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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 1, 1999
REGISTRATION NO. 333-86675
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------
Amendment No. 1 to FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
SAFEGUARD SCIENTIFICS, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C>
PENNSYLVANIA 23-1609753
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
</TABLE>
800 THE SAFEGUARD BUILDING
435 DEVON PARK DRIVE
WAYNE, PENNSYLVANIA 19087-1945
(610) 293-0600
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
---------------------
JAMES A. OUNSWORTH, ESQ.
800 THE SAFEGUARD BUILDING
435 DEVON PARK DRIVE
WAYNE, PENNSYLVANIA 19087-1945
(610) 293-0600
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
---------------------
COPIES TO:
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<S> <C>
N. JEFFREY KLAUDER, ESQ. MARC M. ROSSELL, ESQ.
MORGAN, LEWIS & BOCKIUS LLP SHEARMAN & STERLING
1701 MARKET STREET 599 LEXINGTON AVENUE
PHILADELPHIA, PA 19103 NEW YORK, NY 10022
(215) 963-5000 (212) 848-4000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement the same offering. [ ] _________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
====================================================================
<PAGE>
$200,000,000
SAFEGUARD SCIENTIFICS, INC.
5.0% CONVERTIBLE SUBORDINATED NOTES DUE JUNE 15, 2006
-------------------------
Holders of our 5.0% Convertible Subordinated Notes due June 15, 2006 may
offer for sale the notes and the shares of our common stock into which the notes
are convertible at various times at market prices prevailing at the time of sale
or at privately negotiated prices. The selling holders may sell the notes or the
common stock to or through underwriters, broker-dealers or agents, who may
receive compensation in the form of discounts, concessions or commissions.
Interest on the notes is payable in arrears on June 15 and December 15 of each
year, beginning on December 15, 1999. The notes will mature on June 15, 2006
unless earlier converted or redeemed. The notes are unsecured and rank below our
existing and future indebtedness and would be effectively subordinated to all
indebtedness and other liabilities, including trade payables and lease
obligations, if any, of our subsidiaries.
The holders of the notes may convert any portion of a note (in multiples of
$1,000) into common stock, at a conversion price which is $75.0441 per share as
of November 30, 1999 and which is subject to adjustment in certain events. Our
common stock is quoted on the New York Stock Exchange under the symbol "SFE." On
November 29, 1999, the closing price of the common stock was $117.00 per share.
The notes are not entitled to any sinking fund. At any time on or after
June 18, 2002, we may redeem the notes on at least 20 days', but no more than 60
days', notice as a whole or, from time to time, in part. The prices at which we
may redeem the notes will be equal to the following percentage of principal
amount, plus any interest that has accrued through, and including, the date
fixed for redemption:
. if redeemed during the period beginning June 18, 2002 and ending June
15, 2003, at a redemption price of 102.50% and
. if redeemed during the 12-month period beginning June 16:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003............................... 101.67%
2004............................... 100.83%
2005............................... 100.00%
</TABLE>
and 100% at June 15, 2006.
We do not intend to apply for listing of the notes on any securities
exchange or for quotation through any automated quotation system. The notes are
eligible for trading in the Private Offerings, Resale and Trading through
Automated Linkages ("PORTAL") market of the National Association of Securities
Dealers, Inc.
<PAGE>
We will not receive any proceeds from the sale of the notes and the common
stock into which the notes are convertible by the selling holders. We will pay
all expenses other than selling commissions and fees and stock transfer taxes of
the registration and sale of the notes and the common stock.
INVESTING IN THE NOTES OR THE COMMON STOCK INTO WHICH THE NOTES ARE
CONVERTIBLE INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE
5.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
PROSPECTUS DATED NOVEMBER 30, 1999
<PAGE>
TABLE OF CONTENTS
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PAGE
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FORWARD-LOOKING INFORMATION.................... 1
HOW TO OBTAIN MORE INFORMATION................. 2
SAFEGUARD SCIENTIFICS, INC..................... 3
RISK FACTORS................................... 5
RATIO OF EARNINGS TO FIXED CHARGES............. 11
PRO FORMA RATIO OF EARNINGS TO
FIXED CHARGES................................ 12
DESCRIPTION OF NOTES........................... 13
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.. 31
USE OF PROCEEDS................................ 34
DESCRIPTION OF CAPITAL STOCK................... 35
SELLING HOLDERS................................ 39
PLAN OF DISTRIBUTION........................... 42
LEGAL MATTERS.................................. 44
EXPERTS........................................ 44
</TABLE>
<PAGE>
FORWARD-LOOKING INFORMATION
This prospectus includes "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. This Act provides a "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information about themselves so long as they identify these
statements as forward-looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from the
projected results. All statements other than statements of historical fact we
make in this prospectus or in any document incorporated by reference are
forward-looking. In particular, the statements herein regarding our future
results of operations or financial position are forward-looking statements.
Forward-looking statements reflect our current expectations and are inherently
uncertain. For these statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. You should understand that future events, in addition to those
discussed elsewhere in this prospectus, particularly under "Risk Factors," could
affect our future operations and cause our results to differ materially from
those expressed in our forward-looking statements.
<PAGE>
HOW TO OBTAIN MORE INFORMATION
We file reports, proxy statements and other information with the Securities
and Exchange Commission. You may read any document we file at the SEC's public
reference rooms in Washington, D.C., Chicago, Illinois and New York, New York.
Please call the SEC toll free at 1-800-SEC-0330 for information about its public
reference rooms. You may also read our filings at the SEC's Web site at
http://www.sec.gov.
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act of 1933. This prospectus does not contain all of the information
in the registration statement. We have omitted certain parts of the registration
statement, as permitted by the rules and regulations of the SEC. You may inspect
and copy the registration statement, including exhibits, at the SEC's public
reference facilities or Web site. Our statements in this prospectus about the
contents of any contract or other document are not necessarily complete. You
should refer to the copy of each contract or other document we have filed as an
exhibit to the registration statement for complete information.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with it. This means that we can disclose important
information to you by referring you to those documents. This information we
incorporate by reference is considered a part of this prospectus, and later
information we file with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we make with the SEC under Sections 13(a), 13(c), 14 and 15(d) of
the Securities Exchange Act of 1934 until this offering is completed:
- Our Annual Report on Form 10-K for the year ended December 31, 1998;
- Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
- Our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999;
- Our Amendment to our Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999;
- Our Quarterly Report on Form 10-Q for the quarter ended September 30,
1999;
- Our Current Reports on Form 8-K filed on May 25, 1999, as amended on
Form 8-K/A filed on July 26, 1999.
You may obtain copies of these documents, other than exhibits, free of
charge by contacting our corporate secretary at our principal offices, which are
located at 800 The Safeguard Building, 435 Devon Park Drive, Wayne,
Pennsylvania, 19087-1945, telephone number (610) 293-0600.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. The selling holders are
not making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of the document.
2
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
Safeguard is an information technology (IT) holding company that
identifies, acquires, operates and manages IT companies and has interests in
private equity funds. We are now focusing on IT companies with particular
emphasis on companies engaged in e-commerce, network infrastructure activities
and enterprise applications. We believe that these sectors provide
opportunities for success driven by the rapid growth of the Internet as a
fundamental business tool. We generally acquire ownership interests in
companies that allow us to have a significant influence over their direction and
management. These positions may represent either a majority or minority
ownership interest, although we are generally the largest shareholder of our
partner companies. We assign a dedicated team to each partner company and
actively assist our partner companies in their management, operations and
finances.
Our principal mission is to promote long-term shareholder value. This
approach reflects our belief that shareholder value is maximized by retaining
and promoting the entrepreneurial energy and creativity of the managers of our
partner companies. The entrepreneurs of our partner companies generally retain
significant equity interests in their businesses, and their interests as
shareholders remain aligned with ours. We provide a full range of operational
and management services through a team of Safeguard professionals dedicated to
that partner company. Each team has expertise in the areas of
business/technology strategy, operations, finance, and legal and transactional
support, and provides hands-on assistance to the management of our partner
companies in support of their growth. The level of our involvement varies and
in some circumstances includes the provision of full-time interim personnel.
Since we generally partner with a long-term view, we seek different ways to
maximize the long-term value of our partner companies. In addition to providing
operational assistance to help partner companies grow, this is achieved through
"directed share subscription programs" as part of traditional initial public
offerings ("IPOs") (which we refer to as "Safeguard Shares Subscription
Programs"), "rights IPOs", mergers, sales, open-market transactions, follow-on
acquisitions or the divestiture of our position over time. We typically retain
a significant ownership position in a partner company after the partner company
conducts its IPO.
A directed share subscription program involves the distribution of
subscription rights by a partner company to shareholders of Safeguard that own
more than a specified minimum number of shares of Safeguard common stock. These
subscription rights provide Safeguard shareholders with the opportunity to
purchase, at the public offering price, a portion of the shares offered by the
partner company in its IPO. Safeguard shareholders may not transfer this
opportunity except involuntarily by operation of law.
A rights IPO is an initial public offering conducted by a partner company
by offering rights to purchase its stock solely to Safeguard shareholders. The
rights typically must be exercised within 35 days after the date they are
granted. Safeguard shareholders may elect to exercise the rights, allow the
rights to expire or sell the rights. For each rights IPO to date, the rights
have been listed on the Nasdaq National Market where a public trading market for
the rights has developed. A rights IPO involves one or more standby
underwriters to purchase shares not purchased upon exercise of rights.
3
<PAGE>
As of October 31, 1999, we held interests in 33 partner companies and
participate in the management of nine private equity funds. These funds had
investments in approximately 132 companies as of October 31, 1999.
Although we refer to the companies in which we have acquired an equity
interest as our "partner companies," we do not act as an agent or legal
representative for any of our partner companies. We do not have the power or
authority to legally bind any of our partner companies.
Our web page and the web pages of our partner companies are not part of
this prospectus.
4
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and other
information in this prospectus before investing in the notes or the common stock
issuable upon conversion of the notes.
Except for the historical information in this prospectus, the matters
contained in this prospectus include forward-looking statements that involve
risks and uncertainties. The following factors, among others, could cause
actual results to differ materially from those contained in forward-looking
statements made in this prospectus. Such factors, among others, may have a
material adverse effect upon our business, results of operations and financial
condition.
RISKS RELATED TO SAFEGUARD
RELIANCE ON OUR PARTNER COMPANIES -- OUR OPERATING PERFORMANCE AND THE
VALUE OF OUR ASSETS ARE DEPENDENT ON OUR PARTNER COMPANIES.
A significant portion of our assets consist of our ownership in our partner
companies. As a result, our future performance is substantially dependent upon
the performance of our partner companies. If our partner companies are not
successful, our operating performance will be materially adversely affected and
the value of our assets will decline.
VARIABILITY OF OPERATING RESULTS -- OUR OPERATING RESULTS WILL FLUCTUATE
AND THESE FLUCTUATIONS MAY ADVERSELY AFFECT OUR STOCK PRICE.
Our operating results have fluctuated from period to period. Our operating
results have been dependent upon the performance of our partner companies and
general market conditions. If our partner companies are not successful or the
markets become unfavorable, our partner companies may not be able to complete
securities offerings and we may not be able to generate gains or receive
proceeds from the sales of securities. Fluctuations in future periods may be
greater than those experienced in past periods as a result of our focus on
companies related to the Internet. The market for securities of Internet-
related companies has been more volatile than the market in general.
DEPENDENCE ON FUTURE MARKET CONDITIONS -- OUR ABILITY TO CREATE SHAREHOLDER
VALUE WILL BE MATERIALLY ADVERSELY AFFECTED IF FUTURE MARKET CONDITIONS BECOME
UNFAVORABLE FOR PROLONGED PERIODS.
Our strategy involves creating value for our shareholders by helping our
partner companies grow and assisting them in completing initial public
offerings. If the public markets in general, or the market for Internet-related
companies in particular, were to weaken for a prolonged period of time, the
ability of our partner companies to successfully complete IPOs would be
materially adversely affected. And since we typically retain a significant
ownership position after a partner company conducts its initial public offering,
our ability to increase our shareholder value through the initial public
offering process would also be adversely affected.
5
<PAGE>
COMPETITION IN ACQUIRING INTERESTS IN PARTNER COMPANIES -- OUR GROWTH
DEPENDS UPON OUR ABILITY TO SUCCESSFULLY ACQUIRE INTERESTS IN EMERGING IT
COMPANIES AT ATTRACTIVE VALUATIONS.
Our growth depends upon our ability to successfully acquire interests in
emerging IT companies at attractive valuations. We face substantial competition
in acquiring these interests, from, among others, the following types of
organizations:
. venture capital firms
. large corporate investors
. publicly-traded Internet companies
. our partner companies
These competitors may limit our opportunity to acquire interests in new partner
companies. In addition, we may be unable to acquire interests in emerging
companies for other reasons, including:
. the inability to agree on terms, such as price and ownership percentages
. incompatibility between us and management
. access to sufficient funding
Our growth will be materially adversely affected if we cannot acquire interests
in a sufficient number of emerging companies.
COMPUCOM -- OUR REVENUES ARE SUBSTANTIALLY DEPENDENT ON COMPUCOM.
Because we generally obtain less than a 50% voting interest in our partner
companies, we generally do not consolidate the results of operations of our
partner companies with our results of operations. However, we own more than 50%
of four partner companies, CompuCom Systems, Inc., Tangram Enterprise Solutions,
Inc., Aligne, Inc. and Sotas, Inc., and therefore consolidate the results of
operations of these four companies.
For 1998, the revenues of CompuCom represented more than 95% of out total
revenues. At December 31, 1998, we owned approximately 60% of the aggregate
voting interests of CompuCom. If our voting ownership of CompuCom were to
decrease below 50% as a result of the issuance of stock in an acquisition or
other transaction, we may no longer be able to consolidate the results of
operations of CompuCom with our results of operations. While this would affect
our earnings per share only to the extent of our ownership change, the
presentation of our consolidated statement of operations and balance sheet would
change dramatically.
MANAGEMENT OF GROWTH -- MANY OF OUR PARTNER COMPANIES GROW RAPIDLY AND MAY
BE UNABLE TO MANAGE THEIR GROWTH.
6
<PAGE>
Many of our partner companies grow rapidly. Rapid growth often places
considerable operational, managerial and financial strain on a company. To
successfully manage rapid growth, our partner companies must, among other
things, do many of the following:
. rapidly improve, upgrade and expand their business infrastructures
. hire, train and retain key and other personnel
. deliver services and products on a timely basis
. maintain levels of service expected by clients and customers
. maintain adequate levels of liquidity
We will be materially adversely affected if a sufficient number of our partner
companies are unable to successfully manage their growth.
RELIANCE ON KEY PERSONNEL -- OUR SUCCESS DEPENDS UPON OUR SENIOR MANAGEMENT
AND THE KEY PERSONNEL OF OUR PARTNER COMPANIES.
Our success depends upon the continued employment of and performance by our
senior management, particularly our Chairman and Chief Executive Officer, Warren
"Pete" Musser, and the key personnel of our partner companies. We may be
materially adversely affected if one or more of our senior management team do
not continue to perform in their present positions or if we and our partner
companies are unable to hire and retain a sufficient number of qualified
management, professional, technical and marketing personnel.
INVESTMENT COMPANY ACT OF 1940 -- WE MAY BE REQUIRED TO TAKE SIGNIFICANT
ACTIONS THAT ARE CONTRARY TO OUR BUSINESS OBJECTIVES TO AVOID BEING REQUIRED TO
REGISTER AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940.
As an operating company, we believe that we are not an investment company
as that term is defined under the Investment Company Act. Generally, a company
must register under the Investment Company Act and comply with significant
restrictions on operations and transactions with affiliates if its investment
securities exceed 40% of the company's total assets, or if it holds itself out
as being primarily engaged in the business of investing, owning or holding
securities. Under an alternative test, a company is not required to register
under the Investment Company Act if not more than 45% of its total assets
consist of, and not more than 45% of its net income is derived from, securities
other than government securities and securities of majority-owned subsidiaries
and companies primarily controlled by it. If we are unable to rely on these
alternative tests, we could ask for exemptive relief from the Securities and
Exchange Commission. We are also able to rely once every three years on a one-
year temporary exemption from the registration requirements of the Investment
Company Act.
If we were not able to obtain exemptive relief and the one-year temporary
exemption were no longer available, we might need to take certain actions to
avoid the requirement to register as an investment company. For example, we
might be compelled to acquire additional
7
<PAGE>
income or loss generating assets that we might not otherwise have acquired, be
forced to forego opportunities to acquire interests in companies that would be
important to our strategy or be forced to forego the sale of minority interests
we would otherwise want to sell. In addition, we might need to sell some assets
which are considered to be investment securities, including interests in partner
companies. It is not feasible for us to register as an investment company
because the Investment Company Act regulations are inconsistent with our
strategy of acquiring, operating and managing our partner companies.
YEAR 2000 -- WE MAY BE MATERIALLY ADVERSELY AFFECTED BY YEAR 2000 PROBLEMS.
The Year 2000 issue results from the writing of computer programs using two
digits rather than four to define the applicable year. Because of this
programming convention, computer software, hardware or firmware may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in system failures, miscalculations or errors causing disruptions of operations
or other business problems, including, among others, a temporary inability to
process transactions or engage in other normal business activities. We could be
materially adversely affected if our systems or the systems on which our partner
companies are dependent to conduct their operations are not Year 2000 compliant.
