As filed with the Securities and Exchange Commission on May 5, 1999
Registration Nos. 333-74165
333-34181
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
FINANCIAL SECURITY ASSURANCE
HOLDINGS LTD.
(Exact name of registrant as specified in its charter)
New York 13-3261323
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
350 Park Avenue
New York, New York 10022
(212) 826-0100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------------
Bruce E. Stern, Esq.
General Counsel and Secretary
Financial Security Assurance Holdings Ltd.
350 Park Avenue
New York, New York 10022
(212) 826-0100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------
Copies to:
William H. Widen, Esq.
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019-7475
---------------------------
Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this registration statement, as determined by
market conditions and other factors.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.|_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box.|X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.|_| ______
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.|_| ______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.|_|
---------------------------
(Continued on following page)
<PAGE>
(Continued from previous page)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================================================================
Proposed
Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered(1)(2)(3) Per Unit(4) Offering Price(3)(4) Registration Fee(5)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities
Common Stock
Stock Purchase Contracts (6)
Stock Purchase Units (7)
Preferred Stock
TOTAL................................ $230,000,000 100% $230,000,000 $63,940
==========================================================================================================================
</TABLE>
(1) Securities registered by the registrant under Registration Statement No.
333-34181 and not previously sold in the amount of $20,000,000 are
consolidated in this registration statement pursuant to Rule 429 under the
Securities Act. Registration fees with respect to such unsold securities
in the amount of $6,060.61 have previously been paid. The total amount
registered under this registration statement as so consolidated is
$250,000,000.
(2) Includes such indeterminate principal amount of debt securities, such
indeterminate number of shares of common stock and such indeterminate
number of stock purchase contracts, as may from time to time be issued at
indeterminate prices.
(3) Represents the aggregate initial offering price of all securities sold.
Amounts represent United States Dollars or the equivalent in one or more
other currencies or currency units.
(4) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933 and exclusive
of accrued interest and dividends, if any.
(5) Previously paid.
(6) Each stock purchase contract of the registrant obligates the registrant to
sell, and its holder to purchase, a number of shares of common stock.
(7) Each stock purchase unit consists of a stock purchase contract and debt
securities or preferred securities registered under this registration
statement or debt obligations of third parties.
---------------------------
Pursuant to Rule 429 under the Securities Act, the prospectus filed as
part of this registration statement also relates to the securities registered by
the registrant under Registration Statement No. 333-34181 that remain unsold in
the amount of $20,000,000. This registration statement also constitutes
Post-Effective Amendment No. 1 with respect to the registrant's Registration
Statement No. 333-34181.
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>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS Subject to Completion
Preliminary Prospectus
Dated May 5, 1999
[LOGO]
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
$250,000,000
DEBT SECURITIES, COMMON STOCK,
STOCK PURCHASE CONTRACTS,
STOCK PURCHASE UNITS AND PREFERRED STOCK
We may offer, in one or more offerings, debt securities, common stock,
stock purchase contracts, stock purchase units and preferred stock having an
aggregate initial public offering price of up to $250,000,000. When we decide to
sell a particular series of securities, we will prepare a prospectus supplement
describing those securities and our plan of distribution. You should read this
prospectus and any prospectus supplement carefully.
Our common stock is listed on the New York Stock Exchange under the symbol
"FSA".
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined whether
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
---------------------------
The date of this prospectus is , 1999
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, we may from time to time sell any combination of the
securities described in this prospectus in one or more offerings up to a total
amount of $250,000,000 or the equivalent of this amount in foreign currencies or
foreign currency units.
This prospectus provides you with a general description of the securities
we may offer. Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. We will file each prospectus supplement with the SEC. The prospectus
supplement may also add, update or change information contained in this
prospectus. You should read both this prospectus and any prospectus supplement
together with additional information described under the heading "Where You Can
Find More Information" below.
You should rely only on the information provided in this prospectus and in
any prospectus supplement, including the information incorporated by reference.
We have not authorized anyone to provide you with different information. You
should not assume that the information in this prospectus, or any supplement to
this prospectus, is accurate at any date other than the date indicated on the
cover page of these documents.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement under the Securities
Act that registers the distribution of these securities. The registration
statement, including the attached exhibits and schedules, contains additional
relevant information about us and the securities. For example, the indentures
relating to our debt securities are attached to the registration statement as
exhibits. The rules and regulations of the SEC allow us to omit certain
information included in the registration statement from this prospectus.
In addition, we file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy this
information and the registration statement at the following locations of the
SEC:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. You may obtain information on the operation of
the public reference room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like us, who file
electronically with the SEC. The address of that site is http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
us at the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York.
The SEC allows us to "incorporate by reference" information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be a part of this prospectus, except
for any information that is superseded by other information that is included in
or incorporated by reference into this document.
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<PAGE>
This prospectus incorporates by reference the documents listed below that
we have previously filed with the SEC. These documents contain important
information about us.
o The description of our common stock in our Form 8-A that was filed
on December 3, 1993
o Our Annual Report on Form 10-K for the year ended December 31, 1998
o Our Proxy Statement on Schedule 14A that was filed on March 25, 1999
We incorporate by reference any additional documents that we may file with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
between the date of this prospectus and the termination of the offering of the
securities. These documents may include periodic reports, like Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as Proxy Statements. Any material that we subsequently file with the SEC
will automatically update and replace the information previously filed with the
SEC.
You can obtain any of the documents incorporated by reference in this
prospectus from the SEC on its web site (http://www.sec.gov). You can also
obtain these documents from us without charge by visiting our web site
(http://www.FSA.com) or requesting them in writing or by telephone at the
following address:
Peter E. Hoey
Managing Director, Investor Relations
Financial Security Assurance Holdings Ltd.
350 Park Avenue
New York, New York 10022
Telephone (212) 826-0100
THE COMPANY
We are Financial Security Assurance Holdings Ltd. In this prospectus we
refer to our company as "FSA Holdings", "we" or "us". We own 100% of Financial
Security Assurance Inc., which we refer to as "FSA". FSA primarily provides
financial guaranty insurance on asset-backed securities and municipal bonds. FSA
was the first insurance company organized to insure asset-backed obligations.
FSA has been a leading insurer of asset-backed obligations, based on number of
transactions insured, since its organization in 1985. In 1990, FSA expanded the
focus of its business to include writing financial guaranty insurance of
municipal obligations and has since become a major insurer of municipal bonds.
FSA writes financial guaranty insurance that typically guarantees
scheduled payments on an issuer's obligations. In the case of a default on these
payments, FSA is generally required to pay the principal, interest or other
amounts due either in accordance with the original payment schedule or, at FSA's
option, on an accelerated basis. The underwriting policy of FSA is to insure
asset-backed and municipal obligations that would otherwise be investment grade
without the benefit of FSA's insurance. The asset-backed obligations insured by
FSA are generally issued in structured transactions backed by pools of assets
such as residential mortgage loans, consumer or trade receivables, securities or
other assets having an ascertainable cash flow or market value. The municipal
obligations insured by FSA consist primarily of general obligation bonds,
supported by the issuers' taxing power, and special revenue bonds and other
special obligations of state and local governments, supported by the issuer's
ability to impose and collect fees and charges for public services or specific
projects.
Our business objective is to remain a leading insurer of asset-backed
obligations and to become a more prominent insurer of municipal obligations. We
believe that the demand for our financial guaranty insurance will grow over the
long term as a result of the anticipated continuation of three trends:
o expansion of asset securitization outside the residential mortgage
sector;
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<PAGE>
o growth in the insurance of municipal obligations due, in part, to
the increased use of municipal bonds to finance repairs and
improvements to the nation's infrastructure and the increased
municipal bond purchases by individuals who generally purchase
insured obligations; and
o increased volume of new domestic municipal bonds that are insured,
insurance penetration having already grown every year since 1986 to
reach 50.8% in 1998, according to published sources.
FSA Holdings or its subsidiaries maintain offices in New York City, San
Francisco, Dallas, London, Paris, Madrid, Sydney, Tokyo, Singapore and Bermuda.
In addition to our domestic business, we pursue international opportunities and
currently operate in the European and Pacific Rim markets. We were the first
financial guaranty insurance company to insure obligations in international
markets.
We expect to continue to emphasize a diversified insured portfolio
characterized by insurance of both asset-backed and municipal obligations, with
a broad geographic distribution and a variety of revenue sources and transaction
structures.
FSA's insurance financial strength is rated "Aaa" by Moody's Investors
Service, Inc. FSA's insurer financial strength is rated "AAA" by Standard &
Poor's Ratings Services ("S&P") and Standard and Poor's (Australia) Pty. Ltd.
FSA's claims-paying ability is rated "AAA" by Fitch IBCA, Inc. and Japan Rating
and Investment Information, Inc.
FSA is licensed to engage in the financial guaranty insurance business in
all 50 states, the District of Columbia and Puerto Rico.
Our principal executive offices are located at 350 Park Avenue, New York,
New York 10022. The telephone number at that location is (212) 826-0100.
USE OF PROCEEDS
Unless otherwise stated in the prospectus supplement, we will use the net
proceeds from the sale of the securities for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends for FSA
Holdings for the periods indicated. Earnings represent consolidated earnings
before income taxes and fixed charges. Fixed charges consist of interest and one
third of rental expense which is representative of the interest factor for this
rental expense. We had no capitalized interest for the periods presented.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges............................. 51.2 70.0 35.2 22.6 14.5
Ratio of earnings to combined
fixed charges and preferred
stock dividends..................... 51.2 70.0 35.2 22.6 14.5
</TABLE>
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description provides general terms that may apply to our
debt securities. The prospectus supplement relating to any debt securities
offered will describe the particular terms of those debt securities.
The debt securities will be either senior debt securities or subordinated
debt securities. The senior debt securities will be issued under an existing
senior indenture, as supplemented from time to time, between FSA Holdings and
First Union National Bank, as trustee. The subordinated debt securities will be
issued under a subordinated indenture, as supplemented from time to time,
between FSA Holdings and a trustee to be named in the prospectus supplement. The
senior indenture and the subordinated indenture are collectively referred to as
the indentures.
The following description is a summary of the material provisions of the
indentures. It does not restate those agreements in their entirety. We urge you
to read the indentures because they, and not this description, define your
rights as holders of the debt securities. We have made copies of the indentures
available as described under the heading "Where You Can Find More Information"
above.
General
The debt securities will be our direct and unsecured obligations. The
senior debt securities will rank equally and ratably with all of our other
unsecured and unsubordinated obligations. The subordinated debt securities will
be subordinate and junior in right of payment to the extent and in the manner
set forth in the subordinated indenture to all of our senior debt. As of
December 31, 1998, we had $230 million of outstanding senior debt.
We are a non-operating holding company and most of our assets are owned by
our subsidiaries. As a result, we rely primarily on dividends or other payments
from our subsidiaries to pay principal and interest on our outstanding debt
obligations. Accordingly, the debt securities will be effectively subordinated
to all existing and future liabilities, including debt obligations, of our
subsidiaries. The principal liabilities of our subsidiaries relate to
outstanding financial guarantee insurance policies. In addition, as of December
31, 1998, subsidiary debt consisted of $120 million of surplus notes owed to FSA
Holdings. Furthermore, the payment of dividends or other amounts by FSA, our
insurance company subsidiary, is limited under the applicable insurance laws and
regulations of the State of New York.
Neither indenture limits the total amount of debt securities that we may
issue under it, and we may issue debt securities under each indenture up to the
aggregate principal amount authorized by our board of directors from time to
time. Except as may be described in a prospectus supplement, neither the
indentures nor the debt securities limit the amount of other secured or
unsecured debt that we may incur or issue.
We may issue debt securities in one or more separate series of senior debt
securities and/or subordinated debt securities. The prospectus supplement
relating to an offering of a particular series of debt securities will specify
the particular amounts, prices and terms of those debt securities. These terms
may include:
o the title of the debt securities;
o any limit upon the total principal amount of the debt securities;
o the date or dates on which the principal of the debt securities is
payable;
o the rate or rates at which the debt securities bear interest, if
any, or the method by which that rate is determined, the date or
dates from which interest accrues, the interest payment dates on
which any interest is payable, our right, if any, to defer or extend
an interest payment date, and the record dates for the determination
of holders to whom interest is payable;
o the place or places where the principal and any interest on the debt
securities is payable;
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<PAGE>
o the price or prices at which, the period or periods within which and
the terms and conditions upon which the debt securities may be
redeemed, in whole or in part, at our option, pursuant to any
sinking fund or otherwise;
o our obligation, if any, to redeem, purchase or repay the debt
securities pursuant to any sinking fund or analogous provisions or
at the option of a holder and the price or prices at which and the
period or periods within which, the currency, currencies, currency
unit or currency units in which, and the terms and conditions upon
which the debt securities will be redeemed, purchased or repaid, in
whole or in part, pursuant to that obligation;
o if other than denominations of $1,000 and any integral multiple of
$1,000, the denominations in which any debt securities are issuable;
o if other than in U.S. Dollars, the currency, currencies, currency
unit or currency units in which the principal of, and premium and
interest, if any, on, the debt securities is payable, or in which
the debt securities are denominated;
o whether the debt securities are issued in whole or in part in the
form of one or more global securities and the depositary with
respect to those global securities and the circumstances under which
those global securities may be registered for transfer or exchange,
or authenticated and delivered, in the name of a person other than
the depositary or its nominee;
o the additions, modifications or deletions, if any, in the events of
default or our covenants specified in the indenture;
o if other than the principal amount of a debt security, the portion
of the principal amount of the debt securities that is payable upon
declaration of acceleration of the maturity of that debt security or
provable in bankruptcy;
o if the amount of payments of principal of, or premium or interest,
if any, on, the debt securities may be determined by reference to an
index, formula or other method, the manner in which those amounts
will be determined and any commodities, currencies, currency units
or indices, value, rate or price relevant to that determination;
o whether defeasance and/or covenant defeasance applies to the debt
securities, as more fully described below under the heading
"--Defeasance or Covenant Defeasance";
o the relative degree, if any, to which the debt securities are senior
to or subordinated to other series of debt securities in right of
payment;
o the terms of any right to convert or exchange the debt securities
into or for our common stock or preferred stock;
o any other terms of the debt securities not inconsistent with the
provisions of the applicable indenture; and
o any trustees, authenticating or paying agents, transfer agents or
registrars or any other agents with respect to the debt securities.
(Section 2.03).
Debt securities may be sold at a substantial discount below their
stated principal amount, bearing no interest or interest at a rate which at the
time of issuance is below market rates. Important Federal income tax
consequences and special considerations applicable to any series of debt
securities will be described in the prospectus supplement. The prospectus
supplement will also contain any special Federal income tax, accounting or other
information relating to certain other kinds of debt securities that may be
offered, including debt securities linked to an index or payable in currencies
other than U.S. Dollars.
Denominations, Registration, Payment and Transfer
The debt securities will be issuable only in registered form without
coupons. In the absence of any other specification in the prospectus supplement,
a series of debt securities will be issued in denominations of $1,000 and any
integral multiple of $1,000.
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Debt securities of any series may be exchanged for debt securities of the
same series in other authorized denominations, in an equal aggregate principal
amount. Debt securities may also be presented for registration of transfer, upon
which the new transferee or transferees will receive new debt securities of the
same series in authorized denominations in an equal aggregate principal amount.
Debt securities to be exchanged or transferred must be presented at the office
of the registrar or at the office of any transfer agent designated by us for
that purpose with respect to any series of debt securities. Debt securities
presented for exchange or registration of transfer must be duly endorsed by, or
be accompanied by a written instrument or instruments of transfer in a form
satisfactory to us and the trustee duly executed by, the holder of these debt
securities or his attorney who has been duly authorized in writing. We may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any exchange or registration of
transfer. We will not assess a service charge.
We will appoint the trustees as registrars under the indentures. If the
applicable prospectus supplement refers to any additional transfer agents or
paying agents initially designated by us with respect to any series of debt
securities, we may at any time rescind the designation of any transfer agent or
paying agent or approve a change in the location through which any transfer
agent or paying agent acts. We may at any time designate additional transfer
agents or paying agents with respect to any series of debt securities.
We are not required to exchange or register a transfer of (a) any debt
securities of any series for a period of 15 days preceding the first mailing of
notice of redemption for those series to be redeemed, or (b) any debt securities
selected, called or being called for redemption except, in the case of any debt
security to be redeemed in part, the portion of that debt security not so to be
redeemed.
The payment of principal of, and premium and interest, if any, on, debt
securities will be made at the office of the trustee for those debt securities
in the City of New York or at the office of a paying agent or paying agents that
we may designate from time to time, except that at our option payment of any
interest may be made by check mailed to the address of the person entitled to it
as that address appears in the register for those debt securities. The payment
of any interest on debt securities will be made to the person in whose name that
debt security is registered at the close of business on any record date for that
interest, except in the case of defaulted interest.
Global Debt Securities
Unless otherwise specified in a prospectus supplement for a particular
series of debt securities, each series of debt securities will be issued in
whole or in part in global form that will be deposited with, or on behalf of, a
depository identified in the prospectus supplement relating to that series.
Global securities will be registered in the name of the depository, which will
be the sole direct holder of the global securities. Any person wishing to own a
debt security must do so indirectly through an account with a broker, bank or
other financial institution that, in turn, has an account with the depository.
Special Investor Considerations for Global Securities. Our obligations
with respect to the debt securities, as well as the obligations of each trustee,
run only to persons who are registered holders of debt securities. For example,
once we make payment to the registered holder, we have no further responsibility
for that payment even if that recipient is legally required to pass the payment
along to an individual investor but fails to do so. As an indirect holder, an
investor's rights relating to a global security will be governed by the account
rules of the investor's financial institution and of the depository, as well as
general laws relating to transfers of debt securities.
An investor should be aware that when debt securities are issued in the
form of global securities:
o the investor cannot have debt securities registered in his or her
own name;
o the investor cannot receive physical certificates for his or her
interest in the debt securities;
o the investor must look to his or her bank or brokerage firm for
payments on the debt securities and protection of his or her legal
rights relating to the debt securities;
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<PAGE>
o the investor may not be able to sell interests in the debt
securities to some insurance companies or other institutions that
are required by law to hold the physical certificates of debt
securities that they own;
o the depository's policies will govern payments, transfers, exchanges
and other matters relating to the investor's interest in the global
security. Neither FSA Holdings nor the trustees have any
responsibility for any aspect of the depository's actions or for its
records of ownership interests in the global security, and neither
FSA Holdings nor the trustees supervise the depository in any way;
and
o the depository will usually require that interests in a global
security be purchased or sold within its system using same-day
funds.
Special Situations When the Global Security Will Be Terminated. In a
few special situations described below, the global security will terminate and
interests in it will be exchanged for physical certificates representing debt
securities. After that exchange, the choice of whether to hold debt securities
directly or indirectly through an account at an investor's bank or brokerage
firm will be up to the investor. In that event, investors must consult their
banks or brokers to find out how to have their interests in debt securities
transferred to their own names so that they may become direct holders.
The special situations where a global security is terminated are:
o when the depository notifies us that it is unwilling, unable or no
longer qualified to continue as depository, unless a replacement is
named;
o when an event of default on the debt securities has occurred and has
not been cured; or
o when and if we decide to terminate a global security.
A prospectus supplement may list situations for terminating a global
security that would apply only to a particular series of debt securities. When a
global security terminates, the depository, and not us or one of the trustees,
is responsible for deciding the names of the institutions that will be the
initial direct holders. Unless otherwise provided in a prospectus supplement,
debt securities will be issued in denominations of $1,000 and integral multiples
of $1,000, and will be issued in registered form only, without coupons.
Certain Covenants of FSA Holdings
Limitations on Liens. Under the senior indenture, so long as senior
debt securities are outstanding, we will not, and will not permit any subsidiary
to, directly or indirectly, create, issue, assume, incur or guarantee any
indebtedness for borrowed money which is secured by any mortgage, pledge, lien,
security interest or other encumbrance of any nature on any of the present or
future capital stock of any Restricted Subsidiary unless the senior debt
securities then outstanding and, if we so elect, any of our other indebtedness
ranking at least equally with the senior debt securities are secured equally and
ratably with, or prior to, that other secured debt so long as it is outstanding.
This prohibition also applies to guarantees of any indebtedness for borrowed
money which are secured by any mortgage, pledge, lien, security interest or
other encumbrance of any nature on any of the present or future capital stock of
any company, other than FSA Holdings, having direct or indirect control of any
Restricted Subsidiary. (Section 3.06)
"Restricted Subsidiary", as defined in the indentures, means FSA or
any successor to all or substantially all of its business, provided that the
successor is a subsidiary of FSA Holdings. A "subsidiary" is a corporation more
than 50% of the outstanding voting stock of which is owned, directly or
indirectly, by FSA Holdings and/or one or more of its subsidiaries.
Limitations on Disposition of Stock of Restricted Subsidiaries.
Under the senior and subordinated indentures, so long as debt securities are
outstanding, we will not, and will not permit any subsidiary to, sell, transfer
or otherwise dispose of any shares of capital stock of any Restricted Subsidiary
except for:
o a sale, transfer or other disposition of any capital stock of any
Restricted Subsidiary to a wholly owned subsidiary of FSA Holdings
or that subsidiary;
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o a sale, transfer or other disposition of the entire capital stock of
any Restricted Subsidiary for at least fair value; or
o a sale, transfer or other disposition of the capital stock of any
Restricted Subsidiary for at least fair value if, after giving
effect to it, we and our subsidiaries would own more than 80% of the
issued and outstanding voting stock of that Restricted Subsidiary.
