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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 16, 1996
Commission File Number: 0-24780 Commission File Number: 33-73002-01
PROTECTION ONE, INC. PROTECTION ONE ALARM MONITORING, INC.
6011 Bristol Parkway 6011 Bristol Parkway
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
Delaware Delaware
(State or other jurisdiction (State or other jurisdiction
of incorporation or organization) of incorporation or organization)
93-1063818 93-1064579
(I.R.S. employer identification no.) (I.R.S. employer identification no.)
6011 Bristol Parkway 6011 Bristol Parkway
Culver City, California 90230 Culver City, California 90230
(Address of principal executive (Address of principal executive
offices, including zip code) offices, including zip code)
(310) 338-6930 (310) 338-6930
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
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ITEM 5. Other Events
On September 16, 1996, Protection One Alarm Monitoring, Inc.
("Monitoring") and Protection One, Inc. ("POI") entered into an Underwriting
Agreement with Morgan Stanley & Co. Incorporated, Bear, Stearns & Co. Inc. and
Montgomery Securities for the public offering of $90,000,000 aggregate
principal amount ($103,500,000 aggregate principal amount if the Underwriters'
over-allotment option is exercised in full) of Monitoring's 6 3/4% Convertible
Senior Subordinated Notes due 2003 (the "Notes") to be issued pursuant to that
certain Subordinated Debt Shelf Indenture dated as of August 29, 1996, among
Monitoring, POI and State Bank and Trust Company, as Trustee, as supplemented
and amended by a Supplemental Indenture No. 1 to be dated as of September 20,
1996, which will set forth the terms and form of the Notes.
The Notes have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement on Form
S-3 (File No. 333-4901), filed by Monitoring and POI with the Securities and
Exchange Commission on August 1, 1996 and declared effective on August 30,
1996, covering the offering on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of up to $150,000,000 aggregate principal amount
of Monitoring's senior and subordinated debt securities and the guarantee
thereof by POI.
ITEM 7. Financial Statements and Exhibits.
(c) Exhibits.
1.1 Underwriting Agreement dated September 16, 1996, between Monitoring,
POI and Morgan Stanley & Co. Incorporated, Bear, Stearns & Co. Inc. and
Montgomery Securities.
4.1 Form of Supplemental Indenture No. 1 to be dated as of September 20, 1996,
among Monitoring, POI and State Street Bank and Trust Company, as Trustee.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
each Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PROTECTION ONE, INC.
PROTECTION ONE ALARM MONITORING, INC.
September 16, 1996 By: JOHN E. MACK, III
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John E. Mack, III
Executive Vice President
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ---------- ----------------------
1.1 Underwriting Agreement dated September 16, 1996, between
Monitoring, POI, Morgan Stanley & Co. Incorporated,
Bear, Stearns & Co. Inc. and Montgomery Securities.
4.1 Form of Supplemental Indenture No. 1 to be dated as of
September 20, 1996, among Monitoring, POI and State
Street Bank and Trust Company, as Trustee.
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EXHIBIT 1.1
PROTECTION ONE ALARM MONITORING, INC.
6 3/4% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2003
UNDERWRITING AGREEMENT
September 16, 1996
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September 16, 1996
Morgan Stanley & Co. Incorporated
Bear, Stearns & Co. Inc.
Montgomery Securities
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
PROTECTION ONE ALARM MONITORING, INC., a Delaware corporation (the
"Company"), proposes to issue and sell to Morgan Stanley & Co. Incorporated
("Morgan Stanley"), Bear, Stearns & Co. Inc. and Montgomery Securities
(collectively, the "Underwriters"), $90,000,000 aggregate principal amount at
maturity of its 6 3/4% Convertible Senior Subordinated Notes due 2003 (the "Firm
Notes") to be issued pursuant to the provisions of a Subordinated Debt Shelf
Indenture dated as of August 29, 1996 (the "Subordinated Indenture") and a
Supplemental Indenture No. 1 to be dated as of the Closing Date (as defined in
Section 3 hereof) (the "Supplemental Indenture," and, together with the
Subordinated Indenture, the "Indenture") between the Company and Protection One,
Inc., a Delaware corporation ("Protection One"), and State Street Bank and Trust
Company, as trustee (the "Trustee"). The Company also proposes to issue and sell
to the several Underwriters not more than $13,500,000 principal amount at
maturity of the Company's 6 3/4% Convertible Senior Subordinated Notes due 2003
(the "Option Notes") to cover over-allotments if and to the extent such option
is exercised by the Underwriters pursuant to the right to purchase such Option
Notes granted in Section 3 hereof. The Firm Notes and the Option Notes are
hereinafter referred to as the "Notes." The Notes are convertible, at the option
of the holder, into shares of Common Stock, par value $.01 per share (the
"Common Stock", and together with the Notes, the "Securities"), of Protection
One at any time after 90 days following the later of the latest date of original
issuance thereof and the Closing Date through final maturity, unless previously
redeemed or otherwise repurchased by the Company. The number of shares of Common
Stock issuable upon conversion of the Notes (the "Conversion Shares") shall be
determined based on a conversion price of $17.95 per share per $1,000 principal
amount at maturity of Notes, subject to adjustment, as provided in the
Supplemental Indenture. Protection One and each subsidiary of Protection One
which becomes a Subsidiary Guarantor pursuant to the terms of the Indenture (the
Subsidiary Guarantors, together with Protection One, are referred to from time
to time herein, collectively, as the "Guarantors") will jointly and severally
guarantee the obligations of the
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Company under the Notes and the Indenture pursuant to the terms of the Indenture
(each, a "Note Guarantee").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (Registration No. 333-09401)
including a prospectus, relating to certain of its debt securities (including
the Notes, collectively, the "Debt Securities"), the Note Guarantees and the
Common Stock, and the offering thereof from time to time in accordance with Rule
415 under the Securities Act of 1933, as amended (the "Securities Act"). Such
registration statement has been declared effective by the Commission. The
Company will prepare and file with the Commission a prospectus supplement
reflecting the terms of the Notes, the terms of the offering thereof and the
other matters set forth therein pursuant to Rule 424 under the Securities Act.
Such prospectus supplement, in the form first filed after the date hereof
pursuant to Rule 424, is herein referred to as the "Prospectus Supplement." As
used herein, (i) the term "Registration Statement" means the registration
statement, as amended at the date hereof, together with any registration
statement filed with the Commission pursuant to Rule 462(b) under the Securities
Act (a "Rule 462(b) Registration Statement"), including the exhibits thereto and
the documents incorporated by reference therein, (ii) the term "Basic
Prospectus" means the prospectus included in the Registration Statement relating
to all offerings of Debt Securities under the Registration Statement, (iii) the
term "preliminary prospectus" means any preliminary prospectus supplement
specifically relating to the Notes, together with the Basic Prospectus, and (iv)
the term "Prospectus" means the Basic Prospectus as supplemented by the
Prospectus Supplement. As used herein, the terms "Basic Prospectus,"
"Prospectus" and "preliminary prospectus" shall include in each case the
documents, if any, incorporated by reference therein. The terms "supplement,"
"amendment" and "amend" as used herein shall include all documents deemed to be
incorporated by reference in the Prospectus that are filed by the Company with
the Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), subsequent to the date of the Basic Prospectus.
1. Representations and Warranties. The Company and Protection One each
represents and warrants to, and agrees with, each of the Underwriters that:
(a) The Registration Statement has become effective under the
Securities Act; no stop order suspending the effectiveness of the
Registration Statement is in effect, and no proceedings for such purpose
are pending before or threatened by the Commission;
(b) (i) Each document, if any, filed or to be filed with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder (the "Exchange Act
Regulations") and incorporated by reference in the Prospectus complied or
will comply when so filed in all material respects with the Exchange Act
and the Exchange Act Regulations, and
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when read together with the other information in the Prospectus does not
contain and will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, (ii) each part of the Registration Statement
(including any amendment or supplement thereto, any Rule 462(b)
Registration Statement and any annual report on Form 10-K filed with the
Commission after the filing of the original Registration Statement), when
such part became effective, complied in all material respects with the
Securities Act and the rules and regulations of the Commission thereunder
(the "Securities Act Regulations"), the Trust Indenture Act of 1939, as
amended (the "TIA"), and the rules and regulations of the Commission
thereunder (the "TIA Regulations"), and did not contain and each such part,
as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, (iii) the Registration Statement and the Prospectus comply and,
as amended or supplemented, if applicable, will comply in all material
respects with the Securities Act, the Securities Act Regulations, the TIA
and the TIA Regulations and (iv) the Prospectus does not contain and, as
amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and
warranties set forth in this paragraph 1(b) do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein. At the Closing
Date and at the Option Closing Date, if any, the Indenture will comply in
all material respects with the requirements of the TIA and the TIA
Regulations.
(c) All of the issued and outstanding shares of capital stock of
Protection One have been duly and validly authorized and issued and are
fully paid and non-assessable; except as set forth in the Prospectus or
incorporated by reference therein, there are no outstanding rights,
subscriptions, warrants, calls, options or other agreements of any kind to
which the Company or Protection One is a party with respect to the capital
stock of Protection One; Protection One has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
State of Delaware, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a
material adverse effect on the Protection One and the subsidiaries of
Protection One listed on Schedule II attached hereto (each, a "Subsidiary"
and, collectively, the
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"Subsidiaries"), taken as a whole. The only subsidiaries of Protection One
are listed on Schedule II attached hereto.
(d) All of the issued and outstanding shares of capital stock of each
of the Subsidiaries have been duly authorized and validly issued and are
fully paid and nonassessable and are owned by Protection One, directly or
indirectly, in each case free and clear of any pledge, lien, encumbrance,
security interest, preemptive right or other claim other than liens in
favor of the lenders under the Revolving Credit Facility (as defined in the
Prospectus); except as set forth in the Prospectus, there are no
outstanding rights, subscriptions, warrants, calls, options or other
agreements of any kind to which the Company or Protection One is a party
with respect to the capital stock of any Subsidiary; each Subsidiary has
been duly incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on Protection
One and the Subsidiaries, taken as a whole. As of the Closing Date,
Protection One will have no direct subsidiary other than the Company and
will directly own all of the outstanding capital stock of the Company.
(e) This Agreement has been duly authorized, executed and delivered by
the Company and Protection One.
(f) The authorized capital stock of Protection One conforms as to legal
matters to the description thereof contained in the Prospectus.
(g) The Notes have been duly authorized and, when executed,
authenticated and delivered to and paid for by the Underwriters in
accordance with the terms of this Agreement, will (x) be valid and binding
obligations of the Company enforceable in accordance with their terms,
except as (A) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (B)
rights of acceleration, if applicable, and the availability of equitable
remedies may be limited by equitable principles of general applicability
and (y) be entitled to the benefits of the Indenture. The Notes will
conform in all material respects to the description thereof contained in
the Prospectus under the headings "Description of Debt Securities" and
"Description of Convertible Notes."
(h) The Subordinated Indenture has been duly qualified under the TIA
and duly authorized, executed and delivered by the Company and Protection
One and is a valid and binding agreement of the Company and Protection One,
enforceable in
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accordance with its terms except as (x) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (y) rights of acceleration, if applicable, and the
availability of equitable remedies may be limited by equitable principles
of general applicability. The Supplemental Indenture has been duly
authorized, and when executed and delivered by the Company, Protection One
and the Trustee will be a valid and binding agreement of the Company and
Protection One, enforceable in accordance with its terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (y) rights of acceleration,
if applicable, and the availability of equitable remedies may be limited by
equitable principles of general applicability. The Subordinated Indenture
conforms, and the Supplemental Indenture will conform, in all material
respects to the description thereof contained in the Prospectus under the
headings "Description of Debt Securities" and "Description of Convertible
Notes."
(i) The Note Guarantee has been duly authorized, executed and delivered
by Protection One and upon execution and delivery of the Supplemental
Indenture by Protection One and, assuming due execution and authentication
of the Notes in accordance with the Indenture, will (x) be a valid and
binding obligation of Protection One enforceable in accordance with its
terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration, if applicable, and the
availability of equitable remedies may be limited by equitable principles
of general applicability and (y) be entitled to the benefits of the
Indenture. The Note Guarantee will conform in all material respects to the
description thereof contained in the Prospectus under the headings
"Description of Debt Securities" and "Description of the Notes."
(j) The Conversion Shares have been duly authorized and reserved and,
when issued upon conversion of the Notes in accordance with the terms of
the Notes and the Indenture, will be validly issued, fully paid and
nonassessable and will not be subject to any preemptive or similar rights.
The Conversion Shares will conform in all material respects to the
description thereof contained in the Prospectus under the heading
"Description of Capital Stock."
(k) The execution and delivery by the Company and Protection One of,
and the performance by each of the Company and Protection One of its
obligations under, this Agreement, the Indenture, the Notes (in the case of
the Company) and the Note Guarantee (in the case of Protection One), and
the issuance, sale and delivery of the Notes, the Note Guarantee or the
Conversion Shares will not contravene any provision of applicable law or
the certificate of incorporation or by-laws of the Company or Protection
One or any agreement or other instrument binding upon Protection One or any
of the Subsidiaries that is material to Protection One and the
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Subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over Protection One
or any Subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
issuance of the Notes or the Conversion Shares upon conversion of the
Notes, or the performance by each of the Company and Protection One of its
respective obligations under this Agreement, the Indenture, the Notes or
the Note Guarantee (in the case of Protection One), except such as may be
required by the Securities Act and the securities or Blue Sky laws of the
various states in connection with the offer and sale of the Notes and the
Note Guarantee.
(l) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of Protection One and the Subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(m) There are no legal or governmental proceedings pending or overtly
threatened to which Protection One or any Subsidiary is a party or to which
any of the properties of Protection One or any Subsidiary is subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations, contracts
or other documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required.
(n) Each of Protection One and the Subsidiaries has all necessary
consents, authorizations, approvals, orders, certificates and permits of
and from, and has made all declarations and filings with, all federal,
state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, to own, lease, license
and use its properties and assets and to conduct its business in the manner
described in the Prospectus, except to the extent that the failure to
obtain or file would not have a material adverse effect on Protection One
and the Subsidiaries, taken as a whole.
(o) Neither the Company nor Protection One is an "investment company"
or an entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended.
(p) Protection One and each of the Subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have
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received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental
Laws, failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits, licenses
or approvals would not, singly or in the aggregate, have a material adverse
effect on Protection One and the Subsidiaries, taken as a whole.
(q) In the ordinary course of its business, Protection One conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of Protection One and each Subsidiary, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such review, Protection One has reasonably
concluded that the associated costs and liabilities would not, singly or in
the aggregate, have a material adverse effect on Protection One and the
Subsidiaries, taken as a whole.
(r) Each preliminary prospectus filed pursuant to Rule 424 under the
Securities Act complied when so filed in all material respects with the
Securities Act and Securities Act Regulations.
(s) Other than the Amended and Restated Stockholders' Agreement dated
as of August 15, 1994, among the Company and the Stockholders (as defined
therein), there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company (other than registration
statements that have previously been filed) or to require the Company to
include such securities with the Debt Securities, Note Guarantees and
Common Stock registered pursuant to the Registration Statement.
(t) Each of the Company and Protection One has complied with all
applicable provisions, if any, of Section 517.075, Florida Statutes
relating to doing business with the Government of Cuba or with any person
or affiliate located in Cuba.
2. Public Offering. The Company is advised by you that the Underwriters
propose to make a public offering of their respective portions of the Notes on
the terms set forth in the Prospectus as soon as practicable after this
Agreement is entered into as in the judgment of the Underwriters is advisable.
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3. Purchase and Delivery. Upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
the Company hereby agrees to sell to the Underwriters, and the Underwriters
agree, severally and not jointly, to purchase from the Company the aggregate
principal amount at maturity of Firm Notes set forth in Schedule I hereto
opposite their names at a purchase price of 97.0% per $1,000 principal amount
thereof at maturity plus accrued interest, if any, from September 20, 1996 to
the date of payment and delivery (the "Purchase Price").
Upon the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company hereby agrees to
sell to the Underwriters, and the Underwriters shall have a one-time right to
purchase, severally and not jointly, up to an aggregate of $13,500,000 principal
amount at maturity of Option Notes at the Purchase Price. Option Notes may be
purchased solely for the purpose of covering over-allotments made in connection
with the Firm Notes. If any Option Notes are to be purchased, each Underwriter
agrees, severally and not jointly, to purchase the principal amount at maturity
of Option Notes (subject to such adjustments to eliminate the issuance of Option
Notes in denominations other than integral multiples of $1,000 principal amount
at maturity as the Underwriters may determine) that bears the same proportion to
the principal amount at maturity of Option Notes to be purchased as the
principal amount at maturity of Firm Notes set forth on Schedule I hereto
opposite the name of such Underwriter bears to the total principal amount at
maturity of Firm Notes.
Payment for the Firm Notes shall be made against delivery of the Firm
Notes at a closing (the "Closing") to be held at the offices of Shearman &
Sterling, 777 South Figueroa Street, Los Angeles, California, at 7:00 a.m.,
local time, on September 20, 1996, or at such other time on the same or such
other date, not later than September 27, 1996, as shall be designated in writing
by the Underwriters. The time and date of such payment are herein referred to as
the "Closing Date." Payment for the Firm Notes shall be made by wire transfer of
immediately available funds payable to the order of the Company.
Payment for any Option Notes to be sold by the Company shall be made at
the offices of Shearman & Sterling, 777 South Figueroa Street, Los Angeles,
California, at 7:00 a.m., local time, on such date (which may be the same as the
Closing Date but shall in no event be earlier than the Closing Date nor later
than ten business days after the giving of the notice hereinafter referred to)
as shall be designated in a written notice from the Underwriters to the Company
their determination to purchase an amount, specified in said notice, of Option
Notes. Payment for the Option Notes shall be made by wire transfer of
immediately available funds payable to the order of the Company. The time and
date of such payment are hereinafter referred to as the "Option Closing Date."
The notice of the determination to exercise the option to purchase Option Notes
and of the Option Closing Date may be given at any time within 30 days after the
date of this Agreement, but in any event shall be given at least two business
days prior to the Option Closing Date.
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Certificates for the Firm Notes and the Option Notes shall be in
definitive or global form and registered in such names and in such denominations
as Morgan Stanley, on behalf of the Underwriters, shall request in writing not
less than two full business days prior to the Closing Date or the Option Closing
Date, as the case may be. The Firm Notes and any Option Notes shall be delivered
to you on the Closing Date or the Option Closing Date, as the case may be, with
any transfer taxes payable in connection with the transfer of the Notes to you
duly paid, against payment of the purchase price therefor.
4. Conditions to Closing. The several obligations of the Underwriters
under this Agreement to purchase the Firm Notes will be subject to the following
conditions:
(a) Subsequent to the date of this Agreement and on or prior to the
Closing Date:
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded any of the Company's or
any of Protection One's securities by any "nationally recognized
statistical rating organization", as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of Protection One
and the Subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your judgment, is
material and adverse and that makes it, in your judgment, impracticable
to market the Notes on the terms and in the manner contemplated in the
Prospectus.
(b) You shall have received certificates on the Closing Date from each
of the Company and Protection One, dated the Closing Date and signed by an
executive officer of the Company and Protection One, as the case may be, to
the effect set forth in clause (a)(i) above and to the effect that the
representations and warranties of the Company and Protection One contained
in this Agreement are true and correct as of the Closing Date and that the
Company and Protection One have complied with all of the agreements and
satisfied all of the conditions on its part to be performed or satisfied on
or before the Closing Date. The officer signing and delivering each such
certificate may rely upon the best of such officer's knowledge as to
proceedings threatened.
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(c) You shall have received on the Closing Date an opinion of Mitchell,
Silberberg & Knupp LLP, independent counsel for the Company and Protection
One, dated the Closing Date, to the effect set forth in Exhibit A.
(d) You shall have received on the Closing Date an opinion of Shearman
& Sterling, counsel for the Underwriters, dated the Closing Date, to the
effect set forth in Exhibit B.
(e) You shall have received on each of the date hereof and the Closing
Date a letter, dated the Closing Date, in form and substance satisfactory
to you, from Coopers & Lybrand L.L.P., independent public accountants,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in or
incorporated by reference into the Prospectus.
(f) The "lock-up" agreements each substantially in the form of Exhibit
C hereto, between you and certain officers, directors and stockholders of
Protection One relating to sales and certain other dispositions of shares
of Common Stock or certain other securities, delivered to you on or before
the date hereof, shall be in full force and effect on the Closing Date.
(g) You shall have received such other documents and certificates of
the Company and Protection One as are reasonably requested by the
Underwriters or their counsel.
The several obligations of the Underwriters to purchase Option Notes
hereunder are subject to the delivery to the Underwriters on the Option Closing
Date of such documents as Morgan Stanley, on behalf of the Underwriters, may
reasonably request with respect to the good standing of the Company and
Protection One, the due authorization and issuance and sale of the Option Notes
and other matters related to the issuance and sale of the Option Notes.
5. Covenants of the Company. In further consideration of the agreements
of the Underwriters contained in this Agreement, the Company and Protection One
covenant as follows:
(a) To furnish to you, without charge, four signed copies of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and to furnish to you in New York City, without
charge, prior to 5:00 p.m., local time, on the business day following the
date of this Agreement and during the period mentioned in paragraph (c)
below, as many copies of each preliminary prospectus, if
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any, the Prospectus, any documents incorporated by reference therein and
any supplements and amendments thereto or to the Registration Statement as
each of you may reasonably request.
(b) Before amending or supplementing the Registration Statement or the
Prospectus (other than through the making of any filing pursuant to the
Exchange Act), to furnish to you a copy of each such proposed amendment or
supplement and not to use any such proposed amendment or supplement to
which you reasonably object unless, in the judgment of the Company and as
stated in the written opinion of the Company's counsel, such amendment or
supplement is necessary to comply with applicable law, and to file with the
Commission within the applicable period specified in Rule 424(b) under the
Securities Act any prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public offering
of the Notes as in the opinion of counsel for the Underwriters the
Prospectus is required by law to be delivered in connection with sales by
an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary in your judgment to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the opinion of counsel to the Underwriters, it is
necessary to amend or supplement the Prospectus to comply with law,
forthwith to prepare, file with the Commission and furnish, at its own
expense, to the Underwriters and to the dealers (whose names and addresses
you will furnish to the Company) to which Notes may have been sold by you
on behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as so amended or supplemented, will
comply with law.
(d) To endeavor to qualify the Notes, the Note Guarantee and the
Conversion Shares for offer and sale under the securities or Blue Sky laws
of such jurisdictions as you shall reasonably request.
(e) Whether or not any sale of such Notes to the Underwriters is
consummated, to pay all expenses incident to the performance of the
Company's and Protection One's obligations under this Agreement, including:
(i) the fees, disbursements and expenses of the Company's counsel, the
Company's accountants and the Trustee and its counsel in connection with
the registration and delivery of the Notes, Note Guarantees and Conversion
Shares under the Securities Act and all other fees and expenses in
connection with the preparation and filing of the Registration Statement,
any preliminary prospectus, the Prospectus and amendments and
<PAGE> 13
12
supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof to
the Underwriters and dealers, in the quantities hereinabove specified, (ii)
the preparation, issuance and delivery of the Notes and the Conversion
Shares upon conversion of the Notes, including any transfer or other taxes
payable thereon, (iii) the cost of printing or producing any Blue Sky or
legal investment memoranda in connection with the offer and sale of the
Notes under state securities laws and all expenses in connection with the
qualification of the Notes, the Note Guarantee and the Conversion Shares
under securities or Blue Sky laws in accordance with the provisions in
Section 5(d) hereof, including filing fees and the fees and disbursements
of counsel for the Underwriters in connection therewith and in connection
with the preparation of any Blue Sky or legal investment memoranda, (iv)
any fees charged by rating agencies for the rating of the Notes, (v) all
document production charges and expenses of counsel to the Underwriters
(but not including their fees for professional services) in connection with
the preparation of this Agreement, (vi) the fees and expenses incident to
listing the Notes on the New York Stock Exchange (the "NYSE"), (vii) all
filing fees and disbursements of counsel to the Underwriters incurred with
respect to any filing with the National Association of Securities Dealers,
Inc. (the "NASD"), (viii) all fees and expenses incident to listing the
Conversion Shares on the Nasdaq National Market or any exchange on which
the Common Stock listed and primarily traded following registration of the
Conversion Shares under the Securities Act, (ix) the cost of printing
certificates representing the Notes and the Conversion Shares, (x) the
costs and charges of any transfer agent, registrar or depositary for the
Notes and the Conversion Shares, as the case may be, (xi) the costs and
expenses of the Company relating to investor presentations on any "road
show" undertaken in connection with the marketing of the offering,
including, without limitation, expenses associated with the production of
road show slides and graphics, fees and expenses of any consultants engaged
in connection with the road show presentations with the prior approval of
the Company, travel and lodging expense of the representatives and officers
of the Company and any such consultants, and the cost of any aircraft
chartered in connection with the road show, and (xii) all other costs and
expenses incident to the performance of the obligations of the Company and
Protection One hereunder for which provision is not otherwise made in this
Section. It is understood, however, that except as provided in this
Section, Section 7 entitled "Indemnity and Contribution", and the last
paragraph of Section 9 below, the Underwriters will pay all of their costs
and expenses, including fees and disbursements of their counsel, stock
transfer taxes payable on resale of any of the Notes by them, and any
advertising expenses connected with any offers they may make.
