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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-13492
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THE TIMES MIRROR COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4481525
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
TIMES MIRROR SQUARE 90053
LOS ANGELES, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (213) 237-3700
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Series A Common Stock New York Stock Exchange and Pacific Stock Exchange
Conversion Preferred New York Stock Exchange
Stock, Series B
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Series C Common Stock
(TITLE OF CLASS)
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
----
The aggregate market value of the voting stock of the Registrant held by
non-affiliates of the Registrant on March 15, 1996 was approximately $2.4
billion. (For purposes of this calculation, the market value of a share of
Series C Common Stock was assumed to be the same as a share of Series A Common
Stock, into which it is convertible.)
Number of shares of the Registrant's Series A Common Stock outstanding at
March 15, 1996: 76,852,761
Number of shares of the Registrant's Series C Common Stock outstanding at
March 15, 1996: 27,825,020
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference: In Part III, portions
of the Registrant's definitive Proxy Statement dated March 29, 1996.
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PART I
ITEM 1. BUSINESS.
GENERAL
The Times Mirror Company ("Times Mirror" or the "Company") is engaged
principally in the newspaper publishing, professional information and consumer
media businesses (the "Publishing and Information Businesses"). The Company
publishes the Los Angeles Times, Newsday, The Baltimore Sun, The Hartford
Courant, The Morning Call, The (Stamford) Advocate, the Greenwich Time and
several smaller newspapers. Through its subsidiaries, the Company also
provides professional information to the legal, aviation and health science
and consumer health markets, publishes college texts, other categories of
books and magazines and also provides training information and services.
In the third quarter, the Company began an aggressive program to improve its
profitability while maintaining the editorial quality of its products in 1995.
The Company completed a comprehensive restructuring program which resulted in,
among other things, (i) closure of New York Newsday, Baltimore's Evening Sun,
and certain sections of the Los Angeles Times, (ii) staff reductions
throughout the Company, (iii) discontinuation of Times Mirror's consumer
multimedia business, cable television programming business and its electronic
shopping joint ventures with Pacific Telesis, (iv) renegotiation of union
agreements at Newsday and The Baltimore Sun, (v) consolidation in the same
building of the New York City offices of Newsday, Matthew Bender, Times Mirror
Magazines and the east coast corporate staff, (vi) writedowns of goodwill and
other intangibles at The Baltimore Sun, Times Mirror Magazines and several
professional information businesses, and (vii) discontinuation of the
development of a companywide digital network of product, marketing and
administrative databases. The after-tax impact of the restructuring program
charges was $554.0 million, of which $504.4 million related to continuing
operations and $49.6 million related to discontinued operations. The Company's
1995 restructuring program and other related actions taken in 1995 are
expected to produce approximately $135 million in annualized operating expense
savings of which approximately 90% will be realized in 1996.
Prior to February 1, 1995, the Company also engaged in the ownership and
operation of cable television systems, which business was divested by the
merger of the Company's corporate predecessor ("Old Times Mirror") with and
into Cox Communications, Inc. ("Cox"), resulting in the acquisition of Old
Times Mirror's cable business by Cox (the "Cox Merger"). The Company was
incorporated in the State of Delaware in June 1994 for the purpose of owning
and operating the Publishing and Information Businesses after the Cox Merger
was completed on February 1, 1995. Old Times Mirror was incorporated in 1884
in the State of California and was reincorporated in the State of Delaware in
1986. All references to "Times Mirror" shall include the Company and the
Company's subsidiaries, collectively, unless the context suggests otherwise.
NEWSPAPER PUBLISHING SEGMENT
Times Mirror publishes the Los Angeles Times, Newsday, The Baltimore Sun,
The Hartford Courant, The Morning Call, The (Stamford) Advocate, and the
Greenwich Time. In addition, Times Mirror publishes several daily and weekly
newspapers. Each daily newspaper operates independently in order to meet most
effectively the needs of the area it serves. Editorial policies and business
practices are established by local management. Each daily newspaper is a
member of Associated Press. The Los Angeles Times and Newsday also subscribe
to other supplementary news services. Production of Times Mirror's newspapers
is performed on presses owned by Times Mirror.
The primary raw material used by the newspapers is newsprint. Times Mirror
centrally purchases newsprint for all of its newspapers in order to achieve
advantageous terms from its vendors. For the first half of 1995, most of the
newsprint requirements for the Los Angeles Times were met by a company in
which Times Mirror owned a 20% interest. In the third quarter of 1995, Times
Mirror sold its entire holding in such company. Except as so
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indicated, the newsprint requirements for all Times Mirror newspapers are
obtained from United States and Canadian sources unaffiliated with Times
Mirror. In 1995, newprint prices rose substantially. To minimize the effect of
escalating prices, Times Mirror responded by significantly increasing its
newprint inventory levels prior to anticipated price increases and conserving
on newsprint utilization. For 1995, Times Mirror's newsprint costs increased
approximately 30% above its 1994 costs.
ELECTRONIC PUBLISHING
During most of 1995, the Los Angeles Times and Newsday continued their
regional online interactive information services through the Prodigy network
in Los Angeles and New York. The Los Angeles Times announced in late December
that its "TimesLink" service had left the Prodigy network and is moving in the
spring of 1996 to the World Wide Web under the name of "LATimes.com" due to
the popularity of the Internet and to take advantage of a far wider audience.
Newsday is keeping its "Newsday Direct" service on the Prodigy network and
will be expanding to the World Wide Web in early 1996.
In October 1995, the Los Angeles Times and five other of the nation's
largest newspapers introduced a national interactive employment service
offering a comprehensive listing of jobs on the Internet. In January 1996, the
Los Angeles Times acquired Hollywood Online, Inc., an online provider of
award-winning entertainment information for consumers about the latest in
movies, television and music. In addition, Hollywood Online offers turnkey
creative, design, production and distribution services for leading motion
picture studios, television networks and record labels.
LOS ANGELES TIMES
The Los Angeles Times has been published continuously since 1881. It is
published every morning, and in 1995 ranked as the second largest metropolitan
newspaper in the United States in weekday circulation based on five-day
averages, and the second largest in Sunday circulation. In 1995, its annual
average unaudited circulation was 1,026,697 for Monday through Friday, 966,291
for Saturday and 1,420,755 for Sunday, compared with 1,077,277, 1,002,603, and
1,468,865, respectively, in 1994. Approximately 80% of the Monday through
Saturday circulation was home-delivered in 1995, compared with 78% of the
circulation in 1994.
In 1995, the Los Angeles Times recorded full-run billed advertising volume
of 3,211,952 standard advertising unit inches (hereafter "inches"), part-run
volume of 4,025,315 inches, and preprinted inserts of 1,086.5 million pieces,
compared with 3,446,246 inches, 4,073,410 inches and 909.0 million pieces,
respectively, in 1994. In addition, the Los Angeles Times derived revenue from
advertising supplements distributed to non-subscribers equivalent to 865.7
million pieces in 1995, compared with 684.7 million pieces in 1994.
Net revenues of the Los Angeles Times were $1,029,277,000 in 1995,
$1,033,486,000 in 1994, and $991,997,000 in 1993, representing 29.8%, 30.8%
and 30.6% of the revenues of the Publishing and Information Businesses for
such years.
The Los Angeles Times serves a five-county region in Southern California
that includes Los Angeles, Orange, Riverside, San Bernardino, and Ventura
counties. In addition to the daily edition covering the Los Angeles
metropolitan area, the Los Angeles Times publishes daily Orange County, San
Fernando Valley and Ventura County editions. The Los Angeles Times also
publishes an edition which is distributed Monday through Friday in the
Washington, D.C. area.
In its primary markets of Los Angeles and Orange counties, the Los Angeles
Times competes with 12 local daily newspapers, which range in size up to
approximately 350,000 total average daily circulation, and three daily
regional editions of national newspapers. In addition, there are over 300
weekly, semi-weekly and free distribution newspapers.
In conjunction with the Washington Post, the Los Angeles Times operates a
supplementary news service sold to newspapers in the United States and foreign
countries. The Los Angeles Times also sells syndicated features to other
newspapers throughout the world. In the fourth quarter of 1995, the Los
Angeles Times and
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La Opinion, the largest Spanish-language daily newspaper in Southern
California of which the Company owns a 50% equity interest, launched a joint
venture that publishes a new Spanish-language weekly paper, Para Ti, targeted
at Latino households in Southern California.
NEWSDAY
Newsday, which is published seven days a week, circulates primarily in
Nassau and Suffolk counties on Long Island, New York and the borough of Queens
in New York City, and prior to being discontinued on July 17, 1995, New York
Newsday circulated in New York City. In 1995, Newsday and New York Newsday
combined ranked as the seventh largest local daily newspaper in the country
for Monday through Friday circulation, and as the twelfth largest for Sunday
circulation. In 1995, Newsday's annual average unaudited circulation, which
includes New York Newsday for a partial year before its discontinuation, was
619,019 for Monday through Friday, 558,187 for Saturday, and 694,781 for
Sunday, compared with 683,109, 576,770 and 771,068, respectively, in 1994. In
1995, New York Newsday's annual average unaudited circulation prior to its
discontinuation was 161,271 for Monday through Friday, 115,040 for Saturday,
and 150,476 for Sunday, compared with 223,004, 148,578 and 209,905,
respectively, in 1994.
In 1995, Newsday and New York Newsday combined recorded full-run billed
advertising volume of 1,478,870 inches, part-run volume of 1,101,551 inches,
and preprinted inserts of 726.3 million pieces, compared with 1,544,925
inches, 1,190,941 inches, and 785.4 million pieces, respectively, in 1994.
Newsday's 1995 part-run volume included inches from New York Newsday from
January 1 through its closing date on July 17, 1995. The 1994 part-run volume
included New York Newsday inches from January 1 through December 31, 1994. In
addition, Newsday and New York Newsday combined, together with their alternate
distribution company, derived revenues from advertising supplements
distributed to non-subscribers equivalent to 975.7 million pieces in 1995,
compared with 937.1 million pieces in 1994.
Newsday competes with three major metropolitan newspapers, numerous daily
and local newspapers, and daily regional editions of national newspapers.
THE BALTIMORE SUN
The Baltimore Sun primarily serves the Baltimore-Annapolis metropolitan
area, including Anne Arundel, Baltimore, Carroll, Harford and Howard counties.
Prior to September 1995, The Baltimore Sun published three editions, including
The Sun, a morning newspaper published Monday through Saturday; The Evening
Sun, an afternoon paper published Monday through Friday; and The Sunday Sun,
published Sunday mornings. In September 1995, The Baltimore Sun ceased
publishing The Evening Sun and completely redesigned The Sun. In 1995, The Sun
had an annual average unaudited circulation of 283,660 for Monday through
Friday, and 367,241 for Saturday, compared with 252,094 and 370,971,
respectively, in 1994. In 1995 prior to its discontinution, the Evening Sun
had an annual average unaudited circulation of 81,209 for Monday through
Friday, compared with 91,451 in 1994. In 1995, The Sunday Sun had an annual
average unaudited circulation of 489,706 compared with 489,283 in 1994.
In 1995, the Baltimore Sun newspapers, including The Evening Sun before its
discontinuation, recorded full-run billed advertising volume of 2,366,175
inches, part-run volume of 418,920 inches, and preprinted inserts of 560.7
million pieces, compared with 2,688,451 inches, 465,290 inches and 521.9
million pieces, respectively in 1994. In addition, the Baltimore Sun
newspapers, inclusive of The Evening Sun before its discontinuation, derived
revenues from advertising supplements delivered to non-subscribers equivalent
to 880,266 inches in 1995 compared with 776,079 inches in 1994.
Weekly newspapers are also published by The Baltimore Sun, including The
Aegis and the Record which are distributed in Harford County, and four other
weeklies that serve the Aberdeen Proving Ground and certain zip codes in
Harford County. The Baltimore Sun competes with the Washington Post in Carroll
and Howard counties, and with the Annapolis Capital in Anne Arundel County. In
addition, there are other weekly and local daily newspapers in the
distribution area.
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THE HARTFORD COURANT
The Hartford Courant, a morning daily and Sunday newspaper that was first
published in 1764, is the oldest continuously-published newspaper in the
United States. It is published in Hartford, Connecticut, and serves the
state's northern and central regions. The Hartford Courant publishes seven
regional editions on a daily basis, which provide local news and advertising.
In 1995, the annual average unaudited circulation was 214,751 for Monday
through Saturday, and 310,490 for Sunday, compared with 228,807 and 317,123,
respectively, in 1994.
In 1995, The Hartford Courant recorded full-run billed advertising volume of
1,414,188 inches, part-run volume of 686,328 inches, and preprinted inserts of
431.7 million pieces, compared with 1,371,717 inches, 696,355 inches and 438.9
million pieces, respectively, in 1994. In addition, The Hartford Courant
derived revenues from advertising supplements distributed to non-subscribers
equivalent to 1,071,251 inches in 1995, compared with 1,203,634 inches in
1994.
The Hartford Courant competes with several small daily and weekly newspapers
in communities adjacent or relatively close to Hartford, and with a number of
larger daily papers, especially, in metropolitan areas on the periphery of its
trade area.
THE MORNING CALL
The Morning Call in Allentown, Pennsylvania is published daily, and
primarily services Lehigh and Northampton counties in eastern Pennsylvania. In
1995, annual average unaudited circulation was 131,628 for Monday through
Friday, 145,156 for Saturday, and 186,733 for Sunday, compared with 134,449,
147,356 and 188,489, respectively, in 1994.
In 1995, The Morning Call recorded full-run billed advertising volume of
1,378,005 inches, part-run volume of 281,236 inches, and preprinted inserts of
229.3 million pieces, compared with 1,431,148 inches, 379,742 inches and 214.3
million pieces, respectively, in 1994. In addition, The Morning Call derived
revenues from advertising supplements distributed to non-subscribers
equivalent to 54,677 inches in 1995, compared with 107,488 inches in 1994.
The Morning Call competes with a few smaller daily and weekly newspapers,
with the principal competitor being the Express Times in Easton, Pennsylvania.
THE (STAMFORD) ADVOCATE AND THE GREENWICH TIME
The (Stamford) Advocate and the Greenwich Time are published every morning,
and serve the southern part of Fairfield County, Connecticut. The Advocate
circulates primarily in Stamford, Connecticut and the Greenwich Time
circulates in Greenwich, Connecticut. In 1995, The Advocate had an annual
average unaudited circulation of 28,840 for Monday through Saturday, and
40,489 for Sunday, compared with 29,314 and 40,354, respectively, in 1994. In
1995, the Greenwich Time had an annual average unaudited circulation of 12,797
for Monday through Saturday, and 14,184 for Sunday, compared with 13,054 and
14,391, respectively, in 1994.
In 1995, The Advocate recorded full-run billed advertising volume of 769,193
inches, and preprinted inserts of 39.5 million pieces, compared with 773,311
inches and 35.9 million pieces in 1994. In 1995, the Greenwich Time recorded
full-run billed advertising volume of 738,802 inches and preprinted inserts of
12.8 million pieces, compared with 718,093 inches and 12.2 million pieces in
1994. In addition, the newspapers derived revenues from advertising
supplements distributed to non-subscribers equivalent to 118,596 inches in
1995 compared with 155,621 inches in 1994.
Both The Advocate and the Greenwich Time compete with a number of larger
daily papers which serve surrounding metropolitan areas.
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OTHER COMPETITION
Besides competing vigorously with similar media in their respective markets,
the Company's newspapers compete for advertising revenues with other local and
national sales promotion media such as radio, broadcast television, cable
television and direct mail.
SEASONALITY
Quarterly revenues of the Company's newspaper publishing segment vary
slightly due to industry seasonality, with first and third quarters' results
generally being minimally lower than those of the second and fourth quarters.
In 1995, the quarterly revenues expressed as a percentage of total annual
revenues for the Company's newspaper publishing segment were 23.2% for the
first quarter, 25.6% for the second quarter, 23.6% for the third quarter and
27.6% for the fourth quarter.
PROFESSIONAL INFORMATION SEGMENT
Times Mirror produces a variety of books and other information products in
the areas of legal information, flight information, and health information
products and services, as well as higher education publishing, technical and
scientific publishing and professional training. Books, journals and other
materials published by Times Mirror, many of which are distributed worldwide,
are sold through a variety of means, including the use of Times Mirror sales
forces, wholesalers, retailers, jobbers, direct-to-the-customer selling and
direct mail. Printing and binding are performed primarily by outside suppliers
in the United States and abroad. In accordance with publishing industry
practice, softcover and hardcover books are generally sold on a returnable
basis.
The primary raw material used by the book publishing businesses is paper. In
1995, paper prices for the book publishing industry also escalated
significantly. On an annual basis, the Company enters into various
centralized, volume-purchasing agreements with a number of unaffiliated
primary paper suppliers to obtain beneficial volume discounts for the book
publishing portions of Times Mirror.
LEGAL INFORMATION PRODUCTS AND SERVICES
Matthew Bender & Company, Incorporated, a legal information company, offers
an array of legal products and services, including treatises in the areas of
bankruptcy, intellectual property, federal practice and immigration law.
Matthew Bender offers its core products in print as well as on CD-ROM and has
begun developing electronic practice tools for lawyers. Matthew Bender
provides its publications to approximately 150,000 legal accounts, including
each of the 100 largest law firms in the United States. In 1995, Matthew
Bender introduced three additional CD-ROM library versions of its print
titles, bringing the total to 18 libraries. In early 1996, Matthew Bender (i)
launched a new brand of CD-ROM products known as "Authority from Matthew
Bender" which employs the industry-standard search engine, and (ii) introduced
new print and electronic titles, including case law collections in four states
and three legal practice specialties on CD-ROM under license from LEXIS/NEXIS.
Matthew Bender competes with various legal information providers, including
West Publishing Company, LEXIS/NEXIS (owned by Reed-Elsevier, Inc.), Thomson
Legal Publishing, The Bureau of National Affairs, Inc., Mead Data Central,
Inc., Commerce Clearing House, Inc. (owned by Wolters Kluwer) and several
other smaller legal information publishers. In the past two years, the
consolidation of the legal publishing industry has accelerated dramatically.
As this consolidation is likely to continue, the Company anticipates that (i)
competitive pressures will increase with smaller companies potentially being
disadvantaged by the scale of the larger competitors, and (ii) publishers
whose revenues principally come from proprietary information may fare better
than those organizations whose sales are derived from repackaging public
domain information.
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FLIGHT INFORMATION SERVICES
Through Jeppesen Sanderson, Inc. and its European sister company, Jeppesen &
Co. GmbH, Times Mirror publishes aeronautical charts, flight information,
pilot training material and navigational aids worldwide. Jeppesen DataPlan,
Inc., a subsidiary of Jeppesen Sanderson, Inc. also provides computerized
online flight plans and weather briefings and weather information. In 1995,
Jeppesen Sanderson launched a new service called OnSight, a sophisticated
operations control workstation combining its aviation, flight planning and
weather display information and also conducted a test program of its
electronic aircraft maintenance and publication service with two major airline
carriers. Jeppesen Sanderson commenced delivery of the aircraft maintenance
service in early 1996. In addition, Jeppesen Sanderson plans to deliver
weather maps and other information to the cockpit via airphone technology by
the end of 1996. The Jeppesen Sanderson companies serve all U.S. domestic
airlines and approximately 90 percent of all airlines worldwide.
The Jeppesen Sanderson companies compete with various airline consortiums
and governmental entities, as well as numerous vendors of training,
maintenance, weather and flight planning information.
HEALTH INFORMATION SERVICES
Mosby-Year Book, Inc. and its subsidiaries publish medical, dental, nursing
and allied health books and college textbooks. In addition, Mosby-Year Book
and its subsidiaries provide consumer health and wellness information, online
health information for professionals and medical cost-containment information.
In connection with its electronic publishing efforts, in 1995 Mosby-Year Book
published a multimedia catalogue of more than 250 products including the
introduction of "Mosby's Medical Encyclopedia for the Health Consumer,"
"Physician's GenRx" and "The Interactive Skeleton." In 1995, Mosby-Year Book
acquired Madison Publishing Corporation and StayWell Health Management Systems
in order to broaden its publishing operations by targeting employers in
addition to consumers directly. In addition, Mosby-Year Book intends to enter
into a joint venture to launch an Internet-based medical online service for
physicians, using Mosby-Year Book's content as well as content from a select
group of other health information publishers.
Mosby-Year Book and its subsidiaries compete with several larger health
information rivals, including J.B. Lippincott Co., W.B. Saunders Company,
Williams & Wilkins and an assortment of smaller publishers.
TIMES MIRROR HIGHER EDUCATION GROUP
The Times Mirror Higher Education Group, which Times Mirror formed in 1994,
includes Richard D. Irwin, publisher of business, economics and higher
education information products; Wm. C. Brown Publishers, publisher of science
and mathematics textbooks; Brown & Benchmark, publisher of social sciences and
humanities; and Irwin Professional, publisher of broad-based business
products. All four companies continued to expand their lines of electronic
products in 1995, including products in CD-ROM format. In addition, Times
Mirror Higher Education Group is in the process of divesting its manufacturing
division. Revenues from the higher education industry are notably tied to the
academic year with significant sales occurring in the months of June through
August followed by a second wave of sales in November and December.
The Times Mirror Higher Education Group competes with various publishers in
a variety of disciplines. The industry structure, however, is rapidly
consolidating with the market concentration among the top four companies in
the higher education market projected to exceed 50% in 1996. The Times Mirror
Higher Education Group's primary competitors include Simon & Schuster, Inc.,
The Thomson Corporation, The McGraw-Hill Companies, Inc. and Addison-Wesley
Publishing Co. owned by Pearson Inc.
TECHNICAL AND SCIENTIFIC PUBLISHING
CRC Press, Inc. publishes reference books and other information for
scientists and engineers in industry, government and academia. In 1995, CRC
Press released the 76th edition of its first product, The CRC Handbook of
Chemistry and Physics, and introduced a new line of engineering handbooks. In
addition, CRC Press established a new product development group for electronic
products which intends to launch its first CD-ROM products in the second half
of 1996. Revenues for CRC Press increase in the third and fourth quarters more
as a result of its publication schedule than from any seasonality aspects of
its customers.
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CRC Press competes with various publishers in several disciplines with its
principal competitors being The McGraw-Hill Companies, Inc., John Wiley &
Sons, Inc. and International Thomson Publishing, a division of The Thomson
Corporation.
TIMES MIRROR TRAINING
Times Mirror provides sales, customer service and management training
programs for professionals in business and industry throughout the world
through Times Mirror Training, Inc. and its Zenger Miller, Learning
International, Kaset International, Allen Communication and international
divisions. These divisions were operated as separate corporations prior to
January 1, 1996 when they were merged and consolidated into Times Mirror
Training, Inc. Significant accomplishments occurring in 1995 include Zenger
Miller's introduction of "Leadership 2000," a new version of its flagship
product, and Kaset's introduction of "Extraordinary Service," a CD-ROM version
of its Achieving Extraordinary Customer Service product. Also, Allen
Communication, the division which produces interactive software to create
multimedia training courses, launched "Designer's Edge," a tool to assist
multimedia developers with all of their pre-authoring needs. Finally, in 1995,
Learning International marked its emergence into the sales force automation
industry through its acquisition of Market Strategies, Inc., the producer of
Heatseeker, a sophisticated sales force automation software product. Quarterly
revenues for Times Mirror Training vary slightly from quarter to quarter,
however fourth quarter revenues tend to be stronger as businesses finish the
year by spending the balance of their budgets on more discretionary items such
as training.
Times Mirror Training competes with many organizations worldwide including
such enterprises as Development Dimensions International, Forum Corporation,
Wilson Learning Corporation and a myriad of smaller local and national
businesses.
CONSUMER MEDIA SEGMENT
Times Mirror publishes a number of special interest and trade magazines
through its subsidiary, Times Mirror Magazines, Inc., as well as art books
through its subsidiary, Harry N. Abrams, Incorporated. The six-month average
unaudited circulation figures per issue for the magazines, for the year ended
December 31, 1995, were 2,000,000 for Field & Stream; 1,800,000 for Popular
Science; 1,350,000 for Outdoor Life; 1,000,000 for Home Mechanix (published 10
times a year); 1,275,000 for Golf Magazine; 439,000 for Ski Magazine
(published 8 times a year); 448,000 for Skiing (published 7 times a year);
120,000 for TransWorld SNOWboarding (published 8 times a year); 132,000 for
Yachting; and 145,000 for Salt Water Sportsman. Each of these magazines is
published monthly unless otherwise noted. In 1995, the magazines had several
major accomplishments including the launch of a new publication called
Snowboard Life, aimed at an unserved market of 25-45 year-old snowboarders and
crossover skiers, and the centennial celebration of Field & Stream.
Capitalizing on the expertise of its magazines, Times Mirror Magazines also
entered the online world with the creation of SkiNet and YachtNet.
The primary raw material used by Times Mirror Magazines is paper. For 1995,
the prices for the grades of papers used by its magazines increased
substantially. In 1995 Times Mirror (i) centrally purchased paper for all of
its magazines to obtain more favorable terms and (ii) minimized the effect of
rising paper prices by increasing inventory levels prior to anticipated price
increases.
Times Mirror Magazines competes nationally with numerous special interest
and trade magazines. While Times Mirror Magazines not only competes with
similar national media, it must also compete for advertising revenues with
other local and national sales promotion media such as radio, broadcast
television and direct mail.
In addition, Times Mirror publishes The Sporting News, a national sports
weekly; National Journal, a weekly magazine on politics and government;
Government Executive, a controlled-circulation trade magazine for government
business; Skiing Trade News and TransWorld SNOWboarding Business, controlled-
circulation business magazines and other related publications. These magazines
are primarily intended for specialized markets.
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Prior to July 1995, Times Mirror's consumer media segment also included the
development and marketing of consumer multimedia software through Times Mirror
Multimedia Corporation and the development of cable television programming
through Times Mirror Programming, Inc. In the third quarter of 1995, Times
Mirror (i) discontinued its consumer multimedia business and (ii)
substantially decreased its commitment to a venture in the cable television
programming business with Cox. The Company now develops electronic products
inside Times Mirror's operating units, such as National Journal's "Politics,
USA," an Internet-based online service.
INTELLECTUAL PROPERTY
Intellectual property (e.g. copyrights, trademarks, licenses and the like)
is becoming one of the most important assets possessed by the Publishing and
Information Businesses in their respective markets. As the Company and its
subsidiaries undertake new ventures, whether individually or with partners,
the need to secure proper rights and to protect existing rights are essential
to the Company's continuing efforts to expand the Publishing and Information
Businesses, especially in the realm of electronic and online publishing
activities.
EMPLOYEES
At December 31, 1995, Times Mirror's businesses had 21,877 employees, 16,310
of whom were full-time employees. Approximately 2,902 employees were
represented by collective bargaining agents. The Company believes that its
employee relations are good. Employees receive supplemental benefits ranging
from various forms of group insurance coverage to retirement income programs.
RECENT DEVELOPMENTS
On March 12, 1996, the Company announced its plan to explore its strategic
alternatives for its higher education publishing businesses and CRC Press,
both of which are included in its professional information segment. These
alternatives may include the sale, exchange or contribution to a joint venture
in which the Company would have a continuing interest. These businesses
accounted for less than 10 percent of the Company's 1995 revenues and total
assets.
CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
Certain plans, objectives, projections and other information regarding
future performance and outcomes discussed in this Form 10-K are forward-
looking statements that are subject to risk and uncertainty. There can be no
assurances that these future results will be achieved. Potential risks and
uncertainty which could adversely affect the Company's ability to obtain these
results include, without limitation, the following factors: (a) an increase in
paper, printing and distribution costs over the levels anticipated; (b)
increased consolidation among major retailers or other events depressing the
level of display advertising; (c) an economic downturn in the Company's
principal newspaper markets or other occurrences leading to decreased
circulation and diminished revenues from both display and classified
advertising; (d) competitive pressures arising from increased consolidation in
the legal information industry and the college textbook publishing industry;
(e) an increase in expenses related to new initiatives and product improvement
efforts in the legal information, flight information and health information
products and services; (f) unfavorable foreign currency fluctuations and
increased international sales and marketing expenses over amounts
contemplated; and (g) a general economic downturn resulting in decreased
professional or corporate spending on discretionary items such as information
or training and in decreased consumer spending on discretionary items such as
newspapers or magazines.
8
<PAGE>
ITEM 2. PROPERTIES.
The general character, location, terms of occupancy and approximate size of
Times Mirror's materially important physical properties at December 31, 1995
are listed below.
<TABLE>
<CAPTION>
APPROXIMATE AREA IN
SQUARE FEET
----------------------
GENERAL CHARACTER OF PROPERTY OWNED(1) LEASED(2)(3)
----------------------------- --------- ------------
<S> <C> <C>
NEWSPAPER PUBLISHING
Printing plants, business and editorial offices,
garages and warehouse space located in:
Los Angeles, California............................ 2,096,000 69,000
Hartford, Connecticut.............................. 500,000 122,000
Baltimore, Maryland................................ 844,000 36,000
Melville, New York................................. 700,000
Other locations.................................... 1,071,000 1,536,000
PROFESSIONAL INFORMATION
Business and editorial offices and warehouses in
California, Colorado, Illinois, Missouri, New York,
Iowa and other locations........................... 1,073,000 1,487,000
CONSUMER MEDIA
Business and editorial offices and warehouses in New
York, Missouri, Massachusetts, Washington, D.C. and
other locations.................................... 45,000 264,000
CORPORATE
Corporate offices and garages located in California,
New York, New Jersey, and Washington, D.C. ........ 496,000 21,000
</TABLE>
- --------
(1) Excludes 648,000 square feet of undeveloped land, primarily in
Connecticut.
(2) Excludes 831,000 square feet of space sublet to unrelated third parties
and 203,000 square feet of vacant space which is available for subleasing.
(3) The Company's material lease agreements expire at various dates through
2012.
ITEM 3. LEGAL PROCEEDINGS.
Times Mirror and its subsidiaries are defendants in actions for libel and
other matters arising out of their business operations. In addition, from time
to time, Times Mirror and its subsidiaries are involved as parties in various
governmental and administrative proceedings, including environmental matters,
relating to the Publishing and Information Businesses. Times Mirror does not
believe that any such proceedings currently pending will have a material
adverse effect on its business or financial condition.
9
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company as of March 11, 1996 are listed below.
Executive officers are elected to serve until they resign or are removed, or
are otherwise disqualified to serve, or until their successors are elected and
qualified. Except as indicated below, all such officers were employed by the
Company and its predecessor company, Old Times Mirror, for more than five
years.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES WITH OFFICER
NAME AGE TIMES MIRROR SINCE(1)
---- --- -------------------------- --------
<C> <C> <S> <C>
Mark H. Willes................... 54 Chairman of the Board,
President and Chief
Executive Officer 1995(2)
Richard T. Schlosberg III........ 51 Executive Vice President 1990
Patrick A. Clifford.............. 54 Senior Vice President 1990
Edward E. Johnson................ 52 Senior Vice President 1984
James R. Simpson................. 55 Senior Vice President,
Human Resources 1983
Thomas Unterman.................. 51 Senior Vice President and
Chief Financial officer 1992(3)
Donald F. Wright................. 61 Senior Vice President 1988
Debra A. Gastler................. 43 Vice President, Taxes 1994(4)
Michael N. Liebhold.............. 51 Vice President, Technology 1994(5)
Kathleen G. McGuinness........... 47 Vice President and General
Counsel 1995(6)
Stephen C. Meier................. 45 Vice President, Public and
Government Affairs 1989
Victor A. Perry III.............. 42 Vice President, Corporate
Development 1995(7)
Steven J. Schoch................. 37 Vice President and
Treasurer 1995(8)
Efrem Zimbalist III.............. 48 Vice President 1993(9)
O. Jean Williams................. 47 Secretary and Associate
General Counsel 1989
</TABLE>
- --------
(1) The date indicated relates to the date on which such person first became
an officer of Old Times Mirror unless the context suggest otherwise. All
of the executive officers of the Company, other than Mark H. Willes,
Thomas Unterman, Kathleen G. McGuinness, Victor A. Perry III, Steven J.
Schoch and O. Jean Williams, were elected executive officers of the
Company effective January 30, 1995 and had served as executive officers of
Old Times Mirror prior to that time. Mr. Unterman and Ms. Williams were
elected executive officers of the Company effective June 3, 1994 and had
served as executive officers of Old Times Mirror prior to that time.
(2) Mark H. Willes was elected as President and Chief Executive Officer of the
Company effective June 1, 1995 and Chairman of the Board effective January
1, 1996. Prior to joining the Company, Mr. Willes was an executive of
General Mills, Inc. from 1980 to 1995, serving as Vice Chairman upon his
departure.
(3) Thomas Unterman was elected as an executive officer of Old Times Mirror
effective October 1, 1992. Prior thereto, he had been a partner at the law
firm of Morrison & Foerster since 1986.
(4) Debra A. Gastler was elected as an executive officer of Old Times Mirror
effective January 3, 1994. Prior thereto, she had been Vice President, Tax
of Pacific Enterprises since 1990 and Director of taxes of Pacific
Enterprises since 1987.
(5) Michael N. Liebhold was elected as an executive officer of Old Times
Mirror effective March 3, 1994. Prior thereto, he was lead research
scientist and manager at Apple Computer, Inc. in the area of advanced
media systems since 1984, and was senior scientist, Media Architecture
Research, Advanced Technology Group at the time of his departure.
(6) Kathleen G. McGuinness was elected as an executive officer of the Company
effective November 1, 1995. Prior thereto, she had been a partner at the
law firm of O'Melveny & Myers since 1985.
10
<PAGE>
(7) Victor A. Perry III was elected as an executive officer of the Company
effective December 11, 1995. Prior thereto, he had been Vice President,
New Business Development for the Los Angeles Times from 1992 until
rejoining corporate headquarters and had been Vice President of Planning
and Development at SCECorp. from 1991 to 1992. Prior to his employment at
SCECorp, he served as special assistant to the publisher of the Los
Angeles Times and special assistant to the president of the Los Angeles
Times from 1990 to 1991 and Director, Corporate Planning of Old Times
Mirror from 1988 to 1990.
(8) Steven J. Schoch was elected as an executive officer of the Company
effective December 11, 1995. Prior thereto, he had been Vice President,
Treasurer at EuroDisney S.C.A. from 1994 to 1995 and Vice President,
Assistant Treasurer of The Walt Disney Company from 1992 to 1994. Prior
thereto, he was Director of Corporate Finance of The Walt Disney Company
from 1991 to 1992, a Vice President at Citibank from 1989 to 1991 and
Manager of Finance of The Walt Disney Company from 1987 to 1989.
(9) Efrem Zimbalist III was elected as an executive officer of Old Times
Mirror effective March 4, 1993. Mr. Zimbalist was Chairman and Chief
Executive Officer of Correia Art Glass, Inc. from 1978 until he joined Old
Times Mirror in July 1992.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
Prior to February 1, 1995, Old Times Mirror Series A Common Stock was traded
principally on the New York Stock Exchange, Inc. ("NYSE") and was also listed
on the Pacific Stock Exchange. The Company's Series A Common Stock is traded
principally on the NYSE and is also listed on the Pacific Stock Exchange. Old
Times Mirror Series C Common Stock was not traded in an established public
trading market but was convertible into old Times Mirror Series A Common
Stock. Upon the effectiveness of the Cox Merger on February 1, 1995, each
share of Old Times Mirror Series A Common Stock outstanding immediately prior
to the Cox Merger and held by non-controlling shareholders of the Company,
which excludes all Chandler Trust shareholders, was converted into one share
of the Company's Series A Common Stock and a portion of a share of Cox's Class
A Common Stock, par value $1.00 per share ("Cox Class A Common Stock"). In
addition, each share of Old Times Mirror Series C Common Stock outstanding
immediately prior to the Cox Merger and held by non-controlling shareholders
of the Company, which excludes all Chandler Trust shareholders, was converted
into one share of the Company's Series C Common Stock and a portion of a share
of Cox Class A Common Stock. At March 15, 1996, there were approximately 3,668
record holders of the Company's Series A Common Stock and 2,509 record holders
of Series C Common Stock. The price ranges for Old Times Mirror Series A
Common Stock and the Company's Series A Common Stock and the quarterly cash
dividend declared and paid on all Old Times Mirror and Company Common Stock in
1995 and 1994 are listed below.
<TABLE>
<CAPTION>
STOCK PRICE (1) CASH DIVIDEND
--------------- -------------
HIGH LOW DECLARED PAID
------- ------- -------- ----
<S> <C> <C> <C> <C>
1995
First Quarter............................. $33 1/2 $17 1/4 $.06 $.27
Second Quarter............................ 24 3/4 17 5/8 .06 .06
Third Quarter............................. 32 5/8 23 1/4 .06 .06
Fourth Quarter............................ 35 1/4 28 .06 .06
1994
First Quarter............................. $37 1/8 $32 5/8 $.27 $.27
Second Quarter............................ 36 1/8 29 1/2 .27 .27
Third Quarter............................. 33 1/4 28 3/4 .27 .27
Fourth Quarter............................ 33 3/8 29 7/8 .27 .27
</TABLE>
- --------
(1) On February 1, 1995, the Times Mirror common shareholders received
distributions having a value of $10.45 per Times Mirror common share. The
trading prices indicated for 1994 and for the first month of 1995 have not
been adjusted to reflect these distributions.
11
<PAGE>
On October 10, 1994 as part of the settlement of certain shareholders'
litigation with respect to the Cox Merger, the Company agreed to pay an annual
dividend to Series A and Series C common shareholders of no less than 24 cents
per share, beginning in June 1995 and continuing for a period of three years,
subject to the fiduciary duties of its Board of Directors. Thereafter, the
payment of dividends on common stock will depend on future earnings, capital
requirements, financial condition and other factors. The Company declared a
dividend on the Common Stock of 6 cents per share payable on March 10, 1996 to
stockholders of record as of February 23, 1996.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data has been derived from the Consolidated
Financial Statements that have been audited by Ernst & Young LLP, independent
auditors. The information set forth below is not necessarily indicative of
results of future operations, and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes
thereto included elsewhere in this Form 10-K.
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA AND OTHER INFORMATION
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS
EXCEPT PER COMMON SHARE,
FINANCIAL RATIOS AND 1995 1994 1993 1992 1991
OTHER) ----------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Revenues............... $ 3,448,287 $ 3,355,761 $ 3,243,749 $ 3,155,430 $ 3,117,174
Restructuring,
impairment and one-
time charges.......... 634,077 80,164 202,700 42,300
Operating profit
(loss)................ (455,379) 302,508 189,042 63,759 208,672
Net interest expense... 2,230 66,805 81,366 71,481 72,562
Income (loss) from
continuing operations
before income taxes... (455,013) 257,899 109,785 (7,102) 55,348
Income (loss) from
continuing
operations(1)......... (338,983) 132,223 51,669 (18,369) 14,320
Net income (loss)(2)... 1,226,751 173,117 317,159 (66,601) 81,954
PER COMMON SHARE
Income (loss) from
continuing
operations(1)......... $(3.74) $1.03 $ .40 $(.14) $.11
Earnings (loss) per
share................. 10.02 1.35 2.46 (.52) .64
Earnings from
continuing operations
excluding
restructuring program
charges and other
special items(3)...... .84 .95 .77 .82 .71
Dividends declared..... .24 1.08 1.08 1.08 1.08
Dividends paid......... .45 1.08 1.08 1.08 1.08
FINANCIAL DATA
Current assets(4)...... $ 1,248,037 $ 851,594 $ 1,178,880 $ 952,593 $ 813,417
Property, plant and
equipment--net........ 1,174,831 1,311,130 1,308,628 1,345,320 1,332,597
Total assets........... 3,817,159 4,287,208 4,521,047 4,255,196 4,028,301
Long-term debt......... 247,934 246,462 795,454 1,114,367 978,351
Shareholders' equity... 1,806,236 1,957,043 1,899,275 1,700,646 1,884,008
Additions to property,
plant and equipment(5) 128,612 128,167 102,093 110,110 140,923
Operating profit
margin(6)............. 7.8% 9.0% 8.3% 8.4% 8.1%
Total debt as a % of
adjusted
capitalization........ 12.1% 31.3% 37.3% 41.7% 36.7%
Long-term debt as a %
of shareholders'
equity................ 13.7% 12.6% 41.9% 65.5% 51.9%
Shareholders' equity
per common share...... $11.64 $15.06 $14.76 $13.23 $14.66
OTHER
Adjusted price range of $35 1/4 to $26 11/16 to $24 11/16 to $27 15/16 to $22 3/16 to
common stock(7)....... 17 1/4 18 5/16 17 13/16 18 1/16 15 1/16
Number of employees at
end of year........... 21,877 26,902 26,936 28,313 27,732
Weighted average common
and common equivalent
shares................ 113,797,192 128,807,156 128,740,904 128,818,449 128,626,366
</TABLE>
- --------
This summary should be read in conjunction with the consolidated financial
statements and notes thereto.