Other potential areas of exposure include Year 2000 problems encountered by
customers, vendors or other third parties that have material business
relationships with us or our partner companies.
RISK RELATED TO THE INTERNET INDUSTRY
SECURITY OF INTERNET TRANSACTIONS -- CONCERNS REGARDING SECURITY OF
TRANSACTIONS AND TRANSMITTING CONFIDENTIAL INFORMATION OVER THE INTERNET, AND
SECURITY PROBLEMS EXPERIENCED BY OUR PARTNER COMPANIES, MAY HAVE AN ADVERSE
IMPACT ON OUR BUSINESS.
We believe that concern regarding the security of confidential information
transmitted over the Internet prevents many potential customers from engaging in
online transactions. If our partner companies that depend on such transactions
do not maintain sufficient security features, our partner companies' products
may not gain market acceptance or there may be additional legal exposure to
them.
Despite the measures some of our partner companies have taken, the
infrastructure of each of them is potentially vulnerable to physical or
electronic break-ins, viruses and similar problems. If a person circumvents the
security measures imposed by any one of our partner companies, he or she could
misappropriate proprietary information or cause interruption in operation of the
partner company. Security breaches that result in access to confidential
information could damage the reputation of any one of our partner companies and
expose the partner company affected to a risk of loss or liability. Some of our
partner companies may be required to make significant investments and efforts to
protect against or remedy security breaches. Additionally, as e-commerce
becomes more widespread, customers of our partner companies will become more
concerned about security. If our partner companies are unable to adequately
address these concerns, they may be unsuccessful.
RAPID TECHNOLOGICAL CHANGE -- OUR PARTNER COMPANIES OPERATE IN MARKETS
CHARACTERIZED BY RAPID TECHNOLOGY CHANGE.
8
<PAGE>
The markets in which our partner companies operate are characterized by
rapid technological change, frequent new product and service introductions and
evolving industry standards. Significant technological changes could render
their existing technologies, products and services obsolete. The e-commerce
market's growth and intense competition exacerbate these conditions. If our
partner companies are unable to successfully respond to these developments or do
not respond in a cost-effective way, our business, financial condition and
operating results will be adversely affected. To be successful, our partner
companies must adapt to their rapidly changing markets by continually improving
the responsiveness, services and features of their products and services and by
developing new features to meet the needs of their customers. Our success will
depend, in part, on our partner companies' abilities to license leading
technologies useful in their businesses, enhance their existing products and
services and develop new offerings and technology that address the needs of
their customers. Our partner companies will also need to respond to
technological advances and emerging industry standards in a cost-effective and
timely manner.
REGULATION OF THE INTERNET -- GOVERNMENT REGULATIONS AND LEGAL
UNCERTAINTIES MAY PLACE FINANCIAL BURDENS ON OUR BUSINESS AND THE BUSINESSES OR
OUR PARTNER COMPANIES.
As of November 30, 1999, there were few laws or regulations directed
specifically at e-commerce. However, because of the Internet's popularity and
increasing use, new laws and regulations may be adopted. These laws and
regulations may address issues such as the collection of and use of data from
Web site visitors and related privacy issues, pricing, content, copyrights,
online gambling, distribution and the quality of goods and services. The
enactment of any additional laws or regulations may impede the growth of the
Internet and e-commerce, which could reduce sales and increase costs of our
partner companies. Laws and regulations directly applicable to e-commerce or
Internet communications are becoming more prevalent. Although these laws may
not have direct adverse effect on our business or those of our partner
companies, they add to the legal and regulatory burden faced by e-commerce
companies.
RISKS RELATED TO THE NOTES
SUBORDINATION -- THE NOTES ARE SUBORDINATED AND THERE ARE NO FINANCIAL
COVENANTS.
The notes are unsecured and subordinated in right of payment to any senior
indebtedness. As a result of this subordination, in the event of our
bankruptcy, liquidation or reorganization or certain other events, our assets
will be available to pay obligations on the notes only after all senior
indebtedness has been paid in full. After repaying any senior indebtedness, we
may not have sufficient assets remaining to pay amounts on any or all of the
notes then outstanding.
The indenture does not prohibit or limit the incurrence of senior
indebtedness or other indebtedness and liabilities. We may from time to time
incur additional indebtedness, including senior indebtedness. The indenture
does not contain any financial covenants or restrictions on the payment of
dividends. The indenture does not restrict the incurrence of indebtedness or
the issuance or repurchase of securities by us or our subsidiaries. The
indenture contains no covenants or other provisions to afford you protection in
the event of a highly leveraged transaction or a change in control except as
described under "Description of Notes -- Repurchase of Notes on Fundamental
Change." The term "fundamental change" is limited to certain
9
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specified transactions. It may not include other events that might adversely
affect our financial condition. In addition, our requirement to offer to
repurchase the notes upon a fundamental change will not necessarily afford you
protection in the event of a highly leveraged transaction, reorganization,
merger or similar transaction involving Safeguard.
REPAYMENT OF NOTES -- WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS
NECESSARY TO FINANCE THE REPURCHASE OF THE NOTES.
We cannot guarantee that we will have sufficient funds to pay the
repurchase price in cash at maturity or in the event of a fundamental change.
In addition, our credit agreement prohibits us from repurchasing the notes in
certain events, including those that would be considered a fundamental change.
If a fundamental change were to occur at a time when we were prohibited from
repurchasing the notes, we would attempt to refinance the borrowings that
contained these prohibitions. If we were not able to obtain a consent or repay
these borrowings, we would be prohibited from repurchasing the notes. This
would result in an event of default under the indenture. This may also result
in an event of default under our other indebtedness. In this circumstance, the
subordination provisions of the indenture would likely prohibit us from making
payments to you.
POSSIBLE VOLATILITY OF NOTES AND COMMON STOCK PRICE -- THE MARKET PRICES
FOR OUR COMMON STOCK AND THE NOTES MAY BE VOLATILE.
The market price for our common stock has been volatile and has fluctuated
significantly to date. The trading price of our common stock, and therefore,
our notes, is likely to continue to be highly volatile. In addition, the stock
market in general and the market for technology companies in particular, have
experienced extreme price and volume fluctuations. These broad market and
industry factors may materially and adversely affect the market price of our
common stock, regardless of our actual operating performance. In the past,
following periods of volatility in the market price of a company's securities,
securities class-action litigation has often been instituted against such
companies. Such litigation, if instituted, could result in substantial costs
and a diversion of management's attention and resources, which would have a
material adverse effect on our business, financial condition and results of
operations.
10
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RATIO OF EARNINGS TO FIXED CHARGES
(in thousands)
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ---------------------------------------------------------------
1999 1998 1997 1996 1995 1994
------------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings before Minority interest
and Equity (Income)/Loss................. $ 98,169 $173,677 $61,147 $51,607 $41,509 $25,409
Fixed Charges............................. 28,263 33,620 25,759 28,749 22,505 20,568
--------- -------- -------- -------- ------- -------
Adjusted Earnings........................ 126,432 207,297 86,906 80,356 64,014 45,977
Fixed Charges
Interest.................................. $ 26,664 29,720 22,359 23,916 19,538 17,468
Assumed interest element included
in rent expense (1)...................... 1,559 3,900 3,400 4,833 2,967 3,100
--------- -------- -------- -------- ------- -------
Total Fixed Charges....................... 28,263 33,620 25,759 28,749 22,505 20,568
Earnings Available to Cover
Fixed Charges(*).......................... $126,432 $207,297 $86,906 $80,356 $64,014 $45,977
Ratio of Earnings to Fixed Charges........ 4.47 6.17 3.37 2.80 2.84 2.24
</TABLE>
- -------------------------
(*) Earnings consist of earnings before income taxes, minority interest and
equity (income)/loss plus fixed charges. Fixed charges consist of interest
expense, including amortization of debt issuance costs, and that portion of
rental expense we believe to be representative of interest.
(1) Total rent expense for the year divided by three. This is the portion of
rental expense that Safeguard Scientifics, Inc. believes to be
representative of interest.
11
<PAGE>
PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
---------------------- ---------------------
<S> <C> <C>
Earnings before Minority interest
and Equity (Income)/Loss......................... $ 98,169 $173,677
Fixed Charges.................................... 28,181 39,340
-------- --------
Adjusted Earnings.............................. 126,350 213,017
Fixed Charges
Interest......................................... 26,582 35,440
Assumed interest element included in rent
expense (1)..................................... 1,599 3,900
-------- --------
Total Fixed Charges.............................. 28,181 39,340
Earnings Available to Cover
Fixed Charges(*)................................. $126,350 $213,017
Ratio of Earnings to Fixed Charges............... 4.48 5.41
</TABLE>
(*) Earnings consist of earnings before income taxes, minority interest and
equity (income)/loss plus fixed charges. Fixed charges consist of interest
expense, including amortization of debt issuance costs, and that portion of
rental expense we believe to be representative of interest.
(1) Total rent expense for the year divided by three. This is the portion of
rental expense that Safeguard Scientifics, Inc. believes to be
representative of interest.
12
<PAGE>
DESCRIPTION OF NOTES
The notes were issued under an indenture dated as of June 9, 1999 between
Safeguard and Chase Manhattan Trust Company, National Association, as trustee.
This section summarizes the provisions of the notes and the indenture and the
related Registration Rights Agreement. You should refer to these documents for
more detailed information.
GENERAL
We issued $200,000,000 aggregate principal amount of the notes. The notes
are unsecured general obligations of Safeguard subordinate in right of payment
to certain other of our obligations. Holders of the notes may convert them into
our common stock as described below. The notes were issued only in multiples
of $1,000 and mature on June 15, 2006 unless earlier converted by holders or
redeemed.
The indenture does not contain any financial covenants or restrictions on
the payment of dividends, the incurrence of indebtedness, including indebtedness
or issuing or repurchasing any of our other securities. The indenture also does
not contain covenants or other provisions to protect you in the event of a
highly leveraged transaction.
The notes bear interest at the annual rate of 5.0% from June 9, 1999 or
from the most recent date on which we have paid interest. We will pay interest
in arrears on June 15 and December 15 of each year, commencing on December 15,
1999, to holders of record at the close of business on the preceding June 1 and
December 1. However, interest payable upon redemption on a date of redemption
that is not also an interest payment date will be payable to the person to whom
principal is then payable.
We generally will not be required to pay interest on any note that is
converted into our common stock. However, we will pay interest when a note has
been converted into our common stock during the period (an "interest payment
period") beginning on the day after a record date for any interest payment and
ending on the day before the interest payment date. In such circumstances,
other than in connection with a fundamental change or during a period in which
it has been called for redemption, the notes submitted for a conversion must be
accompanied by funds equal to the interest payable on such interest payment date
on the principal amount so converted. See "--Conversion of Notes."
Interest may, at your option, be paid either:
. by check mailed to the address of the person entitled to receive it as
it appears in the note register, provided that if you hold an
aggregate principal amount in excess of $10.0 million, you may, at
your written election, be paid by wire transfer in immediately
available funds or
. by transfer to an account maintained by such person located in the
United States; provided, however, that payment to the Depository Trust
Company ("DTC") will
13
<PAGE>
be made by wire transfer of immediately available funds to the account
of DTC or its nominee.
Interest will be computed on the basis of a 360 day year comprised of
twelve 30-day months.
FORM, DENOMINATION AND REGISTRATION
We have issued the notes in fully registered form, without coupons, in
multiples of $1,000.
No service charge will be made for any registration of transfer or exchange
of notes but we may require payment of a sum sufficient to cover any tax or
other payable in connection therewith.
In case any note becomes mutilated, defaced, destroyed, lost or stolen, we
will execute and, upon our request, the trustee will authenticate and deliver a
new note dated the date of its authentication in exchange and substitution for
such note upon surrender and cancellation of the old note or instead of and as a
substitute for such note. In case your note is destroyed, lost or stolen, and
you request a substitute note, you shall give us and the trustee security or
indemnity satisfactory to each of us and them and, in case your note is
destroyed, lost or stolen, you shall also give to us satisfactory evidence of
the destruction, loss or theft of such note and of your ownership of the note.
Upon issue of any substitute note, you may be required to pay us a sum
sufficient to cover the fees and expenses for the issue.
Book-Entry Notes. The notes were sold to "qualified institutional buyers,"
as defined in Rule 144A under the Securities Act, and are represented by one or
more global notes, which have been deposited with, or on behalf of, DTC. These
notes have been registered in the name of Cede & Co. as DTC's nominee. Except
as described below, a global note may be transferred, in whole or in part, only
to another nominee of DTC or to a successor of DTC or its nominee.
You may hold your interests in a global note directly through DTC if you
are a participant in DTC, or indirectly through organizations which are
participants in DTC. Transfers between DTC participants will be effected in the
ordinary way according to DTC rules and will be settled in same day funds. The
laws of some states require that specified persons take physical delivery of
securities in definitive form. Consequently, the ability to transfer beneficial
interests in the global note to those persons may be limited.
If you are not a DTC participant, you may beneficially own interests in a
global note held by DTC only through DTC participants, or selected banks,
brokers, dealers, trust companies and other parties that clear through or
maintain a custodial relationship with a DTC participant, either directly or
indirectly ("indirect DTC participants"). So long as Cede & Co., as the nominee
of DTC, is the registered owner of a global note, Cede & Co. for all purposes
will be considered the sole holder of such global note. Except as provided
below, owners of beneficial interests in a global note will not be entitled to
have certificates registered in their names and will not be considered the
holders of such global note.
14
<PAGE>
We will pay interest on, and the redemption price of, a global note to Cede
& Co. by wire transfer of immediately available funds or by check on each
interest payment date or the redemption or repurchase date, as the case may be.
Neither we, the trustee nor any paying agent 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.
We have been informed by DTC that, with respect to any payment of interest
on, or the redemption price of, a global note, DTC's practice is to credit DTC
participants' accounts on the payment date with payments in amounts
proportionate to their respective beneficial interests in the principal amount
represented by such global note as shown on the records of DTC, unless DTC has
reason to believe that it will not receive payment on such payment date.
Payments by DTC participants to owners of beneficial interests in the principal
amount represented by a global note held through such DTC participants will be
the responsibility of such DTC participants, as is now the case with securities
held for the accounts of customers registered in "street name."
Because you cannot hold a physical certificate representing your interest
in a global note and because DTC can only act on behalf of DTC participants,
your ability to pledge your interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of your
interest, may be affected by the absence of a physical certificate representing
your interest in a global note.
Neither we, the trustee nor any registrar, paying agent or conversion agent
under the indenture will have any responsibility for the performance by DTC or
its DTC participants or indirect DTC participants of their respective
obligations under the rules and procedures governing their operations. DTC has
advised us that it will take any action permitted to be taken by you, including,
without limitation, the presentation of notes for exchange as described below,
only at the direction of one or more DTC participants to whose account with DTC
interests in a global note are credited, and only in respect of the principal
amount of the notes represented by such global note as to which such DTC
participant or DTC participants has or have given such direction.
DTC has advised us that it 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
Securities Exchange Act of 1934. DTC was created to hold securities for its DTC
participants and to facilitate the clearance and settlement of securities
transactions between DTC participants through electronic book-entry changes to
the accounts of its DTC participants, thereby eliminating the need for physical
movement of certificates. DTC participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include other
organizations such as the placement agents. Some of these DTC participants or
their representatives, together with other entities, own DTC. Indirect access
to the DTC system is available to others such as banks, brokers, dealers and
trust companies that clear through, or maintain a custodial relationship with, a
DTC participant, either directly or indirectly.
15
<PAGE>
Although DTC has agreed to the procedures described above in order to
facilitate transfers of interests in the global note among DTC participants, DTC
is under no obligation to perform or continue to perform those procedures, and
the procedures may be discontinued at any time. If DTC is at any time unwilling
or unable to continue as depositary and a successor depositary is not appointed
within 90 days, we will cause notes to be issued in definitive registered form
in exchange for a global note.
Beneficial owners of interests in global notes who desire to convert such
interests into our common stock or to cause us to repurchase such interests on a
repurchase date should contact their brokers or other participants or indirect
participants through whom they hold such beneficial interests to obtain
information on procedures, including proper forms and cut-off times for
submitting requests for conversion or notices relating to repurchase of notes in
the event of a fundamental change. See "-- Repurchase of Notes on Fundamental
Change."
CONVERSION OF NOTES
You may convert your notes into our common stock at any time prior to the
close of business on the final maturity date of the notes, subject to any prior
redemption by us. You may convert any notes or portions thereof in multiples of
$1,000. The conversion price was $75.0441 per share as of November 30, 1999.
The conversion price is subject to adjustment as described below. No payment or
other adjustment will be made on conversion of any notes for interest accrued or
for dividends on any of our common stock issued upon conversion unless the note
is converted during an interest payment period. If any notes not called for
redemption or subject to repurchase in the event of a fundamental change are
converted during an interest payment period, the notes must be accompanied by
funds equal to the interest payable on the next interest payment date on the
principal amount so converted. The term "fundamental change" is described on
page 21. We are not required to issue fractional shares of our common stock
upon conversion of notes and, instead, may pay a cash adjustment based upon the
market price of our common stock on the last business day prior to the date of
conversion. In the case of notes called for redemption, conversion rights will
expire at the close of business on the business day preceding the day fixed for
redemption unless we default in the payment of the redemption price. You may
convert a note which you have elected to be repurchased upon a fundamental
change only if you withdraw your election to redeem according to the terms of
the indenture.