<PAGE> 14
13
(f) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the
twelve-month period ending September 30, 1997 that satisfies the provisions
of Section 11(a) of the Securities Act and the Securities Act Regulations.
(g) To cause the Notes to be duly authorized for listing on the NYSE
and to be registered under the Exchange Act.
(h) To apply the net proceeds from the sale of the Notes being sold by
it in the manner set forth under the caption "Use of Proceeds" in the
Prospectus.
6. Covenants of Protection One. In further consideration of the
agreements of the Underwriters contained in this Agreement, Protection One
covenants as follows:
(a) To reserve and keep available at all times, free of preemptive or
similar rights, that number of shares of Common Stock sufficient for the
purpose of enabling Protection One to issue the Conversion Shares issuable
upon conversion of the Notes.
(b) To cause the Conversion Shares to be approved for quotation on the
Nasdaq National Market or any exchange on which the Common Stock is listed
and primarily traded following registration of the Conversion Shares under
the Securities Act.
(c) For a period of 90 days after the date of the Prospectus
Supplement, it will not offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, make any short sale, or
otherwise transfer or dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or enter into any swap or similar
arrangement that transfers to another, in whole or in part, the economic
risk of ownership of the Common Stock without the prior written consent of
Morgan Stanley; except for (i) sales to the Underwriters pursuant to this
Agreement, (ii) the grant of options, restricted stock and other awards to
employees pursuant to a benefit plan in effect on the date hereof and the
issuance of shares of Common Stock upon exercise of such options and other
awards and (iii) the issuance of Common Stock having an aggregate market
value at the time of issuance not exceeding $11,250,000 (such aggregate
market value of Common Stock being referred to herein, as the "Acquisition
Stock") as full or partial compensation in connection with acquisitions by
the Company of portfolios of subscriber accounts, subject to the condition
that prior to such issuance Protection One shall obtain from each of the
proposed recipients of such Acquisition Stock, and shall deliver to Morgan
Stanley at least five days prior to
<PAGE> 15
14
the issuance of any Acquisition Stock, a written agreement for the benefit
of the Underwriters and Protection One (an "Acquisition Lock-Up Letter")
that such recipients collectively (A) for a period of 90 days after the
date of the Prospectus Supplement will not offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, make any
short sale, or otherwise transfer or dispose of, directly or indirectly,
Acquisition Stock having an aggregate market value of $10,000,000
(determined at the time of the issuance of the Acquisition Stock to such
recipients), and (B) for a period of 30 days after the date of the
Prospectus Supplement will not offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, make any short sale,
or otherwise transfer or dispose of, directly or indirectly, any
Acquisition Stock. In the event that, prior to any issuance of Acquisition
Stock, Protection One shall fail to obtain an Acquisition Lock-Up Letter
from each recipient of such Acquisition Stock or shall fail to deliver any
such Acquisition Lock-Up Letter to Morgan Stanley, in each case as provided
in clause (iii) of the preceding sentence, the exception provided by such
clause (iii) shall be revoked and of no further force and effect and such
issuance of Acquisition Stock shall be deemed to have been made in
violation of the provisions of this subsection 6(c).
(d) Within 30 days after the date of the Prospectus Supplement, it will
cause each of Metrol Security Services, Inc., a Delaware corporation
("Metrol"), and Sonitrol of Arizona, Inc. ("Sonitrol"), an Arizona
corporation, each of which is a Subsidiary of Protection One, to be merged
with and into the Company, and if either Metrol or Sonitrol is not so
merged within such 30-day period, Protection One shall cause Metrol or
Sonitrol, as the case may be, to become a Subsidiary Guarantor in
accordance with the terms of the Indenture.
7. Indemnification and Contribution. (a) Each of the Company and
Protection One, jointly and severally, agrees to indemnify and hold harmless
each Underwriter, and each person, if any, who controls such Underwriter within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, or is under common control with, or is controlled by, such
Underwriter, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by any Underwriter or any such controlling or affiliated
person in connection with defending or investigating any such action or claim)
caused by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented, if the
Company and Protection One shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, except insofar as such
losses, claims, damages
<PAGE> 16
15
or liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Underwriter
furnished to the Company and Protection One in writing by such Underwriter
expressly for use therein; provided, however, that the foregoing indemnity
agreement with respect to any preliminary prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
claims, damages or liabilities purchased Notes or of any person controlling such
Underwriter, if a copy of the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of such Underwriter to such person, if required by law
so to have been delivered, at or prior to the written confirmation of the sale
of the Notes to such person, and if the Prospectus (as amended or supplemented)
would have cured the defect giving rise to such losses, claims, damages or
liabilities.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company and Protection One, their directors, their
officers who sign the Registration Statement and each person, if any, who
controls the Company or Protection One within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company and Protection One to such Underwriter,
but only with reference to information relating to such Underwriter furnished to
the Company and Protection One in writing by such Underwriter expressly for use
in the Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either paragraph (a) or (b) above, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel, in the opinion of the indemnified person on the
advice of counsel, would be inappropriate due to actual or potential differing
interests between them. It is understood that the indemnifying party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties and that all
such fees and expenses shall be reimbursed as they are incurred. Such firm shall
be designated in writing
<PAGE> 17
16
by Morgan Stanley in the case of parties indemnified pursuant to paragraph (a)
above and by the Company in the case of parties indemnified pursuant to
paragraph (b) above. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by the second and third sentences of this paragraph,
the indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in paragraph (a) or
(b) of this Section 7 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities, then each indemnifying
party under such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and Protection One, on the one hand, and the Underwriters, on the other
hand, from the offering of the Notes or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and Protection One, on the one
hand, and the Underwriters, on the other hand, in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and Protection One, on the one hand, and the
Underwriters, on the other hand, in connection with the offering of such Notes
shall be deemed to be in the same respective proportions as the net proceeds
from the offering of such Notes (before deducting expenses) received by the
Company and the total discounts and commissions received by the Underwriters in
respect thereof bear to the aggregate offering price of such Notes. The relative
fault of the Company and Protection One, on the one hand, and of the
Underwriters, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company and Protection One or by the Underwriters
and the parties' relative intent, knowledge, access to information and
<PAGE> 18
17
opportunity to correct or prevent such statement or omission. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the respective aggregate principal amount of Notes they have
purchased hereunder, and not joint.
(e) The Company, Protection One and the Underwriters agree that it
would not be just or equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Notes
resold by it in the initial placement of such Notes were offered to investors
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The indemnity and contribution provisions contained in this
Section 7 and the representations and warranties of the Company and Protection
One contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of the Underwriters or any person controlling
the Underwriters or by or on behalf of the Company and Protection One, their
officers or directors or any person controlling the Company or Protection One
and (iii) acceptance of and payment for any of the Notes. The remedies provided
for in this Section 7 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law or in
equity.
8. Termination. This Agreement shall be subject to termination by
notice given by the Underwriters to the Company and Protection One, if (a) after
the execution and delivery of this Agreement and prior to the Closing Date (i)
trading generally shall have been suspended or materially limited on or by, as
the case may be, any of the NYSE, the American Stock Exchange, the NASD, the
Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the
Chicago Board of Trade, (ii) trading of any securities of the Company or
Protection One shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event singly or
<PAGE> 19
18
together with any other such event makes it, in your judgment, impracticable to
market the Notes on the terms and in the manner contemplated in the Prospectus.
9. Defaulting Underwriters. If, on the Closing Date or the Option
Closing Date, as the case may be, any one of the Underwriters shall fail or
refuse to purchase Notes that it has agreed to purchase hereunder on such date,
and the number of Notes which such defaulting Underwriter agreed but failed or
refused to purchase is not more than one-tenth of the total number of Notes to
be purchased on such date, the other Underwriters shall be obligated severally
in the proportions that the principal amount of Firm Notes set forth opposite
their respective names in Schedule I bears to the aggregate principal amount of
Firm Notes set forth opposite the names of all such non-defaulting Underwriters,
or in such other proportions as you may specify, to purchase the Notes which
such defaulting Underwriter agreed but failed or refused to purchase on such
date; provided that in no event shall the principal amount of Notes that any
Underwriter has agreed to purchase pursuant to Section 3 be increased pursuant
to this Section 9 by an amount in excess of one-ninth of such principal amount
of Notes without the written consent of such Underwriter. If, on the Closing
Date or the Option Closing Date, as the case may be, any Underwriter shall fail
or refuse to purchase Notes which it or they have agreed to purchase hereunder
on such date and the aggregate principal amount of Notes with respect to which
such default occurs is more than one-tenth of the aggregate principal amount of
Notes to be purchased on such date and arrangements satisfactory to you and the
Company for the purchase of such Notes are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or of the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date or the Option Closing
Date, as the case may be, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters because (i)
of any failure or refusal on the part of the Company or Protection One to comply
with the terms or to fulfill any of the conditions of this Agreement to be
complied with or fulfilled by the Company and Protection One or (ii) for any
reason the Company or Protection One shall be unable to perform its obligations
under this Agreement, the Company will reimburse the Underwriters for all
out-of-pocket expenses (including the fees and disbursements of their or its
counsel) reasonably incurred by the Underwriters in connection with this
Agreement or the offering contemplated hereunder.
10. Representations and Indemnities to Survive. The respective
indemnity and contribution agreements and the representations, warranties and
other statements of the Company and Protection One, their respective officers
and the Underwriters set forth in this
<PAGE> 20
19
Agreement will remain in full force and effect, regardless of any termination of
this Agreement, any investigation made by or on behalf of any Underwriter or the
Company or Protection One or any of the officers, directors or controlling
persons referred to in Section 7 and delivery of and payment for the Notes.
11. Successors. This Agreement will enure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors and controlling persons referred to in Section 7, and no
other person will have any right or obligation hereunder.
12. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
14. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
[Signature pages follow]
<PAGE> 21
S-1
Please confirm your agreement to the foregoing by signing in the space
provided below for that purpose and returning to us a copy hereof, whereupon
this Agreement shall constitute a binding agreement between us.
Very truly yours,
PROTECTION ONE ALARM MONITORING, INC.
By /s/ JOHN E. MACK, III
----------------------------------
Name: John E. Mack, III
Title: Executive Vice President
PROTECTION ONE, INC.
By /s/ JOHN E. MACK, III
----------------------------------
Name: John E. Mack, III
Title: Executive Vice President
Accepted and agreed as of the date hereof:
MORGAN STANLEY & CO. INCORPORATED
BEAR, STEARNS & CO. INC.
MONTGOMERY SECURITIES
By: MORGAN STANLEY & CO. INCORPORATED
By /s/ MARK H. BRADLEY
-----------------------------
Name: Mark H. Bradley
Title: Principal
<PAGE> 22
SCHEDULE I
<TABLE>
<CAPTION>
Aggregate Principal
Amount of Notes
Underwriter To Be Purchased
----------- ---------------
<S> <C>
Morgan Stanley & Co. Incorporated 63,000,000
Bear, Stearns & Co. Inc. 13,500,000
Montgomery Securities 13,500,000
Total 90,000,000
==========
</TABLE>
<PAGE> 23
SCHEDULE II
SUBSIDIARIES OF PROTECTION ONE, INC.
<TABLE>
<CAPTION>
Name Ownership
---- ---------
<S> <C>
Protection One Alarm 100% of issued and outstanding
Monitoring, Inc. ("Monitoring") shares owned by Protection One, Inc.
Electronic Security Services, Inc. 100% of issued and outstanding shares
owned by Monitoring
G.T.M.T. Holding Co., Inc. ("GTMT") 100% of issued and outstanding shares
owned by Monitoring
Dictoguard Security, Inc. 100% of issued and outstanding shares
owned by GTMT
</TABLE>
<PAGE> 24
EXHIBIT A
OPINION OF COUNSEL
FOR THE COMPANY AND PROTECTION ONE
The opinion of the counsel for the Company and Protection One to be
delivered pursuant to Section 4(c) of the Underwriting Agreement shall be to the
effect that:
(A) All of the issued and outstanding shares of capital stock of
Protection One have been duly and validly authorized and issued and are
fully paid and non-assessable; to the best of such counsel's knowledge,
except as set forth in the Prospectus or incorporated by reference therein,
there are no outstanding rights, subscriptions, warrants, calls, options or
other agreements of any kind to which the Company or Protection One is a
party with respect to the capital stock of Protection One; Protection One
has been duly incorporated, is validly existing as a corporation in good
standing under the laws of the State of Delaware, has the corporate power
and authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in good
standing in [list].
(B) All of the issued and outstanding shares of capital stock of each
of the Subsidiaries have been duly authorized and validly issued and are
fully paid and nonassessable and, to the best of such counsel's knowledge,
are owned of record by Protection One, directly or indirectly, in each case
free and clear of any pledge, lien, encumbrance, security interest,
preemptive right or other claim; to the best of such counsel's knowledge,
except as set forth in the Prospectus, there are no outstanding rights,
subscriptions, warrants, calls, options or other agreements of any kind to
which the Company or Protection One is a party with respect to the capital
stock of any Subsidiary; each Subsidiary has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own its property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in
[list].
(C) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company and Protection One.
(D) The authorized capital stock of Protection One conforms as to legal
matters to the description thereof contained in the Prospectus.
A - 1
<PAGE> 25
(E) The Notes have been duly authorized and, when executed,
authenticated and delivered to and paid for by the Underwriters in
accordance with the terms of the Underwriting Agreement, will (x) be valid
and binding obligations of the Company enforceable in accordance with their
terms, except as (A) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (B) rights of acceleration, if applicable, and the
availability of equitable remedies may be limited by equitable principles
of general applicability and (y) be entitled to the benefits of the
Indenture.
(F) The Indenture has been duly qualified under the TIA and duly
authorized, executed and delivered by the Company and Protection One and
the Subordinated Indenture is, and the Supplemental Indenture, upon due
authorization, execution and delivery by the Trustee, will be, a valid and
binding agreement of the Company and Protection One, enforceable in
accordance with its terms except as (x) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (y) rights of acceleration, if applicable, and the
availability of equitable remedies may be limited by equitable principles
of general applicability.
(G) The Note Guarantee has been duly authorized, executed and delivered
by Protection One and, assuming due execution and authentication of the
Notes in accordance with the Indenture, will (x) be a valid and binding
obligation of Protection One enforceable in accordance with its terms
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
rights of acceleration, if applicable, and the availability of equitable
remedies may be limited by equitable principles of general applicability
and (y) be entitled to the benefits of the Indenture.
(H) The Conversion Shares have been duly authorized and reserved and,
when issued upon conversion of the Notes in accordance with the terms of
the Notes and the Indenture, will be validly issued, fully paid and
nonassessable and will not be subject to any preemptive or similar rights.
(I) The execution and delivery by the Company and Protection One of,
and the performance by each of the Company and Protection One of its
obligations under, the Underwriting Agreement, the Indenture, the Notes (in
the case of the Company) and the Note Guarantee (in the case of Protection
One), and the issuance, sale and delivery of the Notes and the Note
Guarantee and the issuance and delivery of the Conversion Shares upon
conversion of the Notes will not contravene any provision of applicable law
or the certificate of incorporation or by-laws of Protection One or any of
the Subsidiaries or any agreement or other instrument that is material to
Protection One and the Subsidiaries, taken as a whole, or, to the best
knowledge of such counsel after due inquiry, any judgment, order or decree
of any governmental body, agency or court known to such counsel to have
jurisdiction over Protection One or any
A - 2
<PAGE> 26
Subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
issuance of the Notes, the performance by each of the Company and
Protection One of its respective obligations under the Underwriting
Agreement, the Indenture, the Notes, or the Note Guarantee (in the case of
Protection One), except such as may be required by the Securities Act or
the securities or Blue Sky laws of the various states in connection with
the offer and sale of the Notes and the Note Guarantee and the issuance of
Conversion Shares upon conversion of the Notes.
(J) Such counsel does not know of any legal or governmental proceedings
pending or threatened to which Protection One or any Subsidiary is a party
or to which any of the properties of Protection One or any Subsidiary is
subject that are required to be described in the Registration Statement or
the Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(K) The statements (x) in the Prospectus under the captions
"Description of the Notes," "Description of Capital Stock," and "Plan of
Distribution" and (y) in the Registration Statement in Item 14, in each
case insofar as such statements constitute a summary of the legal matters,
documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents and
proceedings and are accurate in all material respects.
(L) The terms of the Notes, the Note Guarantees and the Indenture
conform in all material respects to the description thereof in the
Prospectus under the heading "Description of Notes" and the Conversion
Shares confirm in all material respects to the description thereof
contained in the Prospectus under the heading "Description of Capital
Stock."
(M) The statements in the Prospectus under the caption "Certain Federal
Income Tax Consequences" insofar as such statements constitute a summary of
matters of law or legal conclusions are accurate in all material respects
and fairly summarize the matters referred to therein.
(N) Neither the Company nor Protection One is an "investment company"
or an entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended.
(O) Such counsel is of the opinion that each preliminary prospectus
filed pursuant to Rule 424 under the Securities Act complied when so filed
as to form in all material respects with the Securities Act and the
Securities Act Regulations.
A - 3
<PAGE> 27
(P) Such counsel (i) is of the opinion that each document, if any,
filed with the Commission pursuant to the Exchange Act and the Exchange Act
Regulations and incorporated by reference in the Prospectus (except for
financial statements and schedules and other financial and statistical data
derived therefrom included or incorporated by reference therein as to which
such counsel need not express any opinion), complied when so filed as to
form in all material respects with the Exchange Act and the Exchange Act
Regulations, (ii) is of the opinion that the Registration Statement and
Prospectus (except for financial statements and schedules and other
financial and statistical data and derived therefrom included or
incorporated by reference therein as to which such counsel need not express
any opinion), as amended or supplemented, comply as to form in all material
respects with the Securities Act, the Securities Act Regulations, the TIA
and the TIA Regulations, (iii) has no reason to believe that any part of
the (except for financial statements and schedules and other financial and
statistical data derived therefrom included or incorporated by reference
therein as to which such counsel need not express any belief) Registration
Statement (including any amendment or supplement thereto, any Rule 462(b)
Registration Statement and any annual report on Form 10-K filed with the
Commission after the filing of the Registration Statement), when such part
became effective, contained, or as of the date of such opinion contains,
any untrue statement of a material fact or omitted or as of the date of
such opinion omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading and (iv) has no
reason to believe that (except for financial statements and schedules and
other financial and statistical data derived therefrom included or
incorporated by reference therein as to which such counsel need not express
any belief) the Prospectus or any amendment or supplement thereto contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
With respect to paragraph (P) above, counsel may state that their
opinion and belief are based upon their participation in the preparation of the
Registration Statement and the Prospectus (and any amendments or supplements
thereto) and review and discussion of the contents thereof, but are without
independent check or verification except with respect to paragraphs (D), (K),
(L) and (M) above.
Such opinion shall be rendered to the Underwriters at the request of
the Company and shall so state therein.
A - 4
<PAGE> 28
EXHIBIT B
OPINION OF SHEARMAN & STERLING
The opinion of Shearman & Sterling to be delivered pursuant to Section
4(d) of the Placement Agreement shall be to the effect that:
(A) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company and Protection One.
(B) The Notes have been duly authorized and, when executed,
authenticated and delivered to and paid for by the Underwriters in
accordance with the terms of the Underwriting Agreement, will (x) be valid
and binding obligations of the Company enforceable in accordance with their
terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration, if applicable, and the
availability of equitable remedies may be limited by equitable principles
of general applicability and (y) be entitled to the benefits of the
Indenture.
(C) The Indenture has been duly qualified under the TIA and duly
authorized, executed and delivered by the Company and Protection One and
the Subordinated Indenture is, and the Supplemental Indenture, upon due
authorization, execution and delivery by the Trustee, will be, a valid and
binding agreement of the Company and Protection One, enforceable in
accordance with its terms except as (x) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (y) rights of acceleration, if applicable, and the
availability of equitable remedies may be limited by equitable principles
of general applicability.
(D) The Note Guarantee has been duly authorized, executed and delivered
by Protection One and, assuming due execution and authentication of the
Notes in accordance with the Indenture, will (x) be a valid and binding
obligation of Protection One enforceable in accordance with its terms
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
rights of acceleration, if applicable, and the availability of equitable
remedies may be limited by equitable principles of general applicability
and (y) be entitled to the benefits of the Indenture.
(E) The statements in the Prospectus under the captions "Description of
the Notes," "Description of Capital Stock," and "Plan of Distribution,"
insofar as such statements constitute a summary of the legal matters,
documents or proceedings
B - 1
<PAGE> 29
referred to therein, fairly present the information called for with respect
to such legal matters, documents and proceedings and are accurate in all
material respects.
(F) The terms of the Notes, the Note Guarantees and the Indenture
conform in all material respects to the description thereof in the
Prospectus under the heading "Description of Notes" and the Conversion
Shares confirm in all material respects to the description thereof
contained in the Prospectus under the heading "Description of Capital
Stock."
(G) Such counsel (i) is of the opinion that the Registration Statement
and Prospectus (except for financial statements and schedules and other
financial and statistical data derived therefrom included or incorporated
by reference therein as to which such counsel need not express any
opinion), as amended or supplemented, comply as to form in all material
respects with the Securities Act, the Securities Act Regulations, the TIA
and the TIA Regulations, (ii) has no reason to believe that any part of the
(except for financial statements and schedules and other financial and
statistical data derived therefrom included or incorporated by reference
therein as to which such counsel need not express any belief) Registration
Statement (including any amendment or supplement thereto, any Rule 462(b)
Registration Statement and any annual report on Form 10-K filed with the
Commission after the filing of the Registration Statement), when such part
became effective, contained, or as of the date of such opinion contains,
any untrue statement of a material fact or omitted or as of the date of
such opinion omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading and (iii) has no
reason to believe that (except for financial statements and schedules and
other financial and statistical data derived therefrom included or
incorporated by reference therein as to which such counsel need not express
any belief) the Prospectus or any amendment or supplement thereto contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
With respect to paragraph (G) above, Shearman & Sterling may state that
their opinion and belief are based upon their participation in the preparation
of the Registration Statement and the Prospectus (and any amendments or
supplements thereto) and review and discussion of the contents thereof, but are
without independent check or verification except with respect to paragraph (F)
above.
B - 2
<PAGE> 30
EXHIBIT C
FORM OF LOCK-UP CONTRACT
__________, 199_
Morgan Stanley & Co. Incorporated
Bear, Stearns & Co. Inc.
Montgomery Securities
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY l0036
Ladies and Gentlemen:
The undersigned understands that Morgan Stanley & Co. Incorporated
("Morgan Stanley"), Bear, Stearns & Co. Inc. and Montgomery Securities, as
Representatives of the several Underwriters referred to below, propose to enter
into an Underwriting Agreement (the "Underwriting Agreement") with Protection
One Alarm Monitoring, Inc., a Delaware corporation (the "Issuer") and a wholly
owned subsidiary of Protection One, Inc., a Delaware corporation (the
"Company"), and the Company providing for the public offering (the "Public
Offering") by the several Underwriters, including Morgan Stanley (the
"Underwriters") of up to $86,250,000 aggregate principal amount of Convertible
Senior Subordinated Notes due 2003 (the "Notes") to be issued by the Issuer.
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period ending 90
days after the date of the final prospectus supplement (the "Prospectus
Supplement") to the basic prospectus relating to the Public Offering, (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, make any short sale, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock, $.01 par value, of the Company (the
"Common Stock") or any securities convertible into or exercisable or
exchangeable for Common Stock (provided that such shares or securities are
either now owned by the undersigned or are hereafter acquired prior to or in
connection with the Public Offering), or (2) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by
C - 1
<PAGE> 31
delivery of Common Stock or such other securities, in cash or otherwise. In
addition, the undersigned agrees that, without the prior written consent of
Morgan Stanley on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 90 days after the date of the
Prospectus Supplement, make any demand for or exercise any right with respect
to, the registration of any shares of Common Stock or any security convertible
into or exercisable or exchangeable for Common Stock.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
agreement between the Issuer, the Company and the Underwriters.
