As filed with the Securities and Exchange Commission on October 30, 1998
Registration No. 333-63921
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
Amendment No. 1
to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------------
Ampex Corporation
(Exact name of Registrant as specified in its charter)
-------------------------------
Delaware 13-3667696
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) I.D. Number)
500 Broadway
Redwood City, CA 94063-3199
(650) 367-2011
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
JOEL D. TALCOTT, Esq.
500 Broadway
Redwood City, CA 94063
(650) 367-3330
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With a copy to:
DAVID D. GRIFFIN, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
-------------------------------
Approximate date of commencement of proposed sale to public: As soon as
possible following the effectiveness of this Registration Statement. If the
securities being registered on the Form are to be offered in connection with
the formation of a holding company and there is compliance with General
Instruction G, 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.
===============================================================================
767531.3
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AMPEX CORPORATION
CROSS-REFERENCE SHEET TO FORM S-4
<TABLE>
<CAPTION>
FORM S-4 CAPTION OR LOCATION
ITEM NUMBER AND HEADING IN PROSPECTUS
______________________________ ___________________
<S> <C>
A. INFORMATION ABOUT
THE TRANSACTION
1 Forepart of Registration Statement and Outside
Front Cover Page of Prospectus........................Facing Page; Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus.............................Available Information: Information Incorporated by
Reference
3. Summary Information, Risk Factors,
Ratio of Earnings to Fixed Charges ...................Summary of the Prospectus; Risk Factors; Ratio of Earnings
to Fixed Charges
4. Terms of the Transaction..............................Summary of the Prospectus; The Exchange Offer
5. Pro Forma Financial Information.......................Not Applicable
6. Material Contacts with the Company
Being Acquired............................... ........Not Applicable
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters..........................................Not Applicable
8. Interests of Named Experts and Counsel................Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities........Not Applicable
B. INFORMATION ABOUT THE
REGISTRANT
10. Information with Respect to S-3
Registrants...........................................Summary of the Prospectus -
Recent Developments
11. Incorporation of Certain Information
By Reference..........................................Information Incorporated by Reference
12. Information with Respect to S-2 or
S-3 Registrants.......................................Not Applicable
13. Incorporation of Certain Information
</TABLE>
767531.3
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<TABLE>
<S> <C>
By Reference..........................................Not applicable
.
14. Information with Respect to
Registrants other than S-2 or S-3 Registrants.........Not Applicable
C. INFORMATION ABOUT THE
COMPANY BEING ACQUIRED
15. Information with Respect to
S-3 Companies.........................................Not Applicable
16. Information with Respect to S-2 or
S-3 Companies.........................................Not Applicable
17. Information with Respect to
Companies Other than
S-3 or S-2 Companies..................................Not Applicable
D. VOTING AND MANAGEMENT
INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited....................Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer...............................Not Applicable
</TABLE>
767531.3
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<PAGE>
PROSPECTUS
$14,000,000
Ampex Corporation
OFFER TO EXCHANGE ITS 12% SENIOR NOTES DUE 2003, SERIES B,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, FOR ANY AND ALL OF ITS OUTSTANDING
12% SENIOR NOTES DUE 2003
THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON 1998,
UNLESS EXTENDED.
-------------------------------
Ampex Corporation, a Delaware corporation ("Ampex" or the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal" and together with this Prospectus, the "Exchange Offer"), to
exchange its 12% Senior Notes due 2003, Series B (the "Exchange Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined) of which
this Prospectus is a part, for an equal principal amount of its outstanding 12%
Senior Notes due 2003 (the "Old Notes"), of which $14 million principal amount
is outstanding. The Exchange Notes and the Old Notes are collectively referred
to herein as the "Notes."
The Company will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended (the "Expiration Date"). Tenders of
Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time,
on the Expiration Date. Information contained herein is subject to completion or
amendment. A Registration Statement relating to these securities has been filed
with the Securities and Exchange Commission (the "Commission" or the "SEC").
These securities may not be sold nor may offers to buy be accepted prior to the
time the Registration Statement becomes effective. This Prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy, nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any state. The Exchange Notes will be issued and
delivered promptly after the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. See "The Exchange Offer." Old Notes may be tendered only in integral
multiples of $1,000. The Company has agreed to pay the expenses of the Exchange
Offer.
The Exchange Notes will be obligations of the Company evidencing the same debt
as the Old Notes, and will be entitled to the benefits of the same indenture,
dated as of January 28, 1998 (the "Indenture"), between the Company and IBJ
Schroder Bank & Trust Company, as trustee (the "Trustee"). The form and terms of
the Exchange Notes are substantially the same as the form and terms of the Old
Notes except that the Exchange Notes have been registered under the Securities
Act. See "The Exchange Offer."
The Exchange Notes will bear interest from September 15, 1998. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Old Notes accrued
up until the date of the issuance of the Exchange Notes. Such waiver will not
result in the loss of interest income to such holders, since the Exchange Notes
will bear interest from the issue date of the Old Notes.
Interest on the Exchange Notes will be payable semi-annually on March 15 and
September 15 of each year, commencing March 15, 1999, accruing from September
15, 1998 at the rate of 12% per annum. The Exchange Notes will mature on March
15, 2003. Except as described below, the Company may not redeem the Exchange
Notes prior to March 15, 2000. On or after such date, the Company may redeem the
Exchange Notes, in whole or in part, at any time, at the
767531.3
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redemption prices set forth herein, together with accrued and unpaid interest,
if any, to the date of redemption. In addition, at any time and from time to
time on or prior to March 15, 2000, the Company may, subject to certain
requirements, redeem up to 35% of the aggregate principal amount of the Notes
with the cash proceeds of one or more Public Equity Offerings (as defined) at a
redemption price equal to 112% of the principal amount to be redeemed, together
with accrued and unpaid interest, if any, to the date of redemption, provided
that at least $9.1 million of the aggregate principal amount of the Notes remain
outstanding immediately after each such redemption. The Exchange Notes will not
be subject to any sinking fund requirement. Upon the occurrence of a Change of
Control (as defined), the Company will be required to make an offer to
repurchase the Exchange Notes at a price of 101% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
repurchase. See "Description of Notes- -Optional Redemption" and "--Change of
Control."
Each broker-dealer that receives Exchange Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market-making or other trading activities, must acknowledge that it
will deliver a Prospectus in connection with any resale of such Exchange Notes.
The Letter of Transmittal states that, by so acknowledging and by delivering a
Prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by broker-dealers
in connection with resales of Exchange Notes received in exchange for Old Notes
that were acquired by such broker-dealer as a result of market-making or other
trading activities. The Company has agreed that for a period of 90 days after
consummation of the Exchange Offer, it will make this Prospectus, as it may be
amended or supplemented from time to time, available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
There has been no public market for the Old Notes. If a market for the Exchange
Notes should develop, the Exchange Notes could trade at a discount from their
principal amount. The Company does not intend to list the Exchange Notes on a
national securities exchange or to apply for quotation of the Exchange Notes
through the National Association of Securities Dealers Automated Quotation
System. There can be no assurance that an active public market for the Exchange
Notes will develop.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE EXCHANGE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------------
The date of this Prospectus is , 1998
767531.3
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed with the Commission by the Company can be inspected and
copied at the public reference facilities maintained by the Commission, located
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
and at the Commission's Regional Offices, located at 7 World Trade Center, Suite
1300, New York, New York 10048, Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511, and 5670 Wilshire Boulevard, 11th Floor, Los
Angeles, California 90036. Copies of all or any part of such materials also may
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material also
can be reviewed through the Commission's Electronic Data Gathering, Analysis and
Retrieval System, which is publicly available through the Commission's Web site
(http://www.sec.gov). In addition, such reports and other information may be
inspected at the offices of the American Stock Exchange, 86 Trinity Place, New
York, New York 10006-1881.
Pursuant to the Securities Act and the rules and regulations promulgated
thereunder, the Company has filed with the Commission a Registration Statement
on Form S-4 covering the securities being offered hereunder (the "Registration
Statement," which term includes this Prospectus and all amendments, supplements,
exhibits, annexes and schedules to the Registration Statement). This Prospectus
does not contain all the information set forth in the Registration Statement,
certain parts of which are omitted as permitted by the rules and regulations of
the Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With respect
to each such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is hereby made to such exhibit for a more
complete description of the matter involved, and each such statement shall be
qualified in its entirety by such reference.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission (File No.
0-20292) pursuant to the Exchange Act are incorporated herein by reference:
1.The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
2.The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998 and June 30, 1998.
3.The Company's Current Reports on Form 8-K and 8-K/A filed on February 2,
1998, July 15, 1998, July 30, 1998 and October 16, 1998.
4.The Company's definitive proxy statement dated April 9, 1998 relating to
its annual meeting of stockholders held on May 15, 1998.
5.The Company's Registration Statement on Form 8-A filed with the
Commission on January 16, 1996.
In addition, all reports and other documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Prospectus and prior to the termination of the offering of the
securities shall be deemed to be incorporated by reference in this Prospectus
from the date of filing such documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
767531.3
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<PAGE>
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any and all of the documents that are
incorporated herein by reference (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into such documents).
Such requests should be directed to Ampex Corporation, 500 Broadway, Redwood
City, California 94063-3199, Attention: Investor Relations, (650) 367-4111.
FORWARD-LOOKING STATEMENTS
Certain statements contained or incorporated in this Prospectus constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could cause the
actual results, performance or achievements of the Company, or industry results,
to differ materially from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such risks,
uncertainties and other important factors include, among others, those described
under "Risk Factors" beginning on page 10. These forward-looking statements
speak only as of the date of this Prospectus. Statements herein with respect to
the Company's future strategies, policies or practices are subject to change at
any time without prior notice to security holders of the Company, and the
Company disclaims any obligation or undertaking to disseminate updates or
revisions of any forward- looking statements contained or incorporated herein to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based. The information and documents contained or incorporated by reference
under "Risk Factors" identify important factors that could cause future results
to differ from results currently anticipated.
767531.3
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<PAGE>
SUMMARY OF THE PROSPECTUS
The names "Ampex," "DCT," "DST," "DIS" and "DCRsi" are trademarks of Ampex
Corporation. "MicroNet" and "Data Dock" are trademarks of MicroNet Technology,
Inc., a subsidiary of Ampex Corporation.
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information contained or incorporated
elsewhere in this Prospectus.
The Company
General
Ampex is a leader in the design and manufacture of high performance
scanning recording devices and digital image processors. Its specialized
recording products are used for the acquisition of data at high speeds under
difficult conditions, such as those in aircraft, and for the storage of mass
computer data, especially images. The Company has significant experience in
digital image processing and has approximately 1,000 patents and patent
applications in this field and in recording technology, from which it derives
significant licensing income. The Company's principal licensees are the
manufacturers of consumer video products worldwide.
The Company's principal product groups are its mass data storage and
instrumentation products and its professional video and other products. The mass
data storage and instrumentation products group includes (i) 19- millimeter
scanning recorders and library systems (DST and DIS products) and related tape
and after-market equipment; and (ii) data acquisition and instrumentation
products (primarily DCRsi instrumentation recorders) and related tape and
aftermarket equipment. The Company's professional video and other products
groups includes primarily its DCT video recorders and image processing systems
and related tape products and television after-market equipment.
Since the end of the second fiscal quarter of 1998, the Company's
operations have included the operations of MicroNet Technology, Inc.
("MicroNet"), a manufacturer of disk array and network attached storage products
for image-based markets, such as the video and commercial pre-press markets.
MicroNet is currently focusing its product development efforts on its DataDock
7000, a data storage product development based upon redundant arrays of
independent disk drives.
The Company was incorporated in Delaware in January 1992 as the successor
to a business originally organized in 1944. References to "Ampex" or the
"Company" include subsidiaries of Ampex Corporation, unless the context
indicates otherwise. The principal executive offices of the Company are located
at 500 Broadway, Redwood City, California 94063, and its telephone number is
(650) 367-2011. The Company's Class A Common Stock is traded on the American
Stock Exchange under the symbol "AXC".
Recent Developments
In the third quarter of 1998, Ampex recognized a $5.2 million income tax
benefit due to the liquidation of its Italian subsidiary. Ampex also expects to
recognize a net restructuring credit of $0.3 million in the third quarter, which
reflects a payment it received in connection with a lease renegotiation, offset
by other restructuring charges incurred in connection with its previously
announced plans to relocate a portion of its DCRsi manufacturing operations to
Ampex's Colorado Springs, Colorado facility. In October 1998, the Company was
notified of the assertion of a claim against MicroNet in the amount of
approximately $595,000 on behalf of an insolvent former customer of MicroNet.
The Company's counsel is currently assessing this claim.
The Exchange Offer
<TABLE>
<S> <C>
The Exchange Offer.......................... $1,000 principal amount of Exchange Notes will be issued in exchange
for each $1,000 principal amount of Old Notes validly tendered
pursuant to the Exchange Offer. As of the date hereof, $14 million in
aggregate principal amount of Old Notes are outstanding. The
Company will issue the Exchange Notes to tendering holders of Old
Notes promptly after the Expiration Date.
Resales..................................... Based on an interpretation by the staff of the Commission set forth in
Morgan Stanley & Co. Incorporated, SEC No-Action Letter (available
</TABLE>
767531.3
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<TABLE>
<S> <C>
June 5, 1991) (the "Morgan
Stanley letter"), Exxon Capital Holdings Corporation, SEC
No-Action Letter (available May 13, 1988) (the "Exxon Capital
letter") and similar letters, the Company believes that
Exchange Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any person receiving such Exchange
Notes, whether or not such person is the holder (other than
any such holder or other person which is (i) a broker-dealer
that received Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making or other trading
activities, or (ii) an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act
(collectively, "Restricted Holders")) without compliance
with the registration and prospectus delivery provisions
of the Securities Act, provided that (a) such Exchange Notes are
acquired in the ordinary course of business of such holder or
other person (b) neither such holder nor such other person is
engaged in or intends to engage in a distribution of such
Exchange Notes and (c) neither such holder nor other person has
any arrangement or understanding with any person to participate
in the distribution of such Exchange Notes. If any person
were to be participating in theExchange Offer for the purposes
of participating in a distribution of the Exchange
Notes in a manner not permitted by the Commission's
interpretation, such person (a) could not rely upon the Morgan
Stanley Letter, the Exxon Capital Letter or similar
letters and (b) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection
with a secondary resale transaction. Each broker or
dealer that received Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by
such broker or dealer as a result of market-making or other
activities, must acknowledge that it will deliver a
Prospectus in connection with any sale of such Exchange Notes.
See "Plan of Distribution."
Expiration Date............................. 5:00 p.m., New York City time, on ___________, 1998, unless the
Exchange Offer is extended, in which case the term "Expiration Date"
means the latest date and time to which the Exchange Offer is extended.
Accrued Interest on the
Exchange Notes and Old Notes................ The Exchange Notes will bear interest from September 15, 1998.
Holders of Old Notes whose Old Notes are accepted for exchange will
be deemed to have waived the right to receive any payment in respect
of interest on such Old Notes accrued to the date of issuance of the
Exchange Notes.
Conditions to the Exchange Offer............ The Exchange Offer is subject to certain customary conditions. The
conditions are limited and relate in general to proceedings which have
been instituted or laws which have been adopted that might impair the
ability of the Company to proceed with the Exchange Offer. As of the
date of this Prospectus, none of these events had occurred, and the
Company believes their occurrence to be unlikely. If any such
conditions exist prior to the Expiration Date, the Company may
</TABLE>
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<TABLE>
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(a) refuse to accept any Old Notes and return all previously tendered
Old Notes, (b) extend the Exchange Offer, or (c) waive such conditions.
See "The Exchange Offer--Conditions."
Procedures for Tendering Old
Notes....................................... Each holder of Old Notes wishing to accept the Exchange Offer must
complete, sign and date the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of Transmittal, or
such facsimile, together with the Old Notes to be exchanged and any
other required documentation to the Exchange Agent (as defined) at the
address set forth herein and therein. Tendered Old Notes, the Letter of
Transmittal and accompanying documents must be received by the
Exchange Agent by 5:00 p.m. New York City time, on the Expiration
Date. See "The Exchange Offer--Procedures for Tendering." By
executing the Letter of Transmittal, each holder will represent to the
Company that, among other things, the Exchange Notes acquired
pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes,
whether or not such person is the holder, that neither the holder nor
any such other person is engaged in or intends to engage in a
distribution of the Exchange Notes or has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes, and that neither the holder nor any such other person
is an "affiliate," as defined under Rule 405 of the Securities Act, of the
Company.