(1) Includes the following after-tax gains (charges) related to continuing
operations (in thousands except per share amounts):
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Restructuring, impairment
and one-time charges and
nonrecurring costs...... $ (463,667) $(47,724) $(123,248) $(25,514)
Writedowns of assets..... (40,687) (41,235)
Gains (loss) on sales of
assets.................. 25,821 $10,646 (11,750)
---------- ------- -------- --------- --------
$ (478,533) $10,646 $(47,724) $(123,248) $(78,499)
========== ======= ======== ========= ========
Earnings (loss) per
share................... $ (4.20) $ .08 $ (.37) $ (.96) $ (.60)
========== ======= ======== ========= ========
(2) Includes the following after-tax gains (charges) related
to discontinued operations (in thousands):
Discontinuation costs... $ (49,627)
Gain on disposal........ 1,634,294 $131,702
---------- --------
$1,584,667 $131,702
========== ========
</TABLE>
13
<PAGE>
(3) Excludes the gains (charges) set forth in (1) above as well as, for 1995,
the 38 cents per share impact of the cash paid in excess of liquidation
value on Series B preferred stock repurchases.
(4) Excludes the net assets of the discontinued cable television operations in
1994.
(5) Excludes capital assets acquired in business combinations accounted for as
purchases and capital assets acquired by discontinued operations.
(6) Excludes restructuring program charges as follows (in thousands): 1995--
$724,107; 1993--$80,164; 1992-- $202,700; 1991--$42,300.
(7) On February 1, 1995, Times Mirror common shareholders received
distributions having a value of $10.45 per Times Mirror common share. The
trading prices prior to February 1, 1995 have been adjusted to reflect
these distributions.
14
<PAGE>
FIVE-YEAR SUMMARY OF BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
(IN THOUSANDS OF DOLLARS) ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES
Newspaper Publishing.... $2,057,596 $2,062,954 $1,980,717 $1,943,229 $1,974,351
Professional
Information............ 1,091,017 1,005,335 992,220 935,448 851,633
Consumer Media.......... 300,723 288,144 271,176 277,757 292,157
Corporate and Other..... 391
Intersegment Revenues... (1,049) (672) (364) (1,004) (1,358)
---------- ---------- ---------- ---------- ----------
$3,448,287 $3,355,761 $3,243,749 $3,155,430 $3,117,174
========== ========== ========== ========== ==========
OPERATING PROFIT
(LOSS)(1)
Newspaper Publishing.... $ (109,483) $ 194,772 $ 107,346 $ 19,126 $ 93,094
Professional
Information............ (131,429) 173,951 174,855 114,348 193,161
Consumer Media.......... (75,887) 3,279 (3,785) (3,527) (7,775)
Corporate and Other..... (138,580) (69,494) (89,374) (66,188) (69,808)
---------- ---------- ---------- ---------- ----------
$ (455,379) $ 302,508 $ 189,042 $ 63,759 $ 208,672
========== ========== ========== ========== ==========
IDENTIFIABLE ASSETS
Newspaper Publishing.... $1,840,058 $1,987,752 $2,012,623 $2,036,453 $2,023,275
Professional
Information............ 1,151,830 1,018,357 1,030,586 971,833 788,260
Consumer Media.......... 308,098 382,768 309,955 360,746 360,208
Corporate and Other..... 517,173 255,954 563,686 317,423 341,493
Discontinued Operations
Cable Television....... 642,377 606,678 495,036 509,942
Broadcast Television... 285 123,439 120,649
Eliminations............ (2,766) (49,734) (115,526)
---------- ---------- ---------- ---------- ----------
$3,817,159 $4,287,208 $4,521,047 $4,255,196 $4,028,301
========== ========== ========== ========== ==========
DEPRECIATION AND
AMORTIZATION
Newspaper Publishing.... $ 110,299 $ 114,115 $ 113,877 $ 105,939 $ 110,946
Professional
Information............ 51,462 42,928 44,490 40,092 41,640
Consumer Media.......... 8,780 8,761 10,816 10,705 14,656
Corporate and Other..... 2,156 1,684 1,795 1,753 2,664
---------- ---------- ---------- ---------- ----------
$ 172,697 $ 167,488 $ 170,978 $ 158,489 $ 169,906
========== ========== ========== ========== ==========
CAPITAL EXPENDITURES
Newspaper Publishing.... $ 63,014 $ 79,397 $ 66,429 $ 88,226 $ 119,963
Professional
Information............ 48,361 43,910 33,006 19,984 19,324
Consumer Media.......... 1,308 1,606 1,718 1,579 1,142
Corporate and Other..... 15,929 3,254 940 321 494
---------- ---------- ---------- ---------- ----------
128,612 128,167 102,093 110,110 140,923
---------- ---------- ---------- ---------- ----------
Discontinued Operations
Cable Television....... 11,283 118,948 116,914 82,333 60,426
Other(2)............... 409 264 3,464 3,141
---------- ---------- ---------- ---------- ----------
$ 140,304 $ 247,379 $ 219,007 $ 195,907 $ 204,490
========== ========== ========== ========== ==========
- --------
(1) Includes restructuring-related charges as follows (in thousands):
<CAPTION>
1995 1993 1992 1991
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Newspaper Publishing... $ 316,216 $ 33,080 $ 106,700 $ 39,690
Professional
Information........... 267,413 25,300 96,000 1,160
Consumer Media......... 74,875
Corporate and Other.... 65,603 21,784 1,450
---------- ---------- ---------- ----------
$ 724,107 $ 80,164 $ 202,700 $ 42,300
========== ========== ========== ==========
</TABLE>
The pre-tax charges of $724,107 in 1995 are comprised of restructuring,
impairment and one-time charges of $634,077 and nonrecurring operating
costs of $90,030. In addition, other pre-tax restructuring program charges
in 1995 of $69,755 related to discontinued operations and $43,851 related
to investment writedowns are described in Notes 3 and 6, respectively, to
the financial statements.
(2) Expenditures in 1995 and 1994 are for the discontinued consumer multimedia
and cable programming operations. Expenditures in 1992 and 1991 are for
the discontinued broadcast television operations.
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
SUMMARY OF 1995 RESULTS
Times Mirror's 1995 net income was $1.23 billion, including an after-tax
charge of $554.0 million for its 1995 restructuring program and a $1.63
billion gain on the disposal of its cable television operations, compared to
$173.1 million in 1994. The loss from continuing operations in 1995 was $339.0
million compared to income from continuing operations of $132.2 million in
1994. Comparisons with the prior year are complicated by significant events
which occurred during 1995, including the reorganization and recapitalization
of the Company in connection with the cable television transaction in the
first quarter, as well as the Company's restructuring program and stock
repurchases in the third and fourth quarters. These actions and other
significant changes are discussed in further detail below. The following
provides a comparison of income from continuing operations and earnings per
share from continuing operations excluding restructuring program charges and
other special items in both years (in thousands except per share amounts):
<TABLE>
<CAPTION>
1995 1994
-------------------- ----------------
PER PER
COMMON COMMON
SHARE SHARE
------- ------
<S> <C> <C> <C> <C>
Net income............................. $ 1,226,751 $ 10.02 $173,117 $1.35
Add (subtract):
Cumulative changes in accounting
principles and
extraordinary loss.................... 12,724 .11 12,232 .09
Discontinued operations:
Net (income) loss from operations..... 55,836 .49 (53,126) (.41)
Net gain on disposal of cable
television........................... (1,634,294) (14.36)
Restructuring program charges related
to continuing operations.............. 504,354 4.43
Gains on asset sales, net, related to
continuing operations................. (25,821) (.23) (10,646) (.08)
----------- ------- -------- -----
Income from continuing operations
excluding restructuring program
charges and other special items....... $ 139,550 .46 $121,577 .95
=========== ========
Earnings per share effect of cash paid
in excess of liquidation value for
Series B preferred stock repurchases.. .38
------- -----
Earnings per share from continuing
operations excluding restructuring
program charges and other special
items................................. $ .84 $ .95
======= =====
</TABLE>
RESTRUCTURING PROGRAM
In 1995, Times Mirror completed a comprehensive review of all operations and
assets in order to refocus resources on its core businesses of newspaper
publishing, professional information and magazine publishing. This review led
to a major restructuring program which resulted in the following charges and
costs in 1995 (in thousands except per share amounts):
<TABLE>
<CAPTION>
PER
AFTER- COMMON
PRE-TAX TAX SHARE
-------- -------- ------
<S> <C> <C> <C>
All Business Segments............................ $724,107 $463,667 $4.07
Investments...................................... 43,851 40,687 .36
-------- -------- -----
Continuing Operations............................ 767,958 504,354 4.43
Discontinued Operations.......................... 69,755 49,627 .44
-------- -------- -----
$837,713 $553,981 $4.87
======== ======== =====
</TABLE>
16
<PAGE>
The charges and costs included in each business segment were as follows (in
thousands):
<TABLE>
<CAPTION>
NEWSPAPER PROFESSIONAL CONSUMER CORPORATE
PUBLISHING INFORMATION MEDIA AND OTHER TOTAL
---------- ------------ -------- --------- --------
<S> <C> <C> <C> <C> <C>
Restructuring, impairment
and one-time charges...... $291,542 $222,794 $70,346 $49,395 $634,077
Nonrecurring costs......... 24,674 44,619 4,529 16,208 90,030
-------- -------- ------- ------- --------
$316,216 $267,413 $74,875 $65,603 $724,107
======== ======== ======= ======= ========
</TABLE>
Nonrecurring costs are costs that do not meet the accounting criteria for
inclusion as restructuring charges.
The major elements of the restructuring program included actions which
affected all business segments, specific actions within each business segment,
as well as actions which related to other investments and businesses as
follows:
All Business Segments:
. Staff reductions throughout the Company.
. Consolidation of leased office space, particularly in New York City,
where there was a substantial reduction in the cost per square foot and a
net reduction of leased office space from approximately 559,000 square
feet to approximately 270,000 square feet.
Newspaper Publishing:
. Closure of New York Newsday, Baltimore's Evening Sun, and certain
sections of the Los Angeles Times.
. Renegotiation of union agreements at Newsday and The Baltimore Sun.
. Writedowns of goodwill and other assets at The Baltimore Sun resulting
from the closure of the Evening Sun.
Professional Information:
. Writedowns of identifiable intangibles and certain other assets
associated primarily with the discontinuation of marginal product lines,
channels of distribution and manufacturing facilities.
Consumer Media:
. Writedowns of goodwill for certain magazines.
. Abandonment of the sports marketing business.
Corporate:
. Writedowns of assets and other costs in connection with the
discontinuation of the development of a companywide digital network of
product, marketing and administrative data bases.
Investments:
. Writedowns of certain investments in privately-held media companies.
Discontinued Operations:
. Discontinuation of the Company's consumer multimedia business, cable
television programming business and an electronic shopping joint venture.
The restructuring program is expected to improve substantially the financial
performance of the Company and to stimulate earnings growth in future years.
It is anticipated that, following the completion of restructuring actions in
1996, the restructuring program will produce approximately $135 million in
annualized operating expense savings. Approximately $20 million of these
expense reductions were realized in the 1995-fourth quarter, and approximately
$120 million of operating expense savings are expected to be realized in 1996.
In addition, businesses and projects projected to lose $50 million in 1996
have been discontinued. Approximately $427 million in cash is expected to be
spent for restructuring program actions, of which approximately $169 million
was spent in 1995 and approximately $151 million is expected to be spent in
1996. The remaining cash outlays will occur in 1997 and beyond and primarily
represent payments on existing leases. As a result of the program-related cost
reductions and the
17
<PAGE>
elimination of anticipated operating losses from discontinued operations, the
Company expects to recover these cash expenditures in less than three years.
STOCK REPURCHASE PROGRAM
During 1995, the Company repurchased 7.0 million shares of its common stock
and 8.8 million shares of Series B preferred stock for an aggregate cost of
$446.5 million. The common shares purchased are intended, in part, to offset
dilution from shares of common stock issued under the Company's stock-based
employee compensation and benefit programs. In December 1995, the Board of
Directors authorized the repurchase of an additional 12 million shares of
common stock over the next three years. Repurchases are expected to be made
from time-to-time in the open market or in private transactions, depending on
market conditions, and may be discontinued at any time. In connection with
this program, the Company may from time-to-time sell put options on its common
stock.
CABLE MERGER AND RELATED TRANSACTIONS
In the first quarter of 1995, the Company completed the disposal of its
cable television operations and also completed related transactions, including
the issuance of two new series of preferred stock and the retirement of nearly
75 percent of total debt outstanding at year-end 1994. In connection with this
transaction, the Company transferred all of its non-cable operations into a
newly formed entity, New TMC, Inc., as part of a tax-free reorganization. New
TMC, Inc. was then renamed The Times Mirror Company. Note 2 to the
consolidated financial statements provides a discussion of these transactions.
Results for 1995 benefited from the $1.63 billion gain on the disposal of the
cable television operations as well as from lower interest expense due to debt
reduction and higher interest income from the investment of the cash proceeds
from the disposal.
PREFERRED STOCK IMPACT ON EARNINGS PER SHARE
Dividend requirements on the preferred shares issued in connection with the
cable transactions reduced earnings applicable to common shareholders by $44.0
million, or 39 cents per share, in 1995. In addition, the cash paid in excess
of liquidation value for the repurchases of Series B preferred stock further
reduced earnings applicable to common shareholders by $21.8 million, or 20
cents per share, in the fourth quarter and $43.1 million, or 38 cents per
share, for the full year. In 1996, preferred stock dividend requirements are
expected to total $43.6 million, reflecting the requirements for the full year
but for a lower number of Series B preferred shares outstanding. In the first
quarter of 1996, preferred dividend requirements are expected to total $10.9
million, compared to $4.7 million in the first quarter of 1995, because the
preferred stock did not begin accruing dividends until late in the first
quarter of 1995.
18
<PAGE>
CONSOLIDATED RESULTS OF OPERATIONS
The following table summarizes Times Mirror's financial results (dollars in
millions, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenues...................................... $3,448.3 $3,355.8 $3,243.7
Restructuring, impairment and one-time
charges...................................... 634.1 80.2
Operating profit (loss)....................... (455.4) 302.5 189.0
Interest expense.............................. (29.5) (69.3) (84.1)
Interest income............................... 27.2 2.5 2.7
Income (loss) from continuing operations...... (339.0) 132.2 51.7
Net income (loss) from discontinued
operations................................... (55.8) 53.1 133.8
Net gain on disposal of discontinued
operations................................... 1,634.3 131.7
Extraordinary loss............................ (12.2)
Cumulative effect of changes in accounting
principles................................... (12.7)
Net income.................................... 1,226.8 173.1 317.2
Preferred dividend requirements............... 44.0
Cash paid in excess of liquidation value for
Series B preferred stock repurchases......... 43.1
Earnings applicable to common shareholders.... $1,139.7 $ 173.1 $ 317.2
Earnings (loss) per share from continuing
operations................................... $ (3.74) $ 1.03 $ .40
Earnings per share............................ $ 10.02 $ 1.35 $ 2.46
</TABLE>
1995 COMPARED WITH 1994
Times Mirror's consolidated revenues rose 2.8 percent in 1995 compared with
the prior year, reflecting growth in the Professional Information and Consumer
Media segments of the Company's businesses. Growth in health information
services, including international sales and consumer medical information, the
flight information business and magazine advertising, coupled with additional
revenues from acquisitions made early in 1995, contributed to the year's
growth. In the Company's largest business segment, Newspaper Publishing,
revenues declined slightly, reflecting the closure of certain newspaper
editions in connection with the restructuring program.
Net income of $1.23 billion for 1995 includes the $1.63 billion, or $14.36
per share, gain on the disposition of the Company's discontinued cable
television operations, which more than offset the $554.0 million, or $4.87 per
share, after-tax charge for the Company's 1995 restructuring program.
A consolidated operating loss of $455.4 million was reported for the full
year 1995 as a result of the Company's restructuring program. Excluding the
restructuring program, consolidated operating profit would have been $268.7
million, a decrease of 11.2 percent from $302.5 million in 1994, as gains in
Newspaper Publishing profitability were more than offset by declines at both
Professional Information and Consumer Media. Excluding restructuring program
charges in 1995 and 1993, Newspaper Publishing reported operating margin
recovery for the third consecutive year, as extensive cost reduction efforts
more than offset the sharp rise in newsprint prices. However, consolidated
operating profit, excluding restructuring charges, declined on reduced profits
at Matthew Bender as well as in higher education, training and international
publishing, reflecting lower revenues at Bender and considerably higher
expense levels at higher education and the training companies due to marketing
and product improvement efforts. In Consumer Media, the small operating loss
for 1995, excluding restructuring charges, was due largely to increased
promotional and marketing costs and overall higher paper and postage costs.
The loss from continuing operations in 1995 included, in addition to
restructuring program charges, gains on asset sales of $41.4 million (or 23
cents per share after taxes) and investment-related writedowns and charges of
$43.9 million (or 36 cents per share after taxes).
19
<PAGE>
Earnings applicable to common shareholders were reduced by preferred
dividend requirements of $44.0 million (39 cents per share) for two series of
preferred stocks. The preferred stocks began accruing dividends on March 1,
1995. The preferred dividend impact on earnings per share was somewhat
mitigated because one series of the preferred stock was issued in exchange for
common stock, which lowered the weighted average number of shares of common
stock outstanding during 1995. In addition, the earnings applicable to common
shareholders for 1995 were reduced by $43.1 million (38 cents per share) for
the cash paid in excess of liquidation value for Series B preferred stock
repurchases. These preferred stock repurchases are further described in Note
13 to the consolidated financial statements. Excluding the impact of
restructuring program charges and the cash paid in excess of liquidation value
for preferred stock repurchases in 1995, as well as net gains on asset sales
in both years, earnings per share from continuing operations was 84 cents per
share for the year, compared to 95 cents per share in 1994.
Net interest expense in 1995 declined to $2.2 million from $66.8 million in
1994. Debt levels were reduced early in the year, using proceeds from the
disposition of the Company's cable television operations, and interest income
was generated from the investment of the remaining proceeds. These investments
have been substantially reduced due to the significant cash requirements of
the restructuring program and share repurchases.
FOURTH QUARTER 1995 COMPARED WITH FOURTH QUARTER 1994
Consolidated revenues of $966.7 million for the fourth quarter of 1995 were
essentially level with revenues in the prior-year quarter, as 1995 gains in
health science and higher education were offset by declines in Newspaper
Publishing due principally to the closure of New York Newsday. In the 1995
quarter, the Company reported a consolidated operating loss of $206.3 million,
as a result of the previously discussed restructuring, impairment and one-time
charges and nonrecurring costs. Excluding these items, consolidated operating
profit for the 1995 fourth quarter of $112.4 million was slightly lower than
the prior year's fourth quarter operating profit. The year-over-year decline
primarily reflects the continued decline at Matthew Bender as well as lower
profits at the training companies and an operating loss at the magazines.
These declines were offset, in part, by the operating profit improvement in
Newspaper Publishing. The fourth quarter 1995 net loss on continuing
operations was $141.6 million, which included $189.8 million in after-tax
restructuring program charges. Excluding asset dispositions, restructuring
program charges and other special items, net income for the fourth quarter
would have been $57.1 million, or 42 cents per share, compared with $51.7
million, or 40 cents per share, in 1994's fourth quarter. This increase was
attributable in part to a reduction in net interest expense between years.
Earnings applicable to common shareholders in the fourth quarter of 1995
benefited from the lower average number of shares outstanding but were reduced
by preferred dividend requirements of $12.1 million, or 11 cents per share,
and the cash paid in excess of liquidation value for Series B preferred stock
repurchases of $21.8 million, or 20 cents per share.
For the fourth quarter of 1995, Newspaper Publishing operating profit,
excluding restructuring program charges, rose 9.9 percent to $80.0 million,
despite a decline in revenues and a significant increase in newsprint prices.
Fourth quarter revenues decreased 2.2 percent to $568.5 million, due primarily
to the closure of New York Newsday. Circulation revenues for the quarter rose
2.0 percent, reflecting an increase in subscription prices year-over-year at
most of the newspapers. Other revenues, which include new media and
syndication revenues, declined in the quarter to $14.2 million from $19.5
million in the prior year quarter. For the group, operating profit margins,
excluding restructuring program charges, rose to 14.1 percent compared to 12.5
percent in the 1994 fourth quarter. Excluding restructuring program charges
and newsprint costs in the fourth quarter of 1995, all other costs for this
segment declined about 10 percent from last year's fourth quarter, reflecting
benefits from the restructuring program and other cost-saving productivity
improvements. These fourth-quarter 1995 cost savings more than offset the 37
percent increase in newsprint costs resulting from the significantly higher
newsprint prices.
Professional Information revenues for the fourth quarter of 1995 rose to
$321.3 million, reflecting growth at all businesses within the segment except
Matthew Bender. However, the fourth quarter operating profit,
20
<PAGE>
excluding restructuring program charges, declined to $56.6 million, compared
with $60.2 million in the 1994 fourth quarter. Bender's significant decline in
revenues, as well as operating profit margin erosion at most of the other
businesses in the segment, contributed to this operating profit decline.
Consumer Media revenues declined 2.5 percent in the fourth quarter due to
declines in magazine advertising and art book sales. An operating loss for the
1995 fourth quarter of $1.0 million, excluding restructuring program charges,
resulted primarily from increased marketing and promotion costs and overall
higher paper and postage costs.
The Corporate and Other operating costs in the fourth quarter of 1995,
excluding restructuring program charges, increased to $23.2 million from $21.8
million in the 1994 quarter, due to revisions in estimates of liabilities
associated with prior dispositions.
1994 COMPARED WITH 1993
Times Mirror's consolidated revenues rose 3.5 percent in 1994 compared with
the prior year, reflecting improvements in each of the Company's business
segments, particularly Newspaper Publishing. The emerging economic recovery in
Southern California, the Company's largest newspaper market, and core business
growth in the health information services and higher education markets,
coupled with acquisitions in the professional information segment in 1993 and
1994, contributed to the revenue growth.
The significant improvement in operating profit in 1994 largely reflected
the absence of restructuring charges, which totaled $80.2 million in 1993.
Excluding the 1993 restructuring charges, operating profit would have improved
12.4 percent over 1993, principally due to gains at each of the Company's
newspapers, particularly the Los Angeles Times, Newsday and The Baltimore Sun.
With 1994 newsprint expense up only slightly over the prior year, declines in
full-time staffing levels and tight control of other costs, Newspaper
Publishing reported improved operating margins for the second consecutive
year. In the Professional Information segment, improvements at most of the
book companies, particularly in higher education and international publishing,
were more than offset by declines at Matthew Bender and at the training
companies, resulting in a drop in operating profit for the segment. Consumer
Media reported operating profit in 1994, compared with an operating loss in
1993, as 1994 benefitted from higher advertising volume as well as the
acquisition of TransWorld SNOWboarding and special publications for 1994's
World Cup of Soccer.
Income from continuing operations in 1994 included gains on asset sales of
$22.1 million (8 cents per share after taxes), and 1994 net income included an
extraordinary loss of $12.2 million net of taxes (9 cents per share) from the
early retirement of debt. Also included in net income were the operating
results of discontinued operations and, in 1993, an after-tax gain of $131.7
million ($1.02 per share) on the sale of the discontinued broadcast television
operations.
Interest expense in 1994 declined to $69.3 million from $84.1 million in the
prior year, as debt levels were reduced early in the year using proceeds
received from the sale of the broadcast television operations.
21
<PAGE>
ANALYSIS BY SEGMENT
NEWSPAPER PUBLISHING
Newspaper Publishing revenue and operating profit (loss) was as follows
(dollars in millions):
<TABLE>
<CAPTION>
1995 CHANGE 1994 CHANGE 1993
-------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C>
Revenues
Advertising....................... $1,558.2 (.4)% $1,564.1 5.1 % $1,488.7
Circulation....................... 454.5 .9 450.3 (.6) 453.0
Other............................. 44.9 (7.6) 48.6 24.6 39.0
-------- -------- --------
$2,057.6 (.3)% $2,063.0 4.2 % $1,980.7
======== ======== ========
Operating Profit (Loss)............ $ (109.5) (100+)% $ 194.8 81.4 % $ 107.3
======== ======== ========
Operating Profit Excluding
Restructuring Charges............. $ 206.7 6.1 % $ 194.8 38.7 % $ 140.4
======== ======== ========
</TABLE>
1995 RESULTS
Newspaper Publishing's revenues in 1995 declined slightly due primarily to
the closure of New York Newsday and the sluggish advertising environment in
Southern California, which continued to impact the Los Angeles Times.
Advertising revenues declined in 1995, as increases at most of the Company's
eastern newspapers were more than offset by declines due to the revenues lost
as a result of the closure of New York Newsday as well as a drop in retail and
national advertising revenues at The Times. Advertising revenues at The Times
were $821.8 million in 1995, reflecting rate increases which kept revenues
virtually even with 1994, while advertising revenues at the Eastern newspapers
declined 1.0 percent to $736.4 million due to the closure of New York Newsday.
Excluding Newsday, all other Eastern newspapers reported average advertising
revenue growth of more than 4 percent. Circulation revenues rose slightly as
higher street and home delivery prices offset a year-over-year decline in
total circulation.
The segment's 1995 operating profit, excluding restructuring charges, rose
to the highest level since 1989. Higher operating profit and profit margins
were achieved, excluding restructuring charges, despite slightly lower
revenues and a sharp increase in newsprint expense of nearly 30 percent,
largely through productivity improvements and a reduction in operating costs.
Excluding newsprint expense, all other expenses declined about 10 percent in
1995.
1994 RESULTS
Newspaper Publishing revenues surpassed the $2 billion revenue mark for the
first time in four years, as total advertising revenues increased over the
prior year. The emerging economic recovery in Southern California helped to
stimulate volume expansion in all advertising categories at The Times, which
posted a total revenue increase of 4.2 percent in 1994 to over $1 billion,
following three consecutive years of declines. Advertising revenues at The
Times rose 4.9 percent to $820.3 million, up from $781.7 million in 1993,
spurred by double-digit volume gains in classified help-wanted advertising, an
important indicator of economic recovery. Each of the Eastern newspapers
reported solid revenue gains, with particular strength at The Baltimore Sun
and The Hartford Courant. Advertising revenues at the Eastern newspapers rose
5.2 percent to $743.8 million in 1994.
Circulation revenues for the segment declined slightly in 1994, as daily
circulation averages declined at all major newspapers except The Baltimore
Sun. Circulation price increases, as well as the planned curtailment of
circulation outside primary market areas, contributed to the circulation
declines.
The segment's operating profit for 1994 rose significantly as compared with
the prior year, as each of the newspapers reported solid operating profit
improvements in 1994. Operating costs rose less than 2.0 percent, as
22
<PAGE>
full-time equivalent staff levels declined and newsprint expense remained
relatively flat compared to 1993, despite a 1.1 percent increase in newsprint
consumption to 644,059 tons. The segment's operating margin improved in 1994,
increasing to 9.4 percent compared with 7.1 percent in 1993, excluding the
prior-year restructuring charges.
NEWSPAPER PUBLISHING OUTLOOK
Growth in the regional economies of Southern California and Long Island, New
York, has lagged other U.S. regions, depressing retail advertising and consumer
spending in these markets. Further consolidations in Southern California retail
businesses, notably the department store and grocery chain categories, are
scheduled for 1996 and will continue to dampen advertising growth at the Los
Angeles Times. Classified advertising at The Times continued to show growth in
the fourth quarter of 1995 and early in January 1996, but remains highly
sensitive to the local economy, notably the rate of change in unemployment
levels, and housing and auto sales. For the Eastern newspapers, the closure of
New York Newsday in mid-July 1995 and Baltimore's Evening Sun in mid-September
1995 may reduce both circulation and advertising revenues in these markets in
the first three quarters of 1996 when compared to prior year periods.
While prices appear to be stabilizing in early 1996, the Company's average
price per ton for newsprint is expected to increase by 15 to 20 percent during
1996. Consumption levels are expected to decline modestly from the 1995 tonnage
of 582,000, due to edition closures which led to an expected decrease in
average circulation. Cost savings from the 1995 restructuring program as well
as other productivity savings are expected to help offset this expense
increase.
PROFESSIONAL INFORMATION
Professional Information revenue and operating profit (loss) was as follows
(dollars in millions):
<TABLE>
<CAPTION>
1995 CHANGE 1994 CHANGE 1993
-------- ------ -------- ------ ------
<S> <C> <C> <C> <C> <C>
Revenues............................. $1,091.0 8.5 % $1,005.3 1.3 % $992.2
======== ======== ======
Operating Profit (Loss).............. $ (131.4) (100+)% $ 174.0 (.5)% $174.9
======== ======== ======
Operating Profit Excluding
Restructuring Charges............... $ 136.0 (21.8)% $ 174.0 (13.1)% $200.2
======== ======== ======
</TABLE>
1995 RESULTS
Professional Information revenues in 1995 increased, reflecting double-digit
revenue growth in professional and academic health science publishing, consumer
health information and flight information, as well as the revenues from several
small health science information companies which were acquired early in 1995.
Higher education also reported strong revenue growth. These revenue gains were
tempered by a revenue decline at Matthew Bender due to ongoing subscriber
attrition in print products.
Operating profit for the segment, excluding restructuring charges, declined
from the prior year largely reflecting the lower revenues at Matthew Bender.
Higher education publishing and the Company's health science information
businesses had lower operating profit, excluding restructuring charges, due to
higher expenses in key areas including: increasing international sales and
marketing efforts in Southeast Asia, the development of new products and
product improvement efforts in health information services, including an online
medical service, and the costs associated with expanding product lists in the
higher education businesses. These efforts increased costs faster than revenues
and reduced profitability for the health science and higher education
companies. Times Mirror's training companies reported reduced operating profit
in 1995, excluding restructuring charges, due to weaknesses in certain markets,
as well as higher marketing, acquisition and other costs. Jeppesen Sanderson,
the Company's flight information publisher, reported strong operating profit
growth for the 1995 year, further benefiting from favorable foreign currency
fluctuations.
23
<PAGE>
1994 RESULTS
Professional Information revenues rose slightly in 1994, as strong growth in
higher education, health information services and international publishing was
largely offset by declines at Matthew Bender. Excluding Matthew Bender, where
declines in the first half of 1994 significantly depressed its full-year
results, revenues for the rest of the segment rose 8.7 percent as compared
with 1993. Revenue growth also reflected several small acquisitions in the
segment during 1994. In higher education publishing, revenues grew more than
10 percent, considerably ahead of the industry average, due to growth in
custom publishing sales and market share gains in some textbook disciplines.
During 1994, Bender marketed combined practice sets in core areas,
instituted service fee annual subscription pricing and held prices in key
areas to 1992 levels in order to reduce subscriber attrition rates in key
product lines.
Operating profit for the segment was below the prior year, due primarily to
the declines at Matthew Bender. The operating profit margin declined to 17.3
percent in 1994 from 20.2 percent in the prior year.
PROFESSIONAL INFORMATION OUTLOOK
For 1996, Professional Information is expected to show improvements in
operating profitability, based on stabilization in revenues and profitability
at Matthew Bender, modest revenue gains at most other businesses within the
segment and overall cost reductions due to the 1995 restructuring efforts.
In early March 1996, the Company announced its plan to explore its strategic
alternatives for the higher education publishing businesses and CRC Press,
which may include the sale of all or part of these businesses. These
businesses accounted for less than 10 percent of the Company's 1995 revenues
and total assets.
CONSUMER MEDIA
Consumer Media revenue and operating profit (loss) was as follows (dollars in
millions):
<TABLE>
<CAPTION>
1995 CHANGE 1994 CHANGE 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues................................. $300.7 4.4 % $288.1 6.3 % $271.2
====== ====== ======
Operating Profit (Loss).................. $(75.9) (100+)% $ 3.3 100+% $ (3.8)
====== ====== ======
Operating Profit (Loss) Excluding
Restructuring Charges................... $ (1.0) (100+)% $ 3.3 100+% $ (3.8)
====== ====== ======
</TABLE>
1995 RESULTS
Each of the companies in the Consumer Media segment, comprised of Times
Mirror Magazines, Harry N. Abrams and The National Journal, reported higher
revenues in 1995, compared with 1994. These revenue gains were generated
largely from the successful launch of Snowboard Life magazine, fees related to
the licensing of certain magazine titles for use on affinity credit cards to
be issued by a bank, the successful Abrams' book, "Hidden Treasures Revealed,"
on the art of Russia's Hermitage Museum, and 1995 publications related to
Ocean Planet, a Smithsonian Institution traveling exhibition. The 1995
increase also included revenues from TransWorld SNOWboarding, which was
acquired in August 1994. For the year, the magazines reported a 6.6 percent
increase in advertising revenue over 1994, reflecting improved advertising
trends industry wide. This increase was mostly offset by lower circulation
revenues at some of the magazines. Excluding restructuring program charges,
Consumer Media reported an operating loss for the year due to increased year-
end promotional and marketing expenses at the magazines and overall higher
paper and postage costs.
1994 RESULTS
Consumer Media revenues and operating profits were up in 1994 due to solid
gains at the magazines. The magazines benefited from higher advertising
volume, reflecting an industrywide trend in 1994, the acquisition of
TransWorld SNOWboarding in August 1994, and special publications related to
the 1994 World Cup of Soccer.
24
<PAGE>
The Company's consumer multimedia and cable television programming
businesses, which were previously reported in the Consumer Media segment, have
been discontinued. The operating results and other costs and charges related
to the discontinuation of these businesses are reported in discontinued
operations. Note 3 to the consolidated financial statements contains further
information about these discontinued operations.
CONSUMER MEDIA OUTLOOK
The Consumer Media segment is expected to become profitable in 1996 with
modest revenue growth and considerable expense reductions contributing to the
turnaround in operating profit. Magazine advertising revenue should increase
overall if industry growth trends continue and modest pricing increases are
realized.
CORPORATE AND OTHER
Corporate and Other operating costs were as follows (dollars in millions):
<TABLE>
<CAPTION>
1995 CHANGE 1994 CHANGE 1993
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Operating Costs........................ $(138.6) (99.4)% $(69.5) 22.2% $(89.4)
======= ====== ======
Operating Costs Excluding Restructuring
Charges............................... $ (73.0) (5.0)% $(69.5) 22.2% $(89.4)
======= ====== ======
</TABLE>
1995 RESULTS
Operating costs in this segment primarily reflect the ongoing expenses
associated with corporate administrative functions, including executive
office, legal and treasury operations, among other costs. Excluding
restructuring program charges, operating costs for the Corporate and Other
segment increased slightly in 1995 due to the development of a companywide
digital network of product, marketing and administrative data bases. This
project was abandoned in the third quarter of 1995.
1994 RESULTS
Operating costs in 1994 were significantly lower than the prior year, which
included a $21.8 million restructuring charge for the costs associated with
the planned re-engineering and consolidation of certain financial processes
across all Times Mirror companies.
CORPORATE AND OTHER OUTLOOK
Due to the Corporate workforce reductions and the consolidation of New York
City office space, the operating costs for Corporate administration are
expected to decline by more than $20 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Significant sources of cash during 1995 included the $1.225 billion in
proceeds from the first quarter disposition of the Company's cable television
operations and the $262.8 million generated from continuing operating
activities. These funds enabled the Company to pursue three strategic
initiatives to change the Company's capital structure and lower its cost base:
. Retire $588.1 million of short-term debt during the first quarter of
1995.
. Restructure its businesses in a companywide restructuring program during
the last half of 1995.
. Spend $446.5 million to repurchase shares of its common stock and Series
B preferred stock.
These actions are expected to enhance cash flow in future years primarily
through reduced interest expense and operating costs as well as lower common
and preferred dividend requirements.
25
<PAGE>
Capital expenditures for continuing operations in 1996 are expected to be
$140 million, slightly higher than the 1995 expenditures of $128.6 million,
due to capital expenditures anticipated to implement the restructuring
program.
The Company's cash requirements are funded primarily by its operating
activities. The Company also obtains external financing through the issuance
of fixed rate debt and has unsecured long-term revolving bank lines of credit
with commitments totaling $210 million at December 31, 1995. These lines of
credit were increased to $400 million on January 10, 1996. In addition to
loans, these lines of credit may be used to support a commercial paper program
which was established in late December 1995 and under which no issuances of
commercial paper have been made. Future commercial paper issuances or other
debt drawdowns are expected to be used for short-term cash requirements.
CASH FLOWS
During 1995, the Company generated $262.8 million in net cash from
continuing operations, compared with $321.3 million in 1994. The reduced cash
flow in 1995 is largely attributable to cash outlays for restructuring
program-related actions and higher levels of more costly newsprint inventory.
These items were mostly offset by decreased interest payments in 1995,
compared to the prior year, as well as higher interest income from the
investment of proceeds from the cable merger.
Net cash provided by investing activities of continuing operations during
1995 was $918.6 million, compared to $102.8 million in 1994. The 1995 period
included proceeds of $1.225 billion from the cable merger and $83.3 million
from the sales of assets. Partly offsetting these proceeds were expenditures
aggregating $363.4 million related to acquisitions, capitalized product costs,
capital expenditures and net investments of marketable securities. The prior
year included $340.0 million of proceeds from the sale of assets, primarily
the broadcast television operations, which were partly offset by $220.4
million of expenditures for acquisitions, capital assets and capitalized
product costs. Spending for capital assets and capitalized product costs in
1995 exceeded the prior-year period by $24.5 million.
Net cash used in financing activities of $1.036 billion in 1995 was more
than double the net cash used in the prior-year period. During the first
quarter of 1995 the Company repaid $588.1 million of debt outstanding at the
end of 1994 using proceeds from the cable disposition. Dividends to
shareholders were $97.0 million and $138.9 million in 1995 and 1994,
respectively. Cash spent on common and preferred stock repurchases during 1995
aggregated $355.4 million. An additional $91.2 million was spent on January 6,
1996 to pay for Series B preferred shares repurchased under a tender offer
which closed on December 29, 1995.
DIVIDENDS
Beginning in June 1995, the Company agreed to pay an annual dividend to
common shareholders of no less than 24 cents per share for a period of three
years, subject to the fiduciary duties of its Board of Directors. Thereafter,
the payment of dividends on common stock will depend on future earnings,
capital requirements, financial condition and other factors.