The conversion price is subject to adjustment upon specified events,
including:
. the issuance of our common stock as a dividend or distribution on our
common stock
. the issuance to all holders of our common stock of rights or warrants
entitling them for a period of not more than 60 days to purchase or
subscribe for our common stock (or securities convertible into our
common stock) at less than the current market price as defined in the
indenture, either per share purchased or security converted
. specified subdivisions and combinations of our common stock
16
<PAGE>
. the distribution of: (i) our capital stock (other than our common
stock); (ii) evidences of our indebtedness; or (iii) our assets,
including securities, but excluding those rights, warrants, dividends
and distributions referred to above or paid in cash, in each case to
all or substantially all holders of our common stock
. the distribution to all or substantially all holders of our common
stock of all-cash distributions in an aggregate amount that (together
with any cash and the fair market value of any other consideration
payable in respect of any tender offer by us or any of our
subsidiaries for our common stock completed within the preceding 12
months not requiring a change of the conversion price for the notes,
and all other all-cash distributions to all or substantially all of
our common stock made within the preceding 12 months not requiring a
change of the conversion price for the notes) exceeds an amount equal
to 10% of our market capitalization (determined as provided in the
indenture) on the business day immediately preceding the day on which
we declare such distribution and
. the purchase of our common stock pursuant to a tender offer made by us
or any of our subsidiaries to the extent that the same involves
aggregate consideration that (together with any cash and the fair
market value of any other consideration payable in respect of any
other tender offer by us or any of our subsidiaries for our common
stock completed within the preceding 12 months not requiring a change
of the conversion price of the notes, and all-cash distributions to
all or substantially all holders of our common stock made within the
preceding 12 months not requiring a change of the conversion price for
the notes) exceeds an amount equal to 10% of our market capitalization
(determined as provided in the indenture) on its expiration date.
. the issuance by one of our partner companies of rights solely to all
holders of our common stock to purchase the common stock of that
partner company which is undertaking a "rights IPO"
. the offer by one of our partner companies to holders of our common
stock of an opportunity to purchase the common stock of that partner
company which is undertaking a "directed share subscription program"
as part of its initial public offering of common stock
The adjustment to the conversion price upon a rights IPO will be made as
follows:
(i) dividing the average closing price of the rights (the "IPO
rights") on the last 10 trading days that the IPO rights were
publicly traded, by the number of shares of our common stock that
are required, under the terms of the IPO rights, to allow a
holder of our common stock to receive one IPO right (the "rights
value per share"), then
(ii) multiplying (A) the rights value per share by (B) the principal
amount of each note divided by the conversion price in effect on
the last day (the "expiration date") that the IPO rights are
publicly traded (the "original
17
<PAGE>
conversion ratio" and, the product of such function, the "rights
value per note"), then
(iii)dividing (A) the rights value per note by (B) the closing price
of our common stock on the expiration date minus the rights value
per share, and then
(iv) dividing (A) the principal amount of each note by (B) the sum of
(iii) plus the original conversion ratio.
These adjustments will be made successively upon each rights IPO, if any,
and will be effective on the business day that follows the closing of a rights
IPO.
The adjustment to the conversion price upon a directed share subscription
program will be made as follows:
(i) dividing the difference (if any, and in each case only where (A)
is a higher number than (B)) between (A) the average closing or
last sale prices, as applicable, of the common stock of the
partner company which is undertaking a directed share
subscription program on the first four days that such common
stock was publicly traded and (B) the initial public offering
price of such common stock, by (C) the number of shares of our
common stock required to subscribe for one share of common stock
of the partner company (the "subscription value per share"), then
(ii) multiplying (A) the subscription value per share by (B) the
principal amount of each note divided by the conversion price in
effect on the fourth day that the common stock of the partner
company was publicly traded (the "relevant conversion ratio"),
the product of such calculation being the "subscription value per
note", then
(iii)taking the subscription value per note and dividing by the
conversion price in effect immediately prior to this adjustment,
and then
(iv) dividing (A) the principal amount of each note by (B) the sum of
(iii) plus the relevant conversion ratio.
These adjustments will be made successively upon each IPO which includes a
directed share subscription program, if any, and will be effective on the fifth
business day following the closing of such an IPO. To date, three partner
companies have included directed share subscription programs as part of their
IPOs. Internet Capital Group, Inc. completed its IPO on August 10, 1999 and
there was an adjustment to the conversion price from $77.625 to $76.0786 as a
result of this IPO. U.S. Interactive, Inc. completed its IPO on August 13, 1999
and there was not any adjustment at that time to the conversion price as a
result of this IPO because the minimum 1% change to the conversion price
described below was not reached. Pac-West Telecomm, Inc. completed its IPO on
November 9 and there was an adjustment to the conversion
18
<PAGE>
price from 76.0786 to 75.0441. This adjustment also included a .0093 reduction
of the conversion price as a result of the U.S. Interactive IPO.
In the case of:
. any classification of our common stock or
. a consolidation, merger or contribution involving us or a sale or
conveyance to another person of all or substantially all of our
property or assets, in each case, as a result of which holders of our
common stock shall be entitled to receive stock, other securities,
other property or assets, including cash, with respect to or in
exchange for our common stock,
you will (provided your notes are still outstanding) generally be entitled after
the reclassification, consolidation, merger, combination, sale or conveyance to
convert the notes into the kind and amount of shares of stock, other securities
or other property or assets, including cash, which you would have owned or been
entitled to receive upon the reclassification, consolidation, merger,
combination, sale or conveyance had the notes been converted into our common
stock immediately prior to the reclassification, consolidation, merger,
combination, sale or conveyance assuming that you would not have exercised any
rights of election as to the stock, other securities or other property or
assets, including cash, receivable in connection with such transaction.
If we make a taxable distribution to holders of our common stock or in some
other circumstances requiring an adjustment to the conversion price, you may, in
specified circumstances, be deemed to have received a distribution subject to
United States income tax as a dividend; in other circumstances, the absence of
such an adjustment may result in a taxable dividend to the holders of our common
stock. See "Important United States Federal Income Tax Consequences" below for
more information concerning some possible tax consequences of investing in the
notes or the common stock issuable thereunder.
We may from time to time and to the extent permitted by law, reduce the
conversion price by any amount for any period of at least 20 days, in which case
we shall give at least 15 days' written notice of such reduction, if our board
of directors has made a determination that the reduction would be in our best
interests, which determination shall be conclusive. We may, at our option, make
reductions in the conversion price, in addition to those described above, as our
board of directors deems advisable to avoid or diminish any income tax to
holders of our common stock resulting from any dividend or distribution of
stock, or rights to acquire stock, or from any event treated as such for income
tax purposes. For more information concerning some possible tax implications of
investing in the notes, see "Important United States Federal Income Tax
Consequences."
No adjustment in the conversion price will be required unless it would
require a change of at least 1% in the conversion price then in effect; provided
that any adjustments that would otherwise be required to be made shall be
carried forward and taken into account in any subsequent adjustment. Except as
stated above, the conversion price will not be adjusted for the issuance of our
common stock or any securities convertible into or exchangeable for our common
stock or carrying the right to purchase any of the foregoing.
19
<PAGE>
OPTIONAL REDEMPTION BY SAFEGUARD
The notes are not entitled to any sinking fund. At any time on or after
June 18, 2002, we may redeem the notes on at least 20 days' notice, as a whole
or, from time to time, in part at the following prices, expressed as a
percentage of the principal amount, together with accrued interest to, but
excluding, the date fixed for redemption:
. if redeemed during the period beginning June 18, 2002 and ending June
15, 2003, at a redemption price of 102.50% and
. if redeemed during the 12-month period beginning June 16:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- --------------
<S> <C>
2003....................... 101.67%
2004....................... 100.83%
2005....................... 100.00%
</TABLE>
and 100% at June 15, 2006,
provided in each case that if the date of redemption under this provision is
after an interest payment record date and on or before an interest payment date,
then the interest payable on such interest payment date shall be payable to you
if you are the holder of record of the notes on the relevant record date.
If less than all of the outstanding notes are to be redeemed, the trustee
shall select the notes to be redeemed in principal amounts of $1,000 or
multiples of $1,000 by lot, or by another method the trustee considers fair and
appropriate. If a portion of your notes is selected for partial redemption and
you convert a portion of such notes, such converted portion shall be deemed to
be of the portion selected for redemption. On or after a redemption date,
interest will cease to accrue.
We may not give notice of any redemption of notes if a default in payment
of interest on the notes has occurred and is continuing.
We may at any time purchase notes in the open market at prices which may be
greater or less than the optional prices listed above.
REPURCHASE OF THE NOTES UPON A FUNDAMENTAL CHANGE
The indenture defines the term "fundamental change" to include any of:
. a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) becoming the "beneficial owner" of our
voting shares (as defined below) to the extent that they may exercise
50% of our total voting power or
20
<PAGE>
. a change in our board of directors to the extent that less than a
majority of the directors who constituted our board of directors one
year prior to the date of the potential fundamental change remain in
office at such date or
. the occurrence of any transaction or event in connection with which
all or substantially all our common stock shall be exchanged for,
converted into, acquired for or constitute solely the right to
receive, consideration (whether by means of an exchange offer,
liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise) or we sell or
otherwise dispose of all or substantially all of our assets, unless
the last sale price of our common stock for any of the five trading
days before our announcement of such transaction is at least equal to
105% of the conversion price of the notes at that time, or if the
consideration is in the form of cash or common stock listed (or, upon
consummation of or immediately following such transaction or event
which will be listed), on a United States national securities exchange
or approved for quotation on the Nasdaq National Market or any similar
United States system of automated dissemination of quotations of
securities prices, and the aggregate fair market value of such cash
and securities given in consideration is at least equal to 105% of the
conversion price of the notes in effect on the day preceding the
closing date of such transaction or
. our liquidation or dissolution.
In this definition of fundamental change:
. the term a "beneficial owner" shall be determined in accordance with
Rule 13d-3 under the Exchange Act, as in effect on the date of the
indenture, except that the number of our voting stock shall include,
in addition to all our outstanding voting shares and unissued shares
deemed to be held by the "person" or "group" (as such terms are
defined above) or other person with respect to which the fundamental
change determination is being made, all unissued shares deemed to be
held by all other persons.
. the term "unissued shares" means voting shares not outstanding that
are subject to options, warrants, rights to purchase or conversion
privileges exercisable within 60 days of the date of determination of
a fundamental change
. the term "voting shares" means all our outstanding shares of any class
or series of capital stock entitled to vote generally in the election
of members of our board of directors and
. the term "all or substantially all" in the context of a sale of assets
means the sale of more than 50% of the book value of our assets in one
or a related series of transactions; provided, that the sale of our
interest in any one partner company, including CompuCom, shall not be
deemed the sale of "all or substantially all."
21
<PAGE>
If a fundamental change occurs at any time prior to maturity of the notes,
you shall have the right, at your option, to require us to repurchase any or all
of your notes on the date (the "repurchase date") that is 30 days after the date
of our notice of such fundamental change. The notes will be repurchased in
multiples of $1,000 principal amount.
We shall repurchase the notes at a price equal to 100% of the principal
amount to be repurchased plus accrued interest to, but excluding, the repurchase
date; provided that, if the repurchase date is after an interest record date and
on or before an interest payment date, then the interest payable on the
repurchase date shall be paid to you if you are the holder of record of the
notes on the relevant record date.
We will mail to you a notice of the occurrence of a fundamental change and
of your repurchase right arising as a result of the fundamental change on or
before the 20th day after the occurrence of the fundamental change. We are also
required to deliver to the trustee a copy of such notice. To exercise the
repurchase right, you must deliver, on or before the 30th day after the date of
our notice of a fundamental change (the "fundamental change expiration time"),
written notice of your exercise of such right, together with the notes to be
repurchased, duly endorsed for transfer, to us or an agent designated by us for
such purpose. Payment for notes surrendered for repurchase prior to the
fundamental change expiration time will be made on the repurchase date. Your
submission of such a notice, together with the relevant notes will be
irrevocable on your part (unless we fail to repurchase the notes on the
repurchase date) and your rights to convert the notes will expire on such
submission.
We will comply with the provisions of Rule 13e-4, which requires the
dissemination of certain information to security holders in the event of a
tender offer, and any other tender offer rules under the Exchange Act to the
extent then applicable in the event that the repurchase option upon a
fundamental change becomes available to you.
Your repurchase rights could discourage a potential acquiror of Safeguard.
The fundamental change redemption feature, however, is not the result of
management's knowledge of any specific effort to obtain control of Safeguard by
means of a merger, tender offer, solicitation or otherwise, or part of a plan of
management to adopt a series of anti-takeover provisions. The term "fundamental
change" is limited to specified transactions and may not include other events
that might adversely affect our financial condition, nor would the requirement
that we offer to repurchase the notes upon a fundamental change necessarily
afford you protection in the event of a highly leveraged transaction,
reorganization, merger or similar transaction involving us.
If a fundamental change were to occur, we cannot assure you that we will
have sufficient funds to pay the repurchase price for all the notes tendered by
all, or substantially all, the holders. The terms of our existing senior
indebtedness could, and the terms of our other indebtedness then outstanding may
also, prohibit the payment of the repurchase price in such a circumstance. In
the event a fundamental change occurs at a time when we are prohibited from
repurchasing the notes, we could seek the consent of our then-existing lenders
to the repurchase of the notes or could attempt to refinance the borrowings that
contain such prohibition. If we do not obtain such a consent or repay such
borrowings, we would remain prohibited from repurchasing the notes. In such
case, our failure to repurchase tendered notes would constitute an event of
default under the
22
<PAGE>
indenture, and may constitute a default under the terms of other indebtedness
that we may enter into from time to time. In such circumstances, the
subordination provisions in the indenture would likely restrict payments to
holders of notes.
SUBORDINATION OF NOTES
The notes are subordinated to the extent provided to the indenture to the
prior payment in full of all our senior indebtedness. The notes also would be
effectively subordinated to all indebtedness and other liabilities, including
trade payables and lease obligations, if any, of our subsidiaries.
Upon any distribution of our assets upon any dissolution, winding up,
liquidation or reorganization, the holders of senior indebtedness will be
entitled to receive payment in full, in cash or other payment satisfactory to
the holders of senior indebtedness, before you will be entitled to receive any
payment of the principal of, or premium, if any, and interest, including
liquidated damages (as defined below), if any, on the notes. In the event of
any acceleration of the notes because of an event of default (as defined below),
the holders of any senior indebtedness then outstanding would be entitled to
payment in full in cash or other payment satisfactory to the holders of senior
indebtedness of all obligations in respect of such senior indebtedness before
you are entitled to receive any payment or distribution in respect thereof.
Notwithstanding the foregoing, if you or the trustee receives any payment
or distribution of our assets of any kind in contravention of any of the
subordination provisions of the indenture, whether in cash, property or
securities, including, without limitation, by way of set-off or otherwise, in
respect of the notes before all senior indebtedness is paid in full, then such
payment or distribution will be held by the recipient in trust for the benefit
of holders of senior indebtedness or their representatives to the extent
necessary to make payment in full of all senior indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution, or provision
therefor, to or for the benefit of the holders of senior indebtedness.
By reason of the subordination provisions described above, in the event of
our bankruptcy, dissolution or reorganization, holders of senior indebtedness
may receive more, ratably, and you may receive less, ratably, than other of our
creditors. Such subordination will not prevent the occurrence of any event of
default under the indenture.
The term "senior indebtedness" means the principal of, premium, if any,
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, and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, our indebtedness (as defined below), whether
outstanding on the date of the indenture or thereafter created, incurred,
assumed, guaranteed or in effect guaranteed by us, including all deferrals,
renewals, extensions or refundings of, or amendments, modifications or
supplements in the foregoing, unless in the case of any particular indebtedness
the instrument creating or evidencing the same or the assumption or guarantee
thereof expressly provides that such indebtedness ranks equally with or junior
to the notes. Notwithstanding the foregoing, the term senior indebtedness shall
not include any of our
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indebtedness to any of our subsidiaries, a majority of the voting stock of which
is owned, directly or indirectly, by us, or indebtedness evidenced by the notes.
The term "indebtedness" means, with respect to any person and without
duplication:
. all liabilities for borrowed money or for the deferred purchase price
of property or services
. all obligations of such person evidenced by bonds, notes, debentures
or other similar instruments or with respect to letters of credit,
bank guarantees or bankers' acceptances
. any obligation under a lease of (or other agreement conveying the
right to use) any property (whether real, personal or mixed) that is
required to be classified and the amount of such obligation at any
date shall be the capitalized amount thereof at such date, determined
in accordance with generally accepted accounting principles, and to be
accounted for as capital lease obligation
. all obligations of such person, contingent or otherwise, with respect
to a swap, cap or collar agreement or other similar instrument,
agreement or arrangement designed to protect us against fluctuations
in currency values or interest rates
. all guarantees of indebtedness referred to in this definition by such
person
. indebtedness or other obligations described above which are secured by
any mortgage, lien, pledge or other encumbrance existing on property
which is owned or held by such person, regardless of whether the
indebtedness or other obligation secured thereby shall have been
assumed by such person and
. any deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to any liability of the kind referred to
above.
