<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 17, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PRICE/COSTCO, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 999 Lake Drive 33-0572969
(State of incorporation) Issaquah, Washington 98027 (I.R.S. Employer
(206) 313-8100 Identification Number)
</TABLE>
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
DONALD E. BURDICK
Vice President
Price/Costco, Inc.
999 Lake Drive
Issaquah, Washington 98027
(206) 313-8100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
Copies to:
<TABLE>
<S> <C>
DAVID R. WILSON NICK P. SAGGESE
Foster Pepper & Shefelman Skadden, Arps, Slate, Meagher & Flom
1111 Third Avenue, Suite 3400 300 South Grand Avenue, Suite 3400
Seattle, Washington 98101 Los Angeles, California 90071
</TABLE>
------------------------
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO TO BE PRICE PER OFFERING REGISTRATION
BE REGISTERED REGISTERED UNIT PRICE FEE
- --------------------------------------------------------------------------------------------------
% Senior Notes Due 2005..... $300,000,000 100% $300,000,000 $103,448
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 17, 1995
PROSPECTUS
MAY , 1995
$300,000,000
[PRICE/COSTCO LOGO]
% SENIOR NOTES DUE 2005
Interest on the Notes is payable June 15 and December 15 of each year,
commencing December 15, 1995. The Notes are not redeemable at any time prior to
maturity. The Notes are unsecured obligations of the Company and will rank
equally with all unsecured and unsubordinated indebtedness of the Company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Per Note................................. % % %
Total.................................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting estimated expenses of $300,000 payable by the Company.
The Notes are offered by the Underwriters, subject to prior sale, when, as
and if delivered to and accepted by them and subject to various prior
conditions, including the right to reject any order in whole or in part. It is
expected that delivery of the Notes will be made in New York, New York on or
about June , 1995.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES INC.
BA SECURITIES, INC.
<PAGE> 3
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE NOTES BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 3
The Company........................... 4
The Offering.......................... 4
Selected Financial and Operating
Data................................ 5
Recent Developments................... 7
<CAPTION>
PAGE
----
<S> <C>
Use of Proceeds....................... 7
Capitalization........................ 7
Description of the Notes.............. 8
Legal Matters......................... 12
Experts............................... 12
Underwriting.......................... 13
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
AVAILABLE INFORMATION
Price/Costco, Inc. (the "Company" or "PriceCostco") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and in accordance therewith files reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 and
at the Commission's regional offices at 7 World Trade Center, 13th Floor, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can also be
obtained at prescribed rates from the Public Reference Section of the Commission
at its principal office at Judiciary Plaza, 450 Fifth Street N.W., Washington,
D.C. 20549. This Prospectus does not contain all information set forth in the
Registration Statement and the exhibits thereto which the Company has filed with
the Commission under the Securities Act of 1933, as amended (the "Securities
Act"), and to which reference is hereby made.
2
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended August
28, 1994, the Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended November 20, 1994 and February 12, 1995, and the Company's Current Report
on Form 8-K dated December 21, 1994, filed by the Company with the Commission,
are hereby incorporated in this Prospectus by reference.
All reports and other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to termination of the offering of the Notes hereunder shall
be deemed to be incorporated by reference herein and to be a part hereof from
the date of the filing of such reports and documents.
The Company hereby undertakes to provide without charge to each person to
whom a Prospectus is delivered, upon written or oral request of such person, a
copy of the Indenture (as hereinafter defined) or any document incorporated
herein by reference (other than exhibits to such documents). Requests should be
directed to Donald E. Burdick, Vice President, Price/Costco, Inc., 999 Lake
Drive, Issaquah, Washington 98027, telephone number (206) 313-8100.
------------------------
The Company will furnish each holder of the Notes annual reports containing
audited financial statements, quarterly reports containing unaudited financial
information and such other reports as may be required by applicable law.
3
<PAGE> 5
THE COMPANY
PriceCostco operates, principally through subsidiaries, a chain of cash and
carry membership warehouses under the names "Price Club" and "Costco Wholesale".
The Company's business is based on the concept that offering members very low
prices on a limited selection of nationally branded and selected private label
products in a wide range of merchandise categories will produce rapid inventory
turnover and high sales volumes. This rapid inventory turnover, when combined
with operating efficiencies achieved by volume purchasing, efficient
distribution and reduced handling of merchandise in no-frills, self-service
warehouse facilities, enables the Company to operate profitably at significantly
lower gross margins than traditional wholesalers, discount retailers and
supermarkets.
The Company buys virtually all of its merchandise directly from
manufacturers for shipment either directly to the Company's selling warehouses
or to a consolidation point where various shipments are combined so as to
minimize freight and handling costs. As a result, the Company eliminates many of
the costs associated with multiple step distribution channels, which include
purchasing from distributors as opposed to manufacturers, use of central
receiving, storing and distributing warehouses and storage of merchandise in
locations off the sales floor. By providing this more cost effective means of
distributing goods, the Company meets the needs of business customers who
otherwise would pay a premium for small purchases and for the distribution
services of traditional wholesalers, and who cannot otherwise obtain the full
range of their product requirements from any single source. In addition, these
business members will often combine personal shopping with their business
purchases. The Company's merchandise selection is designed to appeal to both the
business and consumer requirements of its members by offering a wide range of
nationally branded and selected private label products, often in case, carton or
multiple-pack quantities, at low prices.
As of May 7, 1995, the Company operated 233 warehouses located in 21 states
(187 locations), seven Canadian provinces (44 locations), and the United Kingdom
(two locations, through a 60% owned subsidiary). In addition, the Company
operated 13 warehouses in Mexico through a joint venture in which the Company
has a 50% interest. A Price Club operated by Shinsegae Department Stores opened
in October 1994 in Seoul, Korea under a license agreement.
On December 21, 1994, the Company consummated a transaction in which Price
Enterprises, Inc. ("Price Enterprises"), a newly formed Delaware company, was
spun off from the Company and became a separate, publicly-traded company. The
business and assets of Price Enterprises are comprised of PriceCostco's former
non-club commercial real estate operations, together with certain other assets.
The Company is incorporated in the State of Delaware. The Company's offices
are located at 999 Lake Drive, Issaquah, Washington 98027, telephone (206)
313-8100.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................. $300,000,000 principal amount of % Senior Notes due
June 15, 2005 (the "Notes"), with interest payable
semiannually on June 15 and December 15, commencing
December 15, 1995.
Redemption......................... The Notes will not be redeemable prior to maturity.
Ranking............................ The Notes will rank senior in priority to all
subordinated indebtedness of the Company and will be
pari passu with other senior unsecured indebtedness of
the Company, but will be effectively subordinated to
indebtedness of its subsidiaries. At May 7, 1995, the
Company's subsidiaries had approximately $1.2 billion of
debt outstanding, including guaranties of indebtedness
of the Company. The Indenture contains limitations on
the Company's and certain subsidiaries' ability to
create liens securing indebtedness and to enter into
certain sale-leaseback transactions.
Use of Proceeds.................... The net proceeds from the sale of the Notes will be used
to repay existing indebtedness incurred under the
Company's $500.0 million commercial paper program.
</TABLE>
4
<PAGE> 6
SELECTED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AND OPERATING DATA)
The selected consolidated financial information of the Company presented in
the table below for each of the five fiscal years ended August 28, 1994 and the
balance sheet data as of the end of each year has been derived from audited
consolidated financial statements included in the documents incorporated by
reference in this Prospectus. The selected consolidated financial information of
the Company presented in the table below for the 24 weeks ended February 13,
1994 and February 12, 1995 is unaudited; however, in the opinion of management,
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the results for such periods have been included. The
results of operations for the 24 weeks ended February 12, 1995 may not be
indicative of results of operations to be expected for the full year. The table
should be read in conjunction with the Consolidated Financial Statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended August 28, 1994 and the Quarterly Reports on Form 10-Q for the fiscal
quarters ended November 20, 1994 and February 12, 1995 incorporated by reference
herein. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
24 WEEKS ENDED
----------------------------
FISCAL YEARS(1) FEBRUARY
--------------------------------------------------------------------- 13, FEBRUARY 12,
1990 1991 1992 1993 1994 1994 1995
------------ ------------ ----------- ----------- ----------- ---------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data
Net sales............... $9,346,099 $11,813,509 $13,820,380 $15,154,685 $16,160,911 $7,619,214 $ 8,173,878
Gross profit(2)......... 827,148 1,057,686 1,254,917 1,403,532 1,498,020 706,870 774,640
Membership fees and
other................. 185,144 228,742 276,998 309,129 319,732 159,575 163,367
Operating expenses(3)... 737,137 952,259 1,156,493 1,347,832 1,457,613 674,883 719,051
Operating income........ 275,155 334,169 375,422 364,829 360,139 191,562 218,956
Other income
(expense)(4).......... 470 7,872 (6,567) (28,366) (36,584) (17,383) (26,242)
Provision for merger and
restructuring
expenses(5)........... -- -- -- -- (120,000) (120,000) --
Income from continuing
operations............ $ 167,726 $ 207,293 $ 223,022 $ 202,843 $ 110,898 $ 22,771 $ 113,298
Discontinued
operations(6)
Income (loss), net of
tax................. 6,854 11,566 19,385 20,404 (40,766) 6,513 --
Loss on disposal...... -- -- -- -- (182,500) -- (83,363)
Net income (loss)....... $ 174,580 $ 218,859 $ 242,407 $ 223,247 $ (112,368) $ 29,284 $ 29,935
Income (loss) per common
and common equivalent
share (fully diluted)
Continuing
operations.......... $ .79 $ .93 $ .98 $ .92 $ .51(5) $ .10(5) $ .52
Discontinued
operations
Income (loss) net of
tax............... .03 .05 .08 .08 (.19) .03 --
Loss on disposal.... -- -- -- -- (.83) -- (.36)
---------- ---------- ----------- ----------- ----------- ---------- -----------
Net income (loss)..... $ .82 $ .98 $ 1.06 $ 1.00 $ (.51) $ .13 $ .16
========== ========== =========== =========== =========== ========== ===========
Ratio of earnings to
fixed charges(7)...... 8.1 8.0 6.6 5.2 3.3(9) 2.5(9) 5.8
Pro forma ratio of
earnings to fixed
charges(8)............ 2.7(10) 5.1
Operating Data
Warehouses open at end
of period............. 119 140 170 200 221 215 231
Comparable warehouse
sales increase
(decrease)(11)........ 7% 10% 6% (3)% (3)% (3)% 0%
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 12, 1995
SEPTEMBER 2, SEPTEMBER 1, AUGUST 30, AUGUST 29, AUGUST 28, ----------------------------
1990 1991 1992 1993 1994 ACTUAL AS ADJUSTED(15)
------------ ------------ ----------- ----------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data
Working capital
(deficit)............. $ 14,342 $ 304,703 $ 281,592 $ 127,312 $ (113,009) $ (128,036) $ 168,964
Total assets............ 2,029,931 2,986,094 3,576,543 3,930,799 4,235,659 4,120,788 4,120,788
Long-term debt(12)...... 199,506 500,440 813,976 812,576 795,492 794,004 1,094,004
Stockholders'
equity(13)............ 988,458 1,429,703 1,593,943 1,796,728 1,684,960 1,410,808(14) 1,410,808
</TABLE>
(FOOTNOTES ON NEXT PAGE)
5
<PAGE> 7
- ---------------
(1) The Company reports its financial position and results of operations
utilizing a 52 or 53 week fiscal year which ends on the Sunday nearest
August 31. All fiscal years presented were 52 weeks.
(2) Gross profit is comprised of net sales less merchandise costs.
(3) Operating expenses include selling, general and administrative expenses,
preopening expenses and provision for estimated warehouse closing costs.
(4) Other income (expense) includes interest expense, interest income and other
income.
(5) Includes provision for merger and restructuring expenses of $120,000
pre-tax ($80,000 or $.36 per share, after tax) related to the merger of The
Price Company and Costco Wholesale Corporation in October 1993. If such
provision for merger and restructuring expenses were excluded, income from
continuing operations for fiscal 1994 and for the twenty-four weeks ended
February 13, 1994 would have been $190,898 or $.87 per share and $102,771
or $.46 per share, respectively.
(6) In the fourth quarter of fiscal 1994, the Company reported its non-club
real estate segment as a discontinued operation. All of the assets of the
non-club real estate segment along with certain other assets were included
in the spin-off of Price Enterprises. In connection with the decision to
discontinue the non-club real estate operations, the Company recorded
primarily non-cash charges of $80,500 pre-tax ($47,500 after tax or $.22
per share) related to a change in calculating estimated losses for assets
which are considered to be economically impaired and of $182,500 ($15,250
of which related to expenses of the transaction) for estimated loss on
disposal of Price Enterprises. In the second quarter of fiscal 1995, an
additional non-cash charge of $83,363 for the loss on disposal of Price
Enterprises was recorded to reflect the consummation of the spin-off
transaction. The additional charge on the spin-off of Price Enterprises
reflects the difference between the $15.25 per share estimated trading
price of Price Enterprises Common Stock (used to calculate the estimated
loss in the fourth quarter of fiscal 1994) and the average closing sales
price of Price Enterprises Common Stock during the 20-trading days
commencing on the sixth trading day following the closing of the spin-off
on December 20, 1995 (which was approximately $12.16 per share) multiplied
by the 27 million shares which were exchanged or sold during the second
quarter of fiscal 1995.
(7) The ratio of earnings to fixed charges has been computed by dividing
earnings (defined as income from continuing operations before provision for
income taxes) plus fixed charges (excluding capitalized interest) by fixed
charges. Fixed charges consist of interest, debt amortization expense, the
estimated interest component of property rentals and capitalized interest.
(8) The pro forma ratio of earnings to fixed charges gives effect to the
issuance of the Notes and the application of the net proceeds therefrom to
the repayment of existing short-term borrowings under the Company's
$500,000 commercial paper program and other line of credit facilities. For
purposes of this calculation, interest expense on the Notes of
approximately $22,200 for fiscal 1994 and approximately $10,200 for the
twenty-four weeks ended February 12, 1995 has been added to fixed charges
based on an assumed 7.4% interest rate. Actual interest expense incurred
under short-term borrowing facilities was approximately $2,400 for fiscal
1994 and approximately $5,000 for the twenty-four weeks ended February 12,
1995 was eliminated from fixed charges. The average short-term borrowings
outstanding and average short-term interest rate was $60,513 and 4.1% in
fiscal 1994 and $198,404 and 5.9% for the twenty-four weeks ended February
12, 1995. The pro forma ratio of earnings to fixed charges does not include
any adjustments to reflect interest earnings on the proceeds from the Notes
in excess of the Company's average short-term borrowings during fiscal 1994
or for the twenty-four weeks ended February 12, 1995. For each 0.5% change
in the assumed interest rate on the Notes, the pro forma ratio of earnings
to fixed charges will change by approximately 0.04 for fiscal 1994 and
approximately 0.08 for the twenty-four weeks ended February 12, 1995.
(9) If the $120,000 pre-tax provision for merger and restructuring expenses
were excluded, the ratio of earnings to fixed charges for fiscal 1994 and
the twenty-four weeks ended February 13, 1994 would have been 4.7 and 6.0,
respectively.
(10) If the $120,000 pre-tax provision for merger and restructuring expenses
were excluded, the pro forma ratio of earnings to fixed charges for fiscal
1994 would have been 3.8.
(11) Calculated based on sales from warehouses open at least one year.
(12) Long-term debt includes convertible subordinated debt and other long-term
debt, net of current portion.
(13) PriceCostco did not pay any dividends on its common stock during the
periods presented.
(14) In the second quarter of fiscal 1995, the Company exchanged approximately
23.2 million shares of Price Enterprises Common Stock for an equal number
of shares of PriceCostco Common Stock. This exchange transaction resulted
in a $282,462 reduction of stockholders' equity related to the retirement
of these shares of PriceCostco Common Stock.
(15) Adjusted to give effect to the issuance and sale of the Notes and the
anticipated application of the estimated net proceeds therefrom as though
they occurred on February 12, 1995.
6
<PAGE> 8
RECENT DEVELOPMENTS
For the twelve weeks ended May 7, 1995, net sales were $3.8 billion, an
increase of 8 percent from $3.5 billion in the same twelve-week period of the
prior fiscal year. On a comparable warehouse basis (sales from warehouses open
at least one year), sales during the third quarter increased one percent over
the same period in the prior year.
For the thirty-six weeks ended May 7, 1995, net sales were $12.0 billion,
an increase of 7 percent from $11.2 billion in the same thirty-six week period
of the prior fiscal year. On a comparable warehouse basis, sales during this
thirty-six week period increased one percent over the same period in the prior
year.
USE OF PROCEEDS
The net proceeds from the sale of the Notes (estimated at $297.0 million
after payment of underwriting discounts and commissions and expenses of the
offering) will be used to repay existing indebtedness incurred under the
Company's $500.0 million commercial paper program. Such indebtedness was
incurred for general corporate purposes, including the funding of the Company's
ongoing expansion and warehouse remodeling activities. The Company anticipates
that it will borrow additional amounts under its commercial paper program for
similar purposes. The amount of short-term borrowings, which fluctuates on a
daily basis, averaged $368.6 million during the four weeks ended May 7, 1995 at
an average interest rate (excluding amortization of deferred loan fees) of
approximately 6.2%.
CAPITALIZATION
The following table sets forth the short-term borrowings and capitalization
of the Company as of February 12, 1995, and adjusted to give effect to the
issuance of the Notes and the anticipated application of the estimated net
proceeds thereof as set forth in "Use of Proceeds" as though they occurred on
February 12, 1995.
<TABLE>
<CAPTION>
FEBRUARY 12, 1995
--------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term borrowings............................................... $ 330,333(1) $ 33,333
========== ==========
Long-term debt
% Senior Notes due 2005.......................................... -- 300,000
5 3/4% Convertible Subordinated Debentures due 2002................. 300,000 300,000
6 3/4% Convertible Subordinated Debentures due 2001................. 285,079 285,079
5 1/2% Convertible Subordinated Debentures due 2012................. 179,338 179,338
Other long-term debt and capital lease obligations, net of current
portion........................................................... 29,587 29,587
---------- ----------
Total long-term debt...................................... $ 794,004 $1,094,004
Stockholders' equity
Preferred stock, 100,000,000 shares authorized; none
outstanding.................................................... -- --
Common stock, 900,000,000 shares authorized; 194,806,000
outstanding.................................................... 1,948 1,948
Additional paid-in capital........................................ 300,812 300,812
Accumulated foreign currency translation adjustment............... (65,101) (65,101)
Retained earnings................................................. 1,173,149 1,173,149
---------- ----------
Total stockholder's equity........................................ 1,410,808 1,410,808
---------- ----------
Total capitalization...................................... $2,204,812 $2,504,812
========== ==========
</TABLE>
- ---------------
(1) The Company had outstanding short-term borrowings of approximately $412,000
at May 7, 1995.
7
<PAGE> 9
DESCRIPTION OF THE NOTES
The Notes are to be issued under an Indenture, to be dated as of
, 1995 (the "Indenture"), between the Company and American Bank
National Association, as Trustee (the "Trustee"), a copy of which is filed as an
exhibit to the Registration Statement. The following summaries of certain
provisions of the Indenture do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all the provisions of the
Indenture, including the definitions therein of certain terms.