As previously mentioned, Times Mirror issued two new series of preferred
stock during the first quarter of 1995. Annual dividends on the Series A
preferred stock were $27.5 million in 1995 and will be $32.9 million
thereafter. Annual dividends on the Series B preferred stock are paid at the
rate of $1.374 per share, and are expected to be $10.7 million in 1996 and
1997 and $2.7 million in 1998. The Series B preferred stock will be converted
into Series A common stock on April 1, 1998, unless previously redeemed by the
Company.
FORWARD-LOOKING STATEMENTS
The forward-looking statements set forth above and elsewhere in this Annual
Report on Form 10-K are subject to uncertainty and could be adversely affected
by a number of factors. Some of these factors are described on page 8 and in
Note 18 to the consolidated financial statements.
26
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................... 28
Consolidated Statements of Operations--Years Ended December 31, 1995, 1994
and 1993................................................................. 29
Consolidated Balance Sheets--December 31, 1995 and December 31, 1994...... 30
Consolidated Statements of Shareholders' Equity--Years Ended December 31,
1995, 1994 and 1993...................................................... 31
Consolidated Statements of Cash Flows--Years Ended December 31, 1995, 1994
and 1993................................................................. 32
Notes to Consolidated Financial Statements................................ 33
Financial Statement Schedule:
Schedule II--Valuation and Qualifying Accounts and Reserves.............. 56
</TABLE>
All other schedules are omitted because they are not required by the
regulations or related instructions or are not applicable.
27
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
The Times Mirror Company
We have audited the accompanying consolidated balance sheets of The Times
Mirror Company as of December 31, 1995 and 1994, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Times
Mirror Company at December 31, 1995 and 1994, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Notes 1 and 4 to the consolidated financial statements, in
1995 the company changed its method of accounting for the impairment of long-
lived assets and for long-lived assets to be disposed of.
ERNST & YOUNG LLP
Los Angeles, California
February 1, 1996
28
<PAGE>
THE TIMES MIRROR COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
(IN THOUSANDS OF DOLLARS 1995 1994 1993
EXCEPT PER SHARE AMOUNTS) ---------- ---------- ----------
<S> <C> <C> <C>
REVENUES.................................... $3,448,287 $3,355,761 $3,243,749
---------- ---------- ----------
COSTS AND EXPENSES
Cost of sales.............................. 1,843,475 1,778,205 1,759,052
Selling, general and administrative
expenses.................................. 1,426,114 1,275,048 1,215,491
Restructuring, impairment and one-time
charges................................... 634,077 80,164
---------- ---------- ----------
3,903,666 3,053,253 3,054,707
---------- ---------- ----------
OPERATING PROFIT (LOSS)..................... (455,379) 302,508 189,042
Interest expense........................... (29,467) (69,322) (84,054)
Interest income............................ 27,237 2,517 2,688
Other, net................................. 2,596 22,196 2,109
---------- ---------- ----------
Income (loss) from continuing operations
before income tax provision (benefit)..... (455,013) 257,899 109,785
Income tax provision (benefit)............. (116,030) 125,676 58,116
---------- ---------- ----------
Income (loss) from continuing operations... (338,983) 132,223 51,669
Discontinued operations:
Net income (loss) from operations......... (55,836) 53,126 133,788
Net gain on disposal...................... 1,634,294 131,702
Extraordinary loss on early retirement of
debt, net of income tax benefit of $8,517. (12,232)
Cumulative effect of changes in accounting
principles, net of
income tax benefit of $8,817.............. (12,724)
---------- ---------- ----------
NET INCOME.................................. $1,226,751 $ 173,117 $ 317,159
========== ========== ==========
Preferred dividend requirements............. $ 44,003 -- --
========== ========== ==========
Cash paid in excess of liquidation value for
Series B preferred
stock repurchases.......................... $ 43,085 -- --
========== ========== ==========
Earnings applicable to common shareholders.. $1,139,663 $ 173,117 $ 317,159
========== ========== ==========
Primary earnings (loss) per share:
Continuing operations...................... $ (3.74) $ 1.03 $ .40
Discontinued operations:
Net income (loss) from operations......... (.49) .41 1.04
Net gain on disposal...................... 14.36 1.02
Extraordinary loss......................... (.09)
---------- ---------- ----------
Income before cumulative effect of changes
in accounting principles.................. 10.13 1.35 2.46
Cumulative effect of changes in accounting
principles................................ (.11)
---------- ---------- ----------
Primary earnings per share.................. $ 10.02 $ 1.35 $ 2.46
========== ========== ==========
Fully diluted earnings per share:
Income before cumulative effect of changes
in accounting principles.................. $ 9.50 $ 1.35 $ 2.46
Cumulative effect of changes in accounting
principles................................ (.10)
---------- ---------- ----------
Fully diluted earnings per share............ $ 9.40 $ 1.35 $ 2.46
========== ========== ==========
</TABLE>
See notes to consolidated financial statements
29
<PAGE>
THE TIMES MIRROR COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
(IN THOUSANDS OF DOLLARS) ---------------------
1995 1994
---------- ----------
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents............................... $ 182,901 $ 81,944
Marketable securities................................... 72,806
Accounts receivable, less allowances for doubtful
accounts and returns of
$79,536 and $72,317.................................... 561,828 528,562
Recoverable income taxes................................ 56,792 5,406
Inventories............................................. 173,568 153,017
Deferred income taxes................................... 134,395
Net assets of discontinued cable television operations.. 642,377
Prepaid expenses........................................ 44,066 75,245
Other current assets.................................... 21,681 7,420
---------- ----------
Total current assets.................................. 1,248,037 1,493,971
Net property, plant and equipment........................ 1,174,831 1,311,130
Goodwill................................................. 651,745 732,293
Other intangibles........................................ 84,186 124,082
Deferred charges......................................... 199,188 216,205
Deferred income taxes.................................... 4,007
Other assets............................................. 455,165 409,527
---------- ----------
$3,817,159 $4,287,208
========== ==========
LIABILITIES
Current Liabilities
Accounts payable........................................ $ 395,292 $ 362,139
Short-term debt......................................... 253 645,870
Employees' compensation................................. 118,111 108,673
Deferred income taxes................................... 36,681
Unearned income......................................... 222,893 217,595
Other current liabilities............................... 298,641 131,832
---------- ----------
Total current liabilities............................. 1,035,190 1,502,790
Long-term debt........................................... 247,934 246,462
Deferred income taxes.................................... 140,087 131,163
Postretirement benefits.................................. 243,331 249,200
Unearned income.......................................... 60,412 52,567
Other liabilities........................................ 283,969 147,983
---------- ----------
2,010,923 2,330,165
Commitments and contingencies
SHAREHOLDERS' EQUITY
Series A preferred stock, $1 par value; 900,000 shares
authorized;
824,000 shares issued; stated at liquidation value...... 411,784
Series B preferred stock, $1 par value; 25,000,000 shares
authorized;
7,789,000 shares issued; stated at liquidation value;
convertible to Series A common stock.................... 164,595
Preferred stock, $1 par value; 7,100,000 shares
authorized; no shares issued
Common stock
Series A, $1 par value; 500,000,000 shares authorized;
77,765,000 and 99,024,000 shares issued................ 77,765 99,024
Series B, $1 par value; 100,000,000 shares authorized;
no shares issued.......................................
Series C, convertible, $1 par value, 300,000,000 shares
authorized;
27,933,000 and 30,939,000 shares issued................ 27,933 30,939
Additional paid-in capital............................... 192,266 167,898
Retained earnings........................................ 875,981 1,720,725
Net unrealized gain on securities........................ 55,912
---------- ----------
1,806,236 2,018,586
Less treasury stock, at cost; 1,345,000 Series A common
shares.................................................. 61,543
---------- ----------
1,806,236 1,957,043
---------- ----------
$3,817,159 $4,287,208
========== ==========
</TABLE>
See notes to consolidated financial statements
30
<PAGE>
THE TIMES MIRROR COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
THREE YEARS ENDED DECEMBER 31, 1995
------------------------------------------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK NET
----------------- ---------------- ADDITIONAL UNREALIZED
SERIES SERIES PAID-IN RETAINED GAIN ON TREASURY GUARANTEED
(IN THOUSANDS OF SERIES A SERIES B A C CAPITAL EARNINGS SECURITIES STOCK ESOP DEBT TOTAL
DOLLARS) -------- -------- ------- ------- ---------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31,
1992............ $96,534 $33,382 $163,896 $1,513,977 $(61,543) $(45,600) $1,700,646
Conversion of
Series C shares
to Series A
shares......... 1,034 (1,034)
Transactions
related to
stock option
and restricted
stock plans.... 20 18 3,594 3,632
Dividends on
common stock;
$1.08 per
share.......... (138,887) (138,887)
Net income...... 317,159 317,159
Reduction of
guaranteed ESOP
debt........... 21,400 21,400
Translation
losses......... (4,675) (4,675)
-------- -------- ------- ------- -------- ---------- ------- -------- -------- ----------
BALANCE AT
DECEMBER 31,
1993............ 97,588 32,366 167,490 1,687,574 (61,543) (24,200) 1,899,275
Conversion of
Series C shares
to Series A
shares......... 1,442 (1,442)
Transactions
related to
stock option
and restricted
stock plans.... (6) 15 408 417
Dividends on
common stock;
$1.08 per
share.......... (138,904) (138,904)
Net income...... 173,117 173,117
Reduction of
guaranteed ESOP
debt........... 24,200 24,200
Translation
gains and
other.......... (1,062) (1,062)
-------- -------- ------- ------- -------- ---------- ------- -------- -------- ----------
BALANCE AT
DECEMBER 31,
1994............ 99,024 30,939 167,898 1,720,725 (61,543) 1,957,043
Conversion of
Series C shares
to Series A
shares......... 1,462 (1,462)
Exchange of
common stock
for Series B
preferred
stock.......... $349,954 (14,965) (1,596) (333,393)
Retirement of
treasury stock. (1,345) (60,198) 61,543
Issuance of
Series A
preferred
stock.......... $411,784 (411,784)
Repurchases of
stock.......... (185,359) (7,023) (19) (254,135) (446,536)
Partial
redemption of
certain
shareholder
interests...... (932,000) (932,000)
Transactions
related to
stock option
and restricted
stock plans.... 612 71 24,368 25,051
Dividends on
common stock;
24 cents per
share.......... (26,524) (26,524)
Dividends on
preferred
stock.......... (52,921) (52,921)
Net income...... 1,226,751 1,226,751
Net unrealized
gain on
securities..... $55,912 55,912
Translation
losses and
other.......... (540) (540)
-------- -------- ------- ------- -------- ---------- ------- -------- -------- ----------
BALANCE AT
DECEMBER 31,
1995............ $411,784 $164,595 $77,765 $27,933 $192,266 $ 875,981 $55,912 $1,806,236
======== ======== ======= ======= ======== ========== ======= ======== ======== ==========
</TABLE>
See notes to consolidated financial statements
31
<PAGE>
THE TIMES MIRROR COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1995 1994 1993
(IN THOUSANDS OF DOLLARS) ----------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) from continuing operations.... $ (338,983) $ 132,223 $ 51,669
Adjustments to derive cash flows from con-
tinuing operating activities:
Depreciation and amortization.............. 172,697 167,488 170,978
Restructuring program:
Impairments and other non-cash charges.... 386,447
Net change in restructuring liability..... 188,175 (64,492) (35,523)
Amortization of product costs.............. 61,526 59,574 55,876
Gains on asset sales, net.................. (41,435) (22,099)
Provision for doubtful accounts............ 25,184 20,554 23,105
Provision (benefit) for deferred income
taxes..................................... (144,740) 14,978 (1,851)
Changes in assets and liabilities:
Trade accounts receivable................. (50,688) (43,648) (34,771)
Inventories............................... (23,401) 6,039 5,618
Accounts payable.......................... 28,284 11,812 15,184
Income taxes.............................. (21,553) 3,790 75,761
Other, net................................. 21,299 35,072 (23,587)
----------- --------- ---------
Net cash provided by continuing operating
activities................................ 262,812 321,291 302,459
Income (loss) from discontinued operations. (55,836) 53,126 133,788
Adjustment to derive cash flows from dis-
continued operating activities:
Change in net operating assets............ 42,770 111,599 (1,454)
----------- --------- ---------
Net cash provided by (used in) discontinued
operating activities...................... (13,066) 164,725 132,334
----------- --------- ---------
Net cash provided by operating activities. 249,746 486,016 434,793
----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of cable television
operations................................. 1,225,013
Capital expenditures........................ (128,612) (128,167) (111,703)
Capitalization of product costs............. (90,903) (66,817) (61,722)
Proceeds from sales of assets............... 83,345 340,035 33,546
Investment in marketable and long-term secu-
rities, net................................ (79,845)
Acquisitions, net of cash acquired.......... (64,070) (25,368) (54,318)
Other, net.................................. (26,295) (16,851) (1,091)
----------- --------- ---------
Net cash provided by (used in) investing
activities of continuing operations....... 918,633 102,832 (195,288)
Net cash used in investing activities of
discontinued operations................... (31,497) (155,649) (32,033)
----------- --------- ---------
Net cash provided by (used in) investing
activities............................... 887,136 (52,817) (227,321)
----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of commercial paper and short-term
borrowings, net............................ (488,010) (233,901) (10,120)
Principal repayments of other debt.......... (100,792) (344,357) (301,228)
Proceeds from issuance of debt.............. 363,680 249,397
Dividends paid.............................. (96,972) (138,901) (138,878)
Repayment of guaranteed ESOP debt........... (24,200) (21,400)
Repurchases of common and preferred stocks.. (355,354)
Other, net.................................. 5,203 (20,332) 3,632
----------- --------- ---------
Net cash used in financing activities...... (1,035,925) (398,011) (218,597)
----------- --------- ---------
Increase (decrease) in cash and cash
equivalents................................. 100,957 35,188 (11,125)
Cash and cash equivalents at beginning of
year........................................ 81,944 46,756 57,881
----------- --------- ---------
Cash and cash equivalents at end of year..... $ 182,901 $ 81,944 $ 46,756
=========== ========= =========
</TABLE>
See notes to consolidated financial statements
32
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include
the accounts of the Company and its subsidiaries after elimination of all
significant intercompany transactions and balances. Affiliated companies in
which the Company owns a 20 percent to 50 percent interest are accounted for
by the equity method.
Reclassifications and Restatements. Certain amounts in previously issued
financial statements have been reclassified or restated to conform to the 1995
presentation. Financial information in the Notes to Consolidated Financial
Statements excludes discontinued operations, except where noted.
Changes in Accounting Principles. Effective January 1, 1995, the Company
changed its method of accounting for certain contract-related revenues from
the licensing and sale of training programs and related materials. Prior to
1995, revenues were recognized for licensing fees, as well as the sale of
training products and seminars. However, the majority of these contract-
related revenues were recognized as licensing fees on the date a non-
cancelable agreement was signed and a master copy of the training materials
was delivered to the customer. As of January 1, 1995, revenues are recognized
either when the training products are delivered or the seminars presented,
with no revenues recognized for licensing fees. The Company believes that this
provides for consistent accounting treatment among its professional training
companies. The Company recorded a cumulative charge of $7,372,000 ($4,511,000
net of taxes, or 4 cents per share) as of January 1, 1995. The effect of this
change on 1995 net income before cumulative effect of changes in accounting
principles was not significant.
Effective January 1, 1995, the Company adopted the Financial Accounting
Standards Board's Practice Bulletin 13, "Direct-Response Advertising and
Probable Future Benefits," which clarified the accounting for direct-response
advertising costs. The Company's accounting practice prior to 1995 was to
capitalize magazine subscription-related direct response advertising costs to
the extent that such costs did not exceed estimated future revenues from
magazine subscriptions and advertising for the specific direct response
efforts. Under the Practice Bulletin 13 interpretation, future estimated
advertising revenues may not be included in estimating probable future
revenues for purposes of determining whether direct response advertising costs
should be capitalized or expensed. The Company recorded a cumulative charge of
$14,169,000 ($8,213,000 net of taxes, or 7 cents per share) as of January 1,
1995. The effect of this change on 1995 net income before cumulative effect of
changes in accounting principles was not significant.
Effective July 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121). Long-lived
assets, such as plant and equipment, identifiable intangibles and goodwill,
are reviewed for impairment whenever events or changes in circumstances
indicate that the net book value of these assets may not be recoverable. As a
result of the adoption of SFAS 121, the Company has changed its methodology
for assessing the recoverability of long-lived assets, including goodwill.
Prior to SFAS 121, the Company recognized the difference between future
undiscounted cash flows and net book value as an impairment loss. Impairment
losses under SFAS 121 are determined based on the difference between fair
value, which would generally approximate estimated future cash flows
discounted at the Company's cost of capital, and net book value. An impairment
loss on certain assets, as described in Note 4, was recorded in 1995. Prior
period financial statements have not been affected by the adoption of SFAS
121.
Cash and Cash Equivalents. Cash equivalents consist of investments that are
readily convertible into cash and generally have original maturities of three
months or less. Cash equivalents of $129,471,000 and $39,813,000 at December
31, 1995 and 1994, respectively, were primarily commercial paper and
repurchase agreements.
Under the Company's cash management system, the bank notifies the Company
daily of checks presented for payment against its primary disbursing accounts.
The Company transfers funds from other sources such as
33
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
short-term investments or commercial paper issuance to cover the checks
presented for payment. This program results in a book cash overdraft in the
primary disbursing accounts as a result of checks outstanding. The book
overdraft, which was reclassified to accounts payable, was $33,009,000 and
$54,263,000 at December 31, 1995 and 1994, respectively.
Inventories. Inventories are carried at the lower of cost or market and are
determined under the first-in, first-out method for books and certain finished
products, and under the last-in, first-out method for newsprint, paper and
certain other inventories.
Property, Plant and Equipment. Property, plant and equipment are carried on
the basis of cost. Maintenance and repairs are charged to expense as incurred.
Additions, improvements and replacements are capitalized.
Depreciation is provided on a straight-line basis over the estimated useful
lives as follows:
<TABLE>
<S> <C>
Buildings........................... 15-45 years
Machinery and equipment............. 3-20 years
Leasehold improvements.............. Lesser of useful life or lease term
</TABLE>
Goodwill and Other Intangibles. Goodwill recognized in business combinations
accounted for as purchases subsequent to October 31, 1970 ($638,292,000 at
December 31, 1995 and $718,840,000 at December 31, 1994 net of accumulated
amortization of $167,399,000 and $168,904,000, respectively) is being
amortized primarily over a period of 40 years. Goodwill arising from business
combinations consummated prior to November 1, 1970 is not being amortized
because, in the opinion of management, it has not diminished in value.
Goodwill amortization expense amounted to $25,219,000 for 1995, $22,330,000
for 1994, and $20,327,000 for 1993.
Other intangibles arising in connection with acquisitions are being
amortized on a straight-line basis over their estimated useful lives ranging
from 3 to 21 years. Amortization expense amounted to $20,753,000 for 1995,
$22,387,000 for 1994 and $32,960,000 for 1993. Accumulated amortization was
$95,105,000 and $100,747,000 at December 31, 1995 and 1994, respectively.
The Company assesses on an ongoing basis the recoverability of goodwill,
based on estimates of future undiscounted cash flows for the applicable
business compared to net book value. If the future undiscounted cash flow
estimate were less than net book value, net book value would then be reduced
to fair value based on an estimate of discounted cash flow. The Company also
evaluates the amortization periods of assets, including goodwill and other
intangible assets, to determine whether events or circumstances warrant
revised estimates of useful lives.
Deferred Charges. Certain expenses for books and training materials are
capitalized and charged to expense over the estimated product life as the
products are sold. Magazine subscription procurement costs are charged to
expense over the same period as the related revenue is earned.
Derivative Financial Instruments. Interest rate swaps and forward swaps are
used to manage exposure to market risk associated with changes in interest
rates. Interest rate swaps are accounted for on the accrual basis. Payments
made or received are recognized as an adjustment to interest expense related
to the debt. Amounts received in connection with forward swaps are included in
"Other liabilities" and are amortized on a straight-line basis as a reduction
in interest expense over the term of the swaps.
Exposures associated with foreign currency fluctuations are generally
managed with foreign currency forward contracts. The contracts are entered
into at the beginning of each year and mature at various times during the
year. The gains and losses on the forward contracts, which do not qualify as
accounting hedges, are recognized currently in earnings.
34
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition. Revenues from certain products sold with the right of
return, principally books, are recognized net of a provision for estimated
returns. Revenues from newspaper and magazine subscriptions and professional
service fee annual subscriptions are deferred as unearned income at the time
of the sale. A pro rata share of the newspaper and magazine subscription price
is included in revenue as products are delivered to subscribers. Professional
service fee annual subscription revenues are recognized on a straight-line
basis over the life of the subscription service.
Earnings Per Share. Primary earnings per share is computed by dividing net
income, less preferred dividend requirements and cash paid in excess of
liquidation value on Series B preferred stock repurchases, by the weighted
average number of shares of common stock and common stock equivalents
outstanding during the period, except when the common stock equivalents are
antidilutive or result in less than 3% dilution. The weighted average number
of shares used for primary earnings per share totaled 113,797,000 and
128,807,000 for the year ended December 31, 1995 and 1994, respectively.
Fully diluted earnings per share for the year ended December 31, 1995 is
computed by dividing net income, less preferred dividend requirements for
Series A preferred stock and cash paid in excess of liquidation value for
Series B preferred stock repurchases, by the weighted average number of shares
of common stock and dilutive common stock equivalents outstanding, assuming
that the Series B preferred stock outstanding at December 31, 1995 was
converted to common stock on a one-for-one basis on March 1, 1995. The
weighted average number of shares for fully diluted earnings per share is
123,001,000 and 128,807,000 for the years ended December 31, 1995 and 1994,
respectively.
Stock-Based Benefits. Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), must be adopted no later
than January 1, 1996. SFAS 123 requires that stock awards granted subsequent
to January 1, 1995 be recognized as compensation cost based on their estimated
fair value at the date of grant. Alternatively, a company may use APB 25,
"Accounting for Stock Issued to Employees," and disclose the pro forma income
amount which would have resulted from recognizing such awards at their fair
value. The Company will continue to account for stock-based compensation
expense under APB 25. The required pro forma disclosures for the SFAS 123 fair
value compensation will be made in the 1996 year-end financial statements.
Retirement Plans and Postretirement Benefits. The Company has defined
benefit pension plans and various other contributory and noncontributory
retirement plans covering substantially all employees. In general, benefits
under the defined benefit plans are based on years of service and the
employee's compensation during the last five years of employment. In
determining net periodic pension expense (income), prior service costs are
amortized on a straight-line basis over 10 years. The defined benefit plans
are generally funded on a current basis in accordance with the Employee
Retirement Income Security Act of 1974. An Employee Stock Ownership Plan
(ESOP) provides benefits in conjunction with certain defined benefits, and the
fair value of ESOP assets is recognized as an offset to required funding. The
majority of the Company's employees are covered by one defined benefit plan.
Funding is not expected to be required for this plan in the near future as
this plan is overfunded.
Postretirement health care benefits provided by the Company are unfunded and
cover employees hired before January 1, 1993, or approximately half of the
Company's current employees. The various plans have significantly different
provisions for lifetime maximums, retiree cost-sharing, health care providers,
prescription drug coverage and other benefits. Postretirement life insurance
benefits are generally insured by life insurance policies and cover employees
who retired on or before December 31, 1993. Life insurance benefits vary by
plan, ranging from $1,000 to $250,000. Certain employees become eligible for
the postretirement health care benefits if they meet minimum age and service
requirements and retire from full-time, active service.
35
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2--REORGANIZATION
On February 1, 1995, the Company completed the merger of its cable
television operations with Cox Communications, Inc. (Cox) and completed the
transfer of all its non-cable operations into a newly formed entity, New TMC,
Inc., as part of a tax-free reorganization. New TMC, Inc. was then renamed The
Times Mirror Company. The Company borrowed $1.306 billion shortly before the
merger. The $1.306 billion of debt, as well as $57.3 million of the Company's
publicly held notes which were not repurchased or exchanged prior to the
merger, was assumed by Cox on February 1, 1995. The Company received cash
proceeds of $1.225 billion, primarily the cash proceeds from the debt
issuance, and recognized a gain of $1.634 billion. About 48% of the proceeds
were used to retire commercial paper, the short-term borrowings issued to
finance the debt tender offer, and to redeem the Company's $100 million 8 7/8%
Notes which were called on February 1, 1995.
In addition to assuming debt and accrued interest of approximately $1.364
billion, Cox issued 54,904,000 shares of their Class A common stock to the
non-controlling shareholders of the Company, which excludes all Chandler Trust
shareholders. This stock had a fair value of $932,000,000. Due to certain
constraints imposed by the terms of the Chandler Trusts, in lieu of common
stock of Cox, the Chandler Trusts received Series A preferred stock. In
connection with the settlement of reorganization-related litigation, all non-
controlling shareholders were offered the opportunity to exchange shares of
Series A or Series C common stock for shares of Series B preferred stock.
Accordingly, 16,561,178 shares of Series B preferred stock were issued
pursuant to this settlement offer.
The following shows pro forma income statement data for the years ended
December 31, 1995 and 1994 assuming that the transactions had occurred on
January 1, 1994, that all commercial paper and $500 million of debt was
retired on January 1, 1994 and that preferred dividends aggregated $47.8
million and $55.7 million in 1995 and 1994, respectively (in thousands, except
per share amount):
<TABLE>
<CAPTION>
(UNAUDITED)
-------------------
1995 1994
--------- --------
<S> <C> <C>
Income (loss) from continuing operations............. $(335,711) $159,469
========= ========
Earnings (loss) per common share from continuing op-
erations............................................ $ (3.84) $ .92
========= ========
</TABLE>
NOTE 3--DISCONTINUED OPERATIONS
Discontinued operations include cable programming, consumer multimedia, an
electronic shopping joint venture, cable television and broadcast television.
The cable programming business, consumer multimedia business and the joint
venture were discontinued during the third quarter of 1995. The cable
television operations were disposed of on February 1, 1995 in connection with
the reorganization described in Note 2, for a nontaxable gain of $1.634
billion, or $14.36 per share. The broadcast television operations were sold in
1993 for an after-tax gain of $131,702,000, net of income tax expense of
$76,928,000, or $1.02 per share.
36
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The combined results of operations of these businesses have been reported as
discontinued operations for all periods presented. The income (loss) from
discontinued operations is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---------- -------- --------
<S> <C> <C> <C>
Revenues...................................... $ 42,673 $499,775 $565,242
---------- -------- --------
Income (loss) before income tax provision
(benefit)(1)................................. (77,507) 96,592 227,267
Income tax provision (benefit)................ (21,671) 43,466 93,479
---------- -------- --------
Income (loss) after taxes(1).................. (55,836) 53,126 133,788
Net gain on disposal.......................... 1,634,294 131,702
---------- -------- --------
Total discontinued operations................. $1,578,458 $ 53,126 $265,490
========== ======== ========
</TABLE>
- --------
(1) Included in the loss before income taxes and loss after taxes for 1995
were estimated operating costs during the exit period, writedowns of
assets to net realizable value, and severance and other closure costs
aggregating $69,755,000 ($49,627,000 after income tax benefits of
$20,128,000, or 44 cents per share) related to the discontinuance of cable
programming, consumer multimedia and a joint venture.
Included in income before income taxes and income after taxes for 1993 were
gains on asset sales at cable television totaling $86,799,000 ($50,364,000
after taxes, or 39 cents per share) on the sale of QVC Network, Inc. common
stock and on the sale of a small cable system.
Summarized balance sheet data for the discontinued cable television
operations were classified as net assets of discontinued cable television
operations at December 31, 1994. These net assets consist of the following (in
thousands):
<TABLE>
<S> <C>
Property, plant and equipment, net.............................. $485,384
Intangible assets, net.......................................... 229,477
Other assets.................................................... 91,292
Amount due from the parent...................................... 43,968
Deferred income tax liabilities................................. 96,776
Other liabilities............................................... 110,968
Shareholder's equity............................................ 642,377
</TABLE>
The balance sheet amounts for all other discontinued operations were not
significant and are not segregated in the consolidated balance sheets.
The major components of cash flow for discontinued operations are as follows
(in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- --------- ---------
<S> <C> <C> <C>
Income (loss) from discontinued operations..... $(55,836) $ 53,126 $ 133,788
Depreciation and amortization.................. 8,459 99,714 100,013
Gains on asset sales........................... (86,799)
Other, net..................................... 34,311 11,885 (14,668)
-------- --------- ---------
Net cash provided by (used in) discontinued op-
erating activities............................ $(13,066) $ 164,725 $ 132,334
======== ========= =========
Capital expenditures........................... $(11,692) $(119,212) $(116,914)
Proceeds from disposal of assets............... 91,665
Acquisitions, net of cash acquired............. (10,442) (22,308) (1,413)
Other, net..................................... (9,363) (14,129) (5,371)
-------- --------- ---------
Net cash used in investing activities of dis-
continued operations.......................... $(31,497) $(155,649) $ (32,033)
======== ========= =========
</TABLE>
37
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--RESTRUCTURING PROGRAMS
During 1995, the Company recorded restructuring, impairment and one-time
charges of $634,077,000 ($410,623,000 after taxes) in connection with a
comprehensive and systematic review of its operations, cost structures, and
balance sheets. Additional charges of $90,030,000 were also included in 1995
results. These charges do not meet the accounting criteria for inclusion in
restructuring charges, but were part of the Company's restructuring program,
along with additional pre-tax charges of $69,755,000 related to discontinued
operations (see Note 3) and $43,851,000 related to investment writedowns (see
Note 6). These actions are designed to lower the cost base and free up the
resources necessary to finance new growth initiatives in the Company's
newspaper, professional information and magazine businesses. The 1995 charges
were comprised of the following:
Restructuring: Restructuring costs aggregating $409,238,000 consisted of
$153,764,000 for termination benefit costs, $126,412,000 for estimated
sublease and lease abandonment losses, $117,152,000 for asset write-offs and
$11,910,000 for other costs. The termination benefits are largely severance
costs that cover approximately 2,700 full-time equivalent employees company-
wide, of which 1,900 were in the Newspaper Publishing segment. Severance
payments were $92,755,000 during 1995 and approximately 2,000 full-time
equivalent employees had terminated employment as of December 31, 1995. Some
terminated employees are receiving severance payments over time. The remaining
liability for severance costs at December 31, 1995 aggregated $64,076,000. The
sublease and lease abandonment losses primarily cover office space in New York
City, largely related to the closure of New York Newsday on July 17, 1995 and
the consolidation of office space. Approximately 268,000 square feet will be
abandoned and 21,000 square feet has been subleased. The asset write-offs were
primarily goodwill and other intangibles related to the closure of Baltimore's
Evening Sun on September 15, 1995, the abandonment of the magazines' sports
marketing business and the abandonment of other products or product lines,
primarily in the health sciences and college textbook publishing businesses.
Impairment: In connection with the restructuring of operations at Times
Mirror Magazines, magazine titles that historically had operating losses, and
that did not have the estimated future earnings necessary to recover asset
values, were reviewed for impairment in accordance with SFAS 121 (see Note 1).
The net book value of the primary long-lived asset, goodwill, exceeded the
undiscounted estimated future cash flows for certain magazine titles. The
$36,096,000 difference between the net book value and the fair value was
recorded as an impairment loss in 1995. The fair value was based on estimated
future cash flows discounted at the Company's cost of capital. In connection
with the restructuring of its college publishing business, the Company decided
to sell its printing, fulfillment and distribution facilities in order to
reduce costs. An impairment loss on the remaining printing, fulfillment and
distribution facilities of $24,797,000 was recorded in 1995. The December 31,
1995 carrying value of $8,250,000 is expected to equal the fair value of these
assets, less the cost to sell. The Company is currently negotiating the sale
and expects the transaction to be completed in the first quarter of 1996.
One-Time Charges: One-time charges aggregating $163,946,000 were primarily
related to employee benefits costs incurred in the renegotiation of union
agreements at Newsday and the write-down of certain idle facilities and
equipment.
At December 31, 1995, the Company had restructuring liabilities of
$257,749,000 of which $151,165,000 is included in "Other current liabilities"
and $106,584,000 is included in "Other liabilities" in the consolidated
balance sheets. The current portion of the restructuring liability relates
primarily to severance and other employee benefit-related costs while the
noncurrent portion principally relates to lease payments which will be paid
over lease periods extending to 2004.
During 1993, the Company recorded restructuring charges of $80,164,000
($47,724,000 after taxes, or 37 cents per share). More than half of this
amount was for severance or pay-related actions and approximately
38
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
40 percent related to leased facilities, product line changes and other costs
necessary to implement the Company's plans. The remainder included various
asset write-offs. The liabilities related to the 1993 restructuring charges
were not significant at December 31, 1995.
NOTE 5--SUPPLEMENTAL CASH FLOW AND OTHER INFORMATION
Cash payments during the years ended December 31, 1995, 1994 and 1993
included interest, net of amounts capitalized, of $29,218,000, $71,654,000 and
$87,951,000, respectively, and income taxes of $84,968,000, $107,865,000 and
$6,593,000, respectively.
The reorganization described in Note 2 resulted in the following non-cash
transactions during the year ended December 31, 1995 (in thousands):
<TABLE>
<S> <C>
Fair value of Cox Class A common stock issued to noncontrolling
shareholders and accounted for as a partial redemption of certain
shareholder interests............................................. $932,000
Transfer of debt, related interest and other liabilities to Cox.... 133,257
Exchange of debentures............................................. 246,965
Issuance of Series A preferred stock............................... 411,784
Exchange of common stock for Series B preferred stock.............. 349,954
Retirement of treasury stock....................................... 61,543
</TABLE>
In June 1995, the Company implemented a broad-based company-owned life
insurance program which will be used to fund various employee benefits. The
cash surrender value of approximately $112,166,000 is reported in the
consolidated balance sheet net of the $106,700,000 in borrowings against these
policies. Interest on the borrowings is recorded as interest expense while
increases in the cash surrender value are recognized as tax free income.
Advertising and promotion costs amounted to $106,420,000 for 1995,
$98,557,000 for 1994 and $94,699,000 for 1993.
NOTE 6--OTHER, NET
Other, Net consists primarily of gains and losses on asset sales and, in
1995, restructuring-related write-downs of certain investments.
During 1995, asset sales resulted in a gain of $41,435,000, or $25,821,000
(23 cents per share) after applicable income taxes. Gains on the sale of
securities, including equity securities in Graphic Holdings, Inc. and a
newsprint manufacturer, were partially offset by losses on the disposal of
newspaper-related equipment, the sale of The Sporting Goods Dealer and the
sale of a small book printing business. Restructuring-related write-downs and
charges of $43,851,000, or $40,687,000 (36 cents per share) after applicable
income taxes, were recorded in 1995 to state certain investments at their net
realizable value and record certain investment-related commitments.
During 1994, the Company recognized a gain of $22,099,000, or $10,646,000 (8
cents per share) after applicable income taxes, on the divestiture of a small
elementary-high school book publishing operation and the sale of preferred
stock and common stock warrants, obtained as part of the 1992 settlement of a
note receivable related to the 1987 sale of the Denver Post.
NOTE 7--INTEREST
For the years ended December 31, 1995, 1994 and 1993, interest expense of
$29,952,000, $70,464,000 and $84,445,000, respectively, was incurred;
$485,000, $1,142,000 and $391,000, respectively, of which was capitalized.
39
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--FINANCIAL INSTRUMENTS
Financial instruments consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------
1995 1994
----------------- ---------------------
FAIR
COST VALUE COST FAIR VALUE
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Assets:
Short-term assets................. $817,535 $817,535 $ 610,506 $ 610,506
Investments....................... 7,937 102,663 10,351 12,054
Liabilities:
Short-term liabilities............ 395,545 395,545 1,008,009 1,008,009
Long-term debt.................... 247,934 273,582 246,462 214,774
Off Balance Sheet:
Unrealized net gain (loss) on
interest rate swaps.............. -- 19,478 -- (13,000)
</TABLE>
Short-Term Assets and Liabilities: The fair value of cash and cash
equivalents, marketable securities, accounts receivable, accounts payable and
short-term debt approximates their carrying value due to the short-term nature
of these financial instruments.
Investments: Investments in equity securities which are classified as
available-for-sale are stated at fair value based on estimated or quoted
market prices and are included in "Other assets" in the consolidated balance
sheets. The unrealized gain is reported as a separate component of
shareholders' equity, net of applicable income taxes.
Long-Term Debt: The fair value of long-term debt is based primarily on the
Company's current refinancing rates for publicly issued fixed rate debt with
comparable maturities.
Interest Rate Swaps: Interest rate swap agreements for notional amounts of
$150,000,000, expiring in 2010, and $100,000,000, expiring in 2023, exchange
payments to the Company at fixed rates of 7 1/8% and 7 3/8%, respectively, for
payments by the Company at a variable rate based generally on LIBOR. Forward
swap agreements beginning in 1997 and expiring in 2007 exchange payments to
the Company at a variable rate, based generally on LIBOR, for payments by the
Company at fixed rates. The fixed rates are 7 1/4% and 7 1/2% on notional
amounts of $148,215,000 and $98,750,000, respectively. The fair value of all
swaps is the amount at which they could be settled based on estimates of
market rates. The Company received $12,275,000 in connection with forward
interest rate swaps which will be recognized on a straight-line basis as a
reduction in interest expense, beginning in 1997, over the 10-year term of the
swaps.
NOTE 9--INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1995 1994
-------- --------
<S> <C> <C>
Newsprint, paper and other raw materials.................. $ 53,051 $ 33,789
Books and other finished products......................... 91,206 94,290
Work-in-progress.......................................... 29,311 24,938
-------- --------
$173,568 $153,017
======== ========
</TABLE>
40
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Inventories determined on the last-in, first-out method were $31,137,000 and
$21,946,000 at December 31, 1995 and 1994, respectively, and would have been
higher by $27,647,000 in 1995 and $9,825,000 in 1994 had the first-in, first-
out method (which approximates current cost) been used exclusively.