As of September 30, 1999, on an unconsolidated basis Safeguard had
approximately $247.4 million of indebtedness outstanding, all of which would
have constituted senior indebtedness. Also, our consolidated subsidiaries had
approximately $438.6 million of indebtedness, all of which would have been
effectively senior to the notes. The indenture will not limit the amount of
additional indebtedness, including senior indebtedness, which we can create,
incur, assume or guarantee, nor does the indenture limit the amount of
indebtedness or other liabilities that any of our subsidiaries can create,
incur, assume or guarantee.
We are obligated to pay reasonable compensation to the trustee and to
indemnify the trustee against certain losses, liabilities or expenses incurred
by it in connection with its duties relating to the notes. The trustee's claims
for such payment will generally be senior to your claims in respect of all funds
collected or held by the trustee.
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EVENTS OF DEFAULT; NOTICE AND WAIVER
The following would be events of default under the indenture:
. failure by us to pay any principal of, or premium, if any (upon
redemption or otherwise), on the notes, whether or not such payment is
permitted to be made under the subordination provisions described
above
. failure by us to pay interest on the notes when due and payable, which
continues for 30 days (whether or not such payment is permitted to be
made under the subordination provisions described above)
. failure by us to convert any note in accordance with the provisions of
the indenture
. failure by us to perform or observe any other covenant or agreement
contained in the indenture or the notes which remains uncured for a
period of 60 days following receipt of written notice of our failure
from holders of at least 25% of principal amount of the outstanding
notes or the trustee
. failure by either us or one of our majority-owned subsidiaries
(defined below) to pay principal at maturity of, or the occurrence and
continuation of an event of default which results in the acceleration
of any loan agreement, mortgage, indenture or other instruments under
which there is issued or by which there is secured or evidenced any
indebtedness (other than the notes) of either of us or one of our
majority-owned subsidiaries, whether such indebtedness exists on the
date of the issuance of the notes or is created thereafter and the
principal amount of such indebtedness that, together with any such
other indebtedness so accelerated or not paid at maturity, aggregates
an amount equal to or greater than $25,000,000
. the rendering of one or more final judgments, orders or decrees
against us and/or any majority-owned subsidiary of ours in an
aggregate amount equal to or in excess of $15,000,000 which are not
vacated, satisfied, discharged or execution thereof stayed within a
period of 45 days from the entry thereof and
. certain events of bankruptcy, insolvency or reorganization relating to
us.
The term "majority-owned subsidiary" means any corporation or the entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of our board of directors or other persons performing similar
functions are at the time directly or indirectly owned by us.
The trustee shall, within 90 days after the occurrence of any default known
to it, give to the holders notice of all defaults of which the trustee is aware,
unless such default has been cured or waived before giving of such notice;
provided that the trustee may withhold such notice as to any default other than
a payment default if it in good faith determines that the withholding of such
notice is in your interests.
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The indenture provides that the holders of a majority in principal amount
at maturity of the outstanding notes may on behalf of all holders waive any
existing default or event of default and its consequences except a default or
event of default in the payment on the notes, any default with respect to your
conversion rights or any default in respect of any provision of the indenture
that cannot be modified or amended without the consent of the holder of each
note affected.
Assuming the holders of a majority of the principal amount of the notes do
not at any time waive an event of default, the indenture provides that if this
event of default is continuing, the trustee or the holders of not less than 25%
in principal amount of the notes then outstanding may declare the principal of,
premium, if any, and accrued interest (including liquidated damages, if any) on
the notes to be due and payable immediately. In the case of certain events of
bankruptcy or insolvency, the principal of, premium, if any, and accrued
interest (including liquidated damages, if any) on the notes shall automatically
become and be immediately due and payable. However, if we cure all defaults,
except the nonpayment of principal of, premium, if any, and interest (including
liquidated damages, if any) on any of the notes which have become due by
acceleration, and certain other conditions are met, with certain exceptions,
such declaration may be canceled and past defaults may be waived at any time by
the holders of a majority of the principal amount of the notes then outstanding.
The indenture provides that any payment of principal, premium, if any, or
interest (including liquidated damages, if any) that is not made when due,
whether or not such payment is permitted to be made under the subordination
provisions described above, will accrue interest, to the extent legally
permissible, at the annual rate of five percent from the date on which such
payment was required under the terms of the indenture until the date of payment.
The holders of a majority in principal amount of the notes then outstanding
have the right to direct in writing the time, method and place of conducting any
proceedings for any remedy available to the trustee, subject to certain
limitations specified in the indenture.
The indenture provides that you may not pursue any remedy under the
indenture, except for a default in the payment of principal, premium, if any, or
interest (including liquidated damages, if any), on the notes, unless you have
previously given to the trustee written notice of a continuing event of default,
and the holders of at least 25% in principal amount of the outstanding notes
have made a written request, and offered reasonable indemnity, to the trustee to
pursue the remedy, and the trustee has not received from the holders of a
majority in principal amount of the outstanding notes a direction inconsistent
with such request and the trustee has failed to comply with such request within
60 days after receipt of such request.
We are required to deliver an officers' certificate to the trustee within
90 days after the end of each of our fiscal years while the notes remain
outstanding as to the signers' knowledge of our compliance with all conditions
and covenants on our part contained in the indenture, and stating whether or not
the signers know of any default or event of default. If any such signer knows
of such a default or event of default, the officers' certificate shall describe
the default or event of default and the efforts to remedy the same.
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MODIFICATION OF THE INDENTURE
We may, with the trustee, amend or supplement the indenture or the notes
with the written consent of the holders of at least a majority in principal
amount at maturity of the outstanding notes. The holders of a majority in
principal amount at maturity of the notes outstanding may waive our compliance
in a particular instance with any provision of the indenture or the notes
without notice to you should you not be part of such majority. However, without
the consent of the holder of each note affected thereby, an amendment,
supplement or waiver may not:
. extend the maturity date of the notes
. extend any interest payment date
. reduce the principal amounts of the notes
. reduce the interest rate of the notes
. reduce the percentage of the principal amount at maturity of
outstanding notes whose holders must consent to an amendment,
supplement or waiver
. alter the conversion, redemption or repurchase provisions with respect
to any note in a manner adverse to you
. reduce the percentage of notes necessary to waive defaults or events
of default
. modify any of the subordination provisions in the indenture in a
manner adverse to you
. make any note payable in money other than that stated in the note or
. impair your right to institute suit for the enforcement of payment
with respect to, or conversion of, the notes.
We may, with the trustee, amend or supplement the indenture or the notes
without notice to you or your consent in certain events, such as:
. to comply with the certain conversion adjustment, liquidation and
merger provisions described in the indenture
. to cure any ambiguity, defect or inconsistency or to make any other
change that does not adversely affect your rights
. to comply with the provisions of the Trust indenture Act or
. to appoint a successor trustee.
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No amendment to the indenture may be made that adversely affects the rights
under the provisions described under "-- Subordination of Notes" above, of a
holder of an issue of senior indebtedness unless the holders of that issue,
pursuant to its terms, consent to such amendment.
REGISTRATION RIGHTS OF THE NOTEHOLDERS
Under a Registration Rights Agreement with Credit Suisse First Boston
Corporation, we are required to keep a shelf registration statement relating to
these notes and the common stock issuable upon conversion of the notes effective
for at least two years after the date the initial shelf registration statement
is filed, or if either of:
. the sale pursuant to the shelf registration statement of all the
securities registered thereunder or
. the expiration of the holding period applicable to such securities
held by persons that are not our affiliates under Rule 144(k) under
the Securities Act, or any successor provision, subject to permitted
exceptions occurring before that date, then we shall only be bound to
keep the shelf registration effective until the date that the earlier
of these events occurs.
We are permitted to suspend the use of this prospectus under circumstances
relating to pending corporate developments, public filings with the SEC and
similar events for a period not to exceed 30 days in any three-month period or
not to exceed an aggregate of 90 days in any 12 month period. We have agreed to
pay predetermined liquidated damages ("liquidated damages"):
. in respect of the notes, at a rate per annum equal to .5% of the
principal amount of the notes and
. in respect of any shares of common stock issued upon conversion of the
notes, at a rate per annum equal to .5% of the then applicable
conversion price,
to holders of restricted notes and holders of restricted shares of our common
stock issued upon conversion of the notes if:
. the shelf registration statement is not declared effective by the
Securities and Exchange Commission prior to December 9, 1999 or
. the prospectus is unavailable for periods in excess of those permitted
above, for that period of excess unavailability.
If you sell notes or our common stock issued upon conversion of the notes
pursuant to the shelf registration statement, you will generally be required to
be named as a selling holder in the related prospectus, deliver a prospectus to
purchasers and be bound by certain provisions of the Registration Rights
Agreement that are applicable to you, including certain indemnification
provisions. We will pay all expenses of the shelf registration statement,
provide to each registered holder copies of this prospectus, notify each
registered holder when the shelf registration statement has become effective and
take certain other actions as are required to
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permit, subject to the foregoing, unrestricted resale of the notes and our
common stock issued upon conversion of the notes. The plan of distribution of
the shelf registration statement permits resales of the notes and our common
stock issuable upon conversion of the notes by selling holders through brokers
and dealers.
You may request a copy of the Registration Rights Agreement from us.
DISCHARGE OF THE INDENTURE
We may satisfy and discharge our obligations under the indenture by
delivering to the trustee for cancellation all outstanding notes or by
depositing with the trustee, after the notes have become due and payable,
whether at stated maturity, or any other redemption date, or upon conversion or
otherwise, cash or common stock (as applicable under the terms of the indenture)
sufficient to pay all of the outstanding notes and paying all other sums payable
by us under the indenture.
MERGERS AND CONSOLIDATION
Subject to your right to require us to repurchase the notes in the event of
a fundamental change, we may consolidate or merge with or into any other
corporation, and we may sell, lease, convey, assign or otherwise transfer all or
substantially all our property and assets to any other corporation, provided:
. the resulting or surviving corporation or successor corporation (if
other than us) is organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and
expressly assumes, by supplemental indenture executed and delivered to
the trustee, all our obligations under the notes and the indenture
. immediately after giving effect to such transaction, no default or
event of default has occurred and is continuing and
. certain other conditions are met.
Thereafter, in any such transaction (other than a lease) in which we are not the
surviving or resulting corporation, we shall be released from all of our
obligations under the indenture and the notes.
THE TRUSTEE
Chase Manhattan Trust Company, National Association, is currently to
serving as trustee under the indenture. The trustee is permitted to deal with
us and any of our affiliates with the same rights as if it were not trustee;
provided, however, that under the Trust Indenture Act, if the trustee acquires
any conflicting interest (as defined in the Trust Indenture Act) and there
exists a default with respect to the notes, it must eliminate such conflict or
resign.
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The holders of a majority in principal amount at maturity of all
outstanding notes have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy or power available to the
trustee, provided that such direction does not conflict with any law or the
indenture, is not unduly prejudicial to the rights of another holder or the
trustee and does not involve the trustee in personal liability.
RULE 144A INFORMATION REQUIREMENT
We have agreed to furnish to the holders or beneficial holders of the notes
or the underlying shares of our common stock and prospective purchasers of the
notes or the underlying shares of our common stock designated by the holders of
the notes or the underlying shares of our common stock, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act until such time as such securities are no longer "restricted
securities" within the meaning of Rule 144 under the Securities Act, assuming
such securities have not been owned by our affiliates.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income tax
consequences of the acquisition, ownership, and disposition of the notes and our
common stock into which the notes may be converted to U.S. Holders (as defined
below). This summary is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations, Internal Revenue Service rulings and
judicial decisions now in effect, all of which are subject to change (possibly
with retroactive effect) or different interpretations. There can be no
assurance that the Internal Revenue Service will not challenge one or more of
the conclusions described herein, and Safeguard has not obtained, nor does it
intend to obtain, a ruling from the Internal Revenue Service with respect to the
United States federal income tax consequences of acquiring, or holding notes.
This summary is addressed only to U.S. Holders that hold the notes and common
stock into which the notes have or would be converted as capital assets within
the meaning of section 1221 of the Code. This discussion does not address any of
the United States federal income tax considerations relevant to persons other
than U.S. Holders and does not purport to deal with all aspects of United States
federal income taxation that may be relevant to a particular U.S. Holder in
light of the Holder's circumstances (for example, persons subject to the
alternative minimum tax provisions of the Code). Also, it is not intended to be
applicable to all categories of investors, some of which (such as dealers in
securities, banks, insurance companies, tax-exempt organizations, and U.S.
Holders holding notes as part of a hedging or conversion transaction or straddle
or other risk reduction transaction) may be subject to special rules. The
discussion also does not discuss the tax consequences arising under the laws of
any state, local or foreign jurisdiction.
For purposes of this discussion, a beneficial owner of a note or our common
stock is a U.S. Holder if for United States federal income tax purposes the
beneficial owner is (i) an individual who is a citizen or a resident of the
United States, (ii) a corporation or partner created or organized in or under
the laws of the United States or of any political subdivision thereof, (iii) an
estate, the income of which is subject to United States federal income taxation
regardless of its source, or (iv) a trust, if both: (A) a United States court is
able to exercise primary supervision over the administration of the trust, and
(B) one or more United States persons have the authority to control all
substantial decisions of the trust.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP, CONVERSION OR OTHER
DISPOSITION OF NOTES OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL INCOME TAX
CONSEQUENCES AND THE CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR
FOREIGN TAXING JURISDICTION.
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THE NOTES
INTEREST
A U.S. Holder will include payments of stated interest on the notes as
ordinary interest income at the time such interest accrues or is received, in
accordance with such Holder's method of accounting for United States federal
income tax purposes.
SALE OR OTHER DISPOSITION
Except as described under "Conversion," below, a U.S. Holder generally will
recognize capital gain (or loss) on the sale or other disposition of a note
(including on a redemption by reason of a fundamental change) in an amount equal
to the excess (or shortfall) of (i) the amount realized by such Holder, which
will not include amounts attributable to accrued but unpaid interest, which will
be taxable as ordinary income unless previously taken into account, over (or
against) (ii) such Holder's adjusted tax basis in the note, which generally will
equal the cost of the note to such Holder. In the case of individual U.S.
Holders, long-term capital gains are subject to tax at a maximum 20% federal tax
rate. Net capital gains of corporations are subject to tax at the same rates as
ordinary income, with a maximum federal tax rate of 35%.
CONVERSION
A U.S. Holder's conversion of a note into our common stock generally is not
a taxable event (except with respect to cash received in lieu of a fractional
share). Accordingly, a U.S. Holder's adjusted tax basis in our common stock
received on conversion of a note will be the same as the Holder's adjusted tax
basis in the note at the time of conversion (exclusive of any tax basis
allocable to a fractional share), and the holding period for our common stock
received on conversion will include the holding period of the note converted.
Cash received in lieu of a fractional share of our common stock upon
conversion of a note should be treated as a payment in exchange for such
fractional share. Accordingly, the receipt of cash in lieu of a fractional
share of our common stock should generally result in capital gain or loss, if
any, measured by the difference between the cash received for the fractional
share and the Holder's basis in the fractional share. Such capital gain or loss
will be long-term capital gain or loss if the note in respect of which such cash
was received was held for more than one year.
CHANGES TO CONVERSION PRICE
Under certain circumstances, adjustments to the conversion price of the
notes pursuant to the antidilution provisions or otherwise may result in taxable
dividends to noteholders under Section 305 of the Code.
For example, if at any time:
. Safeguard makes a distribution of cash or property (including rights
to purchase property) to its shareholders or purchases common stock
and such distribution or
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purchase would be taxable to such shareholders as a dividend for
United States federal income tax purposes (e.g., distributions of
evidences of indebtedness or assets of Safeguard, but generally not
stock dividends or rights to subscribe for common stock of Safeguard)
and, pursuant to the anti-dilution provisions, the conversion price of
the notes is decreased,
. the conversion price of the notes is decreased at the discretion of
Safeguard,
. a distribution is made by a partner company of IPO Rights to Safeguard
shareholders in circumstances that cause the conversion price to be
decreased, or
. a partner company conducts an IPO that includes a Directed Share
Subscription Program in circumstances that cause the conversion price
to be decreased,
such decrease in conversion price would entitle a noteholder to receive a
greater number of shares of our common stock upon conversion and may be deemed
to be the payment of a taxable dividend, to the extent of Safeguard's current or
accumulated earnings and profits, to noteholders, pursuant to Section 305 of the
Code. Such noteholders therefore could have taxable income as a result of an
event pursuant to which they received no cash or property.
The distribution of IPO rights or a directed share subscription program
should not result in taxable dividends to noteholders in circumstances that do
not cause the conversion price to be adjusted. See "DESCRIPTION OF NOTES --
Conversion of Notes."
THE COMMON STOCK
DIVIDENDS
Distributions, if any, made on our common stock generally will be first
includable in the income of a U.S. Holder as ordinary income to the extent of
the U.S. Holder's ratable share of Safeguard's current or accumulated earnings
and profits, and then treated as a tax-free return of capital to the extent of
the Holder's tax basis in our common stock, and thereafter treated as capital
gain from the sale or exchange of such stock.
SALE OR OTHER DISPOSITION
A U.S. Holder generally will recognize capital gain (or loss) on the sale
or other disposition of our common stock in an amount equal to the excess (or
shortfall) of (i) the amount realized by such Holder, over (or against) (ii)
such Holder's adjusted tax basis in our common stock. Such capital gain or loss
will be long-term capital gain or loss if the holding period for such common
stock (which, as discussed above, will include the holding period of the notes
in respect of which our common stock was received) is more than one year. In
the case of individuals, long-term capital gains with respect to property held
for more than one year are subject to tax at a maximum 20% federal tax rate.