Very truly yours,
__________________________________
(Name)
__________________________________
(Address)
C - 2
<PAGE> 1
EXHIBIT 4.1
================================================================================
PROTECTION ONE ALARM MONITORING, INC.,
as Issuer
PROTECTION ONE, INC.,
as Parent Company
and
STATE STREET BANK AND TRUST COMPANY,
as Trustee
--------------------
Supplemental Indenture No. 1
Dated as of September 20, 1996
--------------------
$90,000,000
6 3/4% Convertible Senior Subordinated Notes due 2003
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE ONE
Relation to Subordinated Indenture; Definitions;
Amendments to Subordinated Indenture
<S> <C>
SECTION 1.01 Relation to Subordinated Indenture............................................... 2
SECTION 1.02 Definitions...................................................................... 2
SECTION 1.03 Amendments to Subordinated Indenture............................................. 9
ARTICLE TWO
The Series of Notes
SECTION 2.01 Title of the Securities.......................................................... 11
SECTION 2.02 Limitation on Aggregate Principal Amount; Dates of Notes......................... 11
SECTION 2.03 Form and Denomination of Notes................................................... 11
SECTION 2.04 Date of Notes; Payments of Interest.............................................. 12
SECTION 2.05 Place of Payment................................................................. 14
SECTION 2.06 Method of Payment................................................................ 14
SECTION 2.07 Registrar and Paying Agent....................................................... 14
ARTICLE THREE
Redemption of Notes
SECTION 3.01 Redemption Prices................................................................ 15
SECTION 3.02 Notice of Redemption; Selection of Notes......................................... 15
SECTION 3.03 Payment of Notes Called for Redemption........................................... 17
SECTION 3.04 Conversion Arrangement on Call for Redemption.................................... 18
SECTION 3.05 Redemption at Option of Holders.................................................. 19
ARTICLE FOUR
Conversion of Notes
SECTION 4.01 Right to Convert................................................................. 22
SECTION 4.02 Exercise of Conversion Privilege; Issuance of Common
Stock on Conversion; No Adjustment for Interest or
Dividends........................................................................ 22
SECTION 4.03 Cash Payments in Lieu of Fractional Shares....................................... 24
SECTION 4.04 Conversion Price................................................................. 24
SECTION 4.05 Adjustment of Conversion Price................................................... 24
SECTION 4.06 Effect of Reclassification, Consolidation, Merger or Sale........................ 36
</TABLE>
<PAGE> 3
ii
<TABLE>
<S> <C>
SECTION 4.07 Taxes on Shares Issued........................................................... 37
SECTION 4.08 Reservation of Shares; Shares to Be Fully Paid; Compliance
with Governmental Requirements; Listing of Common Stock.......................... 37
SECTION 4.09 Responsibility of Trustee........................................................ 38
SECTION 4.10 Notice to Holders Prior to Certain Actions....................................... 38
SECTION 4.11 Conversion Agent................................................................. 39
ARTICLE FIVE
Certain Covenants
SECTION 5.01 Office of the Parent Company..................................................... 39
SECTION 5.02 Limitation on Senior Subordinated Indebtedness................................... 40
SECTION 5.03 Limitation on Senior Indebtedness................................................ 40
SECTION 5.04 Issuance of Certain Subsidiary Guarantees........................................ 40
ARTICLE SIX
Subordination of Notes
SECTION 6.01 Notes Subordinated to Senior Indebtedness........................................ 41
SECTION 6.02 No Payment on Securities or Coupons in Certain
Circumstances.................................................................... 41
SECTION 6.03 Payment over of Proceeds upon Dissolution, Etc................................... 43
SECTION 6.04 Subrogation...................................................................... 44
SECTION 6.05 Obligations of the Issuer Unconditional.......................................... 45
SECTION 6.06 Notice to Trustee................................................................ 45
SECTION 6.07 Reliance on Judicial Order or Certificate of Liquidating
Agent............................................................................ 46
SECTION 6.08 Trustee's Relation to Senior Indebtedness........................................ 46
SECTION 6.09 Subordination Rights Not Impaired by Acts or Omissions of
the Issuer or Holders of Senior Indebtedness..................................... 47
SECTION 6.10 Holders Authorize Trustee to Effectuate Subordination of
the Notes........................................................................ 47
SECTION 6.11 Not to Prevent Events of Default................................................. 47
SECTION 6.12 Trustee's Compensation Not Prejudiced............................................ 47
SECTION 6.13 No Waiver of Subordination Provisions............................................ 47
SECTION 6.14 Payments May Be Paid Prior to Dissolution........................................ 48
ARTICLE SEVEN
Subordination of Note Guarantees
SECTION 7.01 Note Guarantees Subordinated to Guarantor Senior
Indebtedness..................................................................... 48
</TABLE>
<PAGE> 4
iii
<TABLE>
<S> <C>
SECTION 7.02 No Payment on Note Guarantees in Certain Circumstances........................... 49
SECTION 7.03 Payment over of Proceeds upon Dissolution, Etc................................... 50
SECTION 7.04 Subrogation...................................................................... 51
SECTION 7.05 Obligations of Guarantors Unconditional.......................................... 52
SECTION 7.06 Notice to Trustee................................................................ 53
SECTION 7.07 Reliance on Judicial Order or Certificate of Liquidating
Agent............................................................................ 54
SECTION 7.08 Trustee's Relation to Guarantor Senior Indebtedness.............................. 54
SECTION 7.09 Subordination Rights Not Impaired by Acts or Omissions of
Guarantors or Holders of Guarantor Senior Indebtedness........................... 54
SECTION 7.10 Holders Authorize Trustee to Effectuate Subordination of
Note Guarantees.................................................................. 54
SECTION 7.11 Not to Prevent Events of Default................................................. 55
SECTION 7.12 Trustee's Compensation Not Prejudiced............................................ 55
SECTION 7.13 No Waiver of Subordination Provisions............................................ 55
SECTION 7.14 Payments May Be Paid Prior to Dissolution........................................ 55
ARTICLE EIGHT
Miscellaneous Provisions
SECTION 8.01 Ratification of Subordinated Indenture........................................... 56
SECTION 8.02 Supplemental Indenture........................................................... 56
SECTION 8.03 Governing Law.................................................................... 56
SECTION 8.04 Counterparts..................................................................... 57
SECTION 8.05 Effect of Headings............................................................... 57
</TABLE>
EXHIBIT A
FORM OF FACE OF NOTE
FORM OF REVERSE OF NOTE
CONVERSION NOTICE
ASSIGNMENT
OPTION TO ELECT REPAYMENT UPON A FUNDAMENTAL CHANGE
ABBREVIATIONS
<PAGE> 5
THIS SUPPLEMENTAL INDENTURE NO. 1, dated as of September 20, 1996
between PROTECTION ONE ALARM MONITORING, INC., a Delaware corporation (the
"Issuer"), PROTECTION ONE, INC., a Delaware corporation (the "Parent Company"),
and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company, as
trustee (the "Trustee") (the "Supplemental Indenture").
W I T N E S S E T H :
WHEREAS, the Issuer has duly authorized the creation of an issue of
6 3/4% Convertible Senior Subordinated Notes due 2003 (the "Notes"), of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Issuer has duly authorized the execution and delivery of an
Indenture dated as of August 29, 1996 providing for the issuance from time to
time of unsecured debentures, notes or other evidences in one or more series
(the "Securities") of the Issuer (the "Subordinated Indenture") and the
execution and delivery of this Supplemental Indenture;
WHEREAS, Sections 2.01 and 2.03 of the Subordinated Indenture provide
for various matters with respect to any series of Securities issued under the
Subordinated Indenture to be established in an indenture supplemental to the
Subordinated Indenture;
WHEREAS, Section 8.01(e) of the Subordinated Indenture provides for the
Issuer and the Trustee to enter into an indenture supplemental to the
Subordinated Indenture to establish the forms or terms of Securities of any
series as permitted by Sections 2.01 and 2.03 of the Subordinated Indenture;
WHEREAS, the Board of Directors of the Issuer has duly adopted
resolutions authorizing the Issuer to execute and deliver this Supplemental
Indenture; and
WHEREAS, all the conditions and requirements necessary to make this
Supplemental Indenture, when duly executed and delivered, a valid and binding
agreement in accordance with its terms and for the purposes herein expressed,
have been performed and fulfilled;
NOW, THEREFORE:
In consideration of the premises and the purchase of the series of
Securities provided for herein by the Holders thereof, the Issuer, the Parent
Company and the Trustee mutually covenant and agree for the equal and
proportionate benefit of all Holders of the Securities or of any series thereof,
as follows:
<PAGE> 6
2
ARTICLE ONE
Relation to Subordinated Indenture; Definitions;
Amendments to Subordinated Indenture
SECTION 1.01 Relation to Subordinated Indenture.
This Supplemental Indenture constitutes an integral part of the
Subordinated Indenture and all references to "this Indenture" in this
Supplemental Indenture shall mean and be a reference to the Subordinated
Indenture as supplemented by this Supplemental Indenture. If there shall be any
inconsistency or conflict between any provision of this Supplemental Indenture
and any provision in the Subordinated Indenture, then, unless this Supplemental
Indenture provides otherwise, the provision of this Supplemental Indenture shall
prevail.
SECTION 1.02 Definitions.
For all purposes of this Supplemental Indenture, except as otherwise
expressly provided for or unless the context otherwise requires:
(1) Capitalized terms used but not defined herein shall have the
respective meanings assigned to them in the Subordinated Indenture; and
(2) All references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of this
Supplemental Indenture.
"Accounts" means alarm monitoring accounts or alarm service accounts of
customers pursuant to which the Parent Company or any of its Subsidiaries
provides alarm monitoring or other security services or sells, installs or
services security alarms or services ancillary thereto.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
<PAGE> 7
3
"Applicable Price" means (i) in the event of a Fundamental Change in
which the holders of the Common Stock receive only cash, the amount of cash
received by the holder of one share of Common Stock and (ii) in the event of any
other Fundamental Change, the arithmetic average of the Closing Price for the
Common Stock (determined as set forth in Section 4.05(i)) during the ten Trading
Days prior to the record date for the determination of the holders of Common
Stock entitled to receive cash, securities, property or other assets in
connection with such Fundamental Change, or, if there is no such record date,
the date upon which the holders of the Common Stock shall have the right to
receive such cash, securities, property or other assets in connection with the
Fundamental Change.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person; and "Capitalized
Lease Obligation" is defined to mean the rental obligations, as aforesaid, under
such lease.
"Closing Price" shall have the meaning specified in Section 4.05(i)(1).
"Conversion Price" shall have the meaning specified in Section 4.04.
"Credit Agreement" means the Amended and Restated Credit Agreement
dated as of June 7, 1996, as amended, among the Issuer and Heller Financial,
Inc., as agent and as lender, and certain other lenders, together with all other
agreements, instruments and documents executed or delivered pursuant thereto or
in connection therewith, in each case as such Credit Agreement, agreements,
instruments or documents (or such agents or lenders) may be amended,
supplemented, extended, renewed, replaced, substituted or otherwise modified
from time to time, including, without limitation, replacement or substitution in
its entirety with one or more agreements, agents or syndicates of financial
institutions; provided, that with respect to any one or more loan agreements
providing for the refinancing of Indebtedness under the Credit Agreement, such
loan agreement or loan agreements shall be the Credit Agreement under this
Supplemental Indenture only if a notice to that effect has been delivered by the
Issuer to the Trustee and there shall be at any time only one Credit Agreement
Agent.
"Credit Agreement Agent" means (i) if one loan agreement constitutes
the Credit Agreement, the sole lender thereunder or the agent for the financial
institutions from time to time party to such Credit Agreement and any successor
or successors of such agent or (ii) if more than one loan agreement constitutes
the Credit Agreement, the representative of the financial institutions from time
to time parties to such agreements and any successor or successors of such
representative, which representative shall have been identified in a written
notice delivered by the Issuer to the Trustee.
<PAGE> 8
4
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Issuer or any Restricted Subsidiary against fluctuations in currency values to
or under which the Issuer or any Restricted Subsidiary is a party or a
beneficiary on the date of this Supplemental Indenture or becomes a party or a
beneficiary thereafter.
"Defaulted Interest" shall have the meaning specified in Section 2.04.
"Deferred Account Acquisition Price" means, in connection with (i) the
purchase of Accounts, or (ii) the acquisition of all of the outstanding Capital
Stock of a Person where the principal purpose of such acquisition is to acquire
Accounts, that portion of the purchase price of such Accounts or Capital Stock
that has been deferred to provide an offset for future purchase price
adjustments.
"Designated Senior Indebtedness" means (i) Indebtedness and all other
monetary obligations (including expenses, fees and other monetary obligations)
under the Credit Agreement and (ii) any other Indebtedness constituting Senior
Indebtedness that, at any date of determination, has an aggregate principal
amount of at least $25 million and is specifically designated by the Issuer in
the instrument creating or evidencing such Senior Indebtedness as "Designated
Senior Indebtedness."
"Discount Notes" means the Issuer's 13-5/8% Senior Subordinated
Discount Notes due 2005.
"Discount Notes Indenture" means the Indenture dated as of May 17,
1995, as amended, between the Issuer, as issuer, the Parent Company, as
guarantor, and State Street Bank and Trust Company, as successor trustee,
relating to the Discount Notes.
"Distribution Securities" shall have the meaning specified in Section
4.05(d).
"Expiration Time" shall have the meaning specified in Section 4.05(f)
or Section 4.05(g), as applicable.
"Fundamental Change" means the occurrence of any transaction or event
in connection with which all or substantially all the Common Stock of the Parent
Company shall be exchanged for, converted into, acquired for or constitute the
right to receive consideration (whether by means of an exchange offer,
liquidation, tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all common
stock which is (or, upon consummation of or immediately following such
transaction or event, will be) listed on a United States national securities
exchange or approved for quotation on the Nasdaq National Market or any similar
United States system of automated dissemination of quotations of securities
prices.
<PAGE> 9
5
"Fundamental Change Expiration Time" shall have the meaning specified
in Section 3.05(b).
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the date of this Supplemental Indenture,
including, without limitation, those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All ratios and
computations based on GAAP contained in the Indenture shall be computed in
conformity with GAAP applied on a consistent basis.
"Guarantor Payment Blockage Period" shall have the meaning specified in
Section 7.02(b).
"Guarantor Senior Indebtedness" means, with respect to each Guarantor,
the following obligations of such Guarantor, whether outstanding on the date of
this Supplemental Indenture or thereafter Incurred: (i) all Indebtedness and all
other monetary obligations (including expenses, fees and other monetary
obligations) of such Guarantor under the Credit Agreement, including any
Guarantee of Senior Indebtedness of the Issuer under the Credit Agreement and
(ii) all other Indebtedness of such Guarantor (other than the Note Guarantee and
the Guarantee by such Guarantor of the obligations of the Issuer under the
Discount Notes), including principal and interest on such Indebtedness if, in
the case of this clause (ii), (A) in the event such Indebtedness is unsecured, a
notice to the effect that such Indebtedness constitutes "Guarantor Senior
Indebtedness" under this Indenture is delivered by the Issuer or such Guarantor
to the Trustee, and (B) such Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, does not
expressly state that it is pari passu with, or subordinated in right of payment
to, the Note Guarantee; provided that the term "Guarantor Senior Indebtedness"
shall not include (a) any Indebtedness of such Guarantor that, when Incurred and
without respect to any election under Section 1111(b) of the United States
Bankruptcy Code, was without recourse to such Guarantor, (b) any Indebtedness of
such Guarantor to the Parent Company or any Subsidiary of the Parent Company or
to a joint venture in which such Guarantor or any Affiliate has an interest
(unless, in the case of such Indebtedness of a Subsidiary Guarantor to the
Issuer, (1) such Indebtedness is evidenced by a note or other similar instrument
that is pledged to secure Senior Indebtedness, and (2) such note evidences an
obligation by such Subsidiary Guarantor to repay proceeds of such Senior
Indebtedness which at the time of any enforcement of the Notes were loaned to
such Subsidiary Guarantor), (c) any Indebtedness of such Guarantor not permitted
by this Indenture; provided, however, that this clause (c) shall not be
applicable with respect to Indebtedness under clause (i) of this definition that
consists of up to $200 million of principal outstanding at any time under the
Credit Agreement, all interest accrued under the Credit Agreement on up to $200
million of
<PAGE> 10
6
principal and all other monetary obligations (other than principal and interest)
under the Credit Agreement, (d) any repurchase, redemption or other obligation
in respect of Redeemable Stock, (e) any Indebtedness of such Guarantor to any
employee, officer or director of such Guarantor or any of its Affiliates, (f)
any liability for federal, state, local or other taxes owed or owing by such
Guarantor, (g) Indebtedness of such Guarantor pursuant to its Guarantee of any
Indebtedness under the Discount Notes Indenture, which Indebtedness of such
Guarantor shall be pari passu with the Note Guarantee of such Guarantor, and (h)
any Trade Payables of such Guarantor. Guarantor Senior Indebtedness will also
include interest accruing subsequent to an event specified in Section 5.01(d) or
Section 5.01(e) of the Subordinated Indenture at the rate provided for in the
document governing such Guarantor Senior Indebtedness, whether or not such
interest is an allowed claim enforceable against the debtor under the United
States Bankruptcy Code or similar laws relating to insolvency.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an Incurrence of Indebtedness by reason of the
acquisition of more than 50% of the Capital Stock of any Person; provided that
none of the accrual of interest, the accrual of dividends payable on Redeemable
Stock or the accretion of original issue discount shall be considered an
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments (except, with respect to the
Issuer, the promissory notes issued by the Issuer in favor of Ion Leasing (which
obligations have been defeased by a cash deposit in a segregated trust
account)), (iii) all obligations of such Person in respect of letters of credit
or other similar instruments (including reimbursement obligations with respect
thereto), (iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is due more than
six months after the date of placing such property in service or taking delivery
and title thereto or the completion of such service, except (A) Trade Payables,
(B) all obligations to pay any Deferred Account Acquisition Price, provided that
the maximum amount excluded from the definition of "Indebtedness" under this
clause (B) shall not exceed $5 million in the aggregate at any date of
determination and (C) compensation payable to employees of such Person (or any
subsidiary thereof) under employee benefit plans of such Person, which
compensation is deferred in the ordinary course of business of such Person (or
such subsidiary) and in accordance with such plans, (v) all Capitalized Lease
Obligations of such Person, (vi) all Indebtedness of other Persons secured by a
Lien on any asset of such Person, whether or not such Indebtedness is assumed by
such Person; provided that the amount of such Indebtedness shall be the lesser
of (A) the fair market value of such asset at such date of determination and (B)
the amount of such Indebtedness, (vii) all Indebtedness of other Persons
Guaranteed by such Person to the extent
<PAGE> 11
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such Indebtedness is Guaranteed by such Person, (viii) all outstanding
Redeemable Stock issued by such Person and (ix) to the extent not otherwise
included in this definition, obligations under Currency Agreements and Interest
Rate Agreements. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and, with respect to contingent obligations (other than those
described in clause (vii)), the maximum liability upon the occurrence of the
contingency giving rise to the obligations (including with respect to any
premium which may be payable on the redemption of Redeemable Stock), provided
(i) that the amount outstanding at any time of any Indebtedness issued with
original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP and (ii) that
Indebtedness shall not include any liability for federal, state, local or other
taxes that are not delinquent.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement or other similar agreement or arrangement designed
to protect the Issuer or any Restricted Subsidiary against fluctuations in
interest rates to or under which the Issuer or any Restricted Subsidiary is a
party or a beneficiary on the date of this Supplemental Indenture or becomes a
party or a beneficiary hereafter.
"Issuer Notice" has the meaning specified in Section 3.05(b).
"Noteholder" means the registered Holder of any Note.
"Notes" shall have the meaning specified in Section 2.01.
"Predecessor Note" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 2.09 of the Subordinated Indenture in
lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same
debt as the lost, destroyed or stolen Note that it replaces.
"Purchased Shares" shall have the meaning specified in Section 4.05(f)
or Section 4.05(g), as applicable.
"Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class of series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that
<PAGE> 12
8
would not constitute Redeemable Stock but for provisions thereof giving holders
thereof the right to require such Person to repurchase or redeem such Capital
Stock upon the occurrence of an "asset sale" or "change of control" occurring
prior to the Stated Maturity of the Discount Notes shall not constitute
Redeemable Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in Sections 4.12 and 4.13 of the
Discount Notes Indenture and such Capital Stock specifically provides that such
Person will not repurchase or redeem any such stock pursuant to such provision
prior to the Issuer's repurchase of such Discount Notes as are required to be
repurchased pursuant to Sections 4.12 and 4.13 of the Discount Notes Indenture.
"Reference Market Price" shall initially mean $9.67 and in the event of
any adjustment to the Conversion Price pursuant to Sections 4.05(a), (b), (c),
(d), (e), (f), (g) or (h), the Reference Market Price shall also be adjusted so
that the ratio of the Reference Market Price to the Conversion Price after
giving effect to any such adjustment shall always be the same as the ratio of
$9.67 to the initial Conversion Price specified in the form of Note attached
hereto (without regard to any adjustment thereto).
"Repurchase Date" shall have the meaning specified in Section 3.05(a).
"Senior Indebtedness" means the following obligations of the Issuer,
whether outstanding on the date of this Supplemental Indenture or thereafter
Incurred (as defined herein): (i) all Indebtedness and all other monetary
obligations (including expenses, fees and other monetary obligations) of the
Issuer under the Credit Agreement and (ii) all other Indebtedness of the Issuer
(other than the Notes and the Discount Notes), including principal and interest
on such Indebtedness, if, in the case of this clause (ii), (A) in the event such
Indebtedness is unsecured, a notice to the effect that such Indebtedness
constitutes "Senior Indebtedness" under this Indenture is delivered by the
Issuer to the Trustee, and (B) such Indebtedness, by its terms or by the terms
of any agreement or instrument pursuant to which such Indebtedness is issued,
does not expressly state that it is pari passu with, or subordinated in right of
payment to, the Notes; provided that the term "Senior Indebtedness" shall not
include (a) any Indebtedness of the Issuer that, when Incurred and without
respect to any election under Section 1111(b) of the United States Bankruptcy
Code, was without recourse to the Issuer, (b) any Indebtedness of the Issuer to
the Parent Company or any Subsidiary of the Parent Company or to a joint venture
in which the Issuer or any Affiliate has an interest, (c) any Indebtedness of
the Issuer not permitted by this Indenture; provided, however, that this clause
(c) shall not be applicable with respect to Indebtedness under clause (i) of
this definition that consists of up to $200 million of principal outstanding at
any time under the Credit Agreement, all interest accrued under the Credit
Agreement on up to $200 million of principal and all other monetary obligations
(other than principal and interest) under the Credit Agreement, (d) any
repurchase, redemption or other obligation in respect of Redeemable Stock, (e)
any Indebtedness of the Issuer to any employee, officer or director of
<PAGE> 13
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the Issuer or any of its Affiliates, (f) any liability for federal, state, local
or other taxes owed or owing by the Issuer, (g) Indebtedness under the Discount
Notes Indenture, which shall be pari passu with the Notes, and (h) any Trade
Payables of the Issuer. Senior Indebtedness will also include interest accruing
subsequent to an event specified in Section 5.01(d) or Section 5.01(e) of the
Subordinated Indenture at the rate provided for in the document governing such
Senior Indebtedness, whether or not such interest is an allowed claim
enforceable against the debtor under the United States Bankruptcy Code or
similar laws relating to insolvency.
"Senior Subordinated Obligations" means all principal of, premium, if
any, or interest on the Notes payable pursuant to the terms of the Notes or upon
acceleration, including any amounts received upon the exercise of rights of
rescission or other rights of action (including claims for damages) or
otherwise, to the extent relating to the purchase price of the Notes or amounts
corresponding to such principal of or interest on the Notes.
"Stated Maturity" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Trade Payables" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries arising
in the ordinary course of business in connection with the acquisition of goods
or services.
"Trading Day" shall have the meaning specified in Section 4.05(i)(5).
"Trigger Event" shall have the meaning specified in Section 4.05(d).
SECTION 1.03 Amendments to Subordinated Indenture. The Subordinated
Indenture is hereby amended as follows:
(a) The first paragraph to the Subordinated Indenture is hereby amended
by deleting the words "a banking corporation duly organized and existing
under the laws of the Commonwealth of Massachusetts" therein and inserting
the words "a Massachusetts trust company" in lieu thereof.
(b) Section 1.01 of the Subordinated Indenture is hereby amended by:
(i) deleting the reference "Section 13.12" in the definition of
"Judgment Currency" and inserting "Section 15.12" in lieu thereof;
<PAGE> 14
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(ii) deleting the words "Article Twelve" in the definition of
"Note Guarantee" and inserting the words "Article Thirteen" in lieu
thereof;
(iii) deleting the reference "Section 13.05" in the definition of
"Officers' Certificate" and inserting the reference "Section 15.05" in lieu
thereof;
(iv) deleting the reference "Section 13.05" in the definition of
"Opinion of Counsel" and inserting the reference "Section 15.05" in lieu
thereof;
(v) deleting the reference "Section 13.12" in the definition of
"Required Currency" and inserting "Section 15.12" in lieu thereof; and
(vi) deleting the reference "Section 8.07" in the definition of
"Opinion of Counsel" and inserting the reference "Section 8.06" in lieu
thereof.
(c) Section 3.07 of the Subordinated Indenture is hereby amended by
deleting in clause (ii) thereof the words "Article Twelve" and inserting
the words "Article Thirteen" in lieu thereof.