(Section 3.07)
For the purposes of this limitation, our board of directors acting in good faith
will determine what constitutes fair value.
Limitations on Consolidation, Merger, Sale or Conveyance. Under the
senior and subordinated indentures, so long as debt securities are outstanding,
we will not consolidate with or merge into any other corporation or convey,
transfer or lease our properties and assets as an entirety or substantially as
an entirety to any person, unless:
o the successor or purchaser is a corporation organized and existing
under the laws of the United States of America, any State of the
United States of America or the District of Columbia;
o the due and punctual payment of the principal of, and premium and
interest, if any, on, all the debt securities under that indenture,
according to their tenor, and the due and punctual performance and
observance of all of our covenants and conditions under that
indenture, shall be expressly assumed, by supplemental indenture
satisfactory in form to the applicable trustee, by the corporation
formed by that consolidation or into which we have been merged, or
which acquired that property; and
o immediately after giving effect to that transaction, no event of
default under the applicable indenture, and no event which, after
notice or lapse of time or both, would become an event of default
under the applicable indenture, has occurred and is continuing.
(Section 9.01)
Events of Default
Any one of the following events will constitute an event of default
with regard to any series of debt securities under an indenture:
(a) default continued for 30 days in payment of any installment of
interest on any of the debt securities of that series when due and
payable; or
(b) default in payment of all or any part of the principal on any of the
debt securities of that series when due and payable either at
maturity, upon any redemption, by declaration or otherwise; or
(c) default in the payment of any sinking fund instalment as and when
the same becomes due and payable by the terms of the debt securities
of that series; or
(d) default in the performance, or breach, of any of our covenants or
warranties in respect of the debt securities of that series and
continuance of that default or breach for a period of 60 days after
written notice as provided in that indenture; or
(e) our failure to make any payment at maturity, including any
applicable grace period, in respect of indebtedness in an amount in
excess of $10,000,000, and that failure continues for a period of 10
days after written notice as provided in that indenture; or
(f) our default with respect to any indebtedness, which default results
in the acceleration of indebtedness in an amount in excess of
$10,000,000, without that indebtedness having been discharged or
that acceleration having been cured, waived, rescinded or annulled
for a period of 10 days after written notice as provided in that
indenture; or
(g) certain events of bankruptcy, insolvency, or reorganization with
respect to us or any Restricted Subsidiary; or
(h) any other event of default provided in the supplemental indenture or
resolution of our board of directors under which that series of debt
securities is issued or in the form of debt security for that
series. (Section 5.01)
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We are required to file with the trustee annually a written statement as
to any defaults in the performance or fulfillment of any of our covenants,
agreements or conditions contained in the indenture. (Section 3.05) Each
indenture provides that if the trustee considers it in the interests of the
holders of the debt securities of any series, the trustee may withhold notice to
the holders of debt securities of that series of any default other than a
default in the payment of principal of or interest on the debt securities of
that series. (Section 5.11)
Each indenture provides for acceleration of the unpaid amount of some or
all of the debt securities issued under that indenture in the following
circumstances:
(1) if an event of default described in clause (a), (b) or (c) above has
occurred and is continuing with regard to the debt securities of any
series outstanding under that indenture, either the trustee or the
holders of not less than 25% in principal amount of the debt
securities of that series then outstanding may declare the principal
of all debt securities of that series and interest accrued thereon,
if any, to be due and payable immediately,
(2) if an event of default described in clause (d) or (h) above has
occurred and is continuing, either the trustee or the holders of not
less than 25% in principal amount of all debt securities affected
and then outstanding, voting together as a single class, may declare
the principal of all debt securities then outstanding under that
indenture and interest accrued thereon, if any, to be due and
payable immediately, and
(3) if an event of default described in clause (e), (f) or (g) above has
occurred and is continuing, either the trustee or the holders of not
less than 25% in principal amount of all debt securities then
outstanding, voting together as a single class, may declare the
principal of all debt securities then outstanding under that
indenture and interest accrued thereon, if any, to be due and
payable immediately.
If debt securities of any series are original issue discount debt securities,
then only the amount of the principal of those debt securities then outstanding
under the applicable indenture as may be specified in the terms of that series
and interest accrued on that amount of the principal of those debt securities,
if any, may be declared due and payable immediately pursuant to clause (1), (2)
or (3) above.
After a declaration of acceleration of maturity of the debt
securities of any series, if all payments due have been made and all events of
default, have been cured, waived or otherwise remedied as provided in the
applicable indenture, then:
o with respect to an event of default described in clauses (a), (b)
and (c) above, the holders of a majority in principal amount of the
debt securities of that series then outstanding under that
indenture, voting as a separate class, may waive all defaults with
respect to that series and rescind and annul that declaration and
its consequences,
o with respect to an event of default described in clauses (d) or (h)
above, the holders of a majority in principal amount of the debt
securities of all series affected by that default and then
outstanding under that indenture, voting as a single class, may
waive all those defaults with respect to all the debt securities
affected by that default and then outstanding under that indenture
and rescind and annul that declaration and its consequences, and
o with respect to an event of default described in clauses (e), (f)
and (g) above, the holders of a majority in principal amount of the
debt securities of all series then outstanding under that indenture,
voting as a single class, may waive all those defaults with respect
to all the debt securities then outstanding under that indenture and
rescind and annul that declaration and its consequences. (Section
5.01)
It is not necessary that payments of principal due as a result of acceleration
be paid or that the event of default caused by non-payment of the principal due
as a result of acceleration be cured, waived or otherwise remedied
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in order to for the applicable holders to rescind and annul a declaration of
acceleration of the maturity of the debt securities of any series as provided
above.
Prior to a declaration of acceleration of maturity of the debt
securities of any series, either the holders of a majority in principal amount
of the outstanding debt securities of all series under the applicable indenture,
voting as a single class, or the holders of a majority in principal amount of
the outstanding debt securities of the affected series, depending on the nature
of the event of default, may waive an event of default and its consequences,
except a default in the payment of the principal of or interest on any debt
securities or in respect of a covenant or provision of the indenture which
cannot be modified or amended without the consent of the holder of each debt
security affected. (Section 5.10)
Each indenture provides that the trustee is under no obligation,
subject to the trustee's duty during an event of default to act with the
required standard of care, to exercise any of the trusts or powers vested in it
by that indenture at the request, order or direction of any of the holders of
debt securities, unless those holders have offered the trustee reasonable
indemnity. (Sections 6.01 and 6.02) Subject to these provisions for
indemnification, the holders of a majority in principal amount of the debt
securities of each series affected, voting as a separate classes, may 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 debt securities of that series. (Section 5.09)
No holder of debt securities of any series will have any right by
virtue of either indenture to institute any legal action or proceeding with
respect to that indenture, unless
o that holder has previously given to the trustee written notice of a
continuing default,
o the holders of not less than 25% in principal amount of the debt
securities of that series then outstanding have made written request
on the trustee to institute such action or proceeding and have
offered to the trustee any reasonable indemnity that the trustee may
require relating to their request,
o the trustee fails to institute the requested proceeding within 60
days and
o no direction inconsistent with such written request has been given
to the trustee by the holders of a majority in principal amount of
the debt securities of such series then outstanding. (Section 5.06)
These limitations do not apply to a suit for enforcement of payment of the
principal of or interest on a debt security on or after the respective due
dates. (Section 5.07)
Defeasance and Covenant Defeasance
The indentures contain a provision that, if made applicable to any
series of debt securities, permits us to elect, subject to certain conditions:
o to be discharged from our obligations with respect to the debt
securities of that series, subject to limited exceptions
("defeasance") and/or
o to be released from our obligations with respect to that series of
debt securities under the covenant in the indentures relating to
limitations on disposition of stock of Restricted Subsidiaries and,
in the case of the senior indenture, also the covenant relating to
limitations on liens ("covenant defeasance").
To make either of these elections, we must irrevocably deposit with the trustee
as trust funds monies, United States Government Obligations or a combination of
the two sufficient, without reinvestment, in the opinion of a nationally
recognized firm of independent public accountants, to pay and discharge the
principal of and interest on the outstanding debt securities of that series on
the maturity of that principal or interest. (Sections 13.01 through 13.04)
Each indenture provides that, to effect defeasance or covenant
defeasance, we must deliver to the trustee an opinion of counsel to the effect
that defeasance or covenant defeasance, as the case may be, will not cause the
holders of the debt securities to recognize income, gain or loss for Federal
income tax purposes and that those holders will be subject to Federal income tax
on the same amounts, in the same manner and
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at the same times as would have been the case if defeasance or covenant
defeasance had not occurred. In addition, in the case of defeasance, that
opinion of counsel must state that a private letter ruling or a general revenue
ruling to the same effect has been issued by the United States Internal Revenue
Service or state that since the date of the applicable indenture there has been
a change in the applicable Federal income tax law or the interpretation of the
applicable Federal income tax law to the same effect. (Section 13.04)
In order to effect defeasance or covenant defeasance under the
subordinated indenture, in addition to the requirements described above, no
default in the payment of principal of, or premium or interest, if any, on, any
senior debt can have occurred and be continuing or no event of default with
respect to senior debt can have occurred and be continuing and have resulted in
that senior debt becoming or being declared due and payable prior to the date it
would have become due and payable.
Modification and Waiver
Each indenture provides that with the consent of the holders of not
less than a majority in principal amount of the debt securities at the time
outstanding of all series affected by that supplemental indenture, voting as a
single class, FSA Holdings and the trustee may enter into supplemental
indentures for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of that indenture or of modifying in any
manner the rights of the holders of the debt securities of that series;
provided, that no supplemental indenture shall, without the consent of the
holder of each debt security so affected:
o extend the final maturity of any debt security,
o reduce the principal amount of any debt security,
o reduce the rate or extend the time of payment of interest on any
debt security,
o reduce any amount payable on redemption of any debt security,
o reduce the amount of the principal of an original issue discount
debt security that would be due and payable upon an acceleration of
the maturity of that debt security or the amount of that debt
security provable in bankruptcy,
o impair or affect the right of any holder to institute suit for the
payment of any debt security, if the debt securities provide for
those rights,
o impair or affect any right of repayment of any debt security at the
option of the holder or
o reduce the percentage of debt securities of any series, the consent
of the holders of which is required for any supplemental indenture.
(Section 8.02)
Each Indenture further provides that FSA Holdings and the trustee
may, without the consent of the holders of any of the debt securities issued
under that indenture, enter into supplemental indentures to, among other things,
cure any ambiguity or to correct or supplement any defective or inconsistent
provision or to make other provisions in regard to matters or questions arising
under the indenture or under any supplemental indenture as we may deem necessary
or desirable and which do not adversely affect the interests of the holders of
the debt securities.
The holders of at least a majority in principal amount of the debt
securities of all series outstanding under an indenture voting as a class may
waive compliance by us with the covenants contained in that indenture relating
to limitations on liens, limitations on dispositions of stock of Restricted
Subsidiaries and corporate existence. (Section 3.09)
Subordination under the Subordinated Indenture
To the extent provided in the subordinated indenture, the payment of
the principal of, and premium and interest, if any, on, each and all of the
subordinated debt securities we issue will be subordinate and subject in right
of payment to the prior payment of all amounts then due and payable in respect
of all senior debt. Upon any payment or distribution of assets to creditors upon
any liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of FSA Holdings, the
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holders of the senior debt will first be entitled to receive payment in full of
principal of, and premium and interest, if any, on, the senior debt before the
holders of subordinated debt securities will be entitled to receive or retain
any payment in respect of the principal of, and premium or interest, if any, on,
the subordinated debt securities. (Sections 14.01 and 14.02)
In the event of the acceleration of the maturity of any subordinated
debt securities, the holders of all senior debt outstanding at the time of that
acceleration will first be entitled to receive payment in full of all amounts
due on the senior debt before the holders of subordinated debt securities will
be entitled to receive any payment upon the principal of, or premium or
interest, if any, on, the subordinated debt securities. (Section 14.03)
No payments on account of principal of, or premium or interest, if
any, on, the subordinated debt securities may be made if there shall have
occurred and be continuing a default in any payment with respect to senior debt,
or an event of default with respect to any senior debt resulting in the
acceleration of the maturity of that senior debt, or if any judicial proceeding
shall be pending with respect to that default. (Section 14.04)
The subordinated indenture defines "senior debt" as the principal
of, and premium and interest, if any, on, Debt, as defined in the subordinated
indenture, whether incurred on or prior to the date of the subordinated
indenture or thereafter incurred, unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that those obligations are not superior in right of payment to the subordinated
debt securities or to the other Debt which ranks equally with, or is
subordinated to, the subordinated debt securities; provided, however, that
senior debt does not include:
o any of our Debt which when incurred and without respect to any
election under Section 1111(b) of the Bankruptcy Code was without
recourse to us,
o any of our Debt to any of our subsidiaries,
o Debt to any of our employees,
o any liability for taxes,
o indebtedness or monetary obligations to trade creditors or assumed
by us or any of our subsidiaries in the ordinary course of business
in connection with the obtaining of goods, materials or services and
o the subordinated debt securities.
For the purposes of the definition of senior debt, interest on Debt includes any
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to us whether or not that claim for post-petition
interest is allowed in that proceeding.
The subordinated indenture places no limitation on the amount of
additional senior debt that may be incurred by us. We may from time to time
incur additional indebtedness constituting senior debt.
The subordinated indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular issue of subordinated debt
securities, may be changed prior to that issuance. Any change will be described
in the prospectus supplement relating to those subordinated debt securities.
Conversion or Exchange
The debt securities of any series may be convertible or exchangeable
into common stock or preferred stock registered under the registration statement
relating to this prospectus. The specific terms and conditions on which debt
securities of any series may be so converted or exchanged will be set forth in
the applicable prospectus supplement. Those terms may include the conversion or
exchange price, provisions for conversion or exchange, either mandatory, at the
option of the holder, or at our option, and provisions under which the number of
shares of common stock or other securities to be received by the holders of debt
securities would be calculated as of a time and in the manner stated in the
applicable prospectus supplement.
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DESCRIPTION OF COMMON STOCK
We are authorized to issue up to 50,000,000 shares of common stock.
At March 25, 1999, 31,533,781 shares of our common stock were outstanding. This
number of shares outstanding includes shares owned by a trust on our behalf and
excludes 742,520 shares of treasury stock.
The following description of our common stock does not purport to be
complete. It does not give full effect to the provisions of statutory or common
law applicable to securities like our common stock. The description is qualified
in its entirety by reference to our certificate of incorporation and by-laws,
which have been incorporated by reference as exhibits to the registration
statement of which this prospectus is a part.
The amount of dividends we pay in the future will be reviewed
periodically by our board of directors in light of our earnings, financial
condition and capital and other cash requirements. It is the policy of our board
of directors that we retain an adequate portion of our earnings to support the
growth of our business. We cannot assure you that any dividends will be paid.
Most of our operations are conducted through FSA and thus our
ability to pay dividends is dependent on FSA's financial condition, results of
operations, cash requirements and other related factors. FSA is also subject to
restrictions contained in the insurance laws and related regulations of New York
and other states.
We will ordinarily be required to withhold United States Federal
income taxes in the amount of 30% of any dividends paid to non-United States
shareholders who are not subject to United States Federal income taxation,
unless a tax treaty between the United States and the country of the
shareholder's residence provides for withholding at a reduced rate.
Our common stock is traded on the New York Stock Exchange under the
symbol "FSA". The transfer agent for our common stock is The Bank of New York.
DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS
As may be specified in a prospectus supplement, we may issue stock
purchase contracts obligating holders to purchase from us, and us to sell to the
holders, a number of shares of our common stock at a future date or dates. The
stock purchase contracts may be issued separately or as part of stock purchase
units consisting of a stock purchase contract and an underlying security that is
pledged by the holder of a stock purchase contract to secure its obligations
under the stock purchase contract. The prospectus supplement will specify the
material terms of the stock purchase contracts, the stock purchase units and any
applicable pledge or depository arrangements, including one or more of the
following:
o The stated amount that a holder will be obligated to pay under the
stock purchase contract in order to purchase our common stock.
o The settlement date or dates on which the holder will be obligated
to purchase shares of our common stock. The prospectus supplement
will specify whether the occurrence of any events may cause the
settlement date to occur on an earlier date and the terms on which
any early settlement would occur.
o The events, if any, that will cause our obligations and the
obligations of the holder under the stock purchase contract to
terminate.
o The settlement rate, which is a number that, when multiplied by the
stated amount of a stock purchase contract, determines the number of
shares of our common stock that we will be obligated to sell and a
holder will be obligated to purchase under that stock purchase
contract upon payment of the stated amount of that stock purchase
contract. The settlement rate may be determined by the application
of a formula specified in the prospectus supplement. If a formula is
specified, it may be based on the market price of our common stock
over a specified period or it may be based on some other reference
statistic.
o Whether the stock purchase contracts will be issued separately or as
part of stock purchase units consisting of a stock purchase contract
and an underlying security with an aggregate principal amount
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equal to the stated amount. Any underlying securities will be
pledged by the holder to secure its obligations under a stock
purchase contract.
o The type of underlying security, if any, that is pledged by the
holder to secure its obligations under a stock purchase contract.
Underlying securities may be debt securities, preferred securities
or debt obligations of third parties, including U.S. Treasury
securities.
o The terms of the pledge arrangement relating to any underlying
securities, including the terms on which distributions or payments
of interest and principal on any underlying securities will be
retained by a collateral agent, delivered to us or be distributed to
the holder.
o The amount of the contract fee, if any, that may be payable by us to
the holder or by the holder to us, the date or dates on which the
contract fee will be payable and the extent to which we or the
holder, as applicable, may defer payment of the contract fee on
those payment dates. The contract fee may be calculated as a
percentage of the stated amount of the stock purchase contract or
otherwise.
The descriptions of the stock purchase contracts, stock purchase
units and any applicable pledge or depository arrangements in this prospectus
and in any prospectus supplement are summaries of the material provisions of the
applicable agreements. These descriptions do not restate those agreements in
their entirety. We urge you to read the applicable agreements because they, and
not the summaries, define your rights as holders of the stock purchase contracts
or stock purchase units. We will make copies of the relevant agreements
available as described under the heading "Where You Can Find More Information"
above.
DESCRIPTION OF PREFERRED STOCK
General
Our restated certificate of incorporation, as amended, vests our
board of directors with authority to issue up to 3,000,000 shares of preferred
stock from time to time in one or more series, as may be adopted by resolutions
of the board of directors, and to fix, so far as not inconsistent with our
restated certificate of incorporation:
o the rate and times at which, and the conditions under which,
dividends shall be payable on shares of that series, and the status
of those dividends as cumulative or non-cumulative and as
participating or non-participating;
o the price or prices, times and terms and conditions, if any, upon
which or at which shares of that series shall be subject to
redemption;
o the rights, if any, of holders of shares of that series to convert
those shares into, or to exchange those shares for, shares of other
classes of our stock, or series of other classes of our stock, and
the terms and conditions of that conversion or exchange;
o the rights of the holders of shares of that series upon the
liquidation, dissolution or winding up of our affairs or upon any
distribution of our assets;
o the limitations, if any, applicable while that series is
outstanding, on the payment of dividends or making of distributions
on, or the acquisition of, or the use of moneys for the purchase of,
our common stock;
o the full or limited voting rights, if any, to be provided for the
shares of that series; and
o any other designations, preferences and relative, participating,
optional or other similar special rights, and qualifications,
limitations or restrictions of or on the shares of that series.
All shares of our preferred stock will be identical and of equal
rank except as otherwise provided in our restated certificate of incorporation
or as may be fixed by our board of directors as described above. In any event,
all shares of the same series will be identical and of equal rank except as to
the times from which cumulative dividends, if any, on those shares will be
cumulative. We may from time to time amend our restated certificate of
incorporation to increase or decrease the number of authorized shares of
preferred stock.
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The material terms of any series of preferred stock being offered by
us will be described in the prospectus supplement relating to that series of
preferred stock. That prospectus supplement may not restate the amendment to our
restated certificate of incorporation or the board resolution that establishes a
particular series of preferred stock in its entirety. We urge you to read that
amendment or board resolution because it, and not the description in the
prospectus supplement, will define your rights as a holder of preferred stock.
The certificate of amendment to our restated certificate of incorporation or
board resolution will be filed with the Secretary of State of the State of New
York and with the SEC.
Dividend Rights. The preferred stock will be preferred over our
common stock as to payment of dividends. Before any dividends or distributions
on our common stock, other than dividends or distributions payable in common
stock, shall be declared and set apart for payment or paid, the holders of
shares of each series of preferred stock will be entitled to receive dividends
when, as and if declared by our board of directors. We will pay those dividends
either in cash, shares of common stock or preferred stock or otherwise, at the
rate and on the date or dates indicated in the applicable prospectus supplement.
With respect to each series of preferred stock, the dividends on each share of
that series will be cumulative from the date of issue of the share unless some
other date is set forth in the prospectus supplement relating to the series.
Accruals of dividends will not bear interest.