Special Procedures for
Beneficial Holders.......................... Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender in the Exchange Offer should contact such
registered holder promptly and instruct such registered holder to tender
on his behalf. If such beneficial holder wishes to tender on his own
behalf, such beneficial holder must, prior to completing and executing
the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
holder's name or obtain a properly completed bond power from the
registered holder. The transfer of record ownership may take
considerable time. See "The Exchange Offer--Procedures for
Tendering."
Guaranteed Delivery Procedures.............. Holders of Old Notes who wish to tender their Old Notes and whose
Old Notes are not immediately available or who cannot deliver their
Old Notes and a properly completed Letter of Transmittal or any other
documents required by the letter of Transmittal to the Exchange Agent
prior to the Expiration Date may tender their Old Notes according to
the guaranteed delivery procedures set forth in "The Exchange Offer--
Guaranteed Delivery Procedures."
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<TABLE>
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Withdrawal Rights........................... Tenders may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date.
Acceptance of Old Notes and
Delivery of Exchange Notes.................. Subject to certain conditions, the Company will accept for exchange
any and all Old Notes which are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on the Expiration Date.
The Exchange Notes issued pursuant to the Exchange Offer will be
delivered promptly after the Expiration Date. see "The Exchange
Offer--Terms of the Exchange Offer."
Certain U.S. Federal Income
Tax Considerations.......................... The exchange of Old Notes for Exchange Notes pursuant to the
Exchange Offer will not be a taxable event for federal income tax
purposes. A holder's holding period for Exchange Notes will include
the holding period for Old Notes. For a discussion summarizing certain
U.S. federal income tax consequences to holders of the Exchange
Notes, see "Certain U.S. Federal Income Tax Considerations."
Exchange Agent.............................. IBJ Schroder Bank & Trust Company is serving as exchange agent (the
"Exchange Agent") in connection with the Exchange Offer. The
mailing address of the Exchange Agent is IBJ Schroder Bank and Trust
Company, P.O. Box 84, Bowling Green Station, New York, New
York, 10274-0084, Attention: Reorganization Operations Department.
Deliveries by hand or overnight courier should be addressed to IBJ
Schroder Bank & Trust Company, One State Street, Securities
Processing Window SC-1, New York, New York 10004. For facsimile
transmission, use facsimile number (212) 858-2611 and confirm by
telephone at (212) 858-2657.
Use of Proceeds............................. The Company will not receive any proceeds from the Exchange Offer.
See "Use of Proceeds." The Company has agreed to bear the expenses
of the Exchange Offer pursuant to the Registration Rights Agreement
(as defined). No underwriter is being used in connection with the
Exchange Offer.
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Summary of Terms of Exchange Notes
The Exchange Offer constitutes an offer to exchange up to $14 million aggregate
principal amount of the Exchange Notes for up to an equal aggregate principal
amount of Old Notes. The Exchange Notes will be obligations of the Company
evidencing the same indebtedness as the Old Notes, and will be entitled to the
benefit of the same Indenture. The form and terms of the Exchange Notes are
substantially the same as the form and terms of the Old Notes except that the
Exchange notes have been registered under the Securities Act. See "Description
of Notes."
Comparison with Old Notes
<TABLE>
<S> <C>
Freely Transferable......................... The Exchange Notes will be freely transferable under the Securities Act
by holders who are not Restricted Holders. Restricted Holders are
restricted from transferring the Exchange Notes without compliance
with the registration and prospectus delivery requirements of the
Securities Act. The Exchange Notes will be identical in all material
respects (including interest rate, maturity and restrictive covenants) to
the Old Notes, with the exception that the Exchange Notes will be
registered under the Securities Act. See "The Exchange Offer--Terms
of the Exchange Offer."
Registration Rights......................... The holders of Old Notes currently are entitled to certain registration
rights pursuant to the Exchange and Registration Rights Agreement,
dated July 20, 1998 (the "Registration Rights Agreement") by and
between the Company and First Albany Corporation, the initial
purchaser of the Old Notes ("First Albany"), including the right to
cause the Company to register the Old Notes under the Securities Act
if the Exchange Offer is not consummated prior to the Exchange Offer
Termination Date (as defined). See "The Exchange Offer--Conditions."
However, pursuant to the Registration Rights Agreement, such
registration rights will expire upon consummation of the Exchange
Offer. Accordingly, holders of Old Notes who do not exchange their
Old Notes for Exchange Notes in the Exchange Offer will not be able
to reoffer, resell or otherwise dispose of their Old Notes unless such
Old Notes are subsequently registered under the Securities Act or unless
an exemption from the registration requirements of the Securities Act
is available.
</TABLE>
Terms Of The Exchange Notes
<TABLE>
<S> <C>
Issuer...................................... Ampex Corporation, a Delaware corporation
Exchange Notes.............................. $14,000,000 aggregate principal amount of 12% Senior Notes due
2003, Series B.
Maturity of Notes........................... March 15, 2003
Interest Payment Dates...................... March 15 and September 15 of each year, commencing on
September 15, 1998.
Sinking Fund................................ None.
</TABLE>
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<TABLE>
<S> <C>
Ranking..................................... The Notes will be senior unsecured obligations of the Company and will
rank pari passu in right of payment with all existing and future senior
indebtedness of the Company and senior in right of payment to all
existing and future subordinated indebtedness of the Company. As of
September 30, 1998, after giving pro forma effect to the Old Notes, the
Company had approximately $45 million of senior indebtedness
outstanding.
Optional Redemption......................... Except as described below and under "Change of Control," the
Company may not redeem the Notes prior to March 15, 2000. On or
after such date, the Company may redeem the Notes, in whole or in
part, at any time, at the redemption prices set forth herein, together
with accrued and unpaid interest, if any, to the date of redemption. In
addition, at any time and from time to time on or prior to March 15,
2000, the Company may, subject to certain requirements, redeem up to
35% of the aggregate principal amount of the Notes with the cash
proceeds received from one or more Equity Offerings at a redemption
price equal to 112% of the principal amount to be redeemed, together
with accrued and unpaid interest, if any, to the date of redemption. See
"Description of Notes--Optional Redemption."
Change of Control........................... Upon the occurrence of a Change of Control, the Company will be
required to make an offer to repurchase the Notes at a price equal to
101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase. See "Description of Notes--
Change of Control."
Restrictive Covenants....................... The Indenture will limit (i) the incurrence of additional senior
indebtedness by the Company and its Restricted Subsidiaries (as defined
herein), (ii) the payment of dividends on, and redemption of, capital
stock of the Company and the redemption of certain subordinated
obligations of the Company, (iii) investments in Unrestricted
Subsidiaries (as defined herein), (iv) sales of assets and subsidiary
stock, (v) transactions with affiliates and (vii) consolidations, mergers
and transfers of all or substantially all of the assets of the Company.
However, all of these limitations are subject to a number of important
qualifications and exceptions. See "Description of Notes--Certain
Covenants."
</TABLE>
RISK FACTORS
Investment in the securities offered hereby involves a significant degree
of risk. Prospective investors should carefully consider the following factors,
together with the other information included or incorporated by reference in
this Prospectus, in evaluating the Company and its business before making our
investment decision.
Increased Leverage
Following issuance of the Notes, the Company's leverage increased
significantly from its prior level, which was not material. As of September 30,
1998, the Company had outstanding approximately $45 million of total
indebtedness (including the Notes). In addition, subject to the restrictions in
the Indenture, the Company may incur
767531.3
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<PAGE>
additional indebtedness from time to time to finance acquisitions or capital
expenditures or for other purposes. See "Description of Notes." The degree to
which the Company is leveraged could have important consequences to holders of
the Notes, including the following: (i) a substantial portion of the Company's
consolidated cash flow from operations must be dedicated to the payment of the
principal of and interest on its outstanding indebtedness and will not be
available for other purposes, (ii) the Company's ability to obtain additional
financing in the future for working capital needs, capital expenditures,
acquisitions and general corporate purposes may be materially limited or
impaired or such financing may not be on terms favorable to the Company, (iii)
the Company may be more highly leveraged than its competitors, which may place
it at a competitive disadvantage, (iv) the Company's leverage may make it more
vulnerable to a downturn in its business or the economy in general, and (v) the
financial covenants and other restrictions contained in the Indenture and other
agreements relating to the Company's indebtedness will restrict its ability to
borrow additional funds, to dispose of assets or to pay dividends on or
repurchase preferred or common stock.
The Company anticipates that its cash balances together with cash flow from
operations will be sufficient to fund anticipated operating expenses, capital
expenditures and its debt service requirements as they become due. There can be
no assurance, however, that the amounts available from such sources will be
sufficient for such purposes. No assurance can be given that additional sources
of funding will be available if required or, if available, will be on terms
satisfactory to the Company. If the Company is unable to service its
indebtedness it will be forced to adopt alternative strategies that may include
actions such as reducing or delaying capital expenditures, selling assets,
restructuring or refinancing its indebtedness, or seeking additional equity
capital. There can be no assurance that any of these strategies will be
successful should such strategies become necessary or that the Company will not
be restricted from such actions under the terms of the Indenture.
The Company derives a substantial portion of its operating income from its
subsidiaries. Accordingly, Ampex will be dependent on dividends and other
distributions from its subsidiaries to generate the funds necessary to meet its
obligations, including the payment of principal and interest on the Notes. The
ability of the Company's subsidiaries to pay such dividends will be subject to,
among other things, the terms of any debt instruments of the Company's
subsidiaries then in effect and applicable law. The holders of the Notes will
have no direct claim against Ampex's subsidiaries, and the rights of holders of
the Notes to participate in any distribution of assets of any subsidiary upon
liquidation, bankruptcy or reorganization may, as is the case with other
unsecured creditors of the Company, be subject to prior claims of creditors of
such subsidiary. The Company's subsidiaries had outstanding indebtedness for
borrowed money of approximately $1.4 million as of September 30, 1998. The
Indenture will, among other things, limit the incurrence of additional senior
debt by the Company and its Restricted Subsidiaries (as defined). The
restrictive covenants contained in the Indenture could significantly limit the
Company's ability to respond to changing business or economic conditions or to
substantial declines in operating results. However, these limitations are
subject to a number of important qualifications. See "Description of Notes."
Ranking of the Notes
The Notes will rank pari passu in right of payment with all other existing
and future unsecured senior indebtedness of the Company. However, the Notes will
be effectively subordinated to all future secured indebtedness of the Company
and to all future and existing indebtedness of the Company's subsidiaries. As of
September 30, 1998, the Company had no secured indebtedness outstanding and the
Company's subsidiaries had approximately $1.4 million of indebtedness
outstanding. No other Senior Indebtedness is outstanding with the exception of
the Notes. The Indenture will permit the Company to incur additional
indebtedness, subject to certain limitations. See "Description of
Notes--Ranking."
Fluctuations In Operating Results
Ampex's sales and results of operations are generally subject to quarterly
and annual fluctuations. Factors affecting operating results include: customer
ordering patterns; availability and market acceptance of new products;
767531.3
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<PAGE>
timing of significant orders and new product announcements; order cancellations;
receipt of royalty income; and numerous other factors. Ampex's revenues are
typically dependent upon receipt of a limited number of customer orders
involving relatively large dollar volumes in any given fiscal period, increasing
the potential volatility of its sales revenues from quarter to quarter In
addition, sales to government customers (primarily sales of DCRsi
instrumentation products) are subject to fluctuations as a result of the changes
in government spending programs, which can materially affect the Company's gross
margin as well as its sales. Accordingly, results may fluctuate significantly
from quarter to quarter and from year to year. Results of a given quarter or
year may not necessarily be indicative of results to be expected for future
periods. In addition, fluctuations in operating results may negatively affect
the Company's debt service coverage, or its ability to issue debt or equity
securities should it wish to do so, in any given fiscal period.
Broad Discretion Over Use of Proceeds; Yield on Temporary Investments
Although the proceeds from the issuance of the Old Notes will be applied
substantially in the manner described under "Use of Proceeds," because a
significant portion of such proceeds will not be immediately utilized in the
Company's business, management will retain significant discretion over the
application of the net proceeds. In addition, no assurance can be given as to
the timing of the application of such net proceeds, which may depend, among
other things, upon implementation of the Company's strategy to expand into new
markets and services internally and through acquisitions. Pending utilization as
described in "Use of Proceeds", the Company intends temporarily to invest the
net proceeds of the Offering in Cash Equivalents, including Government
securities, and the Company expects that the interest received on such
investments will be substantially less than the interest payable on the Notes.
In order to minimize the spread between the interest the Company receives on
these investments and the interest payable on the Notes, the Company may invest
a significant portion of the Note proceeds in securities with higher yields,
longer terms or lower credit quality and may engage in various transactions in
derivative securities. Investments in securities with lower credit quality or
longer maturities could subject the Company to potential losses due to
non-payment or changes in market value of those securities and transactions in
derivative securities could expose Ampex to losses caused by market
fluctuations.
Risks Associated With Acquisition Strategy
In order to implement its business strategy, the Company will consider
expansion of its products and services through internal development, joint
ventures, strategic partnerships and acquisitions of, and/or investments in,
other business entities. In July 1998 the Company completed the acquisition of
MicroNet. There is no assurance that management will be able to identify,
acquire or manage future acquisition candidates profitably on behalf of the
Company, or as to the timing or amount of any return that the Company might
realize in any such investment. Acquisitions could necessitate commitments of
funds in fixed assets and working capital of acquired businesses in excess of
the purchase price, which could reduce the Company's future liquidity. Possible
future acquisitions by the Company could result in the incurrence by the Company
or its Subsidiaries of additional debt, contingent liabilities and amortization
expenses related to goodwill and other intangible assets, as well as write-offs
of unsuccessful acquisitions. In connection with the Company's acquisition
strategy, the Company may purchase in the open market securities issued by
companies in which the Company is considering acquiring or in which the Company
is considering making a larger investment. The Company may also engage in
transactions in derivative securities to offset potential market risks
associated with these investments. Investments in these securities could expose
the Company to the risk of trading losses due to market fluctuations or other
factors that are not within the Company's control. Any or all of these items
could materially adversely affect the Company's financial condition, results of
operations, cash flow available to service the Notes and ability to issue debt
or equity securities.
Seasonality; Backlog
Sales of most of the Company's products have historically declined during
the first and third quarters of its fiscal year, due to seasonal procurement
practices of its customers. A substantial portion of the Company's backlog
767531.3
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at a given time is normally shipped within one or two quarters thereafter.
Therefore, sales in any quarter are heavily dependent on orders received in that
quarter and the immediately preceding quarter.
Fluctuating Royalty Income
Ampex's results of operations in certain prior fiscal periods reflect the
receipt of significant royalty income, including material non-recurring payments
resulting from negotiated settlements primarily related to sales of products by
manufacturers prior to the negotiation of licenses from the Company. Although
Ampex has a substantial number of outstanding and pending patents, and the
Company's patents have generated substantial royalties in the past, it is not
possible to predict the amount of royalty income that will be received in the
future. Royalty income has historically fluctuated widely due to a number of
factors that the Company cannot predict, such as the extent of use of the
Company's patented technology by third parties, the extent to which the Company
must pursue litigation in order to enforce its patents and the ultimate success
of its licensing and litigation activities. The costs of patent litigation can
be material, and the institution of patent enforcement litigation may also
increase the risk of counterclaims alleging infringement by the Company of
patents held by third parties or seeking to invalidate patents held by the
Company. Moreover, there is no assurance that the Company will continue to
develop patentable technology that will be able to generate significant patent
royalties in future years to replace patents as they expire. Ampex's royalty
income fluctuates significantly from quarter to quarter and from year to year,
and there can be no assurance as to the level of royalty income that will be
realized in future periods.
Risk of Continuing Sales Decline
In recent years, Ampex's net sales have declined materially. These declines
reflect declines in sales to U.S. and foreign government agencies, which are
material to the Company's operating results. These government agencies have
experienced continued pressure to reduce spending, which has particularly
affected the Company's sales to government contractors of the Company's DCRsi
instrumentation recorders, which have generally been more profitable than the
Company's data storage and video recording products. Sales of the Company's
professional video products have also declined in recent years following the
Company's substantial withdrawal from this market in 1993, and are no longer
material to Ampex. However, Ampex has continued to derive material revenues from
sales of after-market television equipment. Sales of these products are also
expected to decline as a result of the recent announcement of new television
transmission standards.