Net capital gain of corporations is subject to tax at the same rate as ordinary
income, with a maximum federal tax rate of 35%.
BACKUP WITHHOLDING AND INFORMATION REPORTING
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Information reporting will apply to payments of interest or dividends, if
any, made by Safeguard on, or the proceeds of the sale or other disposition of,
the notes or shares of our common stock with respect to certain noncorporate
U.S. Holders, and backup withholding at a rate of 31% may apply unless the
recipient of such payment supplies a taxpayer identification number, certified
under penalties of perjury, as well as certain other information or otherwise
establishes an exemption from backup withholding. Any amount withheld under the
backup withholding rules will be allowable as a credit against the U.S. Holder's
federal income tax, provided that the required information is provided to the
Internal Revenue Service.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the notes and common
stock into which the notes are convertible by the selling holders.
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DESCRIPTION OF CAPITAL STOCK
The following summarizes the terms of the Safeguard capital stock.
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
. $500,000,000 shares of common stock, par value $0.10, authorized, and
34,825,229 shares outstanding as of November 12, 1999
. 1,000,000 shares of preferred stock, par value $0.10, authorized, and
none outstanding
COMMON STOCK
Voting
In elections to our board of directors:
. Cumulative voting rights -- shareholders are entitled to cast that
number of votes equal to the number of shares that they own multiplied
by the number of directors to be elected
On all other matters except as described under "Supermajority voting
requirements" below:
. One vote for each share held of record
. Action taken by the vote of majority of votes cast
Dividends
. Subject to preferred stock rights, entitled to receive ratably
declared dividends
. Our board of directors may only declare dividends out of legally
available funds
Additional Rights
. Subject to the preferred stock rights, entitled to receive ratably net
assets which are available after payment of debts, upon liquidation,
dissolution or winding up of Safeguard
. No preemptive rights
. No subscription rights
. No redemption rights
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. No sinking fund rights
. No conversion rights
The rights and preferences of common shareholders are subject to the rights of
any series of preferred stock Safeguard may issue.
PREFERRED STOCK
By resolution of our board of directors, we may, without any further vote
by our shareholders, authorize and issue an aggregate of 1,000,000 shares of
preferred stock. The preferred stock may be issued in one or more classes or
series. With respect to each class or series, our board of directors may
determine the designation and the number of shares, voting rights, preferences,
limitations and special rights, including any dividend rights, conversion
rights, redemption rights and liquidation preferences. Because of the rights
that may be granted, the issuance of preferred stock may delay or prevent a
change of control.
SUPERMAJORITY VOTING REQUIREMENTS
The vote by the holders of 80% of the voting power of all shares of stock
entitled to vote in the election of directors is required for any of the
following actions:
. the merger or consolidation of Safeguard or any subsidiary of
Safeguard
. the sale or other disposition of substantially all of Safeguard's or
any Safeguard's subsidiary's assets or
. the sale or lease of assets of Safeguard or any subsidiary of
Safeguard if:
. the assets have a fair market value in excess of $2,000,000 and
. the other party owns at least 5% of any class of capital stock of
Safeguard.
This 80% voting requirement, however, is not applicable in the following
circumstances:
. our board of directors approved the agreement relating to the
transaction prior to the time the other party acquired its 5% interest
or
. our board of directors, acting prior to the time the other party
acquired its 5% interest, approved the transaction.
This 80% voting requirement can only be amended or repealed with the
approval by the vote of the holders of 80% of the voting power of all shares of
stock entitled to vote in the election of our directors.
PENNSYLVANIA ANTI-TAKEOVER LAWS
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The Pennsylvania corporate law contains provisions applicable to publicly
held Pennsylvania corporations that may be deemed to have an anti-takeover
effect. Safeguard specifically opted out of all of these provisions, except for
those described below.
Under Section 1715 of the Pennsylvania corporate law, directors of the
corporation are not required to regard the interests of the shareholders as
being dominant or controlling in considering the best interests of the
corporation. The directors may consider, to the extent they deem appropriate,
such factors, including:
. the effects of any action upon any group affected by such actions
including shareholders, employees, suppliers, customers and creditors
of the corporation and upon communities in which offices or other
establishments of the corporation are located
. the short term and long term interests of the corporation, including
benefits that may accrue to the corporation from its long term plans
and the possibility that these interests may be best served by the
continued independence of the corporation
. the resources, intent and conduct of any person seeking to acquire
control of the corporation and
. all other pertinent factors.
Section 1715 further provides that any act of our board of directors, a
committee of our board of directors or an individual director relating to or
affecting an acquisition or potential or proposed acquisition of control to
which a majority of disinterested directors have assented will be presumed to
satisfy the standard of care set forth in the Pennsylvania corporate law, unless
it is proven by clear and convincing evidence that the disinterested directors
did not consent to such act in good faith after reasonable investigation. As a
result of this and the other provisions of the Pennsylvania corporate law,
directors are provided with broad discretion with respect to actions that may be
taken in response to acquisitions or proposed acquisitions of corporate control.
Chapter 25, Subchapter F of the Pennsylvania corporate law is designed to
regulate certain business combinations between most publicly traded Pennsylvania
corporations and interested shareholders. In general, Subchapter F prohibits
the consummation of enumerated business combination transactions during a five
year moratorium period. The moratorium period does not apply to:
. business combinations with persons who became interested shareholders
with the approval of our board of directors
. business combinations that were approved prior to the date on which
the shareholder became an interested shareholder
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. business combinations approved by a majority of disinterested
shareholders at a meeting at least three months after the interested
shareholder acquires at least 80% of the outstanding voting stock if
the consideration paid to other holders of the corporations's
outstanding securities satisfies fair price requirements set forth in
Subchapter F of the Pennsylvania corporate law
. business combinations approved by all of the holders of the
outstanding shares
The moratorium period runs from the date on which the interested
shareholder becomes an interested shareholder. Generally, a shareholder becomes
an interested shareholder the date the shareholder first acquires beneficial
ownership of 20% or more of the corporation's voting shares. After the
moratorium period, the corporation can undertake a business combination with an
interested shareholder only upon approval of disinterested shareholders holding
a majority of the voting shares or in a transaction approved by shareholders
that satisfies the fair price provisions referred to above.
Section 1715 and Subchapter F may discourage open market purchases of our
common stock or a nonnegotiated tender or exchange offer for our common stock of
a corporation and, accordingly, may be considered disadvantageous by a
shareholder who would desire to participate in any such transactions. In
addition, Section 1715 and Subchapter F may have a depressive effect on the
price of our common stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar with respect to our common stock is
ChaseMellon Shareholder Services, L.L.C.
38
<PAGE>
SELLING HOLDERS
The notes were originally issued by Safeguard and sold by Credit Suisse
First Boston in a transaction exempt from the registration requirements of the
Securities Act to persons reasonably believed by Credit Suisse First Boston to
be qualified institutional buyers or other institutional accredited investors.
Selling holders, which term includes their transferees, pledgees or donees or
their successors, may from time to time offer and sell pursuant to this
prospectus any or all of the notes and common stock into which the notes are
convertible.
The following table sets forth information, as of November 29, 1999, with
respect to the selling holders and the respective principal amounts of notes
beneficially owned by each selling holder that may be offered pursuant to this
prospectus. The information is based on information provided by or on behalf of
the selling holders. The selling holders may offer all, some or none of the
notes or common stock into which the notes are convertible. Because the selling
holders may offer all or some portion of the notes or the common stock, no
estimate can be given as to the amount of the notes or the common stock that
will be held by the selling holders upon termination of any such sales. In
addition, the selling holders identified below may have sold, transferred or
otherwise disposed of all or a portion of their notes since the date on which
they provided the information regarding their notes in transactions exempt from
the registration requirements of the Securities Act.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF NOTES
BENEFICIALLY COMMON STOCK
OWNED AND OFFERED OWNED PRIOR TO COMMON STOCK
NAME HEREBY (1) THE OFFERING (1)(2) OFFERED HEREBY (2)
- --------------------------- ----------------- --------------------- ------------------
<S> <C> <C> <C>
Associated Electric & Gas
Insurance Services $ 360,000 4,797 4,797
JMG Convertible Investments, L.P. $ 3,500,000 46,639 46,639
Triton Capital Investments, Ltd. $ 3,500,000 46,639 46,693
National Bank of Canada $ 800,000 10,660 10,660
Conseco Direct Life $ 625,000 8,328 8,328
Palladin Securities LLC $ 625,000 8,328 8,328
PGEP III, LLC $ 450,000 5,996 5,996
University of South Florida $ 350,000 4,663 4,663
Lord Abbett & Co. Oxford Fund $ 1,250,000 16,656 16,656
Lord Abbett Bond Debenture Fund $ 6,850,000 91,279 91,279
ELF Aquitaine $ 150,000 1,998 1,998
Employee Benefit
Convertible Securities Fund $ 400,000 5,330 5,330
Nations Capital Income Fund $ 5,200,000 69,292 69,292
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF NOTES
BENEFICIALLY COMMON STOCK
OWNED AND OFFERED OWNED PRIOR TO COMMON STOCK
NAME HEREBY (1) THE OFFERING (1)(2) OFFERED HEREBY (2)
- --------------------------- ----------------- --------------------- ------------------
<S> <C> <C> <C>
Pacific Innovations Trust
Capital Income Fund $ 400,000 5,330 5,330
BNP Arbitrage SNC $ 8,000,000 106,603 106,603
Fidelity Financial Trust:
Fidelity Convertible Securities
Fund $ 900,000 11,992 11,992
OCM Convertible Trust $ 1,060,000 14,125 14,125
Delta Air Lines Master
Trust, c/o Oaktree Capital
Management, LLC $ 865,000 11,526 11,526
State Employees'
Retirement Fund of the
State of Delaware $ 1,080,000 14,391 14,391
State of Connecticut
Combined Investment Funds $ 2,500,000 33,313 33,313
Partner Reinsurance $ 330,000 4,397 4,397
Company Ltd.
Chrysler Corporation
Master Retirement Trust $ 2,105,000 28,050 28,050
Motion Picture Industry $ 255,000 3,398 3,398
Health Plan-Active Member
Fund
Motion Picture Industry
Health Plan-Retiree
Member Fund $ 125,000 1,665 1,665
Vanguard Convertible
Securities Fund, Inc. $ 1,575,000 20,987 20,987
Boulder Capital, Inc. $ 1,950,000 25,984 25,984
Onex Industrial Partners
Limited $ 1,950,000 25,984 25,984
Boulder II Limited $ 8,750,000 116,598 116,598
Pebble Capital Inc. $ 850,000 11,326 11,326
Fiduciary Trust Company
International $ 750,000 9,994 9,994
Credit Suisse First
Boston Corporation $ 40,933,000 545,452 545,452
Any other holder of notes
or future transferee from
any such holder (3)(4)....... $ 98,438,000 1,311,720 1,311,720
------------ ---------- ----------
Total.................... $200,000,000 2,665,099 2,665,099
============ ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
_______________________________
(1) Includes common stock into which the notes are convertible.
(2) Assumes a conversion price of $75.0441 per share and a cash payment in lieu
of any fractional interest.
(3) Information concerning other selling holders of notes will be set forth in
prospectus supplements from time to time, if required.
40
<PAGE>
(4) Assumes that any other holders of notes or any future transferee from any
such holder does not beneficially own any common stock other than common
stock into which the notes are convertible at the conversion price of
$75.0441 per share.
None of the selling holders has had any material relationship with us or
our affiliates within the past three years. All of the notes were "restricted
securities" under the Securities Act prior to this registration.
We have agreed to file the registration statement to register the resale of
the notes and the shares of common stock issuable upon conversion of the notes.
We agreed to prepare and file all necessary amendments and supplements to the
registration statement to keep it effective until the earlier of (1) September
7, 2001 and (2) the date on which the notes and the common stock into which the
notes are convertible no longer qualify as "registrable securities" under the
Registration Rights Agreement.
Information concerning the selling holders may change from time to time and
any such changed information will be set forth in supplements to this prospectus
if and when necessary. In addition, the per share conversion price, and
therefore the number of shares of common stock issuable upon conversion of the
notes, is subject to adjustment under certain circumstances. Accordingly, the
number of shares of common stock into which the notes are convertible may
increase or decrease.
41
<PAGE>
PLAN OF DISTRIBUTION
The selling holders and their successors, which term includes their
transferees, pledgees or donees or their successors, may sell the notes and the
common stock into which the notes are convertible directly to purchasers or
through underwriters, broker-dealers or agents, who may receive compensation in
the form of discounts, concessions or commissions from the selling holders or
the purchasers, which discounts, concessions or commissions as to any particular
underwriter, broker-dealer or agent may be in excess of those customary in the
types of transactions involved.
The notes and the common stock into which the notes are convertible may be
sold in one or more transactions at fixed prices, at prevailing market prices at
the time of sale, at prices related to such prevailing market prices, at varying
prices determined at the time of sale, or at negotiated prices. Such sales may
be effected in transactions, which may involve crosses or block transactions (1)
on any national securities exchange or quotation service on which the notes or
the common stock may be listed or quoted at the time of sale, (2) in the over-
the-counter market, (3) in transactions otherwise than on such exchanges or
services or in the over-the-counter market, (4) through the writing of options,
whether such options are listed on an options exchange or otherwise, or (5)
through the settlement of short sales. In connection with the sale of the notes
and the common stock into which the notes are convertible or otherwise, the
selling holders may enter into hedging transactions with broker-dealers or other
financial institutions which may in turn engage in short sales of the notes or
the common stock into with the notes are convertible and deliver these
securities to close out such short positions, or loan or pledge the notes or the
common stock into which the notes are convertible to broker-dealers that in turn
may sell these securities.
The aggregate proceeds to the selling holders from the sale of the notes or
common stock into which the notes are convertible offered by them hereby will be
the purchase price of such notes or common stock less discounts and commissions,
if any. Each of the selling holders reserves the right to accept and, together
with their agents from time to time, to reject, in whole or in part, any
proposed purchase of notes or common stock to be made directly or through
agents. We will not receive any of the proceeds from this offering.
Our common stock is listed for trading on the New York Stock Exchange. We
do not intend to list the notes for trading on any national securities exchange
or on the Nasdaq National Market and can give no assurance about the development
of any trading market for the notes.
In order to comply with the securities laws of some states, if applicable,
the notes and common stock into which the notes are convertible may be sold in
such jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the notes and common stock into which the notes are
convertible may not be sold unless they have been registered or qualified for
sale or an exemption from registration or qualification requirements is
available and is complied with.
The selling holders and any underwriters, broker-dealers or agents that
participate in the sale of the notes and common stock into which the notes are
convertible may be "underwriters" within the meaning of Section 2(11) of the
Securities Act. Any discounts, commissions,
42
<PAGE>
concessions or profit they earn on any resale of the shares may be underwriting
discounts and commissions under the Securities Act. Selling holders who are
"underwriters" within the meaning of Section 2(11) of the Securities Act will be
subject to the prospectus delivery requirements of the Securities Act. The
selling holders have acknowledged that they understand their obligations to
comply with the provisions of the Exchange Act and the rules thereunder relating
to stock manipulation, particularly Regulation M, and have agreed that they will
not engage in any transaction in violation of such provisions.
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. A selling holder
may not sell any notes or common stock described herein and may not transfer,
devise or gift such securities by other means not described in this prospectus.
To the extent required, the specific notes or common stock to be sold, the
names of the selling holders, the respective purchase prices and public offering
prices, the names of any agent, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement of which this prospectus is a part.
We entered into a Registration Rights Agreement for the benefit of holders
of the notes to register the resale of their notes and common stock under
applicable federal securities laws under certain circumstances and at certain
times. The Registration Rights Agreement provides for cross-indemnification of
the selling holders and Safeguard and their respective directors, officers and
controlling persons against certain liabilities in connection with the offer and
sale of the notes and the common stock, including liabilities under the
Securities Act. We will pay all of our expenses and substantially all of the
expenses incurred by the selling holders incident to the offering and sale of
the notes and the common stock, provided that each selling holder will be
responsible for payment of commissions, concessions and discounts of
underwriters, broker-dealers or agents.
43
<PAGE>
LEGAL MATTERS
The validity of the notes and the shares of our common stock issuable upon
conversion of the notes will be passed upon for Safeguard by Morgan, Lewis &
Bockius LLP, Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements and schedules of Safeguard
Scientifics, Inc., as of December 31, 1998, and 1997, and for each of the years
in the three year period ended December 31, 1998, have been incorporated by
reference herein and in this prospectus in reliance upon the reports of KPMG
LLP, independent certified public accountants, which are based partially upon
the reports of other auditors, incorporated by reference herein and elsewhere in
this prospectus, upon the authority of said firm as experts in accounting and
auditing.
The audited financial statements of Cambridge Technology Partners
(Massachusetts), Inc., not separately presented in this prospectus, have been
audited by PricewaterhouseCoopers LLP, independent accountants, whose report
thereon is incorporated herein by reference to the Safeguard Scientifics, Inc.
Current Annual Report on Form 10-K. Such financial statements, to the extent
that have been included in the financial statements of Safeguard Scientifics,
Inc., have been so included in reliance on the report of such independent
accountants given on the authority of said firm as experts in auditing and
auditing.