NOTE 10--NET PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1994
---------- ----------
<S> <C> <C>
Land.................................................. $ 91,118 $ 95,483
Buildings............................................. 550,057 599,611
Machinery and equipment............................... 1,334,916 1,355,211
Leasehold improvements................................ 36,006 34,597
Construction-in-progress.............................. 66,342 54,939
---------- ----------
2,078,439 2,139,841
Less accumulated depreciation and amortization........ 903,608 828,711
---------- ----------
$1,174,831 $1,311,130
========== ==========
</TABLE>
NOTE 11--INCOME TAXES
Income tax expense (benefit) from continuing operations consists of the
following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- -------
<S> <C> <C> <C>
Current
Federal........................................ $ 12,617 $ 74,675 $34,561
State.......................................... 1,048 23,762 14,715
Foreign........................................ 15,045 12,261 10,691
Deferred
Federal........................................ (106,660) 6,375 (4,062)
State.......................................... (37,171) 8,579 2,482
Foreign........................................ (909) 24 (271)
--------- -------- -------
$(116,030) $125,676 $58,116
========= ======== =======
</TABLE>
41
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The difference between actual income tax expense and the U.S. Federal
statutory income tax expense for continuing operations is reconciled as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Income (loss) from continuing operations
before income taxes:
United States.............................. $(469,310) $231,684 $ 88,803
Foreign.................................... 14,297 26,215 20,982
--------- -------- --------
$(455,013) $257,899 $109,785
========= ======== ========
Federal statutory income tax rate............ 35% 35% 35%
Federal statutory income tax expense (bene-
fit)........................................ $(159,255) $ 90,265 $ 38,425
Increase (decrease) in income taxes resulting
from:
State and local income tax expense
(benefit), net of Federal effect.......... (23,421) 21,021 11,179
Goodwill amortization not deductible for
tax purposes.............................. 7,947 7,569 7,120
Writedown of assets........................ 44,291
Foreign tax differentials.................. 7,147 416 1,154
Book donations value in excess of cost..... (1,618) (2,194)
Other...................................... 7,261 8,023 2,432
--------- -------- --------
$(116,030) $125,676 $ 58,116
========= ======== ========
</TABLE>
The tax effect of temporary differences results in deferred income tax
assets (liabilities) and balance sheet classifications as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
TEMPORARY DIFFERENCES 1995 1994
--------------------- --------- ---------
<S> <C> <C>
Depreciation and other property, plant and equipment
differences......................................... $(172,308) $(199,727)
Retirement and health benefits....................... (132,226) (118,746)
Postretirement benefits.............................. 111,954 112,028
Valuation and other reserves......................... 61,717 81,751
Deferred gain on sale of assets...................... (84,901)
Other employee benefits.............................. 62,918 43,473
Unrealized investment gains.......................... (38,805)
State and local income taxes......................... 29,798 19,444
Restructuring charges................................ 83,645 15,424
Intangible asset differences......................... 12,615 (36,711)
Other deferred tax assets............................ 19,045 32,991
Other deferred tax liabilities....................... (40,038) (32,870)
--------- ---------
$ (1,685) $(167,844)
========= =========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
BALANCE SHEET CLASSIFICATIONS 1995 1994
----------------------------- --------- ---------
<S> <C> <C>
Current deferred tax assets........................... $ 134,395
Current deferred tax liabilities...................... $ (36,681)
Noncurrent deferred tax assets........................ 4,007
Noncurrent deferred tax liabilities................... (140,087) (131,163)
--------- ---------
$ (1,685) $(167,844)
========= =========
</TABLE>
42
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--DEBT
Short-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------
1995 1994
---- --------
<S> <C> <C>
Commercial paper.............................................. $124,330
Short-term borrowings......................................... 363,680
8 7/8% Notes due February 1, 1998, called on February 1, 1995. 100,000
Debt assumed by Cox........................................... 57,349
Current maturities of long-term debt.......................... $253 511
---- --------
Total short-term debt......................................... $253 $645,870
==== ========
</TABLE>
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1994
-------- --------
<S> <C> <C>
7 1/4% Debentures due
March 1, 2013.......... $148,215
7 1/2% Debentures due
July 1, 2023........... 98,750
7 1/8% Debentures due
March 1, 2013.......... $148,215
7 3/8% Debentures due
July 1, 2023........... 98,750
Others at various inter-
est rates, maturing
through 2003........... 1,222 1,539
-------- --------
248,187 248,504
Unamortized discount.... (1,531)
Less current maturities. (253) (511)
-------- --------
$247,934 $246,462
======== ========
</TABLE>
Interest rate swaps converted the average interest rate on the debentures due
in 2013 and 2023 from 7.34% and 7.25% to 5.84% and 6.75% for the year ended
December 31, 1995 and 1994, respectively.
In January 1995, the Company completed an exchange offer for $246,965,000 of
the 7 1/8% and 7 3/8% Debentures for similar debentures bearing interest rates
of 7 1/4% and 7 1/2%, respectively. The publicly held notes of $57,349,000 at
December 31, 1994 were assumed by Cox on February 1, 1995 as part of the
reorganization described in Note 2. Part of the proceeds received from the
reorganization transactions were used to retire all of the Company's commercial
paper and short-term borrowings and to redeem the 8 7/8% Notes on February 1,
1995.
Commercial paper and short-term borrowings carried a weighted average
interest rate of 6.1% at December 31, 1994. The Company completed a tender
offer in December 1994 for $345,179,000 of its Medium-Term Notes and its three
other Notes due 1999 thru 2001. The premium and related costs of the tender,
aggregating $20,749,000, or $12,232,000 after taxes, were recorded as an
extraordinary loss in 1994.
The Company has an agreement with several domestic and foreign banks for
unsecured long-term revolving lines of credit that expire in September 2000.
This agreement provides for borrowings up to $210,000,000 at interest rates
based on, at the Company's option, the banks' base rates, Eurodollar rates or
competitive bid rates. These lines of credit were increased to $400,000,000 on
January 10, 1996. The commitment fee is approximately 8/100 of one percent per
annum. The lines of credit are used to support a commercial paper program. As
of December 31, 1995, the Company had not borrowed under the agreement. In
addition, the Company has $46,893,000 of undrawn standby letters of credit at
December 31, 1995.
43
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's revolving lines of credit contain restrictive provisions
relating primarily to the level of consolidated net worth. At December 31,
1995, consolidated net worth was required to be not less than approximately
$1.370 billion.
At December 31, 1995, the aggregate principal maturities of the Company's
debt are as follows (in thousands):
<TABLE>
<S> <C>
1996............................................................. $ 253
1997............................................................. 244
1998............................................................. 233
1999............................................................. 221
2000............................................................. 167
Thereafter....................................................... 247,069
</TABLE>
NOTE 13--CAPITAL STOCK AND STOCK REPURCHASE PROGRAM
The Series A and Series B preferred stocks are cumulative, non-voting shares
that were issued in 1995 in connection with the reorganization described in
Note 2. The Series A preferred stock has an annual dividend rate of 8% of its
liquidation value of $411,784,000. The Series B preferred stock has an annual
dividend rate of $1.374 per share. Both series of preferred stock are entitled
to dividends effective March 1, 1995. The Series B preferred stock is
convertible into the Company's Series A common stock on April 1, 1998, or
earlier under certain circumstances. The conversion rate fluctuates with the
value of the common stock, but it will not exceed a one-for-one conversion
rate. Preferred stock is issuable in series under such terms and conditions as
the board of directors may determine.
Shares of Series A and Series C common stock are identical, except with
respect to voting rights, restrictions on transfer of Series C shares and the
right to convert Series C shares into Series A shares. Series A shares are
entitled to one vote per share and Series C shares are entitled to ten votes
per share. Series C shares are subject to mandatory conversion into Series A
shares upon transfer to any person other than a "Permitted Transferee" as
defined in the Company's Certificate of Incorporation or upon the occurrence
of certain regulatory events. Series B common stock is entitled to one-tenth
vote per share and is available for common stock issuance transactions, such
as underwritten public offerings and acquisitions.
During 1995, the Company repurchased 7,042,000 common shares for a total
cost of $218,091,000 and 8,772,000 shares of Series B preferred stock for a
total cost of $228,445,000. About 40% of the Series B shares were acquired
through a tender offer which closed on December 29, 1995. "Other current
liabilities" in the consolidated balance sheets at December 31, 1995 include
$91,182,000 for settlement of the tender offer on January 6, 1996. The common
shares purchased under this program are intended, in part, to offset dilution
from shares of common stock issued under the Company's stock-based employee
compensation and benefit program.
As of December 31, 1995, the repurchase program for common stock had been
expanded. Up to 12,000,000 shares of common stock may be repurchased in the
open market over the next three years.
NOTE 14--STOCK OPTION AND AWARD PLANS
The Company has various stock option plans under which options may be
granted to purchase shares of Series A common stock at a price equal to the
fair market value at the date of grant. Options granted prior to December 27,
1991 had a purchase price equal to 75 percent of the fair market value at the
date of grant. Options that are not exercised expire ten years from the date
of grant. Options generally vest over a four-year period. Restricted stock may
be awarded to key employees, including officers, at a price generally equal to
par value. The Company expects that future restricted stock awards will not be
significant.
44
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During the fourth quarter of 1995, the Company adopted new stock option and
stock award programs, subject to shareholder approval. A total of 21,000,000
shares have been authorized for future grants and awards. No more than
2,000,000 shares may be used for restricted stock awards. Substantially all of
the options granted during 1995 were granted under the new plan.
The following table sets forth information relative to the stock option
plans:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
---------- ----------------
<S> <C> <C>
Options Outstanding December 31, 1992.......... 1,895,218 $18.66 to $37.93
Granted....................................... 2,425,960 31.25 to 32.13
Exercised..................................... (138,721) 18.66 to 30.71
Canceled...................................... (170,909) 18.66 to 36.94
---------- ----------------
Options Outstanding December 31, 1993.......... 4,011,548 18.66 to 37.93
Granted....................................... 961,255 30.81 to 34.38
Exercised..................................... (134,135) 19.46 to 32.13
Canceled...................................... (306,011) 18.66 to 36.94
---------- ----------------
Options Outstanding December 31, 1994.......... 4,532,657 19.46 to 37.93
Adjustment due to reorganization.............. 3,065,245
Granted....................................... 2,845,649 18.88 to 34.00
Exercised..................................... (1,207,180) 11.43 to 32.13
Canceled...................................... (584,714) 14.54 to 36.94
---------- ----------------
Options Outstanding December 31, 1995.......... 8,651,657 $11.43 to $34.00
========== ================
Options Exercisable December 31, 1995.......... 3,880,913 $11.43 to $23.94
========== ================
</TABLE>
The weighted average exercise price and weighted average option life for
options outstanding on December 31, 1995 was $23.29 and 8.1 years,
respectively. The weighted average exercise price for options exercisable at
December 31, 1995 was $18.54. At December 31, 1995, there were 280,250 options
outstanding with purchase prices equal to 75 percent of the fair market value
at the date of grant. At December 31, 1995 and 1994, there were 18,389,660
shares, subject to shareholder approval, and 1,018,710 shares, respectively,
reserved for future grants and awards under the various plans.
In connection with the reorganization described in Note 2, the number of
options and the option price was adjusted in 1995 based on the average market
price for a short period before and after the reorganization was completed. The
adjustment increased the number of options outstanding and decreased the option
exercise price in order to preserve the economic value of the outstanding
options.
NOTE 15--RETIREMENT PLANS AND POSTRETIREMENT BENEFITS
Net periodic pension expense (income) for the defined benefit plans is as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost--benefits
earned during period... $ 39,448 $ 45,777 $ 51,138
Interest cost on
projected benefit
obligation............. 61,225 58,613 54,197
Return on plan assets... (92,626) (98,223) (90,888)
Net amortization and
deferral............... (14,619) (14,480) (8,151)
-------- -------- --------
Net periodic pension ex-
pense (income)......... $ (6,572) $ (8,313) $ 6,296
======== ======== ========
</TABLE>
45
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Curtailment gains in connection with the 1995 workforce reductions did not
exceed the net unrecognized loss in the defined benefit plans and, as a result,
were not recognized in earnings.
Assumptions used in the actuarial computations were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Discount rate.............................................. 7.5 % 8.25% 7.5 %
Rate of increase in compensation levels.................... 5.0 % 6.0 % 6.25%
Expected long-term rate of return on assets................ 9.75% 9.5 % 9.75%
</TABLE>
The following table sets forth the plans' funded status and amounts
recognized in the consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested............................................. $480,991 $ 35,840
Nonvested.......................................... 2,632 447
-------- --------
Accumulated benefit obligations..................... $483,623 $ 36,287
======== ========
Projected benefit obligations....................... $606,467 $ 42,723
Plan assets at fair value........................... 897,462 9,681
-------- --------
Plan assets greater (less) than projected benefit
obligations........................................ 290,995 (33,042)
Unrecognized net loss from past experience different
from that assumed.................................. 68,529 6,116
Prior service cost not yet recognized............... 2,765 8,687
Unrecognized net transition asset................... (65,797)
Adjustment to recognize additional minimum
liability.......................................... (10,107)
-------- --------
Prepaid pension cost (liability).................... $296,492 $(28,346)
======== ========
</TABLE>
46
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------------
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested............................................. $450,717 $ 29,801
Nonvested.......................................... 4,865 436
-------- --------
Accumulated benefit obligations..................... $455,582 $ 30,237
======== ========
Projected benefit obligations....................... $618,999 $ 36,882
Plan assets at fair value........................... 833,921 8,055
-------- --------
Plan assets greater (less) than projected benefit
obligations........................................ 214,922 (28,827)
Unrecognized net loss from past experience different
from that assumed.................................. 171,802 6,563
Prior service cost not yet recognized............... 3,576 7,376
Unrecognized net transition (asset) liability....... (90,915) 77
Adjustment to recognize additional minimum
liability.......................................... (6,979)
-------- --------
Prepaid pension cost (liability).................... $299,385 $(21,790)
======== ========
</TABLE>
Prepaid pension cost is included in "Other assets" except for approximately
$9,394,000 which is included in net assets of discontinued cable television
operations as of December 31, 1994. Projected benefit obligations increased by
approximately $96,694,000 at December 31, 1995 due to the change in the
discount rate and decreased $51,670,000 due to the change in the rate of
increase in compensation levels.
Plan assets include the Company's common stock, other listed stocks, and
corporate and government fixed-income securities. The fair value of plan
assets attributable to the Company's common stock at December 31, 1995 and
1994 was $38,326,000 and $28,287,000, respectively.
Benefits provided by the ESOP are coordinated with certain pension benefits
and, as a result, the defined benefit plan obligations are net of the
actuarially equivalent value of the benefits earned under the ESOP, with the
maximum offset equal to the value of the benefits earned under the defined
benefit plan. The fair value of the ESOP assets was $221,576,000 and
$169,113,000 as of December 31, 1995 and 1994, respectively. At December 31,
1995, the ESOP held 2,947,000 shares of Series A common stock, 2,224,000
shares of Series C common stock, and 3,131,000 shares of Cox Class A common
stock. The Cox common stock, which was received in connection with the
reorganization described in Note 2, is expected to be disposed of by the end
of 1996 and the proceeds will be reinvested. The ESOP currently covers
approximately one-half of the Company's employees. The Company did not make a
contribution to the ESOP in 1995 and has not adopted any plan to make
additional contributions. There are no unallocated shares in the ESOP at
December 31, 1995.
Substantially all employees over age 21 with one year of service are
eligible to participate in the Company's Savings Plus Plan. Eligible employees
may contribute from 1 percent to 13 percent of their basic compensation. The
Company makes matching contributions equal to 50 percent of employee before-
tax contributions from 1 percent to 6 percent. Employees may choose among five
investment options, including a Company common stock fund, for investing their
contributions and the Company's matching contribution. Defined contribution
plan expense, primarily related to the Savings Plus Plan, was $21,347,000 for
1995, $21,553,000 for 1994, and $23,776,000 for 1993.
47
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net periodic postretirement benefit expense is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Service cost--benefits earned during period...... $ 3,315 $ 3,307 $ 3,457
Interest cost on accumulated projected benefit
obligation...................................... 12,707 12,431 11,110
Net amortization................................. (8,627) (7,712) (8,155)
------- ------- -------
Net periodic postretirement expense.............. $ 7,395 $ 8,026 $ 6,412
======= ======= =======
In addition, curtailment gains related to postretirement benefit plans
totaling $12,044,000 were recorded in 1995 as a result of the workforce
reductions. These gains reduced the reported restructuring charges.
Assumptions used in the actuarial computations were as follows:
<CAPTION>
DECEMBER 31
-------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Discount rate.................................... 7.5% 8.25% 7.5%
Health care cost trend rate...................... 10.0% 11.0 % 12.0%
</TABLE>
At December 31, 1995, the health care cost trend rate of 10 percent was
assumed to ratably decline to 5.5 percent by 2011 and remain at that level.
The following table sets forth the plans' unfunded obligations and amounts
recognized in the consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1995 1994
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Retirees................................................... $ 97,690 $119,445
Other fully eligible participants.......................... 8,039 10,958
Other active participants.................................. 37,259 34,230
-------- --------
Accumulated postretirement benefit obligations.............. 142,988 164,633
Unrecognized net decrease in prior service cost............. 74,753 94,200
Unrecognized net gain (loss) from past experience different
from that assumed.......................................... 25,590 (9,633)
-------- --------
Postretirement benefit liability............................ $243,331 $249,200
======== ========
</TABLE>
The assumed health care cost trend rate can significantly affect
postretirement expense and liabilities. An increase of 1 percent in the health
care cost trend rate would increase 1995 net periodic postretirement expense by
$1,718,000 and increase the accumulated postretirement benefit obligations as
of December 31, 1995 by $14,497,000.
A Voluntary Employee Beneficiary Association (VEBA) trust funds certain
health care benefits. At December 31, 1995 and 1994, the VEBA trust balance of
$385,000 and $20,112,000, respectively, is included in "Prepaid expenses."
Future funding of the VEBA is expected to be made on a pay-as-you-go-basis.
48
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16--LEASES
Rental expense under operating leases was $66,539,000, $61,440,000 and
$63,021,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. Capital leases, contingent rentals and sublease income are not
significant. The future minimum lease payments as of December 31, 1995 for all
noncancelable operating leases, excluding future obligations included in the
restructuring liabilities on the consolidated balance sheets, are as follows
(in thousands):
<TABLE>
<S> <C>
1996............................................................. $ 35,944
1997............................................................. 32,057
1998............................................................. 32,087
1999............................................................. 27,820
2000............................................................. 30,058
Later years...................................................... 100,026
--------
Total............................................................ $257,992
========
</TABLE>
NOTE 17--BUSINESS SEGMENTS
Financial data for the Company's three business segments, Newspaper
Publishing, Professional Information and Consumer Media, presented on page 15
of this report, are incorporated herein by reference. Revenues derived from
these business segments represent approximately 60%, 31% and 9%, respectively,
of the Company's consolidated revenues. The Newspaper Publishing segment
publishes daily metropolitan newspapers in the east coast and west coast
regions of the United States, as well as several weekly newspapers. The
Professional Information segment publishes various books and other media,
including legal and health information services publications, higher education
textbooks, aeronautical charts and flight information, and sales and
management training programs. The Consumer Media segment publishes special
interest and trade magazines and art books. Total revenue by industry segment
includes sales to unaffiliated customers and intersegment sales, which are
accounted for at market price.
NOTE 18--USE OF ESTIMATES AND OTHER UNCERTAINTIES
Financial statements prepared in accordance with generally accepted
accounting principles require management to make estimates and judgments that
affect amounts and disclosures reported in the financial statements. Actual
results could differ from those estimates, although management does not
believe that any differences would materially affect the Company's financial
position or reported results.
The Company's future results could be adversely affected by a number of
factors, including (a) an increase in paper, printing and distribution costs
over the levels anticipated; (b) increased consolidation among major retailers
or other events depressing the level of display advertising, (c) an economic
downturn in the Company's principal newspaper markets or other occurrences
leading to decreased circulation and diminished revenues from both display and
classified advertising, (d) competitive pressures arising from increased
consolidation in the legal information industry and the college textbook
publishing industry; (e) an increase in expenses related to new initiatives
and product improvement efforts in the legal information, flight information
and health information operating units; (f) unfavorable foreign currency
fluctuations; and (g) a general economic downturn resulting in decreased
professional or corporate spending on discretionary items such as information
or training and in decreased consumer spending on discretionary items such as
magazines or newspapers.
49
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 19--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
A summary of the unaudited quarterly results of operations follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1995 QUARTERS ENDED
---------------------------------------------
MAR. 31(1)(2) JUNE 30(1) SEPT. 30 DEC. 31
------------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Revenues........................ $ 773,670 $843,078 $ 864,797 $ 966,742
Costs and expenses
Cost of sales.................. 422,200 458,419 473,127 489,729
Selling, general and
administrative expenses....... 321,989 329,533 342,651 431,941
Restructuring, impairment and
one-time charges.............. 3,223 379,451 251,403
---------- -------- --------- ---------
Operating profit (loss)......... 26,258 55,126 (330,432) (206,331)
Interest expense................ (8,732) (5,007) (8,001) (7,727)
Interest income................. 6,392 8,490 7,467 4,888
Other, net...................... 7,534 (2,648) 5,324 (7,614)
---------- -------- --------- ---------
Income (loss) from continuing
operations before income tax
provision (benefit)............ 31,452 55,961 (325,642) (216,784)
Income tax provision (benefit).. 15,102 26,750 (82,730) (75,152)
---------- -------- --------- ---------
Income (loss) from continuing
operations..................... 16,350 29,211 (242,912) (141,632)
Discontinued operations, net.... 1,637,642 (3,165) (56,019)
Cumulative effect of accounting
changes, net................... (12,724)
---------- -------- --------- ---------
Net income (loss)............... $1,641,268 $ 26,046 $(298,931) $(141,632)
========== ======== ========= =========
Preferred dividend requirements. $ 4,730 $ 13,836 $ 13,385 $ 12,052
========== ======== ========= =========
Cash premium for Series B repur-
chases......................... -- -- $ 21,267 $ 21,818
========== ======== ========= =========
Earnings (loss) applicable to
common shareholders............ $1,636,538 $ 12,210 $(333,583) $(175,502)
========== ======== ========= =========
Earnings (loss) per share:
Continuing operations.......... $ .09 $ .14 $ (2.48) $ (1.62)
Discontinued operations........ 13.27 (.03) (.50)
Cumulative effect of accounting
changes, net................... (. 10)
---------- -------- --------- ---------
Earnings (loss) per share....... $ 13.26 $ .11 $ (2.98) $ (1.62)
========== ======== ========= =========
</TABLE>
- --------
(1)Restated to reflect the consumer multimedia and cable television
programming operations as discontinued operations.
(2)Restated for the change in accounting for direct-response advertising
costs.
50
<PAGE>
THE TIMES MIRROR COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1994 QUARTERS ENDED
-------------------------------------------
MAR. 27 JUNE 26(1) SEPT. 25(1) DEC. 31(1)
-------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues........................... $733,706 $807,177 $858,469 $956,409
Costs and expenses
Cost of sales..................... 404,874 431,062 453,482 488,787
Selling, general and
administrative expenses.......... 295,903 309,703 315,558 353,884
-------- -------- -------- --------
Operating profit................... 32,929 66,412 89,429 113,738
Interest expense................... (17,709) (16,603) (17,445) (17,565)
Interest income.................... 421 413 657 1,026
Other, net......................... 1,057 10,308 11,303 (472)
-------- -------- -------- --------
Income from continuing operations
before income taxes............... 16,698 60,530 83,944 96,727
Income taxes....................... 9,197 27,783 43,619 45,077
-------- -------- -------- --------
Income from continuing operations.. 7,501 32,747 40,325 51,650
Discontinued operations, net....... 15,225 12,622 11,974 13,305
Extraordinary loss on early retire-
ment of debt, net................. (12,232)
-------- -------- -------- --------
Net income......................... $ 22,726 $ 45,369 $ 52,299 $ 52,723
======== ======== ======== ========
Earnings per share:
Continuing operations............. $ .06 $ .25 $ .31 $ .40
Discontinued operations........... .12 .10 .10 .10
Extraordinary loss................ (.09)
-------- -------- -------- --------
Earnings per share................. $ .18 $ .35 $ .41 $ .41
======== ======== ======== ========
</TABLE>
- --------
(1)Restated to reflect the consumer multimedia and cable television
programming operations as discontinued operations.
NOTE 20--COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are defendants in actions for libel and
other matters arising out of their business operations. In addition, from time
to time, the Company and its subsidiaries are involved as parties in various
governmental and administrative proceedings, including environmental matters.
The Company does not believe that any such proceedings currently pending will
have a material adverse effect on its consolidated financial position,
although an adverse resolution in any reporting period of one or more of these
matters could have a material impact on results of operations for that period.
To assure a long-term supply of newsprint for the Los Angeles Times, the
Company has an agreement with a supplier to purchase specified quantities of
newsprint at prevailing market prices. The specified quantities represent a
majority of The Times newsprint requirements.
51
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Company's principal officers, including executive officers, are listed
in Part I hereof. The information under the heading "Election of Directors" in
the definitive Proxy Statement for the Company's 1996 Annual Meeting of
Shareholders is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the headings "Compensation of Directors" and
"Executive Compensation" in the definitive Proxy Statement for the Company's
1996 Annual Meeting of Shareholders is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the heading "Ownership of Voting Securities"
in the definitive Proxy Statement for the Company's 1996 Annual Meeting of
Shareholders is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the headings "Executive Compensation" and
"Compensation Committee Interlocks and Insider Participation" in the
definitive Proxy Statement for the Company's 1996 Annual Meeting of
Shareholders is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) and (2) Financial Statements and Financial Statement Schedules filed
as part of this report:
As listed in the Index to Financial Statements and Financial Statement
Schedules on page 27 hereof.
(a)(3) Exhibits filed as part of this report:
As listed in the Exhibit Index beginning on page 57 hereof.
(b) Reports on Form 8-K:
None
52
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE TIMES MIRROR COMPANY
By /s/ Mark H. Willes
_____________________________________
Mark H. Willes
Chairman of the Board, President
and Chief Executive Officer
Dated: March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Mark H. Willes Chairman of the Board, March 29, 1996
____________________________________ President, Chief Executive
Mark H. Willes Officer and Director
(Principal Executive
Officer)
/s/ Thomas Unterman Senior Vice President and March 29, 1996
____________________________________ Chief Financial Officer
Thomas Unterman (Principal Financial and
Accounting Officer)
/s/ Richard T. Schlosberg III Executive Vice President and March 29, 1996
____________________________________ Director
Richard T. Schlosberg III
/s/ C. Michael Armstrong Director March 29, 1996
____________________________________
C. Michael Armstrong
/s/ Gwendolyn Garland Babcock Director March 29, 1996
____________________________________
Gwendolyn Garland Babcock
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Donald R. Beall Director March 29, 1996
____________________________________
Donald R. Beall
/s/ John E. Bryson Director March 29, 1996
____________________________________
John E. Bryson
/s/ Bruce Chandler Director March 29, 1996
____________________________________
Bruce Chandler
/s/ Otis Chandler Director March 29, 1996
____________________________________
Otis Chandler
/s/ Robert F. Erburu Director March 29, 1996
____________________________________
Robert F. Erburu
/s/ Clayton W. Frye, Jr. Director March 29, 1996
____________________________________
Clayton W. Frye, Jr.
/s/ David Laventhol Director March 29, 1996
____________________________________
David Laventhol
/s/ Alfred E. Osborne, Jr. Director March 29, 1996
____________________________________
Alfred E. Osborne, Jr.
/s/ Joan A. Payden Director March 29, 1996
____________________________________
Joan A. Payden
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ William Stinehart, Jr. Director March 29, 1996
____________________________________
William Stinehart, Jr.
/s/ Harold M. Williams Director March 29, 1996
____________________________________
Harold M. Williams
/s/ Warren B. Williamson Director March 29, 1996
____________________________________
Warren B. Williamson
/s/ Edward Zapanta Director March 29, 1996
____________________________________
Edward Zapanta
</TABLE>
55
<PAGE>
THE TIMES MIRROR COMPANY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE
BALANCE AT CHARGES TO CHARGES DEDUCTIONS AT END
BEGINNING COSTS AND TO OTHER FROM OF
OF PERIOD EXPENSES ACCOUNTS RESERVES PERIOD
---------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Year ended 12/31/95
Allowance for doubtful
accounts................... $29,249 $25,184 $ 49 $22,295 $32,187
Allowance for returns....... 43,068 4,528 (247) 47,349
------- ------- ------- ------- -------
$72,317 $29,712 $ (198) $22,295 $79,536
======= ======= ======= ======= =======
Year ended 12/31/94
Allowance for doubtful
accounts................... $29,666 $20,554 $ 694 $21,665 $29,249
Allowance for returns....... 41,200 517 1,351 43,068
------- ------- ------- ------- -------
$70,866 $21,071 $ 2,045 $21,665 $72,317
======= ======= ======= ======= =======
Year ended 12/31/93
Allowance for doubtful
accounts................... $27,997 $23,105 $ 318 $21,754 $29,666
Allowance for returns....... 38,250 4,373 (1,423) 41,200
------- ------- ------- ------- -------
$66,247 $27,478 $(1,105) $21,754 $70,866
======= ======= ======= ======= =======
</TABLE>
56
<PAGE>
EXHIBIT INDEX
Exhibits marked with an asterisk (*) are incorporated by reference to
documents previously filed by the Registrant, or its predecessor Old Times
Mirror, with the Securities and Exchange Commission, as indicated. All other
documents listed are filed with this report, unless otherwise indicated.
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
*2.1 Agreement and Plan of Merger by and among Old Times Mirror, New TMC
Inc. (subsequently changed to The Times Mirror Company), Cox Cable
Communications, Inc. and Cox Enterprises, Inc., dated as of June 5,
1994 (Annex IV to Old Times Mirror's definitive Proxy Statement for
Special Meeting of Stockholders, dated December 16, 1994
2.2 Contribution and Assumption Agreement by and between Old Times Mirror
and New TMC Inc. (subsequently changed to The Times Mirror Company) as
of February 1, 1995
*2.3 Amendment No. 1 to Agreement and Plan of Merger by and among Old Times
Mirror, New TMC Inc. (subsequently changed to The Times Mirror
Company), Cox Communications, Inc. and Cox Enterprises, Inc. dated as
of December 16, 1994 (Annex V to Old Times Mirror's definitive Proxy
Statement for Special Meeting of Stockholders, dated December 16,
1994)
*3.1 Restated Certificate of Incorporation of the Registrant, as filed with
the Secretary of State of the State of Delaware on January 23, 1995
(Exhibit to the Registrant's Registration Statement on Form S-4 (File
No. 33-87482))
*3.2 Certificate of Amendment to Certificate of Incorporation of the
Registrant, as filed with the Secretary of State of the State of
Delaware on February 1, 1995 (Exhibit to the Registrant's Registration
Statement on Form S-4 (File No. 33-87482))
*3.3 Certificate of Designations of Series C Common Stock, as filed with
the Secretary of State of the State of Delaware on January 23, 1995
(Exhibit to the Registrant's Registration Statement on Form S-4 (File
No. 33-87482))
3.4 Bylaws of the Registrant
3.5 Certificate of Designations of Series A Preferred Stock
3.6 Certificate of Designations of Series B Preferred Stock
4.1 Indenture by and between New TMC Inc. (subsequently changed to The
Times Mirror Company) and First Interstate Bank of California, as
Trustee for the 7 1/4% Debentures due 2013 and 7 1/2% Debentures due
2023, dated January 30, 1995
4.2 Specimen Note for 7 1/4% Debenture due March 1, 2013 (New TMC Inc.,
subsequently changed to The Times Mirror Company)
4.3 Specimen Note for 7 1/2% Debenture due July 1, 2023 (New TMC Inc.,
subsequently changed to The Times Mirror Company)
*4.4 Indenture dated March 19, 1996, by and between The Times Mirror
Company and Citibank, as Trustee for the 4 1/4% PEPS due March 15,
2001 (Exhibit 4.1 to Registrant's Current Report on Form 8-K, dated
March 19, 1996)
*4.5 Officers' Certificate dated as of March 19, 1996 establishing the
terms of the PEPS and attaching the Specimen Certificate for 4 1/4%
PEPS due March 15, 2001 and Specimen Certificate of Global PEPS
(Exhibit 4.2 to Registrant's Current Report on Form 8-K, dated March
19, 1996)
*10.1 Deferred Compensation Plan for Executives (Exhibit 10.1 to The Times
Mirror Company's 1994 Annual Report on Form 10-K)
*10.2 1987 Restricted Stock Plan (Exhibit II to Old Times Mirror's
definitive Proxy Statement, dated March 27, 1987)
*10.3 1984 Executive Stock Option Plan (Exhibit A to Old Times Mirror's
definitive Proxy Statement, dated April 23, 1984)
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S> <C>
*10.4 1988 Executive Stock Option Plan (Exhibit A to Old Times
Mirror's Proxy Statement, dated March 30, 1988)
*10.5 Deferral Plan for Director's Fees (Exhibit 10.8 to Old Times
Mirror's 1981 Annual Report on Form 10-K)
*10.6 The Times Mirror Pension Plan for Directors, as Amended and
Restated on March 5, 1987
(Exhibit 10.11 to Old Times Mirror's 1986 Annual Report on Form
10-K)
*10.7 Deferred Compensation Plan for Non-Employee Directors (Exhibit
10.7 to The Times Mirror Company's 1994 Annual Report on Form
10-K)
*10.8 Non-Employee Director Stock Option Plan (Appendix A to Old Times
Mirror's definitive Proxy Statement, dated March 21, 1994)
*10.9 Agreement dated April 29, 1985 between Old Times Mirror and Otis
Chandler (Exhibit 10.10 to Old Times Mirror's 1985 Annual Report
on Form 10-K)
10.10 Letter Agreement amended and restated as of August 28, 1995
between The Times Mirror Company and Mark H. Willes
*10.11 1992 Key Employee Long-Term Incentive Plan (Appendix A to Old
Times Mirror's Proxy Statement, dated March 20, 1992)
10.12 1996 Management Incentive Plan
10.13 Non-Employee Directors Stock Plan
11 Computation of Earnings Per Share
12 Computation of Ratio of Earnings to Fixed Charges and
Computation of Ratio of Earnings to Fixed Charges and Preferred
Stock Dividends
21 Subsidiaries of the Registrant
23 Consent of Ernst & Young LLP, Independent Auditors
</TABLE>
58
<PAGE>
EXHIBIT 2.2
CONTRIBUTION AND ASSUMPTION AGREEMENT
This Contribution and Assumption Agreement (this "Agreement"), dated as of
January 30, 1995, is made by and between The Times Mirror Company, a Delaware
corporation (the "Company"), and New TMC Inc., a Delaware corporation and wholly
owned subsidiary of the Company ("New Times Mirror").
RECITALS
WHEREAS, the Company, New Times Mirror and Cox Communications, Inc., a
Delaware corporation ("Acquiror"), are parties to that certain Agreement and
Plan of Merger dated as of June 5, 1994, as amended by Amendment No. 1 thereto
dated as of December 16, 1994 and Amendment No. 2 thereto dated as of January
30, 1995 (the "Merger Agreement"), pursuant to which, among other things, the
Company has agreed to contribute to New Times Mirror all of the assets of the
Company except the capital stock of Times Mirror Cable Television, Inc., a
Delaware corporation and wholly owned subsidiary of the Company ("TMCT" and
together with its subsidiaries (other than KDFW, KTBC and WVTM (as defined in
Section 6.10(a)(i) of the Merger Agreement)) "Cable"), and certain other assets
pursuant to the terms of this Agreement as a step in a series of transactions as
a result of which (i) Acquiror will acquire Cable by merging the Company with
and into Acquiror and (ii) New Times Mirror will conduct the business previously
conducted by the Company (other than the operations of Cable).
NOW, THEREFORE, in consideration of the foregoing and the agreements set forth
below, the parties hereto agree as follows:
ARTICLE I
CONTRIBUTION AND ASSUMPTION
1.01 Contribution of Assets.
(a) Subject to Section 1.01(b), the Company hereby contributes, grants,
conveys, assigns, transfers and delivers to New Times Mirror (the
"Contribution") all the Company's right, title and interest in and to any and
all assets of the Company, whether tangible or intangible and whether fixed,
contingent or otherwise, including, without limitation, (i) the stock of all
subsidiaries of the Company, (ii) the real property more particularly described
on Schedule 1.01(a) hereto, (iii) the Company's right to receive dividends, if
any, from TMCT pursuant to Section 6.03(c) of the Merger Agreement and (iv) any
and all furniture, fixtures, equipment, tools, vehicles, supplies, buildings,
improvements, accounts receivable, notes, prepaid expenses, securities,
trademarks, trade names, leases and contract rights, wherever located
(collectively, the "Contributed Assets").
(b) Notwithstanding Section 1.01(a), the Company hereby retains and does not
contribute to New Times Mirror (i) the issued and outstanding capital stock of
TMCT, (ii) any rights of the Company created by the Merger Agreement (except as
provided in Section 1.01(a)(iii)) or this Agreement, and (iii) cash in the
amount of $ (collectively, the "Retained Assets").
1.02 Assumption of Liabilities.
(a) Subject to Sections 1.02(b) and 1.07 hereof, New Times Mirror, in partial
consideration for the Contribution, hereby unconditionally assumes and
undertakes to pay, satisfy and discharge (i) any and all liabilities of the
Company, whether fixed, contingent or otherwise, as of the Closing Date and (ii)
except with respect to Taxes that are specifically governed by Section 6.10 of
the Merger Agreement, any and all liabilities of KDFW, KTBC and WVTM as of the
Closing Date, whether fixed, contingent or otherwise (the "Assumed
Liabilities").
(b) Notwithstanding Section 1.02(a), the Company hereby retains, and New Times
Mirror does not assume and will have no liability with respect to, (i) the New
Company Debt, (ii) any liabilities associated with the business operations of
Cable, except as described in Section 6.10(a), Section 6.10(d)(i), Section 6.12
and Section 6.13 of the Merger Agreement, (iii) any obligations of the Company
created by this
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Agreement, (iv) the liabilities set forth on Schedule 2.02(c) to the Merger
Agreement, or (v) the Old Notes which are not exchanged pursuant to the Exchange
Offer or defeased (collectively, the "Retained Liabilities").
1.03 Issuance of New Times Mirror Stock and Notes. In partial consideration
for the Contribution, New Times Mirror hereby issues and delivers to the
Company, and the Company hereby acknowledges receipt of, the following:
(i) 97,846,614 newly issued shares of New Times Mirror's Series A Common
Stock, $1.00 par value;
(ii) 30,806,278 newly issued shares of New Times Mirror's Series C Common
Stock, $1.00 par value; and
(iii) notes of New Times Mirror (the "New Times Mirror Notes") in an
aggregate principal amount equal to the principal amount of the Old Notes
tendered to and accepted by the Company in exchange for New Times Mirror Notes
pursuant to the Exchange Offer. The New Times Mirror Notes are being issued
pursuant to an indenture of even date herewith between New Times Mirror and
First Interstate Bank of California, as trustee, which contains terms at least
as favorable as the terms contained in the Indenture dated as of November 1,
1982 between the Company and First Interstate Bank of California, as trustee
(the "Indenture") with respect to the Old Notes.
As further consideration for the Contribution, New Times Mirror hereby agrees
to issue that number of shares of New Times Mirror's Series A Preferred Stock,
$1.00 par value and additional shares of New Times Mirror's Series A Common
Stock as determined in accordance with that certain Amended and Restated Stock
Exchange and Registration Rights Agreement (the "Exchange Agreement") dated as
of December 16, 1994 heretofore entered into in contemplation of this Agreement
by and among the Company, New Times Mirror, and those certain stockholders of
the Company listed as parties thereto (the "Stockholder Parties"). The Company
hereby directs New Times Mirror, and New Times Mirror hereby agrees, to issue
such shares directly to the Stockholder Parties.
1.04 Employee Benefits. All plans and arrangements for the benefit of the
Company's employees in place as of the date hereof are subject to the terms of
Section 6.12 of the Merger Agreement, and all obligations of New Times Mirror
under Section 6.12 of the Merger Agreement shall be treated as Assumed
Liabilities and not as Retained Liabilities under this Agreement.
1.05 Employee Stock Options. All plans and arrangements with respect to the
Company's employee stock options in place as of the date hereof and all options
outstanding thereunder as of the date hereof are subject to the terms of
Section 6.13 of the Merger Agreement, and all obligations of New Times Mirror
under Section 6.13 of the Merger Agreement shall be treated as Assumed
Liabilities and not as Retained Liabilities under this Agreement.
1.06 Further Assurances. Each of the parties hereto promptly shall execute
such documents and other instruments and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and to
consummate the transactions contemplated hereby.
1.07 Tax Matters. Notwithstanding anything to the contrary in this Agreement,
liabilities of the parties for Taxes that are associated with the business
operations of Cable and certain Taxes of KDFW, KTBC and WVTM are subject to
the terms of Section 6.10 of the Merger Agreement, and all obligations of New
Times Mirror under Section 6.10 of the Merger Agreement shall be treated as
Assumed Liabilities and not as Retained Liabilities under this Agreement. The
transactions contemplated by the Merger Agreement are intended to qualify as a
tax-free reorganization within the meaning of Sections 368(a)(1)(D), 355 and
368(a)(1)(A) of the Internal Revenue Code.
