Securities.
SECTION 3.6. Registration, Registration of Transfer and Exchange
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency of the Company designated pursuant to Section 10.2
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 of Securities.
The Trustee is hereby appointed "Security Registrar" for the purpose of
registering Securities and transfers and exchanges of Securities as herein
provided.
Upon surrender for registration of transfer of any Security at
an office or agency of the Company designated pursuant to Section 10.2 for such
purpose, 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 any authorized denominations and of a like aggregate principal
amount and bearing such restrictive legends as may be required by this
Indenture.
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<PAGE> 36
At the option of the Holder, and subject to the other
provisions of this Section 3.6, Securities may be exchanged for other Securities
of any authorized denomination and of a like aggregate principal amount, upon
surrender of the Securities to be exchanged at any such office or agency.
Whenever any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing.
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 3.4, 3.5, 9.6, 11.8, 12.2 or 14.3 not
involving any transfer.
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 11.4 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 3.7. Mutilated, Destroyed, Lost or Stolen Securities.
If any mutilated Security is surrendered to the Trustee or to
a Transfer Agent, 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 satisfactory to the
Company or the Trustee to save each of them and any agent of either of them
harmless, then, in the absence of actual notice to the Company or a Responsible
Officer of 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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<PAGE> 37
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 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 pursuant to this Section in lieu of
any mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
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 of any Holder with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Securities.
SECTION 3.8. 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 such
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, the date of the proposed payment
and the Special Record Date, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to
be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this Clause provided. The Special Record Date
for the payment of such Defaulted Interest 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 written notice of the proposed payment. The Trustee, in the name
and at the expense of the Company, shall cause notice of the proposed
payment of
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<PAGE> 38
such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder of Securities at
such Holder's 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).
(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, 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.
Interest on any Security which is converted in accordance with
Section 12.2 during a Record Date Period shall be payable in accordance with the
provisions of Section 12.2.
SECTION 3.9. 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 (and premium,
if any) and (subject to Section 3.8) 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 3.10. 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 cancelled 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 cancelled by the
Trustee. No Securities shall be authenticated in lieu of or in exchange for any
Securities cancelled 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.
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<PAGE> 39
SECTION 3.11. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
SECTION 3.12. CUSIP and ISIN Numbers.
The Company in issuing Securities may use "CUSIP" and "ISIN"
numbers (if then generally in use) in addition to serial numbers; if so, the
Trustee shall use such "CUSIP" and "ISIN" numbers in addition to serial numbers
in notices of redemption and repurchase as a convenience to Holders; provided
that any such notice may state that no representation is made as to the
correctness of such CUSIP and ISIN numbers either as printed on the Securities
or as contained in any notice of a redemption or repurchase and that reliance
may be placed only on the serial or other identification numbers printed on the
Securities, and any such redemption or repurchase shall not be affected by any
defect in or omission of such CUSIP and ISIN numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as
to any surviving rights of conversion, registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, on reasonable demand
of and 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 3.7 and
(ii) Securities for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 10.3) 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,
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<PAGE> 40
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose 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; and
(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.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, 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 4.2 and the last
paragraph of Section 10.3 shall survive. Funds held in trust pursuant to this
Section are not subject to the provisions of Article Thirteen.
SECTION 4.2. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
10.3, all money deposited with the Trustee pursuant to Section 4.1 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 4.1
(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 FIVE
REMEDIES
SECTION 5.1. 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 Thirteen or be voluntary or
involuntary or be effected by operation of law
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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 the principal of or premium, if
any, on any Security at its Maturity; or
(2) 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
(3) failure by the Company to give the Company Notice in
accordance with Section 14.3; or
(4) default in the performance, or breach, of any material
covenant or warranty of the Company in this Indenture (other than a
covenant or warranty a default in the performance or breach of which is
specifically dealt with elsewhere in this Section), 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 bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company, or under
any agreement, mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company, with a principal amount
then outstanding in excess of $25,000,000, whether such indebtedness
now exists or shall hereafter be created, which default shall
constitute a failure to pay the principal of such indebtedness (in
whole or in any part greater than $25,000,000) when due and payable or
shall have resulted in such indebtedness (in whole or in any part
greater than $25,000,000) 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 60
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 aggregate 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 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 bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
ordering the winding up or
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liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in
effect for a period of 60 consecutive days; or
(7) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by
it to the entry of a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, or the filing by it of a petition or answer
or consent seeking reorganization or similar relief under any
applicable Federal or State law, or the consent by it to the filing of
such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of corporate
action by the Company in furtherance of any such action.
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default
specified in Section 5.1(6) or 5.1(7)) occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% in aggregate 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 the Holders), and upon any such
declaration such principal and all accrued interest thereon shall become
immediately due and payable. If an Event of Default specified in Section 5.1(6)
or 5.1(7) occurs and is continuing, the principal of, and accrued interest on,
all the Securities shall ipso facto become immediately due and payable without
any declaration or other Act of the Holders or any act on the part of the
Trustee.
At any time after such declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the Holders of
a majority in principal amount of the Outstanding 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 any 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 provided therefor
in the Securities, and
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(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, and any premium and interest on, Securities which have
become due solely by such declaration of acceleration, have been cured
or waived as provided in Section 5.13.
No rescission or annulment referred to above shall affect any
subsequent default or impair any right consequent thereon.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when it 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 Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and interest and interest on any overdue principal and
premium, if any, and on any overdue interest, at the rate provided therefor in
the Securities, and in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee,
subject to Article VI, may in its discretion proceed to protect and enforce its
rights and the rights of the Holders of Securities 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 5.4. 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, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and,
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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, disbursement and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section 6.7.
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 of a Security in any such
proceeding; provided, however, that the Trustee may, on behalf of such Holders,
vote for the election of a trustee in bankruptcy or similar official and be a
member of a creditors' or other such committee.
SECTION 5.5. 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 judgment
has been recovered.
SECTION 5.6. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal,
premium, if any, or interest, upon presentation of the Securities, or both, as
the case may be, 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 6.7; and
SECOND: Subject to Article Thirteen, to the payment of the
amounts then due and unpaid for principal of, premium, if any, or
interest on, the Securities in respect of which or for the benefit of
which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Securities for principal, premium, if any, and interest, respectively.
SECTION 5.7. 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;
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(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 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 such
Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal,
Premium and Interest and to Convert.
Notwithstanding any other provision in this Indenture, but
subject to the provisions of Article Thirteen, the Holder of any Security shall
have the right, which is absolute and unconditional, to receive payment of the
principal of, premium, if any, and (subject to Section 3.8) interest on such
Security or payment 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 Twelve, 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 5.9. 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 3.7, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders of Securities is intended
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to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or any acquiescence therein. Every right and remedy given by this
Article Five 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 of Securities.
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,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction,
(3) the Trustee may refuse to follow the directions if the
Trustee, upon the written advice of counsel, determines that it may
involve the Trustee in personal liability.
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, premium, if any, or
interest on any Security, or
(2) in respect of a covenant or provision hereof which under
Article Nine 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.
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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 or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorney's fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 5.14 does not apply to a suit by the Trustee, a suit by a
Holder to enforce the provisions of Section 5.8 hereof, or a suit by a Holder or
Holders or more than 10% in principal amount of the then outstanding Notes.
SECTION 5.15. Waiver of Stay, Usury or Extension Laws.
Subject to Article Thirteen hereof, the Company covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, usury or extension law wherever enacted, now or at any time hereafter
in force, which may affect the covenants or the performance of this Indenture;
and the Company (to the extent that it may lawfully do so) 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 SIX
THE TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(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, but not to verify the contents thereof.
(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
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care and skill in their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own 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, if it shall have reasonable
grounds for believing that repayment of such funds or indemnity
satisfactory to it against such risk or liability is not reasonably
assured to it.
(d) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section.
SECTION 6.2. Notice of Defaults.
The Trustee shall give the Holders notice of any default
hereunder as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
5.1(4), no such notice to Holders shall be given until at least 30 days after
the occurrence thereof. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or both would become,
an Event of Default.
SECTION 6.3. Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may conclusively rely and shall be fully
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;
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(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee may, in the absence of bad faith on its part, request and
conclusively 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 so long as reasonable prior notice is provided to the Company
and such investigation does not unreasonably interfere with the
Company's operations;
(g) the permissive right of the Trustee to take or refrain
from taking any actions enumerated in this Indenture shall not be
construed as a duty and the Trustee shall not be answerable in any such
actions other than for its own negligence or willful misconduct;
(h) the Trustee shall not be liable for any action taken,
suffered or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights and
powers conferred upon it by this Indenture; and
(i) in the event the Trustee is also acting as Paying Agent or
Transfer Agent and Security Registrar hereunder, the rights and
protections afforded to the Trustee pursuant to this Section 6.3 shall
also be afforded to such Paying Agent or Transfer Agent and Security
Registrar.