In response to declining sales of these products, Ampex is seeking to
expand its products and services, including through acquisitions such as the
acquisition of MicroNet Technology, Inc. Ampex intends to focus on MicroNet's
DataDock 7000 product line and a new high-end product line to be introduced in
the first quarter of 1999. Ampex also plans to de-emphasize other lower-priced
product lines which, in prior years, have accounted for the majority of
MicroNet's sales. See "The Company - General." Ampex has also instituted, and
will continue to implement, cost reduction programs, which address the continued
reduction in sales levels. However, there can be no assurance that any of these
strategies will be successful, or that Ampex will be able to reverse recent
sales declines.
Rapid Technological Change and Risks of New Product Development
All the industries and markets from which the Company derives revenues,
directly or through its licensing program, are characterized by continual
technological change and the need to introduce new products, product upgrades
and patentable technology. This has required, and will continue to require, the
expenditure of substantial amounts by the Company in the research, development
and engineering of new products and advances to existing products. No assurance
can be given that the Company's existing products and technologies will not
become obsolete or that any new products or technologies will win commercial
acceptance. Obsolescence of existing product lines, or inability to develop and
introduce new products, could have a material adverse effect on sales and
results of operations in the future.
767531.3
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<PAGE>
The development and introduction of new technologies and products are subject to
inherent technical and market risks, and there can be no assurance that the
Company will be successful in this regard.
Competition
Ampex encounters significant competition in all its product markets.
Although its competitors vary from product to product, many of the Company's
competitors are larger companies with greater resources, broader product lines
and other competitive advantages. In the mass data storage market, Ampex
competes with a number of well-established competitors such as IBM, Storage
Technology Corporation, Exabyte Corporation, Sony Corporation and Quantum
Corporation, as well as smaller companies. In addition, other manufacturers of
scanning video recorders may seek to enter the mass data storage market in
competition with the Company. For example, in 1996, IBM announced the general
availability of a new high performance tape storage product. Also, in 1995, Sony
Corporation introduced a tape line intended for the mass data storage industry.
In addition, price declines in competitive storage systems, such as magnetic or
optical disk drives, can negatively impact the Company's sales of its DST
products. In the instrumentation market, the Company competes primarily with
companies that depend on government contracts for a major portion of their sales
in this market, including Sony Corporation, Loral Data Systems, Datatape
Incorporated and Metrum Incorporated. The number of competitors in this market
has decreased in recent years as the level of government spending in many areas
has declined. MicroNet's competitors includes both large companies such as EMC
Corporation, Data General Corporation and IBM Corporation, as well as other
small systems integrators. There is no assurance that the Company will be able
to compete successfully in these markets in the future.
Dependence On Certain Suppliers
Ampex purchases certain components from a single domestic or foreign
manufacturer. Significant delays in deliveries or defects in such components
could adversely affect Ampex's manufacturing operations, pending qualification
of an alternative supplier. In addition, the Company produces highly engineered
products in relatively small quantities. As a result, its ability to cause
suppliers to continue production of certain products on which the Company may
depend may be limited. The Company does not generally enter into long-term raw
materials or components supply contracts.
Risks Related to International Operations
Although the Company significantly curtailed its international operations
in connection with the restructuring of its operations in 1993, sales to foreign
customers (including U.S. export sales) continue to be significant to the
Company's results of operations. International operations are subject to a
number of special risks, including limitations on repatriation of earnings,
restrictive actions by local governments, and fluctuations in foreign currency
exchange rates and nationalization. Additionally, export sales are subject to
export regulation and restrictions imposed by U.S. government agencies.
Fluctuations in the value of foreign currencies can affect Ampex's results of
operations. The Company does not normally seek to mitigate its exposure to
exchange rate fluctuations by hedging its foreign currency positions.
Exchange of Preferred Stock
Pursuant to an agreement dated as of June 22, 1998 with the holders of the
Old Preferred Stock, the Company redeemed all of the outstanding shares of its
8% Noncumulative Preferred Stock (the "Old Preferred Stock"), effective as of
July 2, 1998, in exchange for the following securities: (i) 3,000,000 shares of
its Class A Common Stock, par value $0.01 per share (the "Class A Stock"); (ii)
10,000 shares of a new series of 8% Noncumulative Convertible Preferred Stock,
par value $1.00 (the "Convertible Preferred Stock"); and (iii) 21,859 shares of
a new series of 8% Noncumulative Redeemable Preferred Stock, par value $1.00
(the "Redeemable Preferred Stock"). Each share of Convertible Preferred Stock
and Redeemable Preferred Stock (together the "New Preferred Stock") has a
liquidation
767531.3
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<PAGE>
preference of $2,000 per share and will bear noncumulative dividends at the rate
of 8% per annum, if declared by the Company's Board of Directors. Each share of
Convertible Preferred Stock may be converted, at the option of the holder
thereof, into 500 shares of Class A Stock, subject to adjustment under certain
circumstances. Beginning in June 2001, the Company will become obligated to
redeem the Convertible Preferred Stock in quarterly installments until March
2008. The Company will also be obligated to redeem the Redeemable Preferred
Stock in quarterly installments from June 1999 until December 2008. The Company
will have the option to redeem the Redeemable Preferred Stock at any time and
the Convertible Preferred Stock beginning in June 2001, and will have the option
to make both optional and mandatory redemption payments either in cash or in
shares of Common Stock. In the event that the Company does not have sufficient
funds legally available to make any mandatory redemption payment in cash, the
Company will be required to make such redemption payment by issuing shares of
its Common Stock. In addition, the Company is required to make a mandatory offer
to redeem these securities in cash out of legally available funds in the event
of a Change of Control. For this purpose, a Change of Control includes the
following events: a person or group of persons acting together acquires 30% or
more of the Company's voting securities; the merger, consolidation or sale of
all or substantially all of the assets of the Company; or the dissolution of the
Company.
Repurchase of Notes upon a Change of Control
Upon the occurrence of a Change of Control, the Company will be required to
offer to repurchase the Notes at a purchase price equal to 101% of the
outstanding principal amount thereof, together with accrued and unpaid interest.
The Change of Control repurchase feature may make more difficult a sale or
takeover of the Company. There can be no assurance that the Company will have
the necessary financial resources to meet its obligations in respect of its
indebtedness, including the required repurchase of the Notes, following a Change
of Control. If an offer to repurchase the Notes is required to be made and the
Company does not have available sufficient funds to pay for the Notes, an event
of default would occur under the Indenture. The occurrence of an event of
default could result in acceleration of the maturity of the Notes. See
"Description of Notes." Furthermore, these provisions would not necessarily
afford protection to holders of the Notes in the event of a highly leveraged
transaction that does not result in a Change in Control.
Dependence on Key Personnel
The Company is highly dependent on its management. The Company's success
depends upon the availability and performance of its executive officers and
directors. The loss of the services of any of these key persons could have a
material adverse effect upon the Company. The Company does not maintain key man
life insurance on any of these individuals.
Dependence on Licensed Patent Applications and Proprietary Technology
The Company's success depends, in part, upon its ability to establish and
maintain the proprietary nature of its technology through the patent process.
There can be no assurance that one or more of the patents held directly by the
Company will not be successfully challenged, invalidated or circumvented or that
the Company will otherwise be able to rely on such patents for any reason. In
addition, there can be no assurance that competitors, many of whom have
substantial resources and have made substantial investments in competing
technologies, will not seek to apply for and obtain patents that prevent, limit
or interfere with the Company's ability to make, use and sell its products
either in the United States or in foreign markets. If any of the Company's
patents are successfully challenged, invalidated or circumvented or the
Company's right or ability to manufacture its products were to be proscribed or
limited, the Company's ability to continue to manufacture and market its
products could be adversely affected, which would likely have a material adverse
effect upon the Company's business, financial condition and results of
operations.
Litigation may be necessary to enforce patents issued to the Company, to
protect trade secrets or know-how owned by the Company or to determine the
enforceability, scope and validity of the proprietary rights of others. Any
767531.3
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litigation or interference proceedings brought against, initiated by or
otherwise involving the Company may require the Company to incur substantial
legal and other fees and expenses and may require some of the Company's
employees to devote all or a substantial portion of their time to the
prosecution or defense of such litigation or proceedings. The Company is
currently involved in patent infringement litigation with a manufacturer of VHS
video recorders and television receivers, with respect to which it has incurred
significant expenses.
Environmental Issues
The Company's facilities are subject to numerous federal, state and local
laws and regulations designed to protect the environment from waste emissions
and hazardous substances. Owners and occupiers of sites containing hazardous
substances, as well as generators and transporters of hazardous substances, are
subject to broad liability under various federal and state environmental laws
and regulations, including liability for investigative and cleanup costs and
damages arising out of past disposal activities. The Company has been named from
time to time as a potentially responsible party by the United States
Environmental Protection Agency with respect to contaminated sites that have
been designated as "Superfund" sites, and is currently engaged in various
environmental investigation, remediation and/or monitoring activities at several
sites located off Company facilities. There can be no assurance the Company will
not ultimately incur liability in excess of amounts currently reserved for
pending environmental matters, or that additional liabilities with respect to
environmental matters will not be asserted. In addition, changes in
environmental regulations could impose the need for additional capital equipment
or other requirements. Such liabilities or regulations could have a material
adverse effect on the Company in the future.
Readiness for Year 2000
Many currently installed computer systems, software applications and
other control devices (collectively, "Systems") are coded to accept only two
digit entries in the date code field. As the Year 2000 approaches, these code
fields will need to accept four digit entries to distinguish years beginning
with "19" from those beginning with "20". As a result, in just over one year the
Systems used by many companies may need to be upgraded to comply with Year 2000
requirements. The Company relies on its internal Systems in operating and
monitoring all major aspects of its business, including manufacturing processes,
engineering management controls, financial systems (such as general ledger,
accounts payable and payroll modules), customer services, infrastructure,
embedded computer chips, networks and telecommunications equipment and products.
The Company also relies on the external Systems of its suppliers and other
organizations with which it does business.
The Company is currently reviewing all of its products, as well as its
internal use of Systems, in order to identify and modify those products and
Systems that are not Year 2000 compliant. To accomplish this, the Company has
established a Year 2000 Compliance Committee that is investigating the impact of
the Year 2000 on the Company's business. The Committee membership includes
representatives involved in all major functions of the Company. Its charter is
to identity all Systems that, if not in compliance, could adversely affect the
Company's business. For critical Systems that are found not to be in compliance,
the Committee will develop a plan, including a budget for associated costs, to
ensure compliance before the Year 2000. The Committee has nearly completed its
assessment and it has already been determined that many of the Company's
Systems, such as its manufacturing Systems, are in compliance as are all of its
products currently offered for sale by the Company. Other Systems, such as its
financial Systems and some engineering management Systems, currently do not
comply but are expected to be modified in early 1999 so that they are compliant.
There can be no assurance, however, that the Company will not be required to
reevaluate its assessments should it become evident that any Systems previously
determined to be in compliance are not yet fully compliant. The Company has also
sent questionnaires to major suppliers to assess Year 2000 issues as they relate
to the Company. To date, no material issue has been identified in any of the
other Systems used or relied upon by the Company and the cost of bringing
non-compliant Systems into compliance by early 1999 has not been and is not
expected to be material. The Company believes the most reasonably likely worse
case scenario is that the required modifications will not be completed until
late 1999. Under this scenario, the Company does not believe there would be any
material impact on the Company's business. Accordingly, the Company has not
developed a contingency plan in the event the required modifications are not
made in 1999. The Company's current insurance programs do not specifically
exclude losses attributed to Year 2000 non-compliance,
767531.3
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but these programs are subject to change as they are renewed for future periods.
However, despite the Company's efforts thus far to address the Year 2000 impact,
the Company cannot guarantee that all internal or external systems will be
compliant, or that its business will not be materially adversely affected by any
such non-compliance.
Absence of a Public Market
The Exchange Notes will be new securities for which there is currently no
public market. The Company does not intend to list the Exchange notes on any
national securities exchange or to seek the admission thereof to trading in the
National Association of Securities Dealers Automated Quotation System.
Accordingly, there can be no assurance as to the development of any market or
liquidity of any market that may develop for the Exchange Notes.
To the extent that Old Notes are tendered and accepted in the Exchange
Offer, the aggregate principal amount of Old Notes outstanding will decrease,
with a resulting decrease in the liquidity of the market therefor.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of the Old Notes set forth in the legend thereon as a consequence of
the issuance of the Old Notes pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act. In general,
Old Notes may not be offered or sold, unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. The Company currently
does not anticipate that it will register the Old Notes under the Securities
Act.
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. In
consideration for issuing the Exchange Notes as contemplated in this Prospectus,
the Company will receive in exchange Old Notes of like principal amount, the
terms of which are identical in all material respects to the Exchange Notes. The
Old Notes surrendered in exchange for Exchange Notes will be retired and
canceled and cannot be reissued. Accordingly, issuance of the Exchange Notes
will not result in any increase in the indebtedness of the Company. The Company
has agreed to bear the expenses of the Exchange Offer pursuant to the
Registration Rights Agreements. No underwriter is being used in connection the
Exchange Offer.
The net proceeds of the Old Notes (approximately $13.4 million after
estimated fees and expenses), together with the net proceeds from the Notes
issued in January 1998, will be used primarily for working capital purposes,
expansion of the Company's existing businesses, and possible investments in, or
acquisitions of, new businesses. See "Summary of the Prospectus -- Recent
Developments". Pending application for such purposes, the Company will invest
the proceeds of the Old Notes in cash and Cash Equivalents (as defined).
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's historical ratio of earnings
to fixed charges and ratio of earnings to combined fixed charges and preferred
stock dividends, for the periods shown. Such information should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto incorporated by reference in this Prospectus.
767531.3
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<TABLE>
<CAPTION>
For the 6-Months Ending June 30 For the Years ended December 31
------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- -----
Ratio of earnings (c)
to fixed charges (a)...................... n/a 9.9x 10.4x 6.7x 5.2x 2.7x n/a
Ratio of earnings to combined fixed
charges and preferred stock n/a 9.9x 10.4x 6.7x 4.6x 2.1x n/a
dividends (b)..............................
</TABLE>
(a) The ratio of earnings to fixed charges is calculated as follows: income
(loss) from continuing operations before provision for (benefit of) income
taxes ("adjusted income") plus fixed charges divided by fixed charges.
Fixed charges are defined as interest incurred (expensed or capitalized)
plus amortization of debt financing costs plus one-third of rental expenses
on operating leases. The Company's adjusted income plus fixed charges was
insufficient to cover fixed charge during 1993 by $296 million.
(b) The ratio of earnings to combined fixed charges and on preferred stock
dividends is calculated as follows: adjusted income plus fixed charges and
accretion of preferred stock dividends divided by fixed charges plus
preferred stock dividends. The Company's adjusted income plus fixed charges
and accretion of preferred stock dividends was insufficient to cover fixed
charges plus preferred stock dividends during 1993 by $296 million.
(c) For the six months ended June 30, 1998, the Company's adjusted income plus
fixed charges was insufficient to cover fixed charges by $4.0 million. The
Company's adjusted income plus fixed charges and accretion of preferred
stock dividends was insufficient to cover fixed charges plus preferred
stock dividends by $4.0 million.
DESCRIPTION OF NOTES
The Old Notes were and the Exchange Notes will be issued under an Indenture
(the "Indenture"), dated as of January 28, 1998, between the Company and IBJ
Schroder Bank & Trust Company, as trustee (the "Trustee"). The following is a
summary of certain provisions of the Indenture and the Notes and does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture (including the definitions of
certain terms therein and those terms made a part thereof by the Trust Indenture
Act of 1939, as amended) and the Notes. The definition of certain capitalized
terms used in the following summary are set forth below under "--Certain
Definitions."
General
The Notes mature on March 15, 2003, and will bear interest at the rate of
12% per annum, payable semiannually in arrears on March 15 and September 15 of
each year (each an "Interest Payment Date"), commencing September 15, 1998, to
the persons who are registered holders thereof at the close of business on the
March 1 or September 1 preceding such Interest Payment Date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Principal and
interest will be payable at the office of the Trustee but, at the option of the
Company, interest may be paid by check mailed to the registered holders at their
registered addresses or by wire transfer to accounts specified by them. The
Notes will be transferable and exchangeable at the office of the Trustee and
will be issued in fully registered form, without coupons, in denominations of
$1,000 and any integral multiple thereof. No service charge will be made for any
registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith. The interest rate on the
Notes is subject to increase under certain circumstances.