GENERAL
The Notes will be senior unsecured obligations of the Company, will be
limited to $300,000,000 aggregate principal amount and will mature on June 15,
2005. The Notes will bear interest at the rate per annum shown on the front
cover of this Prospectus from , 1995 or from the most recent Interest
Payment Date to which interest has been paid or provided for, payable
semiannually on June 15 and December 15 of each year, commencing on December 15,
1995, to the persons in whose names the Notes are registered at the close of
business on the preceding June 1 and December 1, as the case may be. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
The Notes are obligations exclusively of the Company. Because the
operations of the Company are currently conducted substantially through
subsidiaries, the cash flow of the Company and the consequent ability to service
its debt, including the Notes, are dependent upon the earnings of such
subsidiaries and the distribution of those earnings to the Company, or upon
loans or other payments of funds by such subsidiaries to the Company. The
subsidiaries are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due with respect to the Notes or to
make funds available therefor, whether by dividends, loans or other payments. In
addition, the payment of dividends and certain loans and advances to the Company
by such subsidiaries may be subject to certain statutory or contractual
restrictions, are contingent upon the earnings of such subsidiaries, and are
subject to various business considerations.
The Notes will be effectively subordinated to all liabilities, including
trade payables and capitalized lease obligations, of the Company's subsidiaries.
As of May 7, 1995, the Company's subsidiaries had approximately $1.2 billion of
debt outstanding. Any right of the Company to receive assets of any such
subsidiaries upon the latter's liquidation or reorganization (and the consequent
right of the holders of the Notes to participate in those assets) will be
effectively subordinated to the claims of that subsidiary's creditors, except to
the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interests in the assets of such subsidiary and any liabilities
of such subsidiary senior to that held by the Company.
Principal of and interest on the Notes are payable, and the Notes may be
presented for transfer and exchange, either at the office or agency of the
Company maintained for such purposes in New York, New York or St. Paul,
Minnesota, provided that payment of interest may, at the option of the Company,
be made by check mailed to the registered address of the person entitled
thereto. Initially, the office or agency in New York, New York, shall be the
office of the Trustee maintained for such purpose. Notes will be issued in
registered form without coupons in denominations of $1,000 and any multiple of
$1,000. No service charge will be made for any transfer or exchange of Notes,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
REDEMPTION OF NOTES
The Notes are not subject to redemption at any time prior to maturity,
whether at the option of the Company or otherwise.
8
<PAGE> 10
CERTAIN DEFINITIONS
"Attributable Debt" with respect to any sale leaseback transaction that is
subject to the restrictions described under "Certain Covenants -- Limitation on
Sale and Leaseback Transactions" below means the lesser of (i) the total net
amount of rent required to be paid during the remaining base term of the related
lease or until the earliest date on which the lessee may terminate such lease
upon payment of a penalty or a lump-sum termination payment (in which case the
total net rent shall include such penalty or termination payment), discounted at
the interest rate borne by the Notes, computed semi-annually, or (ii) the sale
price of the property so leased multipled by a fraction the numerator of which
is the remaining base term of the related lease (expressed in months) and the
denominator of which is the base term of such lease (expressed in months).
"Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves) after deducting therefrom (i) all current liabilities
and (ii) all goodwill, tradenames, trademarks, patents, unamortized debt
discount and expense (to the extent included in said aggregate amount of assets)
and other intangible assets, all as set forth on the most recent consolidated
balance sheet of the Company and its consolidated Subsidiaries and computed in
accordance with generally accepted accounting principles.
"Principal Property" means any right, title or interest (including
leasehold interests under capital leases) of the Company or any Subsidiary in,
to or under real property or improvements to real property, which right, title
or interest has a book value equal to or greater than 0.5% of the Consolidated
Net Tangible Assets of the Company and its consolidated Subsidiaries.
"Restricted Subsidiary" means any Subsidiary that owns or is lessee of one
or more Principal Properties.
"Secured Debt" means indebtedness for money borrowed which is secured by a
Lien on property of the Company or any Restricted Subsidiary, excluding certain
guarantees arising in the ordinary course of business.
CERTAIN COVENANTS
Limitation on Liens
The Indenture provides that, except as described below under "Exempted
Indebtedness," the Company will not, nor will it permit any Restricted
Subsidiary to, create, assume or suffer to exist any mortgage, security
interest, pledge or lien ("Lien") of or upon any Principal Property or any
shares of capital stock or evidences of indebtedness for borrowed money issued
by any Restricted Subsidiary and owned by the Company or any Restricted
Subsidiary, unless the Notes are directly secured equally and ratably by (or, at
the option of the Company, prior to) such Lien with any and all other
indebtedness or obligations thereby secured, so long as such indebtedness or
obligations shall be so secured. This restriction does not apply to: (i) Liens
that exist on the date of the Indenture; (ii) Liens on property or shares of
capital stock or evidences of indebtedness of any corporation existing at the
time such corporation becomes a Subsidiary; (iii) Liens in favor of the Company
or any Subsidiary; (iv) Liens in favor of governmental bodies to secure
progress, advance or other payments pursuant to contract or law or indebtedness
incurred to finance all or part of construction of, or improvements to, property
subject to such Liens; (v) Liens (a) on property, shares of capital stock or
evidences of indebtedness for borrowed money existing at the time of acquisition
thereof (including acquisition through merger or consolidation), and
construction and improvement Liens that are entered into within one year from
the date of such construction or improvement, provided that in the case of
construction or improvement the Lien does not apply to any property theretofore
owned by the Company or any Restricted Subsidiary except substantially
unimproved real property on which the property so constructed or the improvement
is located and (b) for the acquisition of any Principal Property which Liens are
created within 180 days after the completion of such acquisition to secure or
provide for the payment of the purchase price of the Principal Property
acquired, provided that any such Liens do not extend to any other property of
the Company or any of its Restricted Subsidiaries (whether or not such property
is then owned or thereafter acquired); (vi) mechanics', landlords' and similar
Liens arising in the ordinary course of business in respect of obligations not
due or being contested in good faith; (vii) Liens for taxes, assessments, or
governmental charges or levies
9
<PAGE> 11
that are not delinquent or are being contested in good faith; (viii) Liens
arising from any legal proceedings that are being contested in good faith; (ix)
any Liens that (a) are incidental to the ordinary conduct of its business or the
ownership of its properties and assets, including Liens incurred in connection
with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts, (b) were not incurred in connection
with the borrowing of money or the obtaining of advances or credit, and (c) do
not in the aggregate materially detract from the value of the property of the
Company or any Restricted Subsidiary or materially impair the use thereof in the
operation of its business; (x) Liens securing industrial development, road,
traffic improvement, sewer, utility, or pollution control bonds; and (xi) Liens
for the sole purpose of extending, renewing or replacing in whole or in part any
of the foregoing.
Limitation on Sale and Leaseback Transactions
The Indenture provides that, except as described below under "Exempted
Indebtedness," the Company will not, nor will it permit any Restricted
Subsidiary to, enter into any sale and leaseback transactions (except for
transactions involving temporary leases for a term of three years or less) of
any Principal Property unless either: (i) the Company or such Restricted
Subsidiary would be entitled, pursuant to the covenant described under
"Limitations on Liens" above, to incur a Lien on the Principal Property to be
leased without equally and ratably securing the Notes or (ii) the proceeds of
such sale are at least equal to the fair value of the Principal Property sold
and the Company will apply an amount equal to the net proceeds of such sale to
(a) the retirement of Secured Debt of the Company or a Restricted Subsidiary or
(b) the acquisition, construction or improvement of a Principal Property, in the
case of either clause (a) or (b) within 180 days of the effective date of any
such sale and leaseback transaction.
Exempted Indebtedness
The Indenture provides that, notwithstanding the limitations on Liens and
sale and leaseback transactions described above, the Company or any Restricted
Subsidiary may create, assume or suffer to exist Liens or enter into sale and
leaseback transactions not otherwise permitted by the Indenture provided that at
the time of such event, and after giving effect thereto, the sum of outstanding
indebtedness for borrowed money incurred after the date of the Indenture and
secured by such Liens plus the Attributable Debt in respect of such sale and
leaseback transactions entered into after the date of the Indenture does not
exceed 15% of the Consolidated Net Tangible Assets of the Company and its
Restricted Subsidiaries.
Limitation on Mergers and Consolidations
The Indenture provides that the Company will not merge, consolidate or
convey, transfer or lease its properties and assets substantially as an entirety
and the Company will not permit any Person to be consolidated with or merge into
the Company unless, among other things: (i) the successor Person is the Company
or other corporation organized and existing under the laws of the United States,
any state thereof or the District of Columbia that expressly assumes the
Company's obligations on the Notes and under the Indenture, (ii) immediately
after giving effect to such transaction on a pro forma basis no Default or Event
of Default shall exist or shall occur and (iii) if, as a result of any such
consolidation or merger or such conveyance, transfer or lease, any Principal
Property of the Company would become subject to a Lien that would not be
permitted by the Indenture, the Company or such successor Person takes such
steps as are necessary effectively to directly secure the Notes equally and
ratably with (or, at the option of the Company, prior to) all indebtedness
secured thereby.
EVENTS OF DEFAULT
An Event of Default is defined in the Indenture as being: default in
payment of any principal on the Notes when due; default for 30 days in payment
of any interest on the Notes; default for 60 days after written notice in the
observance or performance of any other covenant or agreement in the Notes or the
Indenture; certain events of bankruptcy, insolvency or reorganization; or
default under any bond, debenture, note or other evidence of indebtedness for
borrowed money of the Company or under any agreement under which such
10
<PAGE> 12
indebtedness is issued, which default shall involve the failure to pay principal
of, or interest on, indebtedness for borrowed money in excess of $10,000,000 at
the stated maturity thereof or shall have resulted in indebtedness for borrowed
money in excess of $10,000,000 being accelerated and such acceleration has not
been rescinded, stayed or annulled, such indebtedness has not been discharged,
or in the case of indebtedness contested in good faith by the Company an amount
sufficient to discharge such indebtedness has not been set aside, within 60 days
after the Company has received notice thereof from the Trustee or from the
holders of at least 25% in aggregate principal amount of the Notes.
The holders of at least a majority in aggregate principal amount of the
outstanding Notes may waive any past default and its consequences except for
payment defaults or defaults in respect of provisions that cannot be modified or
amended without the consent of the holders of each outstanding Note affected. If
an Event of Default shall occur and be continuing, either the Trustee or the
holders of at least 25% in aggregate principal amount of the outstanding Notes
may accelerate the maturity of all Notes; provided, however, that after such
acceleration, but before a judgment or decree based on acceleration, the holders
of a majority in aggregate principal amount of outstanding Notes may, under
certain circumstances, rescind and annul such acceleration if all Events of
Default, other than the non-payment of accelerated principal, have been cured or
waived as provided in the Indenture.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the holders of at least 25% in aggregate principal
amount of the outstanding Notes shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as trustee,
and the Trustee shall not have received from the holders of a majority in
aggregate principal amount of the outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instigated by a holder of
a Note for the enforcement of payment of the principal of or interest on such
Note on or after the respective due dates expressed in such Note.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding, to modify the Indenture
or the rights of the holders of the Notes, except that no such modification
shall, among other things, (i) change the final maturity of any Note, or reduce
the rate or extend the time of payment of interest thereon, or reduce the
principal amount thereof, or change the currency in which the Notes are payable,
or impair or affect the right of any holder of a Note to institute suit for the
payment thereof, without the consent of the holder of each Note or Notes
affected thereby, or (ii) reduce the aforesaid percentage of Notes, the consent
of the holders of which is required for any such modification, without the
consent of the holders of all of the Notes.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option, elect to have its obligations discharged
with respect to the outstanding Notes ("Legal Defeasance"). Such Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented, and the Indenture shall cease to be of
further effect as to all outstanding Notes except as to (i) rights of holders to
receive payments in respect of the principal of, premium, if any, and interest
on the Notes when such payments are due from the trust assets described below;
(ii) the Company's obligations with respect to the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen
Notes, and the maintenance of an office or agency for payment of the Notes;
(iii) the rights, powers, trust, duties, and immunities of the Trustee, and the
Company's obligations in connection therewith; and (iv) the Legal Defeasance
provisions of the Indenture. The Company may cause Legal Defeasance to occur at
any time. In addition, the Company may, at its option and at any time, elect to
have the obligations of the Company released with respect to certain covenants
that are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Notes. In the event Covenant Defeasance occurs,
11
<PAGE> 13
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, U.S. Legal Tender, U.S. Government Obligations or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of and interest on the Notes on the stated date for payment thereof,
and the holders of Notes must have a valid, perfected, exclusive security
interest in such trust; (ii) in the case of Legal Defeasance, the Company shall
have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (a) the Company has
received from, or there has been published by the Internal Revenue Service, a
ruling or (b) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the holders of the Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the holders of the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period ending
on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant
Defeasance shall not result in a breach or violation of, or constitute a default
under, the Indenture or any other material agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee
an Officers' Certificate stating that the deposit was not made by the Company
with the intent of preferring the holders of the Notes over any other creditors
of the Company or with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company or others; and (vii) the Company
shall have delivered to the Trustee an Officers' Certificate stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Foster Pepper & Shefelman, Seattle, Washington. Certain legal matters
for the Underwriters will be passed upon by Skadden, Arps, Slate, Meagher &
Flom, Los Angeles, California. Foster Pepper & Shefelman may rely on the opinion
of Skadden Arps as to matters of New York law. Members of Foster Pepper &
Shefelman own 6,667 shares of the Company's Common Stock. Skadden, Arps, Slate,
Meagher & Flom has from time to time represented the Company on unrelated
matters.
EXPERTS
The consolidated financial statements and schedules of the Company for the
three fiscal years ended August 28, 1994, incorporated herein by reference, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto. In those reports, that firm
states that with respect to The Price Company for fiscal years 1993 and 1992,
its opinion is based on the reports of other independent auditors, namely Ernst
& Young LLP. The consolidated financial statements referred to above have been
incorporated herein by reference in reliance upon the reports of said firms and
upon the authority of those firms as experts in accounting and auditing.
With respect to the unaudited financial information of the Company for the
fiscal quarters ended November 20, 1994 and February 12, 1995, incorporated
herein by reference, Arthur Andersen LLP has applied limited procedures in
accordance with professional standards for a review of such information.
12
<PAGE> 14
However, their separate reports thereon and incorporated by reference herein,
state that they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their reports on
that information should be restricted in light of the limited nature of the
review procedures applied. In addition, Arthur Andersen LLP is not subject to
the liability provisions of Section 11 of the Securities Act for their report on
the unaudited interim financial information because that report is not a
"report" or a "part" of this Prospectus prepared or certified by Arthur Andersen
LLP within the meaning of Sections 7 or 11 of the Securities Act.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement"), among the Company and Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), J.P. Morgan Securities Inc. and BA Securities,
Inc. (together, the "Underwriters"), the Underwriters have severally agreed to
purchase from the Company, and the Company has agreed to sell to the
Underwriters, at the public offering price set forth on the cover page of this
Prospectus less the underwriting discounts and commissions, the Notes. The
respective principal amounts of the Notes that each Underwriter has agreed to
purchase is set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
--------------------------------------------------------------------- ----------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.................. $
J.P. Morgan Securities Inc...........................................
BA Securities, Inc...................................................
------------
Total...................................................... $300,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters thereunder are subject to the approval of certain legal matters by
their counsel and to certain other conditions precedent. The Underwriting
Agreement also provides that the Company will indemnify the Underwriters and
certain persons controlling the Underwriters against certain liabilities and
expenses, including under the Securities Act, or will contribute to payments the
Underwriters are required to make in respect thereof. The nature of the
Underwriters' obligations under the Underwriting Agreement is such that they are
committed to purchase all of the Notes if any of the Notes are purchased by
them.
The Underwriters have advised the Company that they propose to offer the
Notes to the public initially at the public offering price set forth on the
cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of % of the principal amount. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of % of the
principal amount of the Notes to certain other dealers. After the initial public
offering, the public offering price, concession and reallowance may be changed
by the Underwriters.
Each of the Underwriters has performed investment banking services, and
affiliates of certain of the Underwriters have performed commercial banking
services, for the Company in the past for which they received customary
compensation. Hamilton E. James, a Managing Director of DLJ, is a director of
the Company.
There is currently no public market for the Notes. The Company has no
present plan to list any of the Notes on a national securities exchange or to
seek the admission thereof for trading in the National Association of Securities
Dealers Automated Quotation System. The Underwriters have advised the Company
that they currently intend to make a market in the Notes, but they are not
obligated to do so and may discontinue any such market making at any time
without notice. Accordingly, there can be no assurance as to the liquidity of,
or that an active trading market will develop for, the Notes.
13
<PAGE> 15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses (not including underwriting commissions and fees) of issuance
and distribution of the securities are estimated to be:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $103,448
Accounting Fees and Expenses...................................... $ 40,000
Attorneys' Fees and Expenses...................................... $ 40,000
Trustee's Fees and Expenses....................................... $ 7,500
Rating Agencies................................................... $ 30,000
Printing Expenses................................................. $ 50,000
Blue Sky Filing Fees and Expenses (including attorneys' fees)..... $ 10,000
Miscellaneous Expenses............................................ $ 19,052
--------
Total............................................................. $300,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The PriceCostco Certificate of Incorporation and the PriceCostco Bylaws
provide for indemnification of present and former directors and officers of
PriceCostco, The Price Company ("Price") and Costco Wholesale Corporation
("Costco") and persons serving as directors, officers, employees or agents of
another corporation or entity at the request of PriceCostco, Price or Costco
(each, an "Indemnified Party"), each to the fullest extent permitted by the
DGCL. Section 145 of the Delaware General Corporation Law ("DGCL") allows
indemnification of specified persons by Delaware corporations, and describes
requirements and limitations on such powers of indemnification. PriceCostco has
included in the PriceCostco Certificate of Incorporation and the PriceCostco
Bylaws provisions which require PriceCostco to indemnify an Indemnified Party if
the standard of conduct and other requirements set forth therein and by the DGCL
are met.
Indemnified Parties are specifically indemnified in the PriceCostco
Certificate of Incorporation and the PriceCostco Bylaws (the "Indemnification
Provisions") from expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with an action, suit or
proceeding (i) by reason of the fact that he or she is or was a director or
officer of PriceCostco, Price or Costco or served as a director, officer,
employee or agent at the request of PriceCostco, Price or Costco or (ii) by or
in right of PriceCostco, Price or Costco, provided that indemnification is
permitted only with judicial approval if the Indemnified Party is adjudged to be
liable to PriceCostco. Such Indemnified Party must have acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interests of the subject corporation and, with respect to any criminal action or
proceeding, must have had no reasonable cause to believe his or her conduct was
unlawful. Any indemnification must be authorized based on a determination that
the indemnification is proper as the applicable standard of conduct has been met
by the Indemnified Party. Such determination will be made by a majority vote of
a quorum of the Board consisting of directors not a party to the suit, action or
proceeding, by a written opinion of independent legal counsel or by the
stockholders. In the event that a determination is made that a director or
officer is not entitled to indemnification under the Indemnification Provisions,
the Indemnification Provisions provide that the Indemnified Party may seek a
judicial determination of his or her rights to indemnification. The
Indemnification Provisions further provide that the Indemnified Party is
entitled to indemnification for and advancement of, all expenses (including
attorneys' fees) incurred in any proceeding seeking to collect from PriceCostco
an indemnity claim or advancement of expenses under the Indemnification
Provision whether or not such Indemnified Party is successful.