The audited financial statements of Docucorp International, Inc., not
separately presented in this prospectus, have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report thereon is
incorporated herein by reference to the Safeguard Scientifics, Inc. Current
Annual Report on Form 10-K. Such financial statements, to the extent that have
been included in the financial statements of Safeguard Scientifics, Inc., have
been so included in reliance on the report of such independent accountants given
on the authority of said firm as experts in auditing and auditing.
The audited financial statements of USDATA Corporation, not separately
presented in this prospectus, have been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report thereon is incorporated herein by
reference to the Safeguard Scientifics, Inc. Current Annual Report on Form 10-K.
Such financial statements, to the extent that have been included in the
financial statements of Safeguard Scientifics, Inc., have been so included in
reliance on the report of such independent accountants given on the authority of
said firm as experts in auditing and auditing.
The financial statements of Sanchez Computer Associates, Inc. have been
audited by Arthur Andersen LLP as stated in their report, which is incorporated
herein by reference to Safeguard's Current Annual Report on Form 10-K, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
44
<PAGE>
The financial statements of OAO Technology Solutions, Inc., not presented
separately herein, have been audited by Deloitte & Touche LLP as stated in their
report, which is incorporated herein by reference to Safeguard's Current Annual
Report on Form 10-K, and has been so incorporated in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
45
<PAGE>
================================================================================
We have not authorized any person to give you any information or to make any
representations other than those contained in this prospectus. You should not
rely on any information or representations other than those contained in this
prospectus. This prospectus is not an offer to sell or a solicitation of an
offer to buy any securities other than the convertible subordinated notes and
the common stock into which the notes are convertible. It is not an offer to
sell or a solicitation of an offer to buy securities if the offer or
solicitation would be unlawful. The affairs of Safeguard may have changed since
the date of this prospectus. You should not assume that the information in this
prospectus is correct at any time subsequent to its date.
$200,000,000
SAFEGUARD SCIENTIFICS, INC.
5.0% CONVERTIBLE SUBORDINATED NOTES DUE JUNE 15, 2006
-----------------
PROSPECTUS
-----------------
November 30, 1999
================================================================================
46
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the
registrant in connection with the resale of the 5.0% Convertible Subordinated
Notes due June 15, 2006 and the common stock being registered. All amounts are
estimates except the SEC registration fee, and the New York Stock Exchange
additional listing fee.
<TABLE>
<S> <C>
SEC registration fee....................................................... $ 55,600
New York Stock Exchange listing fee for the common stock................... 1,500
Transfer Agent and registrar fees.......................................... 10,000
Legal fees and expenses.................................................... 30,000
Accounting fees and expenses............................................... 36,000
Miscellaneous fees and expenses............................................ 16,900
--------
Total................................................................. $150,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 1741 and 1742 of the Pennsylvania Business Corporation Law of
1988, as amended (the "PBCL") provide that a business corporation may indemnify
directors and officers against liabilities they may incur as such provided that
the particular person acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and, with respect to any criminal proceeding, had no reasonable cause to believe
his or her conduct was unlawful. In general, the power to indemnify under these
sections does not exist in the case of actions against a director or officer by
or in the right of the corporation if the person otherwise entitled to
indemnification shall have been adjudged to be liable to the corporation unless
it is judicially determined that, despite the adjudication of liability but in
view of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnification for specified expenses. The corporation is required
to indemnify directors and officers against expenses they may incur in defending
actions against them in such capacities if they are successful on the merits or
otherwise in the defense of such actions.
Section 1713 of the PBCL permits the shareholders to adopt a bylaw
provision relieving a director (but not an officer) of personal liability for
monetary damages except where (i) the director has breached the applicable
standard of care, and (ii) such conduct constitutes self-dealing, willful
misconduct or recklessness. The statute provides that a director may not be
II-1
<PAGE>
relieved of liability for the payment of taxes pursuant to any federal, state or
local law or responsibility under a criminal statute.
Section 1746 of the PBCL grants a corporation broad authority to indemnify
its directors, officers and other agents for liabilities and expenses incurred
in such capacity, except in circumstances where the act or failure to act giving
rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness.
The Registrant's Articles of Incorporation provide that a director or
officer of the Registrant shall not be personally liable for monetary damages as
such (including, without limitation, any judgment, amount paid in settlement,
penalty, punitive damages or expense of any nature (including, without
limitation, attorneys' fees and disbursements)) for any action taken, or any
failure to take any action, unless the director or officer has breached or
failed to perform the duties of his or her office under the Articles or the
bylaws of the Registrant or applicable provisions of law and the breach or
failure to perform constitutes self-dealing, willful misconduct or recklessness
provided that such limitation on monetary damages does not relieve a director or
officer of liability for the payment of any taxes pursuant to local, state or
federal law, or liability or responsibility pursuant to any criminal statute.
Section 6 of Article II of the bylaws also limits the monetary liability of
directors for any action taken, or any failure to take any action, unless the
director has breached or failed to perform the duties of his or her office. The
limitation on monetary liability does not extend to breaches of duty
constituting self-dealing, willful misconduct or recklessness and does not
relieve a director of liability for the payment of any taxes pursuant to local,
state or federal law, or liability or responsibility pursuant to any criminal
statute.
Article VIII of the bylaws provides, except as expressly prohibited bylaw,
an unconditional right to indemnification for expenses and any liability paid or
incurred by any director or officer of the Registrant, or any other person
designated by the board of directors as an indemnified representative, in
connection with any proceeding in which the indemnified representative may be
involved as a party or otherwise, by reason of the fact that such person is or
was serving in an indemnified capacity, including without limitation liabilities
resulting from any actual or alleged breach or neglect of duty, error,
misstatement or misleading statement, negligence, gross negligence or act giving
rise to stricter products liability, except where such indemnification is
expressly prohibited by applicable law or where the conduct of the indemnified
representative has been determined to constitute willful misconduct,
recklessness or self-dealing sufficient in the circumstances to bar
indemnification against liabilities arising from the conduct.
The Registrant has a directors' and officers' liability insurance policy
that affords directors and officers with insurance coverage for losses arising
from claims based on breaches of duty, negligence, error and other wrongful
acts.
II-2
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
3.1 Amended and Restated Articles of Incorporation of Safeguard**
3.2 By-laws of Safeguard, as amended***
4.1 Indenture, dated as of June 9, 1999, between Safeguard Scientifics, Inc.
and Chase Manhattan Trust Company, National Association, as trustee,
including the form of 5.0% Convertible Subordinated Note due 2006
attached as Exhibit A thereto****
4.2 Registration Rights Agreement, dated as of June 3, 1999, by and among
Safeguard Scientifics, Inc. and Credit Suisse First Boston Corporation****
5.1 Opinion of Morgan, Lewis & Bockius LLP, counsel to the registrant,
regarding the legality of the notes and the common stock into which the
notes are convertible*
12.1 Computation of Ratio of Earnings to Fixed Charges*
23.1 Consent of KPMG LLP*
23.2 Consent of PricewaterhouseCoopers LLP*
23.3 Consent of PricewaterhouseCoopers LLP*
23.4 Consent of PricewaterhouseCoopers LLP*
23.5 Consent of Arthur Andersen LLP*
23.6 Consent of Deloitte & Touche LLP*
23.7 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5.1)
24.1 Power of Attorney#
25.1 Form T-1 Statement of Eligibility of Chase Manhattan Trust Company,
National Association, to act as trustee under the indenture*
</TABLE>
- --------------------
* Filed herewith.
** Incorporated by reference to the registrant's Annual Report on Form 10-K
(No. 1-5620) for the year ended December 31, 1996 filed on March 31,
1997.
*** Incorporated by reference to the registrant's Annual Report on Form 10-K
(No. 1-5620) for the year ended December 31, 1991 filed on March 30,
1992.
**** Incorporated by reference to the registrant's quarterly report on
Form 10-Q/A for the quarter ended June 30, 1999 filed on September 3,
1999.
# Previously filed
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price, set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (i) and (ii) above do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference into the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment 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; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that
II-4
<PAGE>
is incorporated by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. 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 Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
D. The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Trust
indenture Act.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Amendment No. 1
to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Wayne, Commonwealth of Pennsylvania,
on November 30, 1999.
SAFEGUARD SCIENTIFICS, INC.
By: /s/ Warren V. Musser
----------------------
Warren V. Musser
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities indicated on November 30, 1999.
<TABLE>
<CAPTION>
SIGNATURE Title Date
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/ Warren V. Musser Chairman of the Board and Chief November 30, 1999
- ------------------------------------ Executive Officer
Warren V. Musser (Principal Executive Officer)
/s/ Michael W. Miles Senior Vice President and Chief November 30, 1999
- ------------------------------------ Financial Officer (Principal
Michael W. Miles Financial and Accounting Officer)
/s/ * Director November 30, 1999
- ------------------------------------
Judith Areen
/s/ * Director November 30, 1999
- ------------------------------------
Vincent G. Bell, Jr.
/s/ * Director November 30, 1999
- ------------------------------------
Michael J. Emmi
/s/ * Director November 30, 1999
- ------------------------------------
Robert A. Fox
/s/ * Director November 30, 1999
- ------------------------------------
Robert E. Keith, Jr.
II-6
<PAGE>
/s/ * Director November 30, 1999
- ----------------------------------
Jack L. Messman
/s/ * Director November 30, 1999
- ----------------------------------
Russell E. Palmer
/s/ *. Director November 30, 1999
- ----------------------------------
John W. Poduska, Sr.
/s/ * Director November 30, 1999
- ----------------------------------
Heinz Schimmelbusch
/s/ * Director November 30, 1999
- ----------------------------------
Hubert J.P. Schoemaker
/s/ * Director November 30, 1999
- ----------------------------------
Harry Wallaesa
/s/ * Director November 30, 1999
- ----------------------------------
Carl J. Yankowski
*By: /s/ James A. Ounsworth, Esq.
-----------------------------
Attorney-in-Fact
II-7
<PAGE>
EXHIBIT INDEX
</TABLE>
<TABLE>
<C> <S>
3.1 Amended and Restated Articles of Incorporation of Safeguard**
3.2 By-laws of Safeguard, as amended***
4.1 Indenture, dated as of June 9, 1999, between Safeguard Scientifics, Inc.
and Chase Manhattan Trust Company, National Association, as trustee,
including the form of 5.0% Convertible Subordinated Note due 2006
attached as Exhibit A thereto****
4.2 Registration Rights Agreement, dated as of June 3, 1999, by and among
Safeguard Scientifics, Inc. and Credit Suisse First Boston Corporation****
5.1 Opinion of Morgan, Lewis & Bockius LLP, counsel to the registrant,
regarding the legality of the notes and the common stock into which the
notes are convertible*
12.1 Computation of Ratio of Earnings to Fixed Charges*
23.1 Consent of KPMG LLP*
23.2 Consent of PricewaterhouseCoopers LLP*
23.3 Consent of PricewaterhouseCoopers LLP*
23.4 Consent of PricewaterhouseCoopers LLP*
23.5 Consent of Arthur Andersen LLP*
23.6 Consent of Deloitte & Touche LLP*
23.7 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5.1)
24.1 Power of Attorney#
25.1 Form T-1 Statement of Eligibility of Chase Manhattan Trust Company,
National Association, to act as trustee under the indenture*
</TABLE>
- ----------------------
* Filed herewith.
** Incorporated by reference to the registrant's Annual Report on Form 10-K
(No. 1-5620) for the year ended December 31, 1996 filed on March 31,
1997.
*** Incorporated by reference to the registrant's Annual Report on Form 10-K
(No. 1-5620) for the year ended December 31, 1991 filed on March 30,
1992.
**** Incorporated by reference to the registrant's quarterly report on
Form 10-Q/A for the quarter ended June 30, 1999 filed on September 3,
1999.
# Previously filed
<PAGE>
November 30, 1999
Safeguard Scientifics, Inc.
435 Devon Park Drive
Wayne, PA 19043
Re: Safeguard Scientifics, Inc. - Registration Statement on Form S-3
----------------------------------------------------------------
(No. 333-86675)
---------------
Ladies and Gentlemen:
We have acted as counsel to Safeguard Scientifics, Inc., a Pennsylvania
corporation (the "Company"), in connection with the preparation of the subject
Registration Statement on Form S-3 (the "Registration Statement") filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"). The Registration Statement relates to the
Company's 5% Convertible Subordinated Notes (the "Notes") and 2,628,860 shares
(the "Shares") of the Company's common stock, par value $.01 per share (the
"Common Stock") obtainable upon conversion of the Notes to be sold by the
Selling Stockholders named therein.
In rendering the opinion set forth below, we have examined the Registration
Statement and the exhibits thereto, the Notes and certain records of the
Company's corporate proceedings as reflected in its minute books and such
statutes, records and other documents as we have deemed relevant. In our
examination, we have assumed the genuineness of documents submitted to us as
originals and the conformity with the originals of all documents submitted to us
as copies thereof.
Based on the foregoing, it is our opinion that the Shares, when issued upon
conversion of the Notes, will be validly issued, fully paid and nonassessable.
The opinion set forth above is limited to the Pennsylvania Business Corporation
Law of 1988, as amended. We hereby consent to the use of this opinion as
Exhibit 5.1 to the Registration Statement. In giving such consent, we do not
thereby admit that we are acting within the category of persons whose consent is
required under Section 7 of the Act and the rules or regulations of the
Commission thereunder.
The opinion expressed herein is solely for your benefit and may be relied upon
only by you.
Very truly yours,
/s/ Morgan, Lewis & Bockius LLP
<PAGE>
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED FOR THE YEARS ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------------
1999 1998 1997 1996 1995 1994
------------- --------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings before Minority interest $ 98,169 $ 173,677 $ 61,147 $ 51,607 $41,509 $25,409
and Equity (Income)/Loss......
Fixed Charges.................. 28,263 33,620 25,759 28,749 22,505 20,568
------------- --------- ---------- -------- ------- -------
Adjusted Earnings............ 126,432 207,297 86,906 80,356 64,014 45,977
Fixed Charges
Interest....................... $ 26,664 29,720 22,359 23,916 19,538 17,468
Assumed interest element
included in rent expense (1). 1,559 3,900 3,400 4,833 2,967 3,100
------------- --------- ---------- -------- ------- -------
Total Fixed Charges............ 28,263 33,620 25,759 28,749 22,505 20,568
Earnings Available to Cover
Fixed Charges(*)............... $ 126,432 $ 207,297 $ 86,906 $ 80,356 $ 64,014 $45,977
Ratio of Earnings to Fixed Charges 4.47 6.17 3.37 2.80 2.84 2.24
- -------------------------
</TABLE>
(*) Earnings consist of earnings before income taxes, minority interest and
equity (income)/loss plus fixed charges. Fixed charges consist of
interest expense, including amortization of debt issuance costs, and that
portion of rental expense we believe to be representative of interest.
(1) Total rent expense for the year divided by three. This is the portion of
rental expense that Safeguard Scientifics, Inc. believes to be
representative of interest.
<PAGE>
PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------------
<S> <C> <C>
Earnings before Minority interest $ 98,169 $173,677
and Equity (Income)/Loss.........................
Fixed Charges.................................... 28,181 39,340
-------- --------
Adjusted Earnings.............................. 126,350 213,017
Fixed Charges
Interest......................................... 26,582 35,440
Assumed interest element included in rent
expense (1)..................................... 1,599 3,900
-------- --------
Total Fixed Charges.............................. 28,181 39,340
Earnings Available to Cover
Fixed Charges(*)................................. $126,350 $213,017
Ratio of Earnings to Fixed Charges............... 4.48 5.41
</TABLE>
(*) Earnings consist of earnings before income taxes, minority interest and
equity (income)/loss plus fixed charges. Fixed charges consist of interest
expense, including amortization of debt issuance costs, and that portion
of rental expense we believe to be representative of interest.
(1) Total rent expense for the year divided by three. This is the portion of
rental expense that Safeguard Scientifics, Inc. believes to be
representative of interest.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Safeguard Scientifics, Inc.
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Philadelphia, Pennsylvania
November 30, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement of Safeguard Scientifics, Inc. on Amendment No. 1 to Form S-3 of our
report dated February 2, 1999, except for Note R, as to which the date is March
29, 1999, relating to the financial statements of Cambridge Technology Partners
(Massachusetts), Inc., which appears in Safeguard Scientifics, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1998. We also consent to
the reference to us under the heading "Experts" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
November 29, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement of Safeguard Scientifics, Inc. on Form S-3 of our report dated
September 9, 1998, relating to the consolidated financial statements of DocuCorp
International, Inc., which appears in Safeguard Scientifics, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1998. We also consent to
the reference to us under the heading "Experts" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS
Dallas, Texas
November 29, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement of Safeguard Scientifics, Inc. on Form S-3 of our report dated
February 12, 1999, relating to the consolidated financial statements of USDATA
Corporation, which appears in Safeguard Scientifics, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1998. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
Dallas, Texas
November 29, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of Safeguard Scientifics, Inc. on Form
S-3 of our report dated February 5, 1999, included in Sanchez Computer
Associates, Inc.'s Form 10-K for the year ended December 31, 1998 and to all
references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
November 29, 1999
<PAGE>
EXHIBIT 23.6
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement of
Safeguard Scientifics, Inc. on Amendment No. 1 to Form S-3 of our report dated
February 24, 1999 (relating to the financial statements of OAO Technology
Solutions, Inc. not presented separately therein) appearing in the Annual Report
on Form 10-K of Safeguard Scientifics, Inc. for the year ended December 31,
1998.
We also consent to the reference to us under the heading "Experts" in such
Prospectus, which is part of this Registration Statement.