1.08 Cooperation. The parties shall cooperate with each other in all
reasonable respects to ensure the smooth transfer of the Contributed Assets, the
Assumed Liabilities and the business related thereto, including, without
limitation, entering into any service or other sharing agreements that may be
necessary.
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ARTICLE II
INDEMNIFICATION
2.01 Indemnification by the Company. The Company shall indemnify, defend and
hold harmless New Times Mirror and each of its subsidiaries and their respective
successors-in-interest and each of their respective past and present officers
and directors against any losses, claims, damages or liabilities, joint or
several, arising out of or in connection with the Retained Liabilities, the
Retained Assets or the operations of Cable, except as described in Section
6.10(a), Section 6.10(d)(i), Section 6.12 and Section 6.13 of the Merger
Agreement and the Company shall reimburse New Times Mirror, each such
subsidiary, each such successor-in-interest and each such officer and director
for any legal or any other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, damage,
liability or action.
2.02 Indemnification by New Times Mirror. New Times Mirror shall indemnify,
defend and hold harmless the Company and each of its subsidiaries and their
respective successors-in-interest, including Acquiror, and each of their
respective past and present officers and directors against any losses, claims,
damages or liabilities, joint or several, arising out of or in connection with
the Assumed Liabilities, the Contributed Assets or the operations of any of the
businesses contributed to New Times Mirror, and New Times Mirror shall reimburse
the Company, each such subsidiary, each such successor-in-interest and each such
officer and director for any legal or any other expenses reasonably incurred by
any of them in connection with investigating or defending any such loss, claim,
damage, liability or action.
2.03 Notification of Claims. For the purpose of this Article II, the term
"Indemnifying Party" shall mean the party having an obligation hereunder to
indemnify the other party pursuant to this Article II, and the term "Indemnified
Party" shall mean the party having the right to be indemnified pursuant to this
Article II. Whenever any claim shall arise for indemnification under this
Article II, the Indemnified Party shall promptly notify the Indemnifying Party
in writing of such claim and, when known, the facts constituting the basis for
such claim (in reasonable detail). Failure by the Indemnified Party to so notify
the Indemnifying Party shall not relieve the Indemnifying Party of any liability
hereunder except to the extent that such failure materially prejudices the
Indemnifying Party.
2.04 Indemnification Procedures.
(a) After the notice required by Section 2.03, if the Indemnifying Party
undertakes to defend any such claim, then the Indemnifying Party shall be
entitled, if it so elects, to take control of the defense and investigation with
respect to such claim and to employ and engage attorneys of its own choice to
handle and defend the same, at the Indemnifying Party's cost, risk and expense,
upon written notice to the Indemnified Party of such election, which notice
acknowledges the Indemnifying Party's obligation to provide indemnification
hereunder. The Indemnifying Party shall not settle any third-party claim that is
the subject of indemnification without the written consent of the Indemnified
Party, which consent shall not be unreasonably withheld; provided, however, that
the Indemnifying Party may settle a claim without the Indemnified Party's
consent if such settlement (i) makes no admission or acknowledgment of liability
or culpability with respect to the Indemnified Party, (ii) includes a complete
release of the Indemnified Party and (iii) does not require the Indemnified
Party to make any payment or forego or take any action. The Indemnified Party
shall cooperate in all reasonable respects with the Indemnifying Party and its
attorneys in the investigation, trial and defense of any lawsuit or action with
respect to such claim and any appeal arising therefrom (including the filing in
the Indemnified Party's name of appropriate cross claims and counterclaims). The
Indemnified Party may, at its own cost, participate in any investigation, trial
and defense of such lawsuit or action controlled by the Indemnifying Party and
any appeal arising therefrom.
(b) If, after receipt of a claim notice pursuant to Section 2.03, the
Indemnifying Party does not undertake to defend any such claim the Indemnified
Party may, but shall have no obligation to, contest any lawsuit or action with
respect to such claim and the Indemnifying Party shall be bound by the result
obtained with respect thereto by the Indemnified Party (including, without
limitation, the settlement thereof without the consent of the Indemnifying
Party). If there are one or more legal defenses available to the Indemnified
Party that conflict with those available to the Indemnifying Party, the
Indemnified Party shall have the right, at the expense of the Indemnifying
Party, to assume the defense of the lawsuit or action; provided, however,
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that the Indemnified Party may not settle such lawsuit or action without the
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld.
(c) At any time after the commencement of defense of any lawsuit or action,
the Indemnifying Party may request the Indemnified Party to agree in writing to
the abandonment of such contest or to the payment or compromise by the
Indemnifying Party of such claim, whereupon such action shall be taken unless
the Indemnified Party determines that the contest should be continued and so
notifies the Indemnifying Party in writing within 15 days of such request from
the Indemnifying Party. If the Indemnified Party determines that the contest
should be continued, the Indemnifying Party shall be liable hereunder only to
the extent of the lesser of (i) the amount which the other party(ies) to the
contested claim had agreed to accept in payment or compromise as of the time the
Indemnifying Party made its request therefor to the Indemnified Party or (ii)
such amount for which the Indemnifying Party may be liable with respect to such
claim by reason of the provisions hereof.
ARTICLE III
MISCELLANEOUS
3.01 Entire Agreement. This Agreement constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all prior
written and oral and all contemporaneous oral agreements and understandings with
respect to the subject matter hereof.
3.02 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware regardless of the laws that
might otherwise govern under principles of conflicts of laws applicable thereto.
3.03 Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
3.04 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
telecopy, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
if to the Company (prior to the Merger) or New Times Mirror:
The Times Mirror Company
Times Mirror Square
Los Angeles, California 90053
Telecopy: (213) 237-3800
Attention: Thomas Unterman, Esq.
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, California 90071-3197
Telecopy: (213) 229-7520
Attention: Peter F. Ziegler, Esq.
if to the Company (after the Merger):
Cox Communications, Inc.
1400 Lake Hearn Drive
Atlanta, Georgia 30319-1464
Telecopy: (404) 843-5777
Attention: James O. Robbins
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with a copy to:
Dow, Lohnes & Albertson
1255 23rd Street, N.W., Suite 500
Washington, D.C. 20037
Telecopy: (202) 857-2900
Attention: Leonard J. Baxt, Esq.
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy shall be deemed effective
on the first business day at the place of which such notice or communication is
received following the day on which such notice or communication was sent. Any
notice or communication sent by registered or certified mail shall be deemed
effective on the fifth business day at the place from which such notice or
communication was mailed following the day in which such notice or communication
was mailed.
3.05 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement except as
provided in Section 3.08 and except for Article II and Section 3.07 (which are
intended to be for the benefit of the persons provided for therein, and may be
enforced by such persons).
3.06 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
3.07 Personal Liability. This Agreement shall not create or be deemed to
create or permit any personal liability or obligation on the part of any direct
or indirect stockholder of any party hereto or any officer, director, employee,
agent, representative or investor of any party hereto.
3.08 Binding Effect; Assignment. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective legal
representatives and successors, including Acquiror as the surviving entity in
the merger of the Company and Acquiror. This Agreement may not be assigned by
any party hereto.
3.09 Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of all the parties.
3.10 Legal Fees; Costs. If any party hereto institutes any action or
proceeding, whether before a court or arbitrator, to enforce any provision of
this Agreement, the prevailing party therein shall be entitled to receive from
the losing party reasonable attorneys' fees and costs incurred in such action or
proceeding, whether or not such action or proceeding is prosecuted to judgment.
3.11 Defined Terms. Defined terms used herein which are not otherwise defined
shall have the meanings ascribed to them in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.
THE TIMES MIRROR COMPANY
By: /s/ Thomas Unterman
--------------------------------------------
Name: Thomas Unterman
Title: Vice President and General Counsel
NEW TMC INC.
By: /s/ Thomas Unterman
---------------------------------------------
Name: Thomas Unterman
Title: Vice President and General Counsel
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EXHIBIT 3.4
THE TIMES MIRROR COMPANY
(A DELAWARE CORPORATION)
BYLAWS
AS AMENDED EFFECTIVE DECEMBER 7, 1995
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of The Times Mirror
-----------------
Company (hereinafter called the Corporation) shall be in the City of Wilmington,
County of New Castle, State of Delaware.
SECTION 2. Principal Office. The principal office for the transaction of
----------------
the business of the Corporation shall be at Times Mirror Square, in the City of
Los Angeles, County of Los Angeles, State of California. The Board of Directors
(hereinafter called the Board) is hereby granted full power and authority to
change said principal office from one location to another.
SECTION 3. Other Offices. The Corporation may also have an office or
-------------
offices at such other place or places, either within or without the State of
Delaware, as the Board may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 1. Place of Meetings. All annual meetings of stockholders and all
-----------------
other meetings of stockholders shall be held either at the principal office or
at any other place within or without the State of Delaware which may be
designated by the Board pursuant to authority hereinafter granted to said Board.
SECTION 2. Annual Meetings. Annual meetings of the stockholders of the
---------------
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 3. Special Meetings. Special meetings of the stockholders of the
----------------
Corporation for any purpose or purposes may only be called in accordance with
the provisions in the Certificate of Incorporation.
<PAGE>
SECTION 4. Notice of Meetings. Except as otherwise required by law,
------------------
notice of each meeting of the stockholders, whether annual or special shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to him at his post office address furnished by him to the Secretary of
the Corporation for such purpose or, if he shall not have furnished to the
Secretary his address for such purpose, then at his post office address last
known to the Secretary, or by transmitting a notice thereof to him at such
address by telegraph, cable or wireless. Except as otherwise expressly required
by law, no publication of any notice of a meeting of the stockholders shall be
required. Every notice of a meeting of the stockholders shall state the place,
date and hour of the meeting, and, in the case of a special meeting, shall also
state the purpose for which the meeting is called. Notice of any meeting of
stockholders shall not be required to be given to any stockholder to whom notice
may be omitted pursuant to applicable Delaware law or who shall have waived such
notice and such notice shall be deemed waived by any stockholder who shall
attend such meeting in person or by proxy, except a stockholder who shall attend
such meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Except as otherwise expressly required by law, notice of any
adjourned meeting of the stockholders need not be given if the time and place
thereof are announced at the meeting at which the adjournment is taken.
SECTION 5. Quorum. Except as otherwise required by law, the holders of
------
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. Subject to the
requirement of a larger percentage vote contained in the Certificate of
Incorporation, these Bylaws or by statute, the stockholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
In the absence of a quorum at any meeting or any adjournment thereof, a majority
in voting interest of the stockholders present in person or by proxy and
entitled to vote thereat or, in the absence therefrom of all the stockholders,
any officer entitled to preside at, or to act as secretary of, such meeting may
adjourn such meeting from time to time. At any such adjourned meeting at which
a quorum is present any business may be transacted which might have been
transacted at the meeting as originally called.
SECTION 6. Voting. (a) Each stockholder shall, at each meeting of the
------
stockholders, be entitled to vote in person or by proxy each share of the stock
of the Corporation having voting rights on the matter in question and which
shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Article VI, Section 5 of these
Bylaws as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting, or
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(ii) if no such record date shall have been so fixed, then (a) at the
close of business on the day next preceding the day on which notice of the
meeting shall be given or (b) if notice of the meeting shall be waived, at
the close of business on the day next preceding the day on which the
meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity
shall be entitled to vote such stock. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
Corporation he shall have expressly empowered the pledgee to vote thereon, in
which case only the pledgee, or his proxy, may represent such stock and vote
thereon. Stock having voting power standing of record in the names of two or
more persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, tenants by the entirety or otherwise, or with respect to
which two or more persons have the same fiduciary relationship, shall be voted
in accordance with the provisions of the General Corporation Law of the State of
Delaware.
(c) Any such voting rights may be exercised by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders
all matters, except as otherwise provided in the Certificate of Incorporation,
in these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
SECTION 7. List of Stockholders. The Secretary of the Corporation shall
--------------------
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
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SECTION 8. Judges. If at any meeting of stockholders a vote by written
------
ballot shall be taken on any question, the chairman of such meeting may appoint
a judge or judges to act with respect to such vote. Each judge so appointed
shall first subscribe an oath faithfully to execute the duties of a judge at
such meeting with strict impartiality and according to the best of his ability.
Such judges shall decide upon the qualification of the voters and shall certify
and report the number of shares represented at the meeting and entitled to vote
on such question, determine the number of votes entitled to be cast by each
share, conduct and accept the votes, and, when the voting is completed,
ascertain and report the number of shares voted respectively for and against the
question, and determine and retain for a reasonable period a record of the
disposition of any challenge made to any determination made by such judges.
Reports of judges shall be in writing and subscribed and delivered by them to
the Secretary of the Corporation. The judges need not be stockholders of the
Corporation, and any officer of the Corporation may be a judge on any question
other than a vote for or against a proposal in which he shall have a material
interest. The judges may appoint or retain other persons or entities to assist
the judges in the performance of the duties of the judges.
ARTICLE III
Board of Directors
SECTION 1. General Powers. Subject to any requirements in the Certificate
--------------
of Incorporation, the Bylaws, and of the Delaware General Corporation Law as to
action which must be authorized or approved by the stockholders, any and all
corporate powers shall be exercised by or under the authority of, and the
business and affairs of the Corporation shall be under the direction of the
Board to the fullest extent permitted by law. Without limiting the generality
of the foregoing, it is hereby expressly declared that the directors shall have
the following powers, to wit:
First - To select and remove all the officers, agents and employees of the
Corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the Certificate of Incorporation or the Bylaws, fix
their compensation, and require from them security for faithful service.
Second - To conduct, manage and control the affairs and business of the
Corporation, and to make such rules and regulations therefor not inconsistent
with law, or with the Certificate of Incorporation or the Bylaws, as they may
deem best.
Third - To change the location of the registered office of the Corporation
in Article I, Section 1 hereof; to change the principal office and the principal
office for the transaction of the business of the Corporation from one location
to another as provided in Article I, Section 2, hereof; to fix and locate from
time to time one or more subsidiary offices of the Corporation within or without
the State of Delaware as provided in Article I, Section 3 hereof; to designate
any place within or without the State of Delaware for the holding of any
stockholders' meeting or meetings; and to adopt, make and use a corporate seal,
and to prescribe the forms of certificates
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of stock, and to alter the form of such seal and of such certificates from time
to time, as in their judgment they may deem best, provided such seal and such
certificate shall at all times comply with the provisions of law.
Fourth - To authorize the issue of shares of stock of the Corporation from
time to time, upon such terms and for such considerations as may be lawful.
Fifth - To borrow money and incur indebtedness for the purposes of the
Corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust and
securities therefor.
Sixth - By resolution adopted by a majority of the authorized number of
directors, to designate an executive and other committees, each consisting of
one or more directors, to serve at the pleasure of the Board, and to prescribe
the manner in which proceedings of such committee shall be conducted. Unless
the Board or these Bylaws shall otherwise prescribe the manner of proceedings of
any such committee, meetings of such committee may be regularly scheduled in
advance and may be called at any time by the chairman of the committee or by any
two members thereof; otherwise, the provisions of these Bylaws with respect to
notice and conduct of meetings of the Board shall govern. Any such committee,
to the extent provided in a resolution of the Board and subject to any
restrictions or limitations on the delegation of power and authority imposed by
applicable Delaware law, shall have and may exercise all of the powers and
authority of the Board.
SECTION 2. Number and Term of Office. The authorized number of directors
-------------------------
of this Corporation shall be not less than ten (10) nor more than twenty (20)
until this Section 2 is amended by a resolution duly adopted by the directors or
by the shareholders, in either case in accordance with the provisions of Article
XVI of the Certificate of Incorporation. The authorized number of directors
shall be fixed at seventeen (17) until such authorized number is changed by a
resolution duly adopted by the directors or by the shareholders, in either case
in accordance with the provisions of Article XVI of the Certificate of
Incorporation. Directors need not be shareholders. Each of the directors of
the Corporation shall serve until his or her term has expired and his or her
successor is elected and qualified, or until his or her earlier death,
resignation or removal.
SECTION 3. Election of Directors. The directors shall be elected by the
---------------------
stockholders of the Corporation, and at each election the persons receiving the
greatest number of votes, up to the number of directors then to be elected,
shall be the persons then elected. The election of directors is subject to any
provision contained in the Certificate of Incorporation relating thereto,
including any provision for a classified Board and for cumulative voting.
SECTION 4. Resignations. Any director of the Corporation may resign at
------------
any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
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SECTION 5. Vacancies. Except as otherwise provided in the Certificate of
---------
Incorporation, any vacancy on the Board, whether because of death, resignation,
disqualification, an increase in the number of directors, or any other cause,
may be filled by vote of the majority of the remaining directors, although less
than a quorum. Each director so chosen to fill a vacancy shall hold office
until his successor shall have been elected and shall qualify or until he shall
resign or shall have been removed.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of his term of office.
SECTION 6. Place of Meeting. The Board or any committee thereof may hold
-----------------
any of its meetings at such place or places within or without the State of
Delaware as the Board or such committee may from time to time by resolution
designate or as shall be designated by the person or persons calling the meeting
or in the notice or a waiver of notice of any such meeting. Directors may
participate in any regular or special meeting of the Board or any committee
thereof by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board or such
committee can hear each other, and such participation shall constitute presence
in person at such meeting.
SECTION 7. First Meeting. The Board shall meet as soon as practicable
-------------
after each annual election of directors and notice of such first meeting shall
not be required.
SECTION 8. Regular Meetings. Regular meetings of the Board may be held at
----------------
such times as the Board shall from time to time by resolution determine. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day not a legal holiday. Except as provided by
law, notice of regular meetings need not be given.
SECTION 9. Special Meetings. Special meetings of the Board for any
----------------
purpose or purposes shall be called at any time by the Chairman of the Board or,
if he is absent or unable or refuses to act, by the President or, if he is
absent or unable or refuses to act, or by the Executive Vice President, or if he
is absent or unable or refuses to act, by any Senior Vice President or by any
Vice President or by any two directors. Except as otherwise provided by law or
by these Bylaws, written notice of the time and place of special meetings shall
be delivered personally to each director, or sent to each director by mail or by
other form of written communication, charges prepaid, addressed to him at his
address as it is shown upon the records of the Corporation, or if it is not so
shown on such records and is not readily ascertainable, at the place in which
the meetings of the directors are regularly held. In case such notice is mailed
or telegraphed, it shall be deposited in the United States mail or delivered to
the telegraph company in the County in which the principal office for the
transaction of the business of the Corporation is located at least forty-eight
(48) hours prior to the time of the holding of the meeting. In case such notice
is delivered personally as above provided, it shall be so delivered at least
twenty-four (24) hours prior to the time of the holding of the meeting. Such
mailing, telegraphing or delivery as above provided shall be due, legal and
personal notice to such director. Except where otherwise required by law or by
these Bylaws, notice of the purpose of a special meeting need not be given.
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Notice of any meeting of the Board shall not be required to be given to any
director who is present at such meeting, except a director who shall attend such
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.
SECTION 10. Quorum and Manner of Acting. Except as otherwise provided in
---------------------------
these Bylaws, the Certificate of Incorporation or by applicable law, the
presence of a majority of the authorized number of directors shall be required
to constitute a quorum for the transaction of business at any meeting of the
Board, and all matters shall be decided at any such meeting, a quorum being
present, by the affirmative votes of a majority of the directors present. A
meeting at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, provided any action taken is
approved by at least a majority of the required quorum for such meeting. In the
absence of a quorum, a majority of directors present at any meeting may adjourn
the same from time to time until a quorum shall be present. Notice of any
adjourned meeting need not be given. The directors shall act only as a Board,
and the individual directors shall have no power as such.
SECTION 11. Action by Consent. Any action required or permitted to be
-----------------
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if consent in writing is given thereto by all members of the
Board or of such committee, as the case may be, and such consent is filed with
the minutes of proceedings of the Board or committee.
SECTION 12. Compensation. Directors who are not employees of the
------------
Corporation or any of its subsidiaries may receive an annual fee for their
services as directors in an amount fixed by resolution of the Board, and in
addition, a fixed fee, with or without expenses of attendance, may be allowed by
resolution of the Board for attendance at each meeting, including each meeting
of a committee of the Board. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity as an
officer, agent, employee, or otherwise, and receiving compensation therefor.
SECTION 13. Committees. The Board may, by resolution passed by a majority
----------
of the whole Board, designate one or more committees, each committee to consist
of one or more of the directors of the Corporation. Any such committee, to the
extent provided in the resolution of the Board and subject to any restrictions
or limitations on the delegation of power and authority imposed by applicable
Delaware law, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Any such committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of the Board.
7
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ARTICLE IV
Officers
SECTION 1. Officers. The officers of the Corporation shall be a Chairman
--------
of the Board, one or more Vice Chairmen of the Board, a President, one or more
Executive Vice Presidents, Senior Vice Presidents and Vice Presidents, a
Secretary, a Treasurer, a Controller, one or more Assistant Secretaries,
Assistant Treasurers, and Assistant Controllers, and such other officers as may
be appointed at the discretion of the Board in accordance with the provisions of
Section 3 of this Article IV. One person may hold two or more offices, except
that the Secretary may not hold the offices of Chairman of the Board or
President.
SECTION 2. Election. The officers of the Corporation, except such
--------
officers as may be appointed or elected in accordance with the provisions of
Section 3 or Section 5 of this Article IV, shall be chosen annually by the Board
at the organization meeting hereof, and each shall hold office until he or she
shall resign or shall be removed or otherwise disqualified to serve, or his or
her successor shall be elected and qualified.
SECTION 3. Other Officers. In addition to the officers chosen annually by
--------------
the Board at its organization meeting, the Board also may appoint or elect such
other officers as the business of the Corporation may require, each of whom
shall have such authority and perform such duties as are provided in these
Bylaws or as the Board may from time to time specify, and shall hold office
until he or she shall resign or shall be removed or otherwise disqualified to
serve, or his or her successor shall be elected and qualified.
SECTION 4. Removal and Resignation. Any officer may be removed, either
-----------------------
with or without cause, by a majority of the directors at the time in office, at
any regular or special meeting of the Board, or, except in case of an officer
chosen by the Board, by any officer upon whom such power of removal may be
conferred by the Board.
Any officer may resign at any time by giving written notice to the Board or
to the President or to the Secretary of the Corporation. Any such resignation
shall take effect at the date of the receipt of such notice or at any later time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 5. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the Bylaws for regular appointments to such office.
SECTION 6. Chairman of the Board. The Chairman of the Board shall preside
---------------------
at all meetings of the stockholders and all meetings of the Board of Directors
of the Corporation and shall exercise and perform any other powers and duties
that are assigned to him by the Board of Directors of the Corporation or by
these Bylaws. He shall be a member of the Executive Committee and shall be an
ex officio member of all other committees.
8
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SECTION 7. Chief Executive Officer. The Chief Executive Officer of the
-----------------------
Corporation shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
Corporation. He shall have the general powers and duties of management usually
vested in the Chief Executive Officer of a Corporation and shall have such other
powers and duties as may be prescribed by the Board of Directors or by these
Bylaws.
SECTION 8. Vice Chairmen of the Board. The Vice Chairmen of the Board
--------------------------
shall exercise and may perform such powers and duties as may be assigned to them
by the Chairman of the Board, or by the Board, or as may be prescribed by the
Bylaws. In the absence or disability of the Chairman of the Board, or in the
event and during the period of a vacancy in that office, the Vice Chairmen, in
order of their rank as fixed by the Board or, if not ranked, the Vice Chairman
designated by the Board, shall preside at all meetings of the stockholders and
at all meetings of the Board.
SECTION 9. President. The President shall exercise and may perform such
---------
powers and duties with respect to the administration of the business and affairs
of the Corporation as may from time to time be assigned by the Chairman of the
Board, or by the Board, or as may be prescribed by the Bylaws. In the absence
or disability of the Chairman of the Board and Vice Chairmen of the Board, or in
the event and during the period of a vacancy in such office, the President shall
perform all the duties of the Chairman of the Board and when so acting shall
have all of the powers of, and be subject to all the restrictions upon, the
Chairman of the Board and Chief Executive Officer of the Corporation.
SECTION 10. Executive Vice Presidents. The Executive Vice Presidents
-------------------------
shall exercise and may perform such powers and duties with respect to the
administration of the business and affairs of the Corporation as may from time
to time be assigned by the Chairman of the Board, or the Board, or as may be
prescribed by these Bylaws. In the absence or disability of the Chairman of the
Board, Vice Chairmen of the Board and the President, the Executive Vice
Presidents in order of their rank as fixed by the Board or, if not ranked, the
Executive Vice President designated by the Board, shall perform all of the
duties of the Chairman of the Board and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the Chairman of the Board and
Chief Executive Officer of the Corporation.
SECTION 11. Senior Vice Presidents and Vice Presidents. The Senior Vice
------------------------------------------
Presidents and Vice Presidents shall exercise and may perform such powers and
duties with respect to the Corporation as may from time to time be assigned to
each of them by the Chairman of the Board, a Vice Chairman of the Board, the
President, an Executive Vice President, or the Board, or as may be prescribed by
these Bylaws. In the absence or disability of the Chairman of the Board, the
Vice Chairmen of the Board, the President and the Executive Vice Presidents, the
Senior Vice President and Vice President in order of their rank as fixed by the
Board or, if not ranked, the Senior Vice President or Vice President designated
by the Board, shall perform all of the duties of the Chairman of the Board, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the Chairman of the Board and Chief Executive Officer of the
Corporation.
9
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SECTION 12. Secretary. The Secretary shall keep, or cause to be kept, at
---------
the principal office, or such other place as the Board may order, a book of
minutes of all meetings of directors and stockholders, with the time and place
of holding, whether regular or special, and if special, how authorized and the
notice thereof given, the names of those present at directors' meetings, the
number of shares present or represented at stockholders' meetings, and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office or
at the office of the Corporation's transfer agent, a share register, or a
duplicate share register, showing the names of the stockholders and their
addresses; the number of classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the meetings
of the stockholders and of the Board required by these Bylaws or by law to be
given, and he shall keep the seal of the Corporation in safe custody, and shall
have such other powers and perform such other duties as may be prescribed by
these Bylaws or assigned by the Board, the Chairman of the Board, a Vice
Chairman of the Board, the President, an Executive Vice President or any Senior
Vice President or Vice President to whom the Secretary may report. If for any
reason the Secretary shall fail to give notice of any special meeting of the
Board called by one or more of the persons identified in the first paragraph of
Section 9, Article III, or if the Secretary shall fail to give notice of any
special meeting of the stockholders called by one or more of the persons
identified in Section 2, Article II, then any such person or persons may give
notice of any such special meeting.
SECTION 13. Treasurer. The Treasurer shall supervise, have custody of and
---------
be responsible for all funds and securities of the Corporation. The Treasurer
shall deposit all moneys and other valuables in the name and to the credit of
the Corporation with such depositaries as may be designated by the Board or in
accordance with authority delegated by the Board. The Treasurer shall disburse
the funds of the Corporation as may be ordered or authorized by the Board, shall
render to the Chairman of the Board, the President and the directors, whenever
they request it, an account of all transactions as Treasurer and shall have such
other powers and perform such other duties as may be prescribed by these Bylaws
or assigned by the Board, the Chairman of the Board, a Vice Chairman of the
Board, the President, an Executive Vice President or any Senior Vice President
or Vice President to whom the Treasurer may report.
SECTION 14. Controller. The Controller shall keep and maintain, or cause
----------
to be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus, including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all
reasonable times be open to inspection by any director.
10
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The Controller also shall supervise the maintenance of adequate and correct
accounts of the properties and business transactions of all subsidiaries of the
Corporation and shall have such other powers and perform such other duties as
may from time to time be prescribed by these Bylaws or assigned to him by the
Board, the Chairman of the Board, a Vice Chairman of the Board, the President,
an Executive Vice President or any Senior Vice President or Vice President to
whom the Controller may report.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 1. Execution of Contracts. The Board, except as otherwise
----------------------
provided in these Bylaws, may authorize any officer or officers, or agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
SECTION 2. Checks, Drafts, Etc. All checks, drafts or other orders for
-------------------
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, assistant, agent or attorney shall
give such bond, if any, as the Board may require.
SECTION 3. Deposits. All funds of the Corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositaries as the Board may select, or as may
be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the
purpose of collection for the account of the Corporation, the President, any
Vice President or the Treasurer (or any other officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation who
shall from time to time be determined by the Board) may endorse, assign and
deliver checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation.
SECTION 4. General and Special Bank Accounts. The Board may from time to
---------------------------------
time authorize the opening and keeping of general and special bank accounts with
such banks, trust companies or other depositaries as the Board may select or as
may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
11
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ARTICLE VI
Shares and Their Transfer
SECTION 1. Certificates for Stock. Every owner of stock of the
----------------------
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
Chairman of the Board, or the President or the Executive Vice President or a
Senior Vice President or a Vice President, and by the Secretary or an Assistant
Secretary. Any of or all of the signatures on the certificates may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon any such certificate shall
thereafter have ceased to be such officer, transfer agent or registrar before
such certificate is issued, such certificate may nevertheless be issued by the
Corporation with the same effect as though the person who signed such
certificate, or whose facsimile signature shall have been placed thereupon, were
such officer, transfer agent or registrar at the date of issue. A record shall
be kept of the respective names of the persons, firms or corporations owning the
stock represented by such certificates, the number and class of shares
represented by such certificates, respectively, and the respective dates
thereof, and in case of cancellation, the respective dates of cancellation.
Every certificate surrendered to the Corporation for exchange or transfer shall
be canceled, and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing certificate shall have been so
canceled, except in cases provided for in Section 4 of this Article VI.
SECTION 2. Transfers of Stock. Transfers of shares of stock of the
------------------
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 3 of Article VI, and upon
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon. The person in whose name shares of stock
stand on the books of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation. Whenever any transfer of shares shall be
made for collateral security, and not absolutely, such fact shall be so stated
expressly in the entry of transfer if, when the certificate or certificates
shall be presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
SECTION 3. Regulations. The Board may make such rules and regulations as
-----------
it may deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
SECTION 4. Lost, Stolen, Destroyed, and Mutilated Certificates. In any
---------------------------------------------------
case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon
12
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proof of such loss, theft, destruction, or mutilation and upon the giving of a
bond of indemnity to the Corporation in such form and in such sum as the Board
may direct; provided, however, that a new certificate may be issued without
requiring any bond when, in the judgment of the Board, it is proper to do so.
SECTION 5. Fixing Date for Determination of Stockholders of Record. In
-------------------------------------------------------
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than 60 nor less than 10 days before the date of such meeting, nor more than 60
days prior to any other event for which a record date is fixed. When a record
date is so fixed, only stockholders who are such of record on that date are
entitled to notice of and to vote at the meeting or to give written consent
without a meeting, or to receive any such report, dividend, distribution, or
allotment or rights, or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the Corporation after
the record date. If in any case involving the determination of stockholders for
any purpose other than notice of or voting as a meeting of stockholders or
expressing consent to corporate action without a meeting the Board shall not fix
such a record date, the record date for determining stockholders for such
purpose shall be the close of business on the day on which the Board shall adopt
the resolution relating thereto. A determination of stockholders entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of such meeting; provided, however, that the Board may fix a new record date
for the adjourned meeting.
ARTICLE VII
Indemnification
SECTION 1. Actions, Etc. Other Than by or in the Right of the Corporation.
--------------------------------------------------------------
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee of the Corporation, or is
or was serving at the request of the Corporation as a director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any
13
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criminal action or proceeding, that he had reasonable cause to believe that his
conduct was unlawful.
SECTION 2. Actions, Etc., by or in the Right of the Corporation. The
----------------------------------------------------
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer or employee of the Corporation, or is
or was serving at the request of the Corporation as a director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
SECTION 3. Indemnification of Agents. The Corporation may, but only to
-------------------------
the extent that the Board of Directors may (but shall not be obligated to)
authorize from time to time, grant rights to indemnification and to the
advancement of expenses to any agent of the Corporation to the fullest extent of
the provisions of this Article VII as they apply to the indemnification and
advancement of expenses of directors and officers of the Corporation.
SECTION 4. Determination of Right of Indemnification. Any indemnification
-----------------------------------------
under Section 1 of this Article VII or Section 2 of this Article VII (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director, officer
or employee is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 1 of this Article VII or Section 2 of
this Article VII. Such determination shall be made (i) by the Board by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders.
SECTION 5. Indemnification Against Expenses of Successful Party.
-----------------------------------------------------
Notwithstanding the other provisions of this Article, to the extent that a
director, officer or employee of the Corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in
Section 1 of this Article VII or Section 2 of this Article VII, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
SECTION 6. Prepaid Expenses. Expenses incurred by an officer or director
----------------
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid
14
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by the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Corporation as authorized in this Article. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board deems appropriate.
SECTION 7. Other Rights and Remedies. The indemnification provided by
-------------------------
this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer or employee and shall inure to the benefit of the heirs, executors and
administrators of such a person.
SECTION 8. Insurance. Upon resolution passed by the Board, the
---------
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer or employee of the Corporation, or is or was serving
at the request of the Corporation as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article.
SECTION 9. Constituent Corporations. For the purposes of this Article,
------------------------
references to the "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation, so that any person who is or was a director, officer or employee of
such a constituent corporation or is or was serving at the request of such
constituent corporation as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this Article with respect to the
resulting or surviving corporation as he would if he had served the resulting or
surviving corporation in the same capacity.
SECTION 10. Other Enterprises, Fines, and Serving at the Corporation's
----------------------------------------------------------
Request. For purposes of this Article, references to "other enterprises" shall
- --------
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer or employee of the corporation which imposes
duties on, or involves services by, such director, officer or employee with
respect to an employee benefit plan, its participants, or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article.
15
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ARTICLE VIII
Miscellaneous
SECTION 1. Seal. The Board shall adopt a corporate seal, which shall be
----
in the form of a circle and shall bear the name of the Corporation and words
showing that the Corporation is incorporated in the State of Delaware.
SECTION 2. Waiver of Notices. Whenever notice is required to be given by
-----------------
these Bylaws or the Certificate of Incorporation or by law, the person entitled
to said notice may waive such notice in writing, either before or after the time
stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 3. Amendments. Except as otherwise provided herein or in the
----------
Certificate of Incorporation, these Bylaws, or any of them, may be altered,
amended, repealed or rescinded and new Bylaws may be adopted, (i) by the Board,
or (ii) by the stockholders, at any annual meeting of stockholders, or at any
special meeting of stockholders, provided that notice of such proposed
alteration, amendment, repeal, rescission or adoption is given in the notice of
meeting.
SECTION 4. Representation of Other Corporations. The Chairman of the
------------------------------------
Board or the President or the Executive Vice President or a Senior Vice
President or any Vice President or the Secretary or any Assistant Secretary of
this Corporation are authorized to vote, represent and exercise on behalf of
this Corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this Corporation. The
authority herein granted to said officers to vote or represent on behalf of this
Corporation any and all shares held by this Corporation in any other corporation
or corporations may be exercised either by such officers in person or by any
person authorized so to do by proxy or power of attorney duly executed by said
officers.
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EXHIBIT 3.5
CERTIFICATE OF DESIGNATION
OF THE
8% CUMULATIVE CONVERSION PREFERRED STOCK, SERIES A
(PAR VALUE $1.00 PER SHARE)
OF
THE TIMES MIRROR COMPANY
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Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
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The undersigned duly authorized officer of The Times Mirror Company, a
corporation organized and existing under the General Corporation Law (the
"DGCL") of the State of Delaware (the "Company"), in accordance with the
provisions of Section 103 thereof, and pursuant to Section 151 thereof, DOES
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Restated Certificate of Incorporation of the Company, the Board of
Directors of the Company (the "Board" or "Board of Directors") on December 16,
1994 adopted the following resolution creating 900,000 shares of Preferred
Stock, par value $1.00 per share, each designated as set forth below:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors by provisions of the Restated Certificate of
Incorporation of the Company (the "Certificate of Incorporation"), and the DGCL,
the issuance of a series of the Company's preferred stock, par value $1.00 per
share (the "Preferred Stock"), which shall consist of 900,000 of the 33,000,000
shares of Preferred Stock that the Company now has authority to issue, be, and
the same hereby is, authorized, and the Board of Directors hereby fixes the
powers, designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions, of the
shares of such series (in addition to the powers, designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions, set forth in the Certificate of
Incorporation that may be applicable to the Preferred Stock) as follows:
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1. Designation and Rank. The designation of such series of the
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Prefered Stock authorized by this resolution shall be the 8% Cumulative
Convertible Preferred Stock, Series A (the "Series A Preferred Stock"). The
number of shares of Series A Preferred Stock shall be 900,000. The Series A
Preferred Stock shall rank prior to the Common Stock (as hereinafter defined) of
the Company and to all other classes and series of equity securities of the
Company now or hereafter authorized, issued or outstanding (the Common Stock and
such other classes and series of equity securities not expressly designated as
ranking on a parity with or senior to the Series A Preferred Stock collectively
may be referred to herein as the "Junior Stock") as to dividend rights and
rights upon liquidation, winding up or dissolution of the Company, other than
the Company's outstanding Conversion Preferred Stock, Series B (the "Series B
Preferred Stock") and any classes or series of equity securities of the Company
expressly designated as ranking on a parity with (the "Parity Stock") or senior
to (the "Senior Stock") the Series A Preferred Stock as to dividend rights and
rights upon liquidation, winding up or dissolution of the Company. The Series A
Preferred Stock shall be subject to creation of Senior Stock, Parity Stock and
Junior Stock, to the extent not expressly prohibited by the Certificate of
Incorporation or Section 5(c)(i) or 5(c)(ii) hereof, with respect to the payment
of dividends and upon liquidation.
2. Cumulative Dividends; Priority.
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(a) Payment of Dividends.
--------------------
(i) The holders of record of shares of Series A Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available therefor, cumulative cash dividends
from the date of issuance of such shares at the rate per annum per share of 8%
($40 per annum) (the "Dividend Rate"), which shall be payable quarterly in
arrears on the tenth day of March, June, September and December in each year (or
if such day is a non-business day, on the next business day), commencing on June
10, 1995 (each of such dates a "Dividend Payment Date"). Notwithstanding the
foregoing, the Dividend Rate in effect for the period ending on the first
Dividend Payment Date shall be that percentage that would result in an accrued
dividend for such period equal to the dividend that would have accrued at the
regular Dividend Rate if the Series A Preferred Stock had been issued on March
1, 1995. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series A Preferred Stock that
may be in arrears.
(ii) Each declared dividends shall be payable to holders
of record as they appear on the stock books of the Company at the close of
business on such record dates, not more than 60 calendar days preceding the
applicable Dividend Payment Dates therefor, as are determined by the Board of
Directors (each of such dates a "Record
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Date"). Quarterly dividend periods (each a "Dividend Period") shall commence on
and include the eleventh day of March, June, September and December of each year
and shall end on and include the date immediately preceding the next following
Dividend Payment Date. Dividends on the shares of Series A Preferred Stock shall
be fully cumulative and shall accrue (whether or not declared) from the first
day of each Dividend Period; provided, however, that the initial dividend
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payable in respect of the initial Dividend Period and the amount of any dividend
payable for any other Dividend Period shorter than a full Dividend Period shall
be computed on the basis of a 360-day year composed of twelve 30-day months and
the actual number of days elapsed in the relevant Dividend Period.
(b) Priority as to Dividends.