PriceCostco will pay expenses incurred by a director or officer of
PriceCostco, or a former director or officer of Price or Costco, in advance of
the final disposition of an action, suit or proceeding, if he or she undertakes
to repay amounts advanced if it is ultimately determined that he or she is not
entitled to be
II-1
<PAGE> 16
indemnified by PriceCostco. The Indemnification Provision is expressly not
exclusive of any other rights of indemnification or advancement of expenses
pursuant to the PriceCostco Bylaws or any agreement, vote of the stockholders or
disinterested directors or pursuant to judicial direction.
PriceCostco is authorized to purchase insurance on behalf of an Indemnified
Party for liabilities incurred, whether or not PriceCostco would have the power
or obligation to indemnify him or her pursuant to the PriceCostco Certificate of
Incorporation or the DGCL. PriceCostco has obtained such insurance.
PriceCostco has entered into indemnification agreements with all of its
directors providing for the foregoing.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement.
4.1 Form of Note (included in Exhibit 4.2).
4.2 Form of Indenture between Price/Costco, Inc. and American Bank National
Association, as Trustee.
5.1 Opinion of Foster Pepper & Shefelman.
12.1 Statement re computation of ratios.
15.1 Letter of Arthur Andersen LLP regarding unaudited interim financial
information (included in its consent filed as Exhibit 23.1).
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Foster Pepper & Shefelman (included in its opinion filed as
Exhibit 5.1).
23.3 Consent of Ernst & Young LLP
24.1 Power of Attorney (included on the signature page of this Registration
Statement).
25.1 Statement of Eligibility and Qualification of Trustee on Form T-1 under the
Trust Indenture Act of 1939.
</TABLE>
II-2
<PAGE> 17
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
the form of prospectus filed 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 of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Issaquah, State of Washington, on the 15th day of
May, 1995.
PRICE/COSTCO, INC.
By: /s/ JAMES D. SINEGAL
--------------------------------
James D. Sinegal, President and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
Jeffrey H. Brotman, James D. Sinegal, Richard A. Galanti or Donald E. Burdick,
or any of them, as attorneys-in-fact with full power of substitution, to execute
in the name and on behalf of each person, individually and in each capacity
stated below, and to file, any and all amendments to this Registration
Statement, including any and all post-effective amendments.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on May 15, 1995.
<TABLE>
<S> <C>
/s/ JEFFREY H. BROTMAN Chairman of the Board of Directors
- ------------------------------------------
Jeffrey H. Brotman
/s/ JAMES D. SINEGAL President, Chief Executive Officer and Director
- ------------------------------------------
James D. Sinegal
/s/ RICHARD D. DICERCHIO Executive Vice President -- Merchandising and
- ------------------------------------------ Director
Richard D. DiCerchio
/s/ RICHARD A. GALANTI Executive Vice President, Chief Financial Officer and
- ------------------------------------------ Director (Principal Financial Officer and Principal
Richard A. Galanti Accounting Officer)
/s/ DANIEL BERNARD Director
- ------------------------------------------
Daniel Bernard
/s/ HAMILTON E. JAMES Director
- ------------------------------------------
Hamilton E. James
/s/ RICHARD M. LIBENSON Director
- ------------------------------------------
Richard M. Libenson
/s/ JOHN W. MEISENBACH Director
- ------------------------------------------
John W. Meisenbach
/s/ FREDRICK O. PAULSELL, JR. Director
- ------------------------------------------
Fredrick O. Paulsell, Jr.
</TABLE>
II-4
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
------- ------------------------------------------------------------------------- ----
<S> <C> <C>
1.1 Form of Underwriting Agreement...........................................
4.1 Form of Note (included in Exhibit 4.2)...................................
4.2 Form of Indenture between Price/Costco, Inc. and American Bank National
Association, as Trustee..................................................
5.1 Opinion of Foster Pepper & Shefelman.....................................
12.1 Statement re computation of ratios.......................................
15.1 Letter of Arthur Andersen LLP regarding unaudited interim financial
information (included in its consent filed as Exhibit 23.1)..............
23.1 Consent of Arthur Andersen LLP...........................................
23.2 Consent of Foster Pepper & Shefelman (included in its opinion filed as
Exhibit 5.1).............................................................
23.3 Consent of Ernst & Young LLP.............................................
24.1 Power of Attorney (included on the signature page of this Registration
Statement)...............................................................
25.1 Statement of Eligibility and Qualification of Trustee on Form T-1 under
the Trust Indenture Act of 1939..........................................
</TABLE>
<PAGE> 1
EXHIBIT 1.1
$300,000,000
PRICE/COSTCO, INC.
__% Senior Notes due 2005
UNDERWRITING AGREEMENT
_______________, 1995
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES INC.
BA SECURITIES, INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
140 Broadway
New York, New York 10005
Dear Sirs:
Price/Costco, Inc., a Delaware corporation (the "Company"), proposes to issue
and sell $300,000,000 principal amount of its __% Senior Notes due 2005 (the
"Securities") to Donaldson, Lufkin & Jenrette Securities Corporation, J.P.
Morgan Securities Inc. and BA Securities, Inc. (the "Underwriters"). The
Securities are to be issued pursuant to the provisions of an Indenture to be
dated as of ____________, 1995 (the "Indenture") between the Company and
American Bank National Association, as Trustee (the "Trustee").
1. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively called the
"Act"), a registration statement on Form S-3 including a prospectus relating to
the Securities, which may be amended. The registration statement as amended at
the time when it becomes effective, including in each case all documents (if
any) incorporated by reference or deemed to be incorporated by reference
therein (the "Incorporated Documents"), all financial statements and exhibits
and the
<PAGE> 2
information (if any) deemed to be part of the registration statement at the
time of effectiveness pursuant to Rule 430A under the Act, is hereinafter
referred to as the Registration Statement; and the prospectus in the form first
used to confirm sales of Securities, including the Incorporated Documents, is
hereinafter referred as the Prospectus.
2. Agreements to Sell and Purchase. On the basis of the representations
and warranties contained in this Agreement, and subject to its terms and
conditions, the Company agrees to issue and sell, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, the principal amount
of Securities set forth opposite the name of such Underwriter in Schedule I
hereto, at ____% of the principal amount thereof (the "Purchase Price") plus
accrued interest thereon, if any, from _______________, 1995 to the date of
payment and delivery.
3. Terms of Public Offering. The Company is advised by you that you
propose (i) to make a public offering of the Securities as soon after the
effective date of the Registration Statement as in your judgment is advisable
and (ii) initially to offer the Securities upon the terms set forth in the
Prospectus.
4. Delivery and Payment. Delivery to the Underwriters of and payment for
the Securities shall be made at 10:00 A.M., New York City time, on the fifth
business day (the "Closing Date") following the date of the initial public
offering, at such place as you shall designate. The Closing Date and the
location of delivery of and the form of payment for the Securities may be
varied by agreement between you and the Company.
Certificates for the Securities shall be registered in such names and issued
in such denominations as you shall request in writing not later than two full
business days prior to the Closing Date. Such certificates shall be made
available to you for inspection not later than 9:30 A.M., New York City time,
on the business day next preceding the Closing Date. Certificates in
definitive form evidencing the Securities shall be delivered to you or for your
account on the Closing Date with any transfer taxes thereon duly paid by the
Company, for the respective accounts of the Underwriters, against payment of
the Purchase Price therefor by [certified or official bank checks payable in
New York Clearing House funds to the order of the Company] [wire transfer of
same day funds to the account of the Company specified in writing at least
two business days preceding the Closing Date. The amount of such wire
transfer shall be reduced by an amount equal to the Underwriters' cost of
funds for one day.]
5. Agreements of the Company. The Company agrees with you:
(a) To use its best efforts to cause the Registration Statement to become
effective at the earliest possible time.
(b) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) when the Registration Statement has become effective
and when any post-effective amendment to it becomes effective, (ii) of the
receipt of any comments from the Commission that relate to the Registration
Statement and of any
2
<PAGE> 3
request by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the suspension of
qualification of the Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for such purposes, and (iv) of the happening
of any event during the period referred to in paragraph (e) below which makes
any statement of a material fact made in the Registration Statement or the
Prospectus untrue or which requires the making of any additions to or changes
in the Registration Statement or the Prospectus in order to make the
statements therein not misleading. If at any time the Commission or any
comparable state authority shall issue any stop order suspending the
effectiveness of the Registration Statement or suspending qualification of
the Securities for offering or sale in any jurisdiction, the Company will
make every reasonable effort to obtain the withdrawal or lifting of such
order at the earliest possible time.
(c) To furnish to you, without charge, four signed copies of the
Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits and Incorporated Documents, and to
furnish to you such number of conformed copies of the Registration Statement
as so filed and of each amendment to it, without exhibits, as you may
reasonably request.
(d) Not to file any amendment or supplement to the Registration Statement,
whether before or after the time when it becomes effective, or to make any
amendment or supplement to the Prospectus, or to file any document which,
when filed, will be incorporated or deemed to be incorporated by reference in
the Registration Statement or the Prospectus, in each case of which you shall
not previously have been advised or to which you shall reasonably object; and
to prepare and file with the Commission, promptly upon your reasonable
request, any amendment to the Registration Statement or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Securities by you, and to use its best efforts to cause
the same to become promptly effective.
(e) Promptly after the Registration Statement becomes effective, and from
time to time thereafter for such period as in your reasonable judgment a
prospectus is required by law to be delivered in connection with sales by an
Underwriter or a dealer, to furnish to each Underwriter and each dealer,
without charge, as many copies of the Prospectus (and of any amendment or
supplement to the Prospectus) as such Underwriter or such dealer may
reasonably request.
(f) If during the period specified in paragraph (e) any event shall occur
as a result of which, in the opinion of counsel for the Underwriters it
becomes necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances existing when the
Prospectus is delivered to a purchaser, not misleading, or if it is necessary
to amend or supplement the Prospectus to comply
3
<PAGE> 4
with any law, forthwith to prepare and file with the Commission an
appropriate amendment or supplement to the Prospectus so that the statements
in the Prospectus, as so amended or supplemented, will not in the light of
the circumstances existing when it is so delivered, be misleading, or so that
the Prospectus will comply with law, and to furnish to each Underwriter and to
such dealers as you shall specify, such number of copies thereof as such
Underwriter or such dealers may reasonably request.
(g) Prior to any public offering of the Securities, to cooperate with you
and counsel for the Underwriter in connection with the registration or
qualification of the Securities for offer and sale by the Underwriters and by
dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such qualification in effect so long as required
for distribution of the Securities and to file such consents to service of
process or other documents as may be necessary in order to effect such
registration or qualification (provided that the Company shall not be
obligated to qualify as a foreign corporation in any jurisdiction in which it
is not so qualified nor to take any action that would subject it to general
consent to service of process in any jurisdiction in which it is not now so
subject).
(h) To mail and make generally available to its security holders as soon
as reasonably practicable an earnings statement covering a period of at least
twelve months after the effective date of the Registration Statement (but in
no event commencing later than 90 days after such date) which shall satisfy
the provisions of Section 11(a) of the Act, and to advise you in writing when
such statement has been so made available.
(i) During the period of five years after the date of this Agreement, (i)
to mail as soon as reasonably practicable after the end of each fiscal year
to the record holders of the Securities a financial report of the Company and
its subsidiaries on a consolidated basis (and a similar financial report of
all unconsolidated subsidiaries, if any), all such financial reports to
include a consolidated balance sheet, a consolidated statement of operations,
a consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified
by independent certified public accountants, and (ii) to mail and make
generally available as soon as practicable after the end of each quarterly
period (except for the last quarterly period of each fiscal year) to such
holders, a consolidated balance sheet, a consolidated statement of operations
and a consolidated statement of cash flows (and similar financial reports of
all unconsolidated subsidiaries, if any) as of the end of and for such
period, and for the period from the beginning of such year to the close of
such quarterly period, together with comparable information for the
corresponding periods of the preceding year.
(j) During the period referred to in paragraph (i), to furnish to you as
soon as available a copy of each report or other publicly available
information of the
4
<PAGE> 5
Company mailed to the security holders of the Company or filed with the
Commission and such other publicly available information concerning the
Company and its subsidiaries as you may reasonably request.
(k) Whether or not the transactions contemplated hereby are consummated or
this Agreement is terminated, to pay all costs, expenses, fees and taxes
incident to (i) the preparation, printing, filing and distribution under the
Act of the Registration Statement (including financial statements and
exhibits), each preliminary prospectus and all amendments and supplements to
any of them prior to or during the period specified in paragraph (e), (ii)
the printing and delivery of the Prospectus and all amendments or supplements
to it during the period specified in paragraph (e), (iii) the printing and
delivery of this Agreement, the Preliminary and Supplemental Blue Sky
Memoranda and all other agreements, memoranda, correspondence and other
documents printed and delivered in connection with the offering of the
Securities and the printing and engraving of the Securities (including in
each case any disbursements of counsel for the Underwriter relating to such
printing and delivery), (iv) the registration or qualification of the
Securities for offer and sale under the securities or Blue Sky laws of the
several states (including in each case the fees and disbursements of counsel
for the Underwriters relating to such registration or qualification and
memoranda relating thereto), (v) filings and clearance, if any, with the
National Association of Securities Dealers, Inc. in connection with the
offering (including the fees and disbursements of counsel for the Underwriter
in connection therewith), (vi) furnishing such copies of the Registration
Statement, the Prospectus and all amendments and supplements thereto as may
be requested for use in connection with the offering or sale of the
Securities by the Underwriter or by dealers to whom Securities may be sold,
and (vii) the rating of the Securities by investment rating agencies.
(l) During the period beginning on the date hereof and continuing to and
including the Closing Date, not to offer, sell, contract to sell or otherwise
dispose of any debt securities of the Company or warrants to purchase debt
securities of the Company substantially similar to the Securities (other than
(i) the Securities and (ii) commercial paper issued in the ordinary course of
business), without your prior written consent.
(m) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior
to the Closing Date and to satisfy all conditions precedent to the delivery
of the Securities.
6. Representations and Warranties of the Company. The Company represents
and warrants to each Underwriter that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect; and
no proceedings for such purpose are pending before or threatened by the
Commission.
5
<PAGE> 6
(b) (i) Each part of the Registration Statement, when such part became
effective, did not contain and each such part, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) the Registration Statement and
the Prospectus comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Act and (iii) the Prospectus does
not contain and, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations
and warranties set forth in this paragraph (b) do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon and in
conformity with information relating to any Underwriter furnished to the
Company in writing by such Underwriter expressly for use therein. The Company
acknowledges for all purposes under this Agreement (including this paragraph
and Section 7 hereof) that the statements set forth in paragraph 3 under the
caption "Underwriting" in the Prospectus constitute the only written
information furnished to the Company by or on behalf of any Underwriter
expressly for use in the Registration Statement, the preliminary prospectus,
or the Prospectus (or any amendment or supplement to any of them) and that
the Underwriters shall not be deemed to have provided any information (and
therefore is not responsible for any statements or omissions) pertaining to
any arrangement or agreement with respect to any party other than the
Underwriters. The Incorporated Documents, at the time they were or hereafter
are filed or last amended, as the case may be, with the Commission, complied
and will comply in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder (collectively, the "Exchange Act") and, when read
together and with the other information in the Prospectus, at the time the
Registration Statement became or becomes effective, will not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were or are made, not misleading.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act; and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(d) The Company and each of its subsidiaries has been duly incorporated,
is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority to
carry on its business as it is currently being conducted and to own, lease
and operate its properties, and each is duly qualified and is in good
standing as a foreign corporation authorized to do
6
<PAGE> 7
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where
the failure to be so qualified could not reasonably be expected to have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole
(a "Material Adverse Effect").
(e) All of the outstanding shares of capital stock of, or other ownership
interests in, each of the Company's subsidiaries have been duly authorized
and validly issued and are fully paid and non-assessable, and are owned by
the Company, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature.
(f) The Securities have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to the Underwriters against payment as provided by this
Agreement, will be entitled to the benefits of the Indenture and will be
valid and binding obligations of the Company, enforceable in accordance with
their terms except to the extent that the enforceability thereof may be
limited by (1) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (2) general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(g) This Agreement has been duly authorized, executed and delivered by the
Company and is a valid and binding agreement of the Company enforceable
against the Company in accordance with its terms (except as rights to
indemnity and contribution hereunder may be limited by applicable law).
(h) The Indenture has been duly qualified under the Trust Indenture Act of
1939, as amended, and has been duly authorized, executed and delivered by the
Company and is a valid and binding agreement of the Company, enforceable in
accordance with its terms except to the extent that the enforceability
thereof may be limited by (1) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (2) general principles of equity (regardless
of whether such enforcement is considered in a proceeding in equity or at
law).
(i) The Securities conform as to legal matters to the description thereof
contained in the Prospectus.
(j) Neither the Company nor any of its subsidiaries is in violation of its
respective charter or by-laws or in default in the performance of any
obligation, agreement or condition contained in any bond, debenture, note or
any other evidence of indebtedness or in any other agreement, indenture or
instrument material to the conduct of the business of the Company and its
subsidiaries, taken as a whole, to
7
<PAGE> 8
which the Company or any of its subsidiaries is a party or by which it or any
of its subsidiaries or their respective property is bound.
(k) The execution, delivery and performance of this Agreement, the
Indenture and the Securities and compliance by the Company with all the
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body (except as such may be required under the
securities or Blue Sky laws of the various states) and will not conflict with
or constitute a breach of any of the terms or provisions of, or a default
under, the charter or by-laws of the Company or any of its subsidiaries or
any agreement, indenture or other instrument to which it or any of its
subsidiaries is a party or by which it or any of its subsidiaries or their
respective property is bound, or violate or conflict with any laws,
administrative regulations or rulings or court decrees applicable to the
Company, any of its subsidiaries or their respective property.
(l) There are no material legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any of
their respective property is the subject, and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated. No contract
or document of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the Registration
Statement is not so described or filed as required.
(m) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection
of human health and safety, the environment or hazardous or toxic substances
or wastes, pollutants or contaminants ("Environmental Laws"), nor any federal
or state law relating to discrimination in the hiring, promotion or pay of
employees nor any applicable federal or state wages and hours laws, nor any
provisions of the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder, which in each case could reasonably be
expected to result in any material adverse change in the business, prospects,
financial condition or results of operation of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Change").
(n) The Company and each of its subsidiaries has such permits, licenses,
franchises and authorizations of governmental or regulatory authorities
("permits"), including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease and operate its respective
properties and to conduct its business; the Company and each of its
subsidiaries has fulfilled and performed all of its material obligations with
respect to such permits and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder of any
such
8
<PAGE> 9
permit; and such permits contain no restrictions that are materially
burdensome to the Company or any of its subsidiaries.