Rights upon Liquidation. The preferred stock will be preferred over
common stock as to our assets so that the holders of each series of preferred
stock will be entitled to be paid, upon or voluntary or involuntary liquidation,
dissolution or winding up and before any distribution is made to the holders of
common stock, the amount set forth in the applicable prospectus supplement.
However, in this case the holders of preferred stock will not be entitled to any
other or further payment. If upon any liquidation, dissolution or winding up our
net assets are insufficient to permit the payment in full of the respective
amounts to which the holders of all outstanding preferred stock are entitled,
our entire remaining net assets will be distributed among the holders of each
series of preferred stock in an amount proportional to the full amounts to which
the holders of each series are entitled.
Redemption. All shares of any series of preferred stock will be
redeemable to the extent set forth in the prospectus supplement relating to the
series. All shares of any series of preferred stock will be convertible into
shares of common stock or into shares of any other series of preferred stock to
the extent set forth in the applicable prospectus supplement.
Voting Rights. Except as indicated in the prospectus supplement, the
holders of preferred stock shall be entitled to one vote for each share of
preferred stock held by them on all matters properly presented to shareholders.
The holders of common stock and the holders of all series of preferred stock
will vote together as one class.
Most of our operations are conducted through FSA and thus our
ability to pay dividends on any series of preferred stock is dependent on FSA's
financial condition, results of operations, cash requirements and other related
factors. FSA is also subject to restrictions contained in the insurance laws and
related regulations of New York and other states.
Outstanding Preferred Stock
As of the date of this prospectus, we have outstanding 2,000,000
shares of Series A, non-dividend paying, voting, convertible preferred stock
having an aggregate liquidation preference of $700,000. This preferred stock is
convertible, at the option of the holder upon payment of the conversion price,
into an equal number of shares of common stock, subject to anti-dilutive
adjustment. The conversion price per share, subject to anti-dilutive adjustment,
is $29.65. This preferred stock will be redeemed on May 13, 2004 if still
outstanding on that date at a redemption price of $0.35 per share. The holder of
this preferred stock is entitled to one vote per share of preferred stock,
voting together as a single class with the holders of common stock on all
matters upon which holders of common stock are entitled to vote. The holder of
this preferred stock is not entitled to receive dividends or other distributions
of any kind payable to our shareholders, except that, in the event of our
liquidation, dissolution or winding up, that holder is entitled to receive out
of our assets available for this purpose, before any distribution or payment is
made to the holders of our common stock,
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liquidation payments in the amount of $0.35 per share. The holder of this
preferred stock may not transfer this preferred stock, except to one of its
majority-owned subsidiaries.
PLAN OF DISTRIBUTION
We may sell the securities to one or more underwriters for a public
offering by them. We may also sell securities to investors directly or through
agents or dealers. The supplemental prospectus will include the names of any
underwriters, agents or dealers to be used in the distribution.
The securities may be offered and sold at a fixed price or prices,
which may be changed from time to time. They may also be offered and sold from
time to time at market prices prevailing at the time of sale, at prices related
to these prevailing market prices or at negotiated prices. We may also, from
time to time, authorize underwriters acting as our agents to offer and sell the
securities. A prospectus supplement will include the terms of these
arrangements. If securities are sold through an underwritten offering, we will
execute an underwriting agreement with an underwriter or underwriters. The
prospectus supplement will include the names of the specific managing
underwriter or underwriters and other underwriters, and the amount of securities
to be underwritten by those underwriters. The prospectus supplement will also
have the terms of the transaction, including commissions, discounts and any
other compensation of the underwriters and dealers. The underwriters will use
this prospectus and the prospectus supplement to sell the securities. The
underwriting agreement will provide that the obligations of the underwriters are
subject to specified conditions precedent and that the underwriters will be
obligated to purchase all the securities if any are purchased.
In connection with the sale of securities, underwriters may be
considered to have received compensation from us in the form of underwriting
discounts or commissions. They may also receive commissions from purchasers of
securities for whom they may act as agent. Underwriters may sell securities to
or through dealers. These dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters, and they may also
receive commissions from the purchasers for whom they may act as agent.
The prospectus supplement will set forth any underwriting
compensation paid by us to underwriters or agents in connection with the
offering of securities, as well as any discounts, concessions or commissions
allowed by underwriters to participating dealers. Underwriters, dealers and
agents participating in the distribution of the securities may be deemed to be
underwriters under the Securities Act. Also any discounts and commissions
received by them and any profit realized by them on resale of the securities may
be deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled under agreements with us to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act, and to reimbursement by us for
various expenses.
If we use a dealer in the sale of the securities, we will sell the
securities to the dealer, as principal. The dealer may then resell these
securities to the public at varying prices to be determined by the dealer at the
time of resale. The prospectus supplement will name these dealers and the terms
of these arrangements.
We may offer and sell the securities directly to institutional
investors or others. These parties may be deemed to be underwriters under the
Securities Act with respect to their resales. The prospectus supplement will
include the terms of these transactions.
The securities may or may not be listed on a national securities
exchange or a foreign securities exchange. The securities may not have an
established trading market. No assurances can be given that there will be a
market for any of the securities.
Agents, underwriters and dealers may be customers of, engage in
transactions with or perform services for, us and our subsidiaries in the
ordinary course of business.
17
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LEGAL MATTERS
The legality of the securities will be passed upon for us by Bruce
E. Stern, Esq., our General Counsel, and for any underwriters or agents by
counsel to be named in the prospectus supplement. Bruce E. Stern beneficially
owns 6,114 shares of our common stock, of which 2,100 shares are held in a trust
for the benefit of his children, and has economic ownership of the equivalent of
another 81,040 shares of our common stock.
EXPERTS
The consolidated financial statements and the related financial
statement schedule of Financial Security Assurance Holdings Ltd. and
Subsidiaries included or incorporated by reference in our Annual Report on Form
10-K for the year ended December 31, 1998, and the consolidated financial
statements of Financial Security Assurance Inc. and Subsidiaries included as an
exhibit to that Form 10-K, have been incorporated by reference in this
prospectus in reliance on the reports of PricewaterhouseCoopers LLP, given on
the authority of that firm as experts in accounting and auditing and
incorporated in this prospectus by reference.
18
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities being registered, other
than underwriting discounts and commissions:
Registration............................................ $ 63,940
Trustee Fees ........................................... 7,500
Printing ............................................... 30,000
Accounting Fees ........................................ 30,000
Legal Fees ............................................. 80,000
Rating Agency Fees ..................................... 60,000
Miscellaneous........................................... 2,000
========
$273,440
Item 15. Indemnification of Officers and Directors.
Pursuant to the New York Business Corporation Law (the "NYBCL"), we
have the power to indemnify certain persons, including our officers and
directors, under stated circumstances and subject to certain limitations in
connection with services performed in good faith for us.
Under our by-laws, any person made or threatened to be made a party
to any civil or criminal action or proceeding by reason of the fact that he or
she or his or her testator or intestate is or was our director or officer, or
served any other corporation or entity of any type or kind, domestic or foreign,
in any capacity, at our request, shall be indemnified against judgments, fines,
amounts paid in settlement and reasonable expenses, unless (a) his or her acts
were committed in bad faith or were the result of his or her active and
deliberate dishonesty and were material to such action or proceedings or (b) he
or she personally gained in fact a financial profit or other advantage to which
he or she was not legally entitled.
The indemnification provided in the NYBCL is not exclusive of any
other rights to which a director or officer may be entitled, whether contained
in the certificate of incorporation or by-laws or, when authorized by the
certificate of incorporation or the by-laws, a shareholders' or directors'
resolution or an indemnification agreement, except that no indemnification may
be made in any case if a judgment or other final adjudication adverse to the
director or officer establishes that his or her acts were committed in bad faith
or were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that he or she personally gained in fact a
financial profit or other advantage to which he or she was not legally entitled.
We maintain directors' and officers' liability insurance which
insures against liabilities that our directors or officers may incur in such
capacities.
19
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
1.1 Form of Underwriting Agreement.*
3.1 Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 to the registrant's Annual Report on Form 10-K for the
year ended December 31, 1994).
3.1(A) Certificate of Amendment of the Amended and Restated Certificate of
Incorporation (incorporated by reference to Exhibit 3.1(A) to the
registrant's Registration Statement on Form S-1 (No. 33-70230), as
such Registration Statement has been amended).
3.2 Amended and Restated By-Laws, as amended and restated on February
14, 1996 (incorporated by reference to Exhibit 5 to registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996).
4.1 Amended and Restated Trust Indenture dated as of February 24, 1999,
between the registrant and First Union National Bank, as Trustee.+
4.2 Form of Subordinated Indenture.+
4.3 Form of senior debt security (contained in Exhibit 4.1).
4.4 Form of subordinated debt security (contained in Exhibit 4.2).
4.5 Form of Purchase Contract Agreement (including as Exhibit A the Form
of the Security Certificate).
5.1 Opinion of Bruce E. Stern, Esq.
12.1 Computation of Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges and Preferred Stock Dividends.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Bruce E. Stern, Esq. (contained in Exhibit 5.1).
24.1 Power of Attorney.+
25.1 Statement of Eligibility and Qualification on Form T-1 under the
Trust Indenture Act of 1939, as amended, of the trustee under the
Amended and Restated Trust Indenture filed as Exhibit 4.1 to this
registration statement.+
25.2 Statement of Eligibility and Qualification on Form T-1 under the
Trust Indenture Act of 1939, as amended, of the trustee under the
Subordinated Indenture filed as Exhibit 4.2 to this registration
statement.*
- ----------------
*To be filed by a report on Form 8-K pursuant to Item 601 of Regulation
S-K.
+Previously filed.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
20
<PAGE>
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with the SEC by such registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) 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 said 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.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
(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.
(e) The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee under
subsection (a) of Section 310 of the Trust Indenture Act (the "Act")
in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Act.
21
<PAGE>
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 New York, New York, on May 5, 1999.
FINANCIAL SECURITY ASSURANCE HOLDINGS
LTD.
By: *
--------------------------------------
Robert P. Cochran
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
* Chairman of the Board, Chief May 5, 1999
- ----------------- Executive Officer and Director
Robert P. Cochran (principal executive officer)
* President and Director May 5, 1999
- -----------------
Roger K. Taylor
* Executive Vice President and May 5, 1999
- ----------------- Director
Sean W. McCarthy
* Chief Financial Officer May 5, 1999
- ----------------- (principal financial officer)
John A. Harrison
* Controller May 5, 1999
- ----------------- (principal accounting officer)
Jeffrey S. Joseph
* Vice Chairman of the Board May 5, 1999
- ----------------- and Director
John J. Byrne
* Director May 5, 1999
- -----------------
Robert N. Downey
* Director May 5, 1999
- -----------------
Anthony M. Frank
* Director May 5, 1999
- -----------------
Fudeji Hama
22
<PAGE>
Signature Title Date
--------- ----- ----
* Director May 5, 1999
- ------------------
K. Thomas Kemp
* Director May 5, 1999
- ------------------
David O. Maxwell
* Director May 5, 1999
- ------------------
James M. Osterhoff
* Director May 5, 1999
- ------------------
James H. Ozanne
* Director May 5, 1999
- ------------------
Richard A. Post
* Director May 5, 1999
- ------------------
Howard M. Zelikow
* Bruce E. Stern, by signing his name hereto, does hereby execute this
registration statement on behalf of the directors and officers of Financial
Security Assurance Holdings Ltd. indicated above by asterisks, pursuant to
powers of attorney duly executed by such directors and officers and filed as
Exhibit 24.1 to the registration statement.
By:
/s/ Bruce Stern
----------------------------
Bruce E. Stern
Attorney-in-Fact
23
================================================================================
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
AND
---------------------------------------,
as Purchase Contract Agent
-----------------
PURCHASE CONTRACT AGREEMENT
-----------------
Dated as of ____________
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions and Other Provisions
of General Application
Section 1.01. Definitions.................................................... 1
SECTION 1.02. Compliance Certificates and Opinions........................... 8
SECTION 1.03. Form of Documents Delivered to Agent........................... 9
SECTION 1.04. Acts of Holders; Record Dates.................................. 9
SECTION 1.05. Notices, etc., to Agent and the Company........................11
SECTION 1.06. Notice to Holders; Waiver......................................11
SECTION 1.07. Effect of Headings and Table of Contents.......................12
SECTION 1.09. Separability Clause............................................12
SECTION 1.10. Benefits of Agreement..........................................12
SECTION 1.11. Governing Law..................................................13
SECTION 1.12. Legal Holidays.................................................13
SECTION 1.13. Counterparts...................................................13
SECTION 1.14. Inspection of Agreement........................................13
ARTICLE II
Security Certificate Forms
SECTION 2.01. Forms of Security Certificates Generally.......................13
SECTION 2.02. Form of Agent's Certificate of Authentication..................14
ARTICLE III
The Securities
SECTION 3.01. Title and Terms; Denominations.................................14
SECTION 3.02. Rights and Obligations Evidenced by the Security
Certificates...............................................15
SECTION 3.03. Execution, Authentication, Delivery and Dating.................15
SECTION 3.04. Temporary Security Certificates................................16
SECTION 3.05. Registration; Registration of Transfer and Exchange............17
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Security
Certificates...............................................19
SECTION 3.07. Persons Deemed Owners..........................................20
SECTION 3.08. Cancellation...................................................21
i
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Page
----
SECTION 3.09. Securities Not Separable.......................................21
ARTICLE IV
The Underlying Securities
SECTION 4.01. Payment of Interest; Interest Rights Preserved.................22
SECTION 4.02. Transfer of Underlying Securities
Upon Occurrence of Termination Event.......................23
ARTICLE V
The Purchase Contracts
SECTION 5.01. Purchase of Shares of Common Stock.............................24
SECTION 5.02. Contract Fees..................................................25
SECTION 5.03. Deferral of Payment Dates For Contract Fee.....................26
SECTION 5.05. Issuance of Shares of Common Stock.............................27
SECTION 5.06. Adjustment of Settlement Rate..................................28
SECTION 5.08. Termination Event; Notice......................................36
SECTION 5.09. Early Settlement...............................................36
SECTION 5.10. No Fractional Shares...........................................38
SECTION 5.11. Charges and Taxes..............................................39
ARTICLE VI
Remedies
SECTION 6.01. Unconditional Right of Holders to Receive Contract
Fees and to Purchase Common Stock..........................39
SECTION 6.02. Restoration of Rights and Remedies.............................39
SECTION 6.03. Rights and Remedies Cumulative.................................40
Section 6.04. Delay or Omission Not Waiver...................................40
SECTION 6.05. Undertaking for Costs..........................................40
SECTION 6.06. Waiver of Stay or Extension Laws...............................41
ARTICLE VII
The Agent
SECTION 7.01. Certain Duties and Responsibilities............................41
SECTION 7.02. Notice of Default..............................................42
SECTION 7.03. Certain Rights of Agent........................................42
SECTION 7.04. Not Responsible for Recitals or Issuance of Securities.........43
SECTION 7.05. May Hold Securities............................................43
SECTION 7.06. Money Held in Trust............................................43
SECTION 7.07. Compensation and Reimbursement.................................44
ii
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Page
----
SECTION 7.08. Corporate Agent Required; Eligibility..........................44
SECTION 7.09. Resignation and Removal; Appointment of Successor..............45
SECTION 7.10. Acceptance of Appointment by Successor.........................46
SECTION 7.11. Merger, Conversion, Consolidation or Succession
to Business................................................46
SECTION 7.12. Preservation of Information; Communications to Holders.........47
SECTION 7.13. No Obligations of Agent........................................47
SECTION 7.14. Tax Compliance.................................................48
ARTICLE VIII
Supplemental Agreements
SECTION 8.01. Supplemental Agreements Without Consent of Holders.............48
SECTION 8.02. Supplemental Agreements with Consent of Holders................49
SECTION 8.03. Execution of Supplemental Agreements...........................50
SECTION 8.04. Effect of Supplemental Agreements..............................50
SECTION 8.05. Reference to Supplemental Agreements...........................50
ARTICLE IX
Consolidation, Merger, Sale or Conveyance
SECTION 9.01. Covenant Not to Merge, Consolidate, Sell or
Convey Property Except Under Certain Conditions............50
SECTION 9.02. Rights and Duties of Successor Corporation.....................51
SECTION 9.03. Opinion of Counsel to Agent....................................52
ARTICLE X
Covenants
SECTION 10.01. Performance Under Purchase Contracts...........................52
SECTION 10.02. Maintenance of Office or Agency................................52
SECTION 10.03. Company to Reserve Common Stock................................53
SECTION 10.04. Covenants as to Common Stock...................................53
SECTION 10.05. Statements of Officers of the
Company as to Default.....................................53
EXHIBIT A Form of Security Certificate
iii
<PAGE>
PURCHASE CONTRACT AGREEMENT, dated as
of [ ], 1998, between FINANCIAL
SECURITY ASSURANCE HOLDINGS LTD., a New York
corporation (the "Company"), and [ ],
acting as purchase contract agent for the
Holders of Securities from time to time (the
"Agent").
RECITALS
The Company has duly authorized the execution and delivery of this
Agreement and the Security Certificates evidencing the Securities.
All things necessary to make the Company's obligations under the
Securities, when the Security Certificates are executed by the Company and
authenticated, executed on behalf of the Holders and delivered by the Agent, as
in this Agreement provided, the valid obligations of the Company, and to
constitute these presents a valid agreement of the Company, in accordance with
its terms, have been done.
W I T N E S S E T H:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed as follows:
ARTICLE I
Definitions and Other Provisions
of General Application
Section 1.01. Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(i) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular; and
nouns and pronouns of the masculine gender include the feminine and neuter
genders; and
(ii) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" when used with respect to any Holder, has the meaning
specified in Section 1.04.
<PAGE>
2
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means the Person named as the "Agent" in the first paragraph
of this instrument until a successor Agent shall have become such pursuant to
the applicable provisions of this Agreement, and thereafter "Agent" shall mean
the Person who is then the Agent hereunder.
"Agreement" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more agreements
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Applicable Market Value" has the meaning specified in Section 5.01.
"Board of Directors" means the board of directors of the Company or
a duly authorized committee of that board.
"Board Resolution" means one or more resolutions of the Board of
Directors, a copy of which has been 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 Agent.
"Business Day" means any day that is not a Saturday, Sunday or a day
on which the NYSE or banking institutions or trust companies in The City of New
York are authorized or obligated by law or executive order to be closed.
"Closing Price" has the meaning specified in Section 5.01.
"Collateral Agent" means [ ], as Collateral Agent
under the Pledge Agreement until a successor Collateral Agent shall have become
such pursuant to the applicable provisions of the Pledge Agreement, and
thereafter "Collateral Agent" shall mean the Person who is then the Collateral
Agent thereunder.
"Common Stock" means the Common Stock, par value $0.01 per share, of
the Company.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor
<PAGE>
3
shall have become such, and thereafter "Company" shall mean such successor.
"Contract Fee" means the fee payable by the Company in respect of
each Purchase Contract, equal to [ ]% per annum of the Stated Amount,
accruing from [ ], [ ], computed on the basis of the
actual number of days elapsed in a year of 365 or 366 days, as the case may be,
plus any additional fees accrued pursuant to Section 5.03.
"Corporate Trust Office" means the principal office of the Agent in
the Borough of Manhattan, The City of New York, at which at any particular time
its corporate trust business shall be administered, which office at the date
hereof is located at [ ], New York, New York [ ].
"Current Market Price" has the meaning specified in Section
5.06(a)(8).
"Depositary" means a clearing agency registered under the Exchange
Act that is designated to act as Depositary for the Securities as contemplated
by Section 3.05.
"Early Settlement" has the meaning specified in Section 5.09(a).
"Early Settlement Amount" has the meaning specified in Section
5.09(a).
"Early Settlement Date" has the meaning specified in Section
5.09(a).
"Early Settlement Rate" has the meaning specified in Section
5.09(b).
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time, and the
rules and regulations promulgated thereunder.
"Excess Underlying Securities" has the meaning specified in Section
4.02.
"Expiration Date" has the meaning specified in Section 1.04.
"Expiration Time" has the meaning specified in Section 5.06(a)(6).
"Final Settlement Date" means [ ], [ ].
"Final Settlement Fund" has the meaning specified in Section 5.05.
<PAGE>
4
"Global Security Certificate" means a Security Certificate that
evidences all or part of the Securities and is registered in the name of a
Depositary or a nominee thereof.
"Holder," when used with respect to a Security Certificate (or a
Security), means a Person in whose name the Security evidenced by such Security
Certificate (or the Security Certificate evidencing such Security) is registered
in the Security Register.
"Issuer Order" or "Issuer Request" means a written order or request
signed in the name of the Company by its Chairman of the Board, any Vice
Chairman of the Board, any Vice Chairman, its President or a Vice President and
by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant
Secretary, and delivered to the Agent.
"NYSE" has the meaning specified in Section 5.01.
"Officers' Certificate" means a certificate signed by the Chairman
of the Board, the President or any Vice President and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company and
delivered to the Agent.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company.
"Outstanding Securities" means, as of the date of determination, all
Securities evidenced by then Outstanding Security Certificates, except:
(i) If a Termination Event has occurred, Securities for which the
Underlying Securities have been theretofore deposited with the Agent in
trust for the Holders of such Securities; and
(ii) On and after the applicable Early Settlement Date, Securities
as to which the Holder has elected to effect Early Termination of the
related Purchase Contracts; provided, however, that in determining whether
the Holders of the requisite number of Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Securities owned by the Company or any Affiliate of the Company shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Agent shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only
Securities which the Agent 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 Agent
the pledgee's right so to act with respect to
<PAGE>
5
such Securities and that the pledgee is not the Company or any Affiliate
of the Company.