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(i) Subject to the provisions hereof no cash dividend or
other distribution (other than in Common Stock or other Junior Stock) shall be
declared or paid or set apart for payment on Preferred Stock that constitutes
Parity Stock or Junior Stock with respect to dividends for any Dividend Period
unless full dividends on the Series A Preferred Stock for the immediately
preceding Dividend Period have been or contemporaneously are declared and paid
(or declared and a sum sufficient for the payment thereof set apart for such
payment). When dividends are not paid in full (or declared and a sum sufficient
for such full payment not so set apart) upon the Series A Preferred Stock and
any Parity Stock, all dividends declared upon shares of Series A Preferred Stock
and any Parity Stock shall be declared pro rata with respect thereto, so that in
all cases the amount of dividends declared per share on the Series A Preferred
Stock and such Parity Stock shall bear to each other the same ratio that accrued
dividends for the then-current Dividend Period per share on the shares of Series
A Preferred Stock (which shall include any accumulation in respect of unpaid
dividends for prior Dividend Periods) and dividends, including accumulations, if
any, of such Parity Stock, bear to each other.
(ii) Except as provided in the preceding paragraph, full
dividends on the Series A Preferred Stock must be declared and paid or set apart
for payment for the immediately preceding Dividend Period before (A) any cash
dividend or other distribution (other than in Common Stock or other Junior
Stock) shall be declared or paid or set aside for payment upon the Common Stock
or any other Junior Stock of the Company or (B) any Common Stock or any other
Junior Stock is redeemed, purchased or otherwise acquired by the Company for any
consideration (or any moneys are paid to or made available for a sinking fund
for the redemption of any shares of any such stock), except by redemption into
or exchange for Junior Stock or (C) any Series A Preferred Stock or Parity
Stock is redeemed, purchased or otherwise acquired by the Company for any
consideration (or any moneys are paid to or made available for a sinking fund
for the redemption of any shares of any such stock). The Company shall not
permit any subsidiary of the Company to purchase or otherwise acquire for
consideration any shares of stock of
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the Company if under the preceding sentence, the Company would be prohibited
from purchasing or otherwise acquiring such shares at such time and in such
manner.
(iii) No dividend shall be paid or set aside for holders of
the Series A Preferred Stock for any Dividend Period unless full dividends on
any Preferred Stock that constitutes Senior Stock with respect to dividends for
the period have been or contemporaneously are declared and paid (or declared and
a sum sufficient for the payment thereof set apart for such payment).
(c) Adjustment to Dividend Rate. If the dividends received
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deduction contained in Section 243 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any comparable provision that may be adopted
subsequently (the "DRD"), should be reduced or eliminated, then, upon receipt by
the Company of one or more written requests signed by holders of record of at
least 50% of the outstanding shares of Series A Preferred Stock (a "Rate
Adjustment Request"), the Company shall, for Dividends Periods commencing on or
after such Rate Adjustment Request, adjust the Dividend Rate by multiplying such
rate by a fraction, the numberator of which is .895 and the denominator of which
is [1 - .35(1 - DRDP)]. For purposes of the preceding formula, "DRDP" shall mean
the DRD percentage specified in Section 243(a)(1) of the Code, or any comparable
provision that may be adopted subsequently.
The Dividend Rate shall be adjusted only to take into account
reductions in the DRDP from the current 70 percent rate. In the case of any
particular dividend payment, no adjustment to the Dividend Rate shall be made to
the extent that such dividend payment is not made out of the "earnings and
profits" of the Company as determined under the Code. If, at the time of the
payment of a particular dividend, it is reasonably uncertain whether such
dividend (or portion thereof) will be paid out of the earnings and profits of
the Company, such dividend (or portion thereof) shall be presumed not to be paid
out of earnings and profits and, accordingly, no adjustment to the Dividend Rate
shall be made. If, and to the extent that, such dividend is subsequently
determined to have been paid out of earnings and profits, the Company shall, on
the next Dividend Payment Date, increase the amount of the dividend payment to
take into account the adjustment to the Dividend Rate that would have been made
had the previous dividend (or portion thereof) been treated as having been paid
out of earnings and profits of the Company.
The objective of this provision 2(c) is, in the event of a reduction
of the DRDP, to provide to holders of the Preferred Stock with the same amount
of net dividends, on an after Federal tax basis, as would have been received at
the time of issuance of the Preferred Stock, taking into account the highest
Federal income tax rate applicable to corporations and the 70 percent DRD
prevailing at the time of issuance of the Preferred Stock. Accordingly, if
fundamental changes are made to the Federal income tax system
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(e.g., replacement of the DRD with a dividends received credit), no adjustment
---
to the Dividend Rate shall be made if the dividends received by holders of the
Preferred Stock, on an after Federal tax basis, is not altered. All
determinations required to be made hereunder shall be made by the Board of
Directors in its sole discretion.
3. Conversion at Option of the Company.
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(a) General.
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(i) The shares of the Series A Preferred Stock shall not
be convertible at the option of the Company except (A) following receipt of a
Rate Adjustment Request (as contemplated by Section 2(c)) or (B) upon the later
to occur of (x) the date on which a written notice has been mailed or otherwise
distributed by the Company to each record holder of the Series A Preferred Stock
stating that the assets of either Chandler Trust No. 1 or Chandler Trust No. 2
have been distributed to the beneficiaries thereof and (y) February 1, 2025 (the
date of receipt of a Rate Adjustment Request or such later date being the
"Convertibility Date"). Subject to and upon compliance with the provisions of
this Section 3, shares of Series A Preferred Stock may be converted, in whole or
in part, at the election of the Company by resolution of the Board of Directors,
upon notice as provided in Section 3(b), at any time or from time to time on or
after the Convertibility Date. Conversion shall be made by delivering to the
holders of Series A Preferred Stock, in respect of the conversion of each share
of Series A Preferred Stock so converted, certificates representing the number
of fully paid and nonassessable shares (the "Conversion Shares") of Series A
Common Stock, par value $1.00 per share, of the Company ("Series A Common
Stock," which, together with the Series B Common Stock, par value $1.00 per
share, and Series C Common Stock, par value $1.00 per share, of the Company are
referred to herein as the "Common Stock") equal to the quotient of (1) $500 plus
accrued and unpaid dividends on such shares of Series A Preferred Stock to the
Conversion Date (as hereinafter defined) divided by (2) the Common Share Value
as hereinafter defined). The aggregate number of shares of Common Stock that a
holder of shares of Series A Preferred Stock that have been converted is
entitled to receive pursuant to this Section 3 or Section 4 is hereinafter
referred to as the "Aggregate Conversion Shares."
(ii) The "Common Share Value" shall mean the average of
the closing prices of the Series A Common Stock for the 20 days during which
trades of Series A Common Stock occurred immediately preceding the Valuation
Date (as defined below), as reported in The Wall Street Journal, Western
Edition, or, if no closing prices were so reported, the average of the mean
between the high bid and low asked price per share of Series A Common Stock for
each of the 20 days during which trades of Series A Common Stock occurred
immediately preceding the Valuation Date in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
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Quotation System or such other system then in use, or, if the Series A Common
Stock is not then quoted by any such organization, the average of the mean
between the closing bid and asked prices per share of Series A Common Stock for
each of the 20 days during which trades of Series A Common Stock occurred
immediately preceding the Valuation Date, as furnished by a professional market
maker making a market in the Series A Common Stock, or, if there is no such
market maker, the fair market value of a share of Series A Common Stock
determined by whatever method the Board of Directors reasonably determines to
use. In the case of a conversion pursuant to this Section 3, the "Valuation
Date" shall mean the Conversion Notice Date (as defined in Section 3(b)), and in
the case of any conversion pursuant to Section 4, the "Valuation Date" shall
mean the Conversion Time (as hereinafter defined).
(b) Notice of Conversion. Notice of any conversion, setting
--------------------
forth (i) the Conversion Date, (ii) a statement that dividends on the shares of
Series A Preferred Stock to be converted will cease to accrue on such Conversion
Date, and (iii) the method(s) by which the holders may surrender the
certificates representing shares of Series A Preferred Stock that have been
converted and obtain the Conversion Shares therefor, shall be mailed, postage
prepaid, on a date (the "Conversion Notice Date") that is at least 15 days but
not more than 45 days prior to said Conversion Date to each holder of record of
the Series A Preferred Stock to be converted at his, her or its address as the
same shall appear on the books of the Company. If less than all the shares of
the Series A Preferred Stock owned by such holder are then to be converted, the
notice shall specify the number of shares thereof that are to be converted and
the numbers of the certificates representing such shares.
(c) Method of Conversion. The surrender of any certificate
--------------------
evidencing shares of Series A Preferred Stock that have been converted shall be
made by the holder thereof by the surrender of the certificate or certificates
formerly representing the shares of Series A Preferred Stock converted (with
proper endorsement or instruments of transfer) to the Company at the principal
office of the Company (or such other office or agency of the Company as the
Company may designate in writing to the holder or holders of the Series A
Preferred Stock) at any time during its usual business hours. Shares of Series A
Preferred Stock called for conversion shall be deemed to have been converted,
and the shares of Series A Common Stock to be issued in respect of the shares of
Series A Preferred Stock converted shall be deemed to have been issued, as of
the close of business on the date fixed for conversion (the "Conversion Date"),
without regard to when certificates evidencing such Series A Preferred Stock are
surrendered pursuant to this Section 3(c) or certificates evidencing such Series
A Common Stock are issued pursuant to Section 3(d). The rights of the holder of
Series A Preferred Stock that has been converted, except for the right to
receive the Aggregate Conversion Shares therefor in accordance herewith, shall
cease on the Conversion Date. In the case of lost or destroyed certificates
evidencing
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ownership of shares of Series A Preferred Stock that have been converted, the
holder shall submit proof of loss or destruction and such indemnity as shall be
required by the Company.
(d) Issuance of Certificates for Series A Common Stock. As soon
--------------------------------------------------
as practicable after its receipt of any certificate or certificates formerly
evidencing ownership of shares of Series A Preferred Stock that have been
converted, the Company shall issue and shall deliver to the person for whose
account such certificates formerly representing shares of Series A Preferred
Stock were so surrendered, or on his, her or its written order, a certificate or
certificates for the number of full shares of Series A Common Stock issuable
upon the conversion of such shares of Series A Preferred Stock and a check or
cash payment (if any) to which such holder is entitled with respect to
fractional shares as determined by the Company, in accordance with Section
3(e) hereof.
(e) Fractional Shares. No fractional shares or scrip
-----------------
representing fractional shares shall be issued upon the conversion of any shares
of Series A Preferred Stock, but the holder thereof will receive in cash an
amount equal to the value of such fractional share of Series A Common Stock
based on the Common Share Value. If more than one share of Series A Preferred
Stock shall be converted at one time for the account of the same holder, the
number of full shares issuable upon conversion thereof shall be computed on the
basis of the aggregate number of such shares so surrendered.
(f) Payment of Taxes. The Company shall pay any tax in respect
----------------
of the issuance of stock certificates on conversion of shares of Series A
Preferred Stock. The Company shall not, however, be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of stock in any name other than that of the holder of the shares converted, and
the Company shall not be required to issue or deliver any such stock certificate
unless and until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of any such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
(g) Common Stock Reserved for Conversion. The Company shall at
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all times from and after the Conversion Date reserve and keep available out of
its authorized and unissued Series A Common Stock the full number of shares of
Series A Common Stock deliverable upon the conversion of all outstanding shares
of Series A Preferred Stock and shall take all such action as may be required
from time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Series A Common Stock upon conversion of the Series A
Preferred Stock.
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4. Conversion at the Option of Holders.
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(a) General. After the later to occur of (i) the date on which a
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written notice has been mailed or otherwise distributed by the Company to each
record holder of the Series A Preferred Stock stating that the assets of either
Chandler Trust No. 1 or Chandler Trust No. 2 have been distributed to the
beneficiaries thereof and (ii) February 1, 2025, the holder of any Series A
Preferred Stock may convert pursuant to this Section 4 all or any part (in whole
number of shares only) of the Series A Preferred Stock held by such holder into
fully paid and non-assessable shares of Series A Common Stock. The number of
shares of Series A Common Stock into which a share of Series A Preferred Stock
may be converted shall be equal to the quotient of (1) $500 plus accrued and
unpaid dividends on such share of Series A Preferred Stock to the Conversion
Time divided by (2) the Common Share Value.
(b) Method of Conversion. Each conversion of Series A Preferred
--------------------
Stock shall be effected by the surrender of the certificate or certificates
representing the shares of Series A Preferred Stock to be converted (with proper
endorsement or instruments of transfer) to the Company at the principal office
of the Company (or such other office or agency of the Company as the Company may
designate in writing to the holder or holders of the Series A Preferred Stock)
at any time during its usual business hours, together with written notice by the
holder of such Series A Preferred Stock stating that such holder desires to
convert the shares of Series A Preferred Stock, or a stated number of such
shares, represented by such certificate or certificates, which notice shall also
specify the name or names (with addresses) and denominations in which the
certificate or certificates for the Series A Common Stock shall be issued and
shall include instructions for delivery thereof. Any conversion pursuant to this
Section 4 shall be deemed to have been effected as of the close of business on
the date on which such certificate or certificates shall have been surrendered
and such notice shall have been received, and at such time (the "Conversion
Time") the right of the holder of Series A Preferred Stock (or specified portion
thereof) as such holder shall cease and the person or persons in whose name or
names any certificate or certificates for shares of Series A Common Stock are to
be issued upon conversion shall be deemed to have become the holder or holders
of record of the shares of Series A Common Stock represented thereby. In the
case of lost or destroyed certificates evidencing ownership of shares of Series
A Preferred Stock to be converted, the holder shall submit proof of loss or
destruction and such indemnity as shall be required by the Company.
(c) Issuance of Certificates for Series A Common Stock. As soon
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as practicable after its receipt of any certificate or certificates evidencing
ownership of
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shares of Series A Preferred Stock to be converted pursuant to this Section 4,
the Company shall issue and shall deliver to the person for whose account such
shares of Series A Preferred Stock were so surrendered, or on his, her or its
written order, a certificate or certificates for the number of full shares of
Series A Common Stock issuable upon the conversion of such shares of Series A
Preferred Stock and a check or cash payment (if any) to which such holder is
entitled with respect to fractional shares as determined by the Company, in
accordance with Section 4(d) hereof.
(d) Fractional Shares. No fractional shares or scrip
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representing fractional shares shall be issued upon the conversion of any shares
of Series A Preferred Stock, but the holder thereof will receive in cash an
amount equal to the value of such fractional share of Series A Common Stock
based on the Common Share Value. If more than one share of Series A Preferred
Stock shall be converted at one time for the account of the same holder, the
number of full shares issuable upon conversion thereof shall be computed on the
basis of the aggregate number of such shares so surrendered.
(e) Payment of Taxes. The Company shall pay any tax in respect
----------------
of the issuance of stock certificates on conversion of shares of Series A
Preferred Stock. The Company shall not, however, be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of stock in any name other than that of the holder of the shares converted, and
the Company shall not be required to issue or deliver any such stock certificate
unless and until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of any such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
(f) Common Stock Reserved for Conversion. The Company shall at
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all times from and after the Conversion Time reserve and keep available out of
its authorized and unissued Series A Common Stock the full number of shares of
Series A Common Stock deliverable upon the conversion of all outstanding shares
of Series A Preferred Stock and shall take all such action as may be required
from time to time in order that it may validly and legally issue fully paid and
non-assessable shares of Series A Common Stock upon conversion of the Series A
Preferred Stock.
5. Voting Rights.
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(a) General Voting Rights. Except as expressly provided
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hereinafter in this Section 5, or as otherwise from time to time required by
applicable law, the Series A Preferred Stock shall have no voting rights.
(b) Voting Rights Upon Dividend Arrears.
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(i) Right to Elect Directors. In the event that an amount
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equal to six quarterly dividend payments on the Series A Preferred Stock shall
have accrued and be unpaid (the occurrence of such contingency marking the
beginning of a period herein referred to as the "Default Period," which shall
extend until such time as all accrued and unpaid dividends for all previous
Dividend Periods and for the current Dividend Period on all shares of Series A
Preferred Stock then outstanding shall have been declared and paid or declared
and a sum sufficient for such full payment set apart for payment), the holders
of the Series A Preferred Stock shall have the right, voting separately as a
class together with holders of shares of any Parity Stock upon which like voting
rights have been conferred and are exercisable, other than the Series B
Preferred Stock (such shares of Series A Preferred Stock and shares of Parity
Stock other than Series B Preferred Stock are hereinafter referred to as "Voting
Parity Stock"), to elect two members of the Board of Directors, each member to
be in addition to the then authorized number of directors, at the next annual
meeting of stockholders or at a special meeting called as described below and
thereafter until the Default Period shall have ended.
(ii) Special Meeting; Written Consent. Whenever such
--------------------------------
voting right shall vest, it may be exercised intially by the vote of the holders
of a plurality of the voting power of Series A Preferred Stock and Voting Parity
Stock present and voting as a single class, in person or by proxy, at a special
meeting of holders of the Series A Preferred Stock and Voting Parity Stock or at
the next annual meeting of stockholders. A special meeting for the exercise of
such right shall be called by the Secretary of the Company as promptly as
possible, and in any event within 10 days after receipt of a written request
signed by the holders of record of at least 25% of the outstanding shares of the
Series A Preferred Stock and Voting Parity Stock, subject to any applicable
notice requirements imposed by law or regulation. Notwithstanding the provisions
of this paragraph, no such special meeting shall be required to be held during
the 90-day period preceding the date fixed for the annual meeting of
stockholders. Any action required or permitted to be taken at any such meeting
of such holders may be taken by a consent or consents in writing of such
stockholders, setting forth the action so taken, which consent or consents shall
be signed by the holders of Series A Preferred Stock and Voting Parity Stock
representing a majority of the voting power of shares of such Series A Preferred
Stock and Voting Parity Stock and shall be delivered to the Company in the
manner set forth from time to time in the DGCL.
(iii) Term of Office of Directors. Any director who shall
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have been elected by holders of the Series A Preferred Stock and Voting Parity
Stock entitled to vote in accordance with this subparagraph (b) shall hold
office for a term expiring (subject to the earlier expiry of such term, as set
forth below) at the annual meeting of stockholders at which the term of office
of his class shall expire and during such term may be removed at any time, only
for cause, by, and only by, the affirmative vote of the
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holders of record of a majority of the voting power of the Series A Preferred
Stock and Voting Parity Stock present and voting as a single class, in person or
by proxy, at a special meeting of such stockholders called for such purpose, and
any vacancy created by such removal may also be filled at such meeting. A
meeting for the removal of a director elected by the holders of the Series A
Preferred Stock and Voting Parity Stock and the filling of the vacancy created
thereby shall be called by the Secretary of the Company as promptly as possible
and in any event within 10 days after receipt of a request therefor signed by
the holders of not less than 25% of the aggregate outstanding voting power of
the Series A Preferred Stock and Voting Parity Stock, subject to any applicable
notice requirements imposed by law or regulation. Such meeting shall be held at
the earliest practicable date thereafter, provided that no such meeting shall be
required to be held during the 90-day period preceding the date fixed for the
annual meeting of stockholders. Simultaneously with the expiration of the
Default Period, the terms of office of all directors elected by the holders of
the shares of Series A Preferred Stock and the Voting Parity Stock pursuant
hereto then in office shall, without further action, thereupon terminate unless
otherwise required by law. Upon such termination the number of directors
constituting the Board of Directors of the Company shall, without further
action, be reduced by two, subject always to the increase of the number of
directors pursuant to the foregoing provisions in the case of the future right
of holders of the shares of Series A Preferred Stock and Voting Parity Stock to
elect directors as provided above.
(iv) Vacancies. Any vacancy caused by the death,
---------
resignation or removal of a director who shall have been elected in accordance
with this subparagraph (b) may be filled by the remaining director so elected
or, if not so filled, by a vote of holders of a plurality of the voting power of
the Series A Preferred Stock and Voting Parity Stock present and voting as a
single class, in person or by proxy, at a meeting called for such purpose.
Unless such vacancy shall have been filled by the remaining director as
aforesaid, such meeting shall be called by the Secretary of the Company at the
earliest practicable date after such death or resignation, and in any event
within 10 days after receipt of a written request signed by the holders of
record of at least 25% of the outstanding shares of the Series A Preferred Stock
and Voting Parity Stock, subject to any applicable notice requirements imposed
by law or regulation. Notwithstanding the provisions of this paragraph, no such
special meeting shall be required to be held during the 90-day period preceding
the date fixed for the annual meeting of stockholders.
(v) Stockholders' Right to Call Meeting. If any meeting
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of the holders of the Series A Preferred Stock and Voting Parity Stock required
by this subparagraph (b) to be called shall not have been called within 30 days
after personal service of a written request therefor upon the Secretary of the
Company or within 30 days after mailing the same within the United States of
America by registered mail addressed to the Secretary of the Company at its
principal executive offices, subject to any applicable
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notice requirements imposed by law or regulation, then the holders of record of
at lease 25% of the outstanding shares of the Series A Preferred Stock and
Voting Parity Stock may designate in writing one of their number to call such
meeting at the expense of the Company, and such meeting may be called by such
person so designated upon the notice required for annual meetings of
stockholders or such shorter notice (but in no event shorter than permitted by
law or regulation) as may be acceptable to the holders of a majority of the
total voting power of the Series A Preferred Stock and Voting Parity Stock. Any
holder of Series A Preferred Stock and Voting Parity Stock so designated shall
have access to the Series A Preferred Stock and Voting Parity Stock books of the
Company for the purpose of causing such meeting to be called pursuant to these
provisions.
(vi) Quorum. At any meeting of the holders of the Series A
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Preferred Stock called in accordance with the provisions of this subparagraph
(b) for the election or removal of directors, the presence in person or by proxy
of the holders of a majority of the total voting power of the Series A Preferred
Stock and Voting Parity Stock shall be required to constitute a quorum; in the
absence of a quorum, the holders of a majority of the total number of votes
present in person or by proxy shall have power to adjourn the meeting from time
to time without notice other than an announcement at a meeting, until a quorum
shall be present.
12
<PAGE>
(c) Voting Rights on Extraordinary Matters.
--------------------------------------
(i) So long as any shares of Series A Preferred Stock
shall be outstanding, the holders of the Series A Preferred Stock shall have the
right, voting separately as a class together with holders of shares of any
Voting Parity Stock (with two-thirds of the voting power of such stock at the
time outstanding given in person or by proxy at a meeting at which the holders
of such shares shall be entitled to vote separately as a class, or by a consent
or consents in writing setting forth such approval, which consent shall be
delivered to the Company in the manner set forth from time to time in the DGCL,
required for approval by such holders), to vote on: (i) the liquidation or
dissolution of the Company; (ii) any proposal to authorize, create or issue, or
increase the authorized or issued amount of, any class or series of capital
stock ranking pari passu with, or prior to, the shares of the Series A Preferred
Stock in powers, rights or preferences upon the liquidation, dissolution or
winding up of affairs of the Company or as to dividends; and (iii) any proposal
to amend by merger, amendment or otherwise (or otherwise alter or repeal) the
Certificate of Incorporation (or this resolution) if such amendment, alteration
or repeal would increase or decrease the aggregate number of authorized shares
of Series A Preferred Stock or any Voting Parity Stock, increase or decrease the
par value of the shares of Series A Preferred Stock or any Voting Parity Stock,
or alter or change the powers, preferences, or special rights of the shares of
Series A Preferred Stock or any Voting Parity Stock so as to affect them
adversely. An amendment that increases the number of authorized shares of any
class or series of Preferred Stock or authorizes the creation or issuance of
other classes or series of Preferred Stock, in each case ranking junior to the
Series A Preferred Stock with respect to the payment of dividends and
distribution of assets upon liquidation, dissolution or winding up shall not be
considered to be such an adverse change.
(ii) So long as any shares of Series A Preferred Stock
shall be outstanding and unless the consent or approval of a greater number of
shares shall then be required by applicable law, without first obtaining the
approval of the holders of at least two-thirds of the voting power of the Series
A Preferred Stock at the time outstanding (voting separately as a class together
with the holders of shares of Voting Parity Stock) giving in person or by proxy
at a meeting at which the holders of such shares shall be entitled to vote
separately as a class (or by a consent or consents in writing setting forth such
approval, which consent shall be delivered to the Company in the manner set
forth from time to time in the DGCL), the Company shall not either directly or
indirectly or through merger or consolidation with any other entity, (i)
authorize, create or issue, or increase the authorized or issued amount of, any
class or series of capital stock that would place or have the effect of placing
restrictions on the obligation of the Company to pay dividends to the holders of
Series A Preferred Stock or to perform any of its obligations to the holders of
Series A Preferred Stock at any time; or (ii) authorize, enter into or permit to
exist any cove-
13
<PAGE>
nant or agreement that would place or have the effect of placing restrictions on
the obligations of the Company to pay dividends to holders of Series A Preferred
Stock or to perform any of its other obligations to the holders of Series A
Preferred Stock at any time; provided, however, that notwithstanding the
-------- -------
foregoing, the Company may from time to time enter into credit agreements and
indentures that provide for limitations on the ability of the Company to pay
dividends on its capital stock generally, so long as the Board of Directors
determines, in its sole discretion, that such limitation is necessary in order
to obtain financing on commercially reasonable terms.
(d) One Vote Per Share. In connection with any matter on
------------------
which holders of the Series A Preferred Stock are entitled to vote as provided
in subparagraphs (b) and (c) above, or any other matter on which the holders of
the Series A Preferred Stock are entitled to vote as one class or otherwise
pursuant to applicable law or the provisions of the Certificate of
Incorporation, each holder of Series A Preferred Stock shall be entitled to one
vote for each share of Series A Preferred Stock held by such holder.
(e) Except as otherwise required by law, the holders of
Series A Preferred Stock and holders of Series B Preferred Stock will not vote
together as a single class.
6. No Sinking Fund. No sinking fund will be established for
---------------
the retirement or redemption of shares of Series A Preferred Stock.
7. Liquidation Rights; Priority.
----------------------------
(a) In the event of any liquidation, dissolution or winding
up of the affairs of the Company, whether voluntary or involuntary, after
payment or provision for payment of the debts and other liabilities of the
Company, the holders of shares of the Series A Preferred Stock shall be entitled
to receive, out of the assets of the Company, whether such assets are capital or
surplus and whether or not any dividends as such are declared, $500 per share
plus an amount equal to all accrued and unpaid dividends for the then-current
plus all prior Dividend Periods, and no more, before any distribution shall be
made to the holders of the Common Stock or any other class of stock or series
thereof ranking junior to the Series A Preferred Stock with respect to the
distribution of assets upon liquidation, dissolution or winding up of the
Company. Unless specifically designated as junior or senior to the Series A
Preferred Stock with respect to the liquidation, dissolution or winding up of
the affairs of the Company or as to dividends, all other series or classes of
Preferred Stock of the Company shall rank on a parity with the Series A
Preferred Stock with respect to the distribution of assets.
14
<PAGE>
(b) Nothing contained in this Section 7 shall be deemed to
prevent conversion of shares of the Series A Preferred Stock by the Company in
the manner provided in Section 3. Neither the merger nor consolidation of the
Company into or with any other entity, nor the merger or consolidation of any
other entity into or with the Company, nor a sale, transfer or lease of all or
any part of the assets of the Company, shall be deemed to be a liquidation,
dissolution or winding up of the Company within the meaning of this Section 7.
(c) Written notice of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, stating a
payment date and the place where the distributable amounts shall be payable,
shall be given by mail, postage prepaid, no less than 30 days prior to the
payment date stated therein, to the holders of record of the Series A Preferred
Stock at their respective addresses as the same shall appear on the books of the
Company.
(d) If the amounts available for distribution with respect
to the Series A Preferred Stock and all other outstanding stock of the Company
ranking on a parity with the Series A Preferred Stock upon liquidation,
dissolution or winding up are not sufficient to satisfy the full liquidation
rights of all the outstanding Series A Preferred Stock and stock ranking on a
parity therewith, then the holders of each series of such stock will share
ratably in any such distribution of assets in proportion to the full respective
preferential amount (which in the case of the Series A Preferred Stock shall
mean the amounts specified in Section 7(a) and in the case of any other series
of preferred stock may include accumulated dividends if contemplated by such
series) to which they are entitled.
8. Status of Shares Converted. Shares of Series A Preferred
--------------------------
Stock converted or purchased or otherwise acquired for value by the Company,
shall, after such event, have the status of authorized and unissued shares of
Preferred Stock without designation and may be reissued by the Company at any
time as shares of any series of Preferred Stock.
15
<PAGE>
IN WITNESS WHEREOF, The Times Mirror Company has caused this
Certificate to be signed by _____________, its ___________, and attested by
______________, its ________________,this ____ day of _________, 1995.
THE TIMES MIRROR COMPANY,
a Delaware corporation
By: /s/ Thomas Unterman
-----------------------------------
Name: Thomas Unterman
---------------------------------
Title: Vice President & General Counsel
--------------------------------
Attested:
By: /s/ O. Jean Williams
-----------------------
Name: O. Jean Williams
----------------------
Title: Secretary
---------------------
16
<PAGE>
EXHIBIT 3.6
CERTIFICATE OF DESIGNATION
OF THE
CONVERSION PREFERRED STOCK, SERIES B
(Par Value $1 Per Share)
OF
THE TIMES MIRROR COMPANY
______________________
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
______________________
The undersigned duly authorized officer of The Times Mirror Company, a
corporation organized and existing under the General Corporation Law of the
State of Delaware (the "Corporation"), in accordance with the provisions of
Section 103 thereof, and pursuant to Section 151 thereof, DOES HEREBY CERTIFY:
WHEREAS, the Board of Directors of the Corporation is authorized to
fix, by resolution or resolutions for each series of Preferred Stock of the
Corporation (the "Preferred Stock"), the number of shares constituting such
series and the designations and powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
thereof, including, without limiting the generality of the foregoing, such
provisions as may be desired concerning voting, redemption, dividends,
dissolution or the distribution of assets, conversion or exchange and such other
subjects or matters as may be fixed by resolution or resolutions of the Board of
Directors or a duly authorized Committee thereof under the General Corporation
Law of the State of Delaware;
WHEREAS, the Board of Directors of the Corporation on December 16,
1994 adopted resolutions authorizing a new series of Preferred Stock designated
as Conversion Preferred Stock, Series B; and
WHEREAS, it is the desire of the Board of Directors, to fix the number
of shares constituting a series of Preferred Stock and the designations and
powers, preferences and relative, participating, optional and other special
rights and qualifications, limitations and restrictions of such series as set
forth below.
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such
series of Preferred Stock on the terms and with the provisions herein set forth:
1. Designation. The designation of the series of Preferred Stock
-----------
authorized by this resolution shall be Conversion Preferred Stock, Series B (the
"Series B Preferred Stock") consisting of 25,000,000 shares.
<PAGE>
2. Rank. The Series B Preferred Stock shall, with respect to
----
dividend rights and rights upon liquidation, dissolution and winding up of the
Corporation, rank prior to the Series A Common Stock, par value $1 per share
(the "Series A Common Stock"), the Series B Common Stock, par value $1 per share
(the "Series B Common Stock"), and the Series C Common Stock, par value $1 per
share (the "Series C Common Stock" and together with the Series A Common Stock
and Series B Common Stock, the "Common Stock"), of the Corporation and on a
parity with the Cumulative Redeemable Preferred Stock, Series A, par value $1
per share (the "Series A Preferred Stock), of the Corporation to be issued to
certain stockholders of the Corporation pursuant to that certain Amended and
Restated Exchange and Registration Rights Agreement dated as of December 16,
1994. All equity securities of the Corporation to which the Series B Preferred
Stock ranks prior, including the Common Stock, are collectively referred to
herein as the "Junior Securities," all equity securities of the Corporation with
which the Series B Preferred Stock ranks on a parity, including the Series A
Preferred Stock, are collectively referred to herein as the "Parity Securities"
and all equity securities of the Corporation (other than convertible debt
securities) to which the Series B Preferred Stock ranks junior, whether with
respect to dividends or upon liquidation, dissolution, winding-up or otherwise,
are collectively referred to herein as the "Senior Securities." The Series B
Preferred Stock shall be subject to the creation of Junior Securities, Parity
Securities and Senior Securities, subject to the limitations thereon provided
for in paragraphs (6)(d) and (6)(e).
3. Dividends.
---------
(a) The holders of outstanding shares of the Series B Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available for the payment of dividends,
cumulative preferential cash dividends accruing at the per share rate of 6.5%
($1.374) per annum (the "Dividend Rate") and no more, payable in arrears on each
March 15, June 15, September 15 and December 15, respectively (each such date
being hereinafter referred to as a "Dividend Payment Date"), commencing on June
15, 1995. Notwithstanding the foregoing, the Dividend Rate in effect for the
period ending on the first Dividend Payment Date shall be that percentage that
would result in an accrued dividend for such period equal to the dividend that
would have accrued at the regular Dividend Rate if the Series B Preferred Stock
had been issued on March 1, 1995. If any Dividend Payment Date is not a
business day (as defined in paragraph (4)(h)(i)), then the Dividend Payment Date
shall be on the next succeeding day that is a business day. Each such dividend
will be payable to holders of record as they appear on the stock books of the
Corporation on such record dates, not less than 10 nor more than 60 days
preceding the payment dates thereof, as shall be fixed by the Board of
Directors. Dividends on the Series B Preferred Stock shall accrue (whether or
not declared) on a daily basis from the previous Dividend Payment Date, except
that the first dividend shall accrue from the date of issuance of the Series B
Preferred Stock. Accrued and unpaid dividends shall not bear interest.
Dividends will cease to accrue in respect of the Series B Preferred Stock on the
Mandatory Conversion Date (as defined in paragraph (4)(a)) or on the Settlement
Date (as defined in paragraph (4)(h)(vi)), in the event of their earlier
redemption or conversion, unless the Corporation shall default in delivering the
shares of Series A Common Stock or other kind of security or other property and
cash, if any, payable by the Corporation upon such redemption or conversion
pursuant to paragraph (4). Dividends (or cash amounts equal to accrued and
unpaid dividends) payable on the Series B Preferred Stock for any period shorter
than a quarterly dividend period shall be computed on the basis of a 360-day
year of twelve 30-day months.
(b) No full dividend shall be declared by the Board of Directors or
paid or set apart for payment by the Corporation on any Parity Securities for
any period unless full
2
<PAGE>
cumulative dividends have been or contemporaneously are declared and paid or
declared and a sum set apart sufficient for such payment on the Series B
Preferred Stock through the most recent Dividend Payment Date. If any dividends
are not paid or set apart in full, as aforesaid, upon the shares of the Series B
Preferred Stock and any Parity Securities, all dividends declared upon the
Series B Preferred Stock and any Parity Securities shall be declared pro rata so
that the amount of dividends declared per share on the Series B Preferred Stock
and such Parity Securities shall in all cases bear to each other the same ratio
that accrued dividends per share on the Series B Preferred Stock and such Parity
Securities bear to each other. Unless full cumulative dividends, if any, accrued
on all outstanding shares of the Series B Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum set apart
sufficient for such payment through the most recent Dividend Payment Date, no
dividend shall be declared or paid or set aside for payment or other
distribution declared or made upon the Common Stock or upon any other Junior
Securities (other than a dividend or distribution paid in shares of, or
warrants, rights or options exercisable for or convertible into, Common Stock or
any other Junior Securities), nor shall any Common Stock or any other Junior
Securities be redeemed, purchased or otherwise acquired for any consideration,
nor may any moneys be paid to or made available for a sinking fund for the
redemption of any shares of any such securities, by the Corporation, except by
conversion into or exchange for Junior Securities. Holders of the shares of the
Series B Preferred Stock shall not be entitled to any dividends, whether payable
in cash, property or stock, in excess of full cumulative dividends as provided
in paragraph (3)(a).
(c) Subject to the foregoing provisions of this paragraph (3) and
paragraph (4)(d), the Board of Directors may declare and the Corporation may pay
or set apart for payment dividends and other distributions on any of the Junior
Securities or Parity Securities, and may redeem, purchase or otherwise acquire
out of funds legally available therefor any Junior Securities, and the holders
of the shares of the Series B Preferred Stock shall not be entitled to share
therein.
(d) Any dividend payment made on shares of the Series B Preferred
Stock shall first be credited against the earliest accrued but unpaid dividend
due with respect to shares of the Series B Preferred Stock.
(e) All dividends paid with respect to shares of the Series B
Preferred Stock pursuant to this paragraph (3) shall be paid pro rata to the
holders entitled thereto.
(f) Holders of shares of the Series B Preferred Stock shall be
entitled to receive the dividends provided for in this paragraph (3) in
preference to and in priority over any dividends upon any of the Junior
Securities.
4. Redemptions or Conversions.
--------------------------
(a) Conversion on Mandatory Conversion Date. Subject to the rights
---------------------------------------
of Parity Stock, unless earlier called for redemption in accordance with the
provisions hereof, on March 31, 1998 (the "Mandatory Conversion Date"), each
outstanding share of the Series B Preferred Stock shall automatically convert
into:
(i) shares of Series A Common Stock at the Common Equivalent Rate
(determined as provided in this paragraph (4)) in effect on the Mandatory
Conversion Date; and
(ii) the right to receive an amount in cash equal to all accrued
and unpaid dividends on such share of Series B Preferred Stock to and
including the Mandatory
3
<PAGE>
Conversion Date, whether or not declared, out of funds legally available
for the payment of dividends (and dividends shall cease to accrue on such
share as of the Mandatory Conversion Date).
(b) Conversion Upon the Occurrence of Certain Events. Subject to the
------------------------------------------------
rights of Parity Stock, immediately prior to the effectiveness of a Fundamental
Transaction (as defined in paragraph (4)(h)(iv)), each outstanding share of the
Series B Preferred Stock shall automatically convert into:
(i) shares of Series A Common Stock at the Common Equivalent
Rate in effect immediately prior to the effectiveness of such Fundamental
Transaction; plus
(ii) the right to receive an amount in cash equal to all
accrued and unpaid dividends on such share of the Series B Preferred Stock
to and including the Settlement Date, whether or not declared, out of funds
legally available for payment of dividends (and dividends shall cease to
accrue on such share as of the Settlement Date); plus
(iii) the right to receive an amount of cash initially equal to
$3.402, declining by $0.003127 on each day following March 23, 1995
(computed on the basis of a 360-day year of twelve 30-day months) to
$0.190571 on January 30, 1998, and equal to zero thereafter, in each case
determined with reference to the Settlement Date, out of funds legally
available therefor, unless sooner redeemed.
At the option of the Corporation, it may deliver on the Settlement Date in lieu
of some or all of the cash consideration described in clauses (ii) and (iii)
above, pro rata to the holders of Series B Preferred Stock entitled thereto, a
number of shares of Series A Common Stock to be determined by dividing the
amount of cash consideration that the Corporation has elected to pay in Series A
Common Stock by the Current Market Price (as defined in paragraph (4)(d)(v)) of
the Series A Common Stock determined as of the second Trading Date (as defined
in paragraph (4)(h)(vii)) immediately preceding the Notice Date (as defined in
paragraph (4)(h)(v)).
(c) Right to Call for Redemption. Subject to the rights of Parity
----------------------------
Stock, at any time and from time to time prior to the Mandatory Conversion Date,
the Corporation shall have the right to call, in whole or in part, the
outstanding shares of the Series B Preferred Stock for redemption, subject to
the notice provisions set forth in paragraph (4)(i). Upon the redemption date,
the Corporation shall deliver to the holders thereof in exchange for each such
share called for redemption, the following:
(i) a number of shares of Series A Common Stock equal to the Call
Price (as defined in paragraph (4)(h)(ii)) in effect on the redemption date
divided by the Current Market Price of the Series A Common Stock determined
as of the second Trading Date immediately preceding the Notice Date; and
(ii) an amount in cash equal to all accrued and unpaid dividends
on such share of Series B Preferred Stock to and including the redemption
date (and dividends shall cease to accrue on such share as of such date),
whether or not declared, out of funds legally available therefor.