(o) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the course
of which it identifies and evaluates associated costs and liabilities
(including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties). On the basis of
such review, the Company has reasonably concluded that such associated costs
and liabilities could not, singly or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(p) Except such as are not material to the business, prospects, financial
condition or results of operation of the Company and its subsidiaries, taken
as a whole, the Company and each of its subsidiaries has good and marketable
title, free and clear of all liens, claims, encumbrances and restrictions
(except liens for taxes not yet due and payable), to all property and assets
described in the Registration Statement as being owned by it. All leases to
which the Company or any of its subsidiaries is a party are valid and binding
and no default has occurred or is continuing thereunder which could
reasonably be expected to result in any Material Adverse Change, and the
Company and its subsidiaries enjoy peaceful and undisturbed possession under
all such leases to which any of them is a party as lessee with such
exceptions as do not materially interfere with the use made or proposed to be
made by the Company or such subsidiary.
(q) The Company and each of its subsidiaries maintains reasonably adequate
insurance.
(r) Arthur Andersen & Co. LLP are independent public accountants with
respect to the Company as required by the Act.
(s) The financial statements, together with related schedules and notes,
forming part of, or incorporated or deemed to be incorporated by reference
in, the Registration Statement and the Prospectus (and any amendment or
supplement thereto), present fairly the consolidated financial position,
results of operations and changes in financial position of the Company and
its subsidiaries at the respective dates or for the respective periods to
which they apply; such statements and related schedules and notes comply as
to form in all material respects with the requirements of the Act and have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; and the other financial and statistical information and data set
forth in or incorporated or deemed to be incorporated by reference in the
Registration Statement
9
<PAGE> 10
and the Prospectus (and any amendment or supplement thereto) is, in all
material respects, accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the Company.
(t) The Company is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(u) No holder of any security of the Company has any right to require
registration of shares of common stock or any other security of the Company
in this offering.
(v) The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
(w) There is (i) no significant unfair labor practice complaint pending
against the Company or any of its subsidiaries or, to the best knowledge of
the Company, threatened against any of them, before the National Labor
Relations Board or any state or local labor relations board, and no
significant grievance or arbitration proceeding arising out of or under any
collective bargaining agreement is so pending against the Company or any of
its subsidiaries or, to the best knowledge of the Company, threatened against
any of them, and (ii) no significant strike, labor dispute, slowdown or
stoppage pending against the Company or any of its subsidiaries or, to the
best knowledge of the Company, threatened against it or any of its
subsidiaries except for such actions specified in clause (i) or (ii) above,
which, singly or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
(x) The Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(y) All material tax returns required to be filed by the Company and each
of its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other
charges due pursuant to such returns or pursuant to any assessment received
by the Company or any of its subsidiaries have been paid, other than those
being contested in good faith and for which adequate reserves have been
provided.
10
<PAGE> 11
(z) The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, the copyrights, know-how (including trade secrets and other
proprietary or confidential information, systems or procedures), trademarks,
service marks and trade names presently employed by them in connection with
the business now operated by them, and neither the Company nor any of its
subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, could reasonably be expected to result in any Material Adverse
Change.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless (i) each Underwriter
and (ii) each person, if any, who controls (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act) any Underwriter (any of the persons
referred to in this clause (ii) being hereinafter referred to as a "controlling
person"), and (iii) the respective officers, directors, partners, employees,
representatives and agents of each Underwriter or any controlling person (any
person referred to in clause (i), (ii) or (iii) may hereinafter be referred to
as an "Indemnified Person") to the fullest extent lawful, from and against any
and all losses, claims, damages, judgments, actions, costs, assessments,
expenses and other liabilities (collectively, "Liabilities"), including without
limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Person, directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
supplement or amendment thereto), or the Prospectus (including any amendment or
supplement thereto) or any preliminary prospectus, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading, except
insofar as such Liabilities are caused by an untrue statement or omission or
alleged untrue statement or omission that is made in reliance upon and in
conformity with information relating to an Underwriter furnished in writing to
the Company by or on behalf of such Underwriter expressly for use in the
Registration Statement (or any amendment or supplement thereto) or the
Prospectus (or any amendment or supplement thereto) or any preliminary
prospectus. The Company shall notify you promptly of the institution, threat
or assertion of any claim, proceeding (including any governmental
investigation) or litigation in connection with the matters addressed by this
Agreement which involves the Company or an Indemnified Person.
(b) In case any action or proceeding (for all purposes of this Section 7,
including any governmental investigation) shall be brought or asserted against
any of the Indemnified Persons with respect to which indemnity may be sought
against the Company, such Indemnified Person promptly shall notify the Company
in writing; provided that the failure to
11
<PAGE> 12
give such notice shall not relieve the Company of its obligations pursuant to
this Agreement. Upon receiving such notice, the Company shall be entitled to
participate in any such action or proceeding and to assume, at its sole
expense, the defense thereof, with counsel reasonably satisfactory to such
Indemnified Person (who shall not, except with the consent of the Indemnified
Person, be counsel to the Company) and, after written notice from the Company
to such Indemnified Person of its election so to assume the defense thereof
within 10 business days after receipt of the notice from the Indemnified Person
of such action or proceeding, the Company shall not be liable to such
Indemnified Person hereunder for legal expenses of other counsel subsequently
incurred by such Indemnified Person in connection with the defense thereof,
other than costs of investigation, unless (i) the Company agrees to pay such
fees and expenses, or (ii) the Company fails promptly to assume such defense or
fails to employ counsel reasonably satisfactory to such Indemnified Person, or
(iii) the named parties to any such action or proceeding (including any
impleaded parties) include both such Indemnified Person and the Company or an
affiliate of the Company, and either (x) there may be one or more legal
defenses available to such Indemnified Person that are different from or
additional to those available to the Company or such affiliate or (y) a
conflict may exist between such Indemnified Person and the Company or such
affiliate. In the event of any of clause (i), (ii) and (iii) of the
immediately preceding sentence, if such Indemnified Person notifies the Company
in writing, the Company shall not have the right to assume the defense thereof
and such Indemnified Person shall have the right to employ its own counsel in
any such action and the fees and expenses of such counsel shall be paid, as
incurred, by the Company, regardless of whether it is ultimately determined
that an Indemnified Party is not entitled to indemnification hereunder, it
being understood, however, that the Company shall not, in connection with any
one such action or proceeding or separate but substantially similar or related
actions or proceedings arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) at any time for each such
Indemnified Person. The Company shall be liable for any settlement of any such
action or proceeding effected with the Company's prior written consent, which
consent will not be unreasonably withheld, and the Company agrees to indemnify
and hold harmless any Indemnified Person from and against any Liabilities by
reason of any settlement of any action effected with the written consent of the
Company. The Company agrees to be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered into
more than 10 business days after receipt by the Company of the aforesaid
request for payment in respect of an indemnification obligation pursuant hereto
and (ii) the Company shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement. The Company
shall not, without the prior written consent of each Indemnified Person, settle
or compromise or consent to the entry of any judgment in or otherwise seek to
terminate any pending or threatened action, claim, litigation or proceeding in
respect of which indemnification or contribution may be sought pursuant hereto
(whether or not any Indemnified Person is a party thereto), unless such
settlement, compromise, consent or termination includes an unconditional
release of each Indemnified Person from all Liabilities arising out of such
action, claim, litigation or proceeding.
12
<PAGE> 13
(c) Each of the Underwriters agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, and any person controlling (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) the Company, to the
same extent as the foregoing indemnity from the Company to each of the
Indemnified Persons, but only with respect to claims and actions based on
information relating to such Underwriter furnished in writing by or on behalf
of such Underwriter expressly for use in the Registration Statement,
Prospectus or preliminary prospectus, as applicable. In case any action or
proceeding (including any governmental investigation) shall be brought or
asserted against the Company, any of its directors, any such officer, or any
such controlling person based on the Registration Statement, the Prospectus or
any preliminary prospectus in respect of which indemnity is sought against any
Underwriter pursuant to the foregoing sentence, such Underwriter shall have
the rights and duties given to the Company (except that if the Company shall
have assumed the defense thereof, such Underwriter shall not be required to do
so, but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Underwriter), and the Company, its directors, any such officers and each
such controlling person shall have the rights and duties given to the
Indemnified Person by Section 7(b) above.
(d) If the indemnification provided for in this Section 7 is finally
determined by a court of competent jurisdiction to be unavailable to an
indemnified party in respect of any Liabilities referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such Liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other hand from the offering of the Securities or
(ii), if the allocation provided by clause (i), above, is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i), above, but also the relative fault
of the indemnifying parties and the indemnified party, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand, and the Underwriters (and their related Indemnified
Persons), on the other hand, shall be deemed to be in the same proportion as
the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company and its
Subsidiaries bear to the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the Prospectus. The relative
fault of the Company and the Underwriters shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
related to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The indemnity and contribution
obligations of the Company set forth herein shall be in addition to any
liability or obligation the Company may otherwise have to any Indemnified
Person.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation
13
<PAGE> 14
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, judgments, liabilities or expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, no Underwriter
(and its related Indemnified Persons) shall be required to contribute, in
the aggregate, any amount in excess of the amount by which the total
underwriting discount applicable to the Securities purchased by such Underwriter
exceeds the amount of any damages or liabilities which such Underwriter (and its
related Indemnified Persons) has otherwise been required to pay or incur by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
8. Conditions of the Underwriters' Obligations. The several obligations
of the Underwriters to purchase the Securities under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same
force and effect as if made on and as of the Closing Date.
(b) The Registration Statement shall have become effective (or, if a
post-effective amendment is required to be filed pursuant to Rule 430A under
the Act, such post-effective amendment shall have become effective) not later
than 5:00 P.M., New York City time, on the date of this Agreement or at such
later date and time as you may approve in writing, and at the Closing Date no
stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
commenced or shall be pending before or contemplated by the Commission, every
request for additional information on the part of the Commission shall have
been complied within all material respects, and no stop order, suspending the
sale of the Securities in any jurisdiction referred to in Section 5(g) shall
have been issued and no proceeding for that purpose shall have been commenced
or shall be pending or threatened.
(c) No action shall have been taken and no statute, rule, regulation or
order shall have been enacted, adopted or issued by any governmental agency,
body or official which would, as of the Closing Date, prevent the issuance of
the Securities; and subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, there shall not have been any
downgrading, nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating
14
<PAGE> 15
accorded any of the Company's securities by any "nationally recognized
statistical rating organization", as such term is defined for purposes of
Rule 436(g)(2) under the Securities Act.
(d) (i) Since the date of the latest balance sheet included or
incorporated by reference in the Registration Statement and the Prospectus,
there shall not have been any material adverse change, or any development
involving a prospective material adverse change, in the condition, financial
or otherwise, or in the earnings, affairs or business prospects, whether or
not arising in the ordinary course of business, of the Company, (ii) since
the date of the latest balance sheet included or incorporated by reference in
the Registration Statement and the Prospectus there shall not have been any
change, or any development involving a prospective material adverse change,
in the capital stock or in the long-term debt of the Company from that set
forth or incorporated by reference in the Registration Statement and
Prospectus, (iii) the Company and its subsidiaries shall have no liability or
obligation, direct or contingent, which is material to the Company and its
subsidiaries, taken as a whole, other than those reflected in the
Registration Statement and the Prospectus and (iv) on the Closing Date you
shall have received a certificate dated the Closing Date, signed by the
[President] and by the [Chief Financial Officer] of the Company, confirming
the matters set forth in paragraphs (a), (b), (c) and (d) of this Section 8.
(e) You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Underwriter), dated the Closing Date, of Foster,
Pepper & Shefelman/Don Burdick, counsel for the Company, to the effect that:
(i) the Company and each of its subsidiaries has been
duly incorporated, is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation and has
the corporate power and authority required to carry on its business as
it is currently being conducted and to own, lease and operate its
properties;
(ii) the Company and each of its subsidiaries is duly
qualified and is in good standing as a foreign corporation authorized
to do business in each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified could not
reasonably be expected to have a Material Adverse Effect;
(iii) all of the outstanding shares of capital stock
of, or other ownership interests in, each of the Company's
subsidiaries have been duly and validly authorized and issued and are
fully paid and non-assessable, and are owned by the Company, free and
clear of any security interest, claim, lien, encumbrance or adverse
interest of any nature;
15
<PAGE> 16
(iv) the Securities have been duly authorized and,
when executed and authenticated in accordance with the provisions of
the Indenture and delivered to and paid for by the Underwriter in
accordance with the terms of this Agreement, will be entitled to the
benefits of the Indenture and will be valid and binding obligations of
the Company enforceable against the Company in accordance with their
terms except (A) to the extent that the enforceability thereof may be
limited by (1) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights generally and (2) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at
law) and (B) such counsel need not express any opinion with respect to
the enforceability or effect of Section 5.15 of the Indenture;
(v) this Agreement has been duly authorized, executed
and delivered by the Company and is a valid and binding agreement of
the Company enforceable in accordance with its terms (except as rights
to indemnity and contribution hereunder may be limited by applicable
law);
(vi) the Indenture has been duly qualified under the
Trust Indenture Act of 1939, as amended, and has been duly authorized,
executed and delivered by the Company and is a valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms except (A) to the extent that the
enforceability thereof may be limited by (1) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (2) general
principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law) and (B) such counsel
need not express any opinion with respect to the enforceability or
effect of Section 5.15 of the Indenture;
(vii) the Registration Statement has become effective
under the Act, no stop order suspending its effectiveness has been
issued and no proceedings for that purpose are, to the knowledge of
such counsel, pending before or contemplated by the Commission;
(viii) the statements under the captions "Description of
Securities" and "Underwriting" in the Prospectus, as amended or
supplemented, and Item 15 of Part II of the Registration Statement
insofar as such statements constitute a summary of legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents
and proceedings;
(ix) the Company has full power and authority to
execute, deliver and perform this Agreement and to authorize, issue
and sell the Securities as contemplated by this Agreement; each
document filed pursuant to the Exchange Act and incorporated by
reference in the Prospectus, at the time it was filed or last amended
(except for financial statements, the notes thereto and related
schedules and other financial,
16
<PAGE> 17
numerical, statistical or accounting data included or incorporated by
reference therein or omitted therefrom, as to which such counsel need
express no opinion), complied as to form to the applicable
requirements of the Exchange Act;
(x) neither the Company nor any of its subsidiaries
is in violation of its respective charter or by-laws and, to the best
of such counsel's knowledge, neither the Company nor any of its
subsidiaries is in default in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or in any other agreement, indenture or
instrument material to the conduct of the business of the Company and
its subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which it or any of its subsidiaries or
their respective property is bound;
(xi) the execution, delivery and performance of this
Agreement, the Indenture and the Securities and compliance by the
Company with all the provisions hereof and thereof and the
consummation of the transactions contemplated hereby and thereby will
not require any consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental
body (except such as may be required under the securities or Blue Sky
laws of the various states) and will not conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the
charter or by-laws of the Company or any of its subsidiaries or any
agreement, indenture or other instrument to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective properties is bound, or violate or
conflict with any laws, administrative regulations or rulings or court
decrees applicable to the Company or any of its subsidiaries or their
respective properties;
(xii) such counsel does not know of any legal or
governmental proceeding pending or threatened to which the Company or
any of its subsidiaries is a party or to which any of their respective
property is subject which is required to be described in the
Registration Statement or the Prospectus and is not so described, or
of any contract or other document which is required to be described in
the Registration Statement or the Prospectus or is required to be
filed as an exhibit to the Registration Statement which is not
described or filed as required;
(xiii) the Company is not an "investment company" or a
company "controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended;
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, counsel for the Company, representatives of the independent public
accountants for Company, representatives of the Underwriters and counsel for the
Underwriters at which the contents of the Registration Statement, the Prospectus
and related matters were discussed and, although such counsel is
17
<PAGE> 18
not passing upon, and does not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus and has made no independent check or verification
thereof, during the course of such participation (relying as to factual matters
underlying the determination of materiality to a large extent upon the
statements of officers and other representatives of the Company), on the basis
of the foregoing, no facts have come to such counsel's attention that caused
such counsel to believe that the Registration Statement, at the time such
Registration Statement or any post-effective amendment became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus as amended or supplemented, if
applicable, as of its date, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Such counsel need express no belief with respect to the financial
statements, the notes thereto and related schedules and other financial,
statistical, numerical, and accounting data and financial forecasts including
in, or omitted from, the Registra- tion Statement or the Prospectus, or with
respect to the Statement of Eligibility and Qualification of the Trustee under
the TIA on Form T-1.
The opinion of Foster, Pepper & Shefelman/Don Burdick
described in paragraph (e) above shall be rendered to you at the request of the
Company and shall so state therein.
(f) You shall have received on the Closing Date an
opinion, dated the Closing Date, of Skadden, Arps, Slate, Meagher &
Flom, counsel for the Underwriters, in form and substance reasonably
satisfactory to you.
(g) You shall have received letters on and as of the
date hereof as well as on and as of the Closing Date, in form and
substance satisfactory to you, from Arthur Andersen & Co. LLP,
independent public accountants, with respect to the financial
statements and certain financial information contained or incorporated
by reference in the Registration Statement and the Prospectus and
substantially in the form and substance of the letter delivered to you
by Arthur Andersen & Co. LLP on the date of this Agreement.
(h) The Company shall not have failed at or prior to
the Closing Date to perform or comply with any of the agreements
herein contained and required to be performed or complied with by the
Company at or prior to the Closing Date.
(i) Prior to the Closing Date, the Company shall have
furnished to you such further information, certificates and documents
as you may reasonably request.
9. Effective Date of Agreement and Termination. This
Agreement shall become effective upon the later of (i) execution of this
Agreement and (ii) when notification of the effectiveness of the Registration
Statement (or, if a post-effective amend-
18
<PAGE> 19
ment is required to be filed pursuant to Rule 430A under the Act, such
post-effective amendment) has been released by the Commission.
This Agreement may be terminated at any time prior to the
Closing Date by you by written notice to the Company if any of the following
has occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any adverse change or
development involving a prospective adverse change in the condition, financial
or otherwise, of the Company or any of its subsidiaries or the earnings,
affairs, or business prospects of the Company or any of its subsidiaries,
whether or not arising in the ordinary course of business, which would, in your
judgment, make it impracticable to market the Securities on the terms and in
the manner contemplated in the Prospectus, (ii) subsequent to the execution and
delivery of this Agreement, any downgrading shall have occurred in the rating
accorded the Securities or any of the Company's other debt securities by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Securities
Act, or any such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of any
of the Securities or any of the Company's other debt securities, (iii) any
outbreak or escalation of hostilities or other national or international
calamity or crisis or change in economic conditions or in the financial markets
of the United States or elsewhere that, in your judgment, is material and
adverse and would, in your judgment, make it impracticable to market the
Securities on the terms and in the manner contemplated in the Prospectus, (iv)
the suspension or material limitation of trading in securities on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National Market (the
"NNM") or limitation on prices for securities on any such exchange or the NNM,
(v) the enactment, publication, decree or other promulgation of any federal or
state statute, regulation, rule or order of any court or other governmental
authority which in your judgment materially and adversely affects, or will
materially and adversely affect, the business or operations of the Company or
any subsidiary of the Company, (vi) the declaration of a banking moratorium by
either federal or New York State authorities or (vii) the taking of any action
by any federal, state or local government or agency in respect of its monetary
or fiscal affairs which in your judgment has a material adverse effect on the
financial markets in the United States.