767531.3
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<PAGE>
As used in this "Description of Notes," references to the "Company" means
Ampex Corporation, but not any of its Subsidiaries (unless the context otherwise
requires). As of the date of the Indenture, all of Ampex's Subsidiaries will be
Restricted Subsidiaries except Ampex Holdings Corporation. Subject to the
requirements of the Indenture, Ampex will be permitted to designate current or
future Subsidiaries as Unrestricted Subsidiaries, which will not be subject to
many of the restrictive covenants in the Indenture.
The Indenture provides that the Company may issue Notes from time to time
in an aggregate principal amount of up to $50,000,000, of which an aggregate of
$30,000,000 was issued on January 28, 1998 and an additional aggregate of
$14,000,000 was issued on July 20, 1998. The $14,000,000 issuance represents the
Old Notes which are the subject of this Exchange Offer. If the Company issues
any additional Notes ("Additional Notes") in the future, such Additional Notes
would have terms identical in all material respects (including payment dates and
maturity) to, and rank pari passu with, the Notes. The Company has no present
plan to issue any Additional Notes, but it may do so at any time.
Redemption
Mandatory Redemption. The Notes are not be subject to any mandatory sinking
fund redemption prior to maturity.
Optional Redemption. The Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after March 15, 2000 at the redemption
prices (expressed as percentages of the principal amount of the Notes) set forth
below plus in each case accrued and unpaid interest, if any, to the date of
redemption, if redeemed during the applicable six- or twelve-month periods
indicated below:
Applicable Period Percentage
- ----------------------------------------------- ----------
March 15, 2000 to March 14, 2001.................... 106%
March 15, 2001 to March 14, 2002.................... 104%
March 15, 2002 to September 14, 2002................ 102%
September 15, 2002 and thereafter................... 100%
In addition, at any time on or prior to March 15, 2000, the Company may, at
its option, redeem up to 35% of the aggregate principal amount of Notes
originally issued with the net cash proceeds of one or more Equity Offerings (as
defined), at 112% of the aggregate principal amount thereof plus accrued and
unpaid interest, if any, to the date of redemption. In order to effect the
foregoing redemption with the proceeds of any Equity Offering, the Company shall
make such redemption not more than 90 days after the consummation of any such
Equity Offering.
Ranking
The Notes are senior unsecured obligations of the Company. The Notes will
rank pari passu in right of payment with all existing and future Senior
Indebtedness of the Company (i.e., all indebtedness that is not by its terms
expressly subordinate or junior in right of payment to any other Indebtedness of
the Company) and will rank senior in right of payment to any existing and future
Subordinated Indebtedness of the Company. The Notes will be effectively
subordinated to (a) any secured debt of the Company to the extent of the assets
serving as security therefor and (b) all liabilities of Subsidiaries of the
Company.
Change of Control
In the event of a Change of Control, each holder of Notes will have the
right to require the Company to offer to purchase all or any portion of such
holder's Notes at a purchase price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase, in accordance with the terms set forth in the Indenture (a "Change
of Control Offer").
767531.3
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<PAGE>
"Change of Control" means the occurrence of any of the following events:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or becomes
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act except that for purposes of this clause (i) such person or group shall be
deemed to have "beneficial ownership" of all shares that any such person or
group has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than 50% of the
total voting power of the outstanding Voting Stock of the Company; or (ii) the
sale, lease or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company and its
Restricted Subsidiaries to any person or group (as so defined), excluding any
such sale, lease or other transfer (x) to or among the Company's Restricted
Subsidiaries and (y) to any Person that is controlled by the Permitted Holders.
Within 30 days following any Change of Control, the Company shall mail a
notice to each holder with a copy to the Trustee stating: (1) that a Change of
Control has occurred and that such holder has the right to require the Company
to purchase such holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on a record date to
receive interest on the relevant Interest Payment Date), (2) the repurchase date
(which shall be no earlier than 30 days nor later than 60 days from the date
such notice is mailed); and (3) the procedures determined by the Company,
consistent with the Indenture, that a holder must follow in order to have its
Notes purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in the Indenture by virtue thereof.
The definition of "Change of Control" includes, among other transactions, a
disposition of all or substantially all of the property and assets of the
Company and its Subsidiaries. With respect to the disposition of property or
assets, the phrase "all or substantially all" as used in the Indenture varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under New York law (which is the law which governs
the Indenture) and is subject to judicial interpretation. Accordingly, in
certain circumstances there may be a degree of uncertainty in ascertaining
whether a particular transaction would involve a disposition of "all or
substantially all" of the property or assets of a Person, and therefore it may
be unclear as to whether a Change of Control has occurred and whether the
Company is required to make an offer to repurchase the Notes as described above.
Future indebtedness of the Company and its Subsidiaries may contain
prohibitions of certain events that would constitute a Change of Control or
require such indebtedness to be repurchased upon a Change of Control. Moreover,
the exercise by the holders of their right to require the Company to repurchase
the Notes could cause a default under such indebtedness, even if the Change of
Control itself does not, due to the financial effect of such repurchase on the
Company. Finally, the Company's ability to pay cash to the holders upon a
repurchase may be limited by the Company's then existing financial resources.
There can be no assurance that sufficient funds will be available when necessary
to make any required repurchases.
Certain Covenants
The Indenture contains certain covenants including, among others, the
following:
Limitation on Indebtedness. (a) The Company shall not, and shall not permit
any of its Restricted Subsidiaries to, issue, assume, guarantee, incur or
otherwise become liable for (collectively, "Incur") any Indebtedness (including
the Additional Notes); provided, however, that: (i) the Company may Incur
Indebtedness which is expressly subordinate
767531.3
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and junior in right of payment to the Notes; and (ii) the Company and its
Restricted Subsidiaries may Incur Indebtedness if, on the date of Incurrence,
the Consolidated Coverage Ratio would be at least equal to 3.00 to 1.00.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness of the Company represented by the Notes;
(ii) Existing Indebtedness;
(iii) Indebtedness owed by any Restricted Subsidiary to the
Company or to another Restricted Subsidiary, or owed by the Company to any
Restricted Subsidiary; provided, however, that any such Indebtedness shall
be at all times held by a Person which is either the Company or a
Restricted Subsidiary of the Company;
(iv) Indebtedness of the Company or any Restricted
Subsidiary arising with respect to Interest Rate Agreement Obligations and
Currency Agreement Obligations Incurred for the purpose of fixing or
hedging interest rate risk or currency risk;
(v) Indebtedness represented by performance, completion,
guarantee, surety and similar bonds provided by the Company or any
Restricted Subsidiary in the ordinary course of business;
(vi) Indebtedness Incurred by the Company or any of its
Restricted Subsidiaries constituting reimbursement obligations with respect
to letters of credit or other instruments issued in the ordinary course of
business, including without limitation letters of credit in respect of
workmen's compensation claims or self-insurance or securing obligations of
the Company or any Restricted Subsidiary under operating leases; provided
that upon drawing of such letters of credit or other instrument such
drawings are reimbursed within 30 days following demand for reimbursements;
(vii) Indebtedness Incurred in connection with or given in
exchange for the renewal, extension, modification, amendment, refunding,
defeasance, refinancing or replacement (a "refinancing") of any of the
Notes or any Existing Indebtedness or any Indebtedness issued after the
Issue Date and not Incurred in violation of the Indenture ("Refinancing
Indebtedness"); provided, however, that (a) the principal amount of such
Refinancing Indebtedness shall not exceed the principal amount (or accreted
amount, if less) of the Indebtedness so refinanced at the time outstanding
(or obtainable under any outstanding revolving credit or similar Agreement)
(plus the premiums paid in connection therewith and the reasonable expenses
incurred in connection therewith); (b) with respect to Subordinated
Indebtedness being refinanced, the Stated Maturity of the Refinancing
Indebtedness shall be not earlier than the Stated Maturity of the
Indebtedness being refinanced, and such Refinancing Indebtedness shall have
an Average Life at the time such Refinancing Indebtedness is incurred that
is equal to or greater than the remaining Average Life of the Indebtedness
being Refinanced; (c) with respect to Subordinated Indebtedness of the
Company being refinanced, such Refinancing Indebtedness shall rank no more
senior than, and shall be at least as subordinated in right of payment to
the Notes as the Indebtedness being refinanced; and (d) the obligor on such
Refinancing Indebtedness shall be the obligor on the Indebtedness being
refinanced or the Company or another Restricted Subsidiary;
(viii) Indebtedness of the Company or any Restricted
Subsidiary (a) representing Capital Lease Obligations and (b) in respect of
Purchase Money Obligations for property acquired in the ordinary course of
business, which taken together do not exceed $3 million in aggregate amount
at any time outstanding;
(ix) Indebtedness of Foreign Subsidiaries of the Company
not to exceed a principal amount outstanding at any time of $5 million in
the aggregate for all Foreign Subsidiaries;
(x) Guarantees by the Company or any Restricted
Subsidiary of Indebtedness of the Company or any Restricted Subsidiary that
was permitted to be Incurred pursuant to another provision of this
covenant;
(xi) Indebtedness of a Restricted Subsidiary engaged in
providing lease or similar financing to customers of the Company or its
Restricted Subsidiaries, not exceeding 7.5% of Consolidated Total Assets;
and
(xii) Indebtedness of the Company or any Restricted
Subsidiary in addition to that described in clauses (i) through (xi )
above, and any refinancings of such Indebtedness, so long as the aggregate
767531.3
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<PAGE>
principal amount of all such Indebtedness Incurred pursuant to this clause
(xii) does not exceed $15 million plus 75% of the amount by which accounts
receivable (net of reserves) of the Company and its Restricted Subsidiaries
(as shown in the Company's most recent consolidated balance sheet) exceeds
$15 million.
Any Indebtedness of a Person existing at the time such Person becomes a
Restricted Subsidiary (whether by merger, consolidation, acquisition or
otherwise; an "Acquired Person") shall be deemed to be Incurred by such
Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
Limitation on Restricted Payments. The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, make any Restricted
Payment (including any Restricted Investment), unless at the time of and
immediately after giving effect to the proposed Restricted Payment (with the
value of any such Restricted Payment, if other than cash, to be determined
reasonably and in good faith by the Board of Directors of the Company), (i) no
Default or Event of Default shall have occurred and be continuing or would occur
as a consequence thereof, (ii) the Company could incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph under "--Limitation on
Indebtedness" and (iii) the aggregate amount of all Restricted Payments made
after the Issue Date shall not exceed the sum of (a) an amount equal to 50% of
the Company's aggregate cumulative Consolidated Net Income accrued on a
cumulative basis during the period (treated as one accounting period) beginning
on January 1, 1998 and ending on the last day of the fiscal quarter of the
Company immediately preceding the date of such proposed Restricted Payment (or,
if such aggregate cumulative Consolidated Net Income for such period shall be a
deficit, minus 100% of such deficit), plus (b) (x) the aggregate amount of all
Net Proceeds received since the Issue Date by the Company from the issuance and
sale (other than to a Restricted Subsidiary) of Capital Stock (other than
Disqualified Stock), and (y) an amount equal to the amount (as shown on the
Company's most recent consolidated balance sheet, prepared in accordance with
GAAP) of all Indebtedness or Disqualified Stock that, after the Issue Date, is
converted into or exchanged for Capital Stock of the Company (other than
Disqualified Stock) (less the amount of any cash or property distributed by the
Company upon such conversion or exchange), plus (c) the amount of the net
reduction in Investments by the Company or its Restricted Subsidiaries in
Unrestricted Subsidiaries resulting from (x) the payment of dividends or the
repayment in cash of the principal of loans or the net proceeds from the sale of
the Capital Stock or assets of such Unrestricted Subsidiaries or other cash
return on such Investment, in each case to the extent received by the Company or
any Restricted Subsidiary of the Company, (y) the release or extinguishment of
any guarantee of Indebtedness of any Unrestricted Subsidiary, and (z) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries of the
Company (valued as provided in the definition of "Investment"), such aggregate
amount of the net reduction in Investments not to exceed the amount of
Restricted Investments previously made by the Company or any Restricted
Subsidiary of the Company in such Unrestricted Subsidiaries, which amount was
included in the calculation of the amount of Restricted Payments. For purposes
of the foregoing clause (c), the Company shall be deemed to have made a
Restricted Investment under the Indenture in an amount equal to any cash
contribution made or subscribed for by the Company on or immediately prior to
the Issue Date to one or more Unrestricted Subsidiaries.
In addition, so long as there is no Default or Event of Default continuing,
the following payments and other actions shall be expressly permitted
notwithstanding anything contained in the covenant described above
(collectively, "Permitted Payments"):
(i) the payment of any dividend within 60 days after the
date of declaration thereof, if at such declaration date such payment would
have been permitted under the Indenture and such payment shall be deemed to
have been paid on such date of declaration for purposes of clause (iii) of
the preceding paragraph;
(ii) the redemption, repurchase, retirement or other
acquisition of any Capital Stock or any Indebtedness of the Company that is
subordinated in right of payment to the Notes in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a
Restricted Subsidiary) of Capital Stock of the Company (other than any
Disqualified Stock);
(iii) any purchase or defeasance of Subordinated
Indebtedness to the extent required upon a Change of Control or Asset Sale
(as defined therein) by the Indenture or other Agreement or instrument
pursuant to which such Subordinated Indebtedness was issued, but only if
the Company (x) in the case of a Change of
767531.3
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<PAGE>
Control, has complied with its obligations under the provisions described
under the covenant entitled "Change of Control" or (y) in the case of an
Asset Sale has applied the Net Cash Proceeds from such Asset Sale in
accordance with the provisions under the covenant entitled "Limitation on
Asset Sales";
(iv) any Restricted Investments made with the proceeds of
the substantially concurrent
sale of Capital Stock (other than Disqualified Stock);
(v) Restricted Investments in any Unrestricted Subsidiary
engaged in providing lease or similar financing to customers of the Company
and its Restricted Subsidiaries, in an amount such that the sum of the
aggregate amount of Restricted Investments made pursuant to this clause (v)
after the Issue Date and outstanding on the date of determination does not
exceed the greater of $5 million or 7.5% of Consolidated Total Assets;
(vi) the repurchase of Capital Stock of the Company
(including options, warrants or other rights to acquire such Capital Stock)
from directors, officers or employees (or their nominees) of the Company or
its Subsidiaries pursuant to the terms of an employee benefit plan or
employment Agreement or similar arrangement; provided that an aggregate
amount of all such repurchases, net of repayments or cancellations of
indebtedness as a result of such repurchases, shall not exceed $1 million
in any fiscal year;
(vii) the redemption or repurchase of the Company's
Noncumulative Redeemable Preferred Stock at a price not to exceed 100% of
liquidation value; provided, however, that the aggregate amount of all
payments pursuant to this clause (vii) shall not exceed 100% of cumulative
Consolidated GAAP Net Income accrued during the period from January 1, 1998
to the date of payment (treated as one accounting period); and
(viii) Restricted Payments (other than a dividend or other
distribution declared on any Capital Stock of the Company or a payment to
purchase, redeem or otherwise acquire or retire for value any Capital Stock
of the Company) not to exceed $1 million in the aggregate.
For purposes of clause (iii) of the first paragraph of this covenant,
Permitted Payments made pursuant to clauses (i), (vi) and (vii) of the
immediately preceding paragraph shall be included (without duplication) as
Restricted Payments made since the Issue Date.
Limitation on Asset Sales. (a) The Company will not, and will not permit
any Restricted Subsidiary to, make any Asset Sale unless (i) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the Fair Market Value of the assets or other
property sold or disposed of in the Asset Sale and (ii) at least 75% of such
consideration consists of either cash or Cash Equivalents, provided, however,
that, at the option of the Company, clause (ii) shall not be applicable to Asset
Sales (or portions of Asset Sales) to the extent the Company shall apply cash
and Cash Equivalents available from other sources to make any required Asset
Sale Offer as if 75% of such consideration had consisted of cash and Cash
Equivalents.