If fewer than all the outstanding shares of Series B Preferred Stock are to be
called for redemption, shares to be redeemed shall be selected by the
Corporation from outstanding shares of Series B Preferred Stock not previously
redeemed by lot or pro rata (as nearly as may be
4
<PAGE>
practicable without creating fractional shares) or by any other method
determined by the Board of Directors of the Corporation in its sole discretion
to be equitable. Notwithstanding the use of the words "redeem" or "redemption"
in this Certificate of Designation, the exchange of shares of Series B Preferred
Stock for shares of Series A Common Stock pursuant to paragraph 4(c)(i) shall be
deemed to be a conversion of such shares of Series B Preferred Stock rather than
a redemption thereof for purposes of the Delaware General Corporation Law.
(d) Common Equivalent Rate; Adjustments. The Common Equivalent Rate
-----------------------------------
to be used to determine the number of shares of Series A Common Stock to be
delivered on the conversion of the Series B Preferred Stock into shares of
Series A Common Stock pursuant to paragraph (4)(a) or paragraph (4)(b) (a
"Mandatory Conversion") shall be initially one share of Series A Common Stock
for each share of Series B Preferred Stock; provided, however, that such Common
-------- -------
Equivalent Rate shall be subject to adjustment from time to time as provided
below in this paragraph (4)(d). All adjustments to the Common Equivalent Rate
shall be calculated to the nearest 1/100th of a share of Series A Common Stock.
Such rate as adjusted and in effect at any time is herein called the "Common
Equivalent Rate."
(i) If the Corporation shall do any of the following (an
"Adjustment Event"):
(A) pay a dividend or make a distribution with respect to
Series A Common Stock in shares of Series A Common Stock,
(B) subdivide, reclassify or split its outstanding shares
of Series A Common Stock into a greater number of shares,
(C) combine or reclassify its outstanding shares of
Series A Common Stock into a smaller number of shares, or
(D) issue by reclassification of its shares of Series A
Common Stock any shares of Series A Common Stock other than in a
Fundamental Transaction,
then the Common Equivalent Rate in effect immediately prior to such
Adjustment Event shall be adjusted so that the holder of a share of the
Series B Preferred Stock shall be entitled to receive on the conversion of
such share of the Series B Preferred Stock, the number of shares of Series
A Common Stock that such holder would have owned or been entitled to
receive after the happening of the Adjustment Event had such share of the
Series B Preferred Stock been converted immediately prior to such
Adjustment Event. Where the Adjustment Event is a dividend or distribution,
the adjustment to the Common Equivalent Rate shall become effective as of
the close of business on the record date for determination of stockholders
entitled to receive such dividend or distribution; where the Adjustment
Event is a subdivision, split, combination or reclassification, the
adjustment to the Common Equivalent Rate shall become effective immediately
after the effective date of such subdivision, split, combination or
reclassification; and any shares of Series A Common Stock issuable in
payment of a dividend shall be deemed to have been issued immediately prior
to the close of business on the record date for such dividend for purposes
of calculating the number of outstanding shares of Series A Common Stock
under clauses (ii) and (iii) below. Such adjustment shall be made
successively.
(ii) If the Corporation shall, after the date hereof, issue
rights or warrants to all holders of its Series A Common Stock entitling
them (for a period not
5
<PAGE>
exceeding 45 days from the date of such issuance) to subscribe for or
purchase shares of Series A Common Stock at a price per share less than the
Current Market Price of the Series A Common Stock (determined pursuant to
paragraph (4)(d)(v)) on the record date for the determination of
stockholders entitled to receive such rights or warrants, then in each case
the Common Equivalent Rate shall be adjusted by multiplying the Common
Equivalent Rate in effect immediately prior to the date of issuance of such
rights or warrants by a fraction (A) the numerator of which shall be the
number of shares of Series A Common Stock outstanding on the date of
issuance of such rights or warrants, immediately prior to such issuance,
plus the number of additional shares of Series A Common Stock offered for
subscription or purchase pursuant to such rights or warrants, and (B) the
denominator of which shall be the number of shares of Series A Common Stock
outstanding on the date of issuance of such rights or warrants, immediately
prior to such issuance, plus the number of shares of Series A Common Stock
which the aggregate offering price of the total number of shares of Series
A Common Stock so offered for subscription or purchase pursuant to such
rights or warrants would purchase at such Current Market Price (determined
by multiplying such total number of shares by the exercise price of such
rights or warrants and dividing the product so obtained by such Current
Market Price). Such adjustment shall become effective as of the close of
business on the record date for the determination of stockholders entitled
to receive such rights or warrants. To the extent that shares of Series A
Common Stock are not delivered after the expiration of such rights or
warrants, the Common Equivalent Rate shall be readjusted to the Common
Equivalent Rate which would then be in effect had the adjustments made upon
the issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares of Series A Common Stock actually
delivered. Such adjustment shall be made successively.
(iii) If the Corporation shall pay a dividend or make a
distribution to all holders of its Series A Common Stock of evidence of its
indebtedness or other assets (including shares of capital stock of the
Corporation (other than Series A Common Stock) but excluding any
distributions and dividends referred to in clause (i) above or any cash
dividends), or shall issue to all holders of its Series A Common Stock
rights or warrants to subscribe for or purchase any of its securities
(other than those referred to in clause (ii) above), then in each such
case, the Common Equivalent Rate shall be adjusted by multiplying the
Common Equivalent Rate in effect on the record date mentioned below by a
fraction (A) the numerator of which shall be the Current Market Price of
the Series A Common Stock (determined pursuant to paragraph (4)(d)(v)) on
the record date for the determination of stockholders entitled to receive
such dividend or distribution, and (B) the denominator of which shall be
such Current Market Price per share of Series A Common Stock less the fair
market value (as determined by the Board of Directors of the Corporation,
whose determination shall be conclusive) as of such record date of the
portion of the assets or evidences of indebtedness so distributed, or of
such subscription rights or warrants, applicable to one share of Series A
Common Stock. Such adjustment shall become effective on the opening of
business on the business day next following the record date for the
determination of stockholders entitled to receive such dividend or
distribution.
(iv) Anything in this paragraph (4) notwithstanding, the
Corporation shall be entitled to make such adjustment in the Common
Equivalent Rate, in addition to those required by this paragraph (4), as
the Corporation in its sole discretion may determine to be advisable, in
order that any stock dividends, subdivision of shares, distribution of
rights to purchase stock or securities, or a distribution of securities
convertible into or exchangeable for stock (or any transaction that could
be treated as any
6
<PAGE>
of the foregoing transactions pursuant to Section 305 of the Internal
Revenue Code of 1986, as amended) hereafter made by the Corporation to its
stockholders shall not be taxable. If the Corporation determines that an
adjustment to the Common Equivalent Rate should be made pursuant to this
paragraph (4)(d)(iv), such adjustment shall be made effective as of such
date as the Board of Directors of the Corporation determines. The
determination of the Board of Directors of the Corporation as to whether an
adjustment to the Common Equivalent Rate should be made pursuant to the
foregoing provisions of this paragraph (4)(d)(iv), and, if so, as to what
adjustment should be made and when, shall be conclusive, final and binding
on the Corporation and all stockholders of the Corporation.
(v) As used in this paragraph (4), the "Current Market Price"
of a share of Series A Common Stock on any date shall be, except as
otherwise specifically provided, the average of the daily Closing Prices
(as defined in paragraph (4)(i)(iii)) for the five consecutive Trading
Dates ending on and including the date of determination of the Current
Market Price;
provided, however, that for purposes of paragraph (4)(c), the Current
-------- -------
Market Price shall be the average of the daily Closing Prices for the five
consecutive Trading Days ending on and including the date of determination
of the Current Market Price unless the Closing Price for the Trading Date
next following such five-day period (the "next-day closing price") is less
than 95% of such average, then the Current Market Price per share of Series
A Common Stock on such date of determination shall be the next-day closing
price; and provided, further, that, with respect to any redemption,
-------- -------
conversion or antidilution adjustment, if any event that results in an
adjustment of the Common Equivalent Rate occurs during the period beginning
on the first day of the applicable determination period and ending on the
applicable redemption or conversion date, the Current Market Price as
determined pursuant to the foregoing will be appropriately adjusted to
reflect the occurrence of such event.
(vi) In any case in which paragraph (4)(d) shall require that
an adjustment as a result of any event become effective as of the close of
business on the record date and the date fixed for Mandatory Conversion
pursuant to paragraph (4)(a) or (4)(b) occurs after such record date, but
before the occurrence of such event the Corporation may in its sole
discretion elect to defer the following until after the occurrence of such
event: (A) issuing to the holder of any converted shares of the Series B
Preferred Stock the additional shares of Series A Common Stock issuable
upon such conversion before giving effect to such adjustment and (B) paying
to such holder any amount in cash in lieu of a fractional share of Series A
Common Stock pursuant to paragraph (4)(f).
(vii) Before taking any action which would cause an adjustment
to the Common Equivalent Rate that would cause the Corporation to issue
shares of Series A Common Stock for consideration below the then par value
(if any) of the Series A Common Stock upon conversion of the Series B
Preferred Stock, the Corporation will take any corporate action that may,
in the opinion of its counsel, be necessary in order that the Corporation
may validly and legally issue fully paid and nonassessable shares of such
Series A Common Stock at such adjusted Common Equivalent Rate.
(e) Notice of Adjustments. Whenever the Common Equivalent Rate is
---------------------
adjusted as herein provided, the Corporation shall:
(i) forthwith compute the adjusted Common Equivalent Rate in
accordance with this paragraph (4) and prepare a certificate signed by the
Chief
7
<PAGE>
Executive Officer, the Chief Financial Officer, any Vice President,
the Treasurer or the Controller of the Corporation setting forth the
adjusted Common Equivalent Rate, the method of calculation thereof in
reasonable detail and the facts requiring such adjustment and upon which
such adjustment is based, which certificate shall be conclusive, final and
binding evidence of the correctness of the adjustment, and file such
certificate forthwith with the transfer agent or agents for the Series B
Preferred Stock and the Series A Common Stock; and
(ii) mail a notice stating that the Common Equivalent Rate has
been adjusted, the facts requiring such adjustment and upon which such
adjustment is based and setting forth the adjusted Common Equivalent Rate
to the holders of record of the outstanding shares of the Series B
Preferred Stock at or prior to the time the Corporation mails an interim
statement to its stockholders covering the fiscal quarter during which the
facts requiring such adjustment occurred, but in any event within 45 days
of the end of such fiscal quarter.
(f) No Fractional Shares. No fractional shares or scrip representing
--------------------
fractional shares of Series A Common Stock shall be issued upon the redemption
or conversion of any shares of Series B Preferred Stock. Instead of any
fractional interest in a share of Series A Common Stock which would otherwise be
deliverable upon the conversion or redemption of a share of Series B Preferred
Stock, the Corporation shall pay to the holder of such share an amount in cash
(computed to the nearest cent) equal to the same fraction of the Current Market
Price of the Series A Common Stock determined as of the second Trading Date
immediately preceding (i) the Mandatory Conversion Date, in the case of a
Mandatory Conversion pursuant to paragraph (4)(a), or (ii) the relevant Notice
Date, in any other case. If more than one share shall be surrendered for
conversion at one time by the same holder, the number of full shares of Series A
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares of Series B Preferred Stock so surrendered.
(g) Retirement. Shares of Series B Preferred Stock that have been
----------
issued and reacquired in any manner, including shares purchased, exchanged,
redeemed or converted, shall be retired, shall not be reissued as part of the
Series B Preferred Stock and shall (upon compliance with any applicable
provisions of the laws of the State of Delaware) have the status of authorized
and unissued shares of the class of Preferred Stock undesignated as to series
and may be redesignated and reissued as part of any series of the Preferred
Stock.
(h) Definitions. As used in this paragraph (4):
-----------
(i) the term "business day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in the State of
New York or the State of California are authorized or obligated by law or
executive order to close or are closed because of a banking moratorium or
otherwise;
(ii) the term "Call Price" shall mean the per share price
(payable in shares of Series A Common Stock) at which the Corporation may
redeem shares of Series B Preferred Stock, which shall be initially equal
to $31.92885, declining by $0.003127 on each day following March 23, 1995
(computed on the basis of a 360-day year of twelve 30-day months) to
$28.717421 on January 30, 1998 and equal to $28.52685 thereafter, if not
sooner redeemed;
(iii) the term "Closing Price" on any day shall mean the closing
sale price regular way (with any relevant due bills attached) on such day,
or in case no such
8
<PAGE>
sale takes place on such day, the average of the reported closing bid and
asked prices regular way (with any relevant due bills attached), in each
case on the New York Stock Exchange Consolidated Tape (or any successor
composite tape reporting transactions on national securities exchanges),
or, if the Series A Common Stock is not listed or admitted to trading on
such Exchange, on the principal national securities exchange on which the
Series A Common Stock is listed or admitted to trading (which shall be the
national securities exchange on which the greatest number of shares of
Series A Common Stock has been traded during the five consecutive Trading
Dates ending on and including the date of determination of the Current
Market Price), or, if not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices
regular way (with any relevant due bills attached) of the Series A Common
Stock in the over-the-counter market on the day in question as reported by
the National Association of Securities Dealers Automated Quotation System,
or a similarly generally accepted reporting service, or if not so
available, as determined in good faith by the Board of Directors on the
basis of such relevant factors as the Board of Directors in good faith
considers appropriate;
(iv) the term "Fundamental Transaction" shall mean a merger or
consolidation of the Corporation, a share exchange, division or conversion
of the Corporation's capital stock or an amendment of the Corporation's
Restated Certificate of Incorporation that results in the conversion or
exchange of Common Stock into, or the right of the holders thereof to
receive, in lieu of or in addition to their shares of Common Stock, other
securities or other property (whether of the Corporation or any other
entity);
(v) the term "Notice Date" with respect to any notice given by
the Corporation in connection with a redemption or conversion of any of the
Series B Preferred Stock shall be the commencement of the mailing of such
notice to the holders of the Series B Preferred Stock in accordance with
paragraph (4)(i);
(vi) the term "Settlement Date" shall mean the business day
immediately prior to the effective date of the Fundamental Transaction; and
(vii) the term "Trading Date" shall mean a date on which the New
York Stock Exchange (or any successor to such Exchange) is open for the
transaction of business.
(i) Notice of Redemption or Conversion. The Corporation will provide
----------------------------------
notice of any redemption or conversion (including any potential conversion upon
the effectiveness of a Fundamental Transaction but excluding any conversion
pursuant to paragraph (4)(a)) of shares of Series B Preferred Stock to holders
of record of the Series B Preferred Stock to be called or converted not less
than 30 nor more than 60 days prior to the date fixed for such redemption or
conversion, as the case may be; provided, however, that if the timing of the
-------- -------
effectiveness of a Fundamental Transaction makes it impracticable to provide at
least 30 days' notice, the Corporation shall provide such notice as soon as
practicable prior to such occurrence or effectiveness. Such notice shall be
provided by mailing notice of such redemption or conversion, first class postage
prepaid, to each holder of record of the Series B Preferred Stock, at such
holder's address as it appears on the stock register of the Corporation;
provided, however, that no failure to give such notice nor any defect therein
- -------- -------
shall affect the validity of the proceeding for the redemption or conversion of
any shares of Series B Preferred Stock to be redeemed or converted except as to
the holder to whom the Corporation has failed to give said
9
<PAGE>
notice or except as to the holder whose notice was defective. Each such notice
shall state, as appropriate and to the extent determinable, the following:
(A) the redemption, conversion or exchange date;
(B) that all outstanding shares of Series B Preferred Stock
are to be redeemed or converted or, in the case of a call for redemption
pursuant to paragraph (4)(c) of fewer than all outstanding shares of Series
B Preferred Stock, the number of such shares held by such holder to be
redeemed;
(C) in the case of a call for redemption pursuant to paragraph
(4)(c), the Call Price, the number of shares of Series A Common Stock
deliverable upon redemption of each share of Series B Preferred Stock to be
redeemed and the Current Market Price used to calculate such number of
shares of Series A Common Stock subject to any subsequent adjustments
pursuant to paragraph (4)(d);
(D) whether the Corporation is exercising any option to
deliver shares of Series A Common Stock in lieu of cash (in the case of a
Mandatory Conversion pursuant to paragraph (4)(b)), the Current Market
Price to be used to calculate the number of such shares of Series A Common
Stock and, if the Corporation is exercising such option in respect of less
than all the cash that is deliverable by the Corporation upon such
conversion, the portion of such cash in lieu of which Series A Common Stock
will be delivered;
(E) the place or places where certificates for such shares are
to be surrendered for redemption or conversion; and
(F) that dividends on the shares of Series B Preferred Stock
to be redeemed or converted will cease to accrue on such redemption or
conversion date or, in the case of a Mandatory Conversion pursuant to
paragraph (4)(b), on the related Settlement Date, unless the Corporation
shall default in delivering the shares of Series A Common Stock and cash,
if any, payable by the Corporation pursuant to this paragraph (4), at the
time and place specified in such notice.
(j) Deposit of Shares and Funds. The Corporation's obligation to
---------------------------
deliver shares of Series A Common Stock and provide funds in accordance with
this paragraph (4) shall be deemed fulfilled if, on or before a redemption or
conversion date, the Corporation shall deposit, with a bank or trust company, or
an affiliate of a bank or trust company, having an office or agency in New York
City and having a capital and surplus of at least $50,000,000, such number of
shares of Series A Common Stock as are required to be delivered by the
Corporation pursuant to this paragraph (4) upon the occurrence of the related
redemption or conversion (including any payment of fractional share amounts
pursuant to paragraph (4)(f)), together with funds (or, in the case of a
Mandatory Conversion pursuant to paragraph (4)(b), shares of Series A Common
Stock and/or funds) sufficient to pay all accrued and unpaid dividends on the
shares to be redeemed or converted as required by this paragraph (4), in trust
for the account of the holders of the shares to be redeemed or converted (and so
as to be and continue to be available therefor), with irrevocable instructions
and authority to such bank or trust company that such shares and funds be
delivered upon redemption or conversion of the shares of Series B Preferred
Stock so called for redemption or converted. Any interest accrued on such funds
shall be paid to the Corporation from time to time. Any shares of Series A
Common Stock or funds so deposited and unclaimed at the end of two years from
such redemption or conversion date shall be repaid and released to the
Corporation after which the
10
<PAGE>
holder or holders of such shares of Series B Preferred Stock so called for
redemption or converted shall look only to the Corporation for delivery of such
shares of Series A Common Stock or funds, subject to escheat and similar
abandoned property laws.
(k) Surrender of Certificates; Status. Each holder of shares of
---------------------------------
Series B Preferred Stock to be redeemed or converted shall surrender the
certificates evidencing such shares (properly endorsed or assigned for transfer,
if the Board of Directors of the Corporation shall so require and the notice
shall so state) to the Corporation at the place designated in the notice of such
redemption or conversion and shall thereupon be entitled to receive certificates
evidencing shares of Series A Common Stock and to receive any funds payable
pursuant to this paragraph (4) following such surrender and following the date
of such redemption or conversion. In case fewer than all the shares represented
by any such surrendered certificate are called for redemption, a new certificate
shall be issued at the expense of the Corporation representing the unredeemed
shares. If such notice of redemption or conversion shall have been given, and
if on the date fixed for redemption or conversion shares of Series A Common
Stock and funds necessary for the redemption or conversion shall have been
either set aside by the Corporation separate and apart from its other funds or
assets in trust for the account of the holders of the shares to be redeemed or
converted (and so as to be and continue to be available therefor) or deposited
with a bank or trust company or affiliate thereof as provided in paragraph
(4)(j), then, notwithstanding that the certificates evidencing any shares of
Series B Preferred Stock so called for redemption or subject to conversion shall
not have been surrendered, the shares represented thereby so called for
redemption or subject to conversion shall be deemed no longer outstanding,
dividends with respect to the shares so called for redemption or subject to
conversion shall cease to accrue after the date fixed for redemption or
conversion or, in the case of a Mandatory Conversion pursuant to paragraph
(4)(b), on the related Settlement Date, and all rights with respect to the
shares so called for redemption or subject to conversion shall forthwith after
such date cease and terminate, except for the right of the holders to receive
the shares of Series A Common Stock and funds, if any, payable pursuant to this
paragraph (4) without interest upon surrender of their certificates therefor.
(l) Dividend Payments. The holders of shares of Series B Preferred
-----------------
Stock at the close of business on a dividend payment record date shall be
entitled to receive the dividend payable on such shares on the corresponding
Dividend Payment Date notwithstanding the call or conversion thereof (except
that holders of shares called for redemption or to be converted on a date
occurring between such record date and the Dividend Payment Date or on such
Dividend Payment Date shall not be entitled to receive such dividend on such
Dividend Payment Date but instead will receive accrued and unpaid dividends to
such date or the related Settlement Date, as the case may be).
(m) Payment of Taxes. The Corporation will pay any and all
----------------
documentary, stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Series A Common Stock on the redemption or
conversion of shares of Series B Preferred Stock pursuant to this paragraph (4);
provided, however, that the Corporation shall not be required to pay any tax
- -------- -------
which may be payable in respect of any registration of transfer involved in the
issue or delivery of shares of Series A Common Stock in a name other than that
of the registered holder of Series B Preferred Stock redeemed or converted or to
be redeemed or converted, and no such issue or delivery shall be made unless and
until the person requesting such issue has paid to the Corporation the amount of
any such tax or has established, to the satisfaction of the Corporation, that
such tax has been paid.
(n) Reservation of Shares for Mandatory Conversion. The Corporation
----------------------------------------------
shall at all times reserve and keep available, free from preemptive rights, out
of the aggregate of its
11
<PAGE>
authorized but unissued Series A Common Stock and its issued Series A Common
Stock held in its treasury, for the purpose of effecting a Mandatory Conversion
pursuant to paragraph (4)(a) or (4)(b), the full number of shares of Series A
Common Stock then deliverable upon such Mandatory Conversion.
5. Liquidation Preference.
----------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the holders of
shares of Series B Preferred Stock then outstanding shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders, after payment or provision for payment of any Senior Securities,
an amount per share of Series B Preferred Stock in cash equal to the sum of (i)
$21.131, plus (ii) all accrued and unpaid dividends thereon to the date of
liquidation, dissolution or winding up, before any payment shall be made or any
assets distributed to the holders of any of the Junior Securities. If the
assets of the Corporation are not sufficient to pay in full the liquidation
payments payable to the holders of outstanding shares of the Series B Preferred
Stock and any Parity Securities, then the holders of all such shares shall share
ratably in such distribution of assets in accordance with the amount that would
be payable on such distribution if the amounts to which the holders of
outstanding shares of Series B Preferred Stock and the holders of outstanding
shares of such Parity Securities are entitled were paid in full. Except as
provided in this paragraph (5)(a), holders of Series B Preferred Stock shall not
be entitled to any distribution in the event of liquidation, dissolution or
winding up of the affairs of the Corporation.
(b) For the purposes of this paragraph (5), neither the voluntary
sale, conveyance, lease, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
or assets of the Corporation nor the consolidation or merger of the Corporation
with or into one or more other corporations nor the consolidation or merger of
one or more corporations with or into the Corporation shall be deemed to be a
voluntary or involuntary liquidation, dissolution or winding up.
6. Voting Rights.
-------------
(a) The holders of record of shares of Series B Preferred Stock shall
not be entitled to any voting rights except as hereinafter provided in this
paragraph (6) or as otherwise provided by law.
(b) Except as otherwise provided in the Restated Certificate of
Incorporation or by law, the holders of shares of Series B Preferred Stock shall
be entitled to vote on all matters submitted to a vote of the holders of the
Common Stock, voting together with the holders of the Common Stock (and any
other class or series of capital stock of the Corporation entitled to vote
together with the Common Stock) as one class. Each share of the Series B
Preferred Stock shall be entitled to a number of votes equal to the Common
Equivalent Rate; it being understood that whenever the Common Equivalent Rate is
adjusted as provided in paragraph (4)(d) hereof, the voting rights of the
holders of shares of Series B Preferred Stock shall also be similarly adjusted.
(c) (i) If at any time or times dividends payable on the Series B
Preferred Stock shall be in arrears and unpaid for six quarterly periods, then
the number of directors constituting the Board of Directors, without further
action, shall be increased by two (in addition to the then-authorized number of
directors and any directors that may be elected by any other series of the
Preferred Stock) and the holders of shares of Series B Preferred Stock shall
have the right, voting as a separate class, to elect the directors of the
Corporation to fill the two
12
<PAGE>
newly created directorships at each meeting of stockholders held for the purpose
of electing directors.
(ii) Whenever such voting right shall have vested, such right
may be exercised initially either at a special meeting of the holders of
shares of Series B Preferred Stock called as hereinafter provided, or at
any annual meeting of stockholders held for the purpose of electing
directors, and thereafter at such meetings. Such voting right shall
continue until such time as all cumulative dividends accumulated on all
outstanding shares of Series B Preferred Stock shall have been paid in full
or declared and set aside for payment in full, at which time such voting
right of such holders shall terminate, subject to revesting in the event of
each and every subsequent failure of the Corporation to pay dividends for
the requisite number of quarters as described above.
(iii) At any time when such voting right shall have vested in
the holders of shares of Series B Preferred Stock and if such right shall
not already have been initially exercised, a proper officer of the
Corporation shall, upon the written request of 10% of the holders of record
of shares of Series B Preferred Stock then outstanding, addressed to the
Secretary of the Corporation, call a special meeting of holders of shares
of Series B Preferred Stock. Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of
stockholders at the place for holding annual meetings of stockholders of
the Corporation or, if none, at a place designated by the Secretary of the
Corporation. If such meeting shall not be called by the proper officers of
the Corporation within 30 days after the personal service of such written
request upon the Secretary of the Corporation, or within 30 days after
mailing the same within the United States, by registered mail, addressed to
the Secretary of the Corporation at its principal office (such mailing to
be evidenced by the registry receipt issued by the postal authorities),
then the holders of record of 10% of the shares of Series B Preferred Stock
then outstanding may designate in writing a holder of shares of Series B
Preferred Stock to call such meeting at the expense of the Corporation, and
such meeting may be called by such person so designated upon the notice
required for annual meetings of stockholders and shall be held at the same
place as is elsewhere provided in this paragraph (6)(c)(iii). Any holder
of shares of Series B Preferred Stock that would be entitled to vote at
such meeting shall have access to the stock books of the Corporation for
the Series B Preferred Stock for the purpose of causing a meeting of
stockholders to be called pursuant to the provisions of this paragraph.
Notwithstanding the provisions of this paragraph, however, no such special
meeting shall be called during a period within 90 days immediately
preceding the date fixed for the next annual meeting of stockholders.
(iv) At any meeting held for the purpose of electing directors
at which the holders of shares of Series B Preferred Stock shall have the
right to elect directors as provided in paragraph (6)(c)(i), the presence
in person or by proxy of the holders of at least a majority of the then
outstanding shares of Series B Preferred Stock shall be required and be
sufficient to constitute a quorum for the election of directors pursuant to
paragraph (6)(c)(i). At any such meeting or adjournment thereof (A) the
absence of a quorum of the holders of shares of Series B Preferred Stock
shall not prevent the election of directors other than those to be elected
by the holders of Series B Preferred Stock and the absence of a quorum or
quorums of the holders of capital stock entitled to elect such other
directors shall not prevent the election of directors to be elected by the
holders of Series B Preferred Stock and (B) in the absence of a quorum of
the holders of Series B Preferred Stock, a majority of such holders present
in person or by proxy shall have the power to adjourn the meeting for the
election of directors that the holders of Series B
13
<PAGE>
Preferred Stock may be entitled to elect, from time to time, without notice
(except as required by law) other than announcement at the meeting, until a
quorum shall be present.
(v) The term of office of all directors elected by the holders
of shares of Series B Preferred Stock pursuant to paragraph (6)(c)(i) in
office at any time when the aforesaid voting rights are vested in the
holders of Series B Preferred Stock shall be until the next meeting of
stockholders for the purpose of electing directors and shall terminate upon
the election of their successors at such meeting. Upon any termination of
the aforesaid voting rights in accordance with paragraph (6)(c)(ii), the
term of office of all directors elected by the holders of Series B
Preferred Stock pursuant to paragraph (6)(c)(i) then in office shall
thereupon terminate and upon such termination the number of directors
constituting the Board of Directors shall, without further action, be
reduced by two, subject always to the increase of the number of directors
pursuant to paragraph (6)(c)(i) in case of the future right of the holders
of shares of Series B Preferred Stock to elect directors as provided
herein.
(vi) In case of any vacancy occurring among the directors
elected pursuant to paragraph (6)(c)(i), the remaining director who shall
have been so elected may appoint a successor to hold office for the
unexpired term of the director whose place shall be vacant. If all
directors so elected by the holders of shares of Series B Preferred Stock
shall cease to serve as directors before their terms shall expire, the
holders of shares of Series B Preferred Stock then outstanding may, at a
special meeting of the holders called as provided above, elect successors
to hold office for the unexpired terms of the directors whose places shall
be vacant.
(d) So long as any shares of the Series B Preferred Stock are
outstanding (except when notice of the redemption or conversion of all
outstanding shares of Series B Preferred Stock has been given pursuant to
paragraph (4)(i) and shares of Series A Common Stock and any necessary funds
have been deposited in trust for such redemption or conversion pursuant to
paragraph (4)(j)), the Corporation shall not, without the affirmative vote of
the holders of at least a majority of the shares of Series B Preferred Stock at
the time outstanding, by resolution adopted at an annual or special meeting
called for the purpose, (A) authorize any new class or series of Parity
Securities or (B) increase the authorized number of shares of the Preferred
Stock.
(e) So long as any shares of the Series B Preferred Stock are
outstanding (except when notice of the redemption or conversion of all
outstanding shares of Series B Preferred Stock has been given pursuant to
paragraph (4)(i) and shares of Series A Common Stock and any necessary funds
have been deposited in trust for such redemption or conversion pursuant to
paragraph (4)(j)), the Corporation shall not, without the affirmative vote of
the holders of at least 66-2/3% of the shares of Series B Preferred Stock at the
time outstanding, by resolution adopted at an annual or special meeting called
for the purpose, (A) authorize any new class or series of Senior Securities or
(B) amend the Restated Certificate of Incorporation or this Certificate of
Designation so as to affect materially and adversely the specified rights,
preferences, privileges or voting rights of holders of Series B Preferred Stock.
(f) Except as set forth in paragraphs 6(d) and 6(e), (i) the
creation, authorization or issuance of any shares of any Junior Securities,
Parity Securities or Senior Securities, (ii) the creation of any indebtedness of
any kind of the Corporation, or (iii) the increase or decrease in the amount of
authorized capital stock of any class, including Preferred Stock, shall not
require the consent of the holders of Series B Preferred Stock voting as a
14
<PAGE>
separate class and shall not be deemed to affect materially and adversely the
rights, preferences, privileges or voting rights of holders of shares of Series
B Preferred Stock.
(g) Except as otherwise required by law, the holders of Series A
Preferred Stock and holders of Series B Preferred Stock will not vote together
as a single class.
7. Increase in Shares. The number of shares of Series B Preferred
------------------
Stock may, to the extent of the Corporation's authorized and unissued Preferred
Stock, be increased by further resolution duly adopted by the Board of Directors
and the filing of a certificate of increase with the Secretary of State of the
State of Delaware.
8. Limitations. Except as may otherwise be required by law, the
-----------
shares of Series B Preferred Stock shall not have any powers, preferences or
relative, participating, optional or other special rights other than those
specifically set forth in this resolution (as such resolution may be amended
from time to time) or otherwise in the Restated Certificate of Incorporation of
the Corporation.
IN WITNESS WHEREOF, The Times Mirror Company has caused this
Certificate of Designation to be signed by James F. Guthrie, its Vice President
---------------- --------------
and Chief Financial Officer, and attested by O. Jean Williams, this 16th day of
- --------------------------
March, 1995.
THE TIMES MIRROR COMPANY
By: /s/ James F. Guthrie
----------------------------------
Name: James F. Guthrie
Title: Vice President and
Chief Financial Officer
Attested:
By: /s/ O. Jean Williams
------------------------------
O. Jean Williams
Secretary
15
<PAGE>
EXHIBIT 4.1
NEW TMC INC.
TO
FIRST INTERSTATE BANK
OF
CALIFORNIA
_______________
TRUSTEE
_______________
INDENTURE
Dated as of January 30, 1995
===============
<PAGE>
TABLE OF CONTENTS
=================
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Page
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<S> <C> <C>
PARTIES ........................................................................................ 1
RECITALS ........................................................................................ 1
ARTICLE ONE Definitions and Other Provisions of General Application................................. 1
Section 101. Definitions............................................................................. 1
Act........................................................................................................... 2
Affiliate; Control............................................................................................ 2
Authenticating Agent.......................................................................................... 2
Board of Directors............................................................................................ 2
Board Resolution.............................................................................................. 2
Business Day.................................................................................................. 2
Commission.................................................................................................... 2
Company....................................................................................................... 2
Company Request; Company Order................................................................................ 2
Corporate Trust Office........................................................................................ 3
Default....................................................................................................... 3
Depositary.................................................................................................... 3
Equity Securities............................................................................................. 3
Event of Default.............................................................................................. 3
Holder........................................................................................................ 3
Indenture..................................................................................................... 3
Maturity...................................................................................................... 3
Note Register; Note Registrar................................................................................. 3
Notice of Default............................................................................................. 3
</TABLE>
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<TABLE>
<S> <C>
Officers' Certificate......................................................................................... 3
Opinion of Counsel............................................................................................ 4
Original Issue Discount Note.................................................................................. 4
Outstanding................................................................................................... 4
Paying Agent.................................................................................................. 4
Person........................................................................................................ 5
Place of Payment.............................................................................................. 5
Principal..................................................................................................... 5
Record Date................................................................................................... 5
Redemption Date............................................................................................... 5
Redemption Price.............................................................................................. 5
Required Currency............................................................................................. 5
Responsible Officer........................................................................................... 5
Stated Maturity............................................................................................... 5
Subsidiary.................................................................................................... 6
Trustee....................................................................................................... 6
Trust Indenture Act; TIA...................................................................................... 6
Voting Shares................................................................................................. 6
Section 102. Compliance Certificates and Opinions.................................................... 6
Section 103. Form of Documents Delivered to Trustee.................................................. 7
Section 104. Acts of Holders......................................................................... 7
Section 105. Notices, etc., to Trustee and Company................................................... 8
Section 106. Notices to Holders; Waiver.............................................................. 9
Section 107. Conflict with Trust Indenture Act....................................................... 9
Section 108. Effect of Headings and Table of Contents................................................ 10
</TABLE>
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<TABLE>
<S> <C>
Section 109. Successors and Assigns.................................................................. 10
Section 110. Separability Clause..................................................................... 10
Section 111. Benefits of Indenture................................................................... 10
Section 112. Governing Law........................................................................... 10
Section 113. Execution in Counterpart................................................................ 10
Section 114. Legal Holidays.......................................................................... 10
ARTICLE TWO Note Form............................................................................... 11
Section 201. Form Generally.......................................................................... 11
Section 202. Form of Face of Notes................................................................... 11
Section 203. Form of Reverse of Notes................................................................ 14
Section 204. Form of Trustee's Certificate of Authentication......................................... 17
Section 205. Notes to Global Form.................................................................... 18
ARTICLE THREE The Notes............................................................................... 19
Section 301. Amount Unlimited; Issuable in Series.................................................... 19
Section 302. Denominations........................................................................... 22
Section 303. Execution, Authentication, Delivery and Dating.......................................... 22
Section 304. Temporary Notes......................................................................... 23
Section 305. Registration, Transfer and Exchange..................................................... 23
Section 306. Mutilated, Destroyed, Lost or Stolen Notes.............................................. 25
Section 307. Persons Deemed Owners................................................................... 26
Section 308. Cancellation and Destruction............................................................ 26
Section 309. Authentication and Delivery of Original Issue........................................... 26
Section 310. Payment to be in Proper Currency........................................................ 27
ARTICLE FOUR Satisfaction and Discharge.............................................................. 27
</TABLE>
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<TABLE>
<S> <C>
Section 401. Satisfaction and Discharge of Indenture................................................. 27
Section 402. Application of Trust Money.............................................................. 28
ARTICLE FIVE Remedies................................................................................ 29
Section 501. Events of Default....................................................................... 29
Section 502. Acceleration of Maturity; Rescission and Annulment...................................... 30
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee......................... 31
Section 504. Trustee May File Proofs of Claim........................................................ 32
Section 505. Trustee May Enforce Claims Without Possession of Notes.................................. 33
Section 506. Application of Money Collected.......................................................... 34
Section 507. Limitation on Suits..................................................................... 34
Section 508. Unconditional Right of Holders to Receive Principal and Interest........................ 35
Section 509. Restoration of Rights and Remedies...................................................... 35
Section 510. Rights and Remedies Cumulative.......................................................... 35
Section 511. Delay or Omission Not Waiver............................................................ 36
Section 512. Control by Holders...................................................................... 36
Section 513. Waiver of Past Defaults................................................................. 36
Section 514. Undertaking for Costs................................................................... 37
Section 515. Waiver of Stay or Extension Laws........................................................ 37
ARTICLE SIX The Trustee............................................................................. 37
Section 601. Certain Duties and Responsibilities..................................................... 37
Section 602. Notice of Defaults...................................................................... 39
Section 603. Certain Rights of Trustee............................................................... 39
Section 604. Not Responsible for Recitals or Issuance of Notes....................................... 41
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 605. May Hold Notes.......................................................................... 41
Section 606. Money Held in Trust..................................................................... 41
Section 607. Compensation and Reimbursement.......................................................... 41
Section 608. Disqualification; Conflicting Interests................................................. 42
(a) Elimination of Conflicting Interest or Resignation................................. 42
(b) Notice of Failure to Eliminate Conflicting Interest or Resign...................... 42
(c) Stay of Duty to Resign............................................................. 42
(d) Conflicting Interest Defined....................................................... 42
(e) Definitions of Certain Terms Used in This Section.................................. 46
(f) Calculation of Percentages of Securities........................................... 47
Section 609. Corporate Trustee Required; Eligibility................................................. 49
Section 610. Resignation and Removal; Appointment of Successor....................................... 50
Section 611. Acceptance of Appointment by Successor.................................................. 51
Section 612. Merger, Conversion or Consolidation..................................................... 53
Section 613. Preferential Collection of Claims Against Company....................................... 53
(a) Segregation and Apportionment of Certain Collections by Trustee; Certain Exceptions 53
(b) Certain Creditor Relationships Excluded from Segregation and Apportionment......... 56
(c) Definitions of Certain Terms Used in This Section.................................. 57
Section 614. Records Available to California Commissioner of Corporations............................ 58
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 615. Appointment of Authenticating Agent..................................................... 58
ARTICLE SEVEN Holders Lists and Reports by Trustee and Company........................................ 60
Section 701. Company to Furnish Trustee Names and Addresses of Holders............................... 60
Section 702. Preservation of Information; Communications to Holders.................................. 60
Section 703. Reports by Trustee...................................................................... 62
Section 704. Reports by Company...................................................................... 63
ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease.................................... 64
Section 801. Company May Consolidate, Merge or Convey Properties only on Certain Terms............... 64
Section 802. Successor Corporations Substituted...................................................... 65
Section 803. Restrictions Upon Mergers, Consolidations and Sales and Purchases of Assets............. 65
ARTICLE NINE Supplemental Indentures................................................................. 66
Section 901. Supplemental Indentures Without Consent of Holders...................................... 66
Section 902. Supplemental Indentures with Consent of Holders......................................... 67
Section 903. Execution of Supplemental Indentures.................................................... 68
Section 904. Effect of Supplemental Indentures....................................................... 68
Section 905. Conformity with Trust Indenture Act..................................................... 69
Section 906. Reference in Notes to Supplemental Indentures........................................... 69
ARTICLE TEN Covenants............................................................................... 70
Section 1001. Payment of Principal and Interest....................................................... 70
Section 1002. Maintenance of Office or Agency......................................................... 70
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 1003. Money For Note Payments to be Held in Trust............................................. 71
Section 1004. Payment of Taxes and Other Claims....................................................... 72
Section 1005. Maintenance of Properties............................................................... 72
Section 1006. Restrictions Upon Mortgage, Lien, or Pledge of Property................................. 73
Section 1007. Restrictions Upon Sale and Leaseback Transactions....................................... 76
Section 1008. Certain Definitions..................................................................... 76
Section 1009. Statement as to Compliance.............................................................. 77
Section 1010. Corporate Existence..................................................................... 77
ARTICLE ELEVEN Redemption of Notes..................................................................... 78
Section 1101. Right of Redemption..................................................................... 78
Section 1102. Applicability of Article................................................................ 78
Section 1103. Election to Redeem; Notice to Trustee................................................... 78
Section 1104. Selection by Trustee of Notes to be Redeemed............................................ 78
Section 1105. Notice of Redemption.................................................................... 79
Section 1106. Deposit of Redemption Price............................................................. 79
Section 1107. Notes Payable on Redemption Date........................................................ 79
Section 1108. Notes Redeemed in Part.................................................................. 80
ARTICLE TWELVE Sinking Funds........................................................................... 80
Section 1201. Applicability of Article................................................................ 80
Section 1202. Satisfaction of Sinking Fund Payments with Notes........................................ 81
Section 1203. Redemption of Notes for Sinking Fund.................................................... 81
TESTIMONIUM ........................................................................................ 82
SIGNATURES ........................................................................................ 82
</TABLE>
<PAGE>
[This Cross Reference Sheet, showing the location in the Indenture of the
provisions inserted pursuant to Sections 310 to 318(a), inclusive, of the Trust
Indenture Act of 1939, is not to be considered a part of the Indenture]
TRUST INDENTURE ACT CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
<S> <C>
(S) 310(a)(1)......................... 609
(a)(2)......................... 609
(a)(3)......................... Not Applicable
(a)(4)......................... Not Applicable
(b) .......................... 608
(b)(1)......................... 608
(S) 311(a) .......................... 613(a)
(b) .......................... 613(b)
(c) .......................... Not Applicable
(S) 312(a) .......................... 701
702(a)
(b) .......................... 702(b)
(c) .......................... 703(c)
(S) 313(a) .......................... 703(a)
(b)(1)......................... Not Applicable
(b)(2)......................... 703(b)
(c) .......................... 703(c)
(d) .......................... 703(d)
(S) 314(a) .......................... 704
(b) .......................... Not Applicable
(c)(1)......................... 102
(c)(2)......................... 102
(c)(3)......................... Not Applicable
(d) .......................... Not Applicable
(e) .......................... 102
(S) 315(a) .......................... 601(a)
601(c)
(b) .......................... 602
703(a)(6)
(c) .......................... 601(b)
(d) .......................... 601(c)
(e) .......................... 514
(S) 316(a)(last sentence)............. 101
(a)(1)(A)...................... 512
(a)(1)(B)...................... 513
(a)(2)......................... Not Applicable
(b) .......................... 508
(S) 317(a)(1)......................... 503
(a)(2)......................... 504
(b) .......................... 1003
(S) 318(a) .......................... 107
</TABLE>
___________
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
INDENTURE dated as of January 30, 1995 between New TMC Inc., a
Delaware corporation (the "Company") having its principal office at Times Mirror
Square, Los Angeles, California 90053, and First Interstate Bank of California,
a California State Banking corporation, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Notes"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes or of series thereof, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Section 101. Definitions.