If on the Closing Date any one or more of the Underwriters
shall fail or refuse to purchase the Securities which it or they have agreed to
purchase hereunder on such date and the aggregate number of Securities which
such defaulting Underwriter or Underwriters, as the case may be, agreed but
failed or refused to purchase is not more than one-tenth of the total number of
Securities to be purchased on such date by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion
which the number of Securities set forth opposite its name in Schedule I bears
to the total number of Securities which all the non-defaulting Underwriters, as
the case may be, have agreed to purchse, or in such other proportion as you may
specify, to purchase the Securities which such defaulting Underwriter or
Underwriters, as the case may be, agreed but failed or refused to purchase on
such date; provided that in no event shall the number of Securities which any
Underwriter has agreed to purchase pursuant to Section 2 hereof be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such number
of Securities without the written consent of such Underwriter. If on the
Closing Date any Underwriter or Underwriters shall fail or refuse to purchase
Securities and the aggregate number of Securities with respect to which such
default occurs is more than one-tenth of the aggregate number of Securities to
be purchased on such date by all Underwriters and arrangements satisfactory to
you and the Company for purchase of such Securities are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter and the Company. In any such case which does
not result in termination of this Agreement, either you or the Company shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of any such
Underwriter under this Agreement.
10. Miscellaneous. Notices given pursuant to any provision
of this Agreement shall be addressed as follows: (a) if to the Company, to
Price/Costco, Inc., 999 Lake Drive, Issaquah, Washington 98027, with a copy to
[ ] and (b) if to any Underwriter or to you, c/o Donaldson, Lufkin &
Jenrette Securities Corporation, 140 Broadway, New York, New York 10005,
Attention: Syndicate Department, with a copy to Skadden, Arps, Slate, Meagher &
Flom, 300 South Grand Avenue, Suite 3400, Los Angeles, California 90071,
Attention: Nick P. Saggese, or in any case to such other address as the person
to be notified may have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company, its officers
and directors and of the Underwriters
19
<PAGE> 20
set forth in or made pursuant to this Agreement shall remain operative and in
full force and effect, and will survive delivery of and payment for the
Securities, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of the Underwriter or by or on behalf of the
Company, the officers or directors of the Company or any controlling person of
the Company, (ii) acceptance of the Securities and payment for them hereunder
and (iii) termination of this Agreement.
If this Agreement shall be terminated by the Underwriters
because of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, or because of the
occurrence of any event specified in clause (i) or clause (ii) of the second
paragraph of Section 9, the Company agrees to reimburse the Underwriters for all
out-of-pocket expenses (including the fees and disbursements of counsel)
reasonably incurred by them.
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Underwriters, any indemnified party referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Securities from any of the Underwriters merely because of such
purchase.
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE
AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE
CITY OF NEW YORK IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING RELATED TO
THIS AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED HEREBY, IRREVOCABLY WAIVES
ANY DEFENSE OF LACK OF PERSONAL JURISDICTION AND IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN ANY SUCH COURT. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT
MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
Any determination that any provision of this Agreement may be,
or is, unenforceable shall not affect the enforceability of the remainder of
this Agreement.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
20
<PAGE> 21
Please confirm that the foregoing correctly sets forth the
agreement between the Company and the Underwriters.
Very truly yours,
PRICE/COSTCO, INC.
By: _______________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES INC.
BA SECURITIES, INC.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:__________________________
Name:
Title:
21
<PAGE> 22
SCHEDULE I
<TABLE>
<CAPTION>
Number of Securities
Underwriters to be Purchased
------------ --------------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation
J.P. Morgan Securities Inc.
BA Securities, Inc.
--------------------
Total
</TABLE>
22
<PAGE> 1
EXHIBIT 4.2
=============================================================================
PRICE/COSTCO, INC.
and
AMERICAN BANK NATIONAL ASSOCIATION,
Trustee
_____________________
INDENTURE
Dates as of [ ], 1995
_____________________
$300,000,000
[ ]% SENIOR NOTES DUE 2005
=============================================================================
<PAGE> 2
PRICE/COSTCO, INC.
TRUST INDENTURE ACT CROSS REFERENCE SHEET
This Cross Reference Sheet shows the location in this Indenture of the
provisions inserted pursuant to Sections 310-318(a), inclusive, of the Trust
Indenture Act of 1939, as amended. This Cross Reference Sheet shall not, for
any purpose, be considered a part of this Indenture.
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
--------------- ---------
<S> <C> <C>
Section 310 (a)(1), (2) . . . . . . . . . . . . . . . . . . . . 6.09
(a)(3), (4) . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(5) . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . 6.08, 6.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
Section 311 (a), (b) . . . . . . . . . . . . . . . . . . . . . 6.13
(c) . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
Section 312 (a) . . . . . . . . . . . . . . . . . . . . . . . . 7.01, 7.02(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.02(b)
(c) . . . . . . . . . . . . . . . . . . . . . . . . 7.02(c)
Section 313 (a)(1)-(4), (6)-(8) . . . . . . . . . . . . . . . . 7.03(a)
(a)(5) . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b)(1) . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b)(2) . . . . . . . . . . . . . . . . . . . . . . 7.03(b)
(c), (d) . . . . . . . . . . . . . . . . . . . . . 7.03
Section 314 (a) . . . . . . . . . . . . . . . . . . . . . . . . 7.04
(b) . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1), (2) . . . . . . . . . . . . . . . . . . . . 1.03
(c)(3) . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . 1.03
(f) . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
Section 315 (a) . . . . . . . . . . . . . . . . . . . . . . . . 6.01(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . 6.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . 6.01(b)
(d) . . . . . . . . . . . . . . . . . . . . . . . . 6.01(c)
(d)(1) . . . . . . . . . . . . . . . . . . . . . . 6.01(a)
(d)(2) . . . . . . . . . . . . . . . . . . . . . . 6.01(c)(ii)
(d)(3) . . . . . . . . . . . . . . . . . . . . . . 6.01(c)(iii)
(e) . . . . . . . . . . . . . . . . . . . . . . . . 5.14
Section 316 (a) . . . . . . . . . . . . . . . . . . . . . . . . 1.01
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . 5.12
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . 5.13
(a)(2) . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . 5.08
Section 317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . 5.03
(a)(2) . . . . . . . . . . . . . . . . . . . . . . 5.04
(b) . . . . . . . . . . . . . . . . . . . . . . . . 10.03
Section 318 (a) . . . . . . . . . . . . . . . . . . . . . . . . 1.08
</TABLE>
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<PAGE> 3
CONTENTS
ARTICLE ONE - DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
<TABLE>
<S> <C> <C>
SECTION 1.01. Definitions
SECTION 1.02. Incorporation by Reference of Trust Indenture Act
SECTION 1.03. Compliance Certificates and Opinions
SECTION 1.04. Form of Documents Delivered to Trustee
SECTION 1.05. Acts of Holders
SECTION 1.06. Notices, Etc., to Trustee and Company
SECTION 1.07. Notices to Holders; Waiver
SECTION 1.08. Conflict With Trust Indenture Act
SECTION 1.09. Effect of Headings and Table of Contents
SECTION 1.10. Successors and Assigns
SECTION 1.11. Separability Clause
SECTION 1.12. Benefits of Indenture
SECTION 1.13. Governing Law
SECTION 1.14. Legal Holidays
ARTICLE TWO - FORM OF SECURITIES
SECTION 2.01. Forms Generally
SECTION 2.02. Form of Face of Security
SECTION 2.03. Form of Reverse of Security
SECTION 2.04. Form of Trustee's Certificate of Authentication
ARTICLE THREE - THE SECURITIES
SECTION 3.01. Title and Terms
SECTION 3.02. Denominations
SECTION 3.03. Execution, Authentication, Delivery and Dating
SECTION 3.04. Temporary Securities
SECTION 3.05. Registration, Registration of Transfer and Exchange
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 3.06. Mutilated, Destroyed, Lost or Stolen Securities
SECTION 3.07. Payment of Interest; Interest Rights Preserved
SECTION 3.08. Persons Deemed Owners
SECTION 3.09. Cancellation
SECTION 3.10. Computation of Interest
ARTICLE FOUR - LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 4.01. Option to Effect Legal Defeasance or Covenant Defeasance
SECTION 4.02. Legal Defeasance and Discharge
SECTION 4.03. Covenant Defeasance
SECTION 4.04. Conditions to Legal or Covenant Defeasance
SECTION 4.05. Deposited U.S. Legal Tender and U.S. Government Obligations
to Be Held in Trust; Other Miscellaneous Provisions
SECTION 4.06. Repayment to Company
SECTION 4.07. Reinstatement
ARTICLE FIVE - REMEDIES
SECTION 5.01. Events of Default
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee
SECTION 5.04. Trustee May File Proofs of Claim
SECTION 5.05. Trustee May Enforce Claims Without Possession of Securities
SECTION 5.06. Application of Money Collected
SECTION 5.07. Limitation on Suits
SECTION 5.08. Unconditional Right of Holders to Receive Principal,
Premium and Interest
SECTION 5.09. Restoration of Rights and Remedies
SECTION 5.10. Rights and Remedies Cumulative
SECTION 5.11. Delay or Omission Not Waiver
SECTION 5.12. Control by Holders
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 5.13. Waiver of Past Defaults
SECTION 5.14. Undertaking for Costs
SECTION 5.15. Waiver of Usury, Stay or Extension Laws
ARTICLE SIX - THE TRUSTEE
SECTION 6.01. Certain Duties and Responsibilities
SECTION 6.02. Notice of Defaults
SECTION 6.03. Certain Rights of Trustee
SECTION 6.04. Not Responsible for Recitals or Issuance of Securities
SECTION 6.05. May Hold Securities
SECTION 6.06. Money Held in Trust
SECTION 6.07. Compensation and Reimbursement
SECTION 6.08. Disqualification; Conflicting Interests
SECTION 6.09. Corporate Trustee Required; Eligibility
SECTION 6.10. Resignation and Removal; Appointment of Successor
SECTION 6.11. Acceptance of Appointment by Successor
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business
SECTION 6.13. Preferential Collection of Claims Against Company
ARTICLE SEVEN - HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.01. Company to Furnish Trustee Names and Addresses of Holders
SECTION 7.02. Preservation of Information; Communications to Holders
SECTION 7.03. Reports by Trustee
SECTION 7.04. Reports by Company
SECTION 7.05. Establishment of Record Date
ARTICLE EIGHT - CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.01. Company May Consolidate, Etc., Only on Certain Terms
SECTION 8.02. Successor Corporation Substituted
ARTICLE NINE - SUPPLEMENTAL INDENTURES
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C> <C>
SECTION 9.01. Supplemental Indentures Without Consent of Holders
SECTION 9.02. Supplemental Indentures With Consent of Holders
SECTION 9.03. Execution of Supplemental Indentures
SECTION 9.04. Effect of Supplemental Indentures
SECTION 9.05. Conformity With Trust Indenture Act
SECTION 9.06. Reference in Securities to Supplemental Indentures
ARTICLE TEN - COVENANTS
SECTION 10.01. Payment of Principal and Interest
SECTION 10.02. Maintenance of office or Agency
SECTION 10.03. Money for Security Payments to Be Held in Trust
SECTION 10.04. Existence
SECTION 10.05. Maintenance of Properties
SECTION 10.06. Payment of Taxes and Other Claims
SECTION 10.07. Statement by Officers as to Default; Notice of Certain Events
SECTION 10.08. Limitations on Liens
SECTION 10.09. Limitations on Sale and Leaseback
SECTION 10.10. Waiver of Certain Covenants
</TABLE>
6
<PAGE> 7
INDENTURE
INDENTURE, dated as of [ ], 1995, between PRICE/COSTCO,
INC., a Delaware corporation (herein called the "Company"), and AMERICAN BANK
NATIONAL ASSOCIATION, a national banking association duly incorporated and
existing under the laws of the United States of America, as Trustee (herein
called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
its [ ]% Senior Notes Due 2005 (the "Securities") and, in order to provide,
among other things, for the authentication, delivery and administration
thereof, the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by
the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their terms, have been done.
All things necessary to make this Indenture a valid agreement
of the Company and the Trustee, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which
the Securities are made, executed, authenticated, issued and delivered, the
Company and the Trustee covenant and agree with each other, for the equal and
proportionate benefit of all Holders (as defined below) of the Securities, as
follows:
ARTICLE ONE - DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. DEFINITIONS
For all purposes of this Indenture and any indenture
supplemental hereto, except as otherwise expressly provided or unless the
context otherwise requires:
(a) the terms defined in this Article One have the
meanings assigned to them in this Article One and include the plural as well as
the singular;
(b) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly provided, the
term "generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles used by
the Company as are generally accepted at the date of such computation; and
(c) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision. Certain terms, used
principally in Article Six, are defined in Section 1.02.
"Act" when used with respect to any Holder has the meaning
specified in Section 1.05.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
7
<PAGE> 8
"Attributable Debt" with respect to any sale leaseback
transaction restricted by Section 10.09 means the lesser of (i) the total net
amount of rent required to be paid during the remaining base term of the
related lease or until the earliest date on which the lessee may terminate such
lease upon payment of a penalty or a lump-sum termination payment (in which
case the total net rent shall include such penalty or termination payment),
discounted at the interest rate borne by the Securities, computed semi-
annually, or (ii) the sale price of the property so leased multiplied by a
fraction the numerator of which is the remaining base term of the related lease
(expressed in months) and the denominator of which is the case term of such
lease (expressed in months).
"Authorized Newspaper" means a newspaper of general
circulation in the New York, New York area, printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays. Whenever successive weekly publications in an
Authorized Newspaper are required hereunder they may be made (unless otherwise
expressly provided herein) on the same or different days of the week and in the
same or in different Authorized Newspapers.
"Bankruptcy Law" means Title II, U.S. Code or any similar
federal, state or foreign law for the relief of debtors.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in the States of
New York, Minnesota or Washington are authorized or obligated by law or
executive order to close.
"Capital Stock" means, for any Corporation, any and all
shares, interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in (however designated) capital stock issued
by such Corporation.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
8
<PAGE> 9
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman of the Board, its
President, a Vice Chairman or a Vice President, and by its Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to
the Trustee.
"Consolidated Net Tangible Assets" means the aggregate amount
of assets (less applicable reserves and other properly deductible items) after
deducting therefrom (a) all current liabilities and (b) all goodwill,
tradenames, trademarks, patents, unamortized debt discount and expense (to the
extent included in said aggregate amount of assets) and other like intangibles,
all as set forth on the most recent consolidated balance sheet of the Company
and its consolidated Subsidiaries and computed in accordance with GAAP.
"Consolidated Subsidiary" means, for any person, each
Subsidiary of such person (whether now existing or hereafter created or
acquired) the financial statements of which are or are required to be
consolidated for financial statement reporting purposes with the financial
statements of such person in accordance with GAAP.
"Corporate Trust Office" means the principal office of the
Trustee at which at any particular time its corporate trust business shall be
principally administered, which office is, at the date as of which this
Indenture is dated, located at 180 East Fifth Street, St. Paul, Minnesota
55101.
"Corporation" includes corporations, associations, companies
and business trusts.
"Debt" means indebtedness for money borrowed.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 3.07.
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exempted Indebtedness" means as of any particular time the
sum of (i) all then-outstanding indebtedness for borrowed money of the Company
and Restricted Subsidiaries incurred after the date hereof and secured by any
mortgage, security interest, pledge or lien other than those permitted by
paragraph (a) of Section 10.08, and (ii) all Attributable Debt with respect to
Sale and Leaseback Transactions entered into by the Company and Restricted
Subsidiaries after the date hereof other than those permitted by paragraph (a)
of Section 10.09.
"GAAP" means United States generally accepted accounting
principles as in effect on the date of this Indenture.
"Holder" means a Person in whose name a Security is registered
in the Securities Register.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
9
<PAGE> 10
"Maturity," when used with respect to one of the Securities,
means the date on which the principal of such Security becomes due and payable
as therein or herein provided, whether at the Stated Maturity or by declaration
of acceleration or otherwise.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, the President, a Vice Chairman or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee, which shall to the
extent applicable contain the statements required by Section 1.03.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company and who shall be acceptable to the Trustee,
which shall to the extent applicable contain the statements required by Section
1.03.
"Outstanding," when used with respect to the Securities,
means, as of the date of determination, all Securities theretofore
authenticated and delivered under this Indenture, except:
(i) Securities theretofore cancelled by the
Trustee or delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose
payment money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own Paying
Agent) for the Holders of such Securities; and
(iii) Securities in exchange for or in lieu of
which other Securities have been authenticated and delivered pursuant to this
Indenture;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction
of the Trustee the pledgee's right so to act with respect to such Securities
and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to
pay the principal of or interest on any Securities on behalf of the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 3.06 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
"Principal Property" means any right, title or interest
(including leasehold interest) of the Company or any Restricted Subsidiary in,
to or under real property or improvements to real property, which right, title
or interest has a book value of at least $2 million.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the [ ] or [ ] (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.
10
<PAGE> 11
"Responsible Officer," when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer or assistant trust officer,
the controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above-designated officers, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Subsidiary" means any Subsidiary that owns,
operates or leases one or more Principal Properties.
"Secured Debt" means indebtedness for money borrowed which is
secured by a mortgage, pledge, lien, security interest or encumbrance on
property of the Company or any Restricted Subsidiary, but shall not include
guarantees arising in connection with the sale, discount, guarantee or pledge
of notes, chattel mortgages, leases, accounts receivable, trade acceptances and
other paper arising, in the ordinary course of business, out of installment or
conditional sales to or by, or transactions involving title retention with,
distributors, dealers or other customers, of merchandise, equipment or service.
"Securities" has the meaning stated in the first recital of
this Indenture and more particularly means any securities authenticated and
delivered under this Indenture.
"Securities Register" and "Securities Registrar" have the
respective meanings specified in Section 3.05.
"Significant Subsidiary" of a person means a Subsidiary of
such person which, together with its Consolidated Subsidiaries, has assets or
revenues equal to or greater than ten percent (10%) of the assets or revenues,
respectively, of such person and its Subsidiaries on a consolidated basis.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section 3.07.
"Stated Maturity," when used with respect to any Security or
any installment of interest thereon, means the date specified in such Security
as the fixed date on which the principal of such Security or such installment
of interest is due and payable.
"Subsidiary" means a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries.
"Trustee" means the person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended, as in force at the date as of which this instrument was executed,
except as provided in Section 9.05.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"Voting Stock" means stock which ordinarily has voting power
for the election of directors, whether at all times or only so long as no
senior class of stock has such voting power by reason of any contingency.