"Outstanding Security Certificates" means, as of the date of
determination, all Security Certificates theretofore authenticated, executed and
delivered under this Agreement, except:
(i) Security Certificates theretofore cancelled by the Agent or
delivered to the Agent for cancellation; and
(ii) Security Certificates in exchange for or in lieu of which other
Security Certificates have been authenticated, executed on behalf of the
Holder and delivered pursuant to this Agreement, other than any such
Security Certificate in respect of which there shall have been presented
to the Agent proof satisfactory to it that such Security Certificate is
held by a bona fide purchaser in whose hands the Securities evidenced by
such Security Certificate are valid obligations of the Company.
"Payment Date" means each [________] and [_________], commencing
[__________], [__________].
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, jointstock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Pledge" means the pledge under the Pledge Agreement of the
Underlying Securities constituting a part of the Securities.
"Pledge Agreement" means the Pledge Agreement, dated as of the date
hereof, among the Company, the Collateral Agent and the Agent, on its own behalf
and as Attorney-in-fact for the Holders from time to time of the Securities.
"Predecessor Security Certificate" of any particular Security
Certificate means every previous Security Certificate evidencing all or a
portion of the rights and obligations of the Holder under the Securities
evidenced thereby; and, for the purposes of this definition, any Security
Certificate authenticated and delivered under Section 3.06 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security Certificate shall be
deemed to evidence the same rights and obligations of the Holder as the
mutilated, destroyed, lost or stolen Security Certificate.
"Purchase Contract," when used with respect to any Security, means
the contract obligating the Company to sell and the Holder of such Security to
purchase Common Stock on
<PAGE>
6
the terms and subject to the conditions set forth in Article V hereof.
"Purchased Shares" has the meaning specified in Section 5.06(a)(6).
"Record Date" for the interest and Contract Fees payable on any
Payment Date means the [ ] or [ ] (whether or not a Business Day),
as the case may be, next preceding such Payment Date.
"Reorganization Event" has the meaning specified in Section 5.06(b).
"Responsible Officer," when used with respect to the Agent, means
any officer of the Agent assigned by the Agent to administer its corporate trust
matters.
"Security" means the collective rights and obligations of a Holder
of a Security Certificate in respect of Underlying Securities with a principal
amount equal to the Stated Amount, subject to the Pledge thereof, and a Purchase
Contract.
"Security Certificate" means a certificate evidencing the rights and
obligations of a Holder in respect of the number of Securities specified on such
certificate.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.05.
"Settlement Rate" has the meaning specified in Section 5.01.
"Stated Amount" means $[ ].
"Termination Date" means the date, if any, on which a Termination
Event occurs.
"Termination Event" means the occurrence of any of the following
events: (i) at any time on or prior to the Final Settlement Date, a decree or
order by a court having jurisdiction in the premises shall have been entered
adjudging the Company a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization of the Company under the United States
Bankruptcy Code or any other similar applicable Federal or State law, and,
unless such decree or order shall have been entered within 60 days prior to the
Final Settlement Date, such decree or order shall have continued undischarged
and unstayed for a period of 60 days; or (ii) a decree or order of a court
having jurisdiction in the premises for the appointment of a receiver or
liquidator or trustee or assignee in bankruptcy or insolvency of the Company or
of its property, or for the winding up or liquidation of its affairs, shall have
been entered, and, unless such decree or order shall have been entered within 60
days prior to the Final Settlement Date,
<PAGE>
7
such decree or order shall have continued undischarged and unstayed for a period
of 60 days, or (iii) at any time on or prior to the Final Settlement Date the
Company shall institute proceedings to be adjudicated a bankrupt, or shall
consent to the filing of a bankruptcy proceeding against it, or shall file a
petition or answer or consent seeking reorganization under the United States
Bankruptcy Code or any other similar applicable Federal or State law, or shall
consent to the filing of any such petition, or shall consent to the appointment
of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency
of it or of its property, or shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts generally as
they become due.
"Threshold Appreciation Price" has the meaning specified in Section
5.01.
"TIA" means the Trust Indenture Act of 1939, as amended, or any
successor statute.
"Trading Day" has the meaning specified in Section 5.01.
"Underlying Securities" means the [type and description of
underlying securities] pledged to the Collateral Agent pursuant to the Pledge.
"Underwriting Agreement" means the Underwriting Agreement dated
[ ], [ ] between the Company and [ ], as
representatives of the several Underwriters named therein.
"Vice President" means any vice president, whether or not designated
by a number or a word or words added before or after the title "vice president."
SECTION 1.02. Compliance Certificates and Opinions. Except as
otherwise expressly provided by this Agreement, upon any application or request
by the Company to the Agent to take any action under any provision of this
Agreement, the Company shall furnish to the Agent an Officers' Certificate
stating that all conditions precedent, if any, provided for in this Agreement
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 Agreement relating to such
particular application or request, no additional certificate or opinion need be
furnished.
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8
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Agreement shall include:
(i) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) 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;
(iii) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.03. Form of Documents Delivered to Agent. 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 of, or
representations by, counsel or an Opinion of Counsel, unless such officer knows,
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate of, or
representations by, counsel 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 Agreement, they may, but need not, be consolidated and
form one instrument.
<PAGE>
9
SECTION 1.04. Acts of Holders; Record Dates. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Agreement to be given or taken by Holders 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 Agent and, where it is
hereby expressly required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement and (subject to Section 7.01)
conclusive in favor of the Agent and the Company, if made in the manner provided
in this Section.
(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 Agent deems sufficient.
(c) The ownership of Securities shall be proved by the Security
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 Certificate evidencing
such 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 Agent or the Company in reliance thereon, whether or not notation
of such action is made upon such Security Certificate.
(e) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Agreement to be given, made or taken by
Holders of Securities. If any record date is set pursuant to this paragraph, the
Holders of Outstanding Securities on such record date, and no other Holders,
shall be entitled to take the relevant action,
<PAGE>
10
whether or not such Holders remain Holders after such record date; provided that
no such action shall be effective hereunder unless taken on or prior to the
applicable Expiration Date by Holders of the requisite number of Outstanding
Securities on such record date. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action for which a
record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be cancelled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite number of
Outstanding Securities on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Company, at its own expense,
shall cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Agent in writing and to each
Holder of Securities in the manner set forth in Section 1.06.
With respect to any record date set pursuant to this Section, the
Company may designate any date as the "Expiration Date" and from time to time
may change the Expiration Date to any earlier or later day; provided that no
such change shall be effective unless notice of the proposed new Expiration Date
is given to the Agent in writing, and to each Holder of Securities in the manner
set forth in Section 1.06, on or prior to the existing Expiration Date. If an
Expiration Date is not designated with respect to any record date set pursuant
to this Section, the Company shall be deemed to have initially designated the
180th day after such record date as the Expiration Date with respect thereto,
subject to its right to change the Expiration Date as provided in this
paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than
the 180th day after the applicable record date.
SECTION 1.05. Notices, etc., to Agent and the Company. Any request,
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Agreement to be made upon, given or
furnished to, or filed with:
(i) the Agent by any Holder or by the Company shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if made, given, furnished or filed in writing and personally delivered or
mailed, first-class postage prepaid, to the Agent at [Address], Attention:
[ ], or at any other address previously furnished in writing
by the Agent to the Holders and the Company, or
(ii) The Company by the Agent or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if made, given, furnished or filed in writing and personally delivered or
mailed, first-class postage prepaid, to the Company
<PAGE>
11
at Financial Security Assurance Holdings Ltd., 350 Park Avenue, New York,
NY 10022, Attention: [ ], or at any other address previously
furnished in writing to the Agent by the Company.
SECTION 1.06. Notice to Holders; Waiver. Where this Agreement
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
firstclass postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date,
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 Agreement 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 Agent, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Agent shall
constitute a sufficient notification for every purpose hereunder.
SECTION 1.07. 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 1.08. Successors and Assigns. All covenants and agreements
in this Agreement by the Company shall bind its successors and assigns, whether
so expressed or not.
SECTION 1.09. Separability Clause. In case any provision in this
Agreement or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions hereof and
thereof shall not in any way be affected or impaired thereby.
SECTION 1.10. Benefits of Agreement. Nothing in this Agreement or in
the Securities, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder and, to the extent provided
hereby, the Holders, any benefits or any legal or equitable right, remedy or
claim under this Agreement. The Holders
<PAGE>
12
from time to time shall be beneficiaries of this Agreement and shall be bound by
all of the terms and conditions hereof and of the Securities evidenced by their
Security Certificates by their acceptance of delivery thereof.
SECTION 1.11. Governing Law. This Agreement and the Securities shall
be governed by and construed in accordance with the laws of the State of New
York, without regard to the conflict of laws provisions thereof.
SECTION 1.12. Legal Holidays. In any case where any Payment Date,
any Early Settlement Date or the Final Settlement Date shall not be a Business
Day, then (notwithstanding any other provision of this Agreement or of the
Securities) payment in respect of interest on Underlying Securities or Contract
Fees shall not be made, Purchase Contracts shall not be performed and Early
Settlement shall not be effected on such date, but such payments shall be made,
or the Purchase Contracts shall be performed or Early Settlement shall be
effected, as applicable, on the next succeeding Business Day with the same force
and effect as if made on such Payment Date, Early Settlement Date or Final
Settlement Date, as the case may be; provided, that no interest shall accrue or
be payable by the Company or any Holder for the period from and after any such
Payment Date, Early Settlement Date or Final Settlement Date, as the case may
be, except that, if such next succeeding Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day with the same force and effect as if made on such Payment Date, Early
Settlement Date or Final Settlement Date, as the case may be.
SECTION 1.13. Counterparts. This Agreement may be executed in any
number of counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument.
SECTION 1.14. Inspection of Agreement. A copy of this Agreement
shall be available at all reasonable times at the Corporate Trust Office for
inspection by any Holder.
ARTICLE II
Security Certificate Forms
SECTION 2.01. Forms of Security Certificates Generally. The Security
Certificates (including the form of Purchase Contracts forming part of the
Securities evidenced thereby) shall be in substantially the form set forth in
Exhibit A hereto, with such letters, numbers or other marks of identification or
designation and such legends or endorsements printed, lithographed or engraved
thereon as may be required by the rules of any securities exchange on which the
Securities are listed or any Depositary therefor,
<PAGE>
13
or as may, consistently herewith, be determined by the officers of the Company
executing such Security Certificates, as evidenced by their execution of the
Security Certificates.
The definitive Security Certificates shall be printed, lithographed
or engraved on steel engraved borders or may be produced in any other manner,
all as determined by the officers of the Company executing the Security
Certificates, consistent with the provisions of this Agreement, as evidenced by
their execution thereof.
Every Global Security Certificate authenticated, executed on behalf
of the Holders and delivered hereunder shall bear a legend in substantially the
following form:
THIS SECURITY CERTIFICATE IS A GLOBAL SECURITY CERTIFICATE WITHIN
THE MEANING OF THE PURCHASE CONTRACT AGREEMENT HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY
CERTIFICATE MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY CERTIFICATE
REGISTERED, AND NO TRANSFER OF THIS SECURITY CERTIFICATE IN WHOLE OR IN PART MAY
BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT
AGREEMENT.
SECTION 2.02. Form of Agent's Certificate of Authentication. The
form of the Agent's certificate of authentication of the Securities shall be in
substantially the form set forth on the form of the Security Certificates.
ARTICLE III
The Securities
SECTION 3.01. Title and Terms; Denominations. The aggregate number
of Securities evidenced by Security Certificates authenticated, executed on
behalf of the Holders and delivered hereunder is limited to [ ]
[(subject to increase up to a maximum of [ ] to the extent the
overallotment option of the underwriters under the Underwriting Agreement is
exercised)], except for Security Certificates authenticated, executed and
delivered upon registration of transfer of, in exchange for, or in lieu of,
other Security Certificates pursuant to Section 3.04, 3.05, 3.06, 5.09 or 8.05.
The Security Certificates shall be issuable only in registered form
and only in denominations of a single Security and any integral multiple
thereof.
SECTION 3.02. Rights and Obligations Evidenced by the Security
Certificates. Each Security Certificate shall evidence the number of Securities
specified therein, with each such Security representing the ownership by the
Holder
<PAGE>
14
thereof of Underlying Securities with a principal amount equal to the Stated
Amount, subject to the Pledge of such Underlying Securities by such Holder
pursuant to the Pledge Agreement, and the rights and obligations of the Holder
under one Purchase Contract. Prior to the purchase, if any, of shares of Common
Stock under the Purchase Contracts, the Securities shall not entitle the Holders
to any of the rights of a holder of shares of Common Stock, including, without
limitation, the right to vote or receive any dividends or other payments or to
consent or to receive notice as stockholders in respect of the meetings of
stockholders or for the election of directors of the Company or for any other
matter, or any other rights whatsoever as stockholders, of the Company, except
to the extent otherwise expressly provided in this Agreement.
SECTION 3.03. Execution, Authentication, Delivery and Dating. Upon
the execution and delivery of this Agreement, and at any time and from time to
time thereafter, the Company may deliver Security Certificates executed by the
Company to the Agent for authentication, execution on behalf of the Holders and
delivery, together with its Issuer Order for authentication of such Security
Certificates, and the Agent in accordance with such Issuer Order shall
authenticate, execute on behalf of the Holder and deliver such Security
Certificates.
The Security Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its President, its Executive Vice President or its
Chief Financial Officer under its corporate seal reproduced thereon attested by
its Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Security Certificates may be manual or facsimile.
Security Certificates 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 Security
Certificates or did not hold such offices at the date of such Security
Certificates.
No Purchase Contract underlying a Security evidenced by a Security
Certificate shall be valid until such Security Certificate has been executed on
behalf of the Holder by the manual signature of an authorized signatory of the
Agent, as such Holder's Attorney-in-fact. Such signature by an authorized
signatory of the Agent shall be conclusive evidence that the Holder of such
Security Certificate has entered into the Purchase Contracts underlying the
Securities evidenced by such Security Certificate.
Each Security Certificate shall be dated the date of its
authentication.
<PAGE>
15
No Security Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose unless there appears on such
Security Certificate a certificate of authentication substantially in the form
provided for herein executed by an authorized signatory of the Agent by manual
signature, and such certificate upon any Security Certificate shall be
conclusive evidence, and the only evidence, that such Security Certificate has
been duly authenticated and delivered hereunder.
SECTION 3.04. Temporary Security Certificates. Pending the
preparation of definitive Security Certificates, the Company shall execute and
deliver to the Agent, and the Agent shall authenticate, execute on behalf of the
Holders, and deliver, in lieu of such definitive Security Certificates,
temporary Security Certificates which are in substantially the form set forth in
Exhibit A hereto, with such letters, numbers or other marks of identification or
designation and such legends or endorsements printed, lithographed or engraved
thereon as may be required by the rules of any securities exchange on which the
Securities are listed, or as may, consistently herewith, be determined by the
officers of the Company executing such Security Certificates, as evidenced by
their execution of the Security Certificates.
If temporary Security Certificates are issued, the Company will
cause definitive Security Certificates to be prepared without unreasonable
delay. After the preparation of definitive Security Certificates, the temporary
Security Certificates shall be exchangeable for definitive Security Certificates
upon surrender of the temporary Security Certificates at the Corporate Trust
Office, at the expense of the Company and without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Security Certificates,
the Company shall execute and deliver to the Agent, and the Agent shall
authenticate, execute on behalf of the Holder, and deliver in exchange therefor,
one or more definitive Security Certificates of authorized denominations and
evidencing a like number of Securities as the temporary Security Certificate or
Security Certificates so surrendered. Until so exchanged, the temporary Security
Certificates shall in all respects evidence the same benefits and the same
obligations with respect to the Securities evidenced thereby as definitive
Security Certificates.
SECTION 3.05. Registration; Registration of Transfer and Exchange.
The Agent shall keep at the Corporate Trust Office a register (the register
maintained in such office being herein referred to as the "Security Register")
in which, subject to such reasonable regulations as it may prescribe, the Agent
shall provide for the registration of Security Certificates and of transfers of
Security Certificates (the Agent, in such capacity, the "Security Registrar").
<PAGE>
16
Upon surrender for registration of transfer of any Security
Certificate at the Corporate Trust Office, the Company shall execute and deliver
to the Agent, and the Agent shall authenticate, execute on behalf of the
designated transferee or transferees, and deliver, in the name of the designated
transferee or transferees, one or more new Security Certificates of any
authorized denominations and evidencing a like number of Securities.
At the option of the Holder, Security Certificates may be exchanged
for other Security Certificates, of any authorized denominations and evidencing
a like number of Securities, upon surrender of the Security Certificates to be
exchanged at the Corporate Trust Office. Whenever any Security Certificates are
so surrendered for exchange, the Company shall execute and deliver to the Agent,
and the Agent shall authenticate, execute on behalf of the Holder, and deliver
the Security Certificates which the Holder making the exchange is entitled to
receive.
All Security Certificates issued upon any registration of transfer
or exchange of a Security Certificate shall evidence the ownership of the same
number of Securities and be entitled to the same benefits and subject to the
same obligations, under this Agreement as the Securities evidenced by the
Security Certificate surrendered upon such registration of transfer or exchange.
Every Security Certificate presented or surrendered for registration
of transfer or for exchange shall (if so required by the Agent) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Agent 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 a Security Certificate, but the Company and the Agent may require
payment from the Holder 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 Security Certificates, other than any exchanges pursuant
to Sections 306 and 805 not involving any transfer.
Notwithstanding the foregoing, the Company shall not be obligated to
execute and deliver to the Agent, and the Agent shall not be obligated to
authenticate, execute on behalf of the Holder and deliver any Security
Certificate presented or surrendered for registration of transfer or for
exchange on or after the Final Settlement Date or the Termination Date. In lieu
of delivery of a new Security Certificate, upon satisfaction of the applicable
conditions specified above in this Section and receipt of appropriate
registration or transfer instructions from such Holder, the Agent shall (i) if
the Final Settlement Date has occurred, deliver the shares of Common Stock
issuable in respect of
<PAGE>
17
the Purchase Contracts forming a part of the Securities evidenced by such
Security Certificate, or (ii) if a Termination Event shall have occurred prior
to the Final Settlement Date, transfer the principal amount of the Underlying
Securities evidenced thereby, in each case subject to the applicable conditions
and in accordance with the applicable provisions of Article V hereof.
The provisions of Clauses (1), (2), (3) and (4) below shall apply
only to Global Security Certificates:
1. Each Global Security Certificate authenticated and executed on
behalf of the Holders under this Agreement shall be registered in the name
of the Depositary designated for such Global Security Certificate or a
nominee thereof and delivered to such Depositary or a nominee thereof or
custodian therefor, and each such Global Security Certificate shall
constitute a single Security Certificate for all purposes of this
Agreement.
2. Notwithstanding any other provision in this Agreement, no Global
Security Certificate may be exchanged in whole or in part for Security
Certificates registered, and no transfer of a Global Security Certificate
in whole or in part may be registered, in the name of any Person other
than the Depositary for such Global Security Certificate or a nominee
thereof unless (A) such Depositary (i) has notified the Company that it is
unwilling or unable to continue as Depositary for such Global Security
Certificate or (ii) has ceased to be a clearing agency registered under
the Exchange Act or (B) there shall have occurred and be continuing a
default by the Company in respect to its obligations under one or more
Purchase Contracts.
3. Subject to Clause (2) above, any exchange of a Global Security
Certificate for other Security Certificates may be made in whole or in
part, and all Security Certificates issued in exchange for a Global
Security Certificate or any portion thereof shall be registered in such
names as the Depositary for such Global Security Certificate shall direct.
4. Every Security Certificate authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global
Security Certificate or any portion thereof, whether pursuant to this
Section, Section 3.04, 3.06, 5.09 or 8.05 or otherwise, shall be
authenticated, executed on behalf of the Holders and delivered in the form
of, and shall be, a Global Security Certificate, unless such Security
Certificate is registered in the name of a Person other than the
Depositary for such Global Security Certificate or a nominee thereof.
<PAGE>
18
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Security
Certificates. If any mutilated Security Certificate is surrendered to the Agent,
the Company shall execute and deliver to the Agent, and the Agent shall
authenticate, execute on behalf of the Holder, and deliver in exchange therefor,
a new Security Certificate, evidencing the same number of Securities and bearing
a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Agent (i)
evidence to their satisfaction of the destruction, loss or theft of any Security
Certificate, and (ii) such security or indemnity as may be required by them to
save each of them and any agent of any of them harmless, then, in the absence of
notice to the Company or the Agent that such Security Certificate has been
acquired by a bona fide purchaser, the Company shall execute and deliver to the
Agent, and the Agent shall authenticate, execute on behalf of the Holder, and
deliver to the Holder, in lieu of any such destroyed, lost or stolen Security
Certificate, a new Security Certificate, evidencing the same number of
Securities and bearing a number not contemporaneously outstanding.