(d) Section 5.11 of the Subordinated Indenture is hereby amended by
deleting in clause (i) thereof the reference "Section 3.09" and inserting
the reference "Section 3.08" in lieu thereof.
(e) Section 6.09(a) of the Subordinated Indenture is hereby amended by
deleting in clause (i) of the first sentence thereof the reference "Section
3.09" and inserting the reference "Section 3.08" in lieu thereof.
(f) Section 6.10 of the Subordinated Indenture is hereby amended by
deleting in clause (a) of the first sentence of the fourth paragraph
thereof the reference "Section 3.09" and inserting the reference "Section
3.08" in lieu thereof.
(g) Section 8.02 of the Subordinated Indenture is hereby amended by
deleting in clause (iii) of the first sentence of the fifth paragraph
thereof the reference "Section 3.09" and inserting the reference "Section
3.08" in lieu thereof.
(h) Section 10.04 of the Subordinated Indenture is hereby amended by
deleting in clause (b) of the proviso thereof the reference "Section 3.09"
and inserting the reference "Section 3.08" in lieu thereof.
(i) Section 11.02 of the Subordinated Indenture is hereby amended by
deleting in the third sentence of the first paragraph thereof the reference
"Section 3.09" and inserting the reference "Section 3.08" in lieu thereof.
<PAGE> 15
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(j) Section 11.05 of the Subordinated Indenture is hereby amended by
deleting in the first sentence of the second paragraph the reference
"Section 13.05" and inserting the reference "Section 15.05" in lieu
thereof.
(k) Section 13.05 of the Subordinated Indenture is hereby amended by
deleting in the first sentence of the second paragraph thereof the
reference "Section 3.08" and inserting the reference "Section 3.07" in lieu
thereof.
The provisions of this Section 1.03 shall apply to (a) all Holders of the series
of Notes issued pursuant to this Supplemental Indenture and (b) Holders of any
series of Securities that may be issued under the Subordinated Indenture
subsequent to the date hereof.
ARTICLE TWO
The Series of Notes
SECTION 2.01 Title of the Securities.
There shall be a series of Securities designated the "6 3/4%
Convertible Senior Subordinated Notes due 2003" (the "Notes").
SECTION 2.02 Limitation on Aggregate Principal Amount; Dates of Notes.
The aggregate principal amount of the Notes shall be limited to
$90,000,000 (or $103,500,000 if the over-allotment option set forth in Section 3
of the Underwriting Agreement dated September 16, 1996 (as amended from time to
time by the parties thereto) by and between the Issuer and the Parent Company
and Morgan Stanley & Co. Incorporated, Bear, Stearns & Co. Inc. and Montgomery
Securities is exercised in full) and, except as provided in this Section and in
Section 2.09 of the Subordinated Indenture, the Issuer shall not execute and the
Trustee shall not authenticate or deliver Notes in excess of such aggregate
principal amount.
Nothing contained in this Section 2.02 or elsewhere in this
Supplemental Indenture, or in the Notes, is intended to or shall limit execution
by the Issuer or authentication or delivery by the Trustee of Notes under the
circumstances contemplated by Sections 2.04, 2.05, 2.07, 2.09, 2.11, 8.05 and
11.02 of the Subordinated Indenture and Sections 3.03, 3.05 and 4.02 of this
Supplemental Indenture.
SECTION 2.03 Form and Denomination of Notes. The Notes and the
Trustee's certificate of authentication to be borne by such Notes shall be
substantially in the
<PAGE> 16
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form set forth in Exhibit A, which is incorporated in and made a part of this
Supplemental Indenture.
Any of the Notes may have such letters, numbers or other marks of
identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed, or to conform to usage.
The terms and provisions contained in the form of Note attached as
Exhibit A hereto shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Issuer and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
The Notes shall be issuable and transferable in fully registered form
as Registered Securities, without coupons, in denominations of $1,000 principal
amount and integral multiples thereof. The Notes shall initially be issued in
the form of one or more Registered Global Securities deposited with the Trustee,
as custodian for the Depositary. The Person designated as Depositary with
respect to the Notes is The Depository Trust Company, its nominees and their
respective successors.
SECTION 2.04 Date of Notes; Payments of Interest. Every Note shall be
dated the date of its authentication and shall bear interest from the applicable
date in each case as specified on the face of the form of Note attached as
Exhibit A hereto. Interest on the Notes shall be computed on the basis of a
360-day year comprised of twelve 30-day months.
The person in whose name any Note (or its Predecessor Note) is
registered on the Note register at the close of business on any record date with
respect to any interest payment date shall be entitled to receive the interest
payable on such interest payment date, except (i) that the interest payable upon
redemption (unless the date of redemption is an interest payment date) will be
payable to the person to whom principal is payable and (ii) as set forth in the
next succeeding sentence. In the case of any Note (or portion thereof) which is
converted into Common Stock of the Parent Company during the period from (but
excluding) a record date to (but excluding) the next succeeding interest payment
date either (i) if such Note (or portion thereof) has been called for redemption
on a redemption date which occurs during such period, or is to be redeemed in
connection with a Fundamental Change on a Repurchase Date (as defined in Section
3.05) which occurs during such period, the Issuer shall not be required to pay
interest on such interest payment date in respect of any such Note (or portion
thereof) except to the extent required to be paid upon redemption of
<PAGE> 17
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such Note or portion thereof pursuant to Section 3.03 or 3.05 hereof or (ii) if
otherwise, any Note (or portion thereof) submitted for conversion during such
period shall be accompanied by funds equal to the interest payable on such
succeeding interest payment date on the principal amount so converted. The term
"record date" with respect to any interest payment date shall mean the
March 1 or September 1 preceding said March 15 or September 15, respectively.
Any interest on any Note which is payable, but is not punctually paid
or duly provided for, on any said March 15 or September 15 (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Noteholder on
the relevant record date by virtue of such Holder having been such Noteholder;
and such Defaulted Interest shall be paid by the Issuer, at its election in each
case, as provided in clause (1) or (2) below:
(1) The Issuer may elect to make payment of any Defaulted Interest to
the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a special record date for
the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Issuer shall notify the Trustee in writing of the
amount of Defaulted Interest to be paid on each Note and the date of the
payment (which shall be not less than twenty-five (25) days after the
receipt by the Trustee of such notice, unless the Trustee shall consent to
an earlier date), and at the same time the Issuer shall deposit with the
Trustee an amount of money equal to the aggregate amount to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory
to the Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a special record date for the payment of
such Defaulted Interest which shall be not more than fifteen (15) days and
not less than ten (10) days prior to the date of the proposed payment and
not less than ten (10) days after the receipt by the Trustee of the notice
of the proposed payment. The Trustee shall promptly notify the Issuer of
such special record date and, in the name and at the expense of the Issuer,
shall cause notice of the proposed payment of such Defaulted Interest and
the special record date therefor to be mailed, first-class postage prepaid,
to each Noteholder at such Noteholder's address as it appears in the Note
register, not less than ten (10) days prior to such special record date.
Notice of the proposed payment of such Defaulted Interest and the special
record date therefor having been so mailed, such Defaulted Interest shall
be paid to the Persons in whose names the Notes (or their respective
Predecessor Notes) were registered at the close of business on such special
record date and shall no longer be payable pursuant to the following clause
(2).
(2) The Issuer may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities
exchange or
<PAGE> 18
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automated quotation system on which the Notes may be listed or designated
for issuance, and upon such notice as may be required by such exchange or
automated quotation system, if, after notice given by the Issuer to the
Trustee of the proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.
SECTION 2.05 Place of Payment.
An office or agency of the Issuer where the Notes may be presented or
surrendered for payment, where the Notes may be surrendered for registration of
transfer or exchange and where notices and demands to and upon the Issuer in
respect of the Notes and the Subordinated Indenture may be served shall be
maintained in the Borough of Manhattan, The City of New York, New York, and the
office or agency maintained by the Issuer for such purpose shall initially be
c/o State Street Bank and Trust Company, 61 Broadway, Concourse Level, New York,
New York 10006.
SECTION 2.06 Method of Payment.
Payment of the principal of and interest on the Notes will be made at
the office or agency of the Issuer maintained for that purpose in the Borough of
Manhattan, The City of New York (which shall initially be the Corporate Trust
Office of the Trustee specified in the Subordinated Indenture) by 10:00 a.m.,
New York City time, on the date due, in Dollars. At the option of the Issuer,
payments of principal and interest on the Notes may be made (i) by check mailed
to the address of the Person entitled thereto as such address shall appear in
the register of Holders of the Notes or (ii) by wire transfer to an account
maintained by the Person entitled thereto located in the United States as
specified in the register of Holders of the Notes; provided, however, that
payments to the Depositary shall be made by wire transfer of immediately
available funds to the account of the Depositary or its nominee.
SECTION 2.07 Registrar and Paying Agent.
The Trustee shall initially serve as registrar and paying agent for the
Notes. If, at any time, the Trustee is not the registrar for the Notes, the
registrar shall make available to the Trustee, on or before each interest
payment date and at such other times as the Trustee may reasonably request, the
names and addresses of the Noteholders as they appear in the register of the
Notes. The Issuer may have one or more co-registrars and one or more additional
paying agents for the Notes. Unless the context otherwise requires, the terms
"registrar" and "paying agent" shall apply to any co-register and additional
paying agent for the Notes, respectively.
<PAGE> 19
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The Issuer shall enter into an appropriate agency agreement with any
registrar or paying agent for the Notes not a party to this Supplemental
Indenture. The agreement shall implement the provisions of this Supplemental
Indenture that relate to such registrar or paying agent. The Issuer shall give
prompt written notice to the Trustee of the name and address of any such
registrar or paying agent and any change in the address of such registrar or
paying agent. If the Issuer fails to maintain a registrar and/or paying agent
for the Notes and/or an agent for service of notices and demands on the Issuer,
the Trustee shall act as such registrar, paying agent and/or agent for service
of notices and demands for so long as such failure shall continue. The Issuer
may remove any registrar or paying agent upon written notice to such Person and
the Trustee; provided that no such removal shall become effective until (i) the
acceptance of an appointment by a successor registrar or paying agent to such
registrar or paying agent, as applicable, as evidenced by an appropriate agency
agreement entered into by the Issuer and such successor registrar or paying
agent delivered to the Trustee, or (ii) notification to the Trustee that the
Trustee shall serve as such registrar or paying agent until the appointment of a
successor registrar or paying agent in accordance with clause (i) of this
proviso. The Issuer, any Subsidiary of the Issuer or any Affiliate of any of
them may act as paying agent or registrar for the Notes and/or agent for service
of notice and demand on the Issuer; provided, however, that neither the Issuer,
any Subsidiary of the Issuer nor any Affiliate of any of them shall act as
paying agent for the Notes in connection with the defeasance of the Securities
or the discharge of this Indenture.
ARTICLE THREE
Redemption of Notes
SECTION 3.01 Redemption Prices. The Issuer may not redeem the Notes
prior to September 19, 1999. Subject to the provisions of Section 3.03, at any
time on or after September 19, 1999, the Issuer may, at its option, redeem all
or from time to time any part of the Notes on any date prior to maturity, upon
notice as set forth in Section 3.02, and at the optional redemption prices set
forth in the form of Note attached as Exhibit A hereto, together with accrued
interest to, but excluding, the date fixed for redemption.
SECTION 3.02 Notice of Redemption; Selection of Notes. In case the
Issuer shall desire to exercise the right to redeem all or, as the case may be,
any part of the Notes pursuant to Section 3.01, it shall fix a date for
redemption and it or, at its written request received by the Trustee not fewer
than forty-five (45) days prior (or such shorter period of time as may be
acceptable to the Trustee) to the date fixed for redemption, the Trustee in the
name of the and at the expense of the Issuer, shall mail or cause to be mailed a
notice of such redemption at least 30 days prior to the date fixed for
redemption to the Holders of Notes so to be redeemed as a whole or in part at
their last addresses as the same appear on the Note register (provided, that any
such request so given by the Issuer may be revoked by
<PAGE> 20
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the Issuer at any time prior to the time at which the Trustee shall have given
the requested notice to the Holders of the Notes, and provided, further, that if
the Issuer shall give such notice, it shall also give written notice, and
written notice of the Notes to be redeemed, to the Trustee). Such mailing shall
be by first class mail. The notice if mailed in the manner herein provided shall
be conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, failure to give such notice by mail or any
defect in the notice to the Holder of any Note designated for redemption as a
whole or in part shall not affect the validity of the proceedings for the
redemption of any other Note.
Each such notice of redemption shall specify the aggregate principal
amount of Notes to be redeemed, the date fixed for redemption (which shall be a
Business Day), the redemption price at which Notes are to be redeemed, the place
or places of payment, that payment will be made upon presentation and surrender
of such Notes, that interest accrued to the date fixed for redemption will be
paid as specified in said notice, and that on and after such date, interest
thereon or on the portion thereof to be redeemed will cease to accrue. Such
notice shall also state the current Conversion Price and the date on which the
right to convert such Notes or portions thereof into Common Stock of the Parent
Company will expire. If fewer than all the Notes are to be redeemed, the notice
of redemption shall identify the Notes to be redeemed. In case any Note is to be
redeemed in part only, the notice of redemption shall state the portion of the
principal amount thereof to be redeemed and shall state that on and after the
date fixed for redemption, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion thereof will be issued.
On or prior to the redemption date specified in the notice of
redemption given as provided in this Section 3.02, the Issuer will deposit with
the Trustee or with one or more paying agents (or, if the Issuer is acting as
its own paying agent, set aside, segregate and hold in trust as provided in
Section 3.04 of the Subordinated Indenture) an amount of money sufficient to
redeem on the redemption date all the Notes (or portions thereof) so called for
redemption (other than those theretofore surrendered for conversion into Common
Stock of the Parent Company and those that prior to such date have been
delivered by the Issuer to the Trustee for cancellation) at the appropriate
redemption price, together with accrued interest to, but excluding, the date
fixed for redemption; provided that if such payment is made on the redemption
date it must be received by the Trustee or paying agent, as the case may be, by
10:00 a.m., New York City time, on such date. If any Note called for redemption
is converted pursuant hereto, any money deposited with the Trustee or any paying
agent or so segregated and held in trust for the redemption of such Note shall
be paid to the Issuer upon its written request, or, if then held by the Issuer
shall be discharged from such trust. Whenever any Notes are to be redeemed, the
Issuer will give the Trustee written notice in the form of an Officers'
Certificate not fewer than forty-five (45) days (or such shorter period of time
as may be acceptable to the Trustee), or if the Issuer is mailing the notice of
redemption relating to such redemption, not fewer than thirty (30) days (or such
<PAGE> 21
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shorter period of time as may be acceptable to the Trustee), prior to the
redemption date as to the aggregate principal amount of Notes to be redeemed.
If fewer than all the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed (in principal amounts of $1,000 or integral
multiples thereof) in compliance with the requirements, as certified to the
Trustee by the Issuer in the form of an Officers' Certificate, of the principal
national securities exchange on which the Notes are listed, or if the Notes are
not so listed, by lot or, in the Trustee's discretion, on a pro rata basis or by
another method the Trustee considers fair and appropriate. If any Note selected
for partial redemption is converted in part after such selection, the converted
portion of such Note shall be deemed (so far as may be) to be the portion to be
selected for redemption. The Notes (or portions thereof) so selected shall be
deemed duly selected for redemption for all purposes hereof, notwithstanding
that any such Note is converted as a whole or in part before the mailing of the
notice of redemption. The Trustee shall notify the Issuer and the registrar of
the Notes promptly in writing of the Notes or portions of Notes to be called for
redemption.
Upon any redemption of less than all Notes, the Issuer and the Trustee
may (but need not) treat as outstanding any Notes surrendered for conversion
during the period of fifteen (15) days next preceding the mailing of a notice of
redemption and may (but need not) treat as outstanding any Note authenticated
and delivered during such period in exchange for the unconverted portion of any
Note converted in part during such period.
SECTION 3.03 Payment of Notes Called for Redemption. If notice of
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock of the Parent Company pursuant to the terms hereof, become due and payable
on the date fixed for redemption and at the place or places stated in such
notice at the applicable redemption price, together with interest accrued to
(but excluding) the date fixed for redemption, and on and after said date
(unless the Issuer shall default in the payment of such Notes at the redemption
price, together with interest accrued to said date) interest on the Notes or
portion of Notes so called for redemption shall cease to accrue and such Notes
shall cease after the close of business on the Business Day next preceding the
date fixed for redemption to be convertible into Common Stock of the Parent
Company and, except as provided in Sections 6.05 and 10.04 of the Subordinated
Indenture, to be entitled to any benefit or security under this Indenture, and
the Holders thereof shall have no right in respect of such Notes except the
right to receive the redemption price thereof and unpaid interest to (but
excluding) the date fixed for redemption. On presentation and surrender of such
Notes at a place of payment in said notice specified, the said Notes or the
specified portions thereof shall be paid and redeemed by the Issuer at the
applicable redemption price, together with interest accrued thereon to (but
excluding) the date fixed for redemption; provided that, if the applicable
redemption date is an interest payment date, the semi-annual payment of interest
becoming
<PAGE> 22
18
due on such date shall be payable to the Holders of such Notes registered as
such on the relevant record date instead of the Holders surrendering such Notes
for redemption on such date.
Upon presentation of any Note redeemed in part only, the Issuer shall
execute and the Trustee shall authenticate and deliver to the Holder thereof, at
the expense of the Issuer, a new Note or Notes, of authorized denominations, in
principal amount equal to the unredeemed portion of the Notes so presented.
Notwithstanding the foregoing, neither the Issuer nor the Trustee shall
redeem any Notes or mail any notice of optional redemption (i) during the
continuance of a Default in payment of interest on the Notes or if accrued
interest on any Notes for any interest payment period terminating on or prior to
the last interest payment date before the date of redemption otherwise remains
unpaid or (ii) during the continuance of any Event of Default, provided that for
purposes of this clause (ii), the Trustee shall not redeem any Notes or mail any
notice of optional redemption during the continuance of any Event of Default
(other than an Event of Default under Sections 5.01(a) or 5.01(b) of the
Subordinated Indenture) of which a Responsible Officer of the Trustee has
knowledge. If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal shall, until paid or duly provided for,
bear interest from the date fixed for redemption at the rate borne by the Note
and such Note shall remain convertible into Common Stock of the Parent Company
until the principal shall have been paid or duly provided for.
SECTION 3.04 Conversion Arrangement on Call for Redemption. In
connection with any redemption of Notes, the Issuer may arrange for the purchase
and conversion of any Notes by an agreement with one or more investment bankers
or other purchasers to purchase such Notes by paying to the Trustee in trust for
the Noteholders, on or before the date fixed for redemption, an amount not less
than the applicable redemption price, together with interest accrued to (but
excluding) the date fixed for redemption, of such Notes. Notwithstanding
anything to the contrary contained in this Article Three, the obligation of the
Issuer to pay the redemption price of such Notes, together with interest accrued
to (but excluding) the date fixed for redemption, shall be deemed to be
satisfied and discharged to the extent such amount is so paid by such
purchasers. If such an agreement is entered into, a copy of which will be filed
with the Trustee prior to the date fixed for redemption, any Notes not duly
surrendered for conversion by the Holders thereof may, at the option of the
Issuer, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such Holders and (notwithstanding anything to the contrary
contained in Article Four) surrendered by such purchasers for conversion, all as
of immediately prior to the close of business on the date fixed for redemption
(and the right to convert any such Notes shall be extended through such time),
subject to payment of the above amount as aforesaid. At the written direction of
the Issuer, the Trustee shall hold and dispose of any such amount paid to it in
the same manner as it would monies deposited with it by the Issuer
<PAGE> 23
19
for the redemption of Notes. Without the Trustee's prior written consent, no
arrangement between the Issuer and such purchasers for the purchase and
conversion of any Notes shall increase or otherwise affect any of the powers,
duties, responsibilities or obligations of the Trustee as set forth in this
Indenture.
SECTION 3.05 Redemption at Option of Holders.
(a) If, at any time prior to September 15, 2003, there shall occur a
Fundamental Change, then each Noteholder shall have the right, at such Holder's
option, to require the Issuer to redeem all of such Holder's Notes, or any
portion thereof that is an integral multiple of $1,000 principal amount, on the
date (the "Repurchase Date") that is 30 days after the date of the Issuer Notice
(as defined in Section 3.05(b) below) of such Fundamental Change (or, if such
30th day is not a Business Day, the next succeeding Business Day). Such
repayment shall be made at the following prices (expressed as percentages of the
principal amount) in the event of a Repurchase Date occurring during the
12-month period beginning September 15:
<TABLE>
<CAPTION>
Year Percentage Year Percentage
---- ---------- ---- ----------
<S> <C> <C> <C>
1996 . . . . . . 106.750% 2000 . . . . . . . 102.893%
1997 . . . . . . 105.786 2001 . . . . . . . 101.929
1998 . . . . . . 104.821 2002 . . . . . . . 100.964
1999 . . . . . . 103.857
</TABLE>
and 100% at September 15, 2003; provided that if the Applicable Price with
respect to the Fundamental Change is less than the Reference Market Price, the
Issuer shall redeem such Notes at a price equal to the foregoing redemption
price multiplied by the fraction obtained by dividing the Applicable Price by
the Reference Market Price; provided further, that if such repayment date is
March 15 or September 15, then the interest payable on such date shall be paid
to the Holder of record of the Note on the next preceding March 1 or
September 1. In each case, the Issuer shall also pay to such Holders accrued
interest to, but excluding, the Repurchase Date on the redeemed Notes.
Upon presentation of any Note redeemed in part only, the Issuer shall
execute and, upon the Issuer's written direction to the Trustee, the Trustee
shall authenticate and deliver to the Holder thereof, at the expense of the
Issuer, a new Note or Notes, of authorized denominations, in principal amount
equal to the unredeemed portion of the Notes so presented.
(b) On or before the tenth day after the occurrence of a Fundamental
Change, the Issuer, or, at its written request (which must be received by the
Trustee at least
<PAGE> 24
20
five Business Days prior to the date the Trustee is requested to give notice as
described below), the Trustee in the name of and at the expense of the Issuer,
shall mail or cause to be mailed to all Holders of record on the date of the
Fundamental Change a notice (the "Issuer Notice") of the occurrence of such
Fundamental Change and of the redemption right at the option of the Holders
arising as a result thereof. Such notice shall be mailed in the manner and with
the effect set forth in the first paragraph of Section 3.02. The Issuer shall
also deliver a copy of the Issuer Notice to the Trustee at such time as it is
mailed to Noteholders and shall issue for distribution to Bloomberg Business
News, Dow Jones & Company, Inc. and to Reuters Economic Services a press release
announcing the occurrence of such Fundamental Change and of the redemption right
arising as a result thereof.
Each Issuer Notice shall specify the circumstances constituting the
Fundamental Change, the Repurchase Date, the price at which the Issuer shall be
obligated to redeem Notes, the latest time on the Repurchase Date by which the
Holder must exercise the redemption right (the "Fundamental Change Expiration
Time"), that the Holder shall have the right to withdraw any Notes surrendered
prior to the Fundamental Change Expiration Time, a description of the procedure
which a Noteholder must follow to exercise such redemption right and to withdraw
any surrendered Notes, the place or places where the Holder is to surrender such
Holder's Notes, and the amount of interest accrued on each Note to the
Repurchase Date.
No failure of the Issuer to give the foregoing notices and no defect
therein shall limit the Noteholders' redemption rights or affect the validity of
the proceedings for the repurchase of the Notes pursuant to this Section 3.05.
(c) For a Note to be so repaid at the option of the Holder, the Issuer
must receive at the office or agency of the Issuer maintained for that purpose
or, at the option of such Holder, the Corporate Trust Office, such Note with the
form entitled "Option to Elect Repayment Upon A Fundamental Change" on the
reverse thereof duly completed, together with such Notes duly endorsed for
transfer, on or before the Fundamental Change Expiration Time. All questions as
to the validity, eligibility (including time of receipt) and acceptance of any
Note for repayment shall be determined by the Issuer, whose determination shall
be final and binding absent manifest error.
(d) On or prior to the Repurchase Date, the Issuer will deposit with
the Trustee or with one or more paying agents (or, if the Issuer is acting as
its own paying agent, set aside, segregate and hold in trust as provided in
Section 3.04 of the Subordinated Indenture) an amount of money sufficient to
repay on the Repurchase Date all the Notes to be repaid on such date at the
appropriate redemption price, together with accrued interest to (but excluding)
the Repurchase Date; provided that if such payment is made on the Repurchase
Date it must be received by the Trustee or paying agent, as the case may be, by
10:00 a.m., New York City time, on such date. Payment for Notes surrendered for
<PAGE> 25
21
redemption (and not withdrawn) prior to the Fundamental Change Expiration Time
will be made promptly (but in no event more than five Business Days) following
the Repurchase Date by mailing checks for the amount payable to the Holders of
such Notes entitled thereto as they shall appear on the registry books of the
Issuer.