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SECTION 6.4. 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 the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the use
or application by the Company of Securities or the proceeds thereof.
SECTION 6.5. 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
Sections 6.8 and 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.
The Trustee may become and act as trustee under other
indentures under which other securities, or certificates of interest or
participation in other securities, of the Company are outstanding in the same
manner as if it were not Trustee hereunder.
SECTION 6.6. 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 in writing.
SECTION 6.7. 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 in accordance
with the agreement between the Company and the Trustee (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 written 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) as detailed in such request, except any such
expense, disbursement or advance as may be attributable to its
negligence or bad faith;
(3) to indemnify the Trustee, its officers, directors,
employees and agents for, and to hold it and them harmless against, any
loss, liability or expense incurred without negligence or bad faith on
its or their part, arising out of or in connection with the acceptance
or administration of this trust, including the reasonable costs and
expenses of
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defending itself or themselves against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder; and
(4) to secure the Company's payment obligations in this
Section 6.7, the Trustee shall have a Lien prior to the Notes on all
money or property held or collected by the Trustee, except that money
and property held in trust to pay principal and interest on particular
Notes. Such Lien shall survive the satisfaction and discharge of this
Indenture.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.1(6) or Section
5.1(7), the expenses (including the reasonable fees and expenses of counsel) and
the compensation for the services are intended to constitute expenses of the
administration under any applicable Federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the termination
of this Indenture or the earlier resignation or removal of the Trustee.
SECTION 6.8. 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 6.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
a Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
SECTION 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 under
Section 6.11.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
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(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 6.8 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
(2) the Trustee shall cease to be eligible under Section 6.9
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, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, 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 1.6. 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 request of the
Company or the
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successor Trustee, such retiring Trustee shall, upon payment of the fees and
expenses and any other monies due and owing to the retiring Trustee, 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 (including the trust created by this Indenture),
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, conver sion 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.
SECTION 6.13. Preferential Collection of Claims Against Company.
The Trustee is subject to the Trust Indenture Act ss. 311(a),
excluding any creditor relationship listed in the Trust Indenture Act ss.
311(b). A Trustee who has resigned or been removed shall be subject to the Trust
Indenture Act ss. 311(a) to the extent indicated therein.
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 or partial redemption or pursuant to Section 3.7,
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 of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $50,000,000 and subject
to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of
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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 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, immediately
upon demand.
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:
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This is one of the Securities described in the
within-mentioned Indenture.
As Trustee
By
----------------------------
As Authenticating Agent
By
----------------------------
Authorized Signatory
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1. 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, excluding from any such list names and addresses received
by the Trustee in its capacity as Security Registrar; provided, that,
if after so excluding such names and addresses there are no names and
addresses to furnish, the Company shall not be obligated to furnish or
cause to be furnished such list, 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 7.2. 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 7.1 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 7.1 upon receipt of a new list so furnished.
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(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.
(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 7.3. 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 and with the Company. The
Company will notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 7.4. Reports by Company.
The Company shall file with the Trustee and the Commission,
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.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. 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 or lease 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,
directly or indirectly, convey, transfer, sell or lease 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, sell or lease all or substantially
all of its properties and assets to any Person, the Person formed by
such consolidation or into which the Company is merged or the Person
which acquires by conveyance, transfer or sale, or which leases, all or
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substantially all the properties and assets of the Company shall be a
corporation, limited liability company, partnership or trust, shall be
organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due
and punctual payment of the principal of (and premium, if any) and
interest on all the 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 Twelve;
(2) immediately after giving effect to such transaction and
treating any indebted ness which becomes an obligation of the Company
or a Subsidiary as a result of such transaction as having been incurred
by the Company or such Subsidiary at the time of 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, sale or lease and, if a
supplemental indenture 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 8.2. Successor Substituted.
Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any conveyance, transfer, sale or lease of all
or substantially all of the properties and assets of the Company in accordance
with Section 8.1, the successor Person formed by such consolidation or into
which the Company is merged or to which such conveyance, transfer, sale 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 relieved of all obligations
and covenants under this Indenture and the Securities.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures Without Consent of Holders of
Securities.
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:
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(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants and
obligations of the Company herein and in the Securities as permitted by
this Indenture; or
(2) to add to the covenants of the Company for the benefit
of the Holders of Securities, or to surrender any right or power herein
conferred upon the Company; or
(3) to secure the Securities; or
(4) to make provision with respect to the conversion rights
of Holders of Securities pursuant to Section 12.11; or
(5) to comply with the requirements of the Trust Indenture Act
or the rules and regulations of the Commission thereunder in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act, as contemplated by this Indenture or otherwise; or
(6) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent
with the provisions of this Indenture, provided that such action
pursuant to this Clause (7) shall not adversely affect the interests of
the Holders of Securities.
SECTION 9.2. Supplemental Indentures with Consent of Holders of Securities.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent or affirmative vote 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
or the rate of interest payable thereon or any premium payable upon
redemption or mandatory repurchase thereof, or change the coin or
currency in which any Security or the interest or any premium thereon
or any other amount in respect thereof is payable, modify the
provisions of Article Fourteen in a manner adverse to the Holders or
impair the right to institute suit for the enforcement of any payment
in respect of any Security on or after the Stated Maturity thereof (or,
in the case of redemption or any repurchase, on or after the Redemption
Date or Repurchase Date, as the case may be) or the right to convert
any Security or, except as permitted by Section 12.11, adversely affect
the right to convert any Security as provided in Article Twelve, or
modify the provisions of this Indenture with respect to the
subordination of the Securities in a manner adverse to the Holders of
Securities, or
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(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 pursuant to
Section 10.2, or
(4) modify any of the provisions of this Section or Section
5.13 or 10.9, except to increase any percentage contained herein or
therein 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 of Securities
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 9.3. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and shall be fully protected in relying upon, an Officer's
Certificate and an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The Trustee
may, but shall not be obligated to, enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
SECTION 9.4. 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 9.5. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act.
SECTION 9.6. 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 opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by
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the Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE TEN
COVENANTS
SECTION 10.1. 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 10.2. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The
City of New York an office or agency where Securities may be presented or
surrendered for payment, where Securities may be surrendered for registration of
transfer or exchange, 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 to a
Responsible Officer at the Corporate Trust Office of the Trustee, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside the Borough of Manhattan, The City of
New York) where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York for such purposes. 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 10.3. 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 in writing of its action or failure so to act.
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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 as provided by the Trust Indenture Act, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee in writing of its action or failure so to act.
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will (i) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent and (ii) during the continuance
of any default by the Company (or any other obligor upon the Securities) in the
making of any payment in respect of the Securities, upon the written request of
the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
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.
Subject to any applicable abandoned property laws, 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 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 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 10.4. 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.
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The Company shall deliver to the Trustee, as soon as possible
and in any event within 10 days after the Company becomes aware of the
occurrence of an Event of Default or an event which, with notice or the lapse of
time or both, would constitute an Event of Default, an Officers' Certificate
setting forth the details of such Event of Default or default, and the action
which the Company proposes to take with respect thereto.
SECTION 10.5. Existence.
Subject to Article Eight, 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 Company shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 10.6. 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 or any such
Subsidiary from discontinuing the operation or maintenance of any of such
properties if such discontinuance 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 10.7. 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 10.8. Registration and Listing.
The Company (i) will effect all registrations with, and obtain
all approvals by, all governmental authorities that may be necessary under any
United States Federal or state law (including the Securities Act, the Exchange
Act and state securities and Blue Sky laws) for the shares of Common Stock
issuable upon conversion of Securities to be lawfully issued and delivered as
provided herein, and thereafter publicly traded (if permissible under the
Securities Act) and qualified or listed as contemplated by clause (ii); and (ii)
will list the shares of Common
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Stock required to be issued and delivered upon conversion of Securities, prior
to such issuance or delivery, on each national securities exchange on which
outstanding Common Stock is listed or quoted at the time of such delivery, or if
the Common Stock is not then listed on any securities exchange, to qualify the
Common Stock for quotation on the Nasdaq National Market or such other
inter-dealer quotation system, if any, on which the Common Stock is then quoted.
SECTION 10.9. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with
any covenant or conditions set forth in Sections 10.5 to 10.7, inclusive, if
before the time for such compliance the Holders of at least a majority in
principal amount of the Outstanding Securities, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such covenant or condition shall remain in full
force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 11.1. 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 [ ,] 2000, at
the Redemption Prices specified in the form of Security hereinbefore set forth.