(b) Within 365 days after any Asset Sale, the Company may elect
to apply the Net Available Cash from such Asset Sale to (i) permanently reduce
or redeem any Senior Debt of the Company or a Restricted Subsidiary and/or (ii)
make an Investment in, or acquire assets and properties that will be used in the
business of the Company and its Restricted Subsidiaries, and (iii) any balance
of such Net Available Cash exceeding $10 million and not applied or invested as
provided in clauses (i) and (ii) within 365 days of such Asset Sale, will be
deemed to constitute "Excess Proceeds" and shall be applied to make an offer to
purchase Notes to the holders of the Notes. Pending the final application of any
such Net Available Cash, the Company may temporarily invest such Net Available
Cash in cash or Cash Equivalents
For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption by the transferee of Indebtedness of the Company or
Indebtedness of any Restricted Subsidiary of the Company and the release of the
Company or such Restricted Subsidiary from all liability on such Indebtedness in
connection with such Asset Disposition (in which case the Company shall, without
further action, be deemed to have applied such assumed Indebtedness in
accordance with clause (A) of the preceding paragraph) and (y) securities
received by the Company or any Restricted
767531.3
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<PAGE>
Subsidiary of the Company from the transferee that are promptly (and in any
event within 120 days) converted by the Company or such Restricted Subsidiary
into cash.
(c) In the event of an Asset Disposition that requires the purchase
of Notes pursuant to clause (b)(iii) above, the Company will be required to
purchase Notes tendered pursuant to an offer by the Company for the Notes at a
purchase price of 100% of their principal amount plus accrued and unpaid
interest, if any, to the purchase date in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. If the aggregate purchase price of the Notes tendered pursuant to the
offer is less than the Net Available Cash allotted to the purchase of the Notes,
the Company will apply the remaining Net Available Cash to general corporate
purposes not prohibited by the Indenture. Upon the consummation of any Asset
Sale Offer, the amount of Excess Proceeds shall be deemed to be reset to zero.
(d) The Company will comply, to the extent applicable, with the
requirements of Section 14 (e) of the Exchange Act and any other applicable
securities laws or regulations in connection with the repurchase of Notes
pursuant to the Indenture and will not be deemed to have breached its
obligations under the Indenture by virtue thereof.
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, Incur or suffer to exist any
Lien securing any Indebtedness (other than (1) Indebtedness described in
paragraphs (a) (ii) and (b) (ii), (vii) (to the extent the Refinanced
Indebtedness was secured by a Lien permitted by the Indenture), (xi) and (xii)
of the covenant described under "--Limitation on Indebtedness" above; and (2)
Indebtedness of an Acquired Person existing at the date such Person became a
Restricted Subsidiary, and any refinancing thereof, provided however, that such
Lien is not applicable to any Person or the properties or assets of any Person,
other than the Acquired Person) on any asset now owned or hereafter acquired,
unless the Notes are equally and ratably secured thereby.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions to the Company or any other Restricted Subsidiary on its Capital
Stock, or pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, make loans or advances to the Company or any other Restricted
Subsidiary or (ii) transfer any of its properties or assets to the Company or
any other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of
(a) any Agreement or instrument evidencing or governing any
Existing Indebtedness and any refinancings thereof;
(b) applicable law;
(c) any instrument governing Indebtedness or Capital Stock
of an Acquired Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), or any refinancing thereof; provided, however, that such
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Acquired Person; (d) by reason of customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices; (e) Purchase Money Indebtedness for
property acquired in the ordinary course of business that only impose
restrictions on the property so acquired; (f) an Agreement for the sale or
disposition of the Capital Stock or assets of such Restricted Subsidiary;
provided, however, that such restriction is only applicable to such Restricted
Subsidiary or assets, as applicable, and such sale or disposition otherwise is
permitted under "--Limitation on Asset Sales" above; (g) Refinancing
Indebtedness permitted under the Indenture; provided, however, that the
restrictions contained in the agreements governing such Refinancing Indebtedness
are not materially more
767531.3
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<PAGE>
restrictive in the aggregate than those contained in the agreements governing
the Indebtedness being refinanced immediately prior to such refinancing;
(h) the Indenture and the Notes;
(i) arising or agreed to in the ordinary course of business,
not relating to any Indebtedness, and that do not, individually or in the
aggregate, detract from the value of property or assets of the Company or any
Restricted Subsidiary in any manner material to the Company or any Restricted
Subsidiary; or (j) any instrument governing Indebtedness of a Foreign Subsidiary
which is permitted by the terms of the Indenture.
Nothing contained in this "Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant shall prevent the
Company or any Restricted Subsidiary from (1) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted in the "Limitation on Liens"
covenant or (2) restricting the sale or other disposition of property or assets
of the Company or any of its Restricted Subsidiaries that secure Indebtedness of
the Company or any of its Restricted Subsidiaries.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any
Affiliate of the Company (other than the Company or a Restricted Subsidiary)
unless (1) such transaction or series of transactions is on terms that are not
materially less favorable to the Company or such Restricted Subsidiary, as the
case may be, than would be available in a comparable transaction in arm's-length
dealings with an unrelated third party, and (2) the Company delivers to the
Trustee, with respect to any transaction or series of related transactions
involving aggregate payments in excess of $5.0 million, an Officers' Certificate
certifying that such transaction or series of related transactions has been
approved by a majority of the members of the Board of Directors of the Company
and evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate. Notwithstanding the foregoing, this covenant will not
apply to:
(i) employment agreements, compensation or employee
benefit arrangements, stock options or stock purchase plans or agreements with
or for the benefit of any officer, director or employee of the Company entered
into in the ordinary course of business and approved by the Board of Directors
of the Company (including loans and stock repurchase arrangements thereunder,
customary fringe benefits and including reimbursement or advancement of out of
pocket expenses, loans to officers, directors and employees in the ordinary
course of business, reasonable fees paid to directors who are not employees of
the Company, and director's and officer's liability insurance and
indemnification arrangements); (ii) any transaction entered into by or among the
Company or one of its Restricted Subsidiaries with one or more Restricted
Subsidiaries of the Company; (iii) the sale, discount or other disposition of
accounts receivable or inventory to one or more Unrestricted Subsidiaries
engaged in financing receivables for the benefit of the Company or in providing
lease or similar financing to customers of the Company; (iv) any Restricted
Payment not prohibited by the "Limitation on Restricted Payments" covenant; (v)
transactions permitted by, and complying with, the provisions described under
"-- Merger, Consolidation and Sale of Assets;" (vi) any sale or issuance of
Capital Stock (other than Disqualified Stock) of the Company; (vii) the grant or
performance of registration rights with respect to securities of the Company;
and (viii) transactions in which the Company or any of its Restricted
Subsidiaries delivers to the Trustee an opinion from an independent nationally
recognized financial advisor stating that such transaction is fair to the
Company or such Restricted Subsidiary from a financial point of view and meets
the requirements of clauses (1) and (2) above.
767531.3
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Limitation on Designation of Unrestricted Subsidiaries. The Company will
not designate any Subsidiary of the Company (other than a newly created
Subsidiary in which no Investment in excess of $1,000 has previously been made)
as an "Unrestricted Subsidiary" under the Indenture (a "Designation") after the
Issue Date unless:
(a) no Default shall have occurred and be continued at the time
of or after giving effect to such Designation; and
(b) the Company would not be prohibited under the Indenture
from making an Investment at the time of Designation in an amount (the
"Designation Amount") equal to the fair market value of such Restricted
Subsidiary on such date.
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
described above under the caption "--Limitation on Restricted Payments" for all
purposes of the Indenture in the Designation Amount. The Indenture will further
provide that neither the Company nor any Restricted Subsidiary shall at any time
(x) provide a Guarantee of or similar undertaking (including any undertaking,
agreement or instrument evidencing such Indebtedness) with respect to any
Indebtedness of an Unrestricted Subsidiary; provided that the Company and its
Restricted Subsidiaries may pledge Capital Stock or Indebtedness of any
Unrestricted Subsidiary on a nonrecourse basis such that the pledgee has no
claim whatsoever against the Company other than to obtain such pledged property
or (y) be directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary, except to the extent permitted under the covenant described above
under the caption "--Limitation on Restricted Payments."
The Company will not revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation"), unless:
(a) no Default shall have occurred and be continuing at the
time of and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted
Subsidiary outstanding immediately following such Revocation shall be deemed to
have been incurred at such time and shall have been permitted to be incurred for
all purposes of the Indenture.
All Designations and Revocations must be evidenced by Board Resolutions
delivered to the Trustee certifying compliance with the foregoing provisions.
Additional Covenants. The Indenture will also contain covenants with
respect to the following matters: (i) payment of principal, premium and
interest; (ii) maintenance of an office or agency in the City of New York; (iii)
maintenance of corporate existence; and (iv) provision of financial statements.
Merger, Consolidation and Sale of Assets
The Company will not consolidate with or merge with or into, or convey or
transfer or lease in one transaction or series of related transactions, all or
substantially all of its assets to, another Person unless
(i) the resulting, surviving or transferred Person (the
"Successor Corporation") is a corporation organized and existing under the laws
of the United States or any state thereof or the District of Columbia and (if
other than the Company) assumes by supplemental indenture all the obligations of
the Company under the Notes and the Indenture;
(ii) immediately after giving effect to such transaction, no
Default shall have occurred and be continuing; and
(iii) immediately after giving effect to such transaction,
the Successor Corporation would be permitted to incur at least $1.00 of
Indebtedness pursuant to the Consolidated Coverage Ratio test.
767531.3
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The Successor Corporation shall be the successor to the Company under the
Indenture, and in the case of any such transfer, the Company shall be released
from its obligations under the Indenture and the Notes. Notwithstanding the
foregoing, any Restricted Subsidiary may consolidate or merge with or into or
transfer all or any part of its assets to the Company.
Events of Default
Each of the following constitutes an Event of Default under the Indenture:
(i) a default in any payment of interest on any Note when due, continued for 30
days, (ii) a default in the payment of principal of any Note when due at its
Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise, (iii) the failure by the Company to observe or perform
its described obligations under "--Merger, Consolidation and Sale of Assets
provision and under certain of the covenants described under "--Certain
Covenants" above and the default continues for 30 days after notice, (iv) the
failure by the Company to observe or perform any of its other agreements
contained in the Indenture and such default continues for 60 days after notice,
(v) a default or event of default occurs under any Indebtedness of the Company
or any Significant Subsidiary (other than Indebtedness of a Restricted
Subsidiary incurred pursuant to paragraph (b) (xi) of the covenant described
under "--Limitation on Indebtedness" above) and the holders of such Indebtedness
have accelerated such Indebtedness or any default occurs in the payment of the
principal amount of such Indebtedness at final maturity and the total of all
such Indebtedness described in this covenant exceeds $5 million and there shall
have been a failure to obtain rescission or annulment of all such accelerations
or to pay in full the amount in default (together with any applicable interest)
by the later of the expiration of any applicable grace period or 10 days after
notice (the "cross acceleration provision), (vi) any judgment or decree for the
payment of money in excess of $5 million (to the extent not covered by
insurance) is entered against the Company or a Significant Subsidiary, remains
outstanding for a period of 60 days after such judgment or decree becomes final
and non-appealable, and is not discharged, waived or the execution thereof
stayed for a period of 10 days after notice (the "judgment default provision")
(vii) certain events of bankruptcy, insolvency or reorganization of the Company
or a Significant Subsidiary (the "bankruptcy provisions"). However, a default
under clause (iii), (iv), (v) or (vi) will not constitute an Event of Default
until the Trustee or the holders of 25% in principal amount of the outstanding
Notes notify the Company of the default and the Company does not cure such
default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes by notice to the
Company may declare the principal of and accrued and unpaid interest, if any, on
all the Notes to be due and payable. Upon such a declaration, such principal and
accrued and unpaid interest shall be due and payable immediately. If an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company occurs, the principal of and accrued and unpaid interest on all
the Notes will become and be immediately due and payable without any declaration
or other act on the part of the Trustee or any holders. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, if an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the holders unless such holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction that, in the opinion of the Trustee, is
inconsistent with such request within such 60-day period. Subject to certain
restrictions, the holders of a majority in principal amount of the outstanding
Notes are given the right to direct the time, method and
767531.3
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place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
holder or that would involve the Trustee in personal liability. Prior to taking
any action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of, premium (if any) or interest on any Note, the Trustee may
withhold notice if and so long as its board of directors, a committee of its
board of directors or a committee of its Trust officers in good faith determines
that withholding notice is in the interests of the holders of the Notes. In
addition, the Company is required to deliver to the Trustee, within 90 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any events which would constitute certain Defaults.
Amendments and Waivers
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any provisions may be waived
with the consent of the holders of a majority in principal amount of the Notes
then outstanding. However, without the consent of each holder of an outstanding
Note affected, no amendment may, among other things, (i) reduce the amount of
Notes whose holders must consent to an amendment, (ii) reduce the stated rate of
or extend the stated time for payment of interest on any Note, (iii) reduce the
principal of or extend the Stated Maturity of any Note, (iv) reduce the premium
payable upon the redemption or repurchase of any Note or change the time at
which any Note may be redeemed as described under "Optional Redemption" above,
(v) make any Note payable in money other than that stated in the Note, or (vi)
impair the right of any holder to receive payment of principal of and interest
on such holder's Notes on or after the due dates therefor or to institute suit
for the enforcement of any payment on or with respect to such holder's Notes.
Without the consent of any holder, the Company and the Trustee may amend
the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation of the obligations of the
Company under the Indenture, to provide for uncertificated Notes in addition to
or in place of certificated Notes, to make any change that does not adversely
affect the rights of any holder or to comply with any requirement of the
Commission in connection with the qualification of the Indenture under the Trust
Indenture Act.
Defeasance
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under "--Certain Covenants", the operation of the cross acceleration
provision, the bankruptcy provisions with respect to Significant Subsidiaries,
the judgment default provision and the limitations contained in clause (iii)
under "--Merger, Consolidation and Sale of Assets" above ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clauses (iii), iv),(v), (vi),(vii) and (viii)
(with
767531.3
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respect only to Significant Subsidiaries) under "--Events of Default" above or
because of the failure of the Company to comply with clause (iii) under
"--Merger, Consolidation and Sale of Assets" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
Satisfaction and Discharge of the Indenture
The Indenture will cease to be of further effect (except as otherwise
expressly provided for in the Indenture) when either (i) all outstanding Notes
have been delivered (other than lost, stolen or destroyed Notes which have been
replaced) to the Trustee for cancellation or (ii) all outstanding Notes have
become due and payable, whether at maturity or as a result of the mailing of a
notice of redemption pursuant to the terms of the Indenture and the Company has
irrevocably deposited with the Trustee funds sufficient to pay at maturity or
upon redemption all outstanding Notes, including interest thereon (other than
lost, stolen, mutilated or destroyed Notes which have been replaced), and, in
either case, the Company has paid all other sums payable under the Indenture.
The Trustee is required to acknowledge satisfaction and discharge of the
Indenture on demand of the Company accompanied by an Officer's Certificate and
an Opinion of Counsel at the cost and expense of the Company.
Transfer and Exchange
Upon any transfer of a Note, the registrar may require a holder, among
other things, to furnish appropriate endorsements and transfer documents, and to
pay any taxes and fees required by law or permitted by the Indenture. The
registrar is not required to transfer or exchange any Notes selected for
redemption nor is the registrar required to transfer or exchange any Notes for a
period of 15 days before a selection of Notes to be redeemed. The registered
holder of a Note may be treated as the owner of it for all purposes.
Concerning the Trustee
IBJ Schroder Bank & Trust Company is the Trustee under the Indenture and
has been appointed by the Company as registrar and paying agent with regard to
the Notes. The Trustee's current address is One State Street, New York, New York
10004.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim a security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest (as defined) it
must eliminate such conflict or resign.
The holders of a majority in aggregate principal amount of the then
outstanding Notes issued under the Indenture will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy
available to the Trustee. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured) the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any of the holders of the Notes issued thereunder unless they
shall have offered to the Trustee security and indemnity satisfactory to it.
767531.3
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Governing Law
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
Certain Definitions
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with") of any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by Agreement or otherwise.