(e) In the case of a consolidation, merger, conveyance, transfer or
lease to which Section 4.06 applies, in which the Common Stock of the Parent
Company is changed or exchanged as a result into the right to receive
securities, cash or other property which includes shares of Common Stock of the
Parent Company or another person that are, or upon issuance will be, traded on a
United States national securities exchange or approved for trading on an
established automated over-the-counter trading market in the United States and
such shares constitute at the time such change or exchange becomes effective in
excess of 50% of the aggregate fair market value of such securities, cash and
other property (as determined by the Issuer, which determination shall be
conclusive and binding), then the Person formed by such consolidation or
resulting from such merger or which acquires such assets, as the case may be,
shall execute and deliver to the Trustee a supplemental indenture (accompanied
by an Opinion of Counsel that such supplemental indenture complies with the
Trust Indenture Act as in force at the date of execution of such supplemental
indenture) modifying the provisions of this Indenture relating to the right of
Holders of the Notes to cause the Issuer to repurchase the Notes following a
Fundamental Change, including without limitation the applicable provisions of
this Section 3.05 and the definitions of the Applicable Price, Common Stock,
Fundamental Change and Reference Market Price, as appropriate, as determined in
good faith by the Issuer (which determination shall be conclusive and binding),
to make such provisions apply to the Common Stock and the issuer thereof if
different from the Parent Company and Common Stock of the Parent Company (in
lieu of the Parent Company and the Common Stock of the Parent Company).
(f) Upon receipt by the Corporation Trust Office or the office or
agency of the Issuer referred to in Section 3.05(c) above of a Note for
repayment pursuant to Section 3.05(c), the Holder of such Note shall (unless
such Note is withdrawn as specified in the following paragraph) thereafter be
entitled to receive solely the amount specified in Section 3.05(a) with respect
to such Note. Notes surrendered for repayment as provided in Section 3.05(c) may
not be converted pursuant to Article Four on or after the date of the delivery
of such Note unless such Note has been validly withdrawn as specified in the
following paragraph.
A Note surrendered pursuant to Section 3.05(c) may be withdrawn by
means of a written notice of withdrawal delivered to the office or agency to
which the Note was surrendered at any time prior to the Fundamental Change
Expiration Time specifying the certificate number or numbers, and the principal
amount, of the Note or Notes in respect of which such notice or withdrawal is
being submitted and the principal amount, if any, of Notes that remain subject
to the original surrender for repayment.
<PAGE> 26
22
ARTICLE FOUR
Conversion of Notes
SECTION 4.01 Right to Convert. Subject to and upon compliance with the
provisions of this Supplemental Indenture and the Subordinated Indenture,
including, without limitation, Articles Six and Seven of this Supplemental
Indenture, the Holder of any Note shall have the right, at such Holder's option,
at any time after ninety (90) days following the latest date of original
issuance of the Notes and prior to the close of business on September 15, 2003
(except as provided in Section 3.05(f) and except that, with respect to any Note
or portion of a Note which shall be called for redemption such right shall
terminate, except as provided in Section 3.04 or Section 4.02, at the close of
business on the Business Day next preceding the date fixed for redemption of
such Note or portion of a Note unless the Issuer shall default in payment due
upon redemption thereof) to convert the principal amount of any such Note, or
any portion of such principal amount which is $1,000 or an integral multiple
thereof, into that number of fully paid and non-assessable shares of Common
Stock (as such shares shall then be constituted) of the Parent Company obtained
by dividing the principal amount of the Notes or portion thereof surrendered for
conversion by the Conversion Price in effect at such time, by surrender of the
Note so to be converted in whole or in part in the manner provided, together
with any required funds, in Section 4.02. A Holder of Notes is not entitled to
any rights of a holder of Common Stock of the Parent Company until such Holder
has converted such Holder's Notes to Common Stock of the Parent Company, and
only to the extent such Notes are deemed to have been converted to Common Stock
of the Parent Company under this Article Four.
SECTION 4.02 Exercise of Conversion Privilege; Issuance of Common Stock
on Conversion; No Adjustment for Interest or Dividends. In order to exercise the
conversion privilege with respect to any Note in certificated form, the Holder
of any such Note to be converted in whole or in part shall surrender such Note,
duly endorsed, at the Parent Company Office (as defined in Section 5.01)
accompanied by the funds, if any required by the penultimate paragraph of this
Section 4.02 and shall give written notice of conversion in the form provided on
the Notes (or such other notice which is acceptable to the Issuer and the Parent
Company) to the office or agency that the Holder elects to convert such Note or
the portion thereof specified in said notice. Such notice shall also state the
name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock of the Parent Company which shall be
issuable on such conversion shall be issued, and shall be accompanied by
transfer taxes, if required pursuant to Section 4.07. Each such Note surrendered
for conversion shall, unless the shares issuable on conversion are to be issued
in the same name as the registration of such Note, be duly endorsed by, or be
accompanied by instruments of transfer in form satisfactory to the Parent
Company duly executed by, the Holder or such Holder's duly authorized attorney.
<PAGE> 27
23
In order to exercise the conversion privilege with respect to any
interest in a Note in global form, the beneficial holder must complete the
appropriate instruction form for conversion pursuant to the Depository's
book-entry conversion program, deliver by book-entry delivery an interest in
such Note in global form, furnish appropriate endorsements and transfer
documents if required by the Issuer, the Parent Company or the Trustee or
conversion agent and pay the funds, if any required by this Section 4.02 and any
transfer taxes if required pursuant to Section 4.07.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, subject to compliance with any restrictions on
transfer if shares issuable on conversion are to be issued in a name other than
that of the Noteholder (as if such transfer were a transfer of the Note or Notes
(or portion thereof) so converted), the Parent Company shall issue and shall
deliver to such Holder, at the Parent Company Office, a certificate or
certificates for the number of full shares of Common Stock of the Parent Company
issuable upon the conversion of such Note or portion thereof in accordance with
the provisions of this Article and a check or cash in respect to any fractional
interest in respect of a share of Common Stock of the Parent Company arising
upon such conversion, as provided in Section 4.03. In case any Note of a
denomination greater than $1,000 shall be surrendered for partial conversion,
and subject to Section 2.03, the Issuer shall execute and the Trustee shall
authenticate and deliver to the Holder of the Note so surrendered, without
charge to such Holder, a new Note or Notes in authorized denominations in an
aggregate principal amount equal to the unconverted portion of the surrendered
Note.
Each conversion shall be deemed to have been affected as to any such
Note (or portion thereof) on the date on which the requirements set forth above
in this Section 4.02 have been satisfied as to such Note (or portion thereof),
and the Person in whose name any certificate or certificates for shares of
Common Stock of the Parent Company shall be issued upon such conversion shall be
deemed to have become on said date the holder or record of the shares
represented thereby; provided, however, that any such surrender on any date when
the stock transfer books of the Parent Company shall be closed shall constitute
the Person in whose name the certificates are to be issued as the record holder
thereof for all purposes on the next succeeding day on which such stock transfer
books are open, but such conversion shall be at the Conversion Price in effect
on the date upon which such Note shall be surrendered.
Any Note or portion thereof surrendered for conversion during the
period from the close of business on the record date for any interest payment
date to the close of business on the Business Day next preceding the following
interest payment date shall (unless such Note or portion thereof being converted
shall have been called for redemption on a redemption date which occurs during
the period from the close of business on such record date to the close of
business on the Business Day next preceding the following interest payment date)
be accompanied by payment, in New York Clearing House funds or other
<PAGE> 28
24
funds acceptable to the Parent Company, of an amount equal to the interest
otherwise payable on such interest payment date on the principal amount being
converted; provided, however, that no such payment need be made if there shall
exist at the time of conversion a Default in the payment of interest on the
Notes. Except as provided above in this Section 4.02, no payment or other
adjustment shall be made for interest accrued on any Note converted or for
dividends or other distributions on any shares issued upon the conversion on
such Note as provided in this Article.
Upon the conversion of an interest in a Note in global form, the
Trustee (or other conversion agent appointed by the Parent Company) shall make a
notation on such Note in global form as to the reduction in the principal amount
represented thereby. The Parent Company shall notify the Trustee in writing of
any conversion of Notes effected through any conversion agent other than the
Trustee.
SECTION 4.03 Cash Payments in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Notes. If more than one Note shall be surrendered for
conversion at one time by the same Holder, the number of full shares which shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Notes (or specified portions thereof to the extent
permitted hereby) so surrendered. If any fractional share of stock would be
issuable upon the conversion of any Note or Notes, the Parent Company shall make
an adjustment any payment therefor in cash at the current market value thereof
to the Holder of Notes. The current market value of a share of Common Stock
shall be the Closing Price on the first Business Day immediately preceding the
day on which the Notes (or specified portions thereof) are deemed to have been
converted.
SECTION 4.04 Conversion Price. The conversion price shall be as
specified in the form of Note (herein called the "Conversion Price") attached as
Exhibit A hereto, subject to adjustment as provided in this Article Four.
SECTION 4.05 Adjustment of Conversion Price. The Conversion Price shall
be adjusted from time to time by the Issuer as follows:
(a) In case the Parent Company shall hereafter pay a dividend or make a
distribution to all holders of its outstanding Common Stock in shares of
Common Stock of the Parent Company, the Conversion Price in effect at the
opening of business on the date following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall reduced by multiplying such Conversion Price by a
fraction of which the numerator shall be the number of shares of Common
Stock of the Parent Company 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
<PAGE> 29
25
distribution, such reduction to become effective immediately after the
opening of business on the day following the date fixed for such
determination. If any dividend or distribution of the type described in
this Section 4.05(a) is declared but not so paid or made, the Conversion
Price shall again be adjusted to the Conversion Price which would then be
in effect if such dividend or distribution had not been declared.
(b) In case the Parent Company shall issue rights or warrants to all
holders of its outstanding shares of its Common Stock entitling them (for a
period expiring within 45 days after the date fixed for determination of
stockholder entitled to receive such rights or warrants) to subscribe for
or purchase shares of Common Stock of the Parent Company at a price per
share less than the Current Market Price (as defined below) on the date
fixed for determination of stockholders entitled to receive such rights or
warrants, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the date fixed for determination of stockholders
entitled to receive such rights or warrants by a fraction of which the
numerator shall be the number of shares of Common Stock of the Parent
Company outstanding at the close of business on the date fixed for
determination of stockholders entitled to receive such rights and warrants
plus the number of shares which the aggregate offering price of the total
number of shares so offered would purchase at such Current Market Price,
and of which the denominator shall be the number of shares of Common Stock
of the Parent Company outstanding on the date fixed for determination of
stockholders entitled to receive such rights and warrants plus the total
number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall be successively made whenever any such
rights and warrants are issued, and shall become effective immediately
after the opening of business on the day following the date fixed for
determination of stockholders entitled to receive such rights or warrants.
To the extent that shares of Common Stock of the Parent Company issuable
upon exercise of such rights or warrants are not delivered prior to the
expiration of such rights or warrants, the Conversion Price shall be
readjusted to the Conversion Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on
the basis of delivery of only the number of shares of Common Stock of the
Parent Company actually delivered. In the event that such rights or
warrants are not so issued, the Conversion Price shall again be adjusted to
be the Conversion Price which would then be in effect if such date fixed
for the determination of stockholders entitled to receive such rights or
warrants had not been fixed. In determining whether any rights or warrants
entitle the holders to subscribe for or purchase shares of Common Stock of
the Parent Company at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock,
there shall be taken into account any consideration received by the Parent
Company for such rights or warrants, the value of such
<PAGE> 30
26
consideration, if other than cash, to be determined by the Board of
Directors of the Parent Company.
(c) In case outstanding shares of Common Stock of the Parent Company
shall be subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day following
the day upon which such subdivision becomes effective shall be
proportionately reduced, and conversely, in case outstanding shares of
Common Stock of the Parent Company shall be combined into a smaller number
of shares of Common Stock, the Conversion Price in effect at the opening of
business on the day upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the case may be,
to become effective immediately after the opening of business on the day
following the day upon which subdivision or combination becomes effective.
(d) In case the Parent Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any class of
Capital Stock of the Parent Company (other than any dividends or
distributions to which Section 4.05(a) applies) or evidences of
Indebtedness or assets of the Parent Company or any of its Subsidiaries
(including securities, but excluding any rights or warrants referred to in
Section 4.05(b), and excluding any dividend or distribution (x) paid
exclusively in cash or (y) referred to in Section 4.05(a) (any of the
foregoing hereinafter in this Section 4.05(d) called the "Distribution
Securities")), then, in each such case (unless the Parent Company elects to
reserve such Distribution Securities for distribution to the Noteholders
upon the conversion of the Notes so that any such Holder converting Notes
will receive upon such conversion, in addition to the shares of Common
Stock of the Parent Company to which such Holder is entitled, the amount
and kind of such Distribution Securities which such Holder would have
received if such Holder had converted its Notes into Common Stock
immediately prior to the Record Date (as defined in Section 4.05(i) for
such distribution of the Distribution Securities)), the Conversion Price
shall be reduced so that the same shall be equal to the price determined by
multiplying the Conversion Price in effect on the Record Date with respect
to such distribution by a fraction of which the numerator shall be the
Current Market Price per share of the Common Stock of the Parent Company on
such Record Date less the firm market value (as determined by the Board of
Directors of the Parent Company, whose determination shall be conclusive,
and described in a resolution of the Board of Directors of the Parent
Company) on the Record Date of the portion of the Distribution Securities
so distributed applicable to one share of Common Stock and the denominator
shall be the Current Market Price per share of the Common Stock of the
Parent Company, such reduction to become effective immediately prior to the
opening of business on the date following such Record Date; provided,
however, that in the event the then fair market value (as so determined) of
the portion of the Distribution Securities so distributed applicable to one
share of
<PAGE> 31
27
Common Stock is equal to or greater than the Current Market Price of the
Common Stock of the Parent Company on the Record Date, in lieu of the
foregoing adjustment, adequate provision shall be amended so that each
Noteholder shall have the right to receive upon conversion the amount of
Distribution Securities such Holder would have received had such Holder
converted each Note on the Record Date. In the event that such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not been declared. If the Board of Directors
of the Parent Company determines the fair market value of any distribution
for purposes of this Section 4.05(d) by reference to the actual or when
issued trading market for any securities, it must in doing so consider the
prices in such market over the same period used in computing the Current
Market Price of the Common Stock of the Parent Company.
Rights or warrants distributed by the Parent Company to all holders of
Common Stock of the Parent Company entitling the holders thereof to
subscribe for or purchase shares of the Parent Company's Capital Stock
(either initially or under certain circumstances), which rights or
warrants, until the occurrence of a specified event or events (a "Trigger
Event"): (i) are deemed to be transferred with such shares of Common Stock;
(ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposed of this Section 4.05 (and no adjustment to the Conversion Price
under this Section 4.05 will be required) until the occurrence of the
earliest Trigger Event, whereupon such rights and warrants shall be deemed
to have been distributed and an appropriate adjustment (if any is required)
to the Conversion Price shall be made under this Section 4.05(d). If any
such right or warrant, including any such existing rights or warrants
distributed prior to the date of this Supplemental Indenture, are subject
to events, upon the occurrence of which such rights or warrants become
exercisable to purchase different securities, evidences of Indebtedness or
other assets, then the date of the occurrence of any and each such event
shall be deemed to be the date of distribution and record date with respect
to new rights or warrants with such rights (and a termination or expiration
of the existing rights or warrant without exercise by any of the holders
thereof.) In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other event
(of the type described in the preceding sentence) with respect thereto that
was counted for purposes of calculating a distribution amount for which an
adjustment to the Conversion Price under this Section 4.05 was made, (1) in
that case of any such rights or warrants which shall all have been redeemed
or repurchased without exercise by any holder thereof, the Conversion Price
shall be readjusted upon such final redemption or repurchase to give effect
to such distribution or Trigger Event, as the case may be, as though it
were a cash distribution, equal to the per share redemption or repurchase
price received by a holder or holders of Common Stock of the Parent
<PAGE> 32
28
Company with respect to such rights or warrants (assuming such holder had
retained such rights or warrants), made to all holders of Common Stock as
of the date of such redemption or repurchase, and (2) in the case of such
rights or warrants which shall have expired or been terminated without
exercise by any holders thereof, the Conversion Price shall be readjusted
as if such rights and warrants had not been issued.
For purposes of this Section 4.05(d) and Section 4.05(a) and (b), any
dividend or distribution to which this Section 4.05(d) is applicable that
also includes shares of Common Stock of the Parent Company, or rights or
warrants to subscribe for or purchase shares of Common Stock (or both),
shall be deemed instead to be (1) a dividend or distribution of the
evidences of Indebtedness, assets or shares of Capital Stock other than
such shares of Common Stock or rights or warrants (and any Conversion Price
reduction required by this Section 4.05(d) with respect to such dividend or
distribution shall then be made) immediately followed by (2) a dividend or
distribution of such shares of Common Stock or such rights or warrants (and
any further Conversion Price reduction required by Section 4.05(a) and (b)
with respect to such dividend or distribution shall then be made), except
(A) the Record Date of such dividend or distribution shall be substituted
as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution" and "the date fixed for such
determination" within the meaning of Section 4.05(a) and (b) and (B) any
shares of Common Stock including in such dividend or distribution shall not
be deemed "outstanding at the close of business on the date fixed for such
determination" within the meaning of Section 4.05(a).
(e) In case the Parent Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding (x) any
quarterly cash dividend on the Common Stock to the extent the aggregate
cash dividend per share of Common Stock in any fiscal quarter does not
exceed the greater of (A) the amount per share of Common Stock of the next
preceding quarterly cash dividend on the Common Stock to the extent that
such preceding quarterly dividend did not require any adjustment of the
Conversion Price pursuant to this Section 4.05(e) (as adjusted to reflect
subdivisions or combinations of the Common Stock), and (B) 3.75% of the
arithmetic average of the Closing Price (determined as set forth in Section
4.05(i) during the ten Trading Days (as defined in Section 4.05(i)
immediately prior to the date of declaration of such dividend, and (y) any
dividend or distribution in connection with the liquidation, dissolution or
winding up of the Parent Company, whether voluntary or involuntary), then,
in such case, the Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on such Record Date by a
fraction of which the numerator shall be the Current Market Price of the
Common Stock of the Parent Company on the Record Date less the amount of
cash so
<PAGE> 33
29
distributed (and not excluded as provided above) applicable to one share of
Common Stock and the denominator shall be such Current Market Price of the
Common Stock, such reduction to be effective immediately prior to the
opening of business on the day following the Record Date; provided,
however, that in the event the portion of the cash so distributed
applicable to one share of Common Stock of the Parent Company is equal to
or greater than the Current Market Price of the Common Stock of the Parent
Company on the Record Date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each Noteholder shall have the right to
receive upon conversion the amount of cash such Holder would have received
had such Holder converted each Note on the Record Date. In the event that
such dividend or distribution is not so paid or made, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in
effect if such dividend or distribution had not been declared. If any
adjustment is required to be made as set forth in this Section 4.05(e) as a
result of a distribution that is a quarterly dividend, such adjustment
shall be based upon the amount by which such distribution exceeds the
amount of the quarterly cash dividend permitted to be excluded pursuant
hereto. If an adjustment is required to be made as set forth in this
Section 4.05(e) above as a result of a distribution that is not a quarterly
dividend, such adjustment shall be based upon the full amount of the
distribution.
(f) In case a tender or exchange offer made by the Parent Company or
any Subsidiary of the Parent Company for all or any portion of the Common
Stock of the Parent Company shall expire and such tender or exchange offer
(as amended upon the expiration thereof) shall require the payment to
stockholders of consideration per share of Common Stock of the Parent
Company having a fair market value (as determined by the Board of Directors
of the Parent Company, whose determination shall be conclusive and
described in a resolution of the Board of Directors) that as of the last
time (the "Expiration Time") tender or exchanges may be made pursuant to
such tender or exchange offer (as it may be amended) that exceeds the
Current Market Price of the Common Stock of the Parent Company on the
Trading Day next succeeding the Expiration Time, the Conversion Price shall
be reduced so that the same shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to the Expiration Time by
a fraction of which the numerator shall be the number of shares of Common
Stock of the Parent Company outstanding (including any tendered or exchange
shares) on the Expiration Time multiplied by the Current Market Price of
the Common Stock of the Parent Company on the Trading Day next succeeding
the Expiration Time and the denominator shall be the sum of (x) the fair
market value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares
validity tendered or exchanged and not withdrawn as of the Expiration Time
(the shares deemed so accepted, up to any such maximum, being referred to
as the "Purchased Shares") and (y) the product of the
<PAGE> 34
30
number of shares of Common Stock of the Parent Company outstanding (less
any Purchased Shares) on the Expiration Time and the Current Market Price
of the Common Stock of the Parent Company on the Trading Day next
succeeding the Expiration Time, such reduction to become effective
immediately prior to the opening of business on the day following the
Expiration Time. In the event that the Parent Company is obligated to
purchase shares pursuant to any such tender or exchange offer, but the
Parent Company is permanently prevented by applicable law from effecting
any such purchase or all such purchases are rescinded, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in
effect if such tender or exchange offer had not been made.
(g) In case of a tender or exchange offer made by a Person other than
the Parent Company or any Subsidiary of the Parent Company for an amount
which increases the offeror's ownership of Common Stock of the Parent
Company to more than 25% of the Common Stock of the Parent Company
outstanding and shall involve the payment by such Person of consideration
per share of Common Stock having a fair market value (as determined by the
Board of Directors of the Parent Company, whose determination shall be
conclusive, and described in a resolution of the Board of Directors of the
Parent Company) at the last time (the "Expiration Time") tenders or
exchanges may be made pursuant to such tender or exchange offer (as it
shall have been amended) that exceeds the Current Market Price of the
Common Stock on the Trading Day next succeeding the Expiration Time, and in
which, as of the Expiration Time the Board of Directors of the Parent
Company is not recommending rejection of the offer, the Conversion Price
shall be reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
Expiration Time by a fraction of which the numerator shall be the number of
shares of Common Stock of the Parent Company outstanding (including any
tendered or exchanged shares) on the Expiration Time multiplied by the
Current Market Price of the Common Stock of the Parent Company on the
Trading Day next succeeding the Expiration Time and the denominator shall
be the sum of (x) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the acceptance (up
to any maximum specified in the terms of the tender or exchange offer) of
all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum,
being referred to as the "Purchased Shares") and (y) the product of the
number of shares of Common Stock of the Parent Company outstanding (less
any Purchased Shares) on the Expiration Time and the Current Market Price
of the Common Stock of the Parent Company on the Trading Day next
succeeding the Expiration Time, such reduction to become effective
immediately prior to the opening of business on the day following the
Expiration Time. In the event that such Person is obligated to purchase
shares pursuant to any such tender or exchange offer, but such Person is
permanently prevented by applicable law from
<PAGE> 35
31
effecting any such purchases or all such purchases are rescinded, the
Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such tender or exchange offer had not been made.
Notwithstanding the foregoing, the adjustment described in this Section
4.05(g) shall not be made if, as of the Expiration Time, the offering
documents with respect to such offer disclose a plan or intention to cause
the Parent Company to engage in any transaction described in Article Nine
of the Subordinated Indenture.
(h) In case the Parent Company shall issue Common Stock or securities
convertible into, or exchangeable for, Common Stock of the Parent Company
at a price per share (or having a conversion or exchange price per share)
that is less than the then Current Market Price of the Common Stock of the
Parent Company (but excluding, among other things, issuances: (a) pursuant
to any bona fide plan for the benefit of employees, directors or
consultants of the Parent Company or any Subsidiary of the Parent Company
now or hereafter in effect; (b) to acquire all or any portion of a business
in an arm's-length transaction between the Parent Company or any Subsidiary
of the Parent Company and an unaffiliated third party including, if
applicable, issuances upon exercise of options or warrants assumed in
connection with such an acquisition; (c) in a bona fide public offering
pursuant to a firm commitment underwriting (or a similar type of offering
made pursuant to Rule 144A and/or Regulation S under the Securities Act) or
sales at the market pursuant to a continuous offering stock program; (d)
pursuant to the exercise of warrants, rights (including, without
limitation, earnout rights) or options, or upon the conversion of
convertible securities, which are issued and outstanding on the date
hereof, or which may be issued in the future at fair value and with an
exercise price or conversion price at least equal to the Current Market
Price of the Common Stock of the Parent Company at the time of issuance of
such warrant, right, option or convertible security; and (e) pursuant to a
dividend reinvestment plan or other plan hereafter adopted for the
reinvestment of dividends or interest provided that such Common Stock is
issued at a price at least equal to 95% of the market price of the Common
Stock at the time of such issuance), the Conversion Price shall be adjusted
so that the Holder of each Note shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock of the Parent
Company determined by multiplying (i) the Conversion Price on the day
immediately prior to such date of issuance by (ii) a fraction, the
numerator of which shall be the sum of (A) the number of shares of Common
Stock of the Parent Company outstanding on such date and (B) the number of
additional shares of Common Stock issued (or into which the convertible
securities may convert), and the denominator of which shall be the sum of
(1) the number of shares of Common Stock outstanding on such date and (2)
the number of shares of Common Stock which the aggregate consideration
receivable by the Parent Company for the total number of shares of Common
Stock so issued (or into which the convertible securities may convert)
would purchase at such Conversion Price on such date. An
<PAGE> 36
32
adjustment made pursuant to this paragraph (h) shall be made on the next
Business Day following the date on which any such issuance is made and
shall be effective retroactively immediately after the close of business on
such date. For purposes of this paragraph (h), the aggregate consideration
receivable by the Parent Company in connection with the issuance of shares
of Common Stock or of securities convertible into shares of Common Stock of
the Parent Company shall be deemed to be equal to the sum of the aggregate
offering price (before deduction of underwriting discounts or commissions
and expenses payable to third parties) of all such securities plus the
minimum aggregate amount, if any, payable upon conversion of any such
convertible securities into shares of Common Stock of the Parent Company.