SECTION 11.2. Applicability of Article.
Redemption of Securities at the election of the Company, as
permitted by any provision of this Indenture, shall be made in accordance with
such provision and this Article.
SECTION 11.3. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant
to Section 11.1 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company of less than all the Securities, the
Company shall, at least 45 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.
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SECTION 11.4. 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 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 and which may provide for the selection for redemption of
portions (equal to $1,000 or any integral multiple thereof) of the principal
amount of Securities of a denomination larger than $1,000.
If (i) the Company selects any Security for partial redemption
and (ii) after receiving notice of such partial redemption (but before the
Redemption Date), the Holder of such Security tenders such Security for
conversion in part, then 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 11.5. Notice of Redemption.
Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of 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 Rate, 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,
(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 11.6. Deposit of Redemption Price.
On or before 12 noon New York time 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 10.3) 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 3.8) be paid to the Company upon
Company Request or, if then held by the Company, shall be discharged from such
trust.
SECTION 11.7. 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 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 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 3.8.
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 interest from the Redemption Date at the rate borne by
the Security.
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SECTION 11.8. 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 10.2 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such 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 of the Security so surrendered.
ARTICLE TWELVE
CONVERSION OF SECURITIES
SECTION 12.1. Conversion Privilege and Conversion Rate.
Subject to and upon compliance with the provisions of this
Article, at the option of the Holder thereof, any Security or any portion which
is $1,000 or an integral multiple thereof may be converted into fully paid and
nonassessable shares (calculated as to each conversion to the nearest 1/100th of
a share) of Common Stock of the Company at the Conversion Rate, determined as
hereinafter provided, in effect at the time of conversion. Such conversion right
shall commence upon issuance of such Security and shall expire at the close of
business on [ ,] 2002, 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
exercises his right to require the Company to repurchase the Security, such
conversion right in respect of the Security, or portion thereof, so called or
repurchasable, shall expire at the close of business on the Redemption Date or
the 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 rate at which shares of Common Stock shall be delivered
upon conversion (herein called the "Conversion Rate") shall be initially [ ]
shares of Common Stock for each $1,000 principal amount of Securities. The
Conversion Rate shall be adjusted in certain instances as provided in this
Article Twelve.
SECTION 12.2. 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 of the Company
maintained for that purpose pursuant to Section 10.2, accompanied by a duly
signed conversion notice substantially in the form provided in Section 2.4
stating that the Holder elects to convert such Security or, if less than the
entire principal amount
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thereof is to be converted, the portion thereof to be converted. Holders that
surrender Securities for conversion on a date that is not an Interest Payment
Date are not entitled to receive any interest for the period from the next
preceding Interest Payment Date to the date of conversion, except as described
below. However, Holders of Securities on a Regular Record Date, including
Securities surrendered for conversion after the Regular Record Date, will
receive the interest payable on such Securities on the next succeeding Interest
Payment Date. Accordingly, any Security surrendered for conversion during the
period from the close of business on a Regular Record Date to the opening of
business on the next succeeding Interest Payment Date must be accompanied by
payment of an amount, in New York Clearing House funds, equal to the interest
payable on such Interest Payment Date on the principal amount of Securities
being surrendered for conversion; provided, however, that no such payment will
be required upon the conversion of any Security (or portion thereof) that has
been called for redemption or that is eligible to be delivered for repurchase
if, as a result, the right to convert such Security would terminate during the
period between such Regular Record Date and the next succeeding Interest Payment
Date. Except as provided in this paragraph, no cash payment or adjustment shall
be made upon any conversion on account of any interest accrued from the Interest
Payment Date next preceding the conversion date, in respect of any Security (or
part thereof, as the case may be) surrendered for conversion, or on account of
any dividends on the Common Stock issued upon conversion.
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 deliver to the Trustee, for delivery to the Holder, a
certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a
share, as provided in Section 12.3.
All shares of Common Stock delivered upon such conversion of
Securities shall rank pari passu with other shares of Common Stock of the
Company.
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 an aggregate principal
amount equal to the unconverted portion of the principal amount of such
Security.
SECTION 12.3. Fractions of Shares.
No fractional shares of Common Stock shall be issued upon
conversion of any Security or 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),
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the Company shall calculate and pay a cash adjustment in respect of such
fraction (calculated to the nearest 1/100th of a share) in an amount equal to
the same fraction of the Closing Price 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), alternatively, the Company shall round up to the next
higher whole share.
SECTION 12.4. Adjustment of Conversion Rate.
The Conversion Rate shall be subject to adjustments from time
to time as follows:
(1) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company payable in shares of
Common Stock, the Conversion Rate in effect at the opening of business on the
day following the Determination Date for such dividend or other distribution
shall be increased by dividing such Conversion Rate by a fraction (a) the
numerator of which shall be the number of shares of Common Stock outstanding at
the close of business on such Determination Date and (b) the denominator of
which shall be the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such increase to become
effective immediately after the opening of business on the day following such
Determination Date. 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
will not pay any dividend or make any distribution on shares of Common Stock
held in the treasury of the Company.
(2) Subject to the last sentence of paragraph (7) of this
Section, in case the Company shall issue rights, options or warrants to all
holders of its Common Stock entitling them 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 (8) of this Section 12.4) of the
Common Stock on the Determination Date for such distribution, the Conversion
Rate in effect at the opening of business on the day following such
Determination Date shall be increased by dividing such Conversion Rate by a
fraction (a) the numerator of which shall be the number of shares of Common
Stock outstanding at the close of business on such Determination Date 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 (b) the denominator of
which shall be the number of shares of Common Stock outstanding at the close of
business on such Determination Date plus the number of shares of Common Stock so
offered for subscription or purchase, such increase to become effective
immediately after the opening of business on the day following such
Determination Date. 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
will not issue any rights, options or warrants 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 Rate
in effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately
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increased, and, conversely, in case outstanding shares of Common Stock shall
each be combined into a smaller number of shares of Common Stock, the Conversion
Rate in effect at the opening of business on the day following the day upon
which such combination becomes effective shall be proportionately reduced, such
increase or reduction, as the case may be, to become effective immediately after
the opening of business on the day following the day upon which such sub
division or combination becomes effective.
(4) Subject to the last sentence of paragraph (7) of this
Section, 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, or other property (including securities, but excluding (i) any
rights, options or warrants referred to in paragraph (2) of this Section, (ii)
any dividend or distribution paid exclusively in cash, (iii) any dividend or
distribution referred to in paragraph (1) of this Section and (iv) any merger or
consolidation to which Section 12.11 applies), the Conversion Rate shall be
adjusted so that the same shall equal the rate determined by dividing the
Conversion Rate in effect immediately prior to the close of business on the
Determination Date for such distribution by a fraction (a) the numerator of
which shall be the current market price per share (determined as provided in
paragraph (8) of this Section 12.4) of the Common Stock on such Determination
Date less the then fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a Board Resolution
filed with the Trustee) of the portion of the assets, shares or evidences of
indebtedness so distributed applicable to one share of Common Stock and (b) the
denominator of which shall be such current market price per share of the Common
Stock, such adjustment to become effective immediately prior to the opening of
business on the day following such Determination 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 (8) of this Section.
(5) In case the Company shall, by dividend or otherwise, make
a Cash Distribution in an aggregate amount that, combined with (i) the aggregate
amount of any other Cash Distributions made within the 12 months preceding the
date of payment of such distribution in respect of which no adjustment pursuant
to this paragraph (5) has been made and (ii) any Excess Purchase Payment made
within the 12 months preceding the date of such distribution and in respect of
which no adjustment has been made pursuant to paragraph (6) of this Section
12.4, exceeds 10% of the Company's Market Capitalization on the Determination
Date for such Cash Distribution, then, and in each such case, immediately after
the close of business on the Determination Date for such Cash Distribution, the
Conversion Rate shall be adjusted so that the same shall equal the rate
determined by dividing the Conversion Rate in effect immediately prior to the
close of business on such Determination Date by a fraction (a) the numerator of
which shall be equal to the current market price per share (determined as
provided in paragraph (8) of this Section) of the Common Stock on such
Determination Date less an amount equal to the quotient of (1) the amount of
such excess divided by (2) the number of shares of Common Stock outstanding on
such Determination Date and (b) the denominator of which shall be equal to the
current market price per share (determined as provided in paragraph (8) of this
Section 12.4) of the Common Stock on such Determination Date.