Notwithstanding the foregoing, the Company shall not be obligated to
execute and deliver to the Agent, and the Agent shall not be obligated to
authenticate, execute on behalf of the Holder, and deliver to the Holder, a
Security Certificate on or after the Final Settlement Date or the Termination
Date. In lieu of delivery of a new Security Certificate, upon satisfaction of
the applicable conditions specified above in this Section and receipt of
appropriate registration or transfer instructions from such Holder, the Agent
shall (i) if the Final Settlement Date has occurred, deliver the shares of
Common Stock issuable in respect of the Purchase Contracts forming a part of the
Securities evidenced by such Security Certificate, or (ii) if a Termination
Event shall have occurred prior to the Final Settlement Date, transfer the
principal amount of the Underlying Securities evidenced thereby, in each case
subject to the applicable conditions and in accordance with the applicable
provisions of Article V hereof.
Upon the issuance of any new Security Certificate under this
Section, the Company and the Agent 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 Agent)
connected therewith.
Every new Security Certificate issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security Certificate shall constitute an
original additional contractual obligation of the Company and of the Holder in
respect of the Security evidenced thereby, whether or not the destroyed, lost or
stolen Security Certificate shall be at any time enforceable by anyone, and
shall be entitled to
<PAGE>
19
all the benefits and be subject to all the obligations of this Agreement equally
and proportionately with any and all other Security Certificates delivered
hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or settlement of mutilated, destroyed, lost or stolen Security Certificates.
SECTION 3.07. Persons Deemed Owners. Prior to due presentment of a
Security Certificate for registration of transfer, the Company and the Agent,
and any agent of the Company or the Agent, may treat the Person in whose name
such Security Certificate is registered as the owner of the Securities evidenced
thereby, for the purpose of receiving payments of interest on the Underlying
Securities, receiving payments of Contract Fees, performance of the Purchase
Contracts and for all other purposes whatsoever, whether or not the payment of
interest on the Underlying Securities or any Contract Fee payable in respect of
the Purchase Contracts constituting a part of the Securities evidenced thereby
shall be overdue and notwithstanding any notice to the contrary, and neither the
Company nor the Agent, nor any agent of the Company or the Agent, shall be
affected by notice to the contrary.
Notwithstanding the foregoing, with respect to any Global Security
Certificate, nothing herein shall prevent the Company, the Agent or any agent of
the Company or the Agent, from giving effect to any written certification, proxy
or other authorization furnished by any Depositary (or its nominee), as a
Holder, with respect to such Global Security Certificate or impair, as between
such Depositary and owners of beneficial interests in such Global Security
Certificate, the operation of customary practices governing the exercise of
rights of such Depositary (or its nominee) as Holder of such Global Security
Certificate.
SECTION 3.08. Cancellation. All Security Certificates surrendered
for delivery of shares of Common Stock on or after the Final Settlement Date,
transfer of Underlying Securities after the occurrence of a Termination Event or
pursuant to an Early Settlement or registration of transfer or exchange shall,
if surrendered to any Person other than the Agent, be delivered to the Agent
and, if not already cancelled, shall be promptly cancelled by it. The Company
may at any time deliver to the Agent for cancellation any Security Certificates
previously authenticated, executed and delivered hereunder which the Company may
have acquired in any manner whatsoever, and all Security Certificates so
delivered shall, upon Issuer Order, be promptly cancelled by the Agent. No
Security Certificates shall be authenticated, executed on behalf of the Holder
and delivered in lieu of or in exchange for any Security Certificates cancelled
as provided in this Section, except as expressly permitted by this Agreement.
All
<PAGE>
20
cancelled Security Certificates held by the Agent shall be disposed of as
directed by Issuer Order.
If the Company or any Affiliate of the Company shall acquire any
Security Certificate, such acquisition shall not operate as a cancellation of
such Security Certificate unless and until such Security Certificate is
delivered to the Agent cancelled or for cancellation.
SECTION 3.09. Securities Not Separable. Notwithstanding anything
contained herein or in the Security Certificates to the contrary, for so long as
the Purchase Contract underlying a Security remains in effect such Security
shall not be separable into its constituent parts, and the rights and
obligations of the Holder of such Security in respect of the Underlying
Securities and Purchase Contracts constituting such Security may be acquired,
and may be transferred and exchanged, only as a Security. Other than a Security
Certificate evidencing a Security, no Holder of a Security, or any transferee
thereof, shall be entitled to receive a certificate evidencing the ownership of
Underlying Securities or the rights and obligations of the Holder and the
Company under a Purchase Contract for so long as the Purchase Contract
underlying the Security remains in effect.
ARTICLE IV
The Underlying Securities
SECTION 4.01. Payment of Interest; Interest Rights Preserved.
Interest on any Underlying Security which is paid on any Payment Date shall,
subject to receipt thereof by the Agent from the Collateral Agent as provided by
the terms of the Pledge Agreement, be paid to the Person in whose name the
Security Certificate (or one or more Predecessor Security Certificates) of which
such Underlying Security is a part is registered at the close of business on the
Record Date next preceding such Payment Date.
Each Security Certificate evidencing Underlying Securities delivered
under this Agreement upon registration of transfer of or in exchange for or in
lieu of any other Security Certificate shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by the Underlying
Securities underlying such other Security Certificate.
In the case of any Security with respect to which Early Settlement
of the underlying Purchase Contract is effected on an Early Settlement Date
after any Record Date and on or prior to the next succeeding Payment Date,
interest on the Underlying Securities underlying such Security otherwise payable
on such Payment Date shall be payable on such Payment Date notwithstanding such
Early Settlement, and such interest shall, subject to receipt
<PAGE>
21
thereof by the Agent, be paid to the Person in whose name the Security
Certificate (or one or more Predecessor Security Certificates) is registered at
the close of business on the Record Date. Except as otherwise expressly provided
in the immediately preceding sentence, in the case of any Security with respect
to which Early Settlement of the underlying Purchase Contract is effected on an
Early Settlement Date, interest on the related Underlying Securities that would
otherwise be payable after the Early Settlement Date shall not be payable
hereunder to the Holder of such Security.
SECTION 4.02. Transfer of Underlying Securities Upon Occurrence of
Termination Event. Upon the occurrence of a Termination Event and the transfer
to the Agent of the Underlying Securities underlying such Securities pursuant to
the terms of the Pledge Agreement, the Agent shall request transfer instructions
with respect to such Underlying Securities from each Holder of Securities by
written request mailed to such Holder at his address as it appears in the
Security Register, in respect of the Underlying Securities underlying the
Security Certificate held by such Holder. Upon surrender to the Agent of a
Security Certificate with such transfer instructions in proper form for transfer
of the Underlying Securities by Federal Reserve BankWire or other appropriate
procedure, the Agent shall transfer the Underlying Securities evidenced by such
Security Certificate to such Holder in accordance with such instructions. If a
Security Certificate is not duly surrendered to the Agent with appropriate
transfer instructions, the Agent shall hold the Underlying Securities evidenced
by such Security Certificate as custodian for the Holder of such Security
Certificate.
Underlying Securities shall be transferred only in denominations of
$1,000 and integral multiples thereof. As promptly as practicable following the
occurrence of a Termination Event, the Agent shall determine the excess of (i)
the aggregate principal amount of Underlying Securities underlying the
Outstanding Securities over (ii) the aggregate principal amount of Underlying
Securities in denominations of $1,000 and integral multiples thereof
transferrable to Holders of record on the date of such Termination Event (such
excess being herein referred to as the "Excess Underlying Securities"). As soon
as practicable after transfer to the Agent of the Underlying Securities
underlying the Outstanding Securities as provided in the Pledge Agreement, the
Agent shall sell the Excess Underlying Securities to or through one or more U.S.
Government securities dealers at then prevailing prices. The Agent shall deduct
from the proceeds of such sales all commissions and other out-of-pocket
transaction costs incurred in connection with such sales of Excess Underlying
Securities and, until the net proceeds of such sale or sales have been
distributed to Holders of the Securities, the Agent shall hold such proceeds in
trust for the Holders of Securities. Each Holder shall be entitled to receive a
portion, if any,
22
<PAGE>
of such net proceeds in lieu of Underlying Securities with a principal amount of
less than $1,000 determined by multiplying the aggregate amount of such net
proceeds by a fraction, the numerator of which is the fraction of $1,000 in
principal amount of Underlying Securities to which such Holder would otherwise
be entitled (after taking into account all Securities then held by such Holder)
and the denominator of which is the aggregate principal amount of Excess
Underlying Securities.
ARTICLE V
The Purchase Contracts
SECTION 5.01. Purchase of Shares of Common Stock. Each Purchase
Contract shall obligate the Holder of the related Security to purchase, and the
Company to sell, on the Final Settlement Date at a price equal to the Stated
Amount, a number of shares of Common Stock equal to the Settlement Rate, unless,
on or prior to the Final Settlement Date, there shall have occurred a
Termination Event or an Early Settlement with respect to the Security of which
such Purchase Contract is a part. The "Settlement Rate" is equal to (A) if the
Applicable Market Value (as defined below) is greater than $[ ] (the "Threshold
Appreciation Price"), [ ] of a share of Common Stock per Purchase Contract, (B)
if the Applicable Market Value is less than or equal to the Threshold
Appreciation Price but is greater than the Stated Amount, a fractional share of
Common Stock per Purchase Contract equal to the Stated Amount divided by the
Applicable Market Value (rounded upward or downward to the nearest 1/10,000th of
a share) and (c) if the Applicable Market Value is less than or equal to the
Stated Amount, one share of Common Stock per Purchase Contract, in each case
subject to adjustment as provided in Section 5.06. As provided in Section 5.10,
no fractional shares of Common Stock will be issued upon settlement of Purchase
Contracts.
The "Applicable Market Value" means the average of the Closing Price
per share of Common Stock on each of the twenty consecutive Trading days ending
on the last Trading Day immediately preceding the Final Settlement Date. The
"Closing Price" of the Common Stock on any date of determination means the
closing sale price (or, if no closing price is reported, the last reported sale
price) of the Common Stock on the New York Stock Exchange (the "NYSE") on such
date or, if the Common Stock is not listed for trading on the NYSE on any such
date, as reported in the composite transactions for the principal United States
securities exchange on which the Common Stock is so listed, or if the Common
Stock is not so listed on a United States national or regional securities
exchange, as reported by Nasdaq, or, if the Common Stock is not so reported, the
last quoted bid price for the Common Stock in the over-the-counter market as
reported by the National Quotation Bureau or similar organization, or, if such
bid price is not
<PAGE>
23
available, the market value of the Common Stock on such date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Company. A "Trading Day" means a day on which the Common Stock
(a) is not suspended from trading on any national or regional securities
exchange or association or overthecounter market at the close of business and
(b) has traded at least once on the national or regional securities exchange or
association or overthecounter market that is the primary market for the trading
of the Common Stock.
Each Holder of a Security Certificate evidencing Securities, by his
acceptance thereof, irrevocably authorizes the Agent to enter into and perform
the related Purchase Contracts on his behalf as his attorney infact, agrees to
be bound by the terms and provisions thereof, covenants and agrees to perform
his obligations under such Purchase Contracts, consents to the provisions
hereof, irrevocably authorizes the Agent as his attorneyinfact to enter into and
perform the Pledge Agreement on his behalf as his attorneyinfact, and consents
to and agrees to be bound by the Pledge of the Underlying Securities underlying
such Security Certificate pursuant to the Pledge Agreement; provided, that upon
a Termination Event, the rights of the Holder of such Security under the
Purchase Contract may be enforced without regard to any other rights or
obligations. Each Holder of a Security, by his acceptance thereof, further
irrevocably covenants and agrees, that, to the extent and in the manner provided
in Section 5.04 and the Pledge Agreement, but subject to the terms thereof,
payments in respect of principal of the Underlying Securities on the Final
Settlement Date shall be paid by the Collateral Agent to the Company in
satisfaction of such Holder's obligations under such Purchase Contract and such
Holder shall acquire no right, title or interest in such payments.
Upon registration of transfer of a Security Certificate evidencing
Purchase Contracts, the transferee shall be bound (without the necessity of any
other action on the part of such transferee), under the terms of this Agreement,
the Purchase Contracts evidenced thereby and the Pledge Agreement and the
transferor shall be released from the obligations under the Purchase Contracts
evidenced by the Security Certificates so transferred. The Company covenants and
agrees, and each Holder of a Security Certificate, by his acceptance thereof,
likewise covenants and agrees, to be bound by the provisions of this paragraph.
SECTION 5.02. Contract Fees. Subject to Section 5.03, the Company
shall pay, on each Payment Date, the Contract Fees payable in respect of each
Purchase Contract to the Person in whose name the Security Certificate (or one
or more Predecessor Security Certificates) evidencing such Purchase Contract is
registered at the close of business on the Record Date next preceding such
Payment Date. The Contract Fees will be payable at the office of the Agent in
The City of New York
<PAGE>
24
maintained for that purpose or, at the option of the Company, by check mailed to
the address of the Person entitled thereto at such address as it appears on the
Security Register.
Upon the occurrence of a Termination Event, the Company's obligation
to pay Contract Fees (including any accrued or deferred Contract Fees) shall
cease.
Each Security Certificate delivered under this Agreement upon
registration of transfer of, or in exchange for, or in lieu of, any other
Security Certificate shall carry the rights to Contract Fees accrued and unpaid,
and to accrue, which were carried by the Purchase Contracts evidenced by such
other Security Certificate.
Subject to Section 5.09, in the case of any Security with respect to
which Early Settlement of the underlying Purchase Contract is effected on an
Early Settlement Date after any Record Date and on or prior to the next
succeeding Payment Date, Contract Fees, if any, otherwise payable on such
Payment Date shall be payable on such Payment Date notwithstanding such Early
Settlement, and such Contract Fees shall be paid to the Person in whose name the
Security Certificate evidencing such Security (or one or more Predecessor
Security Certificates) is registered at the close of business on such Record
Date. Except as otherwise expressly provided in the immediately preceding
sentence, in the case of any Security with respect to which Early Settlement of
the underlying Purchase Contract is effected on an Early Settlement Date,
Contract Fees that would otherwise be payable after the Early Settlement Date
with respect to the Purchase Contract underlying such Security shall not be
payable.
SECTION 5.03. Deferral of Payment Dates For Contract Fee. The
Company shall have the right, at any time prior to the Final Settlement Date, to
defer the payment of any or all of the Contract Fees otherwise payable on any
Payment Date, but only if the Company shall give the Holders and the Agent
written notice of its election to defer such payment (specifying the amount to
be deferred) at least ten Business days prior to the earlier of (i) the next
succeeding Payment Date or (ii) the date the Company is required to give notice
of the Record or Payment Date with respect to payment of such Contract Fees to
the New York Stock Exchange or other applicable self regulatory organization or
to Holders of the Securities, but in any event not less than one Business Day
prior to such Record Date. Any Contract Fees so deferred shall bear additional
Contract Fees thereon at the rate of [ ]% annum (computed on the basis of the
actual number of days elapsed in a year of 365 or 366 days, as the case may be),
compounding on each succeeding Payment Date, until paid in full. Deferred
Contract Fees (and additional Contract Fees accrued thereon) shall be due on the
next succeeding Payment Date except to the extent that payment is deferred
pursuant to this
<PAGE>
25
Section. No Contract Fees may be deferred to a date that is after the Final
Settlement Date or, with respect to any particular Purchase Contract, Early
Settlement thereof. If the Purchase Contracts are terminated upon the occurrence
of a Termination Event, the Holder's right to receive Contract Fees or deferred
Contract Fees (and additional Contract Fees accrued thereon) will terminate.
SECTION 5.04. Payment of Purchase Price. The purchase price for the
shares of Common Stock purchased pursuant to a Purchase Contract shall be paid
by application of payments received by the Company on the Final Settlement Date
from the Collateral Agent pursuant to the Pledge Agreement in respect of the
principal of the Underlying Securities pledged to secure the obligations of the
relevant Holder under such Purchase Contract. Such application shall satisfy in
full the obligations under such Purchase Contract of the Holder of the Security
of which such Purchase Contract is a part. The Company shall not be obligated to
issue any shares of Common Stock in respect of a Purchase Contract or deliver
any certificates therefor to the Holder unless it shall have received payment in
full of the aggregate purchase price for the shares of Common Stock to be
purchased thereunder in the manner herein set forth.
SECTION 5.05. Issuance of Shares of Common Stock. Unless a
Termination Event shall have occurred on or prior to the Final Settlement Date
or an Early Settlement shall have occurred, on the Final Settlement Date, upon
its receipt of payment in full of the purchase price for the shares of Common
Stock purchased by the Holders pursuant to the foregoing provisions of this
Article, and subject to Section 5.06(b), the Company shall issue and deposit
with the Agent, for the benefit of the Holders of the Outstanding Securities,
one or more certificates representing the shares of Common Stock registered in
the name of the Agent (or its nominee) as custodian for the Holders (such
certificates for shares of Common Stock, together with any dividends or
distributions for which a record date and payment date for such dividend or
distribution has occurred after the Final Settlement Date, being hereinafter
referred to as the "Final Settlement Fund") to which the Holders are entitled
hereunder. Subject to the foregoing, upon surrender of a Security Certificate to
the Agent on or after the Final Settlement Date, together with settlement
instructions thereon duly completed and executed, the Holder of such Security
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Common Stock which such Holder is
entitled to receive pursuant to the provisions of this Article V (after taking
into account all Securities then held by such Holder) together with cash in lieu
of fractional shares as provided in Section 5.10 and any dividends or
distributions with respect to such shares constituting part of the Final
Settlement Fund, but without any interest thereon, and the Security Certificate
so surrendered shall forthwith be cancelled. Such shares shall be registered in
the name of
<PAGE>
26
the Holder or the Holder's designee as specified in the settlement instructions
on the Security Certificate.
If any shares of Common Stock issued in respect of a Purchase
Contract are to be registered to a Person other than the Person in whose name
the Security Certificate evidencing such Purchase Contract is registered, no
such registration shall be made unless the Person requesting such registration
has paid any transfer and other taxes required by reason of such registration in
a name other than that of the registered Holder of the Security Certificate
evidencing such Purchase Contract or has established to the satisfaction of the
Company that such tax either has been paid or is not payable.
SECTION 5.06. Adjustment of Settlement Rate. (a) Adjustments for
Dividends, Distributions, Stock Splits, Etc.
(1) In case the Company shall pay or make a dividend or other
distribution on any class of Common Stock of the Company in Common Stock,
the Settlement Rate in effect at the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be increased by dividing
such Settlement Rate by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination and the denominator shall be the sum
of such number of shares and the total number of shares constituting such
dividend or other distribution, such increase to become effective
immediately after the opening of business on the day following the date
fixed for such determination. For the purposes of this paragraph (1), the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
Company.
(2) In case the Company shall issue rights, options or warrants to
all holders of its Common Stock (not being available on an equivalent
basis to Holders of the Securities upon settlement of the Purchase
Contracts underlying such Securities) entitling them, for a period
expiring within 45 days after the record date for the determination of
stockholders entitled to receive such rights, options or warrants, to
subscribe for or purchase shares of Common Stock at a price per share less
than the Current Market Price per share of the Common Stock on the date
fixed for the determination of stockholders entitled to receive such
rights, options or warrants (other than pursuant to a
<PAGE>
27
dividend reinvestment plan), the Settlement Rate in effect at the opening
of business on the day following the date fixed for such determination
shall be increased by dividing such Settlement Rate by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination plus the
number of shares of Common Stock which the aggregate of the offering price
of the total number of shares of Common Stock so offered for subscription
or purchase would purchase at such Current Market Price and the
denominator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination plus the
number of shares of Common Stock so offered for subscription or purchase,
such increase to become effective immediately after the opening of
business on the day following the date fixed for such determination. For
the purposes of this paragraph (2), the number of shares of Common Stock
at any time outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The
Company shall not issue any such rights, options or warrants in respect of
shares of Common Stock held in the treasury of the Company.
(3) In case outstanding shares of Common Stock shall be subdivided
or split into a greater number of shares of Common Stock, the Settlement
Rate in effect at the opening of business on the day following the day
upon which such subdivision or split becomes effective shall be
proportionately increased, and, conversely, in case outstanding shares of
Common Stock shall each be combined into a smaller number of shares of
Common Stock, the Settlement Rate in effect at the opening of business on
the day following the day upon which such combination becomes effective
shall be proportionately reduced, such increase or reduction, as the case
may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision, split or
combination becomes effective.
(4) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock evidences of its indebtedness or assets
(including securities, but excluding any rights or warrants referred to in
paragraph (2) of this Section, any dividend or distribution paid
exclusively in cash and any dividend or distribution referred to in
paragraph (1) of this Section), the Settlement Rate shall be adjusted so
that the same shall equal the rate determined by dividing the Settlement
Rate in effect immediately prior to the close of business on the date
fixed for the determination of stockholders entitled to receive such
distribution by a fraction of which the
<PAGE>
28
numerator shall be the Current Market Price per share of the Common Stock
on the date fixed for such determination less the then fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution filed with the Agent) of
the portion of the assets or evidences of indebtedness so distributed
applicable to one share of Common Stock and the denominator shall be such
Current Market Price per share of the Common Stock, such adjustment to
become effective immediately prior to the opening of business on the day
following the date fixed for the determination of stock holders entitled
to receive such distribution. In any case in which this paragraph (4) is
applicable, paragraph (2) of this Section shall not be applicable.