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<PAGE> 12
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
Whenever this Indenture refers to a provision of the Trust
Indenture Act, the provision is incorporated by reference in and made a part of
this Indenture. The following Trust Indenture Act terms used in this Indenture
have the following meanings:
"Bankruptcy Act" means the Bankruptcy Act (Title 11 of the
United States Code).
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the Securities means the Company or any other
obligor on the Securities.
All the other Trust Indenture Act terms used in this Indenture
that are defined by the Trust Indenture Act, defined by Trust Indenture Act
reference to another statute or defined by Commission rule have the meanings
assigned to them thereby.
SECTION 1.03. COMPLIANCE CERTIFICATES AND OPINIONS
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or request,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the definitions
herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of each such
individual, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been complied with.
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<PAGE> 13
SECTION 1.04. FORM OF DOCUMENTS DELIVERED TO TRUSTEE
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate or Opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 1.05. ACTS OF HOLDERS
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Indenture to be given
or taken by Holders of the Outstanding Securities may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Holders in person or by an agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee and, where it is
hereby expressly required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holder or Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01) conclusive in favor of the Trustee and the
Company if made in the manner provided in this Section 1.05.
(b) The fact and date of the execution by any Person of
any such instrument or writing may be proved by the affidavit of a witness of
such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Where such execution is by a signer acting in a capacity other than
his individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or the authority of the person executing the same,
may also be proved in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the
Securities Register.
(d) Any request, demand, authorization, direction,
notice, consent, waiver or other Act of the Holder of any Security shall bind
every future Holder of the same Security and the Holder of every Security
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
(e) If the Company shall solicit from the Holders any
request, demand, authorization, direction, notice, consent, waiver or other
Act, the Company may, at its option, by or pursuant to a Board Resolution, fix
in advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent,
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waiver or other Act, but the Company shall have no obligation to do so. If
such a record date is fixed, such request, demand, authorization, direction,
notice, consent, waiver or other Act may be given before or after such record
date, but only the Holders of record at the close of business on such record
date shall be deemed to be Holders for the purpose of determining whether
Holders of the requisite proportion of Outstanding Securities have authorized
or agreed or consented to such request, demand, authorization, direction,
notice, consent, waiver or other Act, and for that purpose the Outstanding
Securities shall be computed as of such record date; provided that no such
authorization, agreement or consent by the Holders on such record date shall be
deemed effective unless it shall become effective pursuant to the provisions of
this Indenture not later than six months after the record date.
SECTION 1.06. NOTICES, ETC., TO TRUSTEE AND COMPANY
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at its Corporate Trust Office, Attention:
Corporate Trust Administration, or
(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office or at any other address
previously furnished in writing to the Trustee by the Company, Attention:
[Senior Vice President and Chief Financial Officer].
SECTION 1.07. NOTICES TO HOLDERS; WAIVER
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the
Securities Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice,
nor any defect in any notice so mailed, to any particular Holder shall affect
the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service,
or by reason of any other cause, it shall be impracticable to give notice as
required by this Indenture, then such method of notification as shall be made
with the approval of the Trustee shall constitute a sufficient notice for every
purpose hereunder.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 1.08. CONFLICT WITH TRUST INDENTURE ACT
If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this Indenture by
any of the provisions of the Trust Indenture Act, such required provision shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or
excluded, as the case may be.
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SECTION 1.09. EFFECT OF HEADINGS AND TABLE OF CONTENTS
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 1.10. SUCCESSORS AND ASSIGNS
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 1.11. SEPARABILITY CLAUSE
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 1.12. BENEFITS OF INDENTURE
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder and the Holders of Securities, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 1.13. GOVERNING LAW
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN
IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS INDENTURE AND THE SECURITIES, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
TRUSTEE OR ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY
OTHER JURISDICTION.
SECTION 1.14. LEGAL HOLIDAYS
In any case where any Interest Payment Date or Stated Maturity
of any Security shall not be a Business Day, then (notwithstanding any other
provision of this Indenture or of the Securities) payment of principal of (and
premium, if any) and interest on such Security need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the Interest Payment Date or at the Stated Maturity; and
if so made, no interest shall accrue for the period from and after such
Interest Payment Date or Stated Maturity, as the case may be.
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<PAGE> 16
ARTICLE TWO - FORM OF SECURITIES
SECTION 2.01. FORMS GENERALLY
The Securities and the Trustee's certificates of
authentication shall be in substantially the forms set forth in this Article
Two, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have
imprinted or otherwise reproduced thereon such letters, numbers or other marks
of identification and such legends or endorsements placed thereon, not
inconsistent with the provisions of this Indenture, as may be required to
comply with any law or with any rules or regulations pursuant thereto, or with
any rules of any securities exchange or to conform to general usage, all as
determined by the officers executing such Securities, as evidenced by such
execution.
The definitive Securities shall be printed, lithographed or
engraved or produced by any combination of these methods on steel engraved
borders or may be produced in any other manner permitted by the rules of any
securities exchange on which the Securities may be listed, all as determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.
SECTION 2.02. FORM OF FACE OF SECURITY
PRICE/COSTCO, INC.
[ ]% SENIOR NOTES DUE 2005
No. __________ $__________
Price/Costco, Inc., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company," which
term includes any successor Person under the Indenture hereinafter referred
to), for value received, hereby promises to pay to __________, or registered
assigns, the principal sum of __________ Dollars on [ ], and to pay
interest thereon from [ ] or from the most recent Interest Payment
Date to which interest has been paid or duly provided for, semiannually on June
[ ] and December [ ] of each year, commencing [ ], at the rate
of [ ]% per annum, until the principal hereof is paid or made available for
payment. The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest which shall be the [ ] or [ ] (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture. Payment of the principal of (and premium, if
any) and interest on this Security will be made at the office or agency of the
Company maintained for that purpose in St. Paul, Minnesota, or in [Seattle],
Washington, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Securities Register.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
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<PAGE> 17
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed under its corporate seal.
Price/Costco, Inc.
By:
_________________________
Title:
_________________________
Attest:
_________________________
Secretary
SECTION 2.03. FORM OF REVERSE OF SECURITY
This Security is one of a duly authorized issue of Securities of
the Company designated as its [ ]% Senior Notes Due 2005 (herein called the
"Securities"), limited in aggregate principal amount to $300,000,000, issued
under an Indenture, dated as of [ ], 1995 (herein called the "Indenture"),
between the Company and American Bank National Association, as Trustee (herein
called the "Trustee," which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered.
The Securities are not subject to redemption, whether at the
option of the Company or otherwise.
The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries to, among other things, incur Liens,
enter into sale and leaseback transactions and merge, consolidate or convey,
transfer or lease its properties and assets substantially as an entirety. The
limitations are subject to a number of important qualifications and exceptions.
If an Event of Default shall occur and be continuing, the
principal of all the Securities may be declared due and payable in the manner
and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment hereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities
under the Indenture at any time by the Company and the Trustee with the consent
of the Holders of a majority in aggregate principal amount of the Securities at
the time Outstanding. The Indenture also contains provisions permitting the
Holders of the majority in aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration or transfer hereof or in exchange hereof or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Security as provided in the Indenture.
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<PAGE> 18
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registerable in the
Securities Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company in St. Paul, Minnesota, or in
Seattle, Washington, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Securities Registrar
duly executed by, the Holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Securities, of authorized denominations and for
the same aggregate principal amount, will be issued to the designated
transferee or transferees.
The Securities are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
the Securities are exchangeable for a like aggregate principal amount of
Securities of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company will cause CUSIP
numbers to be printed on the Securities as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
[FORM OF ASSIGNMENT]
I or we assign this Security to
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying
number of assignee _____________ and irrevocably appoint ___________ agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Date: ________________ Signed: _____________________________
(Sign exactly as your name appears on the other side of this Security)
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<PAGE> 19
- -------------------------------------
Signature guarantee should be made by a guarantor institution participating in
the Securities Transfer Agents Medallion Program or in such other guarantee
program acceptable to the Trustee.
SECTION 2.04. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the
within-mentioned Indenture.
Dated:
AMERICAN BANK NATIONAL ASSOCIATION
as Trustee
By:
_________________________
Authorized Officer
ARTICLE THREE - THE SECURITIES
SECTION 3.01. TITLE AND TERMS
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $[ ],
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section
3.04, 3.05, 3.06 or 9.06.
The Securities shall be known and designated as "[ ]% Senior
Notes Due 2005" of the Company. Their Stated Maturity shall be [ ],
1995, and they shall bear interest at the rate of [ ]% per annum, from
[ ], 1995 or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, as the case may be, payable semi-annually on
June [ ] and December [ ], commencing December [ ], 1995, until the
principal thereof is paid or made available for payment.
The principal of (and premium, if any) and interest on the
Securities shall be payable at the office or agency of the Company in St. Paul,
Minnesota, or in [Seattle], Washington, maintained for such purpose and at any
other office or agency maintained by the Company for such purpose; provided,
however, that at the option of the Company payment of principal and interest
may be made by check mailed to the address of the Person entitled thereto as
such address shall appear in the Securities Register.
SECTION 3.02. DENOMINATIONS
The Securities shall be issuable only in definitive registered
form without coupons and only in denominations of $1,000 and any integral
multiple thereof.
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<PAGE> 20
SECTION 3.03. EXECUTION, AUTHENTICATION, DELIVERY AND DATING
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President, a Vice Chairman or one of its Vice
Presidents under its corporate seal reproduced thereon attested by its
Secretary, one of its Vice Presidents or one of its Assistant Secretaries. The
signature of any of these officers on the Securities may be manual or
facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Securities; and the Trustee in
accordance with such Company Order shall authenticate and deliver such
Securities as in this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on
such Security a certificate of authentication substantially in the form
provided for herein executed by the Trustee by manual signature, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
SECTION 3.04. TEMPORARY SECURITIES
Pending the preparation of definitive Securities, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued, with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to
Section 10.02, without charge to the Holder. Upon surrender for cancellation
of any one or more temporary Securities, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Securities. Until so exchanged the temporary Securities
shall in all respects be entitled to the same benefits under this Indenture as
definitive Securities.
SECTION 3.05. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
The Company shall cause to be kept at the Corporate Trust Office
of the Trustee a register (the register maintained in such office and in any
other office or agency designated pursuant to Section 10.02 being herein
sometimes collectively referred to as the "Securities Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities and of transfers of Securities. The
Trustee is hereby appointed "Securities Registrar" for the purposes of
registration and transfer of Securities as herein provided.
Upon surrender for registration of transfer of any Security at
an office or agency of the Company designated pursuant to Section 10.02 for
such purpose, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of any authorized denominations, and of a like aggregate
principal amount.
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<PAGE> 21
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations and of a like aggregate
principal amount upon surrender of the Securities to be exchanged at such
office or agency, and upon payment, if the Company shall so require, of the
charges hereinafter provided. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company,
evidencing the same debt and entitled to the same benefits under this Indenture
as the Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or exchange shall (if so required by the Company or the Securities
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Securities Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer
or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 3.04 or 9.06 not involving any transfer.
SECTION 3.06. MUTILATED, DESTROYED, LOST OR STOLEN SECURITIES
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a new Security of like tenor and principal amount bearing a
number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and upon its request the Trustee
shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section 3.06,
the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section 3.06 in lieu
of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Indenture equally and proportionately
with any and all other Securities duly issued hereunder.
The provisions of this Section 3.06 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
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<PAGE> 22
SECTION 3.07. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name such Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest; provided, however, that each installment of interest on any Security
may at the Company's option be paid by mailing a check for such interest,
payable to or upon the written order of the Person entitled thereto pursuant to
Section 3.08, to the address of such Person as it appears on the Securities
Register. At the option of the Company, interest on any Security may be paid
by wire transfer to an account maintained by the person entitled thereto as
specified in the Securities Register.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date; and, except as
hereinafter provided, such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in Section 3.07(a) or (b):
(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security and the date
of the proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 and not less than 10 days
prior to the date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date and, in the name
and at the expense of the Company, shall cause notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address as it appears in the
Securities Register not less than 10 days prior to such Special Record Date.
The Trustee may, in its discretion, in the name and at the expense of the
Company, cause a similar notice to be published at least once in an Authorized
Newspaper in the Borough of Manhattan, The City of New York, but such
publication shall not be a condition precedent to the establishment of such
Special Record Date. Notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names the Securities
(or their respective Predecessor Securities) are registered on such Special
Record Date and shall no longer be payable pursuant to Section 3.07(b).
(b) The Company may make payment of any Defaulted Interest
on the Securities in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be listed,
and upon such notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment pursuant to this
Section 3.07(b), such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 3.07, each
Security delivered under this Indenture upon transfer of or in exchange for or
in lieu of any other Security shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Security.
SECTION 3.08. PERSONS DEEMED OWNERS
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and
premium, if any) and (subject to Section 3.07) interest, if any, on such
Security and for all other purposes whatsoever, whether or not such Security be
overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary.
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<PAGE> 23
SECTION 3.09. CANCELLATION
All Securities surrendered for payment, redemption, registration
of transfer or exchange shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in
lieu of or in exchange for any Securities cancelled as provided in this Section
3.09, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be destroyed unless otherwise directed by
a Company Order.
SECTION 3.10. COMPUTATION OF INTEREST
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
ARTICLE FOUR - LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 4.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE
The Company may elect to have either Section 4.2 or 4.3
be applied to all outstanding Securities upon compliance with the conditions
set forth below in this Article IV.
SECTION 4.02. LEGAL DEFEASANCE AND DISCHARGE
Upon the Company's exercise under Section 4.1 of the
option applicable to this Section 4.2, the Company shall be deemed to have been
discharged from its obligations with respect to all outstanding Securities on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, such Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire indebtedness represented
by the outstanding Securities, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 4.5 and the other Sections of
this Indenture referred to in (a) and (b) below, and to have satisfied all its
other obligations under such Securities and this Indenture (and the Trustee,
on demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
holders of outstanding Securities to receive solely from the trust fund
described in Section 4.4, and as more fully set forth in such section, payments
in respect of the principal of, premium, if any, and interest on such
Securities when such payments are due, (b) the Company's obligations with
respect to such Securities under Sections 3.04, 3.05, 3.06 and 10.2, (c) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (d) this Article IV. Subject
to compliance with this Article IV, the Company may exercise its option under
this Section 4.2 notwithstanding the prior exercise of its option under Section
4.3 with respect to the Securities.
SECTION 4.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 4.1 of the
option applicable to this Section 4.3, the Company shall be released from its
obligations under the covenants contained in Sections 10.05, 10.07, 10.08 and
10.09 and Article VIII with respect to the outstanding Securities on and after
the date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Securities shall thereafter be deemed not "outstanding"
for the purposes of any direction, waiver, consent or declaration or act of
holders thereof (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder. For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Securities, the Company need not comply with and shall have
no liability in respect of any term, condition or limitation set forth in any
such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document, but, except as
specified above, the remainder of this Indenture and such Securities shall be
unaffected thereby. In addition, upon the Company's
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exercise under Section 4.1 of the option applicable to this Section 4.3,
Sections 5.01(c) and 5.01(d) shall not constitute Events of Default.
SECTION 4.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE
The following shall be the conditions to the
application of either Section 4.2 or Section 4.3 to the outstanding Securities:
(a) (1) The Company shall irrevocably have
deposited or caused to be deposited with the Trustee as trust funds in trust
for the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the holders of such
Securities, (i) U.S. Legal Tender in an amount, or (ii) U.S. Government
Obligations which through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will provide, not later than one
day before the due date of any payment, U.S. Legal Tender in an amount, or
(iii) a combination thereof, in such amounts, as will be sufficient, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
and discharge and which shall be applied by the Trustee to pay and discharge
the principal of and interest on the outstanding Securities on the stated
maturity of such principal or installment of principal or interest; provided
that the Trustee shall have been irrevocably instructed to apply such U.S.
Legal Tender or the proceeds of such U.S. Government Obligations to said
payments with respect to the Securities and (2) the holders of the Securities
must have a valid and perfected exclusive security interest in such trust;
(b) In the case of an election under Section
4.2, the Company shall have delivered to the Trustee an opinion of counsel in
the United States reasonably satisfactory to the Trustee confirming that (i)
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (ii) since the date hereof, there has been a change
in the applicable federal income tax law, in either case to the effect that,
and based thereon such opinion shall confirm that, the holders of the
outstanding Securities will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance has not occurred;
(c) In the case of an election under Section
4.3, the Company shall have delivered to the Trustee an opinion of counsel in
the United States to the effect that the holders of the outstanding Securities
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax in
the same amount, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) No Default or Event of Default with
respect to the Securities shall have occurred and be continuing on the date of
such deposit or, in so far as Section 5.01(e), 5.01(f) or 5.01(g) is concerned,
at any time in the period ending on the 91st day after the date of such deposit
(it being understood that this condition shall not be deemed satisfied until
the expiration of such period);
(e) Such Legal Defeasance or Covenant
Defeasance shall not result in a breach or violation of, or constitute a
default under, this Indenture or any other material agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound;
(f) In the case of an election under either
Section 4.2 or 4.3, the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit made by the Company pursuant to
its election under Section 4.2 or 4.3, as applicable, was not made by the
Company with the intent of preferring the Holders over other creditors of the
Company or with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(g) The Company shall have delivered to the
Trustee an Officers' Certificate and an opinion of counsel in the United
States, each stating that all conditions precedent provided for relating to
either the Legal
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Defeasance under Section 4.2 or the Covenant Defeasance under Section 4.3 (as
the case may be) have been complied with as contemplated by this Section 4.4.
SECTION 4.05. DEPOSITED U.S. LEGAL TENDER AND U.S. GOVERNMENT OBLIGATIONS TO
BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS
Subject to Section 4.6, all money and U.S. Government
Obligations (including the proceeds thereof) deposited with the Trustee
pursuant to Section 4.4 in respect of the outstanding Securities shall be held
in trust and applied by the Trustee, in accordance with the provisions of such
Securities and this Indenture, to the payment, either directly or through any
Paying Agent as the Trustee may determine, to the Holders of such Securities of
all sums due and to become due thereon in respect of principal, premium, if
any, and interest, but such money need not be segregated from other funds
except to the extent required by law.
The Company agrees to pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against the U.S.
Legal Tender or U.S. Government Obligations deposited pursuant to Section 4.4
or the principal and interest received in respect thereof other than any such
tax, fee or other charge which by law is for the account of the Holders of the
outstanding Securities.
Anything in this Article IV to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the request of the Company any U.S. Legal Tender or U.S. Government
Obligations held by it as provided in Section 4.4 which, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the
opinion delivered under Section 4.4(a)), are in excess of the amount thereof
which would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 4.06. REPAYMENT TO COMPANY
Any money deposited with the Trustee or any Paying
Agent, or then held by the Company, in trust for the payment of the principal
of or interest on any Security and remaining unclaimed for two years after such
principal or interest has become due and payable shall be paid to the Company
on its request; and the Holder of such Security shall thereafter look only to
the Company for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Company cause to be published
once, in the New York Times and The Wall Street Journal (national edition),
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 4.07. REINSTATEMENT
If the Trustee or Paying Agent is unable to apply any
U.S. Legal Tender or U.S. Government Obligations in accordance with Section 4.2
or 4.3, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 4.2 or 4.3 until such time as the Trustee or Paying Agent
is permitted to apply such money in accordance with Section 4.2 and 4.3, as the
case may be; provided, however, that, if the Company makes any payment of
principal of or interest on any Security following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders to
receive such payment from the money held by the Trustee or Paying Agent.