"Asset Sale" means (i) any sale, lease, conveyance or other disposition by
the Company or any Restricted Subsidiary (other than to the Company or a
Restricted Subsidiary and other than directors' qualifying shares) of any assets
(including by way of a sale-and-leaseback) other than in the ordinary course of
business , or (ii) the issuance or sale of Capital Stock (other than
Disqualified Stock) of any Restricted Subsidiary, in the case of each of (i) and
(ii), whether in a single transaction or a series of related transactions, to
any Person (other than to the Company or a Restricted Subsidiary and other than
directors' qualifying shares) for Net Proceeds in excess of $1,000,000;
provided, however, the following transactions shall not be deemed Asset Sales:
(i) the Company or any Restricted Subsidiary may sell
accounts receivable (or participations therein) in connection with any accounts
receivables financing;
(ii) the Company or any Restricted Subsidiary may sell
Capital Stock or Indebtedness or other securities of an Unrestricted Subsidiary;
(iii) the Company and any Restricted Subsidiary may (x)
convey, sell, lease, transfer, assign or otherwise dispose of assets pursuant to
and in accordance with the limitation on mergers, sales or consolidations
provisions in the Indenture and (y) make Restricted Payments permitted by the
Restricted Payments covenant in the Indenture;
(iv) the Company and any Restricted Subsidiary may create
or assume Liens (or permit any foreclosure thereon) securing Indebtedness to the
extent that such Lien does not violate the "--Limitation on Liens" covenant
above; and
(v) the Company and any Restricted Subsidiary may
consummate any sale or series of related sales of assets or properties of the
Company and any Restricted Subsidiary having an aggregate fair market value for
all such sales of less than $1 million in any fiscal year.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the product of the numbers of years (rounded upwards to the nearest month)
from the date of determination to the dates of each successive scheduled
principal payment of such Indebtedness or redemption or similar payment with
respect to such Preferred Stock multiplied by the amount of such payment by (ii)
the sum of all such payments.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
767531.3
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"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) the equity of such Person, including any
Preferred Stock, but excluding debt securities convertible into such equity.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Rating Services or Moody's Investors
Service, Inc.; (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from Standard & Poor's Rating Services or at least P-1 from Moody's
Investors Service, Inc.; (iv) certificates of deposit or bankers' acceptances
(or, with respect to foreign banks, similar instruments) maturing within one
year from the date of acquisition thereof issued by any bank organized under the
laws of the United States of America or any state thereof or the District of
Columbia or any member of the European Economic Community or any U.S. branch of
a foreign bank having at the date of acquisition thereof combined capital and
surplus of not less than $200 million; (v) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications specified
in clause (iv) above; and (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above.
"Company" means Ampex Corporation, a Delaware corporation, unless and until
a successor replaces it in accordance with the Indenture and thereafter means
such successor.
"Consolidated Coverage Ratio" means, with respect to any Person for any
period, the ratio of EBITDA of such Person for such period to the Consolidated
Interest Expense of such Person for such period provided, however, that (A) if
the Company or any Restricted Subsidiary has incurred any Indebtedness since the
beginning of such period and through the date of determination of the
Consolidated Coverage Ratio that remains outstanding or if the transaction
giving rise to the need to calculate Consolidated Coverage Ratio is an
incurrence of Indebtedness or both, the EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving effect on a pro forma basis to
(1) such Indebtedness as if such Indebtedness had been incurred on the first day
of such period (provided that if such Indebtedness is incurred under a revolving
credit facility or similar arrangement or under any predecessor revolving credit
or similar arrangement only that portion of such Indebtedness that constitutes
the one year projected average balance of such Indebtedness (as determined in
good faith by the Board of Directors of the Company) shall be deemed outstanding
for purposes of this calculation) and (2) the discharge of any other
Indebtedness repaid, repurchased defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the first
day of such period, (B) if since the beginning of such period and Indebtedness
of the Company or its Restricted Subsidiaries has been repaid, repurchased,
defeased or otherwise discharged (other than Indebtedness under a revolving
credit or similar arrangement unless such revolving credit Indebtedness has been
permanently repaid and the underlying commitment terminated and not replaced),
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Indebtedness had been repaid, repurchased,
defeased or otherwise discharged on the first day of such period, (C) if since
the beginning of such period the Company or any of its Restricted Subsidiaries
shall have made any Asset Sale, EBITDA for such period shall be reduced by an
amount equal to the EBITDA (if positive) attributable to the assets which are
the subject of such Asset Sale for such period or increased by an amount equal
to the EBITDA (if negative) attributable thereto for such period, Consolidated
Interest Expense for such period (i) reduced by an amount equal to the
Consolidated Interest Expense attributable to any Indebtedness of the Company or
any of its Restricted Subsidiaries repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Sale for such period (or if the
Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest
for such period directly attributable to the Indebtedness of Restricted
Subsidiary to the extent the Company and its continuing Restricted Subsidiaries
are no longer liable for such Indebtedness after such sale) and (ii) increased
by interest income attributable to the assets which are the subject of such
767531.3
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Asset Sale for such period, (D) if since the beginning of such period the
Company or any of its Restricted Subsidiaries (by merger or otherwise) shall
have made an Investment in any Restricted Subsidiary (or any Person which
becomes a Restricted Subsidiary as a result thereof) or an acquisition of assets
occurring in connection with a transaction causing a calculation to be made
hereunder which constitutes all or substantially all of an operating unit of a
business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the incurrence of
any Indebtedness) as if such Investment or acquisition occurred on the first day
of such period, and (E) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary of the Company or was merged with or
into the Company or any other Restricted Subsidiary since the beginning of such
period) shall have made any Asset Sale, Investment or acquisition of assets that
would have required an adjustment pursuant to clause (C) or (D) above if made by
the Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Sale, Investment or acquisition had
occurred on the first day of such period. For purposes of this definition
whenever preform effect is to be given to an acquisition of assets, the amount
of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting officer of the Company. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period.
"Consolidated GAAP Net Income" means, with respect to any period, the net
income (or loss) of the Company and its consolidated Subsidiaries for such
period, determined in accordance with GAAP as from time to time in effect.
"Consolidated Interest Expense" means, with respect to any period, the sum
of (i) the interest expense of the Company and its Restricted Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP,
including, without limitation, (a) amortization of debt discount, (b) the net
cash payments, if any, under interest rate contracts, (c) the interest portion
of any deferred payment obligation, (d) accrued interest, and (e) all
commissions, discounts and other fees and charges owed with respect to letters
of credit, bankers' acceptance financing or similar facilities, plus (i) the
interest component of the Capital Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by the Company during such period, of the
Company and its Restricted Subsidiaries, plus (iii) all cash dividends paid
during such period by the Company and its Restricted Subsidiaries with respect
to any Disqualified Stock, in each case as determined on a consolidated basis in
accordance with GAAP; provided, that Consolidated Interest Expense shall exclude
the amortization of fees and expenses related to the issuance of the Notes.
"Consolidated Net Income" means, with respect to any period, the
Consolidated GAAP Net Income (or loss) of the Company and its Restricted
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP, adjusted to the extent included in calculating such net income (or
loss), by excluding, without duplication, (i) extraordinary gains and losses,
(ii) the portion of net income (or loss) of the Company and its Restricted
Subsidiaries allocable to interests in unconsolidated Persons or Unrestricted
Subsidiaries, except that the Company's equity in the net income of such Person
or Subsidiary shall be included in Consolidated Net Income to the extent of the
amount of dividends or distributions actually paid to the Company or its
Restricted Subsidiaries by such Person or Subsidiary during such period, (iii)
net income (or loss) of any Person combined with the Company or any of its
Restricted Subsidiaries on a "pooling of interests" basis attributable to any
period prior to the date of combination, (iv) net gain or loss in respect of any
sale, transfer or disposition of assets (including without limitation, pursuant
to sale and leaseback transactions) other than in the ordinary course of
business, (v) the net income of any Restricted Subsidiary to the extent that the
declaration of dividends or similar distributions by that Restricted Subsidiary
of that income to the Company is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any Agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to the Restricted Subsidiary or its stockholders (other than pursuant
to the Notes or the Indenture), and (vi) the non-recurring cumulative effect of
a change in accounting principles.
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"Consolidated Total Assets" means, as of any date, the total assets of the
Company and its Restricted Subsidiaries, as shown on the most recently available
consolidated balance sheet of the Company and its Restricted Subsidiaries
prepared in conformity with GAAP.
"Currency Agreement Obligations" means the obligations of any Person under
a foreign exchange contract, currency swap Agreement or other similar Agreement
or arrangement to protect such Person against fluctuations in currency values.
"Default" means any event that is, or after the giving of notice or passage
of time or both would be, an Event of Default.
"Disqualified Stock" means (i) any Preferred Stock of any Restricted
Subsidiary and (ii) any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures or its mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof (other than upon the occurrence of an "Asset Sale" or a change of
control of the Company in circumstances where the holders of the Notes would
have similar rights), in whole or in part, on or prior to the Stated Maturity of
the Notes, including, without limitation, the Noncumulative Redeemable Preferred
Stock.
"Dollars" and "$" means lawful money of the United States of America.
"EBITDA" means, with respect to any Person for any period, the sum of
Consolidated Net Income of such Person for such period plus the following to the
extent deducted in calculating such Consolidated Net Income: (a) provision for
taxes based on the net income or profits of such Person, (b) Consolidated
Interest Expense, (c) consolidated depreciation and amortization, calculated in
accordance with GAAP, (d) any other non-cash charges (excluding any non-cash
items that represent an accrual of or reserve for cash charges reasonably
expected to be disbursed in any subsequent period prior to the Stated Maturity
of the Notes) deducted in computing Consolidated Net Income, less, (e) non-cash
items increasing Consolidated Net Income (excluding any items which represent an
accrual for cash receipts or the reduction of required future cash disbursements
reasonably expected to be received or disbursed in a subsequent period prior to
the Stated Maturity of the Notes).
"Equity Offering" means any public or private sale of Capital Stock (other
than Disqualified Stock) of the Company other than public offerings with respect
to the Company's common stock registered on Form S-8.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Company or its Restricted
Subsidiaries in existence or incurred pursuant to any loan or other Agreement in
effect on the Issue Date plus any premium or interest accrued thereon.
"Foreign Subsidiary" means a Subsidiary of a Person not organized under the
laws of the United States or any political subdivision thereof and the
operations of which are located substantially outside the United States.
"GAAP" means generally accepted accounting principles in the United States
set forth in the Statements of Financial Accounting Standards and the
Interpretations, Accounting Principles Board Opinions and AICPA Accounting
Research Bulletins which are applicable as of December 31, 1997 except as
otherwise specified herein.
"Guarantee" means any obligation, contingent or otherwise, of any Person
guaranteeing Indebtedness of another Person (including, without limitation,
obligations, agreements to purchase assets, securities or services, to
take-or-pay, or to maintain financial statement conditions, or similar
arrangements or agreements entered into for the purpose of assuring the obligee
of such Indebtedness of the payment thereof or to protect such obligee against
loss in respect
767531.3
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thereof, in whole or in part); but excluding (i) endorsements of negotiable
instruments for collection or deposit in the ordinary course of business, and
(ii) contingent obligations in connection with the sale or discount of accounts
receivable and similar paper.
"Indebtedness" means, with respect to any Person, without duplication, (i)
the principal of and the premium (if any) on all indebtedness of such Person for
money borrowed or which is evidenced by a note, bond, debenture or similar
instrument for payment of which such Person is liable, (ii) all obligations of
such Person under any conditional sale, title retention or similar Agreement in
respect of the deferred or unpaid purchase price of property or services
acquired by such Person, (iii) all Capital Lease Obligations of such Person,
(iv) all obligations of such Person in respect of letters of credit or bankers'
acceptance issued or created for the account of such Person, (v) all net
obligations of such Person under Interest Rate Agreement Obligations or Currency
Agreement Obligations of such Person, (vi) all liabilities of others of the kind
described in the preceding clauses (i), (ii) or (iii) secured by any Lien on any
property owned by such Person even though such Person has not assumed or become
liable for the payment of such liabilities; provided, however, the amount of
such Indebtedness for purposes of this definition shall be limited to the lesser
of the amount of Indebtedness secured by such Lien or the value of the property
subject to such Lien, (vii) all Disqualified Stock issued by such Person and all
Preferred Stock issued by a Restricted Subsidiary of such Person, and (viii) to
the extent not otherwise included, any Guarantee by such Person of any other
Person's Indebtedness or other obligations described in clauses (i) through
(vii) above. "Indebtedness" of the Company and the Restricted Subsidiaries shall
not include (i) trade payables incurred in the ordinary course of business, and
(ii) contingent obligations incurred in connection with the sale or discount of
accounts receivable and similar paper in the ordinary course of business. The
principal amount outstanding of any Indebtedness issued with original issue
discount is the accreted value of such Indebtedness and Indebtedness shall not
include any liability for federal, state, local or other taxes.
"Interest Rate Agreement Obligations" means, with respect to any Person,
the Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement but excluding advances to customers and employees in the
ordinary course of business) to, capital contribution (by means of any transfer
of cash or other property to others or any payment for property or services for
the account or use of others) to, or any purchase or acquisition of capital
stock, bonds, notes, debentures or other similar instruments issued by, such
Person and shall include the designation of a Restricted Subsidiary as an
Unrestricted Subsidiary. For purposes of the definition of "Unrestricted
Subsidiary" and the "Limitation on Restricted Payments" covenant described
above, (i) "Investment" shall include the Fair Market Value of the assets (net
of liabilities) of any Restricted Subsidiary of the Company at the time that
such Restricted Subsidiary of the Company is designated an Unrestricted
Subsidiary and shall exclude the Fair Market Value of the assets (net of
liabilities) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary of the Company and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its Fair Market Value at the time of such transfer, in each case as determined
by the Board of Directors in good faith.
"Issue Date" means the date on which the Notes are first issued under the
Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention Agreement, any lease in
the nature thereof, any option or other Agreement to sell or give a security
interest in any asset and any filing of, or Agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
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"Net Available Cash" means, with respect to any Asset Sale by any Person,
the aggregate cash or Cash Equivalent proceeds received by such Person
(including any cash payments received by way of deferred payment pursuant to, or
monetization of, a note or installment receivable or otherwise, but only as and
when received) in connection with such Asset Sale, plus the amount of cash and
Cash Equivalents referred to in the proviso set forth in clause (a) (ii) of the
covenant described under "--Limitation on Asset Sales" above, if any, net of (i)
the amount of any Indebtedness (including Disqualified Stock or Preferred Stock
of a Subsidiary) which is required to be repaid by such Person or its Affiliates
in connection with such Asset Sale, plus (ii) all fees, commissions and other
expenses incurred (including without limitation, the fees and expenses of legal
counsel and investment banking, accounting, underwriting and brokerage fees and
expenses) by such Person in connection with such Asset Sale, (iii) provision for
taxes, including income taxes, attributable to the Asset Sale or attributable to
required prepayments or repayments of Indebtedness with the proceeds of such
Asset Sale, (iv) any amounts reasonably provided by the Company or any
Restricted Subsidiary of the Company as a reserve against any liabilities
associated with such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, (v) any dividends or distributions or other amounts payable to
Persons holding a beneficial interest in the assets sold or to holders of
minority interests in a Restricted Subsidiary or other entity as a result of
such Asset Sale.
"Net Proceeds," with respect to any issuance or sale of Capital Stock,
means the proceeds, in cash, securities or property (with any securities or
property valued at fair market value), of the issuance or sale net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees and expenses incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result of such issuance or sale.
"Noncumulative Redeemable Preferred Stock" means the shares of the
Company's 8% Noncumulative Convertible Preferred Stock and 8% Noncumulative
Redeemable Preferred Stock issued effective as of July 2, 1998, and any
subsequent refinancings thereof, provided, however, that the aggregate
liquidation value of all outstanding securities issued in any such refinancings
shall not exceed the aggregate liquidation value of the Noncumulative Redeemable
Preferred Stock outstanding on July 2, 1998.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Holders" means collectively or individually (i) Edward J.
Bramson and (ii) his "associates" (as defined in Rule 12B-2 under the Exchange
Act, except that a person shall not be an "associate" for purposes of this
Indenture solely because such person comes within the definition of such term in
clause (a) of such Rule) and his Affiliates.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" as applied to the Capital Stock of any Person means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over Capital Stock of any other class of such Person.
"Purchase Money Obligation" means any Indebtedness secured by a Lien on
assets related to the business of the Company or the Restricted Subsidiaries,
and any additions and accessions thereto, which are purchased or constructed by
the Company or any Restricted Subsidiary at any time after the Issue Date;
provided that (i) any security Agreement or conditional sales or other title
retention contract pursuant to which the Lien on such assets is created
(collectively a "Security Agreement") shall be entered into within 180 days
after the purchase or substantial completion of the construction of such assets
and shall at all times be confined solely to the assets so purchased or
acquired, any additions
767531.3
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and accessions thereto and any proceeds therefrom, (ii) at no time shall the
aggregate principal amount of the outstanding Indebtedness secured thereby be
increased, except in connection with the purchase of additions and accessions
thereto and except in respect of fees and other obligations in respect of such
Indebtedness and (iii)(A) the aggregate outstanding principal amount of
Indebtedness secured thereby (determined on a per asset basis in the case of any
additions and accessions) shall not at the time such Security Agreement is
entered into exceed 100% of the purchase price to the Company or any Restricted
Subsidiary of the assets subject thereto or (B) the Indebtedness secured thereby
shall be with recourse solely to the assets so purchased or acquired, any
additions and accessions thereto and any proceeds therefrom.