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(6) In case the Company or any Subsidiary shall make an Excess
Purchase Payment in an aggregate that, combined with (i) the aggregate amount of
any other Excess Purchase Payments made by the Company or any Subsidiary within
the 12 months preceding such Excess Purchase Payment in respect of which no
adjustment pursuant to this paragraph (6) has been made and (ii) the aggregate
amount of any Cash Distributions made within the 12 months preceding such Excess
Purchase Payment in respect of which no adjustment pursuant to paragraph (5) of
this Section 12.4 has been made, exceeds 10% of the Company's Market
Capitalization as of the Determination Date, then, and in each such case,
immediately prior to the opening of business on the day after the tender offer
in respect of which such Excess Purchase Payment is to be made expires, the
Conversion Rate shall be adjusted so that the same shall equal the rate
determined by dividing the Conversion Rate in effect immediately prior to the
close of business on the Determination Date for such tender offer by a fraction
(a) the numerator of which shall be equal (1) to the product of (A) the number
of shares of Common Stock outstanding (including any tendered shares) at such
Determination Date less (B) the amount of such excess and (b) the denominator of
which shall be equal to the product of (X) the current market price per share of
the Common Stock (determined as provided in paragraph (8) of this Section 12.4)
as of such Determination Date multiplied by (Y) the number of shares of Common
Stock outstanding (including any tendered shares) as of the Determination Date
less the number of all shares validly tendered and not withdrawn as of the
Determination Date.
(7) The reclassification of Common Stock into securities other
than Common Stock (other than any reclassification upon a consolidation or
merger to which Section 12.11 applies) shall be deemed to involve (a) a
distribution of such securities other than Common Stock to all holders of Common
Stock (and the effective date of such reclassification shall be deemed to be the
Determination Date), and (b) a subdivision or combination, as the case may be,
of the number of shares of Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification shall be
deemed to be "the day upon which such subdivision becomes effective" or "the day
upon which such combination becomes effective", as the case may be, and "the day
upon which such subdivision or combination becomes effective" within the meaning
of paragraph (3) of this Section 12.4). Rights or warrants issued by the Company
to all holders of its Common Stock entitling the holders thereof to subscribe
for or purchase shares of Common Stock, which rights or warrants (i) are deemed
to be transferred with such shares of Common Stock, (ii) are not exercisable and
(iii) are also issued in respect of future issuances of Common Stock, in each
case in clauses (i) through (iii) until the occurrence of a specified event or
events ("Trigger Event"), shall for purposes of this Section 12.4 not be deemed
issued until the occurrence of the earliest Trigger Event.
(8) For the purpose of any computation under paragraphs (2),
(4), (5) or (6) of this Section 12.4, the current market price per share of
Common Stock on any date shall be calculated by the Company and 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 10 Trading Days before, and
ending not later than, the earlier of the day in question and the day before the
"ex" date with respect to the issuance or distribution requiring such
computation. For purposes of this paragraph, the term "ex date", when used with
respect to any issuance or distribution, means the first date on which the
Common Stock trades regular way in the applicable securities
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market or on the applicable securities exchange without the right to receive
such issuance or distribution.
(9) No adjustment in the Conversion Rate shall be required
unless such adjustment (plus any adjustments not previously made by reason of
this paragraph (9)) would require an increase or decrease of at least one
percent in such rate; 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. All calculations under this
Article shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be.
(10) The Company may make such increases in the Conversion
Rate, for the remaining term of the Securities or any shorter term, in addition
to those required by paragraphs (1), (2), (3), (4), (5) and (6) of this Section
12.4, as it considers to be advisable in order to avoid or diminish any income
tax to any holders of shares of Common Stock resulting from any dividend or
distribution of stock or issuance of rights or warrants to purchase or subscribe
for stock or from any event treated as such for income tax purposes. The Company
shall have the power to resolve any ambiguity or correct any error in the
application of this paragraph (10) and its actions in so doing shall, absent
manifest error, be final and conclusive.
(11) The Company from time to time at its option may increase
the Conversion Rate by any amount for any period of at least 20 calendar days if
the Board of Directors has made a determination that such increase would be in
the best interests of the Company, which determination shall be conclusive and
evidenced by a Board Resolution. To exercise this option the Company shall
provide a written notice to the Trustee and the Holders in accordance with
Sections 1.5 and 1.6 at least 15 calendar days prior to the first day of the
period during which the Conversion Rate will be adjusted stating that the
Conversion Rate will be adjusted pursuant to this provision, the period during
which the adjusted Conversion Rate will be in effect and the adjusted Conversion
Rate.
SECTION 12.5. Notice of Adjustments of Conversion Rate.
Whenever the Conversion Rate is adjusted as provided in
Section 12.4:
(1) the Company shall compute the adjusted Conversion Rate in
accordance with Section 12.4 and shall prepare a certificate signed by
either the chief financial officer, the treasurer or the controller of
the Company setting forth the adjusted Conversion Rate and showing in
reasonable detail the facts upon which such adjustment is based, and
such certificate shall promptly be filed with the Trustee and at each
office or agency maintained for the purpose of conversion of Securities
pursuant to Section 10.2; and
(2) a written notice stating that the Conversion Rate has been
adjusted and setting forth the adjusted Conversion Rate shall forthwith
be prepared, and as soon as practicable after it is prepared, such
written notice shall be provided by the Company to the Trustee and to
all Holders in accordance with Sections 1.5 and 1.6. Unless and until
the Trustee receives such written notice, it need not inquire into
whether any adjustment of the Conversion Rate is required and may
assume that no such adjustment has been, or is required to be, made.
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SECTION 12.6. 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 any adjustment pursuant to Section 12.4; or
(b) the Company shall authorize the granting to all the
holders of its Common Stock of rights, options or warrants to subscribe
for or purchase any shares of capital stock of any class or of any
other rights; or
(c) of any reclassification of the Common Stock of the
Company, or of any consolidation, merger or share exchange to which the
Company is a party and for which approval of any shareholders of the
Company is required, or of the conveyance, sale, transfer or lease 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 shall commence a tender
offer for all or a portion of the Company's outstanding shares of
Common Stock (or shall amend any such tender offer);
then the Company shall cause to be filed with the Trustee and at each office or
agency maintained for the purpose of conversion of Securities pursuant to
Section 10.2, and shall cause to be provided to all Holders in accordance with
Section 1.6, at least 20 days (or 10 days in any case specified in clause (a) or
(b) above) prior to the applicable record, expiration or effective date
hereinafter specified, a written notice stating (x) the date on which a record
is to be taken for the purpose of such dividend, distribution, rights, options
or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights, options or warrants are to be determined, (y) the date on which the
right to make tenders under such tender offer expires or (z) the date on which
such reclassification, consolidation, merger, conveyance, transfer, sale, lease,
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,
conveyance, transfer, sale, lease, dissolution, liquidation or winding up.
Neither the failure to give such written notice or the notice referred to in the
following paragraph nor any defect therein shall affect the legality or validity
of the proceedings described in clauses (a) through (e) of this Section 12.6.
The preceding paragraph to the contrary notwithstanding, the
Company shall cause to be filed at each office or agency maintained for the
purpose of conversion of Securities pursuant to Section 10.2, and shall cause to
be provided to all Holders in accordance with Section 1.6,
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notice of any tender offer by the Company or any Subsidiary for all or any
portion of the Common Stock at or about the time that such notice of tender
offer is provided to the public generally.
SECTION 12.7. Company to Reserve Common Stock.
The Company shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued Common Stock, for the
purpose of effecting the conversion of Securities, the full number of shares of
Common Stock then issuable upon the conversion of all Outstanding Securities.
SECTION 12.8. Taxes on Conversions.
Except as provided in the next sentence, the Company will pay any
and all taxes and duties 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 or duty 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 duty, or has established to the satisfaction of the Company that
such tax or duty has been paid.
SECTION 12.9. Covenant as to Common Stock.
The Company agrees that all shares of Common Stock which may be
delivered upon conversion of Securities, upon such delivery, will have been duly
authorized and validly issued and will be fully paid and nonassessable (and
shall be issued out of the Company's authorized but unissued Common Stock) and,
except as provided in Section 12.8, the Company will pay all taxes, liens and
charges with respect to the issue thereof.
SECTION 12.10. Cancellation of Converted Securities.
All Securities delivered for conversion shall be delivered to the
Trustee or the Paying Agent or its agent to be canceled by or at the direction
of the Trustee, which shall dispose of the same as provided in Section 3.10.
SECTION 12.11. Provision in Case of Consolidation, Merger or Sale of Assets.