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ARTICLE FIVE - REMEDIES
SECTION 5.01. EVENTS OF DEFAULT
"Event of Default" with respect to the Securities, wherever used
herein, means any one of the following events which shall have occurred and be
continuing (whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(a) default in the payment of the principal of (and
premium, if any, on) any Security as and when the same shall become due and
payable, either at its Maturity or otherwise; or
(b) default in the payment of any installment of interest
on any Security when it becomes due and payable, and the continuance of such
default for a period of 30 days; or
(c) default in the performance, or breach, of any covenant
or warranty of the Company in this Indenture or the Securities [in respect of
the Securities] (other than a covenant or warranty [in respect of the
Securities], a default in performance or breach of which is elsewhere in this
Section 5.01 specifically dealt with), and continuance of such default or
breach for a period of 60 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least 25% in aggregate principal amount of the Outstanding
Securities affected thereby, a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(d) a default under any bond, debenture, note or other
evidence of Debt of the Company or any Subsidiary (including any Securities) or
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Debt of the Company or any
Subsidiary, whether such Debt now exists or shall hereafter be created, which
default shall involve the failure to pay principal of, or interest on, Debt in
excess of $10,000,000 at the stated maturity thereof or shall have resulted in
Debt in excess of $10,000,000 becoming or being declared due and payable prior
to the date on which it would otherwise have become due and payable, without
such acceleration having been rescinded, stayed or annulled, or such Debt
having been discharged or, in the case of a Debt contested in good faith by the
Company, a bond, letter of credit, escrow deposit or other cash equivalent in
an amount sufficient to discharge such Debt having been set aside by the
Company, within a period of 60 days after there shall have been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in aggregate principal amount of
the Outstanding Securities a written notice specifying such default and
requiring the Company to cause such acceleration to be rescinded or annulled or
cause such Debt to be discharged and stating that such notice is a "Notice of
Default" hereunder; or
(e) the filing by the Company or any Significant Subsidiary
of the Company (in either case, a "Debtor") of a petition commencing a
voluntary case under section 301 of title 11 of the United States Code, or the
commencement by a Debtor of a case or proceeding under any other Bankruptcy Law
seeking the adjustment, restructuring, or discharge of the debts of such
Debtor, or the liquidation of such Debtor, including without limitation the
making by a Debtor of an assignment for the benefit of creditors; or the taking
of any corporate action by a Debtor in furtherance of or to facilitate,
conditionally or otherwise, any of the foregoing; or
(f) the filing against a Debtor of a petition commencing an
involuntary case under section 303 of title 11 of the United States Code, with
respect to which case (i) such Debtor consents or fails to timely object to the
entry of, or fails to seeks the stay and dismissal of, an order of relief, (ii)
an order for relief is entered and is pending and unstayed on the 60th day
after the filing of the petition commencing such case, or if stayed, such stay
is subsequently lifted so that such order for relief is given full force and
effect, or (iii) no order for relief is entered, but the court in which such
petition was filed has not entered an order dismissing such petition by the
60th day after the filing thereof; or the commencement under any other
Bankruptcy Law of a case or proceeding against a Debtor seeking the
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adjustment, restructuring, or discharge of the debts of such Debtor, or the
liquidation of such Debtor, which case or proceeding is pending without having
been dismissed on the 60th day after the commencement thereof; or
(g) the entry by a court of competent jurisdiction of a
judgment, decree or order appointing a receiver, liquidator, trustee, custodian
or assignee of a Debtor or of the property of a Debtor, or directing the
winding up or liquidation of the affairs or property of a Debtor, and (i) such
Debtor consents or fails to timely object to the entry of, or fails to seek the
stay and dismissal of, such judgment, decree, or order, or (ii) such judgment,
decree or order is in full force and effect and is not stayed on the 60th day
after the entry thereof, or, if stayed, such stay is thereafter lifted so that
such judgment, decree or order is given full force and effect.
SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT
If an Event of Default occurs and is continuing, then and in
every such case, unless the principal all the Securities shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of the Securities then outstanding may declare
the principal of all the Securities to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by Holders), and
upon any such declaration such principal shall become and shall be immediately
due and payable, anything in this Indenture or in the Security to the contrary
notwithstanding.
At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article Five provided, the
Holders of a majority in aggregate principal amount of the Outstanding
Securities, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a
sum sufficient to pay
(i) all overdue installments of interest on the
Securities,
(ii) the principal of (and premium, if any, on) any
Securities which have become due otherwise than by such declaration of
acceleration, with interest thereon from the date such principal became due at
the rate borne by the Securities,
(iii) to the extent that payment of such interest is
lawful, interest upon overdue installments of interest at the rate borne by the
Securities, and
(iv) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel; and
(b) all Events of Default, other than the nonpayment of the
principal of Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair
any right consequent thereon.
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SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE
The Company covenants that if default is made in the payment of
(a) any installment of interest on any Security when such interest becomes due
and payable and such default continues for a period of [30] days or (b) the
principal of (and premium, if any, on) any Security at the Maturity thereof or
otherwise, the Company will, upon demand of the Trustee, pay to the Trustee,
for the benefit of the Holders of such Securities, the whole amount then due
and payable on such Securities for principal (and premium, if any) or interest,
if any, or both, as the case may be, with interest upon the overdue principal
and, to the extent that payment of such interest shall be legally enforceable,
upon overdue installments of interest, at the rate per annum borne by the
Securities during the period of such default; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities
so affected and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Securities so affected, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and the rights of
the Holders by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.04. TRUSTEE MAY FILE PROOFS OF CLAIM
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition
or other judicial proceeding relative to the Company or any other obligor upon
the Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the amount of principal
(and premium, if any) and interest, if any, owing and unpaid in respect of the
Securities and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such judicial
proceeding and
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, sequestrator, custodian or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
and any other amounts due the Trustee under Section 6.07.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding.
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SECTION 5.05. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
SECTION 5.06. APPLICATION OF MONEY COLLECTED
Any money collected by the Trustee pursuant to this Article Five
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
(and premium, if any) or interest, if any, upon presentation of the Securities
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 6.07;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest, if any, on the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due and payable on such Securities for principal (and premium, if any) and
interest, if any, respectively; and
THIRD: The balance, if any, to the Persons entitled thereto.
SECTION 5.07. LIMITATION ON SUITS
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(d) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any such action,
suit or proceeding; and
(e) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
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SECTION 5.08. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any) and
(subject to Section 3.07) interest, if any, on such Security on or after the
Stated Maturity expressed in such Security, and to institute suit for the
enforcement of any such payment and such rights shall not be impaired without
the consent of such Holder.
SECTION 5.09. RESTORATION OF RIGHTS AND REMEDIES
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the
Holders shall continue as though no such proceeding had been instituted.
SECTION 5.10. RIGHTS AND REMEDIES CUMULATIVE
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 3.06, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 5.11. DELAY OR OMISSION NOT WAIVER
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article Five or by law to the Trustee or to the Holders may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
SECTION 5.12. CONTROL BY HOLDERS
The Holders of a majority in aggregate principal amount of the
Outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, with respect to the
Securities, provided that
(a) such direction shall not be in conflict with any rule
of law or with this Indenture and
(b) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 5.13. WAIVER OF PAST DEFAULTS
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities may on behalf of the Holders of all the
Securities waive any past default hereunder and its consequences, except a
default
(a) in the payment of the principal of (and premium, if
any) or interest, if any, on any Security or
(b) in respect of a covenant or provision hereof which
under Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
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Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 5.14. UNDERTAKING FOR COSTS
All parties to this Indenture agree, and each Holder of any
Security by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for
any action taken or omitted by it as Trustee, the filing by any party litigant
in such suit of an undertaking to pay the costs of such suit, and that such
court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section 5.14 shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in principal amount of the
Outstanding Securities, or to any suit instituted by any Holder for the
enforcement of the payment of the principal of (or premium, if any) or
interest, if any, on any Security on or after the Stated Maturity expressed in
such Security.
SECTION 5.15. WAIVER OF USURY, STAY OR EXTENSION LAWS
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any usury, stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE SIX - THE TRUSTEE
SECTION 6.01. CERTAIN DUTIES AND RESPONSIBILITIES
(a) With respect to the Securities, except during the
continuance of an Event of Default with respect to the Securities,
(i) the Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture;
but in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) In case an Event of Default with respect to the
Securities has occurred and is continuing, the Trustee shall, with respect to
the Securities, exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that
(i) this Section 6.01(c) shall not be construed to
limit the effect of Section 6.01(a);
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(ii) the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it with respect to the Securities in
good faith in accordance with the direction of the Holders of a majority in
aggregate principal amount of the Outstanding Securities relating to the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under
this Indenture.
No provision of this Indenture shall require the Trustee to expend or risk its
own funds or otherwise incur any financial liability in the performance of any
of its duties hereunder, or in the exercise of any of its rights or powers, if
it shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
SECTION 6.02. NOTICE OF DEFAULTS
Within 90 days after the occurrence of any default hereunder
with respect to the Securities, the Trustee shall transmit by mail to all
Holders entitled to receive reports pursuant to Section 7.04(c), notice of such
default hereunder known to the Trustee, unless such default shall have been
cured or waived; provided, however, that, except in the case of a default in
the payment of the principal of (and premium, if any) or interest, if any, on
any Security, the Trustee shall be protected in withholding such notice if and
so long as the Board of Directors, the executive committee or a trust committee
of directors or Responsible Officers of the Trustee in good faith determine
that the withholding of such notice is in the interest of the Holders; and
provided, further, that in the case of any default of the character specified
in Section 5.01(d) with respect to Securities, no such notice to Holders shall
be given until at least 30 days after the occurrence thereof. For the purpose
of this Section 6.02, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to the Securities.
SECTION 6.03. CERTAIN RIGHTS OF TRUSTEE
Except as otherwise provided in Section 6.01:
(a) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note or other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of
such counsel or any opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such Holders
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
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(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 6.04. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representation as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the
use or application by the Company of Securities or the proceeds thereof.
SECTION 6.05. MAY HOLD SECURITIES
The Trustee, any Paying Agent, any Securities Registrar or any
other agent of the Company, in its individual or any other capacity, may become
the owner or pledgee of Securities and, subject to Sections 6.08 and 6.13, may
otherwise deal with the Company with the same rights it would have if it were
not the Trustee, Paying Agent, Securities Registrar or such other agent.
SECTION 6.06. MONEY HELD IN TRUST
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Company. Upon the written direction of the
Company, the Trustee shall invest funds held by it hereunder either in term or
demand obligations of banking institutions with capital surplus in excess of
$500,000,000 or in a money market fund which invests solely in U.S. government
obligations, and in either case which provides for daily liquidity.
SECTION 6.07. COMPENSATION AND REIMBURSEMENT
The Company agrees
(a) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel) except any such expense,
disbursement or advance as may be attributable to its negligence or bad faith;
and
(c) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
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As security for the performance of the obligations of the
Company under this Section 6.07, the Trustee shall have a lien prior to the
Securities upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the payment of principal of or interest,
if any, on the Securities.
SECTION 6.08. DISQUALIFICATION; CONFLICTING INTERESTS
The Trustee shall comply with Section 310(b) of the Trust
Indenture Act.
SECTION 6.09. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY
There shall at all times be a Trustee hereunder with respect to
the Securities which shall be a Person eligible under the Trust Indenture Act,
having a combined capital and surplus of at least $25,000,000 and subject to
supervision or examination by federal or state authority. If such person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section 6.09 the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. No obligor of the Securities or Person
directly or indirectly controlling, controlled by or under common control with
such obligor shall serve as Trustee upon such Securities. The Trustee shall at
all times satisfy the requirements of Section 310(a)(1) of the Trust Indenture
Act. If at any time the Trustee shall cease to be eligible in accordance with
the provisions of this Section 6.09, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article Six.
SECTION 6.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article Six shall become
effective until the acceptance of appointment by the successor Trustee under
Section 6.11.
(b) The Trustee may resign at any time with respect to the
Securities by giving written notice thereof to the Company. If an instrument
of acceptance by a successor Trustee shall not have been delivered to the
Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time with respect to
the Securities by the Act of the Holders of a majority in aggregate principal
amount of the Outstanding Securities, delivered to the Trustee and to the
Company.
(d) If at any time with respect to the Securities:
(i) the Trustee shall fail to comply with Section
6.08 after written request therefor by the Company or by any Holder who has
been a bona fide Holder of a Security for at least six months or
(ii) the Trustee shall cease to be eligible under
Section 6.09 and shall fail to resign after written request therefor by the
Company or by any such Holder or
(iii) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee with respect to the Securities or (B) subject to Section 5.14, any
Holder who has been a bona fide Holder of a Security for at least six months
(or, in the case of clause (ii), any Holder) may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause with respect to the Securities, the Company, by a Board Resolution,
shall promptly
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appoint a successor Trustee or Trustees with respect to the Securities. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to the Securities
shall be appointed by Act of the Holders of a majority in principal amount of
the Outstanding Securities delivered to the Company and the retiring Trustee,
the successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with Section 6.11, become the successor Trustee with
respect to the Securities and to that extent supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder of a Security
for at least six months, or the Holder or Holders of at least 10% in aggregate
principal amount of the Outstanding Securities, may, on behalf of himself (or
themselves) and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee by
mailing written notice of such event by first-class mail, postage prepaid, to
the Holders of the Securities as their names and addresses appear in the
Securities Register. Each notice shall include the name of the successor
Trustee and the address of its Corporate Trust Office.
SECTION 6.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR
(a) In case of the appointment hereunder of a successor
Trustee with respect to the Securities, every such successor Trustee so
appointed shall execute, acknowledge and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on request of the Company or the successor Trustee, such retiring Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and trusts of the
retiring Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder, subject
nevertheless to its lien, if any, provided for in Section 6.07.
(b) Upon request of any such successor Trustee, the Company
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers and trusts
referred to in Section 6.11(a) and this Section 6.11(b), as the case may be.
(c) No successor Trustee shall accept its appointment
unless at the time of such acceptance such successor Trustee shall be qualified
and eligible under this Article Six.
SECTION 6.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS
Any Corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any Corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any Corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the Trustee hereunder,
provided such Corporation shall be otherwise qualified and eligible under this
Article Six, without the execution or filing of any paper or any further Act on
the part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 6.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY
If and when the Trustee shall become a creditor of the Company
(or any other obligor of the Securities), the Trustee shall be subject to the
terms of the Trust Indenture Act regarding collection of claims against the
Company (or such obligor).
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ARTICLE SEVEN - HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.01. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS
The Company will furnish or cause to be furnished to the Trustee:
(a) semiannually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days prior to
the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Securities Registrar.
SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, (i) the names and addresses of Holders contained in the
most recent list furnished to the Trustee as provided in Section 7.01 and (ii)
the names and addresses of Holders received by the Trustee in its capacity as
Securities Registrar. The Trustee may destroy any list furnished to it as
provided in Section 7.01 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Securities, and
the corresponding rights and privileges of the Trustee, shall be as provided by
the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding
the same, agrees with the Company and the Trustee that neither the Company nor
the Trustee nor any agent of either of them shall be held accountable by reason
of the disclosure of any such information as to the names and addresses of the
Holders in accordance with Section 7.02, regardless of the source from which
such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
Section 7.02(b).
SECTION 7.03. REPORTS BY TRUSTEE
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as may be required
under the Trust Indenture Act at the time and in the manner provided therein.
(b) A copy of each such report shall, at the time of
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Securities are listed, with the Commission and with the Company. The
Company shall notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 7.04. REPORTS BY COMPANY
(a) The Company shall file with the Trustee, within 15 days
after the Company is required to file the same with the Commission, copies of
the annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may from time
to time by rules and regulations prescribe) which the Company is required to
file with the Commission pursuant to Section 13 or Section 15(d) of the
Exchange Act; or, if the Company is not required to file information, documents
or reports pursuant to either of such Sections, then to file with the Trustee
and the Commission, in accordance with rules and regulations prescribed by the
commission, such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the Exchange Act, in
respect of a security listed and registered on a national securities exchange,
as may be prescribed in such rules and regulations.
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(b) The Company shall file with the Trustee and the
Commission, in accordance with the rules and regulations prescribed by the
Commission, such additional information, documents, and reports with respect to
compliance by the Company with the conditions and covenants provided for in
this Indenture as may be required by such rules and regulations.
(c) The Company shall transmit to the Holders within 30
days after the filing thereof with the Trustee, by first class mail, such
summaries of any information, documents and reports required to be filed by the
Company pursuant to Section 7.04(a) and (b) as may be required by rules and
regulations prescribed by the Commission.
SECTION 7.05. ESTABLISHMENT OF RECORD DATE
The Company may set a record date in the circumstances permitted
by the Trust Indenture Act for the purpose of determining the Holders of
Securities entitled to give or take any request, demand, authorization,
direction, notice, consent, waiver or other action, or to vote on any action,
authorized or permitted to be given or taken by Holders of Securities. If not
set by the Company prior to the first solicitation of a Holder of Securities in
respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote shall be the 30th day (or, if
later, the date of the most recent list of Holders required to be provided
pursuant to Section 7.01) prior to such first solicitation or vote, as the case
may be, notwithstanding the provisions of the Trust Indenture Act. If a record
date is fixed, those persons who were Holders of Securities at such record date
(or their duly designated proxies), and only those persons, shall be entitled
to take such action by vote or consent or to revoke any vote or consent
previously given, whether or not such persons continue to be Holders after such
record date. No such vote or consent shall be valid or effective for more than
120 days after such record date.
ARTICLE EIGHT - CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.01. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS
The Company shall not consolidate with or merge into any other
Corporation or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, unless:
(a) in case the Company shall consolidate with or merge
into another Corporation or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the corporation formed by such
consolidation or into which the Company is merged or the Person which acquires
by conveyance or transfer, or which leases, the properties and assets of the
Company substantially as an entirety shall be the Company or a Corporation
organized and existing under the laws of the United States of America, any
state thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the principal of
and interest, if any, on all the Securities and the performance of every
covenant of this Indenture on the part of the Company to be performed or
observed;
(b) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be continuing; and
(c) if, as a result of any such consolidation or merger or
such conveyance, transfer or lease, properties or assets of the Company would
become subject to a mortgage, pledge, lien, security interest or other
encumbrance that would not be permitted by this Indenture, the Company or such
successor Corporation or Person, as the case may be, shall take such steps as
shall be necessary effectively to secure the Securities equally and ratably
with (or prior to) all indebtedness incurred thereby; and
(d) the Company has delivered to the Trustee an Officers'
Certificate and an opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture
comply with this Article Eight and that all conditions precedent herein
provided for relating to such transaction have been complied with.