"Restricted Investment" means an Investment by the Company or a Restricted
Subsidiary in any Subsidiary other than a Restricted Subsidiary.
"Restricted Payment" means (i) any dividend or other distribution declared
or paid on any Capital Stock of the Company (other than dividends or
distributions payable solely in Capital Stock (other than Disqualified Stock) of
the Company or dividends or distributions payable to the Company or any
Restricted Subsidiary and other than pro rata dividends or other distributions
made by a Restricted Subsidiary that is not a Wholly Owned Subsidiary to
minority stockholders (or owners of an equivalent interest in the case of a
Subsidiary that is not a corporation); (ii) any payment to purchase, redeem or
otherwise acquire or retire for value any Capital Stock of the Company; (iii)
any voluntary or optional payment to purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness that is subordinated in right of
payment to the Notes other than a purchase, redemption, defeasance or other
acquisition or retirement for value that is paid for with the proceeds of
Refinancing Indebtedness that is permitted under the covenant described under
"--Certain Covenants --Limitation on Incurrence of Indebtedness"; or (iv) any
Restricted Investment.
"Restricted Subsidiary" means each direct or indirect Subsidiary of the
Company other than an Unrestricted Subsidiary.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X
promulgated pursuant to the Securities Act.
"Senior Indebtedness" in the case of the Notes means Indebtedness that is
not by its terms expressly subordinate or junior in right of payment to any
other Indebtedness of the Company.
"Subordinated Indebtedness" means Indebtedness (including, without
limitation, secured Indebtedness) of the Company which by its express terms is
subordinated or junior in right of payment to the Notes.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding voting power of the Voting Stock of which is owned or controlled,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person, or by such Person and one or more other Subsidiaries thereof, or
(ii) any limited partnership of which such Person or any Subsidiary of such
Person is a general partner, or (iii) any other Person (other than a corporation
or limited partnership) in which such Person, or one or more other Subsidiaries
of such Person, or such Person and one or more other Subsidiaries thereof,
directly or indirectly, has more than 50% of the outstanding partnership or
similar interests or has the power, by contract or otherwise, to direct or cause
the direction of the policies, management and affairs thereof.
"Unrestricted Subsidiary" means Ampex Holdings Corporation and any other
Subsidiary of the Company designated as such pursuant to and in compliance with
the covenant described under "--Limitation on Designations of Unrestricted
Subsidiaries." Any such designation may be revoked by a Board Resolution of the
Company delivered to the Trustee, subject to the provisions of such covenant.
767531.3
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"Voting Stock" of a Person means all classes of Capital Stock of such
Person then outstanding as to which the holders thereof are entitled under
ordinary circumstances (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees of such Person.
"Wholly Owned Subsidiary" means any Subsidiary with respect to which all of
the outstanding Voting Stock (other than directors' qualifying shares) of which
are owned, directly or indirectly, by the Company.
THE EXCHANGE OFFER
Terms of the Exchange Offer
General
In connection with the sale of Old Notes to the initial purchaser pursuant
to the Purchase Agreement, dated July 17, 1998, between the Company and First
Albany, the holders of the Old Notes became entitled to the benefits of the
Registration Rights Agreement described below.
Under the Registration Rights Agreement, the Company became obligated to
(a) file a registration statement in connection with a registered exchange offer
within 60 days after July 20, 1998, the date the Old Notes were issued (the
"Issue Date"), and (b) cause the registration statement relating to such
registered exchange offer to become effective within 150 days after the Issue
Date. The Exchange Offer being made hereby, if consummated within the required
time periods, will satisfy the Company's obligations under the Registration
Rights Agreement. This Prospectus, together with the Letter of Transmittal, is
being sent to all such beneficial holders known to the Company.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all Old
Notes properly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of outstanding Old
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Old Notes pursuant to the Exchange Offer.
Based on an interpretation by the staff of the Commission set forth in the
Morgan Stanley Letter, the Exxon Capital Letter and similar letters, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by any
person who received such Exchange Notes, whether or not such person is the
holder (other than Restricted Holders) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's or other
person's business, neither such holder nor such other person is engaged in or
intends to engage in any distribution of the Exchange Notes and such holders or
other persons have no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes.
If any person were to be participating in the Exchange Offer for the
purposes of participating in a distribution of the Exchange Notes in a manner
not permitted by the Commission's interpretation, such person (a) could not rely
upon the Morgan Stanley Letter, the Exxon Capital Letter or similar letters and
(b) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
Each broker-dealer that received Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an
767531.3
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<PAGE>
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired by such broker-dealer as result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after consummation of the Exchange Offer, it will
make this Prospectus, as it may be amended or supplemented from time to time,
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. See "Use
of Proceeds." The Company has agreed to bear the expenses of the Exchange Offer
pursuant to the Registration Rights Agreement. No underwriter is being used in
connection with the Exchange Offer.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old Notes for the purposes of receiving the Exchange Notes from the Company
and delivering Exchange Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain conditions set forth herein under
"--Conditions" without waiver by the Company, certificates for any such
unaccepted Old Notes will be returned, without expense, to the tendering holder
thereof as promptly as practicable after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes,
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes in connection with the Exchange Offer. See
"--Fees and Expenses."
In the event the Exchange Offer is consummated, the Company will not be
required to register the Old Notes. In such event, holders of Old Notes seeking
liquidity in their investment would have to rely on exemptions to registration
requirements under the securities laws, including the Securities Act. See "Risk
Factors--Consequences of Failure to Exchange."
Expiration Date; Extensions; Amendment
The term "Expiration Date" shall mean the expiration date set forth on the
cover page of this Prospectus, unless the Company, in its sole discretion,
extends the Exchange Offer, in which case the term "Expiration Date" shall mean
the latest date to which the Exchange Offer is extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will issue a
public announcement thereof, each prior to 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Such
announcement may state that the Company is extending the Exchange Offer for a
specified period of time.
The Company reserves the right (a) to delay accepting any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and not accept Old
Notes not previously accepted if any of the conditions set forth herein under
"-- Conditions" shall have occurred and shall not have been waived by the
Company (if permitted to be waived by the Company), by giving oral or written
notice of such delay, extension or termination to the Exchange Agent, or (b) to
amend the terms of the Exchange Offer in any manner deemed by it to be
advantageous to the holders of the Old Notes. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform the
767531.3
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<PAGE>
holders of the Old Notes of such amendment and the Company may extend the
Exchange Offer for a period of up to ten business days, depending upon the
significance of the amendment and the manner of disclosure to holders of the Old
Notes, if the Exchange Offer would otherwise expire during such extension
period.
Without limiting the manner in which the Company may choose to make a
public announcement of any extension, amendment or termination of the Exchange
Offer, the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
Interest on the Exchange Notes
The Exchange Notes will bear interest from September 15, 1998, payable
semiannually on March 15 and September 15 of each year, commencing March 15,
1999, at the rate of 12% per annum. Holders of Old Notes whose Old Notes are
accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on the Old Notes accrued up until the date of the
issuance of the Exchange Notes.
Procedures for Tendering
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by instruction 3 of the Letter of Transmittal, and mail
or otherwise delivers such Letter of Transmittal or such facsimile, together
with the Old Notes and any other required documents. To be validly tendered,
such documents must reach the Exchange Agent on or before 5:00 p.m., New York
City time, on the Expiration Date.
Tender by a holder of Old Notes will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth below. Holders may also request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect such tender for such
holders.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery to the Exchange Agent on or before 5:00 p.m.
New York City time, on the Expiration Date. No Letter of Transmittal or Old
Notes should be sent to the Company.
Only a holder of Old Notes may tender such Old Notes in Exchange Offer. The
term "holder" with respect to the Exchange Offer means any person in whose name
Old Notes are registered on the books of the Company or any other person who has
obtained a properly completed bond power from the registered holder.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such registered holder must, prior to completing and
executing the letter of Transmittal and delivering his Old Notes, either make
appropriate arrangement to register ownership of the Old Notes in such holder's
own name or obtain a properly completed bond power from the registered holder.
The transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States ("Eligible Institution") unless the Old Notes tendered pursuant
thereto are tendered (a) by a registered holder who has not completed the box
767531.3
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entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the Letter of Transmittal or (b) for the account of an Eligible Institution. In
the event that signature on a Letter of Transmittal or a notice of withdrawal,
as the case may be, are required to be guaranteed, such guarantee must be by an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by appropriate bond powers and a proxy which authorized
such person to tender the Old Notes on behalf of the registered holder, in each
case signed as the name of the registered holder appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of a
corporation or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority so to act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Old Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes the Company's acceptance of which would, in
the opinion of counsel for the Company, be unlawful. The Company also reserves
the right to waive any irregularities or conditions of tender as to particular
Old Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification. Tenders of Old Notes will
not be deemed to have been made until such irregularities have been cured or
waived and will be returned without cost by the Exchange Agent to the tendering
holders of Old Notes, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date or, as set forth under "--Conditions," to terminate the
Exchange Offer in accordance with the terms of the Registration Rights Agreement
and (b) to the extent permitted by applicable law, purchase Old Notes in the
open market, in privately negotiated transactions or otherwise. The terms of any
such purchases or offers will differ from the terms of the Exchange Offer. By
tendering, each holder will represent to the Company that, among other things,
(a) the Exchange Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of such holder of other person, (b)
neither such holder nor such other person is engaged in or intends to engage in
a distribution of the Exchange Notes (c) neither such holder or other person has
any arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, and (d) such holder or other person is not
an "affiliate," as defined under Rule 405 of the Securities Act, of the Company
or, if such holder or other person is such an affiliate, will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
The Old Notes were issued on July 20, 1998 (the "Issue Date") and there is
no public market for them at present. To the extent Old Notes are tendered and
accepted in the Exchange Offer, the principal amount of outstanding Old Notes
will decrease with a resulting decrease in the liquidity in the market therefor.
Following the consummation of the Exchange Offer, holders of Old Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for the Old Notes could be adversely affected.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and (a) whose Old Notes are not
immediately available or (b) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if: (i) the tender is made through an
Eligible Institution; (ii) prior to the Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed and duly executed
767531.3
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<PAGE>
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery
setting forth the name and address of the holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby, and guaranteeing
that, within three business days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s) representing
the Old Notes to be tendered in proper form for transfer and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and (iii) such properly completed and
executed Letter of Transmittal (or facsimile thereof) together with the
certificate(s) representing all tendered Old Notes in proper form for transfer
and all other documents required by the Letter of Transmittal are received by
the Exchange Agent within three business days after the Expiration Date.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date,
unless previously accept for exchange. To withdraw a tender of Old Notes in the
Exchange Offer, a written or facsimile transmission notice of withdrawal must be
received by the Exchange Agent at its address set forth herein prior to 5:00
p.m., New York City time, on the Expiration Date. Any such notice of withdrawal
must (a) specify the name of the person having deposited the Old Notes to be
withdrawn (the "Depositor"), (b) identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes), (c) be signed by the Depositor in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Old Notes register
the transfer of such Old Notes into the name of the Depositor withdrawing the
tender and (d) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such withdrawal
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Old Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under "--Procedure
for Tendering" at any time to the Expiration Date.
Conditions
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes not theretofore accepted for exchange, and may terminate or amend the
Exchange Offer as provided herein before the acceptance of such Old Notes, if
the Company or the holders of at least a majority in principal amount of Old
Notes reasonably determine in good faith that any of the following conditions
exist: (a) the Exchange Notes to be received by such holders of Old Notes in the
Exchange Offer, upon receipt, will not be tradable by each such holder (other
than a holder which is an affiliate of the Company at any time on or prior to
the consummation of the Exchange Offer) without restriction under the Securities
Act and the Exchange Act and without material restrictions under the blue sky or
securities laws of substantially all of the states of the United States, (b) the
interests of the holders of the Old Notes, taken as a whole, would be materially
adversely affected by the consummation of the Exchange Offer or (c) after
conferring with counsel, the Commission is unlikely to permit the making of the
Exchange Offer prior to _________________.
Pursuant to the Registration Rights Agreement, if an Exchange Offer shall
not be consummated within 180 days after the Issue Date, the Company will be
obligated to cause to be filed with the Commission a shelf registration
statement with respect to the Old Notes (the "Shelf Registration Statement") as
promptly as practicable after the Exchange Offer Termination Date and thereafter
use its best efforts to have the Shelf Registration Statement declared
effective.
767531.3
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<PAGE>
If any of the conditions described above exist, the Company will refuse to
accept any Old Notes and will return all tendered Old Notes to exchanging
holders of the Old Notes.
Exchange Agent
IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal and
deliveries of completed Letters of Transmittal with tendered Old Notes should be
directed to the Exchange Agent addressed as follows:
Facsimile Transmission:
(212) 858-2611
Confirm by Telephone:
(212) 858-2657
<TABLE>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
<S> <C> <C>
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station Securities Processing Window SC-1
New York, New York 10274-0084 New York, New York 10004
Attention: Reorganization Operations Department.
</TABLE>
The Company will indemnify the Exchange Agent and its agents for any loss,
liability or expense incurred by them, including reasonable costs and expenses
of their defense, except for any loss, liability or expense caused by gross
negligence or bad faith.
Fees and Expenses
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates and agents in
person, by telephone or facsimile.
The Company will not make any payments to brokers, dealers, or other
persons soliciting acceptance of the Exchange Offer. The Company, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, Letters of Transmittal
and related documents to the beneficial owners of the Old Notes, and in handling
or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees and expenses, will be paid by the Company, and are estimated in the
aggregate to be approximately $55,000.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes (or Old Notes for principal amounts not tendered or
accepted for exchange) are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of
767531.3
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<PAGE>
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
Accounting Treatment
The Company will not recognize any gain or loss for accounting purposes
upon the consummation of the Exchange Offer. The expense of the Exchange Offer
will be amortized by the Company over the term of the Exchange Notes under GAAP.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the principal federal income tax
consequences of the acquisition, ownership and disposition of Exchange Notes
that are held as capital assets and received in exchange for tendered Old Notes
purchased at original issuance, but does not purport to be a comprehensive
description of all the tax considerations that may be relevant to an investment
in Exchange Notes. This summary deals only with (i) citizens or residents of the
United States (ii) corporations, partnerships and other business entities
created or organized under the laws of the United States, (iii) estates the
income of which is subject to U.S. federal income taxation regardless of its
source and (iv) trusts with respect to which a court within the United States is
able to exercise primary supervision over its administration and one or more
U.S. fiduciaries have the authority to control all substantial decisions (each,
a "Holder"). This summary does not address investors that may be subject to
special rules, such as banks, tax-exempt entities, insurance companies, dealers
in securities, persons whose functional currency is not the U.S. dollar or
persons that will hold Exchange Notes as part of a "straddle" or "conversion
transaction" for federal income tax purposes or otherwise as part of an
integrated transaction.
This summary is based on laws, regulations, rulings and decisions in effect
as of the date of this Prospectus, all of which are subject to change, with
possible retroactive effect. No ruling from the Internal Revenue Service (the
"IRS") will be sought with respect to the Exchange Notes, and the IRS could take
a contrary view with respect to the matters described below. HOLDERS SHOULD
CONSULT THEIR TAX ADVISORS AS TO THE FEDERAL, STATE, LOCAL AND OTHER TAX
CONSEQUENCES TO THEM OF THEIR ACQUISITION, OWNERSHIP AND DISPOSITION OF EXCHANGE
NOTES.
Consequences of the Exchange
The exchange of Exchange Notes for Old Notes pursuant to the Exchange Offer
will not constitute a taxable event for federal income tax purposes.
Accordingly, no gain or loss will be recognized by a Holder upon receipt of an
Exchange Note; the holding period of an Exchange Note will include the holding
period of the Old Note exchanged therefor; and the adjusted tax basis of an
Exchange Note will be the same as the adjusted tax basis of the Old Note
exchanged therefor.
Stated Interest
Stated interest on the Exchange Note will be taxable to a Holder as ordinary
interest income as the interest accrues or is paid (in accordance with the
Holder's method of tax accounting).