In case of any consolidation of the Company with any other
Person, any merger of the Company into another Person or of another Person into
the Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company) or any conveyance, sale, transfer or lease of all or substantially
all of the properties and assets of the Company, the Person formed by such
consolidation or resulting from such merger or which acquires such properties
and assets, as the case may be, shall execute and deliver to the Trustee a
supplemental indenture providing that the Holder of each Security then
Outstanding shall have the right thereafter, during the period such Security
shall be convertible as specified in Section 12.1, to convert such Security only
into the kind and amount of securities, cash and other property receivable upon
such consolidation,
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merger, conveyance, sale, transfer or lease (including any Common Stock
retainable) by a holder of the number of shares of Common Stock of the Company
into which such Security might have been converted immediately prior to such
consolidation, merger, conveyance, sale, transfer or lease, (a) assuming such
holder of Common Stock of the Company (i) is not a Person with which the Company
consolidated, into which the Company merged or which merged into the Company or
to which such conveyance, sale, transfer or lease was made, as the case may be
(a "Constituent Person"), or an Affiliate of a Constituent Person and (ii)
failed to exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance, sale, transfer or lease (provided that if the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance, sale, transfer, or lease is not the same for each share of Common
Stock of the Company held immediately prior to such consolidation, merger,
conveyance, sale, transfer or lease by others than a Constituent Person or an
Affiliate thereof and in respect of which such rights of election shall not have
been exercised ("Non-electing Share"), then for the purpose of this Section
12.11 the kind and amount of securities, cash and other property receivable upon
such consolidation, merger, conveyance, sale, transfer or lease by the holders
of each Non-electing Share shall be deemed to be the kind and amount so
receivable per share by a plurality of the Non-electing Shares), and (b) further
assuming that, if such consolidation, merger, conveyance, transfer, sale or
lease occurs before the first date on which Securities may be converted as
provided herein, such Security was convertible immediately prior to the time of
such occurrence at the initial Conversion Rate as adjusted from the first
original issue date of the Securities to such time as provided herein. 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 12.11 shall similarly apply to
successive consolidations, mergers, conveyances, sales, transfers or leases.
Notice of the execution of such a supplemental indenture shall be given by the
Company to the Holder of each Security as provided in Section 1.6 promptly upon
such execution. In this paragraph, "securities of the kind receivable" upon such
consolidation, merger, conveyance, transfer, sale or lease by a holder of Common
Stock means securities that, among other things, are registered and transferable
under the Securities Act, and listed and approved for quotation in all
securities markets, in each case to the same extent as such securities so
receivable by a holder of Common Stock.
Neither the Trustee nor any Paying Agent shall be under any
responsibility to determine the correctness of any provisions contained in any
such supplemental indenture relating either to the kind or amount of shares of
stock or other securities or property or cash receivable by Holders upon the
conversion of their Securities after any such consolidation, merger, conveyance,
transfer, sale or lease or to any such adjustment, but may accept as conclusive
evidence of the correctness of any such provisions, and shall be fully protected
in relying upon, an Opinion of Counsel with respect thereto, which the Company
shall cause to be furnished to the Trustee.
SECTION 12.12. Responsibility of Trustee for Conversion Provisions.
The Trustee shall not at any time be under any duty or
responsibility to any Holder to determine whether any facts exist which may
require any adjustment of the Conversion Rate, or with respect to the nature or
extent of any such adjustment when made, or with respect to the
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method employed, or herein or in any supplemental indenture provided to be
employed, in making the same, or whether a supplemental indenture need be
entered into. The Trustee shall not be accountable with respect to the validity
or value (or the kind or amount) of any Common Stock, or of any other securities
or property or cash, which may at any time be issued or delivered upon the
conversion of any Security; and it or they do not make any representation with
respect thereto. The Trustee shall not be responsible for any failure of the
Company to make or calculate any cash payment or to issue, transfer or deliver
any shares of Common Stock or share certificates or other securities or property
or cash upon the surrender of any Security for the purpose of conversion; and
the Trustee shall not be responsible for any failure of the Company to comply
with any of the covenants of the Company contained in this Article.
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
SECTION 13.1. Securities Subordinate to Senior Debt.
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 (subject to the
provisions of Article Four), 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 any payment of the Repurchase Price (other than by
delivery of shares of Common Stock) are hereby expressly made subordinate and
subject in right of payment to the prior payment in full of all Senior Debt.
SECTION 13.2. 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 Debt shall be entitled to
receive payment in full of all amounts due or to become due on or in respect of
all Senior Debt 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 or on account of the purchase, redemption or other acquisition of
Securities, and to that end the holders of Senior Debt 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 of any kind or character,
whether in cash, securities or other property, before all
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Senior Debt is paid in full, 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 Debt remaining unpaid, to the
extent necessary to pay all Senior Debt in full, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt.
For purposes of this Article only, the words "cash, securities or
other property" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment which shares of stock
are subordinated in right of payment to all then outstanding Senior Debt to
substantially the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article. 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 Eight 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 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 Eight.
SECTION 13.3. Prior Payment to Senior Debt Upon Acceleration of Securities.
In the event that any Securities are declared due and payable
before their Stated Maturity pursuant to Section 5.2, then and in such event the
holders of the Senior Debt outstanding at the time such Securities so become due
and payable shall be entitled to receive payment in full of all amounts due or
to become due on or in respect of all Senior Debt before the Holders of the
Securities are entitled to receive any payment by the Company on account of the
principal of (or premium, if any) or interest on the Securities or on account of
the purchase or other acquisition of Securities.
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, 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 shall not apply to any payment
with respect to which Section 13.2 would be applicable.
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SECTION 13.4. No Payment When Senior Debt in Default.
(a) (i) 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
Debt beyond any applicable grace period with respect thereto or (ii) in the
event that any other event of default with respect to any Senior Debt shall have
occurred and be continuing which would then permit the holders of such Senior
Debt (or a trustee on behalf of the holders thereof) to declare such Senior Debt
due and payable prior to the date on which it would otherwise have become due
and payable, unless and until, in the case of this clause (ii), such event of
default shall have been cured or waived or shall have ceased to exist after
written notice of such event of default to the Company and the Trustee by any
holder of such Senior Debt (or a trustee on behalf of the holders thereof), or
(b) in the event any judicial proceeding shall be pending with respect to any
such default in payment or event of 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, redemption or other acquisition of
Securities.
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, 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, in
the case of the Trustee, or the Trustee, in the case of such Holder.
The provisions of this Section shall not apply to any payment
with respect to which Section 13.2 would be applicable.
SECTION 13.5. Payment Permitted If No Default.
Nothing contained in this Article 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 13.2 or under the
conditions described in Section 13.3 or 13.4, 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, it did not have actual knowledge that
such payment would have been prohibited by the provisions of this Article.
SECTION 13.6. Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all Senior Debt, the Holders of
the Securities shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Debt pursuant to the provisions
of this Article to the rights of the holders of such Senior Debt to receive
payments and distributions of cash, property and securities applicable to the
Senior Debt until the principal of (and premium, if any) and interest on the
Securities shall be paid in full. For purposes of such subrogation, no payments
or distributions to the holders of the Senior Debt
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of any cash, property or securities to which the Holders of the Securities or
the Trustee would be entitled except for the provisions of this Article, and no
payments over pursuant to the provisions of this Article to the holders of
Senior Debt by Holders of the Securities or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Debt and the Holders of the
Securities, be deemed to be a payment or distribution by the Company to or on
account of the Senior Debt.
SECTION 13.7. Provisions Solely to Define Relative Rights.
The provisions of this Article 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 Debt on the other hand. Nothing contained
in this Article 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 Debt and the Holders of the Securities, the obligation of the Company,
which is absolute and unconditional, to pay to the Holders of the Securities the
principal 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 Debt; 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 of the holders of Senior Debt to
receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder.
SECTION 13.8. 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 and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 13.9. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Debt 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 of any Senior
Debt, 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 Debt may, at any time and from time to time,
without the consent of or written 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 or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Debt, 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
Debt, or otherwise amend or supplement in any manner Senior Debt or any
instrument evidencing the same or any agreement under which Senior Debt
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is outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person
liable in any manner for the collection of Senior Debt; and (iv) exercise or
refrain from exercising any rights against the Company and any other Person.
SECTION 13.10. 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 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 a Responsible Officer of the Trustee shall have received written
notice thereof from the Company or a holder of Senior Debt or from any trustee
therefor; and, prior to the receipt of any such written notice, the Trustee
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 at least two Business Days prior to the date upon which by the
terms hereof any money may become 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.