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SECTION 8.02. SUCCESSOR CORPORATION SUBSTITUTED
Upon any consolidation or merger by the Company with or into any
other Corporation or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety to any Person in accordance
with Section 8.01, the successor Corporation formed by such consolidation or
into which the Company is merged or to which such conveyance, transfer or lease
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same effect as if such
successor had been named as the Company herein, and thereafter, except in the
case of a lease to another Person, the Company shall be discharged from all
obligations and covenants under this Indenture and the Securities.
ARTICLE NINE - SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS
Without the consent of any Holders, the Company, when authorized
by a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to
the Trustee, for any of the following purposes:
(a) to evidence the succession of another corporation to
the Company and the assumption by any such successor of the covenants of the
Company herein and in the Securities in accordance with this Indenture; or
(b) to add to the covenants of the Company for the benefit
of the Holders of the Securities, or to surrender any right or power herein
conferred upon the Company; or
(c) to secure the Securities; or
(d) to provide for uncertificated Securities in addition to
or in place of certificated Securities; or
(e) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision herein, or
to make any other provisions with respect to matters or questions arising under
this Indenture, provided such action shall not adversely affect the interests
of the Holders in any material respect.
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS
Subject to Section 5.08, with the consent of the Holders of not
less than a majority in aggregate principal amount of the Securities at the
time Outstanding, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee
may enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(a) change the Stated Maturity of the principal of (or
premium, if any, on), or any installment of principal of or interest, if any,
on, any Security, or reduce the principal amount thereof or the interest
thereon or the rate of interest payable on the Securities, or change the place
of payment where, or the coin or currency in which, any Security or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof, or
(b) reduce the percentage in principal amount of the
Outstanding Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture, or
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(c) modify any of the provisions of this Section 9.02 or
Section 5.08 or Section 5.13, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security affected
thereby, or
(d) make the Securities subordinated in right of payment to
any extent or under any circumstances to any other indebtedness.
It shall not be necessary for any Act of Holders under this
Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article Nine or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURES
Upon the execution of any supplemental indenture under this
Article Nine, this Indenture shall be modified in accordance therewith, and
such supplemental indenture shall form a part of this Indenture for all
purposes; and every Holder of Securities theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby.
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT
Every supplemental indenture executed pursuant to this Article
Nine shall conform to the requirements of the Trust Indenture Act as then in
effect.
SECTION 9.06. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article Nine may, and shall, if
required by the Trustee, bear a notation in form approved by the Trustee as to
any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such supplemental indenture may be
prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for outstanding Securities.
ARTICLE TEN - COVENANTS
SECTION 10.01. PAYMENT OF PRINCIPAL AND INTEREST
The Company will duly and punctually pay the principal of (and
premium, if any) and interest, if any, on the Securities in accordance with the
terms of the Securities and this Indenture.
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SECTION 10.02. MAINTENANCE OF OFFICE OR AGENCY
The Company will maintain an office or agency where Securities
may be presented or surrendered for payment, where Securities may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company will give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations. The Company will give prompt written notice to the Trustee of
any such designation or rescission and of any change in the location of any
such other office or agency.
SECTION 10.03. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of (or premium, if any) or
interest, if any, on any of the Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal
(or premium, if any) or interest, if any, so becoming due until such sums shall
be paid to such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it
will, on each due date of the principal of (or premium, if any) or interest, if
any, on any Securities, deposit with a Paying Agent a sum sufficient to pay the
principal or interest so becoming due, such sum to be held in trust for the
benefit of the Persons entitled to such principal or interest, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of
its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section 10.03,
that such Paying Agent will:
(a) hold all sums held by it for the payment of the
principal of (or premium, if any, on) or interest, if any, on Securities in
trust for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company
(or any other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(c) at any time during the continuance of any Default by
the Company, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent for payment in respect
of the Securities.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (and
premium, if any) or interest on any Security and remaining unclaimed for one
year
40
<PAGE> 41
after such principal (and premium, if any) or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in an Authorized Newspaper
or mailed to such Holder or both, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication or mailing, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 10.04. EXISTENCE
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the
loss thereof is not disadvantageous in any material respect to the Holders.
SECTION 10.05. MAINTENANCE OF PROPERTIES
The Company will cause all properties used or useful in the
conduct of its business or the business of any Subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith will not be materially impaired; provided, however, that nothing in
this Section 10.05 shall prevent the Company from discontinuing the operation
or maintenance of any of such properties if such discontinuance is, in the
judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.
SECTION 10.06. PAYMENT OF TAXES AND OTHER CLAIMS
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any Subsidiary
or upon the income, profits or property of the Company or any Subsidiary, and
(b) all lawful claims for labor, materials and supplies which, if unpaid, might
by law become a lien upon the property of the Company or any Subsidiary;
provided, however, that the Company shall not be required to pay or discharge
or cause to be paid or discharged any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings or which would not have a material adverse effect on
the Company and its Subsidiaries taken as a whole.
SECTION 10.07. STATEMENT BY OFFICERS AS TO DEFAULT; NOTICE OF CERTAIN EVENTS
The Company will deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate, stating whether or not to the best knowledge of the
signers thereof the Company is in Default in the performance and observance of
any of the Company's obligations under this Indenture and, if the Company shall
be in Default, specifying all such Defaults and the nature and status thereof
of which they may have knowledge.
The Company will deliver to the Trustee within 15 days after the
occurrence thereof notice of any acceleration which with the giving of notice
and lapse of time would be an Event of Default within the meaning of Section
5.01(e).
41
<PAGE> 42
SECTION 10.08. LIMITATIONS ON LIENS
(a) The Company will not, and will not permit any
Restricted Subsidiary to, hereafter, create, assume or offer to exist any
mortgage, security interest, pledge or lien (herein referred to as a "Lien") of
or upon any Principal Property, or any shares of capital stock or evidences of
indebtedness for borrowed money issued by any Restricted Subsidiary and owned
by the Company or any Restricted Subsidiary, whether owned at the date of this
Indenture or thereafter acquired, without making effective provision, and the
Company in such case will make or cause to be made effective provision, whereby
the Securities shall be secured by such Lien equally and ratably with any and
all other indebtedness or obligations thereby secured, so long as such
indebtedness or obligations shall be so secured; provided, however, that the
foregoing shall not apply to any of the following:
(1) Liens that exist on the date of this Indenture;
(2) Liens on property, shares of capital stock or
evidences of indebtedness of any corporation existing at the
time such corporation becomes a Subsidiary;
(3) Liens in favor of the Company or any Subsidiary;
(4) Liens in favor of governmental bodies to secure
progress, advance or other payments pursuant to contract or
statute or indebtedness incurred to finance all or a part of
construction of or improvements to property subject to such
Liens;
(5) Liens (i) on property, shares of capital stock or
evidences of indebtedness for borrowed money existing at the
time of acquisition thereof (including acquisition through
merger or consolidation), and construction and improvement Liens
that are entered into within one year from the date of such
construction or improvement; provided that in the case of
construction or improvement the Lien shall not apply to any
property theretofore owned by the Company or any Restricted
Subsidiary except substantially unimproved real property on
which the property so constructed or the improvement is located
and (ii) for the acquisition of any Principal Property which
Liens are created within 180 days after the completion of such
acquisition to secure or provide for the payment of the purchase
price of the Principal Property acquired; provided that any such
Lien does not extend to any other property of the Company or any
of its Subsidiaries (whether such property is then owned or
thereafter acquired).
(6) mechanics', landlord and similar Liens arising in
the ordinary course of business in respect of obligations not
due or being contested in good faith;
(7) Liens for taxes, assessments, or governmental
charges or levies that are not delinquent or are being contested
in good faith;
(8) Liens arising from any legal proceedings that are
being contested in good faith;
(9) any Liens that (i) are incidental to the ordinary
conduct of its business or the ownership of its properties and
assets, including Liens incurred in connection with workmen's
compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of
lenders, statutory obligations, taxes and contracts, (ii) were
not incurred in connection with the borrowings of money or the
obtaining of advances or credit and (iii) do not in the
aggregate materially detract from the value of the property of
the Company or any Subsidiary or materially impair the use
thereof in the operation of its business;
(10) Liens securing industrial development or
pollution control bonds; and
(11) Liens for the sole purpose of extending, renewing
or replacing (or successively extending, removing or replacing)
in whole or in part any of the foregoing.
42
<PAGE> 43
(b) Notwithstanding the provisions of paragraph (a) of
this Section 10.08, the Company or any Restricted Subsidiary may, without
equally and ratably securing the Securities, create or assume Liens which would
otherwise be subject to the foregoing restrictions if at the time of such
creation or assumption, and after giving effect thereto, Exempted Indebtedness
does not exceed 10% of Consolidated Net Tangible Assets.
SECTION 10.09. LIMITATION ON SALE AND LEASEBACK
(a) The Company will not, nor will it permit any
Restricted Subsidiary to, enter into any arrangement with any person providing
for the leasing (as lessee) by the Company or any Restricted Subsidiary of any
Principal Property (except for temporary leases for a term, including any
renewal thereof, of not more than three years and except for leases between the
Company and a Restricted Subsidiary or between Restricted Subsidiaries) which
property has been or is to be sold or transferred by the Company or a
Restricted Subsidiary to such person (herein referred to as a "Sale and
Leaseback Transaction") unless either (i) the Company or such Restricted
Subsidiary would be entitled to incur a Lien on such property without equally
and ratably securing the Securities pursuant to paragraph (a) of Section 10.08
or (ii) the net proceeds of such sale are at least equal to the fair value (as
determined by the Board of Directors) of such property and the Company shall
apply an amount equal to the net proceeds of such sale to (A) the retirement of
Secured Debt of the Company or a Restricted Subsidiary or (B) the acquisition,
construction or improvement of a Principal Property, within 120 days of the
effective date of any such arrangement.
(b) Notwithstanding the provisions of paragraph (a) of
this Section 10.9, the Company or any Restricted Subsidiary may enter into Sale
and Leaseback Transactions, if at the time of such entering into, and after
giving effect thereto, Exempted Indebtedness does not exceed 10% of
Consolidated Net Tangible Assets.
SECTION 10.10. WAIVER OF CERTAIN COVENANTS
The Company may omit in any particular instance to comply with
any covenant or condition set forth in Sections 10.05, 10.06, 10.08 and 10.09
if before the time for such compliance the Holders of at least a majority in
aggregate principal amount of the Outstanding Securities shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver shall extend to
or affect such covenant or condition except to the extent so expressly waived,
and, until such waiver shall become effective, the obligations of the Company
and the duties of the Trustee in respect of any such covenant or condition
shall remain in full force and effect.
43
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed all as of the day and year first above written.
PRICE/COSTCO, INC.
By:
__________________________
Its:
__________________________
Attest:
By:__________________________
AMERICAN BANK NATIONAL ASSOCIATION
By:
__________________________
Its:
__________________________
Attest:
By: __________________________
44
<PAGE> 1
Exhibit 5.1
FOSTER PEPPER & SHEFELMAN
1111 Third Avenue, Suite 3400
Seattle, Washington 98101
May 16, 1995
Board of Directors
Price/Costco, Inc.
999 Lake Drive
Issaquah, Washington 98027
Gentlemen:
In connection with the registration under the Securities Act of 1933, as
amended, of senior notes in the principal amount of $300,000,000 (the "Notes")
of Price/Costco, Inc. (the "Company"), and specifically with respect to that
certain Registration Statement on Form S-3 filed by the Company with the
Securities and Exchange Commission for the purpose of such registration, you
have asked that we render certain opinions in connection with the issuance of
the Notes.
In connection with the opinions expressed below, we have examined and are
familiar with:
(a) the form of Trust Indenture between the Company and American Bank,
National Association, as Trustee, which includes the form of Note;
(b) the resolutions of the Board of Directors of the Company pertaining
to the offering of the Notes and the Registration Statement adopted at a
meeting of the Board on May 15, 1995; and
(c) the Registration Statement.
Based upon the foregoing examination, and after consideration of
applicable law, it is our opinion that the Notes to be issued and sold by the
Company pursuant to the Registration Statement have been duly authorized and,
when sold and after receipt of payment therefor, will constitute a valid and
binding obligation of the Company, enforceable in accordance with their terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting the rights of creditors
generally, and to general equity principles.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the references to our firm under the caption
"Legal Matters" in the Prospectus included as part of the Registration
Statement.
Respectfully submitted,
FOSTER PEPPER & SHEFELMAN
/s/David R. Wilson
David R. Wilson
<PAGE> 1
EXHIBIT 12.1
PRICE/COSTCO, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
52 WEEKS ENDED 24 WEEKS ENDED
------------------------------------------------------------------ ----------------------------
SEPTEMBER 2, SEPTEMBER 1, AUGUST 30, AUGUST 29, AUGUST 28, FEBRUARY 13, FEBRUARY 12,
1990 1991 1992 1993 1994 1994 1995
------------ ------------ ---------- ---------- ---------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings(1)................ $275,625 $342,041 $ 368,855 $ 336,463 $ 203,555(3) $54,179(3) $ 192,714
Less: Capitalized
interest................. 4,471 4,114 8,487 9,483 7,170 2,510 656
Add: Interest on debt(2)... 23,240 30,155 44,012 55,599 57,642 24,988 28,275
Portion of rent under
long-term operating
leases representative
of an interest
factor............... 15,088 17,972 20,208 23,220 26,940 9,095 11,653
-------- -------- --------- --------- --------- ------- ---------
Total earnings available
for fixed charges........ $309,482 $386,054 $ 424,588 $ 405,799 $ 280,967 $85,752 $ 231,986
======== ======== ========= ========= ========= ======= =========
Fixed Charges:
Interest on debt(2)...... $ 23,240 $ 30,155 $ 44,012 $ 55,599 $ 57,642 $24,988 $ 28,275
Portion of rent under
long-term operating
leases representative
of an interest
factor................ 15,088 17,972 20,208 23,220 26,940 9,095 11,653
-------- -------- --------- --------- --------- ------- ---------
Total fixed charges........ $ 38,328 $ 48,127 $ 64,220 $ 78,819 $ 84,582 $34,083 $ 39,928
======== ======== ========= ========= ========= ======= =========
Ratio of earnings to fixed
charges.................. 8.1 8.0 6.6 5.2 3.3(4) 2.5(4) 5.8
======== ======== ========= ========= ========= ======= =========
</TABLE>
- ---------------
(1) Earnings represent income from continuing operations before provision for
income taxes.
(2) Includes amortization of debt expense and capitalized interest.
(3) Includes provision for merger and restructuring expenses of $120,000
pre-tax, related to the merger of The Price Company and Costco Wholesale
Corporation in October 1993. If such provision for merger and restructuring
expenses were excluded, income from continuing operations before provision
for income taxes for fiscal 1994 and for the twenty-four weeks ended
February 13, 1994 would have been $323,555 and $174,179, respectively.
(4) If the $120,000 pre-tax provision for merger and restructuring expenses were
excluded, the ratio of earnings to fixed charges for fiscal 1994 and the
twenty-four weeks ended February 13, 1994 would have been 4.7 and 6.0,
respectively.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-3, of our report dated
November 14, 1994, included in Price/Costco, Inc.'s Form 10-K for the year ended
August 28, 1994, and to all references to our firm included in this Registration
Statement.
We are aware that Price/Costco, Inc. has incorporated by reference in this
Registration Statement its Form 10-Q for the quarters ended November 20, 1994
and February 12, 1995, which include our reports dated December 21, 1994 and
March 22, 1995, respectively, covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of the Securities Act of
1933, those reports are not considered a part of the Registration Statement
prepared or certified by our firm or a report prepared or certified by our firm
within the meaning of Sections 7 and 11 of the Act.
/s/ Arthur Andersen LLP
-------------------------------------
ARTHUR ANDERSEN LLP
Seattle, Washington
May 15, 1995
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITOR
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Price/Costco, Inc.
and to the incorporation by reference therein of our report dated November 19,
1993, with respect to the consolidated financial statements and schedules of The
Price Company (not presented separately) included in the Annual Report (Form
10-K) of Price/Costco, Inc. for the year ended August 28, 1994 filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
-------------------------------------
ERNST & YOUNG LLP
San Diego, California
May 15, 1995
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------
AMERICAN BANK NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
A National Banking Association 41-0122055
- ---------------------------------------- ---------------------------------
(State of incorporation (IRS Employer Identification No.)
if not a national bank)
101 East Fifth Street
Corporate Trust Department
St. Paul, Minnesota 55101
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
AMERICAN BANK NATIONAL ASSOCIATION
101 East Fifth Street
St. Paul, Minnesota 55101
(612) 298-6280
----------------------------------------------------------------
(Exact name, address, and telephone number of agent for service)
--------
Price/Costco, Inc.
---------------------------------------------------
(Exact name of obligor as specified in its charter)
Delaware 33-0572969
- ------------------------------------ ------------------------------
(State of other jurisdiction of) (IRS Employer Identification No.)
incorporation or organization)
999 Lake Drive
Issaquah, Washington 98027
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
--------
% Senior Notes due 2005
-------------------------
(Title of indenture securities)
<PAGE> 2
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
-Comptroller of the Currency
Treasury Department
Washington, DC
-Federal Deposit Insurance Corporation
Washington, DC
-The Board of Governors of the Federal Reserve System
Washington, DC
(b) The Trustee is authorized to exercise corporate trust
powers.
GENERAL
Item 2. Affiliations With Obligor and Underwriters. If the obligor or any
underwriter for the obligor is an affiliate of the Trustee,
describe each such affiliation.
None.
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's knowledge
the obligor is not in default under any Indenture for which the Trustee acts as
Trustee.
Item 16. List of Exhibits. List below all exhibits filed as a part of this
statement of eligibility and qualification. All applicable
exhibits listed below are incorporated by reference from a
previous filing under Registration number 33-91748.
Exhibit 1. Copy of Articles of Association of the trustee now
in effect.
Exhibit 2. a. A copy of the certificate of the Comptroller
of Currency dated June 1, 1965, authorizing
American Bank National Association to act
as fiduciary.
b. A copy of the certificate of authority of the
trustee to commence business issued June 9,
1903, by the Comptroller of the Currency to
American Bank National Association.
<PAGE> 3
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued by the
Federal Reserve Board.
Exhibit 4. Copy of By-laws of the trustee as now in effect.
Exhibit 5. Copy of each Indenture referred to in Item 4.
Not applicable.
Exhibit 6. The consent of the trustee required by
Section 321(b) of the Act.
Exhibit 7. A copy of the latest report of condition of the
trustee published pursuant to law or the requirements
of its supervising or examining authority.
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligor within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligor, or affiliates, are based
upon information furnished to the Trustee by the obligor. While the Trustee
has no reason to doubt the accuracy of any such information, it cannot accept
any responsibility therefor.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, a national banking association organized and existing under the laws
of the United States, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the City
of Saint Paul and State of Minnesota on the 15th day of May, 1995.
AMERICAN BANK NATIONAL ASSOCIATION
[SEAL]
/s/ Frank P. Leslie III
----------------------------
Frank P. Leslie III
Vice President
<PAGE> 5
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, American Bank National Association, hereby consents that reports
of examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: May 15, 1995
AMERICAN BANK NATIONAL ASSOCIATION
/s/ Frank P. Leslie III
----------------------------
Frank P. Leslie III
Vice President