/S/ Deloitte & Touche LLP
McLean, VA
November 30, 1999
<PAGE>
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) ____X___
________________________________________
CHASE MANHATTAN TRUST COMPANY, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
29-2933369
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
One Oxford Center, Suite 1100
301 Grant Street, Pittsburgh, PA 15219
(Address of principal executive offices) (Zip Code)
William H. McDavid
The Chase Manhattan Bank
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
____________________________________________
Safeguard Scientifics, Inc.
(Exact name of obligor as specified in its charter)
Pennsylvania 23-1609756
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
800 The Safeguard Building
435 Devon Park Drive, Wayne, PA 19087
(Address of principal executive offices) (Zip Code)
____________________________________________
5.0% CONVERTIBLE SUBORDINATED NOTES DUE JUNE 15, 2006
(Title of the indenture securities)
____________________________________________
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
No responses are included for items 3-15 of this form t-1 because the obligor is
not in default as provided under item 13.
Item 16. List of Exhibits
----------------
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect.
2. A copy of the Certificate of Authority of the Trustee (previously known as
New Trust Company, National Association,) to commence business. Also included
in Exhibit 16(2) are letters dated November 24, 1997 from the Comptroller of the
Currency authorizing the exercise of fiduciary powers by the Trustee and
acknowledging the name change of the Trustee.
3. The Authorization of the Trustee to exercise corporate trust is contained
in Exhibit 16(2).
4. A copy of the By-Laws of the Trustee as now in effect.
5. Not applicable
6. The Trustee's consent required by Section 321(b) of the Act.
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable
9. Not applicable
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Chase Manhattan Trust Company, National Association, a national banking
association organized and existing under the laws of the United States of
America , has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in The City of
Philadelphia and State of Pennsylvania, on the 30th day of November, 1999.
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
By \s\ Judy Gordon
---------------
Judy Gordon
Assistant Vice President
<PAGE>
Exhibit 16(1)
[LOGO]
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
CHARTER NO. 23548
ARTICLES OF ASSOCIATION
For the purpose of organizing an Association to perform any lawful activities of
a national bank, the undersigned do enter into the following Articles of
Association:
FIRST. The title of this Association shall be Chase Manhattan Trust Company,
National Association (the "Association").
SECOND. The main office of the Association shall be in the City of Pittsburgh,
County of Allegheny, Commonwealth of Pennsylvania. The business of the
Association shall be limited to the fiduciary powers and the support of
activities incidental to the exercise of those powers. The Association will
obtain the prior written approval of the Office of the Comptroller of the
Currency before amending these Articles of Association to expand the scope of
its activities and services.
THIRD. The board of directors of this Association shall consist of not less
than five nor more than twenty-five persons, the exact number to be fixed and
determined from time to time by resolution of a majority of the full board of
directors or by resolution of a majority of the shareholders at any annual or
special meeting thereof. Each director, during the full term of his
directorship, shall own common or preferred stock of the Association or of a
holding company owning the Association, with an aggregate par, fair market or
equity value of not less than $1,000. Any vacancy in the board of directors may
be filled by action of the shareholders or a majority of the remaining
directors.
Terms of directors, including directors selected to fill vacancies, shall expire
at the next regular meeting of shareholders at which directors are elected,
unless the directors resign or are removed from office.
Despite the expiration of a director's term, the director shall continue to
serve until his or her successor is elected and qualifies or until there is a
decrease in the number of directors and his or her position is eliminated.
FOURTH. There shall be an annual meeting of the shareholders to elect directors
and transact whatever other business may be brought before the meeting. It
shall be held at the main office or any other convenient place the board of
directors may designate, on the day of each year specified therefore in the by-
laws, or if that day falls on a legal holiday in the state in which the
Association is located, on the next following banking day. If no election is
held on the day fixed or in event of a legal holiday, on the following banking
day, an election may be held on any subsequent day within 60 days of the day
fixed, to be designated by the board of directors, or, if the directors fail to
fix the day, by shareholders representing two-thirds of the shares issued and
outstanding. Advance notice of the meeting may be duly waived by the sole
shareholder in accordance with 12 C.F.R. 7.2001.
A director may resign at any time by delivering written notice to the board of
directors, its Chairperson, or to the Association, which resignation shall be
effective when the notice is delivered unless the notice specifies a later
effective date.
A director may be removed by shareholders at a meeting called to remove him or
her, when notice of the meeting stating that the purpose or one of the purposes
is to remove him or her is provided, if there is a failure to fulfill one of the
affirmative requirements for qualification, or for cause.
FIFTH. The authorized amount of capital stock of this Association shall be five
million dollars ($5,000,000), divided into fifty thousand (50,000) shares of
common stock of the par value of one hundred dollars ($ 100) each; but said
capital stock may be increased or decreased from time to time, according to the
provisions of the laws of the United States.
<PAGE>
No holder of shares of the capital stock of any class of the Association shall
have any preemptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued, or sold, nor
any right to subscription to any thereof other than such, if any, as the board
of directors, in its discretion may from time to time determine and at such
price as the board of directors may from time to time fix.
Unless otherwise specified in the Articles of Association or required by law,
(1) all matters requiring shareholder action, including amendments to the
Articles of Association, must be approved by shareholders owning a majority
voting interest in the outstanding voting stock, and (2) each shareholder shall
be entitled to one vote per share.
The Association, at any time and from time to time, may authorize and issue debt
obligations, whether or not subordinated, without the approval of the
shareholders.
SIXTH. The board of directors may appoint one of its members President of this
Association, and one of its members Chairperson of the board or two of its
members as Co-Chairpersons of the board, and shall have the power to appoint one
or more Vice Presidents, a Secretary who shall keep minutes of the directors'
and shareholders' meetings and be responsible for authenticating the records of
the Association, and such other officers and employees as may be required to
transact the business of this Association. A duly appointed officer may appoint
one or more officers or assistant officers if authorized by the board of
directors in accordance with the by-laws.
The board of directors shall have the power to:
(1) Define the duties of the officers, employees, and agents of the
Association.
(2) Delegate the performance of its duties, but not the responsibility for its
duties, to the officers, employees, and agents of the Association.
(3) Fix the compensation and enter into employment contracts with its officers
and employees upon reasonable terms and conditions consistent with
applicable law.
(4) Dismiss officers and employees.
(5) Require bonds from officers and employees and fix the penalty thereof.
(6) Ratify written policies authorized by the Association's management or
committees of the board.
(7) Regulate the manner in which any increase or decrease of the capital of the
Association shall be made, provided that nothing herein shall restrict the
power of shareholders to increase or decrease the capital of the
Association in accordance with law.
(8) Manage and administer the business and affairs of the Association.
(9) Adopt initial by-laws, not inconsistent with law or the Articles of
Association, for managing the business and regulating the affairs of the
Association.
(10) Amend or repeal by-laws, except to the extent that the Articles of
Association reserve this power in whole or in part to shareholders.
(11) Make contracts.
(12) Generally perform all acts that are legal for a board of directors to
perform.
SEVENTH. The board of directors shall have the power to change the location of
the main office to any other location permitted under applicable law, without
the approval of the shareholders, and shall have the power to establish or
change the location of any branch or branches of the Association to any other
location permitted under applicable law, without the approval of the
shareholders subject to approval by the Office of the Comptroller of the
Currency.
EIGHTH. The corporate existence of this Association shall continue until
termination according to the laws of the United States.
NINTH. These Articles of Association may be amended at any regular or special
meeting of the shareholders by the affirmative vote of the holders of a majority
of the stock of this Association, unless the vote of the holders of a greater
amount of stock is required by law, and in that case by the vote of the holders
of such greater amount. The Association's board of directors may propose one or
more amendments to the Articles of Association for submission to the
shareholders.
<PAGE>
Exhibit 16(2)
Comptroller of the Currency
=================== [PICTURE OF ====================
TREASURY DEPARTMENT TREASURY DEPARTMENT OF THE UNITED STATES
=================== APPEARS HERE] ====================
Washington, D.C.
Whereas, satisfactory evidence has been presented to the Comptroller of the
Currency that NEW TRUST COMPANY, NATIONAL ASSOCIATION located in PITTSBURGH
State of PENNSYLVANIA has complied with all provisions of the statutes of the
United States required to be complied with before being authorized to commence
the business of banking as a National Banking Association;
Now, therefore, I hereby certify that the above named association is
authorized to commence the business of banking as a National Banking
Association.
In testimony whereof, witness my signature and seal of office this 24th day
of NOVEMBER 1997
SEAL APPEARS HERE] Charter No. 23548 [SIGNATURE APPEARS HERE]
<PAGE>
[LETTERHEAD OF COMPTROLLER OF THE CURRENCY APPEARS HERE]
November 24, 1997
Mr. Daryl J. Zupan
President and CEO New Trust Company, National Association
c/o Mellon Bank, N.A., Corporate Trust
Two Mellon Bank Center, Suite 325
Pittsburgh, Pennsylvania 15259
Re: Charter for a National Trust Ban, New Trust Company, National
Association, Pittsburgh, Pennsylvania
ACN 97 NE 01 0022
Dear Mr. Zupan:
The Comptroller of the Currency (OCC) has found that you have met all conditions
imposed by the OCC and completed all steps necessary to commence the business of
banking. Your charter certificate is enclosed. You are authorized to commence
business on November 24, 1997.
This letter also constitutes OCC authorization to exercise fiduciary powers.
You are reminded that several of the standard conditions contained in the
preliminary approval letter dated October 23, 1997 will continue to apply once
the bank opens and by opening, you agree to subject your association to these
conditions of operation. Some of the conditions bear reiteration here:
1. Regardless of the association's FDIC insurance status, the association is
subject to the Change in Bank Control Act (12 U.S.C. 1817(j)) by virtue of its
national bank charter. Please refer to item 4 in the list of standard conditions
sent with the preliminary approval letter.
2. The board of directors is responsible for regular review and update of
policies and procedures and for assuring ongoing compliance with them. This
includes maintaining an internal control system that ensures compliance with the
currency reporting and record keeping requirements of the Bank Secrecy Act
(BSA). The board is expected to train its personnel in BSA procedures and
designate one person or a group to monitor day-to-day compliance.
<PAGE>
Mr. Daryl J. Zupan
Page two
3. The bank will not engage in full commercial powers authorized to national
banks without the OCC's prior approval. Following the commencement of
operations, bank management is urged to become familiar with the requirements of
the Securities Exchange Act of 1934 and Part 11 of the Comptroller's regulations
relative to the registration of the bank's equity securities and related
periodic reports. These requirements will be applicable to your bank when the
number of shareholders of record is maintained at 500 or more. Such registration
may be subsequently terminated pursuant to the Act only when the number of
shareholders of record is reduced to fewer than 300.
Should you have any questions regarding the supervision of your bank, please
contact the portfolio manager who will be responsible for OCC's ongoing
supervisory effort at your institution. You will be notified of the name and
number of the appropriate individual in the near future.
Sincerely,
/s/ Michael G. Tiscia
Michael G. Tiscia
Licensing Manager
Enclosure
cc: Official File
Field File
<PAGE>
[LOGO APPEARS HERE]
- -------------------------------------------------------------------------------
Comptroller of the Currency Administrator of National Banks
- -------------------------------------------------------------------------------
Northeastern District
1114 Avenue of the Americas, Suite 3900
New York, New York 10036
November 24, 1997
Joseph R. Bielawa
Vice President and Assistant General Counsel
The Chase Manhattan Bank
270 Park Avenue, 39th Floor
New York, New York 10017
Re: Change in Corporate Title
New Trust Company, National Association (Bank)
Pittsburgh, Pennsylvania
Dear Mr. Bielawa:
The Office of the Comptroller of the Currency (OCC) has received your
submission, concerning the change and amendment to Article First of the above-
referenced Bank's Articles of Association. The OCC has amended its records to
reflect that effective November 24, 1997, the corporate title of New Trust
Company, National Association, Charter Number 23548, was changed to "Chase
Manhattan Trust Company, National Association."
You are reminded that the OCC does not approve national bank name changes nor
does it maintain official titles or the retention of alternate titles. The use
of other titles or the retention of the rights to any previously used title is
the responsibility of the Bank's board of directors. Legal counsel should be
consulted to determine whether or not the new title, or any previously used
title, could be challenged by competing institutions under the provisions of
federal or state law.
A copy of the amended Article as accepted for filing is enclosed for the Bank's
records.
Very truly yours,
/s/ Linda Leickel
Linda Leickel
Senior Licensing Analyst
Charter No.: 23548
Control No.: 97 NE 04 010 w/97 NE 01 022
<PAGE>
Exhibit 16(4)
[LOGO]
CHASE MANHATTAN TRUST COMPANY,
NATIONAL ASSOCIATION
BY-LAWS
Article I. Meetings of Shareholders
SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the shareholders to
elect directors and transact whatever other business may properly come before
the meeting, shall be held at the main office of the Association, or such other
place as the board may designate, and at such time in each year as may be
designated by the board of directors. Unless otherwise provided by law, notice
of the meeting may be waived by the Association's sole shareholder in accordance
with 12 C.F.R. (S) 7.2001. If, for any cause, an election of directors is not
made on that date, or in the event of a legal holiday, on the next following
banking day, an election may be held on any subsequent day within 60 days of the
date fixed, to be designated by the board, or, if the directors fail to fix the
date, by shareholders representing two thirds of the shares issued and
outstanding.
SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically provided by
statute, special meetings of the shareholders may be called for any purpose at
any time by a majority of the board of directors or by any one or more
shareholders owning, in the aggregate, not less than twenty-five percent of the
stock of the Association or by the Chairperson of the board of directors or the
President. Unless otherwise provided by law, advance notice of a special
meeting may be waived by the Association's Sole Shareholder in accordance with
12 C.F.R. (S) 7.2001.
SECTION 1.3. NOMINATIONS OF DIRECTORS. Nominations for election to the board
of directors may be made by the board of directors or by any stockholder of any
outstanding class of capital stock of the Association entitled to vote for the
election of directors. Nominations, other than those made by or on behalf of
the existing management of the Association, shall be made in writing and shall
be delivered or mailed to the President of the Association and to the
Comptroller of the Currency, Washington, D.C., not less than 14 days nor more
than 50 days prior to any meeting of shareholders called for the election of
directors, provided, however, that if less than 21 days' notice of the meeting
is given to shareholders, such nomination shall be mailed or delivered to the
President of the Association and to the Comptroller of the Currency not later
than the close of business on the seventh (7th) day following the day on which
the notice of meeting was mailed. Such notification shall contain the following
information to the extent known to the notifying shareholder.
(1) The name and address of each proposed nominee.
(2) The principal occupation of each proposed nominee.
(3) The total number of shares of capital stock of the Association that will
be voted for each proposed nominee.
(4) The name and residence address of the notifying shareholder.
(5) The number of shares of capital stock of the Association owned by the
notifying shareholder.
Nominations not made in accordance herewith may, in his/her discretion, be
disregarded by the Chairperson of the meeting, and upon his/her instructions,
the vote tellers may disregard all votes cast for each such nominee.
SECTION 1.4. PROXIES. Shareholders may vote at any meeting of the shareholders
by proxies duly authorized in writing, but no officer or employee of this
Association shall act as proxy. Proxies shall be valid only for one meeting to
be specified therein, and any adjournments of such meeting. Proxies shall be
dated and filed with the records of the meeting. Proxies with rubber stamped
facsimile signatures may be used and unexecuted proxies may be counted upon
receipt of a confirming telegram from the shareholder. Proxies meeting above
requirements submitted at any time during a meeting shall be accepted.
SECTION 1.5 QUORUM. A majority of the outstanding capital stock, represented
in person or by proxy, shall constitute a quorum at any meeting of shareholders,
unless otherwise provided by law, or by the shareholders or directors pursuant
to Section 10.2, but less than a quorum may adjourn any meeting, from time to
time, and the meeting may be held, as adjourned, without further notice. A
majority of the votes cast shall decide every question or matter submitted to
the shareholders at any meeting, unless otherwise provided by law or by the
Articles of Association, or by the shareholders or directors pursuant to Section
10.2. Any action required or
<PAGE>
permitted to be taken by the shareholders may be taken without a meeting by
unanimous written consent of the shareholders to a resolution authorizing the
action. The resolution and the written consent shall be filed with the minutes
of the proceedings of the shareholders.
ARTICLE II. DIRECTORS
SECTION 2.1. BOARD OF DIRECTORS. The board of directors ("board") shall have
the power to manage and administer the business and affairs of the Association.
Except as expressly limited by law, all corporate powers of the Association
shall be vested in and may be exercised by the board.
SECTION 2.2. NUMBER. The board shall consist of not less than five nor more
than twenty-five persons, the exact number within such minimum and maximum
limits to be fixed and determined from time to time by resolution of a majority
of the full board or by resolution of a majority of the shareholders at any
meeting thereof; provided, however, that a majority of the full board may not
--------- --------
increase the number of directors to a number which: (1) exceeds by more than
two the number of directors last elected by shareholders where such number was
15 or less; and (2) exceeds by more than four the number of directors last
elected by shareholders where such number was 16 or more, but in no event shall
the number of directors exceed 25.
SECTION 2.3. ORGANIZATION MEETING. The Secretary shall notify the directors-
elect of their election and of the time at which they are required to meet at
the main office of the Association to organize the new board and elect and
appoint officers of the Association for the succeeding year. Such meeting shall
be held on the day of the election or as soon thereafter as practicable, and, in
any event, within 30 days thereof. If, at the time fixed for such meeting,
there shall not be a quorum, the directors present may adjourn the meeting, from
time to time, until a quorum is obtained.