The Trustee shall be entitled to conclusively rely on the
delivery to it of a written notice by a Person representing himself to be a
holder of Senior Debt (or a trustee therefor) to establish that such notice has
been given by a holder of Senior Debt (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 Debt to participate in
any payment or distribution pursuant to this Article, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Debt 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, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 13.11. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company
referred to in this Article, the Trustee and the Holders of the Securities shall
be entitled to conclusively 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 Debt
and other indebtedness of the Company, the amount thereof or payable thereon,
the
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amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
SECTION 13.12. Trustee Not Fiduciary for Holders of Senior Debt.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt 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 Debt shall be entitled by virtue of this Article or otherwise.
SECTION 13.13. Rights of Trustee as Holder of Senior Debt;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all
the rights set forth in this Article with respect to any Senior Debt which may
at any time be held by it, to the same extent as any other holder of Senior
Debt, and nothing in this Indent re shall deprive the Trustee of any of its
rights as such holder.
Nothing in this Article shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 6.7.
SECTION 13.14. 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 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 in addition to or in place of the Trustee; provided,
however, that Section 13.12 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 13.15. Certain Conversions and Repurchases Deemed Payment.
For the purposes of this Article only, (1) the issuance and
delivery of junior securities upon conversion of Securities in accordance with
Article Twelve or upon the repurchase of Securities in accordance with Article
Fourteen shall not be deemed to constitute a payment or distribution on account
of the principal of or premium or interest on 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, the term "junior
securities" means (a) shares of any stock of any class of the Company and any
cash, property or securities into which the Securities are convertible pursuant
to Article Twelve and (b) securities of the Company which are subordinated in
right of payment to all Senior Debt 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. Nothing contained in this Article or elsewhere in this Indenture or in
the
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Securities is intended to or shall impair, as among the Company, its creditors
other than holders of Senior Debt 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 Twelve or to exchange such Security for
Common Stock in accordance with Article Fourteen if the Company elects to
satisfy the obligations under Article Fourteen by the delivery of Common Stock.
ARTICLE FOURTEEN
REPURCHASE OF SECURITIES AT THE OPTION OF THE
HOLDER UPON A CHANGE OF CONTROL
SECTION 14.1. Right to Require Repurchase.
In the event that a Change of Control (as hereinafter defined)
shall occur, then each Holder shall have the right, at such Holder's option, to
require the Company to repurchase, and upon the exercise of such right the
Company shall repurchase, all of such Holder's Securities, or any portion of the
principal amount thereof that is equal to $1,000 or any integral multiple
thereof, on the date (the "Repurchase Date") that is 45 days after the date on
which the Company Notice (as defined in Section 14.3) is given to Holders at a
purchase price equal to 100% of the principal amount of the Securities to be
repurchased plus interest accrued to the Repurchase Date (the "Repurchase
Price"); provided, however, that installments of interest on Securities whose
Stated Maturity is on or prior to the Repurchase Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such on the relevant Record Date according to their terms and the provisions of
Section 3.8. At the option of the Company, the Repurchase Price may be paid in
cash or, subject to the fulfillment by the Company of the conditions set forth
Section 14.2, by delivery of shares of Common Stock having a fair market value
equal to the Repurchase Price as described in Section 14.2(a). Whenever in this
Indenture (including Sections 2.2, 3.1, 5.1(1) and 5.8) there is a reference, in
any context, to the principal of any Security as of any time, such reference
shall be deemed to include reference to the Repurchase Price payable in respect
of such Security to the extent that such Repurchase Price is, was or would be so
payable at such time, and express mention of the Repurchase Price in any
provision of this Indenture shall not be construed as excluding the Repurchase
Price in those provisions of this Indenture when such express mention is not
made; provided, however, that for the purposes of Article Thirteen, such
reference shall be deemed to include reference to the Repurchase Price only if
the Repurchase Price is payable in cash.
SECTION 14.2. Conditions to the Company's Election to Pay the
Repurchase Price in Common Stock.
The Company may elect to pay the Repurchase Price by delivery of
shares of Common Stock pursuant to Section 14.1 if and only if the following
conditions have been satisfied:
(a) The shares of Common Stock deliverable in payment of the
Repurchase Price shall have a fair market value as of the Repurchase Date of not
less than the Repurchase Price. For purposes of this Section 14.2, the fair
market value of shares of Common Stock shall be
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determined by the Company and shall be equal to 95% of the average of the
Closing Prices for the five consecutive Trading Days ending on and including the
third Trading Day immediately preceding the Repurchase Date;
(b) The shares of Common Stock deliverable in payment of the
Repurchase Price shall have been listed on the New York Stock Exchange or, if
the Common Stock is not then so listed, such shares shall be have been approved
for quotation in the Nasdaq National Market, in either case, immediately prior
to the Repurchase Date; and
(c) All shares of Common Stock deliverable in payment of the
Repurchase Price shall be issued out of the Company's authorized but unissued
Common Stock and will, upon issue, be duly and validly issued and fully paid and
non-assessable and free of any preemptive rights.
If all of the conditions set forth in this Section 14.2 are not
satisfied in accordance with the terms thereof, the Repurchase Price shall be
paid by the Company only in cash.
SECTION 14.3. Notices; Method of Exercising Repurchase Right, Etc.
(a) Unless the Company shall have theretofore called for
redemption all of the Outstanding Securities, on or before the 30th day after
the occurrence of a Change of Control, the Company or, at the request and
expense of the Company, the Trustee, shall give to all Holders of Securities, in
the manner provided in Section 1.6, notice (the "Company Notice") of the
occurrence of the Change of Control and of the repurchase right set forth herein
arising as a result thereof. 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 whether the Repurchase Price shall
be paid by the Company in cash or by delivery of shares of Common
Stock,
(4) the instructions a Holder must follow to exercise a
repurchase right,
(5) that on the Repurchase Date the Repurchase Price, and accrued
interest, if any, will become due and payable upon each such Security
designated by the Holder to be repurchased, and that interest thereon
shall cease to accrue on and after said date, and
(6) the Conversion Rate then in effect, the date on which the
right to convert the principal amount of the Securities to be
repurchased will terminate and the place or places where such
Securities may be surrendered for conversion.
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No failure of the Company to give the foregoing notices or
defect therein shall limit any Holder's right to exercise a repurchase right or
affect the validity of the proceedings for the repurchase of Securities.
If any of the foregoing provisions or other provisions of this
Article Fourteen are inconsistent with applicable law, such law shall govern.
(b) To exercise a repurchase right, a Holder shall deliver to
the Trustee or any Paying Agent on or before the 5th day prior to the Repurchase
Date (i) written notice of the Holder's exercise of such right, which notice
shall set forth the name of the Holder, the principal amount of the Securities
to be repurchased (and, if any Security is to be repurchased in part, the serial
number thereof, the portion of the principal amount thereof to be repurchased
and the name of the Person in which the portion thereof to remain Outstanding
after such repurchase is to be registered) and a statement that an election to
exercise the repurchase right is being made thereby, and, in the event that the
Repurchase Price shall be paid in shares of Common Stock, the name or names
(with addresses) in which the certificate or certificates for shares of Common
Stock shall be issued, and (ii) the Securities with respect to which the
repurchase right is being exercised. Such written notice shall be irrevocable,
except that the right of the Holder to convert the Securities with respect to
which the repurchase right is being exercised shall continue until the close of
business on the Repurchase Date.
(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause to be paid to
the Trustee the Repurchase Price in cash or shares of Common Stock, as provided
above, for payment to the Holder on the Repurchase Date or, if shares of Common
Stock are to be paid, as promptly after the Repurchase Date as practicable,
together with accrued and unpaid interest to the Repurchase Date payable with
respect to the Securities as to which the purchase right has been exercised;
provided, however, that installments of interest that mature on or prior to the
Repurchase Date shall be payable in cash, to the Holders of the Securities, or
one or more Predecessor Securities, registered as such at the close of business
on the relevant Regular Record Date.
(d) If any Security (or portion thereof) surrendered for
repurchase shall not be so paid on the Repurchase Date, the principal amount of
such Security (or portion thereof, as the case may be) shall, until paid, bear
interest to the extent permitted by applicable law from the Repurchase Date at
the rate per annum borne by such Security, and each Security shall remain
convertible into Common Stock until the principal of such Security (or portion
thereof, as the case may be) shall have been paid or duly provided for.
(e) Any Security which is to be repurchased only in part shall
be surrendered to the Trustee at the office or agency of the Company designated
for that purpose pursuant to Section 10.2 (with, if the Company or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and make available for delivery to the Holder of
such Security without service charge, a new Security or Securities, containing
identical terms and conditions, each in an authorized denomination in aggregate
principal amount equal to and in exchange for the unrepurchased portion of the
principal of the Security so surrendered.