(i) For purposes of this Section 4.05, the following terms shall have
the meaning indicated:
(1) "Closing Price" with respect to any securities on any day shall
mean the closing sale price regular way on such day or, in case no such
sale takes place on such day, the average of the reported closing bid
and asked prices, regular way, in each case on the New York Stock
Exchange, or, if such security is not listed or admitted to trading on
such Exchange, on the principal national security exchange or quotation
system on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the average of the
closing bid and asked prices of such security on the over-the-counter
market on the day in question as reported by the National Quotation
Bureau Incorporated, or a similar generally accepted reporting service
or if not so available, in such manner as furnished by any New York
Stock Exchange member firm selected from time to time by the Board of
Directors of the Parent Company for that purpose, or a price determined
in good faith by the Board of Directors of the Parent Company or, to
the extent permitted by applicable law, a duly authorized committee
thereof, whose determination shall be conclusive.
(2) "Current Market Price" shall mean the average of the daily
Closing Prices per share of Common Stock for the ten consecutive
Trading Days immediately prior to the date in question; provided,
however, that (1) if the "ex" date (as hereinafter defined) for any
event (other than the issuance or distribution or Fundamental Change
requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 4.05(a), (b), (c), (d), (e), (f),
(g) or (h) occurs during such ten consecutive Trading Days, the Closing
Price for each Trading Day prior to the "ex" date for such other event
shall be adjusted by multiplying such Closing Price by the same
fraction by which the Conversion Price is so required to be adjusted as
a
<PAGE> 37
33
result of other event, (2) if the "ex" date for any event (other than
the issuance, distribution or Fundamental Change requiring such
computation) that requires an adjustment to the Conversion Price
pursuant to Section 4.05(a), (b), (c), (d), (e), (f), (g) or (h) occurs
on or after the "ex" date for the issuance or distribution requiring
such computation and prior to the day in question, the Closing Price
for each Trading Day on and after the "ex" date for such other event
shall be adjusted by multiplying such Closing Price by the reciprocal
of the fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, and (3) if the "ex" date for
the issuance, distribution or Fundamental Change requiring such
computation is prior to the day in question, after taking into account
any adjustment required pursuant to clause (1) or (2) of this proviso,
the Closing Price for each Trading Day on or after such "ex" date shall
be adjusted by adding thereto the amount of any cash and the fair
market value (as determined by the Board of Directors of the Parent
Company or, to the extent permitted by applicable law, a duly
authorized committee thereof in a manner consistent with any
determination of such value for purposes of Section 4.05(d), (f) or
(g), whose determination shall be conclusive and described in a
resolution of the Board of Directors of the Parent Company or such duly
authorized committee thereof, as the case may be) of the evidences of
Indebtedness, shares of Capital Stock or assets being distributed
applicable to one share of Common Stock of the Parent Company as of the
close of business on the day before such "ex" date. For purposes of any
computation under Section 4.05(f) or (g), the Current Market Price of
the Common Stock of the Parent Company on any date shall be deemed to
be the average of the daily Closing Prices per share of Common Stock
for such day and the next two succeeding Trading Days; provided,
however, that if the "ex" date for any event (other than the tender or
exchange offer requiring such computation) that requires an adjustment
to the Conversion Price pursuant to Section 4.05(a), (b), (c), (d),
(e), (f), (g) or (h) occurs on or after the Expiration Time for the
tender of exchange offer requiring such computation and prior to the
day in question, the Closing Price for each Trading Day on and after
the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such
other event. For purposes of this paragraph, the term "ex" date, (1)
when used with respect to any issuance or distribution, means the first
date on which the Common Stock of the Parent Company trades regular way
on the relevant exchange or in the relevant market from which the
Closing Price was obtained without the right to receive such issuance
or distribution, (2) when used with respect to any subdivision or
combination of shares of Common Stock of the Parent Company, means the
first date on which the Common Stock trades regular way on such
exchange or in such market after the time at which such
<PAGE> 38
34
subdivision or combination becomes effective, and (3) when used with
respect to any tender or exchange offer means the first date on which
the Common Stock of the Parent Company trades regular way on such
exchange or in such market after the Expiration Time of such offer.
(3) "fair market value" shall mean the amount which a willing buyer
would pay a willing seller in an arm's length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of
Common Stock of the Parent Company have the right to receive any cash,
securities or other property or in which the Common Stock (or other
applicable security) of the Parent Company is exchanged for or
converted into any combination of cash, securities or other property,
the date fixed for determination of stockholders entitled to receive
such cash, securities or other property (whether such date is fixed by
the Board of Directors of the Parent Company or by statute, contract or
otherwise).
(5) "Trading Day" shall mean (x) if the applicable security is
listed or admitted for trading on the New York Stock Exchange or
another national security exchange, a day on which the New York
Exchange or another national security exchange is open for business or
(y) if the applicable security is quoted on the Nasdaq National Market,
a day on which trades may be made on thereon or (z) if the applicable
security is not so listed, admitted for trading or quoted, any day
other than a Saturday or Sunday or a day on which banking institutions
in the State of New York are authorized or obligated by law or
executive order to close.
(j) The Issuer and the Parent Company may make such reductions in the
Conversion Price, in addition to those required by Sections 4.05 (a), (b),
(c), (d), (e), (f), (g) and (h) as the Boards of Directors of the Issuer
and the Parent Company consider to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase Common Stock of
the Parent Company resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes.
To the extent permitted by applicable law, the Issuer and the Parent
Company from time to time may reduce the Conversion Price by any amount for
any period of time if the period is at least twenty (20) days, the
reduction is irrevocable during the period and the Boards of Directors of
the Issuer and the Parent Company shall have made a determination that such
reduction would be in the best interests of the Parent Company and its
Subsidiaries taken as a whole, which determination shall
<PAGE> 39
35
be conclusive. When the Conversion Price is reduced pursuant to the
preceding sentence, the Issuer shall mail to Holders of record of the Notes
a notice of the reduction at least fifteen (15) days prior to the date the
reduced Conversion Price takes effect, and such notice shall state the
reduced Conversion Price and the period during which it will be in effect.
(k) No adjustments in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that any adjustments which by reason of this
Section 4.05(k) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Article Four shall be made by the Issuer and the Parent Company,
collectively, and shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be. No adjustment need be made for
rights to purchase Common Stock of the Parent Company pursuant to a plan of
the Parent Company or of any of its Subsidiaries for reinvestment of
dividends or interest. To the extent the Notes become convertible into
cash, assets, property or securities (other than Capital Stock of the
Parent Company), no adjustment need be made thereafter as to the cash,
assets, property or such securities. Interest will not accrue on the cash.
(l) Whenever the Conversion Price is adjusted as herein provided, the
Issuer shall promptly file with the Trustee and any conversion agent other
than the Trustee an Officers' Certificate setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment. Promptly after delivery of such
certificate, the Issuer shall prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the date
on which each adjustment becomes effective and shall mail such notice of
such adjustments of the Conversion Price to the Holder of each Note at such
Holder's last address appearing on the Note register, within 20 days after
execution thereof. Failure to deliver such notice shall not affect the
legality or validity of any such adjustment.
(m) In any case in which this Section 4.05 provides that an adjustment
shall become effective immediately after a record date for an event, the
Parent Company may defer until the occurrence of such event (i) issuing to
the Holder of any Note converted after such record date and before the
occurrence of such event the additional shares of Common Stock of the
Parent Company issuable upon such conversion by reason of the adjustment
required by such event or over and above the Common Stock of the Parent
Company issuable upon such conversion before giving effect to such
adjustment and (ii) paying to such holder any amount in cash in lieu of any
fraction pursuant to Section 4.03.
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36
(n) For purposes of this Section 4.05, the number of shares of Common
Stock of the Parent Company at any time outstanding shall not include
shares held in the treasury of the Parent Company but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock of the Parent Company. The Parent Company will not
pay any dividend or make any distribution on shares of Common Stock held in
the treasury of the Parent Company.
SECTION 4.06 Effect of Reclassification, Consolidation, Merger or Sale.
If any of the following events occur, namely (i) any reclassification or change
of the outstanding shares of Common Stock of the Parent Company (other than a
subdivision or combination to which Section 4.05(c) applies), (ii) any
consolidation, merger or combination of the Parent Company with another
corporation as a result of which holders of Common Stock of the Parent Company
shall be entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock, or (iii)
any sale or conveyance of the properties and assets of the Parent Company as, or
substantially as, an entirety to any other Person as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
then the Parent Company or the successor or purchasing Person, as the case may
be, shall execute with the Trustee a supplemental indenture (which shall comply
with the Trust Indenture Act as in force at the date of execution of such
supplemental indenture) providing that such Note shall be convertible into the
kind and amount of shares of stock and other securities or property or assets
(including cash) receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance by a holder of a number of shares of
Common Stock of the Parent Company issuable upon conversion of such Notes
(assuming, for such purposes, a sufficient number of authorized shares of Common
Stock of the Parent Company available to convert all such Notes) immediately
prior to such reclassification, change, consolidation, merger, combination, sale
or conveyance assuming such holder of Common Stock did not exercise such
holder's rights of election, if any, as to the kind or amount of securities,
cash or other property receivable upon such reclassification, consolidation,
merger, combination, sale or conveyance (provided that, if the kind of amount of
securities, cash or other property receivable upon such reclassification,
change, consolidation, merger, combination, sale or conveyance is not the same
for each share of Common Stock of the Parent Company in respect of which such
rights of election shall not have been exercised ("nonelecting share")), then
for the purposes of this Section 4.06 the kind and amount of securities, cash or
other property receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance for 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. Such supplemental indenture shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article.
<PAGE> 41
37
The Issuer shall cause notice of the execution of such supplemental
indenture to be mailed to each Holder of Notes, at such Holder's address
appearing in the Note register, within twenty (20) days after execution thereof.
Failure to deliver such notice shall not affect the legality or validity of such
supplemental indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 4.06 applies to any event or occurrence, Section 4.05
shall not apply.
SECTION 4.07 Taxes on Shares Issued. The issue of stock certificates on
conversions of Notes shall be made without charge to the converting Noteholder
for any tax in respect of the issue thereof. Neither the Issuer nor the Parent
Company shall, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of stock in any name
other than that of the Holder of any Note converted, and the Parent Company
shall not be required to issue or deliver any such stock certificate unless and
until the person or persons requesting the issue thereof shall have paid to the
Parent Company the amount of such tax or shall have established to the
satisfaction of the Parent Company that such tax has been paid.
SECTION 4.08 Reservation of Shares; Shares to Be Fully Paid; Compliance
with Governmental Requirements; Listing of Common Stock. The Parent Company
shall provide, free from preemptive rights, out of its authorized but unissued
shares or shares held in treasury, sufficient shares of Common Stock to provide
for the conversion of the Notes from time to time as such Notes are presented
for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Parent Company will take all
corporate action which may, in the opinion of its counsel, be necessary in order
that the Parent Company may validly and legally issue shares of such Common
Stock at such adjusted Conversion Price.
The Parent Company covenants that all shares of Common Stock which may
be issued upon conversion of Notes will upon issue be fully paid and
non-assessable by the Parent Company and free from all taxes (to the extent
provided in Section 4.07), liens and charges with respect to the issue thereof.
The Parent Company covenants that if any shares provided of Common
Stock to be provided for the purpose of conversion of Notes hereunder require
registration with or approval of any governmental authority under any federal or
state law before such shares may be validly issued upon conversion, the Parent
Company will in good faith and as
<PAGE> 42
38
expeditiously as possible endeavor to secure such registration or approval, as
the case may be.
The Parent Company further covenants that if at any time the Common
Stock shall be listed on the Nasdaq National Market or any other national
securities exchange or automated quotation system the Parent Company will, if
permitted by the rules of such exchange or automated quotation system, list and
keep listed, so long as the Common Stock shall be so listed on such exchange or
automated quotation system, all Common Stock issuable upon conversion of the
Notes.
SECTION 4.09 Responsibility of Trustee. The Trustee and any other
conversion agent shall not at any time be under any duty or responsibility to
any Holder of Notes to determine the Conversion Price or whether any facts exist
which may require any adjustment of the Conversion Price, or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee and any other
conversion agent shall not be accountable with respect to the validity or value
(or the kind or amount) of any shares of Common Stock of the Parent Company, or
of any securities or property, which may at any time be issued or delivered upon
the conversion of any Note; and the Trustee and any other conversion agent make
no representations with respect thereto. Neither the Trustee nor any conversion
agent shall be responsible for any failure of the Issuer or the Parent Company
to issue, transfer or deliver any shares of Common Stock of the Parent Company
or stock certificates or other securities or property or cash upon the surrender
of any Note for the purpose of conversion or to comply with any of the duties,
responsibilities or covenants of the Issuer or the Parent Company contained in
this Article. Without limiting the generality of the foregoing, neither the
Trustee nor any conversion agent shall be under any responsibility to determine
the correctness of any provisions contained in any supplemental indenture
entered into pursuant to Section 4.06 relating either to the kind or amount of
shares of stock or securities or property (including cash) receivable by
Noteholders upon the conversion of their Notes after any event referred to in
such Section 4.06 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 6.01 of the Subordinated Indenture, may
accept as conclusive evidence of the correctness of any such provisions, and
shall be protected in relying upon, the Officers' Certificate (which the Issuer
and the Parent Company shall be obligated to file with the Trustee prior to the
execution of any such supplemental indenture) with respect thereto.
SECTION 4.10 Notice to Holders Prior to Certain Actions. In the event:
(a) the Parent Company shall declare a dividend (or any other
distribution) on its Common Stock that would require an adjustment in the
Conversion Price pursuant to Section 4.05; or
<PAGE> 43
39
(b) the Parent Company shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe for or
purchase any share of any class or any other rights or warrants; or
(c) of any reclassification or reorganization of the Common
Stock of the Parent Company (other than a subdivision or combination
of its outstanding common Stock, or a change in par value, or from par
value to no par value, or from no par value to par value), or of any
consolidation or merger to which the Parent Company is a party and for
which approval of any stockholders of the Parent Company required, or
of the sale or transfer of all or substantially all of the assets of
the Parent Company; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding-up of the Parent Company;
the Parent Company shall cause to be filed with the Trustee and to be mailed to
each Holder of Notes at such Holder's address appearing on the note register
provided for in Section 2.08 of the Subordinated Indenture, as promptly as
possible but in any event at least fifteen (15) days prior to the applicable
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution or rights or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Stock of the Parent Company of record to be entitled to such dividend,
distribution or rights are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective or occur, and the date
as of which it is expected that holders of Common Stock of the Parent Company of
record shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
SECTION 4.11 Conversion Agent. The Trustee shall initially
serve as conversion agent for the Notes.
ARTICLE FIVE
Certain Covenants
SECTION 5.01 Office of the Parent Company. So long as any
Notes are convertible into Common Stock of the Parent Company in accordance with
the terms of this Supplemental Indenture, the Parent Company shall maintain in
the Borough of Manhattan,
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40
The City of New York, an office or agency where the Notes may be surrendered for
conversion into Common Stock of the Parent Company (the "Parent Company
Office"). The Parent Company and the Issuer covenant and agree for the benefit
of the Holders that the office or agency of the Issuer maintained in the Borough
of Manhattan, The City of New York pursuant to Section 3.02 of the Subordinated
Indenture shall serve as the Parent Company Office.
SECTION 5.02 Limitation on Senior Subordinated Indebtedness.
The Parent Company will not, and will not permit any Subsidiary Guarantor to,
Incur any Indebtedness that is expressly made subordinate in right of payment to
any Senior Indebtedness or Guarantor Senior Indebtedness, as the case may be,
unless such Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such Indebtedness is outstanding, is expressly made
pari passu with, or subordinate in right of payment to, the Securities or the
Note Guarantee of such Guarantor, as the case may be, pursuant to provisions
substantially similar to those contained in this Indenture.
SECTION 5.03 Limitation on Senior Indebtedness. The Parent
Company will not, and will not permit the Issuer or any Subsidiary Guarantor to,
Incur any Indebtedness unless (i) in the case of such Indebtedness that is
secured, there is no outstanding unsecured Senior Indebtedness or Guarantor
Senior Indebtedness of the Issuer or any Guarantor, and (ii) in the case of such
Indebtedness that is unsecured Senior Indebtedness or unsecured Guarantor Senior
Indebtedness, there is no outstanding secured Indebtedness of the Issuer or any
Guarantor, other than Capital Lease Obligations outstanding at any time in an
aggregate amount not to exceed $2.0 million.
The foregoing provision will be of no further force and
effect if (a) a supplemental indenture which eliminates the subordination
provisions set forth in Articles Six and Seven of this Supplemental Indenture
and Articles Twelve and Fourteen of the Subordinated Indenture, in form and
substance satisfactory to the Trustee, shall have been executed and delivered to
the Trustee, (b) the Trustee shall have received necessary consents with respect
to all outstanding Senior Indebtedness and Guarantor Senior Indebtedness from
the holders thereof approving such supplemental indenture, (c) the Trustee shall
have received such Opinions of Counsel as the Trustee may reasonably request,
and (d) immediately before and immediately after giving effect to such
supplemental indenture, no Default or Event of Default shall have occurred and
be continuing.
SECTION 5.04 Issuance of Certain Subsidiary Guarantees. If
and to the extent the same has not occurred as of the date of this Supplemental
Indenture, the Issuer and the Parent Company shall, within 30 days of the date
of final prospectus relating to the public offering of the Notes, cause each of
Metrol Security Services, Inc., a Delaware corporation ("Metrol"), and Sonitrol
of Arizona, Inc. ("Sonitrol"), an Arizona corporation, each of which is a
Subsidiary of the Parent Company, to be merged with and into the Issuer,
<PAGE> 45
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and if either Metrol or Sonitrol is not so merged within such 30-day period,
cause Metrol or Sonitrol, as the case may be, to execute and deliver an
indenture supplemental to the Subordinated Indenture providing for a Note
Guarantee of payment of the Notes by Metrol or Sonitrol, as the case may be,
pursuant to Article Thirteen of the Subordinated Indenture.
ARTICLE SIX
Subordination of Notes
SECTION 6.01 Notes Subordinated to Senior Indebtedness.
Notwithstanding any other provision of this Indenture, the Issuer and the
Trustee each covenants and agrees, and each Holder, by its acceptance of a Note,
likewise covenants and agrees, that all Notes shall be issued subject to the
provisions of this Article Six; and each Person holding any Note, whether upon
original issue or upon transfer, assignment or exchange thereof, accepts and
agrees that Senior Subordinated Obligations shall, to the extent set forth in
this Article Six, be subordinated in right of payment to the prior payment in
full, in cash or cash equivalents, of all amounts that constitute Senior
Indebtedness of the Issuer, including, without limitation, the Issuer's
obligations under the Credit Agreement.
SECTION 6.02 No Payment on Securities or Coupons in Certain
Circumstances.
(a) No direct or indirect payment by or on behalf of the
Issuer of Senior Subordinated Obligations, whether pursuant to the terms of the
Securities or of any Coupons or upon acceleration or otherwise, shall be made
if, at the time of such payment, there exists a default in the payment of all or
any portion of the obligations of any Senior Indebtedness, and such default
shall not have been cured or waived or the benefits of this provision waived by
or on behalf of the holders of such Senior Indebtedness.
(b) During the continuance of any other event of default
with respect to (i) the Credit Agreement pursuant to which the maturity thereof
may be accelerated and (A) upon receipt by the Trustee of written notice from
the Credit Agreement Agent or (B) if such event of default under the Credit
Agreement results from the acceleration of the Securities, from and after the
date of such acceleration, no payment of Senior Subordinated Obligations may be
made by or on behalf of the Issuer upon or in respect of the Securities for a
period (a "Payment Blockage Period") commencing on the earlier of the date of
receipt of such notice or the date of such acceleration and ending 179 days
thereafter (unless such Payment Blockage Period shall be terminated by written
notice to the Trustee from the Credit Agreement Agent or by repayment in full in
cash or cash equivalents of such Senior Indebtedness or such event of default
has been cured or waived) or (ii) any other Designated Senior Indebtedness
pursuant to which the maturity thereof may be accelerated, upon receipt
<PAGE> 46
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by the Trustee of written notice from the trustee or other representative for
the holders of such other Designated Senior Indebtedness (or the holders of at
least a majority in principal amount of such other Designated Senior
Indebtedness then outstanding), no payment of Senior Subordinated Obligations
may be made by or on behalf of the Issuer upon or in respect of the Notes for a
Payment Blockage Period commencing on the date of receipt of such notice and
ending 119 days thereafter (unless, in each case, such Payment Blockage Period
shall be terminated by written notice to the Trustee from such trustee of, or
other representative for, such holders or by repayment in full in cash or cash
equivalents of such Designated Senior Indebtedness or such event of default has
been cured or waived). Not more than one Payment Blockage Period pursuant to
this Section 6.02(b) may be commenced with respect to the Notes during any
period of 360 consecutive days; provided that, subject to the limitations set
forth in the next sentence, the commencement of a Payment Blockage Period by the
representatives for, or the holders of, Designated Senior Indebtedness, other
than under the Credit Agreement or under clause (i)(B) of this paragraph, shall
not bar the commencement of another Payment Blockage Period by the Credit
Agreement Agent within such period of 360 consecutive days. Notwithstanding
anything in this Indenture to the contrary, there must be 180 consecutive days
in any 360-day period in which no Payment Blockage Period is in effect. For all
purposes of this Section 6.02(b), no event of default that existed or was
continuing (it being acknowledged that any subsequent action that would give
rise to an event of default pursuant to any provision under which an event of
default previously existed or was continuing shall constitute a new event of
default for this purpose) on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or shall be made, the basis for the
commencement of a second Payment Blockage Period by the representative for, or
the holders of, such Designated Senior Indebtedness, whether or not within a
period of 360 consecutive days, unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days.
(c) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 6.02(a) or 6.02(b), the Trustee shall promptly notify the
holders of Senior Indebtedness of such prohibited payment and such payment shall
be held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Senior Indebtedness or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Senior
Indebtedness may have been issued, as their respective interests may appear, but
only to the extent that, upon notice from the Trustee to the holders of Senior
Indebtedness that such prohibited payment has been made, the holders of the
Senior Indebtedness (or their representative or representatives of a trustee)
within 30 days of receipt of such notice from the Trustee notify the Trustee of
the amounts then due and owing on the Senior Indebtedness, if any, and only the
amounts specified in such notice to the Trustee shall be paid to the holders of
Senior Indebtedness and any excess above such amounts due and owing on Senior
Indebtedness shall be paid to the Issuer.
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SECTION 6.03 Payment over of Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets or securities
of the Issuer of any kind or character, whether in cash, property or securities,
in connection with any dissolution or winding up or total or partial liquidation
or reorganization of the Issuer, whether voluntary or involuntary, or in a
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due upon all Senior Indebtedness shall first be paid in full, in cash or
cash equivalents, before the Holders or the Trustee on their behalf shall be
entitled to receive any payment by the Issuer on account of Senior Subordinated
Obligations, or any payment to acquire any of the Notes for cash, property or
securities, or any distribution with respect to the Notes of any cash, property
or securities. Before any payment may be made by, or on behalf of, the Issuer on
any Senior Subordinated Obligations in connection with any such dissolution,
winding up, liquidation or reorganization, any payment or distribution of assets
or securities of the Issuer of any kind or character, whether in cash, property
or securities, to which the Holders or the Trustee on their behalf would be
entitled, except for the provisions of this Article Six, shall be made by the
Issuer or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other similar Person making such payment or distribution or by the Holders or
the Trustee if received by them or it, directly to the holders of the Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) or their representatives or to any
trustee or trustees under any indenture pursuant to which any such Senior
Indebtedness may have been issued, as their respective interests appear, to the
extent necessary to pay all such Senior Indebtedness in full, in cash or cash
equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Indebtedness.