SECTION 2.4. REGULAR MEETINGS. The time and location of regular meetings of
the board shall be set by the board. Such meetings may be held without notice.
Any business may be transacted at any regular meeting. The board may adopt any
procedures for the notice and conduct of any meetings as are not prohibited by
law.
SECTION 2.5. SPECIAL MEETINGS. Special meetings of the board may be called at
the request of the Chairperson or Co-Chairperson of the board, the President, or
three or more directors. Each member of the board shall be given notice stating
the time and place, by telegram, telephone, letter or in person, of each such
special meeting at least one day prior to such meeting. Any business may be
transacted at any special meeting.
SECTION 2.6. ACTION BY THE BOARD. Except as otherwise provided by law,
corporate action to be taken by the board shall mean such action at a meeting of
the board. Any action required or permitted to be taken by the board or any
committee of the board may be taken without a meeting if all members of the
board or the committee consent in writing to a resolution authorizing the
action. The resolution and the written consents thereto shall be filed with the
minutes of the proceedings of the board or committee. Any one or more members
of the board or any committee may participate in a meeting of the board or
committee by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time. Participation by such means shall constitute presence in person at such
meeting.
SECTION 2.7. WAIVER OF NOTICE. Notice of a special meeting need not be given
to any director who submits a signed waiver of notice, whether before or after
the meeting, or who attends the meeting without protesting, prior thereto or at
its commencement, the lack of notice to him or her.
SECTION 2.8. QUORUM AND MANNER OF ACTING. Except as otherwise required by law,
the Articles of Association or these by-laws, a majority of the directors shall
constitute a quorum for the transaction of any business at any meeting of the
board and the act of a majority of the directors present and voting at a meeting
at which a quorum is present shall be the act of the board. In the absence of a
quorum, a majority of the directors present may adjourn any meeting, from time
to time, until a quorum is present and no notice of any adjourned meeting need
be given. At any such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called.
SECTION 2.9. VACANCIES. In the event a majority of the full board increases
the number of directors to a number which exceeds the number of directors last
elected by shareholders, as permitted by Section 2.2, directors may be appointed
to fill the resulting vacancies by vote of such majority of the full board. In
the event of a vacancy
<PAGE>
in the board for any other cause, a director may be appointed to fill such
vacancy by vote of a majority of the remaining directors then in office.
SECTION 2.10. REMOVAL OF DIRECTORS. The vacancy created by the removal of a
director pursuant to this Section may be filled by the board in accordance with
Section 2.9 of these by-laws or by the shareholders.
ARTICLE III. COMMITTEES
SECTION 3.1. EXECUTIVE COMMITTEE. There may be an executive committee
consisting of the Chairperson or Co-Chairperson of the board and not less than
two other directors appointed by the board annually or more often. Subject to
the limitations in Section 3.4(g) of these by-laws, the executive committee
shall have the maximum authority permitted by law.
SECTION 3.2. AUDIT COMMITTEE. There may be an audit committee composed of not
less than two directors, exclusive of any active officers, appointed by the
board annually or more often, whose duty it shall be to make an examination at
least once during each calendar year and within fifteen months of the last
examination into the affairs of the Association, or cause continuous suitable
examinations to be made, by auditors responsible only to the board, and to
report the results of any such examinations in writing to the board from time to
time. Such examinations shall include audits of the fiduciary business of the
Association as may be required by law or regulation.
SECTION 3.3. OTHER COMMITTEES. The board may appoint, from time to time, other
committees of one or more persons, for such purposes and with such powers as the
board may determine.
SECTION 3.4. GENERAL. (a) Each committee shall elect a Chairperson from among
the members thereof and shall also designate a Secretary of the committee, who
shall keep a record of its proceedings.
(b) Vacancies occurring from time to time in the membership of any committee
shall be filled by the board for the unexpired term of the member whose
departure causes such vacancy. The board may designate one or more alternate
members of any committee, who may replace any absent member or members at any
meeting of such committee.
(c) Each committee shall adopt its own rules of procedure and shall meet at
such stated times as it may, by resolution, appoint. It shall also meet
whenever called together by its Chairperson or the Chairperson of the board.
(d) No notice of regular meetings of any committee need be given. Notice of
every special meeting shall be given either by mailing such notice to each
member of such committee at his or her address, as the same appears in the
records of the Association, at least two days before the day of such meeting, or
by notifying each member on or before the day of such meeting by telephone or by
personal notice, or by leaving a written notice at his or her residence or place
of business on or before the day of such meeting. Waiver of notice in writing
of any meeting, whether prior or subsequent to such meeting, or attendance at
such meeting, shall be equivalent to notice of such meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at any
special meeting.
(e) All committees shall, with respect to all matters, be subject to the
authority and direction of the board and shall report to it when required.
(f) Unless otherwise required by law, the Articles of Association or these by-
laws, a quorum at any meeting of any committee shall be one-third of the full
membership and present shall be the act of the committee.
(g) No committee shall have authority to take any action which is expressly
required by law or regulation to be taken at a meeting of the board or by a
specified proportion of directors.
ARTICLE IV. OFFICERS AND EMPLOYEES
SECTION 4.1. CHAIRPERSON OF THE BOARD. The board shall appoint one of its
members to be the Chairperson of the board, or two persons to serve as Co-
Chairperson of the board to serve at its pleasure. Such person shall preside at
all meetings of the board. The Chairperson or Co-Chairpersons of the board
shall supervise the carrying out of the policies adopted or approved by the
board; shall have general executive powers, as well as the specific powers
conferred by these by-laws; and shall also have and may exercise such further
powers and duties as from time to time may be conferred upon, or assigned by the
board.
<PAGE>
SECTION 4.2. PRESIDENT. The board may appoint one of its members to be the
President of the Association. In the absence of the Chairperson or Co-
Chairpersons, the President shall preside at any meeting of the board. The
President shall have general executive powers, and shall have and may exercise
any and all other powers and duties pertaining by law, regulation, or practice
to the office of President, or imposed by these by-laws. The President shall
also have and may exercise such further powers and duties as from time to time
may be conferred, or assigned by the board.
SECTION 4.3. VICE PRESIDENT. The board may appoint one or more Vice
Presidents. Each Vice President shall have such powers and duties as may be
assigned by the board.
SECTION 4.4. SECRETARY. The board shall appoint a Secretary, Cashier, or other
designated officer who shall be Secretary of the board and of the Association,
and shall keep accurate minutes of all meetings. The Secretary shall attend to
the giving of all notices required by these by-laws; shall be custodian of the
corporate seal, records, documents and papers of the Association; shall provide
for the keeping of proper records of all transactions of the Association; shall
have and may exercise any and all other powers and duties pertaining by law,
regulation or practice, to the office of Cashier, or imposed by these by-laws;
and shall also perform such other duties as may be assigned from time to time,
by the board.
SECTION 4.5. OTHER OFFICERS. The board may appoint one or more Assistant Vice
Presidents, one or more Trust Officers, one or more Assistant Secretaries, one
or more Assistant Cashiers, one or more Managers and Assistant Managers of
branches and such other officers and attorneys in fact as from time to time may
appear to the board to be required or desirable to transact the business of the
Association. Such officers shall respectively exercise such powers and perform
such duties as pertain to their several offices, or as may be conferred upon, or
assigned to, them by the board, the Chairperson or Co-Chairpersons of the board,
or the President. The board may authorize an officer to appoint one or more
officers or assistant officers.
SECTION 4.6. RESIGNATION. An officer may resign at any time by delivering
notice to the Association. A resignation is effective when the notice is given
unless the notice specifies a later effective date.
ARTICLE V. FIDUCIARY ACTIVITIES
SECTION 5.1. TRUST COMMITTEE. There shall be a Trust Committee of this
Association composed of four or more members, who shall be capable and
experienced officers or directors of the Association. The Committee is charged
with the responsibility for the investment, retention, or disposition of assets
held in accounts with respect to which the Association has investment authority;
for the review of the assets of accounts for which the Association has
investment authority promptly after the acceptance of such an account and at
least once during every calendar year thereafter to determine the advisability
of retaining or disposing of such assets; for the determination of the manner in
which proxies received for accounts for which the Association has responsibility
for the voting of proxies shall be voted; for the determination of all
substantial questions involving discretionary authority of the Association of a
non-investment nature, including, but not limited to, distribution of principal
and/or income in respect of any account; for providing advice as to the
investment, retention, or disposition of assets in investment advisory accounts
maintained by the Association; for the making of such reports as this board
shall require; and for such other responsibilities as may be assigned by this
board. The Trust Committee, in discharging its aforementioned responsibilities,
may authorize officers of the Association to exercise such powers and under such
conditions as the Committee may from time to time prescribe.
SECTION 5.2. TRUST INVESTMENTS. Funds held in a fiduciary capacity shall be
invested according to the instrument establishing the fiduciary relationship and
local law. Where such instrument does not specify the character and class of
investments to be made and does not vest in the Association a discretion in the
matter, funds held pursuant to such instrument shall be invested in investments
in which corporate fiduciaries may invest under applicable law.
SECTION 5.3. TRUST AUDIT COMMITTEE. The board shall appoint a committee of at
least two directors, exclusive of any active officer of the association, which
shall, at least once during each calendar year make suitable audits of the
association's fiduciary activities or cause suitable audits to be made by
auditors responsible only to the board, and at such time shall ascertain whether
fiduciary powers have been administered according to law, Part 9 of the
Regulations of the Comptroller of the Currency, and sound fiduciary principles.
SECTION 5.4. FIDUCIARY FILES. There shall be maintained by the association all
fiduciary records necessary to assure that its fiduciary responsibilities have
been properly undertaken and discharged.
<PAGE>
ARTICLE VI. STOCK AND STOCK CERTIFICATES
SECTION 6.1. TRANSFERS. Shares of stock shall be transferable on the books of
the Association, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall, in proportion to his or her shares, succeed to all rights of the prior
holder of such shares.The board may impose conditions upon the transfer of the
stock reasonably calculated to simplify the work of the Association with respect
to stock transfers, voting at shareholder meetings, and related matters and to
protect it against fraudulent transfers.
SECTION 6.2. STOCK CERTIFICATES. Certificates of stock shall bear the
signature of the Chairperson or Co-Chairpersons of the board or President (which
may be engraved, printed or impressed), and shall be signed manually or by
facsimile process by the Secretary, Assistant Secretary, Cashier, Assistant
Cashier, or any other officer appointed by the board for that purpose, to be
known as an authorized officer, and the seal of the Association shall be
engraved thereon. Each certificate shall recite on its face that the stock
represented thereby is transferable only upon the books of the Association
properly endorsed. In case any such officer who has signed or whose facsimile
signature has been placed upon such certificate shall have ceased to be such
before such certificate is issued, it may be issued by the Association with the
same effect as if such officer had not ceased to be such at the time of its
issue. The corporate seal may be a facsimile, engraved or printed.
ARTICLE VII. CORPORATE SEAL
SECTION 7.1. CORPORATE SEAL. The Chairperson, the President, the Cashier, the
Secretary or any Assistant Cashier or Assistant Secretary, or other officer
thereunto designated by the board, shall have authority to affix the corporate
seal to any document requiring such seal, and to attest the same. Such seal
shall be substantially in the following form: A circle, with the words "Chase
Manhattan Trust Company, National Association" within such circle.
Article VIII. MISCELLANEOUS PROVISIONS
SECTION 8.1. FISCAL YEAR. The fiscal year of the Association shall be the
calendar year.
SECTION 8.2. EXECUTION OF INSTRUMENTS. All agreements, indentures, mortgages,
deeds, conveyances, transfers, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, proxies and other instruments or documents may
be signed, executed, acknowledged, verified, delivered or accepted on behalf of
the Association by the Chairperson or Co-Chairpersons of the board, or the
President, or any Vice Chairperson, or any Managing Director, or any Vice
President, or any Assistant Vice President, or the Chief Financial Officer, or
the Controller, or the Secretary, or the Cashier, or, if in connection with
exercise of fiduciary powers of the Association, by any of those officers or by
any Trust Officer. Any such instruments may also be executed, acknowledged,
verified, delivered or accepted on behalf of the Association in such other
manner and by such other officers as the board may from time to time direct.
The provisions of this Section 8.2 are supplementary to any other provision of
these by-laws.
SECTION 8.3. RECORDS. The Articles of Association, the by-laws and the
proceedings of all meetings of the shareholders, the board, and standing
committees of the board, shall be recorded in appropriate minute books provided
for that purpose. The minutes of each meeting shall be signed by the Secretary,
Cashier or other officer appointed to act as Secretary of the meeting.
SECTION 8.4. CORPORATE GOVERNANCE PROCEDURES. To the extent not inconsistent
with applicable Federal banking law, bank safety and soundness or these by-laws,
the corporate governance procedures found in the Delaware General Corporation
Law shall be followed by the Association.
ARTICLE IX. INDEMNIFICATION
<PAGE>
SECTION 9.1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or an officer of the Association or is or was serving at the request of
the Association as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Association to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Association to provide broader indemnification rights than such law permitted
the Association to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section 9.3 of these by-laws with respect to proceedings
to enforce rights to indemnification, the Association shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the
board.
SECTION 9.2. RIGHT TO ADVANCEMENT OF EXPENSES. The right to indemnification
conferred in Section 9.1 of these by-laws shall include the right to be paid by
the Association the expenses (including attorney's fees) incurred in defending
any such proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Association of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section 9.2 or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Sections 9.1 and 9.2 of these by-laws shall be contract
rights and such rights shall continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
SECTION 9.3. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section 9.1
or 9.2 of these by-laws is not paid in full by the Association within sixty (60)
days after a written claim has been received by the Association except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty (20) days, the indemnitee may at any time thereafter
bring suit against the Association to recover the unpaid amount of the claim.
If successful in whole or in part in any such suit, or in a suit brought by the
Association to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (1) any suit brought by the indemnitee
to enforce a right to indemnification hereunder (but not in a suit brought by
the indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (2) any suit brought by the Association to recover an
advancement of expenses pursuant to the terms of an undertaking, the Association
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met any applicable standard for indemnification set forth in
the Delaware General Corporation Law. Neither the failure of the Association
(including the board, the Association's independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Association (including the board, the Association's independent legal counsel,
or its shareholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Association to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article IX or otherwise shall be on the Association.
SECTION 9.4. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and to
the advancement of expenses conferred in this Article IX shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, the Association's Articles of Association, by-laws, agreement, vote of
shareholders or disinterested directors or otherwise.
<PAGE>
SECTION 9.5. INSURANCE. The Association may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Association or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Association would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 9.6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE ASSOCIATION. The
Association may, to the extent authorized from time to time by the board, grant
rights to indemnification and to the advancement of expenses to any employee or
agent of the Association to the fullest extent of the provisions of this Article
IX with respect to the indemnification and advancement of expenses of directors
and officers of the Association.
ARTICLE X. BY-LAWS
SECTION 10.1. INSPECTION. A copy of the by-laws, with all amendments, shall at
all times be kept in a convenient place at the main office of the Association,
and shall be open for inspection to all shareholders during banking hours.
SECTION 10.2. AMENDMENTS. The by-laws may be amended, altered or repealed, at
any regular meeting of the board by a vote of a majority of the total number of
the directors except as provided below. The Association's shareholders may
amend or repeal the by-laws even though the by-laws may be amended or repealed
by its board.
<PAGE>
EXHIBIT 16(6)
Consent for Records of Governmental Agencies
to be Made Available to the Commission
--------------------------------------
The undersigned, Chase Manhattan Trust Company, National Association, pursuant
to Section 321(b) of The Trust Indenture Act of 1939, hereby authorizes the
Board of Governors of the Federal Reserve System, the Federal Reserve Banks, the
Treasury Department, the Comptroller of the Currency and the Federal Deposit
Insurance Corporation, under such conditions as they may prescribe, to make
available to the Commission such reports, records or other information as they
may have available with respect to the undersigned as a prospective trustee
under an indenture to be qualified under the aforesaid Trustee Indenture Act of
1939 and to make through their examiners or other employees for the use of the
Commission, examinations of the undersigned prospective Trustee.
The undersigned also, pursuant to Section 321(b) of said Trust Indenture Act
of 1939, consents that reports of examination by the Federal, State, Territorial
or District authorities may be furnished by such authorities to the Commission
upon request therefor.
Dated this 30th day of November, 1999.
Chase Manhattan Trust Company,
National Association
By: \s\ Judy Gordon
---------------
Judy Gordon
Assistant Vice President
<PAGE>
Exhibit 16(7)
<TABLE>
<CAPTION>
Chase Manhattan Trust Company, National Association
Statement of Condition
September 30,1999
<S> <C>
($000)
--------
Assets
Cash and Due From Banks $ 16,059
Securities Available for Sale 4,857
Premises and Fixed Assets 893
Intangible Assets 153,623
------------
Total Assets $175,432
============
LIABILITIES
Sundry Liabilities and Accrued Expenses $ 4,414
------------
STOCKHOLDER'S EQUITY
Common Stock $ 5,000
Surplus 156,892
Retained Earnings 9,126
------------
Total Stockholder's Equity $171,018
------------
Total Liabilities and Stockholder's Equity $175,432
============
</TABLE>