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(f) Any issuance of shares of Common Stock in respect of the
Repurchase Price shall be deemed to have been effected immediately prior to the
close of business on the Repurchase Date and the Person or Persons in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such repurchase shall be deemed to have become on the Repurchase
Date the holder or holders of record of the shares represented thereby;
provided, however, that any surrender for repurchase on a date when the stock
transfer books of the Company shall be closed shall constitute the Person or
Persons in whose name or names the certificate or certificates for such shares
are to be issued as the record holder or holders thereof for all purposes at the
opening of business on the next succeeding day on which such stock transfer
books are open. No payment or adjustment shall be made for dividends or
distributions on any Common Stock issued upon repurchase of any Security
declared prior to the Repurchase Date.
(g) No fractions of shares shall be issued upon repurchase of
Securities. If more than one Security shall be repurchased from the same Holder
and the Repurchase Price shall be payable in shares of Common Stock, the number
of full shares which shall be issuable upon such repurchase shall be computed on
the basis of the aggregate principal amount of the Securities so repurchased.
Instead of any fractional share of Common Stock which would otherwise be
issuable on the repurchase of any Security or Securities, the Company will
deliver to the applicable Holder its check for the current market value of such
fractional share. The current market value of a fraction of a share shall be
determined by multiplying the current market price of a full share by the
fraction, and rounding the result to the nearest cent. For purposes of this
Section, the current market price of a share of Common Stock shall be the
Closing Price of the Common Stock on the Trading Day immediately preceding the
Repurchase Date.
(h) Any issuance and delivery of certificates for shares of
Common Stock on repurchase of Securities shall be made without charge to the
Holder of Securities being repur chased for such certificates or for any tax or
duty in respect of the issuance or delivery of such certificates or the
securities represented thereby; provided, however, that the Company shall not be
required to pay any tax or duty which may be payable in respect of any transfer
involved in the issuance or delivery of certificates for shares of Common Stock
in a name other than that of the Holder of the Securities being repurchased, and
no such issuance or delivery shall be made unless and until the Person
requesting such issuance or delivery has paid to the Company the amount of any
such tax or duty or has established, to the satisfaction of the Company, that
such tax or duty has been paid.
(i) All Securities delivered for repurchase shall be delivered to
the Trustee, the Paying Agent or any other agents (as shall be set forth in the
Company Notice) to be canceled at the direction of the Trustee, which shall
dispose of the same as provided in Section 3.10.
SECTION 14.4. Certain Definitions.
For purposes of this Article Fourteen,
(a) the term "beneficial owner" shall be determined in accordance
with Rule 13d-3 promulgated by the Commission pursuant to the Exchange Act;
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(b) a "Change of Control" shall be deemed to have occurred at the
time, after the original issuance of the Securities, of:
(i) the acquisition by any person of beneficial ownership,
directly or indirectly, through a purchase, merger or other
acquisition transaction or series of transactions, of shares of
capital stock of the Company entitling such person to exercise 50% or
more of the total voting power of all shares of capital stock of the
Company entitled to vote generally in the elections of directors (any
shares of voting stock of which such person is the beneficial owner
that are not then outstanding being deemed outstanding for purposes of
calculating such percentage) other than any such acquisition by the
Company or any employee benefit plan of the Company; or
(ii) any consolidation or merger of the Company with or into, any
other person, any merger of another person with or into the Company,
or any conveyance, transfer, sale, lease or other disposition of all
or substantially all of the assets of the Company to another person
(other than (a) any such transaction (x) which does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock and (y) pursuant to which holders of Common
Stock immediately prior to such transaction have the entitlement to
exercise, directly or indirectly, 50% or more of the total voting
power of all shares of capital stock entitled to vote generally in the
election of directors of the continuing or surviving person
immediately after such transaction and (b) any merger which is
effected solely to change the jurisdiction of incorporation of the
Company and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock into solely shares of common
stock);
provided, however, that a Change of Control shall not be deemed to have occurred
if the Closing Price for any five Trading Days within the period of 10
consecutive Trading Days (x) ending immediately after the later of the date of
the Change of Control or the date of the public announcement of the Change of
Control (in the case of a Change of Control under Clause (i) above) or (y)
ending immediately prior to the date of the Change of Control (in the case of a
Change of Control under Clause (ii) above) shall equal or exceed 105% of the
Conversion Price in effect on each such Trading Day; provided, that any
temporary increase in the Conversion Rate made by the Company pursuant to
paragraph (11) of Section 12.4 shall not be taken into account for purposes of
the foregoing determination;
(c) the term "Conversion Price" on any day shall equal $1,000
divided by the Conversion Rate in effect on each such day; and
(d) for purposes of this Section 14.4, the term "person" shall
include any syndicate or group which would be deemed to be a "person" under
Section 13(d)(3) of the Exchange Act.
-76-
<PAGE> 86
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.
TECH DATA CORPORATION
By
--------------------------------
Name:
Title:
Attest:
- ------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
Trustee
By
--------------------------------
Name:
Title:
Attest:
- -------------------------------
Name:
Title:
-77-
<PAGE> 87
STATE OF ________ )
): ss.:
COUNTY OF _______ )
On the __th day of , 1997, before me personally came
_________________, to me known, who, being by me duly sworn, did depose and say
that [s]he is ______________________ of Tech Data Corporation, one of the
corporations described in and which executed the foregoing instrument; that
[s]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 [s]he signed his name thereto
by like authority.
------------------------------
Notary Public
STATE OF )
) : ss.:
COUNTY OF )
On the ______ th day of ________, 1997, before me personally came
________, to me known, who, being by me duly sworn, did depose and say that
[s]he is of ___________, a ___________ described in and which executed the
foregoing instrument; that she knows the seal of said _____________________;
that the seal affixed to said instrument is such corporate seal; that it was
so affixed pursuant to the bylaws of said ; and that [s]he signed her name
thereto by like authority.
------------------------------
Notary Public
-78-
<PAGE> 1
EXHIBIT 5
(SCHIFINO & FLEISCHER, P.A. LETTERHEAD)
October 29, 1997
Tech Data Corporation
5350 Tech Data Drive
Clearwater, FL 34620
Gentlemen:
The following opinion is furnished by us in connection with the
proposed issuance and sale by Tech Data Corporation, a Florida corporation (the
"Company"), of up to $201,250,000 in aggregate principal amount of the
Company's % Convertible Subordinated Notes due , 2002 (the
"Convertible Notes") shares of Common Stock, $.0015 par value, covered by a
Registration Statement filed with the Securities and Exchange Commission on
Form S-3 (the "Registration Statement").
We have examined and are familiar with the Certificate of Incorporation
and By-Laws, and amendments thereto, of the Company and the proceedings of the
Board of Directors of the Company in connection with or with respect to the
proposed issuance and sale of the securities described herein, and we have
likewise examined such other records and documents and have made such
examination of law as we have deemed appropriate.
Based on such examination and our familiarity with such procedure, it
is our opinion that:
1. The Company is a duly incorporated and validly existing
corporation in good standing under the laws of the State of Florida.
2. The Indenture dated as of October , 1997 between the Company, as
Issuer and Bankers Trust Company, as trustee (the "Indenture") has been duly
authorized, and when executed and delivered by the parties thereto, will
constitute a valid and legally binding instrument, enforceable in accordance
with its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
3. The Convertible Notes have been duly authorized and when executed,
authenticated, issued and delivered will constitute valid and legally binding
obligations of the Company entitled to the benefits provided by the Indenture,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors' rights and to
general equity principles.
We hereby consent to this opinion being filed as an Exhibit to the
Registration Statement and we further consent to the use of our name in the
Registration Statement under the caption "Validity of the Securities." In
giving such consent we do not admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
Very truly yours,
SCHIFINO & FLEISCHER, P.A.
Frank N. Fleischer
For the Association
<PAGE> 1
EXHIBIT 23(B)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Amendment No. 1 of the Registration
Statement on Form S-3 (333-36997) of our report dated March 18, 1997, relating
to the consolidated financial statements of Tech Data Corporation and its
subsidiaries, which appears in such Registration Statement. We also consent to
the incorporation by reference in the Prospectus constituting part of this
Amendment No. 1 to the Registration Statement on Form S-3 of our report dated
March 18, 1997, appearing on page 14 of Tech Data Corporation's Annual Report on
Form 10-K for the year ended January 31, 1997, and our report relating to the
Financial Statement Schedule included under Item 14 of such Form 10-K. We also
consent to the references to us under the heading "Experts" in such Registration
Statement.