(5) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock cash (excluding any cash that is
distributed in a Reorganization Event to which Section 5.06(B) applies or
as part of a distribution referred to in paragraph (4) of this Section) in
an aggregate amount that, combined together with (i) the aggregate amount
of any other distributions to all holders of its Common Stock made
exclusively in cash within the 12 months preceding the date of payment of
such distribution and in respect of which no adjustment pursuant to this
paragraph (5) or paragraph (6) of this Section has been made and (ii) the
aggregate of any cash plus the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described
in a Board Resolution) of any noncash consideration payable in respect of
any tender or exchange offer by the Company or any of its subsidiaries for
all or any portion of the Common Stock concluded within the 12 months
preceding the date of payment of such distribution and in respect of which
no adjustment pursuant to this paragraph (5) or paragraph (6) of this
Section has been made, exceeds 15% of the product of the Current Market
Price per share of the Common Stock on the date for the determination of
holders of shares of Common Stock entitled to receive such distribution
times the number of shares of Common Stock outstanding on such date, then,
and in each such case, immediately after the close of business on such
date for determination, the Settlement Rate shall be increased so that the
same shall equal the rate determined by dividing the Settlement Rate in
effect immediately prior to the close of business on the date fixed for
determination of the stockholders entitled to receive such distribution by
a fraction (i) the numerator of which shall be equal to the Current Market
Price per share of the Common Stock on the date fixed for such
determination less an amount equal to the quotient of (x) the excess of
such combined amount over such 15% and (y) the number of shares of Common
Stock
<PAGE>
29
outstanding on such date for determination and (ii) the denominator of
which shall be equal to the Current Market Price per share of the Common
Stock on such date for determination.
(6) In case a tender or exchange offer made by the Company or any
subsidiary of the Company for all or any portion of the Common Stock shall
expire and such tender or exchange offer (as amended upon the expiration
thereof) shall require the payment to stockholders of an aggregate
consideration having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a
Board Resolution) that combined together with (i) the aggregate of the
cash plus the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a Board
Resolution), as of the expiration of the applicable tender or exchange
offer, of any noncash consideration payable in respect of any other tender
or exchange offer, by the Company or any subsidiary of the Company for all
or any portion of the Common Stock expiring within the 12 months preceding
the expiration of such tender or exchange offer and in respect of which no
adjustment pursuant to paragraph (5) of this Section or this paragraph (6)
has been made and (ii) the aggregate amount of any distributions to all
holders of the Company's Common Stock made exclusively in cash within the
12 months preceding the expiration of such tender or exchange offer and in
respect of which no adjustment pursuant to paragraph (5) of this Section
or this paragraph (6) has been made, exceeds 15% of the product of the
Current Market Price per share of the Common Stock as of the last time
(the "Expiration Time") tenders could have been made pursuant to such
tender or exchange offer (as it may be amended) times the number of shares
of Common Stock outstanding (including any tendered shares) on the
Expiration Time, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration Time, the
Settlement Rate shall be adjusted so that the same shall equal the rate
determined by dividing the Settlement Rate immediately prior to the close
of business on the date of the Expiration Time by a fraction (i) the
numerator of which shall be equal to (A) the product of (i) the Current
Market Price per share of the Common Stock on the date of the Expiration
Time and (ii) the number of shares of Common Stock outstanding (including
any tendered shares) on the Expiration Time less (B) the amount of cash
plus the fair market value (determined as aforesaid) of the aggregate
[noncash] consideration payable to stockholders pursuant to such tender or
exchange offer, and (ii) the denominator of which shall be equal to the
product of (A) the Current Market Price per share of the Common Stock as
of the Expiration Time and (B) the number of shares of Common Stock
<PAGE>
30
outstanding (including any tendered shares) as of the Expiration Time less
the number of all shares accepted for payment pursuant to such tender or
exchange offer (the shares deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares").
(7) The reclassification of Common Stock into securities including
securities other than Common Stock (other than any reclassification upon a
Reorganization Event to which Section 5.06(B) applies) shall be deemed to
involve (A) a distribution of such securities other than Common Stock to
all holders of Common Stock (and the effective date of such
reclassification shall be deemed to be "the date fixed for the
determination of stockholders entitled to receive such distribution" and
the "date fixed for such determination" within the meaning of paragraph
(4) of this Section), and (B) a subdivision, split or combination, as the
case may be, of the number of shares of Common Stock outstanding
immediately prior to such reclassification into the number of shares of
Common Stock outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which such
subdivision or split becomes effective" or "the day upon which such
combination becomes effective", as the case may be, and "the day upon
which such subdivision, split or combination becomes effective" within the
meaning of paragraph (3) of this Section).
(8) The "Current Market Price" per share of Common Stock on any day
means the average of the daily Closing Prices for the 5 consecutive
Trading days selected by the Company commencing not more than 30 Trading
days before, and ending not later than, the earlier of the day in question
and the day before the "ex" date with respect to the issuance or
distribution requiring such computation. For purposes of this paragraph,
the term "'ex' date", when used with respect to any issuance or
distribution, shall mean the first date on which the Common Stock trades
regular way on such exchange or in such market without the right to
receive such issuance or distribution.
(9) All adjustments to the Settlement Rate shall be calculated to
the nearest 1/10,000th of a share of Common Stock (or if there is not a
nearest 1/10,000th of a share to the next lower 1/10,000th of a share). No
adjustment in the Settlement Rate shall be required unless such adjustment
would require an increase or decrease of at least one percent therein;
provided, however, that any adjustments which by reason of this
subparagraph are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. If an adjustment is made
to the Settlement Rate pursuant to paragraphs (1), (2), (3), (4), (5),
(6), (7) or (10) of this Section 5.06(a), an
<PAGE>
31
adjustment shall also be made to the Applicable Market Value solely to
determine which of clauses (a), (b) or (c) of the definition of Settlement
Rate in Section 5.01 will apply on the Final Settlement Date. Such
adjustment shall be made by multiplying the Applicable Market Value by a
fraction of which the numerator shall be the Settlement Rate immediately
after such adjustment pursuant to paragraph (1), (2), (3), (4), (5), (6),
(7) or (10) of this Section 5.06(A) and the denominator shall be the
Settlement Rate immediately before such adjustment; provided, however,
that if such adjustment to the Settlement Rate is required to be made
pursuant to the occurrence of any of the events contemplated by paragraphs
(1), (2), (3), (4), (5), (7) or (10) of this Section 5.06(A) during the
period taken into consideration for determining the Applicable Market
Value, appropriate and customary adjustments shall be made to the
Settlement Rate.
(10) The Company may make such increases in the Settlement Rate, in
addition to those required by this Section, as it considers to be
advisable in order to avoid or diminish any income tax to any holders of
shares of Common Stock resulting from any dividend or distribution of
stock or issuance of rights or warrants to purchase or subscribe for stock
or from any event treated as such for income tax purposes or for any other
reasons.
(b) Adjustment for Consolidation, Merger or Other Reorganization
Event. In the event of (i) any consolidation or merger of the Company, with or
into another Person (other than a merger or consolidation in which the Company
is the continuing corporation and in which the Common Stock outstanding
immediately prior to the merger or consolidation is not exchanged for cash,
securities or other property of the Company or another corporation), (ii) any
sale, transfer, lease or conveyance to another Person of the property of the
Company as an entirety or substantially as an entirety, (iii) any statutory
exchange of securities of the Company with another Person (other than in
connection with a merger or acquisition) or (iv) any liquidation, dissolution or
winding up of the Company other than as a result of or after the occurrence of a
Termination Event (any such event, a "Reorganization Event"), the Settlement
Rate will be adjusted to provide that each Holder of Securities will receive on
the Final Settlement Date with respect to each Purchase Contract forming a part
thereof, the kind and amount of securities, cash and other property receivable
upon such Reorganization Event (without any interest thereon, and without any
right to dividends or distributions thereon which have a record date that is
prior to the Final Settlement Date) by a Holder of the number of shares of
Common Stock issuable on account of each Purchase Contract if the Final
Settlement Date had occurred immediately prior to such Reorganization Event,
assuming
<PAGE>
32
such Holder of Common Stock is not a Person with which the Company consolidated
or into which the Company merged or which merged into the Company or to which
such sale or transfer was made, as the case may be ("constituent Person"), or an
Affiliate of a constituent Person (to the extent such Reorganization Event
provides for different treatment of Common Stock held by Affiliates of the
Company and non-Affiliates), and such Holder failed to exercise his rights of
election, if any, as to the kind or amount of securities, cash and other
property receivable upon such Reorganization Event (provided that if the kind or
amount of securities, cash and other property receivable upon such
Reorganization Event is not the same for each share of Common Stock held
immediately prior to such Reorganization Event by other than a constituent
Person or an Affiliate thereof and in respect of which such rights of election
shall not have been exercised ("non-electing share"), then for the purpose of
this Section the kind and amount of securities, cash and other property
receivable upon such Reorganization Event by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). In the event of such a Reorganization Event, the Person
formed by such consolidation, merger or exchange or the Person which acquires
the assets of the Company or, in the event of a liquidation or dissolution of
the Company, the Company or a liquidating trust created in connection therewith,
shall execute and deliver to the Agent an agreement supplemental hereto
providing that the Holders of each Outstanding Security shall have the rights
provided by this Section 5.06. Such supplemental agreement shall provide for
adjustments which, for events subsequent to the effective date of such
supplemental agreement, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section. The above provisions of this
Section shall similarly apply to successive Reorganization Events.
SECTION 5.07. Notice of Adjustments and Certain Other Events. (a)
Whenever the Settlement Rate is adjusted as herein provided, the Company shall:
(i) forthwith compute the adjusted Settlement Rate in accordance
with Section 5.06 and prepare and transmit to the Agent an Officers'
Certificate setting forth the Settlement Rate, the method of calculation
thereof in reasonable detail, and the facts requiring such adjustment and
upon which such adjustment is based; and
(ii) within 10 Business days following the occurrence of an event
that permits or requires an adjustment to the Settlement Rate pursuant to
Section 5.06 (or if the Company is not aware of such occurrence, as soon
as practicable after becoming so aware), provide a written notice to the
Holders of the Securities of the occurrence of such event and a
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33
statement in reasonable detail setting forth the method by which the
adjustment to the Settlement Rate was determined and setting forth the
adjusted Settlement Rate.
(b) The Agent shall not at any time be under any duty or
responsibility to any holder of Securities to determine whether any facts exist
which may require any adjustment of the Settlement Rate, or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed in making the same. The Agent shall not be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock, or of any securities or property, which may at the time
be issued or delivered with respect to any Purchase Contract; and the Agent
makes no representation with respect thereto. The Agent shall not be responsible
for any failure of the Company to issue, transfer or deliver any shares of
Common Stock pursuant to a Purchase Contract or to comply with any of the
duties, responsibilities or covenants of the Company contained in this Article.
SECTION 5.08. Termination Event; Notice. The Purchase Contracts and
the obligations and rights of the Company and the Holders thereunder, including,
without limitation, the rights of the Holders to receive and the obligation of
the Company to pay any Contract Fees or deferred Contract Fees, shall
immediately and automatically terminate, without the necessity of any notice or
action by any Holder, the Agent or the Company, if, on or prior to the Final
Settlement Date, a Termination Event shall have occurred. Upon the occurrence of
a Termination Event, the Company shall give written notice to the Agent, the
Collateral Agent and to the Holders, at their addresses as they appear in the
Security Register. Upon and after the occurrence of a Termination Event, the
Securities shall thereafter represent the right to receive the Underlying
Securities forming a part of such Securities in accordance with the provisions
of Section 4.02 and the Pledge Agreement.
SECTION 5.09. Early Settlement. (a) Subject to and upon compliance
with the provisions of this Section 5.09 at the option of the Holder thereof,
any Purchase Contracts underlying Securities having an aggregate Stated Amount
equal to $[1,000] or an integral multiple thereof may be settled early ("Early
Settlement") as provided herein. In order to exercise the right to effect Early
Settlement with respect to any Purchase Contracts, the Holder of the Security
Certificate evidencing such Purchase Contracts shall deliver such Security
Certificate to the Agent at the Corporate Trust Office duly endorsed for
transfer to the Company or in blank with the form of Election to Settle Early on
the reverse thereof duly completed and accompanied by payment in the form of a
certified or cashier's check payable to the Company in immediately available
funds in an amount (the "Early Settlement Amount") equal to (i) the
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34
product of (A) the Stated Amount times (B) the number of Purchase Contracts with
respect to which the Holder has elected to effect Early Settlement minus (ii)
the aggregate amount of Contract Fees, if any, otherwise payable on or prior to
the immediately preceding Payment Date deferred at the option of the Company
pursuant to Section 5.03 and remaining unpaid as of such immediately preceding
Payment Date plus (iii) if such delivery is made with respect to any Purchase
Contracts during the period from the close of business on any Record Date next
preceding any Payment Date to the opening of business on such Payment Date, an
amount equal to the sum of (x) the Contract Fees payable on such Payment Date
with respect to such Purchase Contracts plus (y) the interest on the related
Underlying Securities payable on such Payment Date. Except as provided in the
immediately preceding sentence and subject to the [last] paragraph of Section
5.02, no payment or adjustment shall be made upon Early Settlement of any
Purchase Contract on account of any Contract Fees accrued on such Purchase
Contract or on account of any dividends on the Common Stock issued upon such
Early Settlement. If the foregoing requirements are first satisfied with respect
to Purchase Contracts underlying any Securities at or prior to 5:00 p.m., New
York City time, on a Business Day, such day shall be the "Early Settlement Date"
with respect to such Securities and if such requirements are first satisfied
after 5:00 p.m., New York City time, on a Business Day or on a day that is not a
Business Day, the "Early Settlement Date" with respect to such Securities shall
be the next succeeding Business Day.
(b) Upon Early Settlement of Purchase Contracts by a Holder of the
related Securities, the Company shall issue, and the Holder shall be entitled to
receive, a number of shares of Common Stock on account of each Purchase Contract
as to which Early Settlement is effected equal to the Early Settlement Rate;
provided, however, that upon the Early Settlement of the Purchase Contracts, the
Holder of such related Securities will forfeit the right to receive any deferred
Contract Fees. The Early Settlement Rate shall initially be equal to [ ] and
shall be adjusted in the same manner and at the same time as the Settlement Rate
is adjusted. As promptly as practicable after Early Settlement of Purchase
Contracts in accordance with the provisions of this Section 5.09, the Company
shall issue and shall deliver to the Agent at the Corporate Trust Office a
certificate or certificates for the full number of shares of Common Stock
issuable upon such Early Settlement together with payment in lieu of any
fraction of a share, as provided in Section 5.10.
(c) The Company shall cause the shares of Common Stock issuable, and
Underlying Securities deliverable, upon Early Settlement of Purchase Contracts
to be issued and delivered, in the case of such shares of Common Stock, and
released from the Pledge by the Collateral Agent and transferred, in the case of
such Underlying Securities, to
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35
the Purchase Contract Agent, for delivery to the Holder thereof or its designee,
no later than the third Business Day after the applicable Early Settlement Date.
(d) Upon Early Settlement of any Purchase Contracts, and subject to
receipt thereof from the Company or the Collateral Agent, as applicable, the
Agent shall, in accordance with the instructions provided by the Holder thereof
on the applicable form of Election to Settle Early on the reverse of the
Security Certificate evidencing the related Securities, (i) transfer the
Underlying Securities forming a part of such Securities and (ii) deliver to the
Holder a certificate or certificates for the full number of shares of Common
Stock issuable upon such Early Settlement together with payment in lieu of any
fraction of a share, as provided in Section 5.10.
(e) In the event that Early Settlement is effected with respect to
Purchase Contracts underlying less than all the Securities evidenced by a
Security Certificate, upon such Early Settlement the Company shall execute and
the Agent shall authenticate, countersign and deliver to the Holder thereof, at
the expense of the Company, a Security Certificate evidencing the Securities as
to which Early Settlement was not effected.
SECTION 5.10. No Fractional Shares. No fractional shares or scrip
representing fractional shares of Common Stock shall be issued or delivered upon
settlement on the Final Settlement Date or upon Early Settlement of any Purchase
Contracts. If Security Certificates evidencing more than one Purchase Contract
shall be surrendered for settlement at one time by the same Holder, the number
of full shares of Common Stock which shall be delivered upon settlement shall be
computed on the basis of the aggregate number of Purchase Contracts evidenced by
the Security Certificates so surrendered. Instead of any fractional share of
Common Stock which would otherwise be deliverable upon settlement of any
Purchase Contracts on the Final Settlement Date or upon Early Settlement, the
Company, through the Agent, shall make a cash payment in respect of such
fractional interest in an amount equal to the value of such fractional shares at
the Closing Price per share on the Trading Day immediately preceding the Final
Settlement Date or the related Early Settlement Date, respectively. The Company
shall provide the Agent from time to time with sufficient funds to permit the
Agent to make all cash payments required by this Section 5.10 in a timely
manner.
SECTION 5.11. Charges and Taxes. The Company will pay all stock
transfer and similar taxes attributable to the initial issuance and delivery of
the shares of Common Stock pursuant to the Purchase Contracts and in payment of
any deferred Contract Fees; provided, however, that the Company shall not be
required to pay any such tax or taxes which may be payable in respect of any
exchange of or substitution for a Security Certificate evidencing a
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36
Purchase Contract or any issuance of a share of Common Stock in a name other
than that of the registered Holder of a Security Certificate surrendered in
respect of the Purchase Contracts evidenced thereby, other than in the name of
the Agent, as custodian for such Holder, and the Company shall not be required
to issue or deliver such share certificates or Security Certificates unless or
until the Person or Persons requesting the transfer or issuance thereof shall
have paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
ARTICLE VI
Remedies
SECTION 6.01. Unconditional Right of Holders to Receive Contract
Fees and to Purchase Common Stock. Notwithstanding any other provision in this
Agreement, the Holder of any Security shall have the right, which is absolute
and unconditional (subject to the right of the Company to defer payment thereof
pursuant to Section 5.03), to receive payment of each installment of the
Contract Fees with respect to the Purchase Contract constituting a part of such
Security on the respective Payment Date for such Security and to purchase Common
Stock pursuant to such Purchase Contract and, in each such case, to institute
suit for the enforcement of any such payment and right to purchase Common Stock,
and such rights shall not be impaired without the consent of such Holder.
SECTION 6.02. Restoration of Rights and Remedies. If any Holder of
Securities has instituted any proceeding to enforce any right or remedy under
this Agreement and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to such Holder, then and in every such
case, subject to any determination in such proceeding, the Company and such
Holder shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of such Holder shall continue
as though no such proceeding had been instituted.
SECTION 6.03. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement of mutilated, destroyed, lost or stolen
Security Certificates in the last paragraph of Section 3.06, no right or remedy
herein conferred upon or reserved to the Holders of Securities 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.
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37
Section 6.04. Delay or Omission Not Waiver. No delay or omission of
any Holder to exercise any right or remedy upon a default shall impair any such
right or remedy or constitute a waiver of any such right. Every right and remedy
given by this Article or by law to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by such Holders.
SECTION 6.05. Undertaking for Costs. All parties to this Agreement
agree, and each Holder of any Security by his acceptance of the Security
Certificate evidencing such Security 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 Agreement, or in any suit against the Agent for any
action taken, suffered or omitted by it as Agent, 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;
provided that the provisions of this Section shall not apply to any suit
instituted by the Company, to any suit instituted by the Agent, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% of the Outstanding Securities, or to any suit instituted by any Holder
for the enforcement of the payment of the interest on any Underlying Security or
the Contract Fees, if any, on any Purchase Contract on or after the respective
Payment Date therefor constituting a part of the Securities held by such Holder,
or for enforcement of the right to purchase shares of Common Stock under the
Purchase Contracts constituting a part of the Securities held by such Holder.
SECTION 6.06. Waiver of 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 stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Agreement; 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 Agent or the Holders, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VII
The Agent
SECTION 7.01. Certain Duties and Responsibilities. (a)(1) The Agent
undertakes to perform, with respect to the Securities, such duties and only such
duties as are
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38
specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Agent; and
(2) in the absence of bad faith or negligence on its part, the Agent
may, with respect to the Securities, conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Agent and conforming to the
requirements of this Agreement, but in the case of any certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Agent, the Agent shall be under a duty to examine the
same to determine whether or not they conform to the requirements of this
Agreement.
(b) No provision of this Agreement shall be construed to relieve the
Agent from liability for its own negligent action, its own negligent failure to
act, or its own wilful misconduct, except that
(1) this Sub-Section shall not be construed to limit the effect of
Sub-Section (A) of this Section;
(2) the Agent shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Agent was negligent in ascertaining the pertinent facts; and
(3) no provision of this Agreement shall require the Agent 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 adequate indemnity is not provided to it.
(c) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Agent shall be subject to the provisions of this
Section.
SECTION 7.02. Notice of Default. Within 90 days after the occurrence
of any default by the Company hereunder, of which a Responsible Officer of the
Agent has actual knowledge, the Agent shall transmit by mail to all Holders of
Securities, as their names and addresses appear in the Security Register, notice
of such default hereunder, unless such default shall have been cured or waived.