(b) To the extent any payment of Senior Indebtedness
(whether by or on behalf of the Issuer, as proceeds of security or enforcement
of any right of setoff or otherwise) is declared to be fraudulent or
preferential, set aside or required to be paid to any receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then
if such payment is recovered by, or paid over to, such receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person, the Senior
Indebtedness or part thereof originally intended to be satisfied shall be deemed
to be reinstated and outstanding as if such payment had not occurred. To the
extent the obligation to repay any Senior Indebtedness is declared to be
fraudulent, invalid or otherwise set aside under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then the obligations so
declared fraudulent, invalid or otherwise set aside (and all other amounts that
would come due with respect thereto had such obligation not been so affected)
shall be deemed to be reinstated and outstanding as Senior Indebtedness for all
purposes of this Indenture as if such declaration, invalidity or setting aside
had not occurred.
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(c) In the event that, notwithstanding the foregoing
provision prohibiting such payment or distribution, any payment or distribution
of assets or securities of the Issuer of any kind or character, whether in cash,
property or securities, shall be received by the Trustee or any Holder at a time
when such payment or distribution is prohibited by Section 6.03(a) and before
all obligations in respect of Senior Indebtedness are paid in full, in cash or
cash equivalents, such payment or distribution shall be received and held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders) or their representatives or
to the trustee or trustees under any indenture pursuant to which any such Senior
Indebtedness may have been issued, as their respective interests appear, for
application to the payment of Senior Indebtedness remaining unpaid until all
such Senior Indebtedness has been paid in full, in cash or cash equivalents,
after giving effect to any concurrent payment, distribution or provision
therefor to or for the holders of such Senior Indebtedness.
(d) The consolidation of the Issuer with, or the merger of
the Issuer with or into, another Person or the liquidation or dissolution of the
Issuer following the sale, conveyance, transfer, lease or other disposition of
all or substantially all of its property and assets to another Person upon the
terms and conditions provided in Article Nine of the Subordinated Indenture
shall not be deemed a dissolution, winding up, liquidation or reorganization for
the purposes of this Section 6.03 if such other Person shall, as a part of such
consolidation, merger, sale, conveyance, transfer, lease or other disposition,
comply (to the extent required) with the conditions stated in Article Nine of
the Subordinated Indenture.
SECTION 6.04 Subrogation.
(a) Upon the payment in full of all Senior Indebtedness in
cash or cash equivalents, the Holders shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Issuer made on such Senior Indebtedness until the
principal of and interest on the Notes shall be paid in full; and, for the
purposes of such subrogation, no payments or distributions to the holders of
such Senior Indebtedness of any cash, property or securities to which the
Holders or the Trustee on their behalf would be entitled except for the
provisions of this Article Six, and no payment pursuant to the provisions of
this Article Six to the holders of Senior Indebtedness by Holders or the Trustee
on their behalf shall, as between the Issuer, its creditors other than holders
of Senior Indebtedness, and the Holders, be deemed to be a payment by the Issuer
to or on account of the Senior Indebtedness. It is understood that the
provisions of this Article Six are intended solely for the purpose of defining
the relative rights of the Holders, on the one hand, and the holders of the
Senior Indebtedness, on the other hand.
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(b) If any payment or distribution to which the Holders
would otherwise have been entitled but for the provisions of this Article Six
shall have been applied, pursuant to the provisions of this Article Six, to the
payment of all amounts payable under Senior Indebtedness, then, and in such
case, the Holders shall be entitled to receive from the holders of such Senior
Indebtedness any payments or distributions received by such holders of such
Senior Indebtedness in excess of the amount required to make payment in full, in
cash or cash equivalents, of such Senior Indebtedness of such holders.
SECTION 6.05 Obligations of the Issuer Unconditional.
(a) Nothing contained in this Article Six or elsewhere in
this Indenture or in the Notes is intended to or shall impair, as among the
Issuer and the Holders, the obligation of the Issuer, which is absolute and
unconditional, to pay to the Holders the principal of and interest on the Notes
as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the Holders and
creditors of the Issuer other than the holders of the Senior Indebtedness, nor
shall anything herein or therein prevent the Holders or the Trustee on their
behalf from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
Six of the holders of the Senior Indebtedness.
(b) Without limiting the generality of the foregoing,
nothing contained in this Article Six will restrict the right of the Trustee or
the Holders to take any action to declare the Notes to be due and payable prior
to their maturity pursuant to Section 5.01 of the Subordinated Indenture or to
pursue any rights or remedies hereunder; provided, however, that all Senior
Indebtedness then due and payable or thereafter declared to be due and payable
shall first be paid in full, in cash or cash equivalents, before the Holders or
the Trustee are entitled to receive any direct or indirect payment from the
Issuer of Senior Subordinated Obligations.
SECTION 6.06 Notice to Trustee.
(a) The Issuer shall give prompt written notice to the
Trustee of any fact known to the Issuer that would prohibit the making of any
payment to or by the Trustee in respect of the Notes pursuant to the provisions
of this Article Six. The Trustee shall not be charged with knowledge of the
existence of any default or event of default with respect to any Senior
Indebtedness or of any other facts that would prohibit the making of any payment
to or by the Trustee unless and until the Trustee shall have received notice in
writing at its Corporate Trust Office to that effect signed by an Officer of the
Issuer, or by a holder of Senior Indebtedness or trustee or agent thereof; and
prior to the receipt of any such written notice, the Trustee shall, subject to
Article Six of the Subordinated Indenture, be entitled to assume that no such
facts exist; provided that, if the Trustee shall not have received the notice
provided for in this Section 6.06 at least two Business Days prior to the date
upon
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which, by the terms of this Indenture, any monies shall become payable for any
purpose (including, without limitation, the payment of the principal of or
interest on any Note), then, notwithstanding anything herein to the contrary,
the Trustee shall have full power and authority to receive any monies from the
Issuer and to apply the same to the purpose for which they were received, and
shall not be affected by any notice to the contrary that may be received by it
on or after such prior date except for an acceleration of the Notes prior to
such application. Nothing contained in this Section 6.06 shall limit the right
of the holders of Senior Indebtedness to recover payments as contemplated by
this Article Six. The foregoing shall not apply if the paying agent is the
Issuer. The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself or itself to be a holder of any Senior
Indebtedness (or a trustee on behalf of, or other representative of, such
holder) to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee or representative on behalf of any such holder.
(b) In the event that the Trustee determines in good faith
that any evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article Six, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article Six and, if such
evidence is not furnished to the Trustee, the Trustee may defer any payment to
such Person pending judicial determination as to the right of such Person to
receive such payment.
SECTION 6.07 Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets or securities
referred to in this Article Six, the Trustee and the Holders shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction in
which bankruptcy, dissolution, winding up, liquidation or reorganization
proceedings are pending, or upon a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person making such
payment or distribution, delivered to the Trustee or to the Holders for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Issuer, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Six.
SECTION 6.08 Trustee's Relation to Senior Indebtedness.
(a) The Trustee and any paying agent shall be entitled to
all the rights set forth in this Article Six with respect to any Senior
Indebtedness that may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Indebtedness and
nothing in this Indenture shall deprive the Trustee or any paying agent of any
of its rights as such holder.
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(b) With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Six, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness (except
as provided in Section 6.02(c) and Section 6.03(c)).
SECTION 6.09 Subordination Rights Not Impaired by Acts or
Omissions of the Issuer or Holders of Senior Indebtedness. No right of any
present or future holders of any Senior Indebtedness to enforce subordination as
provided in this Article Six will at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Issuer or by any act or
failure to act, in good faith, by any such holder, or by any noncompliance by
the Issuer with the terms of this Indenture, regardless of any knowledge thereof
that any such holder may have or otherwise be charged with. The provisions of
this Article Six are intended to be for the benefit of, and shall be enforceable
directly by, the holders of Senior Indebtedness.
SECTION 6.10 Holders Authorize Trustee to Effectuate
Subordination of the Notes. Each Holder, by such Holder's acceptance of any
Notes, authorizes and expressly directs the Trustee on such Holder's behalf to
take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article Six, and appoints the Trustee such
Holder's attorney-in-fact for such purposes, including, in the event of any
dissolution, winding up, liquidation or reorganization of the Issuer (whether in
bankruptcy, insolvency, receivership, reorganization or similar proceedings or
upon an assignment for the benefit of creditors or otherwise) tending towards
liquidation of the property and assets of the Issuer, the filing of a claim for
the unpaid balance of its Notes, if any, in the form required in those
proceedings. If the Trustee does not file a proper claim or proof of
indebtedness in the form required in such proceeding at least 30 days before the
expiration of the time to file such claim or claims, each holder of Senior
Indebtedness is hereby authorized to file an appropriate claim for and on behalf
of the Holders.
SECTION 6.11 Not to Prevent Events of Default. The failure
to make a payment on account of principal of or interest on the Notes by reason
of any provision of this Article Six will not be construed as preventing the
occurrence of an Event of Default.
SECTION 6.12 Trustee's Compensation Not Prejudiced. Nothing
in this Article Six will apply to amounts due to the Trustee pursuant to other
sections of this Indenture.
SECTION 6.13 No Waiver of Subordination Provisions. Without
in any way limiting the generality of Section 6.09, the holders of Senior
Indebtedness may, at any time
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and from time to time, without the consent of or notice to the Trustee or the
Holders, without incurring responsibility to the Holders and without impairing
or releasing the subordination provided in this Article Six or the obligations
hereunder of the Holders to the holders of Senior Indebtedness, do any one or
more of the following: (a) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding or secured; (b) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c)
release any Person liable in any manner for the collection of Senior
Indebtedness; and (d) exercise or refrain from exercising any rights against the
Issuer and any other Person.
SECTION 6.14 Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Six or elsewhere in this Indenture shall
prevent (i) the Issuer, except under the conditions described in Section 6.02 or
Section 6.03, from making payments of principal of and interest on the Notes, or
from depositing with the Trustee any money for such payments, or (ii) the
application by the Trustee of any money deposited with it for the purpose of
making such payments of principal of and interest on the Notes to the Holders
entitled thereto unless, at least two Business Days prior to the date upon which
such payment becomes due and payable, the Trustee shall have received the
written notice provided for in Section 6.02(b) (or there shall have been an
acceleration of the Notes prior to such application) or in Section 6.06. The
Issuer shall give prompt written notice to the Trustee of any dissolution,
winding up, liquidation or reorganization of the Issuer.
ARTICLE SEVEN
Subordination of Note Guarantees
SECTION 7.01 Note Guarantees Subordinated to Guarantor
Senior Indebtedness. Notwithstanding any other provision of this Indenture, each
Guarantor and the Trustee each covenants and agrees, and each Holder, by its
acceptance of a Note, likewise covenants and agrees, that the Note Guarantee of
each Guarantor shall be subject to the provisions of this Article Seven; and
each Person holding any Note, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that all payments pursuant to
any Note Guarantee shall, to the extent set forth in this Article Seven, be
subordinated in right of payment to the prior payment in full, in cash or cash
equivalents, of all amounts payable under the Guarantor Senior Indebtedness of
the issuer of such Note Guarantee, including, without limitation, such
Guarantor's obligations, if any, under the Credit Agreement.
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SECTION 7.02 No Payment on Note Guarantees in Certain
Circumstances.
(a) No direct or indirect payment by or on behalf of any
Guarantor pursuant to the Note Guarantee of such Guarantor shall be made if, at
the time of such payment, there exists a default in the payment of all or any
portion of the obligations of any Guarantor Senior Indebtedness, and such
default shall not have been cured or waived or the benefits of this provision
waived by or on behalf of the holders of such Guarantor Senior Indebtedness.
(b) During the continuance of any other event of default
with respect to (i) the Credit Agreement pursuant to which the maturity thereof
may be accelerated and (A) upon receipt by the Trustee of written notice from
the Credit Agreement Agent or (B) if such event of default under the Credit
Agreement results from the acceleration of the Notes, from and after the date of
such acceleration, no payment may be made by or on behalf of any Guarantor
pursuant to a Note Guarantee for a period (a "Guarantor Payment Blockage
Period") commencing on the earlier of the date of receipt of such notice or the
date of such acceleration and ending 179 days thereafter (unless such Guarantor
Payment Blockage Period shall be terminated by written notice to the Trustee
from the Credit Agreement Agent or by repayment in full in cash or cash
equivalents of such Senior Indebtedness of the Issuer or such event of default
has been cured or waived) or (ii) any other Designated Senior Indebtedness
(payment of which has been guaranteed by such Guarantor) pursuant to which the
maturity thereof may be accelerated, upon receipt by the Trustee of written
notice from the trustee or other representative for the holders of such other
Designated Senior Indebtedness (or the holders of at least a majority in
principal amount of such other Designated Senior Indebtedness then outstanding),
no payment pursuant to the Note Guarantee of such Guarantor may be made by or on
behalf of such Guarantor for a Guarantor Payment Blockage Period commencing on
the date of receipt of such notice and ending 119 days thereafter (unless, in
each case, such Guarantor Payment Blockage Period shall be terminated by written
notice to the Trustee from such trustee of, or other representative for, such
holders or by repayment in full in cash or cash equivalents of such Designated
Senior Indebtedness or such event of default has been cured or waived). Not more
than one Guarantor Payment Blockage Period pursuant to this Section 7.02(b) may
be commenced with respect to any Note Guarantee during any period of 360
consecutive days; provided that, subject to the limitations set forth in the
next sentence, the commencement of a Guarantor Payment Blockage Period by the
representatives for, or the holders of, Designated Senior Indebtedness, other
than under the Credit Agreement or under clause (i)(B) of this paragraph, shall
not bar the commencement of another Guarantor Payment Blockage Period by the
Credit Agreement Agent within such period of 360 consecutive days.
Notwithstanding anything in this Indenture to the contrary, with respect to such
Note Guarantee, there must be 180 consecutive days in any 360-day period in
which, with respect to such Note Guarantee, no Guarantor Payment Blockage Period
is in effect. For all purposes of this Section 7.02(b), no event of default that
existed or was continuing (it being
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acknowledged that any subsequent action that would give rise to an event of
default pursuant to any provision under which an event of default previously
existed or was continuing shall constitute a new event of default for this
purpose) on the date of the commencement of any Guarantor Payment Blockage
Period with respect to the Designated Senior Indebtedness initiating such
Guarantor Payment Blockage Period shall be, or shall be made, the basis for the
commencement of a second Guarantor Payment Blockage Period by the representative
for, or the holders of, such Designated Senior Indebtedness, whether or not
within a period of 360 consecutive days, unless such event of default shall have
been cured or waived for a period of not less than 90 consecutive days.
SECTION 7.03 Payment over of Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets or securities
of any Guarantor of any kind or character, whether in cash, property or
securities, in connection with any dissolution or winding up or total or partial
liquidation or reorganization of such Guarantor, whether voluntary or
involuntary, or in a bankruptcy, insolvency, receivership or other proceedings,
all amounts due or to become due upon all Guarantor Senior Indebtedness of such
Guarantor shall first be paid in full, in cash or cash equivalents, before the
Holders or the Trustee on their behalf shall be entitled to receive any payment
by such Guarantor on account of its Note Guarantee, or any payment by such
Guarantor to acquire any of the Notes for cash, property or securities, or any
distribution with respect to the Notes of any cash, property or securities.
Before any payment may be made by, or on behalf of, any Guarantor pursuant to
such Guarantor's Note Guarantee in connection with any such dissolution, winding
up, liquidation or reorganization, any payment or distribution of assets or
securities of such Guarantor of any kind or character, whether in cash, property
or securities, to which the Holders or the Trustee on their behalf would be
entitled, except for the provisions of this Article Seven, shall be made by such
Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person making such payment or distribution or by the Holders or
the Trustee if received by them or it, directly to the holders of the Guarantor
Senior Indebtedness of such Guarantor (pro rata to such holders on the basis of
the respective amounts of Guarantor Senior Indebtedness held by such holders) or
their representatives or to any trustee or trustees under any indenture pursuant
to which any such Guarantor Senior Indebtedness may have been issued, as their
respective interests appear, to the extent necessary to pay all such Guarantor
Senior Indebtedness in full, in cash or cash equivalents, after giving effect to
any concurrent payment, distribution or provision therefor to or for the holders
of such Guarantor Senior Indebtedness.
(b) To the extent any payment of Guarantor Senior
Indebtedness of any Guarantor (whether by or on behalf of such Guarantor, as
proceeds of security or enforcement of any right of setoff or otherwise) is
declared to be fraudulent or preferential, set aside or required to be paid to
any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
Person under any bankruptcy, insolvency, receivership, fraudulent
<PAGE> 55
51
conveyance or similar law, then if such payment is recovered by, or paid over
to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar Person, the Guarantor Senior Indebtedness of such Guarantor or part
thereof originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred. To the extent the obligation to
repay any Guarantor Senior Indebtedness of such Guarantor is declared to be
fraudulent, invalid or otherwise set aside under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then the obligations so
declared fraudulent, invalid or otherwise set aside (and all other amounts that
would come due with respect thereto had such obligation not been so affected)
shall be deemed to be reinstated and outstanding as Guarantor Senior
Indebtedness of such Guarantor for all purposes of this Indenture as if such
declaration, invalidity or setting aside had not occurred.
(c) In the event that, notwithstanding the foregoing
provision prohibiting such payment or distribution, any payment or distribution
of assets or securities of any Guarantor of any kind or character, whether in
cash, property or securities, shall be received by the Trustee or any Holder at
a time when such payment or distribution is prohibited by Section 7.03(a) and
before all obligations in respect of Guarantor Senior Indebtedness of such
Guarantor are paid in full, in cash or cash equivalents, such payment or
distribution shall be received and held in trust for the benefit of, and shall
be paid over or delivered to, the holders of Guarantor Senior Indebtedness of
such Guarantor (pro rata to such holders on the basis of the respective amounts
of Guarantor Senior Indebtedness held by such holders) or their representatives
or to the trustee or trustees under any indenture pursuant to which any such
Guarantor Senior Indebtedness may have been issued, as their respective
interests appear, for application to the payment of Guarantor Senior
Indebtedness remaining unpaid until all such Guarantor Senior Indebtedness has
been paid in full, in cash or cash equivalents, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Guarantor Senior Indebtedness.
(d) The consolidation of any Guarantor with, or the merger
of any Guarantor with or into, another Person or the liquidation or dissolution
of any Guarantor following the sale, conveyance, transfer, lease or other
disposition of all or substantially all of its property and assets to another
Person upon the terms and conditions provided in Article Nine of the
Subordinated Indenture shall not be deemed a dissolution, winding up,
liquidation or reorganization for the purposes of this Section 7.03 if such
other Person shall, as a part of such consolidation, merger, sale, conveyance,
transfer, lease or other disposition, comply (to the extent required) with the
conditions stated in Article Nine of the Subordinated Indenture.
SECTION 7.04 Subrogation.
(a) Upon the payment in full of all Guarantor Senior
Indebtedness of any Guarantor in cash or cash equivalents, the Holders shall be
subrogated to the rights of the holders of Guarantor Senior Indebtedness to
receive payments or distributions of cash,
<PAGE> 56
52
property or securities of such Guarantor made on such Guarantor Senior
Indebtedness until the principal of and interest on the Securities and any
Coupons appertaining thereto shall be paid in full; and, for the purposes of
such subrogation, no payments or distributions to the holders of such Guarantor
Senior Indebtedness of any cash, property or securities to which the Holders or
the Trustee on their behalf would be entitled except for the provisions of this
Article Seven, and no payment pursuant to the provisions of this Article Seven
to the holders of Guarantor Senior Indebtedness by Holders or the Trustee on
their behalf shall, as between such Guarantor, its creditors other than holders
of Guarantor Senior Indebtedness, and the Holders, be deemed to be a payment by
such Guarantor to or on account of such Guarantor Senior Indebtedness. It is
understood that the provisions of this Article Seven are intended solely for the
purpose of defining the relative rights of the Holders, on the one hand, and the
holders of such Guarantor Senior Indebtedness, on the other hand.
(b) If any payment or distribution to which the Holders
would otherwise have been entitled but for the provisions of this Article Seven
shall have been applied, pursuant to the provisions of this Article Seven, to
the payment of all amounts payable under the Guarantor Senior Indebtedness of a
Guarantor, then, and in such case, the Holders shall be entitled to receive from
the holders of such Guarantor Senior Indebtedness any payments or distributions
received by such holders of such Guarantor Senior Indebtedness in excess of the
amount required to make payment in full, in cash or cash equivalents, of such
Guarantor Senior Indebtedness of such holders.
SECTION 7.05 Obligations of Guarantors Unconditional.
(a) Nothing contained in this Article Seven or elsewhere in
this Indenture or in the Notes is intended to or shall impair, as among any
Guarantor and the Holders, the obligation of such Guarantor, which, pursuant to
the Note Guarantee of such Guarantor is absolute and unconditional, to pay to
the Holders the principal of and interest on the Notes as and when the same
shall become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of the Holders and creditors of such
Guarantor other than the holders of the Guarantor Senior Indebtedness of such
Guarantor, nor shall anything herein or therein prevent the Holders or the
Trustee on their behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article Seven of the holders of the Guarantor Senior Indebtedness of
such Guarantor.
(b) Without limiting the generality of the foregoing,
nothing contained in this Article Seven will restrict the right of the Trustee
or the Holders to take any action to declare the Notes to be due and payable
prior to their maturity pursuant to Section 5.01 of the Subordinated Indenture
or to pursue any rights or remedies hereunder; provided, however, that all
Guarantor Senior Indebtedness of a Guarantor then due and payable or thereafter
declared to be due and payable shall first be paid in full, in cash or cash
<PAGE> 57
53
equivalents, before the Holders or the Trustee are entitled to receive any
direct or indirect payment from such Guarantor on account of its Note Guarantee.
SECTION 7.06 Notice to Trustee.
(a) Each Guarantor shall give prompt written notice to the
Trustee of any fact known to such Guarantor that would prohibit the making of
any payment to or by the Trustee in respect of the Notes pursuant to the
provisions of its Note Guarantee, Article Six of this Supplemental Indenture and
this Article Seven. The Trustee shall not be charged with knowledge of the
existence of any default or event of default with respect to any Guarantor
Senior Indebtedness or of any other facts that would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing at its Corporate Trust Office to that effect signed by an
Officer of a Guarantor, or by a holder of Guarantor Senior Indebtedness or
trustee or agent thereof; and prior to the receipt of any such written notice,
the Trustee shall, subject to Article Six of the Subordinated Indenture, be
entitled to assume that no such facts exist; provided that, if the Trustee shall
not have received the notice provided for in this Section 7.06 at least two
Business Days prior to the date upon which, by the terms of this Indenture, any
monies shall become payable for any purpose (including, without limitation, the
payment of the principal of or interest on any Note), then, notwithstanding
anything herein to the contrary, the Trustee shall have full power and authority
to receive any monies from such Guarantor and to apply the same to the purpose
for which they were received, and shall not be affected by any notice to the
contrary that may be received by it on or after such prior date except for an
acceleration of the Notes prior to such application. Nothing contained in this
Section 7.06 shall limit the right of the holders of Guarantor Senior
Indebtedness to recover payments as contemplated by this Article Seven. The
foregoing shall not apply if the paying agent is such Guarantor. The Trustee
shall be entitled to rely on the delivery to it of a written notice by a Person
representing himself or itself to be a holder of any Guarantor Senior
Indebtedness (or a trustee on behalf of, or other representative of, such
holder) to establish that such notice has been given by a holder of such
Guarantor Senior Indebtedness or a trustee or representative on behalf of any
such holder.
(b) In the event that the Trustee determines in good faith
that any evidence is required with respect to the right of any Person as a
holder of Guarantor Senior Indebtedness to participate in any payment or
distribution pursuant to this Article Seven, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Guarantor Senior Indebtedness held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such Person under this Article Seven and,
if such evidence is not furnished to the Trustee, the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment.
<PAGE> 58
54
SECTION 7.07 Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets or securities
referred to in this Article Seven, the Trustee and the Holders shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction in
which bankruptcy, dissolution, winding up, liquidation or reorganization
proceedings are pending, or upon a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person making such
payment or distribution, delivered to the Trustee or to the Holders for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Guarantor Senior Indebtedness and other
Indebtedness of a Guarantor, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article Seven.
SECTION 7.08 Trustee's Relation to Guarantor Senior
Indebtedness.
(a) The Trustee and any paying agent shall be entitled to
all the rights set forth in this Article Seven with respect to any Guarantor
Senior Indebtedness that may at any time be held by it in its individual or any
other capacity to the same extent as any other holder of Guarantor Senior
Indebtedness and nothing in this Indenture shall deprive the Trustee or any
paying agent of any of its rights as such holder.
(b) With respect to the holders of Guarantor Senior
Indebtedness, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article Seven,
and no implied covenants or obligations with respect to the holders of Guarantor
Senior Indebtedness shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of
Guarantor Senior Indebtedness (except as provided in Section 7.02(c) and Section
7.03(c)).