Sale, Exchange and Retirement of Notes
Upon the sale, exchange or retirement of an Exchange Note, a Holder will
recognize gain or loss equal to the difference between the amount received
(other than amounts in respect of accrued and unpaid interest) and the adjusted
tax basis for the Exchange Note. A Holder's tax basis in an Exchange Note will,
in general, be such Holder's cost for the Old Note exchanged therefor. Except
with respect to a holder who purchased Old Notes at a market discount (i.e.,
where the Holder's original basis for an Old Note is less than its stated
redemption price at maturity), any such gain or loss will be capital gain or
loss for a Holder that holds the Exchange Notes as a capital asset. In the case
of a
767531.3
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<PAGE>
noncorporate Holder, the maximum marginal U.S. federal income tax rate
applicable to such gain will be lower than the maximum marginal U.S. federal
income tax rate applicable to ordinary income if such Holder's holding period
for such Exchange Notes exceeds one year and will be further reduced if such
Notes were held for more than 18 months. Gain attributable to earned market
discount would be treated as ordinary income.
Backup Withholding and Information Reporting
Information reporting requirements apply to certain payments of principal
of and interest on (and the amount of OID, if any, accrued on) a debt
obligation, and to proceeds of certain sales of a debt obligation before
maturity, paid to certain nonexempt persons. In addition, a backup withholding
tax also may apply with respect to such amounts if such a person fails to
provide a correct taxpayer identification number and other information. The
backup withholding tax rate is 31%. Any amounts withheld under the backup
withholding rules from a payment to a Holder will be allowed as a refund or a
credit against such Holder's U.S. federal income tax.
State, Local, and Foreign Taxes
Holders should consult their tax advisors with respect to state, local and
foreign tax considerations relevant to an investment in Exchange Notes.
PLAN OF DISTRIBUTION
A broker-dealer that is the holder of Old Notes that were acquired for the
account of such broker-dealer as a result of market-making or other trading
activities (other than Old Notes acquired directly from the Company or any
affiliate for the Company) may exchange such Old Notes for Exchange Notes
pursuant to the Exchange Offer; provided, that each broker-dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with resales of Exchange Notes received in exchange for
Old Notes where such Old Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that for a period
of 90 days after consummation of the Exchange Offer, it will make this
Prospectus, as it may be amended or supplemented from time to time, available to
any broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers or any other holder of Exchange Notes. Exchange Notes received
by broker-dealers for their own account pursuant to the Exchange Offer may be
sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the
Exchange Notes or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made directly to purchasers
or to or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For a period of 90 days after consummation of the Exchange Offer, the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer and to the Company's performance of, or
compliance with, the Registration Rights Agreement (other than commissions
767531.3
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<PAGE>
or concessions of any brokers or dealers) and will indemnify the holders of the
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Offer will be passed
upon for the Company by Battle Fowler LLP (a limited liability partnership which
includes professional corporations), New York, New York, who may rely, as to
questions of California law and certain other matters, upon an opinion of
General Counsel to the Company. Battle Fowler LLP regularly provides legal
services to the Company and its affiliates. David D. Griffin, who is of counsel
to Battle Fowler LLP, owns shares of Common Stock of the Company.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996 and the
consolidated statements of operations, stockholders' deficit and cash flows for
each of the three years in the period ended December 31, 1997, and related
financial statement schedule, included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997, have been audited by
PriceWaterhouseCoopers LLP, independent accountants, as set forth in their
report included in such Annual Report, and are incorporated herein by reference
in reliance upon such report, given upon the authority of such firm as experts
in accounting and auditing.
The consolidated financial statements of MicroNet Technology, Inc. at of
June 30, 1998, December 31, 1997, and December 19, 1996 and for the periods from
December 20, 1996 to December 31, 1997, January 1, 1996 to December 19, 1996 and
for the year ended December 31, 1995, which are included in the Current Report
of Ampex Corporation on Form 8-K/A filed October 16, 1998, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
(which each contain an explanatory paragraph describing conditions that raise
substantial doubt about MicroNet's ability to continue as a going concern as
described in Note 1 to such consolidated financial statements) included therein
and incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
767531.3
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<PAGE>
<TABLE>
<S> <C>
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained or incorporated by reference in this
Prospectus. If given or made, such information or representation must not be
relied upon as having been authorized by the Company. This Prospectus does not AMPEX CORPORATION
constitute an offer to sell, or a solicitation of an offer to buy, any Notes in
any jurisdiction. Neither the delivery of this Prospectus nor any sale made 12% Senior Notes
hereunder shall, under any circumstances, create an implication that there has due 2003,
been no change in the affairs of the Company since the date hereof. Series B
--------------
---------------
TABLE OF CONTENTS
AVAILABLE INFORMATION...........................................-3-
INFORMATION INCORPORATED BY REFERENCE...........................-3-
FORWARD-LOOKING STATEMENTS......................................-4-
SUMMARY OF THE PROSPECTUS.......................................-5- PROSPECTUS
RISK FACTORS...................................................-10-
__________, 1998
USE OF PROCEEDS................................................-17-
RATIO OF EARNINGS TO FIXED CHARGES.............................-17- _________________
DESCRIPTION OF NOTES...........................................-18-
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS.................-42-
PLAN OF DISTRIBUTION...........................................-43-
LEGAL MATTERS..................................................-44-
EXPERTS........................................................-44-
--------------
</TABLE>
767531.3
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The Registrant is a Delaware corporation. Reference is made to Section 145
of the Delaware General Corporation Law (the "DGCL"), which provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such officer,
director, employee or agent acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests and, for
criminal proceedings, had no reasonable cause to believe that his conduct was
unlawful. A Delaware corporation may indemnify officers and directors in an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses that
such officer or director actually and reasonably incurred.
Reference is also made to Section 102(b)(7) of the DGCL, which enables a
corporation in its certificate of incorporation to eliminate or limit the
personal liability of a director for monetary damages for violations of the
director's fiduciary duty, except (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction from which a director derived an
improper personal benefit.
Article VIII of the Registrant's By-laws provides as follows:
SECTION 1. Right to Indemnification. The Corporation shall indemnify and
hold harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is made or is
threatened to be made a party or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
(including attorneys' fees) reasonably incurred by such person. The Corporation
shall be required to indemnify a person in connection with a proceeding (or part
thereof) initiated by such person only if the proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
SECTION 2. Prepayment of Expenses. The Corporation shall pay the expenses
(including attorneys' fees) incurred in defending any proceeding in advance of
its final disposition, provided, however, that the payment of expenses incurred
by a director or officer in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking by the director or officer to
repay all amounts advanced if it should be ultimately determined that the
director or officer is not entitled to be indemnified under this Article or
otherwise.
SECTION 3. Claims. If a claim for indemnification or payment of expenses
under this Article is not paid in full within sixty days after a written claim
therefor has been received by the Corporation, the claimant may file suit to
recover the unpaid amount of such claim, and if successful in whole or in part,
shall be entitled to be paid
767531.3
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<PAGE>
the expense of prosecuting such claim. In any such action the Corporation shall
have the burden of proving that the claimant was not entitled to the requested
indemnification or payment of expenses under applicable law.
SECTION 4. Non-Exclusivity of Rights. The rights conferred on any person by
this Article VIII shall not be exclusive of any other rights which such person
may have or hereafter acquire under any statute, provision of the Restated
Certificate of Incorporation, these By-Laws, agreement, vote of stockholders or
disinterested directors or otherwise.
SECTION 5. Other Indemnification. The Corporation's obligation, if any, to
indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or nonprofit entity shall be reduced by any amount such person
may collect as indemnification from such other corporation, partnership, joint
venture, trust, enterprise or nonprofit enterprise.
SECTION 6. Amendment or Repeal. Any repeal or modification of the foregoing
provisions of this Article VIII shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
ARTICLE TEN of the Registrant's Certificate of Incorporation provides as
follows:
"A director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent such exemption from
liability or limitation thereof is not permitted under the GCL, so the
same exists or may hereafter be amended.
This ARTICLE TEN may not be amended or modified to increase the
liability of the Corporation's directors, or repealed, except upon the
affirmative vote of the holders of 80% or more in voting power of the
outstanding Common Shares. No such amendment, modification, or repeal
shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such
amendment, modification, or repeal."
The Registrant has entered into agreements to indemnify its directors in
consideration of their agreement to serve as directors of the Registrant and
certain other corporations requested by the Registrant. These agreements
provide, among other things, that the Registrant will indemnify and advance
certain expenses, including attorneys' fees, to such directors to the fullest
extent permitted by applicable law, as such law may be amended from time to
time, and by the Registrant's Certificate of Incorporation, By-Laws and
resolutions.
The Company presently maintains a "Directors & Officers Liability and
Corporate Reimbursement" insurance policy with a $2,000,000 aggregate limit of
liability in each policy year. The policy provides coverage to past, present and
future directors and officers of the Company and its subsidiaries for losses
resulting from claims for which any such officer or director was not indemnified
by the Company. The policy also provides for reimbursement to the Company and
its subsidiaries for amounts paid to indemnify officers and directors for loss
resulting from claims against such officers and directors. The policy is subject
to certain exclusions, such as claims against officers and directors for
dishonest, fraudulent or criminal acts or omissions, willful violations of law,
libel and slander, bodily injury and property damage, pollution, etc.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Common Stock being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled
767531.3
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<PAGE>
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
767531.3
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<PAGE>
Item 21. Exhibits and Financial Statement Schedules
(a) The Exhibits to this Registration Statement are listed in the
Exhibit Index which appears elsewhere herein and is incorporated herein by
reference.
(b) Financial Statement Schedules are not being filed herewith
because the Schedules are either inapplicable or the required information is
represented in the consolidated financial statements or the notes thereto.
Item 22. Undertakings
(a) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions described above in Item 14, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) For purposes of determining any liability under the Securities Act,
each filing of the Registrant's annual report pursuant to section 13(a) or 15(d)
of the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) 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 end of
the estimated maximum offering range, if applicable, may be reflected in the
form of prospectus filed with the Commission pursuant to Rule
767531.3
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<PAGE>
424(b) of the Securities Act if, in the aggregate, the changes in volume and
price represent no more than a 20% 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 (c)(1)(i) and (c)(1)(ii) above do not apply
if the registration statement is on Form S-3, Form S-8 or Form F-3, and 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 Section 15(d) of the
Exchange Act that are incorporated by reference in 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.
(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.
767531.3
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York on October 30, 1998.
AMPEX CORPORATION
By: /s/Craig L. McKibben
---------------------------
Craig L. McKibben
Vice President, Chief Financial Officer
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities indicated and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/Edward J. Bramson Chairman, President, Chief Executive October 30, 1998
- -------------------------
Edward J. Bramson Officer and Director
(Principal Executive Officer)
/s/Craig L. McKibben Vice President, Director, Chief October 30, 1998
- -------------------------
Craig L. McKibben Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
/s/Douglas T. McClure, Jr.* Director October 30, 1998
- -------------------------
Douglas T. McClure, Jr.
/s/Peter Slusser* Director October 30, 1998
Peter Slusser
/s/William A. Stoltzfus, Jr.* Director October 30, 1998
- -------------------------
William A. Stoltzfus, Jr.
*By:/s/Craig L. McKibben
Craig L. McKibben
Attorney-in-Fact
pursuant to power of attorney granted in
the Registration Statement as originally filed.
</TABLE>
767531.3
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<PAGE>
INDEX TO EXHIBITS
Exhibits
- -----------------
<TABLE>
<S> <C>
3.1 Restated Certificate of Incorporation of the Company dated June 1, 1993
(filed as Exhibit 4.01 to the Company's Form 10-Q for the quarter ended
March 31, 1993 and incorporated herein by reference); Certificate of
Amendment of Restated Certificate of Incorporation of the Company filed
with the Secretary of State of Delaware on April 22, 1994 (filed as Exhibit
3.2 to the Company's Form 8-K filed on May 2, 1994 (the "May 1994 8-K")
and incorporated herein by reference); and Certificate of Amendment of
Restated Certificate of Incorporation of the Company filed with the
Secretary of State of Delaware on April 20, 1995 (filed as Exhibit 4.1 to the
Company's Form 10-Q for the quarter ended March 31, 1995 (the "First
Quarter 1995 10-Q") and incorporated herein by reference).
3.2 Certificate of Ownership and Merger of Ampex Video Systems Corporation
and Ampex Recording Systems Corporation into Ampex Systems
Corporation (filed as Exhibit 3.2 to the Company's Form 10-Q for the
quarter ended March 31, 1994 (the "First Quarter 1994 10-Q") and
incorporated herein by reference).
3.3 Certificate of Ownership and Merger of Ampex Systems Corporation into
the Company (filed as Exhibit 3.1 to the May 1994 8-K and incorporated
herein by reference).
3.4 Certificate of Designations, Preferences and Rights of the Company's 8%
Noncumulative Preferred Stock (filed as Exhibit 3.1 to the Company's Form
8-K filed on February 24, 1995 (the "February 1995 8-K") and incorporated
herein by reference).
3.5 By-Laws of the Company, as amended through April 20, 1995 (filed as
Exhibit 4.2 to the First Quarter 1995 10-Q and incorporated herein by
reference).
4.6 Indenture, dated as of January 28, 1998, between the Company and IBJ
Schroder Bank & Trust Company, as trustee, relating to the Registrant's
12% Senior Notes due 2003, including forms of 12% Senior Notes (filed as
Exhibit 4.1 to the February 1998 8-K and incorporated herein by reference)
4.7 Purchase Agreement, dated July 17, 1998, between the Registrant and First
Albany Corporation, relating to the Registrant's 12% Senior Notes due 2003
(filed as Exhibit 1.1 to the July 30, 1998 8-K and incorporated herein by
reference)
4.8 Exchange and Registration Rights Agreement, dated as of July 20, 1998,
between the Registrant and First Albany Corporation, relating to the
Registrant's 12% Senior Notes due 2003 (filed as Exhibit 4.2 to the July 30,
1998 8-K and incorporated herein by reference)
4.9 First Amendment to Indenture, dated as of July 2, 1998, between the
Registrant and IBJ Schroder Bank & Trust Company, as trustee (filed as
Exhibit 4.1 to Registrant's Form 8-K dated July 30, 1998 and incorporated
herein by reference)
4.10** Form of Letter of Transmittal, relating to the Registrant's 12% Senior Notes
due 2003.
</TABLE>
767531.3
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<PAGE>
5.1** Form of Opinion of Battle Fowler LLP as to legality of securities
10.1** Form of Exchange Agency Agreement between the Registrant and IBJ
Schroder Bank & Trust Company
12.1** Statement regarding computation of ratio of earnings to fixed charges
23.1* Consent of PriceWaterhouseCoopers LLP, Independent Accountants
23.2** Consent of Battle Fowler LLP (included in Exhibit 5.1 hereto)
23.3* Consent of Ernst & Young LLP, Independent Auditors
24.1 Power of Attorney (included in the signature pages of this
Registration Statement)
25.1 Statement of Eligibility and Qualification on Form T-1 of IBJ Schroder
Bank & Trust Company (filed as Exhibit 25.1 to Registrant's
Registration
Statement on Form S-4 (No. 333-48469) on March 20, 1998 and
incorporated herein by reference).
* Filed herewith
** Filed with Registrant's Registration Statement on Form S-4 (No. 333-63921)
on September 21, 1998 and incorporated herein by reference.
767531.3
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<PAGE>
EXHIBIT 23.1
333 Market Street
San Francisco, California 94105-2119
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Ampex Corporation on Form S-4 (file no. 333-63921) of our reports, dated
February 20, 1998, on our audits of the consolidated financial statements and
financial statement schedule of Ampex Corporation, which report appears in the
Annual Report on Form 10-K filed by Ampex Corporation for its fiscal year ended
December 31, 1997. We also consent to the reference to our firm under the
caption "Experts."
/s/ PricewaterhouseCoopers LLP
San Francisco, California
October 30, 1998
767531.3
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<PAGE>
Exhibit 23.3
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statement (Form S-4) (File No. 333-63921) and related
Prospectus of Ampex Corporation for the registration of $14 million of its 12%
Senior Notes due 2003 and to the incorporation by reference therein of our
reports dated July 14, 1998 and August 24, 1998, with respect to the
consolidated financial statements of MicroNet Technology, Inc. included in Ampex
Corporation's Current Report on Form 8- K/A filed with the Securities and
Exchange Commission on October 16, 1998.
/s/ Ernst & Young LLP
October 27, 1998
Orange County, California
767531.3
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