SECTION 7.03. Certain Rights of Agent. Subject to the provisions of
Section 7.01:
(a) the Agent 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,
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39
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by an Officers' Certificate, Issuer Order or
Issuer Request, and any resolution of the Board of Directors of the
Company may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Agreement the Agent shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Agent (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate of the Company;
(d) the Agent may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Agent shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Agent, in its discretion, may make reasonable further
inquiry or investigation into such facts or matters related to the
issuance of the Securities and the execution, delivery and performance of
the Purchase Contracts as it may see fit, and, if the Agent shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and promises of the Company,
personally or by agent or attorney; and
(f) the Agent may execute any of its powers hereunder or perform any
duties hereunder either directly or by or through agents or attorneys and
the Agent 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 7.04. Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Security Certificates shall
be taken as the statements of the Company and the Agent assumes no
responsibility for their correctness. The Agent makes no representations as to
the validity or sufficiency of this Agreement or of the Securities. The Agent
shall not be
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40
accountable for the use or application by the Company of the proceeds in respect
of the Purchase Contracts.
SECTION 7.05. May Hold Securities. Any Security Registrar or any
other agent of the Company, or the Agent, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company with the same rights it would have if it were not Security
Registrar or such other agent, or the Agent.
SECTION 7.06. Money Held in Trust. Money held by the Agent in trust
hereunder need not be segregated from the other funds except to the extent
required by law. The Agent shall be under no obligation to invest or pay
interest on any money received by it hereunder except as otherwise agreed with
the Company.
SECTION 7.07. Compensation and Reimbursement. The Company agrees:
(1) to pay to the Agent from time to time reasonable compensation
for all services rendered by it hereunder;
(2) except as otherwise expressly provided herein, to reimburse the
Agent upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Agent in accordance with any provision of
this Agreement (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
(3) to indemnify the Agent and any predecessor Agent for, and to
hold each of them 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 its duties hereunder,
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.
SECTION 7.08. Corporate Agent Required; Eligibility. There shall at
all times be an Agent hereunder which shall be a corporation organized and doing
business under the laws of the United States of America, any State thereof or
the District of Columbia, authorized under such laws to exercise corporate trust
powers, having (or being a member of a bank holding company having) a combined
capital and surplus of at least $50,000,000, subject to supervision or
examination by Federal or State authority and having a Corporate Trust Office in
the Borough of Manhattan, The City of New York, if there be such a corporation
in the Borough of Manhattan, The City of New York qualified and eligible under
this Article and willing to act on reasonable terms.
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41
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Agent
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
SECTION 7.09. Resignation and Removal; Appointment of Successor. (a)
No resignation or removal of the Agent and no appointment of a successor Agent
pursuant to this Article shall become effective until the acceptance of
appointment by the successor Agent in accordance with the applicable
requirements of Section 7.10.
(b) The Agent may resign at any time by giving written notice
thereof to the Company 60 days prior to the effective date of such resignation.
If the instrument of acceptance by a successor Agent required by Section 7.10
shall not have been delivered to the Agent within 30 days after the giving of
such notice of resignation, the resigning Agent may petition any court of
competent jurisdiction for the appointment of a successor Agent.
(c) The Agent may be removed at any time by Act of the Holders of a
majority in number of the Outstanding Securities delivered to the Agent and the
Company.
(d) If at any time
(1) the Agent fails to comply with Section 3.10(B) of the TIA,
as if the Agent were an indenture trustee under an indenture qualified
under the TIA, after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(2) the Agent shall cease to be eligible under Section 7.08
and shall fail to resign after written request therefor by the Company or
by any such Holder, or
(3) the Agent shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Agent or of its
property shall be appointed or any public officer shall take charge or
control of the Agent or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then, in any such case, (i)
the Company by a Board Resolution may remove the Agent, or (ii) any Holder
who has been a bona fide Holder of a Security for at least six months may,
on behalf of himself and all others similarly situated, petition any court
of
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42
competent jurisdiction for the removal of the Agent and the appointment of
a successor Agent.
(e) If the Agent shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Agent for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Agent and
shall comply with the applicable requirements of Section 7.10. If no successor
Agent shall have been so appointed by the Company and accepted appointment in
the manner required by Section 7.10, any Holder who has been a bona fide Holder
of a Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Agent.
(f) The Company shall give, or shall cause such successor Agent to
give, notice of each resignation and each removal of the Agent and each
appointment of a successor Agent by mailing written notice of such event by
first-class mail, postage prepaid, to all Holders of Securities as their names
and addresses appear in the Security Register. Each notice shall include the
name of the successor Agent and the address of its Corporate Trust Office.
SECTION 7.10. Acceptance of Appointment by Successor. (a) In case of
the appointment hereunder of a successor Agent, every such successor Agent so
appointed shall execute, acknowledge and deliver to the Company and to the
retiring Agent an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Agent shall become effective and such
successor Agent, without any further act, deed or conveyance, shall become
vested with all the rights, powers, agencies and duties of the retiring Agent;
but, on the request of the Company or the successor Agent, such retiring Agent
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Agent all the rights, powers and trusts of the
retiring Agent and shall duly assign, transfer and deliver to such successor
Agent all property and money held by such retiring Agent hereunder.
(b) Upon request of any such successor Agent, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Agent all such rights, powers and agencies referred
to in paragraph (a) of this Section.
(c) No successor Agent shall accept its appointment unless at the
time of such acceptance such successor Agent shall be qualified and eligible
under this Article.
SECTION 7.11. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Agent may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
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43
conversion or consolidation to which the Agent shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Agent, shall be the successor of the Agent hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Security Certificates shall have been
authenticated and executed on behalf of the Holders, but not delivered, by the
Agent then in office, any successor by merger, conversion or consolidation to
such Agent may adopt such authentication and execution and deliver the Security
Certificates so authenticated and executed with the same effect as if such
successor Agent had itself authenticated and executed such Securities.
SECTION 7.12. Preservation of Information; Communications to
Holders. (a) The Agent shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders received by the Agent in its
capacity as Security Registrar.
(b) If three or more Holders (herein referred to as "applicants")
apply in writing to the Agent, and furnish to the Agent reasonable proof that
each such applicant has owned a Security for a period of at least six months
preceding the date of such application, and such application states that the
applicants desire to communicate with other Holders with respect to their rights
under this Agreement or under the Securities and is accompanied by a copy of the
form of proxy or other communication which such applicants propose to transmit,
then the Agent shall, within five Business days after the receipt of such
application, afford such applicants access to the information preserved at the
time by the Agent in accordance with Section 7.12(a).
(c) Every Holder of Securities, by receiving and holding the
Security Certificates evidencing the same, agrees with the Company and the Agent
that none of the Company, the Agent nor any agent of any 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 7.12(b), regardless of
the source from which such information was derived.
SECTION 7.13. No Obligations of Agent. Except to the extent
otherwise provided in this Agreement, the Agent assumes no obligations and shall
not be subject to any liability under this Agreement or any Purchase Contract in
respect of the obligations of the Holder of any Security thereunder. The Company
agrees, and each Holder of a Security Certificate, by his acceptance thereof,
shall be deemed to have agreed, that the Agent's execution of the Security
Certificates on behalf of the Holders shall be solely as agent and
Attorney-in-fact for the Holders, and that the Agent shall have no obligation to
perform such
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Purchase Contracts on behalf of the Holders, except to the extent expressly
provided in Article V hereof.
SECTION 7.14. Tax Compliance. (a) The Agent, on its own behalf and
on behalf of the Company, will comply with all applicable certification,
information reporting and withholding (including "backup" withholding)
requirements imposed by applicable tax laws, regulations or administrative
practice with respect to (i) any payments made with respect to the Securities or
(ii) the issuance, delivery, holding, transfer, redemption or exercise of rights
under the Securities. Such compliance shall include, without limitation, the
preparation and timely filing of required returns and the timely payment of all
amounts required to be withheld to the appropriate taxing authority or its
designated agent.
(b) The Agent shall comply with any direction received from the
Company with respect to the application of such requirements to particular
payments or Holders or in other particular circumstances, and may for purposes
of this Agreement rely on any such direction in accordance with the provisions
of Section 7.01(a)(2) hereof.
(c) The Agent shall maintain all appropriate records documenting
compliance with such requirements, and shall make such records available on
request to the Company or to its authorized representative.
ARTICLE VIII
Supplemental Agreements
SECTION 8.01. Supplemental Agreements Without Consent of Holders.
Without the consent of any Holders, the Company and the Agent, at any time and
from time to time, may enter into one or more agreements supplemental hereto, in
form satisfactory to the Company and the Agent, for any of the following
purposes:
(1) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the covenants of the Company
herein and in the Security Certificates; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to evidence and provide for the acceptance of appointment
hereunder by a successor Agent; or
(4) to make provision with respect to the rights of Holders pursuant
to the requirements of Section 5.06(b); or
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45
(5) to cure any ambiguity, to correct or supplement any provisions
herein which may be inconsistent with any other provisions herein, or to
make any other provisions with respect to such matters or questions
arising under this Agreement, provided such action shall not adversely
affect the interests of the Holders.
SECTION 8.02. Supplemental Agreements with Consent of Holders. With
the consent of the Holders of not less than a majority of the Outstanding
Securities, by Act of said Holders delivered to the Company and the Agent, the
Company when authorized by a Board Resolution, and the Agent may enter into an
agreement or agreements supplemental hereto for the purpose of modifying in any
manner the terms of the Securities, or the provisions of this Agreement or the
rights of the Holders in respect of the Securities; provided, however, that no
such supplemental agreement shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change any Payment Date;
(2) change the amount or type of Underlying Securities underlying a
Security, impair the right of the Holder of any Security to receive
interest payments on the Underlying Securities or otherwise adversely
affect the Holder's rights in or to such Underlying Securities;
(3) reduce any Contract Fees or change any place where, or the coin
or currency in which, any Contract Fees are payable;
(4) impair the right to institute suit for the enforcement of any
Purchase Contract;
(5) reduce the number of shares of Common Stock to be purchased
pursuant to any Purchase Contract, increase the price to purchase shares
of Common Stock upon settlement of any Purchase Contract, change the Final
Settlement Date or otherwise adversely affect the Holder's rights under
any Purchase Contract; or
(6) reduce the percentage of the Outstanding Securities the consent
of whose Holders is required for any such supplemental agreement.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental agreement, but it
shall be sufficient if such Act shall approve the substance thereof.
SECTION 8.03. Execution of Supplemental Agreements. In executing, or
accepting the additional agencies created by, any supplemental agreement
permitted by this Article or the modifications thereby of the agencies
<PAGE>
46
created by this Agreement, the Agent shall be entitled to receive and (subject
to Section 7.01) shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental agreement is authorized or
permitted by this Agreement. The Agent may, but shall not be obligated to, enter
into any such supplemental agreement which affects the Agent's own rights,
duties or immunities under this Agreement or otherwise.
SECTION 8.04. Effect of Supplemental Agreements. Upon the execution
of any supplemental agreement under this Article, this Agreement shall be
modified in accordance therewith, and such supplemental agreement shall form a
part of this Agreement for all purposes; and every Holder of Security
Certificates theretofore or thereafter authenticated, executed on behalf of the
Holders and delivered hereunder shall be bound thereby.
SECTION 8.05. Reference to Supplemental Agreements. Security
Certificates authenticated, executed on behalf of the Holders and delivered
after the execution of any supplemental agreement pursuant to this Article may,
and shall if required by the Agent, bear a notation in form approved by the
Agent as to any matter provided for in such supplemental agreement. If the
Company shall so determine, new Security Certificates so modified as to conform,
in the opinion of the Agent and the Company, to any such supplemental agreement
may be prepared and executed by the Company and authenticated, executed on
behalf of the Holders and delivered by the Agent in exchange for Outstanding
Security Certificates.
ARTICLE IX
Consolidation, Merger, Sale or Conveyance
SECTION 9.01. Covenant Not to Merge, Consolidate, Sell or Convey
Property Except Under Certain Conditions. The Company covenants that it will not
merge or consolidate with any other Person or sell or convey all or
substantially all of its assets to any Person, except that the Company may merge
or consolidate with, or sell or convey all or substantially all of its assets
to, any other Person, provided that (i) the Company shall be the continuing
corporation, or the successor (if other than the Company) shall be a corporation
organized and existing under the laws of the United States of America or a State
thereof and such corporation shall assume the obligations of the Company under
the Purchase Contracts, this Agreement and the Pledge Agreement by one or more
supplemental agreements in form satisfactory to the Agent and the Collateral
Agent, executed and delivered to the Agent and the Collateral Agent by such
corporation, and (ii) the Company or such successor corporation, as the case may
be, shall not, immediately after such merger of consolidation, or such sale or
conveyance, be in default in the performance of any covenant
<PAGE>
47
or condition hereunder, under any of the Securities or under the Pledge
Agreement.
SECTION 9.02. Rights and Duties of Successor Corporation. In case of
any such consolidation, merger, sale or conveyance and upon any such assumption
by the successor corporation in accordance with Section 9.01, such successor
corporation shall succeed to and be substituted for the Company with the same
effect as if it had been named herein as the Company. Such successor corporation
thereupon may cause to be signed, and may issue either in its own name or in the
name of Financial Security Assurance Holdings Ltd., any or all of the Security
Certificates evidencing Securities issuable hereunder which theretofore shall
not have been signed by the Company and delivered to the Agent; and, upon the
order of such successor corporation, instead of the Company, and subject to all
the terms, conditions and limitations in this Agreement prescribed, the Agent
shall authenticate and execute on behalf of the Holders and deliver any Security
Certificates which previously shall have been signed and delivered by the
officers of the Company to the Agent for authentication and execution, and any
Security Certificate evidencing Securities which such successor corporation
thereafter shall cause to be signed and delivered to the Agent for that purpose.
All the Security Certificates so issued shall in all respects have the same
legal rank and benefit under this Agreement as the Security Certificates
theretofore or thereafter issued in accordance with the terms of this Agreement
as though all of such Security Certificates had been issued at the date of the
execution hereof.
In case of any such consolidation, merger, sale or conveyance such
change in phraseology and form (but not in substance) may be made in the
Security Certificates evidencing Securities thereafter to be issued as may be
appropriate.
SECTION 9.03. Opinion of Counsel to Agent. The Agent, subject to
Sections 7.01 and 7.03, may receive an Opinion of Counsel as conclusive evidence
that any such consolidation, merger, sale or conveyance, and any such
assumption, complies with the provisions of this Article and that all conditions
precedent to the consummation of any such consolidation, merger, sale,
assignment, transfer, lease or conveyance have been met.
ARTICLE X
Covenants
SECTION 10.01. Performance Under Purchase Contracts. The Company
covenants and agrees for the benefit of the Holders from time to time of the
Securities that it will duly and punctually perform its obligations under the
<PAGE>
48
Purchase Contracts in accordance with the terms of the Purchase Contracts and
this Agreement.
SECTION 10.02. Maintenance of Office or Agency. The Company will
maintain in the Borough of Manhattan, The City of New York an office or agency
where Security Certificates may be presented or surrendered for acquisition of
shares of Common Stock upon settlement or Early Settlement and for transfer of
Underlying Securities upon occurrence of a Termination Event, where Security
Certificates 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 Agreement may be served. The Company will give prompt written notice to
the Agent 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 Agent with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office, and the Company hereby appoints the Agent 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 Security Certificates may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, The City of New York for such purposes. The Company
will give prompt written notice to the Agent of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby designates as the place of payment for the Securities the
Corporate Trust Office and appoints the Agent at its Corporate Trust Office as
paying agent in such city.
SECTION 10.03. Company to Reserve Common Stock. The Company shall at
all times prior to the Final Settlement Date reserve and keep available, free
from preemptive rights, out of its authorized but unissued Common Stock the full
number of shares of Common Stock issuable against tender of payment in respect
of all Purchase Contracts constituting a part of the Securities evidenced by
Outstanding Security Certificates.
SECTION 10.04. Covenants as to Common Stock. The Company covenants
that all shares of Common Stock which may be issued against tender of payment in
respect of any Purchase Contract constituting a part of the Outstanding
Securities will, upon issuance, be duly authorized, validly issued, fully paid
and nonassessable.
SECTION 10.05. Statements of Officers of the Company as to Default.
The Company will deliver to the Agent, within 120 days after the end of each
fiscal year of
<PAGE>
49
the Company ending after the date hereof, an Officers' Certificate, stating
whether or not to the best knowledge of the signers thereof the Company is in
default in the performance and observance of any of the terms, provisions and
conditions hereof, and if the Company shall be in default, specifying all such
defaults and the nature and status thereof of which they may have knowledge.
<PAGE>
50
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
FINANCIAL SECURITY ASSURANCE
HOLDINGS LTD.
Attested by By:
------------------------------------
- -------------------------
----------------------------------------
As Agent
Attested by By:
------------------------------------
- -------------------------
<PAGE>
EXHIBIT A
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
Automatic Common Exchanged Securities
(Stated Amount $________ per Security)
No. _________ Securities
This Security Certificate certifies that ______________________ is
the registered Holder of the number of Securities set forth above. Each Security
represents ownership by the Holder of [type and description of underlying
security] ("Underlying Securities") with a principal amount equal to the Stated
Amount, subject to the Pledge of such Underlying Securities by such Holder
pursuant to the Pledge Agreement, and the rights and obligations of the Holder
under one Purchase Contract with Financial Security Assurance Holdings Ltd., a
New York corporation (the "Company").
Pursuant to the Pledge Agreement, the Underlying Securities
constituting part of each Security evidenced hereby have been pledged to the
Collateral Agent to secure the obligations of the Holder under the Purchase
Contract constituting part of such Security.
The Pledge Agreement provides that all payments of principal of, or
interest on, any Underlying Securities constituting part of the Securities
received by the Collateral Agent shall be paid by the Collateral Agent by wire
transfer in same day funds no later than _____________, New York City time, on
the Business Day such payment is received by the Collateral Agent (provided that
in the event such payment is received by the Collateral Agent on a day that is
not a Business Day or after ______________, New York City time, on a Business
Day, then such payment shall be made no later than _____________, New York City
time, on the next succeeding Business Day) (i) in the case of (a) interest
payments and (b) any principal payments with respect to any Underlying
Securities that have been released from the Pledge pursuant to the Pledge
Agreement, to the Agent to the account designated by it for such purpose and
(ii) in the case of principal payments on any Pledged Underlying Securities (as
defined in the Pledge Agreement), to the Company, in full satisfaction of the
respective obligations of the Holders of the Securities of which such Pledged
Underlying Securities are a part under the Purchase Contracts forming a part of
such Securities. Interest on any Underlying Security forming part of a Security
evidenced hereby which is paid on any _______ or ________, commencing
_____________ (a "Payment Date"), shall, subject to receipt thereof by the Agent
from the Collateral Agent, be paid to
<PAGE>
2
the Person in whose name this Security Certificate (or a Predecessor Security
Certificate) is registered at the close of business on the Record Date next
preceding such Payment Date.
Each Purchase Contract evidenced hereby obligates the Holder of this
Security Certificate to purchase, and the Company to sell, on __________ (the
"Final Settlement Date"), at a price equal to $__________ (the "Stated Amount"),
a number of shares of Common Stock, par value $0.01 per share ("Common Stock"),
of the Company, equal to the Settlement Rate, unless on or prior to the Final
Settlement Date there shall have occurred a Termination Event or Early
Settlement with respect to the Security of which such Purchase Contract is a
part, all as provided in the Purchase Contract Agreement and more fully
described on the reverse hereof. The purchase price for the shares of Common
Stock purchased pursuant to each Purchase Contract evidenced hereby, if not paid
earlier, shall be paid on the Final Settlement Date by application of payment
received in respect of the principal of the Underlying Securities pledged to
secure the obligations under such Purchase Contract of the Holder of the
Security of which such Purchase Contract is a part.
The Company shall pay, on each Payment Date, in respect of each
Purchase Contract forming part of a Security evidenced hereby a fee (the
"Contract Fee") equal to _____% per annum of the Stated Amount, from __________
computed on the basis of the actual number of days elapsed in a year of 365 or
366 days, as the case may be, subject to deferral at the option of the Company
as provided in the Purchase Contract Agreement and more fully described on the
reverse hereof. Such Contract Fee shall be payable to the Person in whose name
this Security Certificate (or a Predecessor Security Certificate) is registered
at the close of business on the Record Date next preceding such Payment Date.
Interest on the Underlying Securities and the Contract Fee will be
payable at the office of the Agent in The City of New York or, at the option of
the Company, by check mailed to the address of the Person entitled thereto as
such address appears on the Security Register.
Reference is hereby made to the further provisions 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 Agent by manual signature, this Security Certificate shall not be entitled
to any benefit under the Pledge Agreement or the Purchase Contract Agreement or
be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.
<PAGE>
3
FINANCIAL SECURITY ASSURANCE
HOLDINGS LTD.
By:
----------------------------------
Attested by
- ---------------------------
HOLDER SPECIFIED ABOVE
(as to obligations of such
Holder under the Purchase
Contracts evidenced hereby)
By:
----------------------------------
as Attorney-in-Fact of
such Holder
By:
----------------------------------
Dated:
This is one of the Security Certificates referred to in the within
mentioned Purchase Contract Agreement.