Price Waterhouse LLP
Tampa, Florida
October 29, 1997
<PAGE> 1
EXHIBIT 25
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT
OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) ___________
------------------------------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
BANKERS TRUST COMPANY
LEGAL DEPARTMENT
130 LIBERTY STREET, 31ST FLOOR
NEW YORK, NEW YORK 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
---------------------------------
TECH DATA CORPORATION
(Exact name of obligor as specified in its charter)
FLORIDA 59-1578329
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
5350 TECH DATA DRIVE
CLEARWATER, FLORIDA 33760
(Address of principal executive offices)
TECH DATA CORPORATION
DEBT SECURITIES
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
NAME ADDRESS
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
ITEM 3.-15. NOT APPLICABLE
ITEM 16. LIST OF EXHIBITS.
EXHIBIT 1 - Restated Organization Certificate of Bankers Trust
Company dated August 7, 1990, Certificate of Amendment of
the Organization Certificate of Bankers Trust Company
dated June 21, 1995 - Incorporated herein by reference to
Exhibit 1 filed with Form T-1 Statement, Registration No.
33-65171, Certificate of Amendment of the Organization
Certificate of Bankers Trust Company dated March 20,
1996, incorporate by referenced to Exhibit 1 filed with
Form T-1 Statement, Registration No. 333-25843 and
Certificate of Amendment of the Organization Certificate
of Bankers Trust Company dated June 19, 1997, copy
attached.
EXHIBIT 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2 filed with
Form T-1 Statement, Registration No. 33-21047.
EXHIBIT 3 - Authorization of the Trustee to exercise corporate trust
powers - Incorporated herein by reference to Exhibit 2
filed with Form T-1 Statement, Registration No. 33-21047.
EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, as amended on
February 18, 1997, Incorporated herein by reference to
Exhibit 4 filed with Form T-1 Statement, Registration No.
333-24509-01.
-2-
<PAGE> 3
EXHIBIT 5 - Not applicable.
EXHIBIT 6 - Consent of Bankers Trust Company required by Section
321(b) of the Act. - Incorporated herein by reference to
Exhibit 4 filed with Form T-1 Statement, Registration No.
22-18864.
EXHIBIT 7 - The latest report of condition of Bankers Trust Company
dated as of June 30, 1997. Copy attached.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 24th day
of October, 1997.
BANKERS TRUST COMPANY
By: /s/ Susan Johnson
-------------------------
Susan Johnson
Assistant Vice President
-4-
<PAGE> 5
<TABLE>
<CAPTION>
Legal Title of Bank: Bankers Trust Company Call Date: 6/30/97 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: 00623
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS JUNE 30, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
---------------------
C400
-------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1) ............. 0081 1,724,000 1.a.
b. Interest-bearing balances(2) ...................................... 0071 2,648,000 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) ........ 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)....... 1773 3,990,000 2.b.
3 Federal funds sold and securities purchased under agreements to resell in domestic offices 1350 26,430,000 3.
of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds sold ................................................
b. Securities purchased under agreements to resell ...................
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 17,815,000 4.a.
b. LESS: Allowance for loan and lease losses........................RCFD 3123 723,000 4.b.
c. LESS: Allocated transfer risk reserve ...........................RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c) .............. 2125 17,092,000 4.d.
5. Assets held in trading accounts ........................................ 3545 40,350,000 5.
6. Premises and fixed assets (including capitalized leases) ............... 2145 937,000 6.
7. Other real estate owned (from Schedule RC-M) ........................... 2150 195,000 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) 2130 96,000 8.
9. Customers' liability to this bank on acceptances outstanding ........... 2155 691,000 9.
10. Intangible assets (from Schedule RC-M) ................................. 2143 85,000 10.
11. Other assets (from Schedule RC-F) ...................................... 2160 4,633,000 11.
12. Total assets (sum of items 1 through 11) ............................... 2170 98,871,000 12.
</TABLE>
- --------------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE> 6
<TABLE>
<CAPTION>
Legal Title of Bank: Bankers Trust Company Call Date: 63097 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2
City, State Zip: New York, NY 10006 12
FDIC Certificate No.: 00623
<S> <C> <C> <C> <C> <C>
SCHEDULE RC--CONTINUED -------------------------------------------
Dollar Amounts in Thousands Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule
RC-E, part I) RCON 2200 18,026,000 13.a.
(1) Noninterest-bearing(1) ..............RCON 6631 3,184,000........... 13.a.(1)
(2) Interest-bearing .....................RCON 6636 14,842,000........... 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from
Schedule RC-E part II) RCFN 2200 22,173,000 13.b.
(1) Noninterest-bearing .................RCFN 6631 1,454,000 13.b.(1)
(2) Interest-bearing ....................RCFN 6636 20,719,000 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs: 2800 14,623,000 14.
a. Federal funds purchased .................................................... RCFD 0278 14.a.
b. Securities sold under agreements to repurchase ............................. RCFD 0279 14.b.
15. a. Demand notes issued to the U.S. Treasury ................................... RCON 2840 0 15.a.
b. Trading liabilities ........................................................ RCFD 3548 19,819,000 15.b.
16. Other borrowed money:
a. With original maturity of one year or less ................................. RCFD 2332 6,877,000 16.a.
b. With original maturity of more than one year ............................... A547 217,000 16.b.
c. With a remaining maturity of more than three years ......................... A548 4,848,000 16.c.
17. Mortgage indebtedness and obligations under capitalized leases .................
18. Bank's liability on acceptances executed and outstanding ....................... RCFD 2920 691,000 18.
19. Subordinated notes and debentures .............................................. RCFD 3200 1,251,000 19.
20. Other liabilities (from Schedule RC-G) ......................................... RCFD 2930 4,872,000 20.
21. Total liabilities (sum of items 13 through 20) ................................. RCFD 2948 93,397,000 21.
22. Limited-life preferred stock and related surplus ............................... RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus .................................. RCFD 3838 1,000,000 23.
24. Common stock ................................................................... RCFD 3230 1,001,000 24.
25. Surplus (exclude all surplus related to preferred stock) ....................... RCFD 3839 540,000 25.
26. a. Undivided profits and capital reserves ..................................... RCFD 3632 3,314,000 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ..... RCFD 8434 ( 3,000) 26.b.
27. Cumulative foreign currency translation adjustments ............................ RCFD 3284 (378,000) 27.
28. Total equity capital (sum of items 23 through 27) .............................. RCFD 3210 5,474,000 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of
items 21, 22, and 28) ......................................................... RCFD 3300 98,871,000 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement
below that best describes the most comprehensive level of
auditing work performed for the bank by independent external Number
auditors as of any date during 1996 ......................................... RCFD 6724 NA M.1
-----------------------------------------------
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company external auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards by a
certified public accounting firm (may be required by state
chartering authority)
</TABLE>
- ----------------------
(1) Including total demand deposits and noninterest-bearing time and
savings deposits.
(2) Includes limited-life preferred stock and related surplus.
<PAGE> 7
State of New York,
BANKING DEPARTMENT
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION
8005 OF THE BANKING LAW," dated June 19, 1997, providing for an increase in
authorized capital stock from $1,601,666,670 consisting of 100,166,667 shares
with a par value of $10 each designated as Common Stock and 600 shares with a
par value of $1,000,000 each designated as Series Preferred Stock to
$2,001,666,670 consisting of 100,166,667 shares with a par value of $10 each
designated as Common Stock and 1,000 shares with a par value of $1,000,000 each
designated as Series Preferred Stock.
WITNESS, my hand and official seal of the Banking Department at the City of New
York, this 27TH day of June in the Year of our Lord one thousand
nine hundred and NINETY-SEVEN.
Manuel Kursky
------------------------------
Deputy Superintendent of Banks
<PAGE> 8
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter
to have is One Billion, Six Hundred and One Million, Six Hundred
Sixty-Six Thousand, Six Hundred Seventy Dollars ($1,601,666,670),
divided into One Hundred Million, One Hundred Sixty-Six Thousand, Six
Hundred Sixty-Seven (100,166,667) shares with a par value of $10 each
designated as Common Stock and 600 shares with a par value of One
Million Dollars ($1,000,000) each designated as Series Preferred
Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter
to have is Two Billion One Million, Six Hundred Sixty-Six Thousand,
Six Hundred Seventy Dollars ($2,001,666,670), divided into One Hundred
Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(100,166,667) shares with a par value of $10 each designated as Common
Stock and 1000 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
<PAGE> 9
5. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this
19th day of June, 1997.
James T. Byrne, Jr.
----------------------------
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
----------------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an
Assistant Secretary of Bankers Trust Company, the corporation described in the
foregoing certificate; that she has read the foregoing certificate and knows the
contents thereof, and that the statements herein contained are true.
Lea Lahtinen
----------------------------
Lea Lahtinen
Sworn to before me this 19th day of June, 1997.
Sandra L. West
--------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 1998