SECTION 7.09 Subordination Rights Not Impaired by Acts or
Omissions of Guarantors or Holders of Guarantor Senior Indebtedness. No right of
any present or future holders of any Guarantor Senior Indebtedness of any
Guarantor to enforce subordination as provided in this Article Seven will at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of such Guarantor or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by such Guarantor with the terms of this
Indenture, regardless of any knowledge thereof that any such holder may have or
otherwise be charged with. The provisions of this Article Seven are intended to
be for the benefit of, and shall be enforceable directly by, the holders of
Guarantor Senior Indebtedness.
SECTION 7.10 Holders Authorize Trustee to Effectuate
Subordination of Note Guarantees. Each Holder, by such Holder's acceptance of
any Notes, authorizes and expressly directs the Trustee on such Holder's behalf
to take such action as may be necessary
<PAGE> 59
55
or appropriate to effectuate the subordination provided in this Article Seven,
and appoints the Trustee such Holder's attorney-in-fact for such purposes,
including, in the event of any dissolution, winding up, liquidation or
reorganization of any Guarantor (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
property and assets of such Guarantor, the filing of a claim for the unpaid
balance of its Notes in the form required in those proceedings. If the Trustee
does not file a proper claim or proof of indebtedness in the form required in
such proceeding at least 30 days before the expiration of the time to file such
claim or claims, each holder of Guarantor Senior Indebtedness is hereby
authorized to file an appropriate claim for and on behalf of the Holders.
SECTION 7.11 Not to Prevent Events of Default. The failure
to make a payment on account of principal of or interest on the Notes by reason
of any provision of this Article Seven will not be construed as preventing the
occurrence of an Event of Default.
SECTION 7.12 Trustee's Compensation Not Prejudiced. Nothing
in this Article Seven will apply to amounts due to the Trustee pursuant to other
sections of the Indenture.
SECTION 7.13 No Waiver of Subordination Provisions. Without
in any way limiting the generality of Section 7.09, the holders of Guarantor
Senior Indebtedness may, at any time and from time to time, without the consent
of or notice to the Trustee or the Holders, without incurring responsibility to
the Holders and without impairing or releasing the subordination provided in
this Article Seven or the obligations hereunder of the Holders to the holders of
such Guarantor Senior Indebtedness, do any one or more of the following: (a)
change the manner, place or terms of payment or extend the time of payment of,
or renew or alter, such Guarantor Senior Indebtedness or any instrument
evidencing the same or any agreement under which such Guarantor Senior
Indebtedness is outstanding or secured; (b) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing such Guarantor
Senior Indebtedness; (c) release any Person liable in any manner for the
collection of such Guarantor Senior Indebtedness; and (d) exercise or refrain
from exercising any rights against a Guarantor with respect to such Guarantor
Senior Indebtedness and any other Person.
SECTION 7.14 Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Seven or elsewhere in this Indenture shall
prevent (i) a Guarantor, except under the conditions described in Section 7.02
or Section 7.03, from making payments under the Note Guarantee of such Guarantor
with respect to the principal of and interest on the Notes, or from depositing
with the Trustee any money for such payments, or (ii) the application by the
Trustee of any money deposited with it for the purpose of making such payments
of principal of and interest on the Notes to the Holders entitled thereto
unless,
<PAGE> 60
56
at least two Business Days prior to the date upon which such payment becomes due
and payable, the Trustee shall have received the written notice provided for in
Section 7.02(b) (or there shall have been an acceleration of the Securities or
any Coupons appertaining thereto prior to such application) or in Section 7.06.
Each Guarantor shall give prompt written notice to the Trustee of any
dissolution, winding up, liquidation or reorganization of such Guarantor.
ARTICLE EIGHT
Miscellaneous Provisions
SECTION 8.01 Ratification of Subordinated Indenture.
Except as expressly modified or amended hereby, the
Subordinated Indenture continues in full force and effect and is in all respects
confirmed and preserved.
SECTION 8.02 Supplemental Indenture.
Notwithstanding any provision to the contrary in Section
8.02 of the Subordinated Indenture, no supplemental indenture entered into by
the Issuer and the Trustee in accordance with Article Eight of the Subordinated
Indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby, change or eliminate any of such Holder's rights under Articles
Three and Four hereof, or modify Articles Six or Seven hereof in a manner
adverse to such Holder.
It shall not be necessary for the consent of the Holders
under this Section 8.02 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall approve
the substance thereof.
SECTION 8.03 Governing Law.
This Supplemental Indenture and each Note shall be deemed to
be a contract under the laws of the State of New York, and for all purposes
shall be construed in accordance with the internal laws of such State, except as
may otherwise be required by mandatory provisions of law. This Supplemental
Indenture is subject to the provisions of the Trust Indenture Act and shall, to
the extent applicable, be governed by such provisions.
<PAGE> 61
57
SECTION 8.04 Counterparts.
This Supplemental Indenture may be executed in any number of
counterparts, each of which shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 8.05 Effect of Headings. The Article and Section
headings herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.
[Signature page follows]
<PAGE> 62
S-1
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first written
above.
PROTECTION ONE ALARM MONITORING, INC.,
as Issuer
By:____________________________________
Name:
Title:
PROTECTION ONE, INC.,
as Parent Company
By:____________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:____________________________________
Name:
Title:
<PAGE> 63
Exhibit A to
Supplemental Indenture
[FORM OF FACE OF NOTE]
[For global Note only:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE "DEPOSITARY," WHICH
TERM INCLUDES ANY SUCCESSOR DEPOSITARY FOR THE NOTES) TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO., OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DEPOSITARY AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO. (OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A NOTE IN DEFINITIVE
REGISTERED FORM, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY
TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY.]
No. ____________ CUSIP No. 743 659 AL8
PROTECTION ONE ALARM MONITORING, INC.
6 3/4% Convertible Senior Subordinated Note due 2003
PROTECTION ONE ALARM MONITORING, INC., a corporation duly
organized and existing under the laws of the State of Delaware (the "Issuer"),
for value received, hereby promises to pay to , or registered assigns,
the principal sum of DOLLARS on September 15, 2003 at the agency of the
Issuer in the Borough of Manhattan, The City of New York, New York, or at such
other office or agency of the Issuer as may be maintained for such purpose, in
such coin or currency of The United States of America as at the time of payment
is legal tender for the payment of public and private debts, and to pay to the
registered Holder hereof, as hereinafter provided, interest on said principal
sum at the rate per annum specified in the title of this Note, in like
<PAGE> 64
2
coin or currency, semiannually on March 15 and September 15 of each year,
commencing March 15, 1997. Interest shall accrue from the most recent date
to which interest has been paid or duly provided for or, if no interest has been
paid or duly provided for, from September 20, 1996. The interest so payable on
any March 15 and September 15 will, subject to certain exceptions provided in
the Supplemental Indenture hereinafter referred to, be paid to the Person in
whose name this Note is registered at the close of business on March 1 and
September 1, as the case may be, next preceding such March 15 and
September 15 whether or not such March 1 and September 1 is a Business Day.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months. At the option of the Issuer, payments of principal and interest on the
Notes may be made (i) by check mailed to the address of the Person entitled
thereto as such address shall appear in the register of Holders of the Notes
or (ii) by wire transfer to an account maintained by the Person entitled
thereto as specified in the register of Holders of the Notes; provided,
however, that payments to The Depository Trust Company ("DTC") shall be made
by wire transfer of immediately available funds to the account of DTC or its
nominee.
As provided in the Supplemental Indenture, this Note shall be
deemed to be a contract made under the laws of the State of New York, and for
all purposes shall be governed by and construed in accordance with the internal
laws of such State, except as may otherwise be required by mandatory provisions
of law.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, including, without limitation, provisions
subordinating the payment of principal of, premium, if any, and interest on the
Notes to the prior payment in full of all Senior Indebtedness, as defined in the
Supplemental Indenture, and provisions giving the Holder of this Note the right
to convert this Note into Common Stock of Protection One, Inc., a Delaware
corporation (the "Parent Company"), on the terms and subject to the limitations
referred to on the reverse hereof and as more fully specified in the
Supplemental Indenture. Such further provisions shall for all purposes have the
same effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have been manually
signed by the Trustee or a duly authorized Authenticating Agent under the Senior
Indenture and Supplemental Indenture referred to on the reverse hereof.
<PAGE> 65
3
IN WITNESS WHEREOF, PROTECTION ONE ALARM MONITORING, INC.
has caused this instrument to be duly executed under its corporate seal.
Dated:
PROTECTION ONE ALARM MONITORING,INC.
By:_________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-mentioned
Supplemental Indenture.
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:_________________________________
Authorized Officer
<PAGE> 66
[FORM OF REVERSE OF NOTE]
PROTECTION ONE ALARM MONITORING, INC.
6 3/4% Convertible Senior Subordinated Note due 2003
This Note is one of a duly authorized issue of Securities of
the Issuer known as its 6 3/4% Convertible Senior Subordinated Notes due 2003
(herein referred to as the "Notes"), limited to the aggregate principal amount
of $90,000,000 (or $103,500,000 if the over-allotment option set forth in
Section 3 of the Underwriting Agreement dated September 16, 1996 (as amended
from time to time by the parties thereto) by and between the Issuer and the
Parent Company and Morgan Stanley & Co., Incorporated, Bear, Stearns & Co.,
Inc. and Montgomery Securities is exercised in full), all issued under and
pursuant to an Indenture, dated as of August 29, 1996 (herein referred to as
the "Subordinated Indenture"), between the Issuer, the Parent Company and
State Street Bank and Trust Company, a Massachusetts trust company, as trustee
(the "Trustee"), to which Subordinated Indenture and all indentures
supplemental thereto reference is hereby made for a description of the
respective rights, limitations of rights, obligations, duties and immunities
thereunder of the Issuer, the Parent Company, the Trustee and the Holders of
the Notes. This Note is one of the series designated on the face hereof, and
is issued pursuant to an indenture supplemental to the Subordinated Indenture,
dated as of September 20, 1996, from the Issuer and the Parent Company to the
Trustee, relating to the Notes of this series (the "Supplemental Indenture").
In case an Event of Default, as defined in the Subordinated
Indenture, shall have occurred and be continuing, the principal of and accrued
interest on all Notes may be declared, and upon said declaration shall become,
due and payable, in the manner, with the effect and subject to the conditions
provided in the Subordinated Indenture.
The Subordinated Indenture and the Supplemental Indenture
contain provisions permitting the Issuer and the Trustee, with the consent of
the Holders of not less than a majority in aggregate principal amount of the
Notes at the time outstanding, evidenced as in the Subordinated Indenture
provided, to execute supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of the Subordinated
Indenture, the Supplemental Indenture or of any other supplemental indenture or
modifying in any manner the rights of the Holders of the Notes; provided,
however, that no such supplemental indenture shall (i) extend the final maturity
of any Note, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon, or reduce any amount payable on
redemption thereof, or make the principal thereof or interest or premium, if
any, thereon payable in any coin or currency other than that provided in the
Note, or impair or affect the right of any Noteholder to institute suit for the
payment thereof, or modify the provisions of the Supplemental Indenture with
respect to the subordination of the Notes in a manner adverse to the Noteholders
in any material respect, or change the obligation of the Issuer to make
redemption of any Note upon the happening of a
<PAGE> 67
2
Fundamental Change in a manner adverse to the Holder of the Notes, or impair the
right to convert the Notes into Common Stock of the Parent Company subject to
the terms set forth in the Supplemental Indenture, including Article Four
thereof, without the consent of the Holder of each Note so affected or (ii)
reduce the aforesaid percentage of Notes, the Holders of which are required to
consent to any such supplemental indenture, without the consent of the Holders
of each Note then outstanding. It is also provided in the Subordinated Indenture
that, prior to any declaration accelerating the maturity of the Notes, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may on behalf of the Holders of all of the Notes waive any past
Default or Event of Default under the Subordinated Indenture and its
consequences except a Default in respect of a covenant or provision of the
Subordinated Indenture or the Supplemental Indenture which cannot be modified or
amended without the consent of the Holder of each Note affected. Any such
consent or waiver by the Holder of this Note (unless revoked as provided in the
Subordinated Indenture) shall be conclusive and binding upon such Holder and
upon all future Holders and owners of this Note and any Notes which may be
issued in exchange or substitute hereof, irrespective of whether or not any
notation thereof is made upon this Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and
in the manner provided in the Supplemental Indenture, expressly subordinate and
subject in right of payment to the prior payment in full of all Senior
Indebtedness (as defined in the Supplemental Indenture) of the Issuer, whether
outstanding at the date of the Supplemental Indenture or thereafter incurred,
and this Note is issued subject to the provisions of the Supplemental Indenture
with respect to such subordination. Each Holder of this Note, by accepting the
same, agrees to and shall be bound by such provisions and authorizes the Trustee
on its behalf to take such action as may be necessary or appropriate to
effectuate the subordination so provided and appoints the Trustee as such
Holder's attorney-in-fact for such purpose.
No reference herein to the Subordinated Indenture or to the
Supplemental Indenture and no provision of this Note or of the Subordinated
Indenture or of the Supplemental Indenture shall alter or impair the obligation
of the Issuer, which is absolute and unconditional, to pay the principal of and
any premium and interest on this Note at the place, at the respective times, at
the rate and in the coin or currency herein prescribed. Interest on the Notes
shall be computed on the basis of a 360-day year comprised of twelve 30-day
months.
The Notes are issuable in registered form without coupons in
denominations of $1,000 and any integral multiple of $1,000. At the office or
agency of the Issuer referred to on the face hereof, and in the manner and
subject to the limitations provided in the Subordinated Indenture, without
payment of any service charge but with payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection
<PAGE> 68
3
with any registration, transfer or exchange of Notes, Notes may be exchanged for
a like aggregate principal amount of Notes of other authorized denominations.
The Notes will not be redeemable at the option of the Issuer
prior to September 19, 1999. At any time on or after September 19, 1999, and
prior to maturity the Notes may be redeemed, subject to certain circumstances
specified in the Supplemental Indenture, at the option of the Issuer as a
whole, or from time to time in part, upon mailing a notice of such redemption
not less than 30 days before the date fixed for redemption to the Holders of
Notes at their last registered addresses, all as provided in the Supplemental
Indenture, at the following optional redemption prices (expressed as
percentages of the principal amount), together in each case with accrued
interest to, but excluding, the date fixed for redemption.
If redeemed during the 12-month period beginning September 15:
<TABLE>
<CAPTION>
Year Percentage Year Percentage
<S> <C> <C> <C> <C>
1999 . . . . . . . . 103.587% 2001 . . . . . . . . 101.929%
2000 . . . . . . . . 102.893 2002 . . . . . . . . 100.964
</TABLE>
and 100% at September 15, 2003; provided that if the date fixed for redemption
is on March 15 or September 15, then the interest payable on such date shall
be paid to the Holder of record on the next preceding March 1 or September 1,
respectively.
The Notes are not subject to redemption through the
operation of any sinking fund.
If a Fundamental Change (as defined in the Supplemental
Indenture) occurs at any time prior to September 15, 2003, the Notes will be
redeemable on the 30th day after notice thereof at the option of the Holder.
Such payment shall be made at the following prices (expressed as percentages of
the principal amount) in the event of a Fundamental Change occurring during the
12-month period beginning September 15:
<TABLE>
<CAPTION>
Year Percentage Year Percentage
<S> <C> <C> <C> <C>
1996 . . . . . . . . 106.750% 2000 . . . . . . . . 102.893%
1997 . . . . . . . . 105.786 2001 . . . . . . . . 101.929
1998 . . . . . . . . 104.821 2002 . . . . . . . . 100.964
1999 . . . . . . . . 103.857
</TABLE>
and 100% at September 15, 2003; provided in each case that if the Applicable
Price (as defined in the Supplemental Indenture) is less than the Reference
Market Price (as defined in the Supplemental Indenture), the Issuer shall
redeem such Notes at a price equal to the
<PAGE> 69
4
foregoing repayment price multiplied by the fraction obtained by dividing the
Applicable Price by the Reference Market Price. In each case, the Issuer shall
also pay accrued interest, if any, on such Notes to, but excluding, the
repayment date; provided that if such repayment date is March 15 or September
15, then the interest payable on such date shall be paid to the Holder of record
of the Note on the next preceding March 1 or September 1. The Issuer shall mail
to all Holders of record of the Notes a notice of the occurrence of a
Fundamental Change and of the redemption right arising as a result thereof on or
before the 10th day after the occurrence of such Fundamental Change. For a Note
to be so repaid at the option of the Holder, the Issuer must receive at the
office or agency of the Issuer maintained for that purpose in accordance with
the terms of the Indenture, such Note with the form entitled "Option to Elect
Repayment Upon a Fundamental Change" on the reverse thereof duly completed,
together with such Notes duly endorsed for transfer, on or before the 30th day
after the date of such notice (or if such 30th day is not a Business Day, the
immediately preceding Business Day).
Subject to the provisions of the Supplemental Indenture, the
Holder hereof has the right, at its option, at any time after 90 days following
the latest date of original issuance of the Notes and prior to the close of
business on September 15, 2003, or, as to all or any portion hereof called for
redemption, prior to the close of business on the Business Day immediately
preceding the date fixed for redemption (unless the Issuer shall default in
payment due upon redemption thereof), to convert the principal hereof or any
portion of such principal which is $1,000 or an integral multiple thereof, into
that number of shares of Common Stock of the Parent Company, as said shares
shall be constituted at the date of conversion, obtained by dividing the
principal amount of this Note or portion thereof to be converted by the
Conversion Price of $17.95 or such Conversion Price as adjusted from time to
time as provided in the Supplemental Indenture, upon surrender of this Note,
together with the form entitled "Conversion Notice" on the reverse thereof duly
completed, as provided in the Supplemental Indenture, to the Parent Company at
the office or agency of the Parent Company maintained for that purpose in
accordance with the terms of the Supplemental Indenture, or at the option of
such Holder, the Corporate Trust Office, and, unless the shares issuable on
conversion are to be issued in the same name as this Note, duly endorsed by, or
accompanied by instruments of transfer in form satisfactory to the Parent
Company duly executed by, the Holder or by such Holder's duly authorized
attorney. No adjustment in respect of interest or dividends will be made upon
any conversion; provided, however, that if this Note shall be surrendered for
conversion during the period from the close of business on any record date for
the payment of interest to the close of business on the Business Day preceding
the interest payment date, this Note (unless it or the portion being converted
shall have been called for redemption during the period from the close of
business on any record date for the payment of interest to the close of business
on the Business Day preceding the interest payment date) must be accompanied by
an amount, in New York Clearing House funds or other funds acceptable to the
Parent Company, equal to the interest payable on such interest payment date on
the principal amount being converted. No fractional shares will be
<PAGE> 70
5
issued upon any conversion, but an adjustment in cash will be made, as provided
in the Indenture, in respect of any fraction of a share which would otherwise be
issuable upon the surrender of any Note or Notes for conversion.
Any Notes called for redemption, unless surrendered for
conversion on or before the close of business on the date fixed for redemption,
may be deemed to be purchased from the Holder of such Notes at an amount equal
to the applicable redemption price, together with accrued interest to (but
excluding) the date fixed for redemption, by one or more investment bankers or
other purchasers who may agree with the Issuer to purchase such Notes from the
Holders thereof and convert them into Common Stock of the Parent Company and to
make payment for such Notes as aforesaid to the Trustee in trust for such
Holders.
Upon due presentment for registration of transfer of this Note
at the office or agency of the Issuer maintained for that purpose in accordance
with the terms of the Subordinated Indenture, or at the option of the Holder of
this Note, at the Corporate Trust Office, a new Note or Notes of authorized
denominations for an equal aggregate principal amount will be issued to the
transferee in exchange thereof, subject to the limitations provided in the
Indenture, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Issuer, the Parent Company, the Trustee, any
authenticating agent, any paying agent, any conversion agent and any Note
registrar may deem and treat the registered Holder hereof as the absolute owner
of this Note (whether or not this Note shall be overdue and notwithstanding any
notation of ownership or other writing hereon made by anyone other than the
Issuer or any Note registrar), for the purpose of receiving payment hereof, or
on account hereof, for the conversion hereof and for all other purposes, and
neither the Issuer nor the Parent Company nor the Trustee nor any other
authenticating agent nor any paying agent nor any other conversion agent nor any
Note registrar shall be affected by any notice to the contrary. All payments
made to or upon the order of such registered Holder shall, to the extent of the
sum or sums paid, satisfy and discharge liability for monies payable on this
Note.
No recourse for the payment of the principal of or any premium
or interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Issuer in the Indenture or any indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, employee, agent, officer or
director or subsidiary, as such, past, present or future, of the Issuer or the
Parent Company or of any successor corporation thereto, either directly or
through the Issuer or the Parent Company or any successor corporation, whether
by virtue of any constitution, statute or rule of law or by the enforcement of
any assessment or penalty or otherwise, all such
<PAGE> 71
6
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.
The Issuer's obligations under the Notes are guaranteed on a
senior subordinated basis, jointly and severally, by the Parent Company and by
each Subsidiary of Parent Company which becomes a Guarantor pursuant to the
provisions of the Subordinated Indenture.
Terms used in this Note and defined in the Subordinated
Indenture or the Supplemental Indenture, as the case may be, are used herein as
therein defined.
<PAGE> 72
7
CONVERSION NOTICE
To: PROTECTION ONE, INC.
The undersigned registered owner of this Note hereby irrevocably
exercises the option to convert this Note, or the portion hereof (which is
$1,000 or an integral multiple thereof) below designated, into shares of Common
Stock of Protection One, Inc. in accordance with the terms of the Supplemental
Indenture referred to in this Note, and directs that the shares issuable and
deliverable upon such conversion, together with any check in payment for
fractional shares and any Notes representing any unconverted principal amount
hereof, be issued and delivered to the registered Holder hereof unless a
different name has been indicated below. If shares or any portion of this Note
not converted are to be issued in the name of a person other than the
undersigned, the undersigned will check the appropriate box below and pay all
transfer taxes payable with respect thereto. Any amount required to be paid to
the undersigned on account of interest accompanies this Note.
Dated:____________________________
____________________________________
____________________________________
Signature(s)
NOTICE: The above signatures of the
Holder(s) hereof must correspond
with the name as written upon the
face of the Note in every particular
without alteration or enlargement or
any change whatever.
Principal amount to be converted (if
less than all):
$
______________
___________________________________
Social Security or Other Taxpayer
Identification Number
<PAGE> 73
8
Signature(s) must be guaranteed by a
commercial bank or trust company or
a member firm of a major stock
exchange if shares of Common Stock
of the Parent Company are to be
issued, or Notes to be delivered,
other than to and in the name of the
registered Holder.
------------------------------------
Signature Guarantee
<PAGE> 74
9
ASSIGNMENT
FOR VALUE RECEIVED, _____________________ hereby sell(s), assign(s) and
transfer(s) unto_________________________ (Please insert social security or
other Taxpayer Identification Number of assignee) the within Note, and hereby
irrevocably constitutes and appoints _______________________ attorney to
transfer the said Note on the books of the Issuer, with full power of
substitution in the premises.
Dated:________________________ ____________________________________
____________________________________
Signature(s)
NOTICE: The above signatures of the
Holder(s) hereof must correspond
with the name as written upon the
face of the Note in every particular
without alteration or enlargement or
any change whatever.
Principal amount to be assigned (if
less than all):
$
_________
___________________________________
Social Security or Other Taxpayer
Identification Number
Signature(s) must be guaranteed by a
commercial bank or trust company or
a member firm of a major stock
exchange if shares of Common Stock
are to be issued, or Notes to be
delivered, other than to and in the
name of the registered Holder.
____________________________________
Signature Guarantee
<PAGE> 75
10
OPTION TO ELECT REPAYMENT
UPON A FUNDAMENTAL CHANGE
To: PROTECTION ONE ALARM MONITORING, INC.
The undersigned registered owner of this Note hereby irrevocably
acknowledges receipt of a notice from Protection One Alarm Monitoring, Inc. (the
"Issuer") as to the occurrence of a Fundamental Change with respect to the
Issuer and requests and instructs the Issuer to repay the entire principal
amount of this Note, or the portion thereof (which is $1,000 or an integral
multiple thereof) below designated, in accordance with the terms of the
Indenture referred to in this Note at the redemption price, together with
accrued interest to, but excluding, such date, to the registered Holder hereof.
Dated:________________________ ____________________________________
____________________________________
Signature(s)
NOTICE: The above signatures of the
Holder(s) hereof must correspond
with the name as written upon the
face of the Note in every particular
without alteration or enlargement or
any change whatever.
Principal amount to be repaid (if
less than all):
$
________________
___________________________________
Social Security or Other Taxpayer
Identification Number
<PAGE> 76
11
Signature(s) must be guaranteed by a
commercial bank or trust company or
a member firm of a major stock
exchange if shares of Common Stock
are to be issued, or Notes to be
delivered, other than to and in the
name of the registered Holder.
------------------------------------
Signature Guarantee
<PAGE> 77
12
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face
of this Note, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT- __________Custodian________
TEN ENT - as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to Minors Act
JT TEN - as joint tenants with
right of survivorship ______________________________________
and not as tenants in (State)
common
</TABLE>
Additional abbreviations may also be used
though not in the above list.