- ---------------------------,
as Agent
By:
-----------------------
<PAGE>
[Form of Reverse of Security Certificate]
Each Purchase Contract evidenced hereby is governed by a Purchase
Contract Agreement, dated as of __________ (the "Purchase Contract Agreement"),
between the Company and ___________________, as Agent (herein called the
"Agent"), to which Purchase Contract Agreement and supplemental agreements
thereto reference is hereby made for a description of the respective rights,
limitations of rights, obligations, duties and immunities thereunder of the
Agent, the Company, and the Holders and of the terms upon which the Security
Certificates are, and are to be, executed and delivered.
Each Purchase Contract evidenced hereby obligates the Holder of this
Security Certificate to purchase, and the Company to sell, on the Final
Settlement Date at a price equal to the Stated Amount, a number of shares of
Common Stock of the Company equal to the Settlement Rate, unless, on or prior to
the Final Settlement Date, there shall have occurred a Termination Event or an
Early Settlement with respect to the Security of which such Purchase Contract is
a part. The "Settlement Rate" is equal to (a) if the Applicable Market Value (as
defined below) is greater than $_____ (the "Threshold Appreciation Price"),
_____ shares of Common Stock per Purchase Contract, (b) if the Applicable Market
Value is less than or equal to the Threshold Appreciation Price but is greater
than the Stated Amount, a fractional share of Common Stock per Purchase Contract
equal to the Stated Amount divided by the Applicable Market Value and (c) if the
Applicable Market Amount is less than or equal to the Stated Amount, one share
of Common Stock per Purchase Contract, in each case subject to adjustment as
provided in the Purchase Contract. No fractional shares of Common Stock will be
issued upon settlement of Purchase Contracts, as provided in the Purchase
Contract Agreement.
The "Applicable Market Value" means the average of the Closing
Prices per share of Common Stock on each of the twenty consecutive Trading days
ending on the last Trading Day immediately preceding the Final Settlement Date.
The "Closing Price" of the Common Stock on any date of determination means the
closing sale price (or, if no closing price is reported, the last reported sale
price) of the Common Stock on the New York Stock Exchange (the "NYSE") on such
date or, if the Common Stock is not listed for trading on the NYSE on any such
date, as reported in the composite transactions for the principal United States
securities exchange on which the Common Stock is so listed, or if the Common
Stock is not so listed on a United States national or regional securities
exchange, as reported by The Nasdaq Stock Market, or, if the Common Stock is not
so reported, the last quoted bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or, if such bid price is not available, the market value of the
Common Stock on such date as determined by a nationally recognized independent
investment banking firm retained for this
<PAGE>
2
purpose by the Company. A "Trading Day" means as a day on which the Common Stock
(a) is not suspended from trading on any national or regional securities
exchange or association or over-the-counter market at the close of business and
(b) has traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the Common Stock.
The purchase price for the shares of Common Stock purchased pursuant
to each Purchase Contract shall be paid by application of payments received by
the Company on the Final Settlement Date from the Collateral Agent pursuant to
the Pledge Agreement in respect of the principal of the Underlying Securities
Pledged to secure the obligations of the relevant Holder under such Purchase
Contract. The Company shall not be obligated to issue any shares of Common Stock
in respect of a Purchase Contract or deliver any certificates therefor to the
Holder unless it shall have received payment in full of the aggregate purchase
price for the shares of Common Stock to be purchased thereunder in the manner
herein set forth.
Subject to the next succeeding paragraph, the Company shall pay, on
each Payment Date, the Contract Fee payable in respect of each Purchase Contract
to the Person in whose name the Security Certificate evidencing such Purchase
Contract is registered at the close of business on the Record Date next
preceding such Payment Date. Contract Fees will be payable at the office of the
Agent in The City of New York or, at the option of the Company, by check mailed
to the address of the Person entitled thereto at such address as it appears on
the Security Register.
The Company shall have the right, at any time prior to the Final
Settlement Date, to defer the payment of any or all of the Contract Fees
otherwise payable on any Payment Date, but only if the Company shall give the
Holders and the Agent written notice of its election to defer such payment
(specifying the amount to be deferred) as provided in the Purchase Contract
Agreement. Any Contract Fees so deferred shall bear additional Contract Fees
thereon at the rate of _____ per annum (computed on the basis of the actual
number of days elapsed in a year of 365 or 366 days, as the case may be),
compounding on each succeeding Payment Date, until paid in full. Deferred
Contract Fees (and additional Contract Fees accrued thereon) shall be due on the
next succeeding Payment Date except to the extent that payment is deferred
pursuant to the Purchase Contract Agreement. No Contract Fees may be deferred to
a date that is after the Final Settlement Date.
The Purchase Contracts and the obligations and rights of the Company
and the Holders thereunder, including, without limitation, the rights of the
Holders to receive and the obligation of the Company to pay any Contract Fee,
shall immediately and automatically terminate, without the
<PAGE>
3
necessity of any notice or action by any Holder, the Agent or the Company, if,
on or prior to the Final Settlement Date, a Termination Event shall have
occurred. Upon the occurrence of a Termination Event, the Company shall give
written notice to the Agent and to the Holders, at their addresses as they
appear in the Security Register. Upon and after the occurrence of a Termination
Event, the Collateral Agent shall release the Underlying Securities from the
Pledge. The Securities shall thereafter represent the right to receive the
Underlying Securities forming a part of such Securities in accordance with the
provisions of the Purchase Contract Agreement and the Pledge Agreement.
Subject to and upon compliance with the provisions of the Purchase
Contract Agreement at the option of the Holder thereof, Purchase Contracts
underlying Securities having an aggregate Stated Amount equal to $__________ or
an integral multiple thereof may be settled early ("Early Settlement") as
provided in the Purchase Contract Agreement. In order to exercise the right to
effect Early Settlement with respect to any Purchase Contracts evidenced by this
Security Certificate, the Holder of this Security Certificate shall deliver this
Security Certificate to the Agent at the Corporate Trust Office duly endorsed
for transfer to the Company or in blank with the form of Election to Settle
Early set forth below duly completed and accompanied by payment in the form of a
certified or cashier's check payable to the order of the Company in immediately
available funds in an amount (the "Early Settlement Amount") equal to (i) the
product of (A) the Stated Amount times (B) the number of Purchase Contracts with
respect to which the Holder has elected to effect Early Settlement minus (ii)
the aggregate amount of Contract Fees, if any, otherwise payable on or prior to
the immediately preceding Payment Date deferred at the option of the Company
pursuant to the Purchase Contract Agreement and remaining unpaid as of such
immediately preceding Payment Date plus (iii) if such delivery is made with
respect to any Purchase Contracts during the period from the close of business
on any Record Date next preceding any Payment Date to the opening of business on
such Payment Date, an amount equal to the sum of (x) the Contract Fees payable
on such Payment Date with respect to such Purchase Contracts plus (y) the
interest with respect to the related Underlying Securities payable on such
Payment Date. Upon Early Settlement of Purchase Contracts by a Holder of the
related Securities, the Underlying Securities underlying such Securities shall
be released from the Pledge as provided in the Pledge Agreement and the Holder
shall be entitled to receive, a number of shares of Common Stock on account of
each Purchase Contract forming part of a Security as to which Early Settlement
is effected equal to the Early Settlement Rate. The Early Settlement Rate shall
initially be equal to __________ and shall be adjusted in the same manner and at
the same time as the Settlement Rate is adjusted as provided in the Purchase
Contract Agreement.
<PAGE>
4
The Security Certificates are issuable only in registered form and
only in denominations of a single Security and any integral multiple thereof.
The transfer of any Security Certificate will be registered and Security
Certificates may be exchanged as provided in the Purchase Contract Agreement.
The Security Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents permitted by the Purchase
Contract Agreement. No service charge shall be required for any such
registration of transfer or exchange, but the Company and the Agent may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. For so long as the Purchase Contract underlying
a Security remains in effect, such Security shall not be separable into its
constituent parts, and the rights and obligations of the Holder of such Security
in respect of the Underlying Securities and Purchase Contract constituting such
Security may be transferred and exchanged only as a Security.
Upon registration of transfer of this Security Certificate, the
transferee shall be bound (without the necessity of any other action on the part
of such transferee, except as may be required by the Agent pursuant to the
Purchase Contract Agreement), under the terms of the Purchase Contract Agreement
and the Purchase Contracts evidenced hereby and the transferor shall be released
from the obligations under the Purchase Contracts evidenced by this Security
Certificate. The Company covenants and agrees, and the Holder, by his acceptance
hereof, likewise covenants and agrees, to be bound by the provisions of this
paragraph.
The Holder of this Security Certificate, by his acceptance hereof,
authorizes the Agent to enter into and perform the related Purchase Contracts
forming part of the Securities evidenced hereby on his behalf as his
attorney-in-fact, agrees to be bound by the terms and provisions thereof,
covenants and agrees to perform his obligations under such Purchase Contracts,
consents to the provisions of the Purchase Contract Agreement, authorizes the
Agent to enter into and perform the Pledge Agreement on his behalf as his
Attorney-in-fact, and consents to the Pledge of the Underlying Securities
underlying this Security Certificate pursuant to the Pledge Agreement. The
Holder further covenants and agrees, that, to the extent and in the manner
provided in the Purchase Contract Agreement and the Pledge Agreement, but
subject to the terms thereof, payments in respect of principal of the Underlying
Securities on the Final Settlement Date shall be paid by the Collateral Agent to
the Company in satisfaction of such Holder's obligations under such Purchase
Contract and such Holder shall acquire no right, title or interest in such
payments.
Subject to certain exceptions, the provisions of the Purchase
Contract Agreement may be amended with the
<PAGE>
5
consent of the Holders of at least a majority of the Outstanding Securities.
All terms used herein which are defined in the Purchase Contract
Agreement have the meanings set forth therein.
The Purchase Contracts shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York.
The Company, the Agent and any agent of the Company or the Agent may
treat the Person in whose name this Security Certificate is registered as the
owner of the Securities evidenced hereby for the purpose of receiving payments
of interest on the Underlying Securities, receiving payments of Contract Fees,
performance of the Purchase Contracts and for all other purposes whatsoever,
whether or not any payments in respect thereof be overdue and notwithstanding
any notice to the contrary, and neither the Company, the Agent nor any such
agent shall be affected by notice to the contrary.
The Purchase Contracts shall not, prior to the settlement thereof,
entitle the Holder to any of the rights of a holder of shares of Common Stock.
A copy of the Purchase Contract Agreement is available for
inspection at the offices of the Agent.
<PAGE>
6
Settlement Instructions
The undersigned Holder directs that a certificate for shares of
Common Stock deliverable upon settlement on or after the Final Settlement Date
of the Purchase Contracts underlying the number of Securities evidenced by this
Security Certificate be registered in the name of, and delivered, together with
a check in payment for any fractional share, to the undersigned at the address
indicated below unless a different name and address have been indicated below.
If shares are to be registered in the name of a Person other than the
undersigned, the undersigned will pay any transfer tax payable incident thereto.
Dated:
------------------------ ----------------------------------------
Signature
REGISTERED HOLDER
Please print name and
address of Registered
Holder:
----------------------------------------
Name
----------------------------------------
Address
----------------------------------------
----------------------------------------
<PAGE>
7
If shares are to be
registered in the name of
and delivered to a Person
other than the Holder,
please print such Person's
name and address:
- ---------------------------
Name
- ---------------------------
Address
- ---------------------------
- ---------------------------
Social Security or other
Taxpayer Identification
Number, if any
<PAGE>
8
Election to Settle Early
The undersigned Holder of this Security Certificate hereby
irrevocably exercises the option to effect Early Settlement in accordance with
the terms of the Purchase Contract Agreement with respect to the Purchase
Contracts underlying the number of Securities evidenced by this Security
Certificate specified below. The option to effect Early Settlement may be
exercised only with respect to Purchase Contracts underlying Securities with an
aggregate Stated Amount equal to $________ or an integral multiple thereof. The
undersigned Holder directs that a certificate for shares of Common Stock
deliverable upon such Early Settlement be registered in the name of, and
delivered, together with a check in payment for any fractional share and any
Security Certificate representing any Securities evidenced hereby as to which
Early Settlement of the related Purchase Contracts is not effected, to the
undersigned at the address indicated below unless a different name and address
have been indicated below. Underlying Securities deliverable upon such Early
Settlement will be transferred in accordance with the transfer instructions set
forth below. If shares are to be registered in the name of a Person other than
the undersigned, the undersigned will pay any transfer tax payable incident
thereto.
Dated:
------------------------- ----------------------------------------
Signature
<PAGE>
9
Number of Securities evidenced hereby as to which Early Settlement of the
related Purchase Contracts is being elected: __________.
REGISTERED HOLDER
Please print name and
address of Registered
Holder:
----------------------------------------
Name
----------------------------------------
Address
----------------------------------------
----------------------------------------
If shares or Security
Certificates are to be
registered in the name of
and delivered to and
Underlying Securities are to
be transferred to a Person
other than the Holder,
please print such person's
name and address:
- -----------------------------------
Name
- -----------------------------------
Address
- -----------------------------------
- -----------------------------------
Social Security or other
Taxpayer Identification
Number, if any
<PAGE>
10
- --------------------------------------------------------------------------------
Transfer Instructions for Underlying Securities Transferable upon Early
Settlement or a Termination Event:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LETTERHEAD OF FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.]
May 5, 1999
Registration Statement on Form S-3 No. 333-74165
Financial Security Assurance Holdings Ltd.
350 Park Avenue
New York, NY 10022
Ladies and Gentlemen:
This opinion is being provided to you by the undersigned, as General
Counsel of Financial Security Assurance Holdings Ltd., a New York corporation
(the "Issuer"). I have acted as counsel to the Issuer in connection with the
preparation and filing with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), of a
Registration Statement on Form S-3 (the "Registration Statement"), and the
prospectus included therein (the "Prospectus"), relating to the registration by
the Issuer of $230,000,000 in the aggregate of (i) debt securities representing
unsecured obligations of the Issuer (the "Senior Debt Securities") to be issued
pursuant to the Amended and Restated Trust Indenture (the "Indenture") dated as
of February 24, 1999, between the Issuer and First Union National Bank, as
trustee (the "Trustee") and subordinated debt securities ("Subordinated Debt
Securities" and, together with the Senior Debt Securities, the "Debt
Securities") to be issued pursuant to a Subordinated Indenture (the
"Subordinated Indenture") between the Issuer and a trustee (the "Subordinated
Trustee") to be named in a prospectus supplement relating to the Subordinated
Debt Securities; (ii) shares of common stock of the Issuer, par value $.01 per
share ("Common Stock"); (iii) contracts to purchase Common Stock ("Stock
Purchase Contracts"); (iv) units ("Stock Purchase Units") consisting of a Stock
Purchase Contract and Debt Securities, Preferred Securities (as defined below)
or debt obligations of third parties; and (v) shares of preferred stock of the
Issuer ("Preferred Securities").
In so acting, I have examined and relied upon the originals, or
copies certified or otherwise identified to my satisfaction, of such records,
documents, certificates and other instruments as in my judgment are necessary or
appropriate to enable me to render the opinion expressed below. My opinion
assumes that each of the definitive Subordinated Indenture and the definitive
purchase contract agreement (the "Purchase Contract Agreement") between the
Issuer and a purchase contract agent (the "Purchase Contract Agent") to be named
in a prospectus supplement relating to the Stock Purchase Contracts and Stock
Purchase Units, as applicable, will be in substantially the form filed as an
exhibit to the Registration Statement.
Based upon the foregoing, I am of the following opinion:
1. When the Senior Debt Securities have been duly executed,
authenticated, issued, delivered and paid for as contemplated by the
Registration Statement and any prospectus supplement relating to the
Senior Debt Securities and in accordance with the Indenture, assuming the
terms of such Senior Debt Securities have been duly established so as not
to violate any applicable law or result in a
<PAGE>
2
default under or breach of any agreement or instrument binding upon the
Issuer and so as to comply with any requirement imposed by any court or
governmental body having jurisdiction over the Issuer, the Senior Debt
Securities will be validly issued and will constitute valid and binding
obligations of the Issuer in accordance with their terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws of general applicability relating to or affecting the
rights of creditors and by general principles of equity.
2. When the Subordinated Indenture has been duly authorized,
executed and delivered by the Issuer and the Subordinated Trustee, and the
Subordinated Debt Securities have been duly executed, authenticated,
issued, delivered and paid for as contemplated by the Registration
Statement and any prospectus supplement relating to the Subordinated Debt
Securities and in accordance with the Subordinated Indenture, assuming the
terms of such Subordinated Debt Securities have been duly established so
as not to violate any applicable law or result in a default under or
breach of any agreement or instrument binding upon the Issuer and so as to
comply with any requirement imposed by any court or governmental body
having jurisdiction over the Issuer, the Subordinated Debt Securities will
be validly issued and will constitute valid and binding obligations of the
Issuer in accordance with their terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws of general applicability relating to or affecting the rights of
creditors and by general principles of equity.
3. When the Common Stock has been duly issued and sold as
contemplated by the Registration Statement and any prospectus supplement
relating to the Common Stock, against payment of the consideration fixed
therefor by the Board of Directors of the Issuer or a duly authorized
committee thereof, the Common Stock will be duly authorized, validly
issued, fully paid and nonassessable.
4. When the Purchase Contract Agreement has been duly authorized,
executed and delivered by the Issuer and the Purchase Contract Agent, and
the Stock Purchase Contracts and Stock Purchase Units, as applicable, have
been duly executed, countersigned, issued, delivered and paid for as
contemplated by the Registration Statement and any prospectus supplement
relating to the Stock Purchase Contracts and Stock Purchase Units, as
applicable, and in accordance with the Purchase Contract Agreement,
assuming the terms of such Stock Purchase Contracts and Stock Purchase
Units, as applicable, have been duly established so as not to violate any
applicable law or result in a default under or breach of any agreement or
instrument binding upon the Issuer and so as to comply with any
requirement imposed by any court or governmental body having jurisdiction
over the Issuer, the Stock Purchase Contracts and Stock Purchase Units, as
applicable, will be validly issued and will constitute valid and binding
obligations of the Issuer in accordance with their terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws of general applicability relating to or affecting the
rights of creditors and by general principles of equity.
5. When the Preferred Stock has been duly issued and sold as
contemplated by the Registration Statement and any prospectus supplement
relating to the Preferred Stock, against payment of the consideration
fixed therefor by the Board of Directors of the Issuer or a duly
authorized committee thereof, the Preferred Stock will be duly authorized,
validly issued, fully paid and nonassessable.
The opinion expressed above is limited to the laws of the State of
New York, the Act and the federal laws of the United States of America.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Prospectus.
<PAGE>
3
In giving such consent, I do not thereby concede that I am within the category
of persons whose consent is required under Section 7 of the Act or the Rules and
Regulations of the Commission thereunder.
Very truly yours,
/s/ Bruce Stern
Bruce E. Stern
Financial Security Assurance Holdings Ltd.
Computation of the Ratio of Earnings to Fixed Charges and the
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
(in thousands except for ratios)
The information appearing below presents historical
consolidated financial results for the Company
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes $78,290 $75,042 $109,771 $138,499 $159,746
Interest Expense 536 57 2,166 5,325 10,625
Portion of rental expense deemed to
be interest (1) 1,024 1,030 1,042 1,077 1,173
Earnings $79,850 $76,129 $112,979 $144,901 $171,544
Fixed Charges:
Interest Expense $ 536 $ 57 $ 2,166 $ 5,325 $ 10,625
Portion of rental expense deemed to
be interest (1) 1,024 1,030 1,042 1,077 1,173
Fixed Charges (2) $ 1,560 $ 1,087 $ 3,208 $ 6,402 $ 11,798
Preferred Stock Dividends $ 0 $ 0 $ 0 $ 0 $ 0
Ratio of Earnings to Fixed Charges 51.2 70.0 35.2 22.6 14.5
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends 51.2 70.0 35.2 22.6 14.5
</TABLE>
(1) One third of rental expense is estimated to be representative of the
interest factor.
(2) The Company had no capitalized interest for the periods presented.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
of Financial Security Assurance Holdings Ltd. on Form S-3, as amended by
Pre-Effective Amendment No. 1 thereto, relating to the shelf registration of
$230,000,000 of debt securities, common stock, stock purchase contracts, stock
purchase units and preferred stock, of:
1. Our report dated January 26, 1999 on our audits of the consolidated
balance sheets of Financial Security Assurance Holdings Ltd. and
Subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in shareholders' equity,
and cash flows for each of the three years in the period ended
December 31, 1998, which report is incorporated by reference in the
Annual Report on Form 10-K of Financial Security Assurance Holdings
Ltd. for the fiscal year ended December 31, 1998;
2. Our report dated January 26, 1999 on our audits of the financial
statement schedule relating to the consolidated financial statements
of Financial Security Assurance Holdings Ltd. and Subsidiaries,
which report is included in the Annual Report on Form 10-K for the
fiscal year ended December 31, 1998; and
3. Our report dated January 26, 1999 on our audits of the consolidated
balance sheets of Financial Security Assurance Inc. and Subsidiaries
as of December 31, 1998 and 1997, and the related consolidated
statements of income, changes in shareholder's equity, and cash
flows for each of the three years in the period ended December 31,
1998, which report is included as Exhibit 99 to the Annual Report on
Form 10-K of Financial Security Assurance Holdings Ltd. for the
fiscal year ended December 31, 1998.
We also consent to the reference to our Firm under the caption "Experts".
/s/ PricewaterhouseCoopers LLP
New York, New York
May 5, 1999