For the purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
1
<PAGE>
Certain terms, used principally in Articles Six and Ten, are defined
in those Articles.
"Act" when used with respect to any Holder has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through ownership of voting securities, by contract or otherwise; and
the terms, "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" shall mean the Agent of the Trustee which at
the time shall be appointed and acting pursuant to Section 615 of this
Indenture.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means, unless otherwise specified as contemplated by
Section 301 with respect to any series of Notes, each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a legal holiday for banking
institutions in the City of Los Angeles, State of California or the City of New
York, State of New York.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties on such date.
"Company", except as otherwise defined in Sections 608 and 613, means
the Person named as the "Company" in the first paragraph of this instrument
until a successor Person shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Company" shall mean such successor
Person.
"Company Request" and "Company Order" mean, respectively, a written
request or order signed in the name of the Company by its Chairman of the Board,
President, an
2
<PAGE>
Executive Vice President, a Senior Vice President or a Vice President, and by
its Treasurer, an Assistant Treasurer, Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Corporate Trust Office" means the office of the Trustee in the City
of Los Angeles, State of California, at which at any particular time its
corporate trust business shall be administered.
"Default" has the meaning specified in Section 602.
"Depositary" means, with respect to the Notes of any series issuable
or issued in whole or in part in the form of a global Note, the Person
designated as Depositary by the Company pursuant to Section 301 until a
successor Depositary shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Depositary" shall mean or include
each Person who is then a Depositary hereunder, and if at any time there is more
than one such Person, "Depositary" as used with respect to the Notes of any such
series shall mean the Depositary with respect to the Notes of that series.
"Equity Securities" means Preferred Stock and Voting Shares.
"Event of Default" has the meaning specified in Article Five.
"Holder" means a Person in whose name a Note is registered in the Note
Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Maturity" when used with respect to any Note means the date on which
the principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 305.
"Notice of Default" has the meaning specified in Section 501.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President, an Executive Vice President, a Senior Vice President
or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary
or an Assistant Secretary of the Company, and delivered to the Trustee.
3
<PAGE>
"Opinion of Counsel" means a written opinion of counsel, who may
(except as otherwise expressly provided in this Indenture) be counsel for the
Company and shall be acceptable to the Trustee.
"Original Issue Discount Note" means any Note which provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding" when used with respect to Notes means, as of the date of
determination, all Notes theretofore authenticated and delivered under this
Indenture, except:
(i) Notes theretofore canceled by the Trustee or delivered to
the Trustee for cancellation; and
(ii) Notes for which payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or
any paying Agent in trust for the Holders of such Notes, provided
that, if such Notes are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made; and
(iii) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture;
provided, however, that in determining whether the Holders of the requisite
principal amount of Notes Outstanding have given any request, demand,
authorization, direction, notice, consent or waiver or taken any other action
hereunder, Notes owned by the Company or any other obligor upon the Notes or any
Affiliate of the Company or such other obligor shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes which the Trustee knows to be so owned
shall be so disregarded. Notes so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Notes and that
the pledgee is not the Company or any other obligor upon the Notes or any
Affiliate of the Company or such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Notes on behalf of the Company.
4
<PAGE>
"Person" (except as otherwise defined in Section 608(d)(3)) means any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Place of Payment" when used with respect to the Notes of any series,
means the place or places where the principal of and any premium and interest on
the Notes of that series are payable as specified as contemplated by Section
301.
The term "principal" whenever used with reference to the Notes or any
Note or any portion thereof is deemed to include "(and premium, if any)".
"Record Date" the interest payable on any interest payment date on the
Notes of any series means the date specified for that purpose as contemplated by
Section 301.
"Redemption Date" when used with respect to any Note to be redeemed
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price" when used with respect to any Note to be redeemed
means the price at which it is to be redeemed pursuant to this Indenture.
"Required Currency" has the meaning specified in Section 310.
"Responsible Officer" when used with respect to the Trustee means the
chairman or vice chairman of the board of directors, the chairman or vice
chairman of the executive committee of the board of directors, the president,
the chairman of the committee on trust matters, any vice president (whether or
not designated by a number or a word or words added before or after the title
"vice president"), the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the comptroller and any assistant comptroller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Stated Maturity" when used with respect to any Note or any
installment of interest thereon means the date specified in such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable.
5
<PAGE>
"Subsidiary" means any corporation a majority of the Voting Shares of
which is at the time owned directly or indirectly by the Company and its other
Subsidiaries.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939,
as in force at the date as of which this instrument was executed.
"Voting Shares" means outstanding shares of capital stock having
voting power for the election of directors, whether at all times or only so long
as no senior class of stock has such voting power because of default in
dividends or other default.
Section 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every Officers' Certificate or Opinion of Counsel with respect to
compliance with a condition or covenant provided for in this Indenture shall
include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to
6
<PAGE>
whether or not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not be consolidated and
form one instrument.
Section 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee, and, where it is hereby expressly required, to the Company.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred
7
<PAGE>
to as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 601)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer of any
jurisdiction authorized to take acknowledgments of deeds or administer oaths,
certifying that the Person signing such instrument or writing acknowledged to
him the execution thereof. Where such execution is by an officer of a
corporation or association or a member of a partnership, on behalf of such
corporation, association or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority. The Trustee may require such
other or additional proof of any matter referred to in this Section as it shall
deem necessary.
(c) The ownership of Notes shall be proved solely by the Note
Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Note shall bind every future Holder
of the same Note and the Holder of every Note issued upon the transfer thereof
or in exchange therefor or in lieu thereof, in respect of anything done or
suffered to be done by the Trustee or the Company in reliance thereon, whether
or not notation of such action is made upon such Note.
Section 105. Notices, etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed, in writing to or with the Trustee at its Corporate Trust
Office, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (except as otherwise provided
in Section 501) if in writing and mailed, first-class postage prepaid,
to the Secretary of the Company at the address of the Company's
principal office specified in the first paragraph of this instrument
or at any other
8
<PAGE>
address previously furnished in writing to the Trustee by the Company
for such purpose.
Section 106. Notices to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage pre-paid, to each Holder, at his
address as it appears on the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver. In any case where notice to Holders is given by
mail, neither the failure to mail such notice, nor any defect in any notice so
mailed to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders, and any notice which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given.
Section 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with the duties
imposed by Section 318(c) of the TIA, the duties imposed shall control.
9
<PAGE>
Section 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 110. Separability Clause.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforce-ability of
the remaining provision shall not in any way be affected or impaired thereby.
Section 111. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and the Holders of Notes, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
Section 112. Governing Law.
This Indenture has been executed and delivered in and shall be
construed in accordance with and governed by the internal laws of the State of
California.
Section 113. Execution in Counterpart.
This Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 114. Legal Holidays.
In any case where the date on which an installment of interest shall
be payable or any Maturity, Redemption Date or Stated Maturity of any Note shall
not be a Business Day at any Place of Payment, then, except as otherwise
provided as contemplated by Section 301 with respect to any series of Notes,
payment of interest or principal need not be made at such Place of Payment on
such date, but may be made on the next succeeding Business Day at such Place of
Payment with the same force and effect as if made on the date the payment of
principal or interest was due, provided that no interest shall accrue for the
period from and after such due date.
10
<PAGE>
ARTICLE TWO
NOTE FORM
Section 201. Form Generally.
The Notes and the Trustee's certificate of authentication thereon
shall be in substantially the forms set forth in this Article Two, or in such
other form as shall be established by or pursuant to a Board Resolution or in
one or more indentures supplemental hereto, with the Notes having such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon,
as may be required to comply with the rules of any securities exchange, or as
may, consistently herewith, be determined by the officers executing such Notes,
as evidenced by their signing of the Notes. Any portion of the text of any Note
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Note. If the form of Notes of any series is established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 303 for the authentication and delivery of such
Notes. The definitive Notes shall be printed, lithographed or engraved or
produced by any combination of these methods on steel engraved borders or may be
produced in any other manner permitted by the rules of any securities exchange,
all as determined by the officers executing such Notes, as evidenced by their
signing of such Notes.
Section 202 Form of Face of Notes.
[If the Note is an Original Issue Discount Note, insert--FOR PURPOSES
OF SECTION 1232 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED,
THE ISSUE PRICE OF THIS NOTE IS __% OF ITS PRINCIPAL AMOUNT AND THE ISSUE DATE
IS _______, 19__]
NEW TMC INC.
______________________
No. __________ $_______
New TMC Inc., a Delaware corporation (the "Company", which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to ________________________, or
registered assigns, the principal sum of ______________________________________
Dollars on _______________________________.
11
<PAGE>
[If the Note is to bear interest prior to Maturity, insert,--, and to pay
interest thereon from ________________________, or from the most recent interest
payment date to which interest has been paid or duly provided for, semi-annually
on ________________ and _________________ in each year, commencing
_____________, at the rate of ___% per annum, until the principal hereof is paid
or made available for payment [If applicable insert--, and (to the extent that
the payment of such interest shall be legally enforceable) at the rate of ____%
per annum on any overdue principal and premium and on any overdue installment of
interest]. The interest so payable, and punctually paid or duly provided for,
on any interest payment date will, as provided in such Indenture, be paid to the
Person in whose name this Note is registered at the close of business on the
Record Date for such interest, which shall be the ____________ or ____________
(whether or not a Business Day), as the case may be, next preceding such
interest payment date.]
[If the Note is not to bear interest prior to Maturity, insert--The principal of
this Note shall not bear interest except in the case of a default in payment of
principal upon acceleration, upon redemption or at Stated Maturity and in such
case the overdue principal of this Note shall bear interest at the rate of ____%
per annum (to the extent that the payment of such interest shall be legally
enforceable), which shall accrue from the date of such default in payment to the
date payment of such principal has been made or duly provided for. Interest on
any overdue principal shall be payable on demand. Any such interest on any
overdue principal that is not so paid on demand shall bear interest at the rate
of ____% per annum (to the extent that the payment of such interest shall be
legally enforceable), which shall accrue from the date of such demand for
payment to the date payment of such interest has been made or duly provided for,
and such interest shall also be payable on demand.]
Payment of the principal of (and premium, if any) and [if applicable,
insert-- any such] interest on this Note will be made at the offices or agencies
of the Company maintained for that purpose in [if applicable, insert--the
Borough of Manhattan, The City of New York, and] the City of Los Angeles, or
such other place or places as the Company shall determine in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts [if applicable, insert--;
provided, however, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Note Register]. The Company may also appoint
additional paying agents.
This note is one of a duly authorized issue of
___________________________ of the Company (the "Notes"), which have been issued
under and are governed by the terms of
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an indenture (the "Indenture") between the Company and First Interstate Bank of
California, Trustee, dated as of ______________ ___, 1995.
The provisions of this Note are continued on the reverse hereof and
the provisions there set forth shall for all purposes have the same effect as
though fully set forth at this place.
Unless the certificate of authentication hereon has been executed by
or on behalf of First Interstate Bank of California, the Trustee under the
Indenture, or its successor thereunder, by the manual signature of one of its,
or its Authenticating Agent's, authorized signatories, this Note shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed in the City of Los Angeles, State of California under its corporate
seal.
NEW TMC INC.
Date
By _____________________________
President
Attest:
________________________
Secretary
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Section 203. Form of Reverse of Notes.
This note is one of a duly authorized issue of Notes of the Company
designated as its _________________________ (the "Notes"), [limited in aggregate
principal amount to $________] all issued or to be issued in one or more series
under an indenture, dated as of ___________ ___, 1995 (the "Indenture"), between
the Company and First Interstate Bank of California, Trustee (the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
description of the respective rights thereunder of the Company, the Trustee and
the Holders of the Notes, and the terms upon which the Notes are, and are to be,
authenticated and delivered.
[If applicable, insert--The Notes of this series are subject to
redemption upon not less than 30 days' notice by mail, [if applicable, insert--
(1) on __________ in any year commencing with the year ________ and ending with
the year _____ through operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and (2)] at any time [on
or after __________, 19__], as a whole or in part, at the election of the
Company, at the following Redemption Prices (expressed as percentages of the
principal amount): If redeemed [on or before _____________, ___%, and if
redeemed] during the 12-month period beginning ___________ of the years
indicated.
Redemption Redemption
Year Price Year Price
- ------ ---------------- ------ ----------------
and thereafter at a Redemption Price equal to ___% of the principal amount,
together in the case of any such redemption [if applicable, insert-- (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Notes, of
record at the close of business on the relevant Record Dates referred to on the
face hereof, all as provided in the Indenture.]
[If applicable, insert--The Notes of this series are subject to
redemption upon not less than 30 days' notice by mail, (1) on ________ in any
year commencing with the year ____ and ending with the year ____ through
operation of the sinking fund for this series at the Redemption Prices for
redemption through operation of the sinking fund (expressed as
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percentages of the principal amount) set forth in the table below, and (2) at
any time [on or after ___________], as a whole or in part, at the election of
the Company, at the Redemption Prices for redemption otherwise than through
operation of the sinking fund (expressed as percentages of the principal amount)
set forth in the table below: If redeemed during the 12-month period beginning
________________ of the years indicated,
Redemption Price For Redemption Price For
Redemption Through Redemption Otherwise
Operation of the Sinking Than Through Operation
Year Fund of the Sinking Fund
- -------------------------- -------------------------- ----------------------
and thereafter at a Redemption Price equal to __% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Notes, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Indenture.]
[The sinking fund for this series provides for the redemption on
_____________ in each year beginning with the year ____ and ending with the year
___ of (not less than] $_____________ ("mandatory sinking fund") and not more
than $_____________ ] aggregate principal amount of Notes of this series. [Notes
of this series acquired or redeemed by the Company otherwise than through
[mandatory] sinking fund payments may be credited against subsequent [mandatory]
sinking fund payments otherwise required to be made -- in the inverse order in
which they become due.]
[If applicable, insert--At any time after ________________ the Notes
of this series may be redeemed, as a whole or from time to time in part, at the
option of the Company at a redemption price equal to their principal amount plus
accrued interest to the date fixed for redemption.]
In case of redemption of less than all of the Notes of this series at
the time outstanding, the Notes of this series to be redeemed shall be selected
by the Trustee in such manner as the Trustee shall deem appropriate and fair.
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[If applicable, insert--Notice of redemption shall be given by first-
class mail postage prepaid, mailed not less than 30 nor more than 60 days prior
to the date fixed for redemption, as provided in the Indenture.]
In the event of redemption of this Note in part only, a new Note or
Notes of this series for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.
[If the Note is not an Original Issue Discount Note,--If an Event of
Default with respect to Notes of this series shall occur and be continuing, the
principal of the Notes of this series may be declared due and payable in the
manner and with the effect provided in the Indenture.]
[If the Note is an Original Issue Discount Note,--If an Event of
Default with respect to Notes of this series shall occur and be continuing, an
amount of principal of the Notes of this series may be declared due and payable
in the manner and with the effect provided in the Indenture. Such amount shall
be equal to--insert formula for determining the amount. Upon payment (i) of the
amount of principal so declared due and payable and (ii) of interest on any
overdue principal and overdue interest (in each case to the extent that the
payment of such interest shall be legally enforceable), all of the Company's
obligations in respect of the payment of the principal of and interest, if any,
on the Notes of this series shall terminate.)
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of Notes of each series to be affected
under the Indenture at any time by the Company with the consent of the Holders
of 66 2/3% in aggregate principal amount of the Notes of each series to be
affected at the time Outstanding as defined in the Indenture. The Indenture
also contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the Notes of each series at the time Outstanding,
as defined in the Indenture, on behalf of the Holders of all the Notes of such
series, by written consent to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note shall
be conclusive and binding upon such Holder and upon all future Holders of this
Note and of any Note issued upon the transfer hereof or in exchange herefor or
in lieu hereof whether or not notation of such consent or waiver is made upon
this Note.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this
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Note at the times, place and rate, and in the coin or currency herein
prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, this Note is transferable on the Note Register of the
Company, upon surrender of this Note for transfer at the office or agency of the
Company in the [if applicable, insert--Borough of Manhattan, City and State of
New York, [and]] City of Los Angeles, State of California, or such other office
or agency as the Company may maintain for such purpose, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Note Registrar duly executed by, the registered Holder hereof or
his attorney duly authorized in writing, and thereupon one or more new Notes of
this series, of authorized denominations and for the same aggregate principal
amount will be issued to the designated transferee or transferees. The Company
may also designate additional offices or agencies for such transfer.
As provided in the Indenture all subject to certain limitations
therein set forth, Notes of this series are exchangeable for a like aggregate
principal amount of Notes of this series of a different authorized denomination,
as requested by the Holder surrendering the same.
No service charge will be made for any such transfer or exchange, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
The Company, the Trustee and any agent of the Company or of the
Trustee may treat the person in whose name this Note is registered as the
absolute owner hereof for the purpose of receiving payment as herein provided
and for all other purposes whether or not this Note be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice or knowledge
to the contrary.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
Section 204. Form of Trustee's Certificate of Authentication.
This is one of the Notes of the series designated therein referred to
in the within-mentioned Indenture.
First Interstate Bank of OR (Name of Authenticating Agent)
California, Authenticating Agent
Trustee
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By:_________________________ By:___________________________
Authorized Signatory Authorized Officer
Section 205. Notes in Global Form.
If Notes of a series are issuable in whole or in part in global form,
as specified as contemplated by Section 301, then, notwithstanding clause (10)
of Section 301 and the provisions of Section 302, any such Note shall represent
such of the Outstanding Notes or such series as shall be specified therein and
may provide that it shall represent the aggregate principal amount of
Outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of Outstanding Notes represented thereby may from time to time
be reduced to reflect exchanges. The global form may be permanent or temporary.
Any endorsement of a Note in global form to reflect the amount, or any increase
or decrease in the principal amount, of Outstanding Notes represented thereby
shall be made by the Trustee in such manner and upon instructions given by such
Person or Persons as shall be specified therein or in the Company Order to be
delivered to the Trustee pursuant to Section 303 or Section 304. Subject to the
provisions of Section 303 and, if applicable, Section 304, the Trustee shall
deliver and redeliver any Note in permanent global form in the manner and upon
instructions given by the Person or Persons specified therein or in the
applicable Company Order. If a Company Order pursuant to Section 303 or 304 has
been or simultaneously is delivered, any instructions by the Company with
respect to endorsement or delivery or redelivery of a Note in global form shall
be in writing but need not comply with Section 102 and need not be accompanied
by an Opinion of Counsel.
Notwithstanding the other provisions of this Indenture, unless
otherwise specified as contemplated by Section 301, payment of principal of and
any premium and interest on any Note in permanent global form shall be made to
the Person or Persons specified therein.
Notwithstanding the provisions of Section 307 and except as provided
in the preceding paragraph, the Company, the Trustee and any agent of the
Company and the Trustee shall treat a Person as the Holder of such principal
amount of Outstanding Notes represented by a permanent global Notes as shall be
specified in a written statement of the Depositary with respect to such
permanent global Note.
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ARTICLE THREE
THE NOTES
Section 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Notes which may be authenticated and
delivered under this Indenture is unlimited.
The Notes may be issued in one or more series and will be issued only
in fully registered form. The Notes will not be subordinated in right of
payment to any other indebtedness of the Company. There shall be established in
or pursuant to a Board Resolution, and set forth in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Notes of any series:
(1) the title of the Notes of the series (which shall
distinguish the Notes of the series from all other Notes);
(2) any limit upon the aggregate principal amount of the Notes
of the series which may be authenticated and delivered under this
Indenture (except for Notes authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Notes of the series pursuant to Sections 304, 305, 306, 906 or 1108);
(3) whether any Notes of the series are to be issuable initially
in temporary global form and, if so, the Depositary and the
circumstances under which such temporary global Note may be exchanged
for Notes of such series, and whether any Notes of the series are to
be issuable in permanent global form and, if so, the Depositary and
whether beneficial owners of interests in any such permanent global
Note may exchange such interests for Notes of such series of like
tenor and of any authorized form and denomination and the
circumstances under which any such exchanges may occur, if other than
in the manner provided in Section 305;
(4) the Person to whom any interest on any Note of the series
shall be payable, if other than the Person in whose name that Note is
registered at the close of business on the Record Date for such
interest;
(5) the date or dates on which the principal of the Notes of the
series is payable;
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(6) the rate or rates, or the method or methods by which such
rate or rates shall be determined, at which the Notes of the series
shall bear interest, if any, the date or dates from which such
interest shall accrue, the Interest Payment Dates on which such
interest shall be payable and the Record Date for the interest payable
on any Interest Payment Date;
(7) the place or places where the principal of and any premium
and interest on Notes of the series shall be payable, any Notes of the
series may be surrendered for registration of transfer, Notes of the
series may be surrendered for exchange and notices and demands to or
upon the Company in respect of the Notes of the series and this
Indenture may be served and where notices to Holders pursuant to
Section 106 will be published;
(8) the period or periods within which, the date or dates on
which, the price or prices at which and the terms and conditions upon
which, Notes of the series may be redeemed, in whole or in part, at
the option of the Company;
(9) the obligation, if any, of the Company to repay, redeem or
purchase Notes of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or
periods within which, the price or prices at which and the terms and
conditions upon which Notes of the series shall be repaid, redeemed or
purchased, in whole or in part, pursuant to such obligation;
(10) the denominations in which any Notes of the series shall be
issuable, if other than denominations of $1,000 and any integral
multiple thereof;
(11) the currency or currencies, including composite currencies,
in which payment of the principal of, any premium on or any interest
on the Notes of the series shall be payable if other than the currency
of the United States;
(12) if the amount of payments of principal of or any premium or
interest on the Notes of the series may be determined with reference
to an index, the manner in which any such amount shall be determined;
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(13) if other than the principal amount thereof, the portion of
the principal amount of any Notes of the series which shall be payable
upon declaration of acceleration of the Maturity thereof pursuant to
Section 502;
(14) if the principal of or any premium or interest on the Notes
of the series are to be payable, at the election of the Company or a
Holder thereof, in a currency or currencies including composite
currencies, other than that or those in which the Notes are stated to
be payable, the currency or currencies in which payment of the
principal of or any premium or interest on Notes of such series as to
which such election is made shall be payable, and the periods within
which and the terms and conditions upon which such election is to be
made;
(15) if other than as defined in Section 101, the meaning of
Business Day when used with respect to any Notes of the series; and
(16) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Notes of any one series shall be substantially identical except as
to denomination and except as may otherwise be provided in or pursuant to the
Board Resolution referred to above and set forth in the Officers' Certificate
referred to above or in any indenture supplemental hereto.
Any such Board Resolution may provide, without limitation, that Notes
of any particular series may be issued at various times, with different dates on
which the principal or any installment of principal is payable, with different
rates of interest, if any, or different methods by which rates of interest may
be determined, with different dates on which such interest may be payable, or
with different redemption or repayment dates and may be denominated in different
currencies or payable in different currencies. Unless otherwise provided in
such Board Resolution, a series of Notes may be reopened for issuances of
additional Notes of that series.
At the option of the Company, interest on the Notes of any series that
bears interest may be paid by mailing a check to the address of the Person
entitled thereto as such address shall appear in the Note Register.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
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delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
Section 302. Denominations.
The Notes of each series shall be issuable in such denominations as
may be approved by the Company, such approval to be evidenced by the execution
thereof by the Company. The Notes may bear such letters and numbers
distinguishing the several denominations and the several Notes of each
denomination as may be determined by the Company with the approval of the
Trustee. At the office or agency of the Company to be maintained by the Company
as provided in Section 1002 and in the manner, subject to the limitations and
upon payment of the charges provided herein, Notes of each series may be
exchanged for a like aggregate principal amount of Notes of such series of other
authorized denominations.
Section 303. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Company by its Chairman
of the Board, its President, its Executive Vice President, one of its Senior
Vice Presidents or one of its Vice Presidents under its corporate seal
reproduced thereon (which may be by facsimile) and attested by its Secretary or
one of its Assistant Secretaries. The signature of any of these officers on the
Notes may be manual or facsimile.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Notes of any series executed by the
Company to the Trustee, together with a Company Order, for the authentication
and delivery of such Notes; and the Trustee in accordance with such Company
Order shall authenticate and deliver such Notes as in this Indenture provided
and not otherwise.
All Notes shall be dated the date of their authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by or on behalf of the Trustee by the manual signature of one of its,
or its Authenticating Agent's, if any, authorized signatories, and such
certificate upon any Note shall be
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conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
Each Depositary designated pursuant to Section 301 for a global Note
must, at the time of its designation and at all times while it serves as
Depositary, be a clearing agency registered under the Securities Exchange Act of
1934 and any other applicable statute or regulation.
Section 304. Temporary Notes.
Pending the preparation of definitive Notes of any series, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Notes in lieu of which they are issued, with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Notes may determine, as evidenced by their signing such Notes.
If temporary Notes of any series are issued, the Company will cause
definitive Notes of that series to be prepared without unreasonable delay.
After the preparation of definitive Notes of such series, the temporary Notes of
such series shall be exchangeable for definitive Notes of such series upon
surrender of the temporary Notes at the office or agency of the Company
maintained for that purpose in the City of Los Angeles, State of California, or
such other office or agency as the Company may maintain for that purpose,
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Notes of any series, the Company shall execute and the Trustee or
Authenticating Agent, if any, shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of that series of
authorized denominations. Until so exchanged the temporary Notes of any series
shall in all respects be entitled to the same benefits under this Indenture as
definitive Notes of such series.
Section 305. Registration, Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (herein sometimes referred to as the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Notes and the registration of transfers of
Notes as herein provided. The Trustee is hereby initially appointed "Note
Registrar" for the purpose of registering Notes and transfers of Notes as herein
provided.
Upon surrender for registration of transfer of any Note of any series
at the office or agency of the Company maintained for that purpose in the City
of Los Angeles, State of California, or such other office or agency as the
Company
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may maintain for that purpose, the Company shall execute, and the Trustee or the
Authenticating Agent, if any, shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Notes of the same series
(in authorized denominations) of a like aggregate principal amount.
At the option of the Holder, Notes of any series may be exchanged for
other Notes of the same series of any authorized denominations, of a like
aggregate principal amount, upon surrender of the Notes to be exchanged at such
office or agency. Whenever any Notes are so surrendered for exchange, the
Company shall execute, and the Trustee or the Authenticating Agent, if any,
shall authenticate and deliver, the Notes which the Holder making the exchange
is entitled to receive.
All Notes issued in exchange for or upon transfer of Notes shall be
the valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Notes surrendered for such
exchange or transfer.
Every Note presented or surrendered for transfer or exchange shall (if
so required by the Company or the Trustee or the Authenticating Agent, if any)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Note Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any transfer or exchange of Notes,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any transfer or
exchange of Notes, other than exchanges pursuant to Section 304 or 906 not
involving any transfer.
The Company shall not be required (i) to issue, transfer or exchange
any Note of any series during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of Notes of that
series selected for redemption under Section 1104 and ending at the close of
business on the day of such mailing, or (ii) to transfer or exchange any Note so
selected for redemption in whole or in part except the unredeemed portion of any
Note redeemed in part.
If at any time the Depositary for the Notes of a series notifies the
Company that it is unwilling or unable to continue as Depositary for the Notes
of such series or if at any time the Depositary for the Notes of such series
shall no longer be eligible under Section 303, the Company shall appoint a
successor Depositary with respect to the Notes of such series. If a successor
Depositary for the Notes of such
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series is not appointed by the Company within 90 days after the Company receives
such notice or becomes aware of such ineligibility, the Company's election to
issue global Notes pursuant to Section 301(3) shall no longer be effective with
respect to the Notes of such series and the Company will execute, and the
Trustee, upon receipt of a Company Order for the authentication and delivery of
definitive Notes of such series, will authenticate and deliver, Notes of such
series in definitive form in an aggregate principal amount equal to principal
amount of the global Note or Notes representing such series in exchange for such
global Note or Notes.
The Company may at any time and in its sole discretion determine that
the Notes of any series issued in the form of one or more global Notes shall no
longer be represented by such global Note or Notes. In such event the Company
will execute, and the Trustee, upon receipt of a Company Order for the
authentication and delivery of a definitive Notes of such series, will
authenticate and deliver, Notes of such series in definitive form and in an
aggregate principal amount equal to the principal amount of the global Note or
Notes representing such series in exchange for such global Note or Notes.
Section 306. Mutilated, Destroyed, Lost or Stolen Notes.
A mutilated Note may be surrendered and thereupon the Company shall
execute and the Trustee or the Authenticating Agent, if any, shall authenticate
and deliver in exchange therefor a new Note of the same series of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
If there be delivered to the Company and to the Trustee
(i) evidence to their satisfaction of the destruction, loss or
theft of any Note, and
(ii) such security or indemnity as may be required by them to
save each of them harmless,
then, in the absence of notice to the Company or the Trustee that such Note has
been acquired by a bona fide purchaser, the Company shall execute and upon its
request the Trust or the Authenticating Agent, if any, shall authenticate and
deliver in lieu of any such destroyed, lost or stolen Note, a new Note of the
same series of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
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Upon the issuance of any new Note under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee or the Authenticating Agent, if any)
connected therewith.
Every new Note of any series issued pursuant to this Section in lieu
of any destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Notes of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Section 307. Persons Deemed Owners.
The Company, the Trustee, the Authenticating Agent, if any, and any
agent of the Company or Trustee may treat the Person in whose name any Note is
registered as the absolute owner of such Note for the purpose of receiving
payment of principal of, and interest on, such Note and for all other purposes
whatsoever whether or not such Note be overdue, and neither the Company, the
Trustee, the Authenticating Agent, if any, nor any agent of the Company or the
Trustee shall be affected by notice or knowledge to the contrary.
Section 308. Cancellation and Destruction.
All Notes surrendered for payment, redemption, transfer or exchange
shall if surrendered to the Company or any agent of the Company, be delivered to
the Trustee and shall be promptly canceled by it. The Company may at any time
deliver to the Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Notes so delivered shall be promptly canceled by the
Trustee. No Notes shall be authenticated in lieu of or in exchange for any
Notes canceled as provided in this Section, except as expressly permitted by
this Indenture. All canceled Notes held by the Trustee shall be disposed of as
directed by a Company Order.
Section 309. Authentication and Delivery of Original Issue.
Forthwith upon the execution and delivery of this Indenture, or from
time to time thereafter, Notes in one more series may be executed by the Company
and delivered to the Trustee or the Authenticating Agent, if any, for
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authentication, and shall thereupon be authenticated and delivered by the
Trustee or the Authenticating Agent, if any, upon Company Order, without any
further action by the Company.
Section 310. Payment to be in Proper Currency.
In the case of any Notes denominated in any currency other than U.S.
Dollars or in a composite currency (the "Required Currency"), except as
otherwise provided therein, the obligation of the Company to make any payment of
principal, premium or interest thereon shall not be discharged or satisfied by
any tender by the Company, or recovery by the Trustee, in any currency other
than the Required Currency, except to the extent that such tender or recovery
shall result in the Trustee timely holding the full amount of the Required
Currency then due and payable. If any such tender or recovery is in a currency
other than the Required Currency, the Trustee may, after consultation with the
Company, take such actions as the Company and the Trustee mutually agree are
appropriate to exchange such currency for the Required Currency. The reasonable
costs and risks of any such exchange, including without limitation the risks of
delay and exchange rate fluctuation, shall be borne by the Company, the Company
shall remain fully liable for any shortfall or delinquency in the full amount of
Required Currency then due and payable, and in no circumstances shall the
Trustee be liable therefore except in the case of its negligence or willful
misconduct.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
Section 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect, and the Trustee,
on demand of and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Notes theretofore authenticated and delivered (other
than (i) Notes which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii) Notes,
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust, as provided in Section
1003) have been delivered to the Trustee for cancellation; or
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(B) all such Notes not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee in trust for the
purpose an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the Trustee
for cancellation, for principal and interest to the date of such
deposit (in the case of Notes which have become due and payable), or
to the Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
In the event there are Notes of two or more series hereunder, the
Trustee shall be required to execute an instrument acknowledging satisfaction
and discharge of this Indenture only if requested to do so with respect to Notes
of all series as to which it is Trustee and if the other conditions thereto are
met. In the event there are two or more Trustees hereunder, then the
effectiveness of any such instrument shall be conditioned upon receipt of such
instruments from all Trustees hereunder.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 shall survive.
Section 402. Application of Trust Money.
All money deposited with the Trustee pursuant to Section 401 shall be
held in trust and applied by it to the payment, either directly or through any
Paying Agent
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(including the Company acting as its own Paying Agent), as the Trustee may
determine, to the Holders of the Notes for whose payment or redemption such
money has been deposited with the Trustee, of all sums due and to become due
thereon for principal and interest; but such money need not be segregated from
other funds except to the extent required by law.
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.
"Event of Default", wherever used herein with respect to Notes of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any installment of interest, if any,
upon any Note of that series when it becomes due and payable, and
continuance of such default for a period of 30 days; or
(2) default in the payment of the principal of any Note of that
series at its Maturity; or
(3) default in the deposit of any sinking fund payment when and as
due by the terms of a Note of that series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with or which has expressly been included
in this Indenture solely for the benefit of any series of Notes other than
that series), and continuance of such default or breach for a period of 90
days after there has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the Holders of
at least 10% in principal amount of the Outstanding Notes of that series, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder;
or
(5) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment
or composition of or in respect of the Company under the Federal Bankruptcy
Act or any other similar applicable
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Federal or State law, or appointing a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Company or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order unstayed
and in effect for a period of 60 consecutive days; or
(6) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization, arrangement or relief
under the Federal Bankruptcy Act or any other similar applicable Federal or
State law, or the consent by it to the filing of any such petition or to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or of any substantial part of
its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due, or the taking of corporate action by
the Company in furtherance of any such action; or
(7) a default under any material bond, debenture, note or other
evidence of indebtedness of the Company (other than the Notes) or under any
indenture or other instrument under which any such evidence of indebtedness
has been issued or by which it is governed and the expiration of the
applicable periods of grace, if any, specified in such evidence of
indebtedness, indenture or other instrument; provided, however, that if
such default under such evidence of indebtedness, indenture or other
instrument shall be cured by the Company, or be waived by the holders of
such indebtedness, indenture or other instrument, then the Event of Default
hereunder by reason of such default shall be deemed likewise to have been
thereupon cured or waived.
For the purposes of this Subsection 501(7) "material bond, debenture,
note or other evidence of indebtedness" shall mean any one or more
obligations of the Company to pay principal on an amount or amounts which
in the aggregate is not less than $50,000,000.
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Notes of any series at the time
Outstanding occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Notes of that series
Outstanding may declare the principal amount (or, if the Notes of that series
are Original Issue Discount Notes, such portion
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of the principal amount as may be specified in the terms of that series) of all
the Notes of that series to be due and payable immediately, by notice in writing
to the Company (and to the Trustee if given by Holders), and upon any such
declaration such principal amount shall become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Notes of that series Outstanding, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue installments of interest on all Notes of that
series,
(B) the principal of any Notes of that series which have become
due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by such Notes,
(C) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest at the rate borne by
such Notes, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Notes of that series, other
than the non-payment of the principal of Notes of that series which have
become due solely by such acceleration, have been cured or waived as
provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
(1) default is made in the payment of any installment of interest on
any Note when such interest
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becomes due and payable and such default continues for a period of 30 days,
or
(2) default is made in the payment of the principal of any Note at
the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
holders of such Notes, the whole amount then due and payable on such Notes for
principal and interest, with interest upon the overdue principal and, to the
extent that payment of such interest shall be legally enforceable, upon overdue
installments of interest, at the rate borne by the Notes; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Notes and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
property of the Company or any other obligor upon the Notes, wherever situated.
If an Event of Default with respect to Notes of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Notes of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
Section 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the Notes
or the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Notes shall then be due
and payable as therein expressed or by declaration or otherwise and irrespective
of whether the Trustee shall have made demand on the Company for the payment of
overdue principal or interest) shall be entitled and empowered, by intervention
in such proceeding or otherwise,
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(i) to file and prove a claim for the whole amount of principal
and interest owing and unpaid in respect of the Notes and to file such
other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel) and of the Holders allowed in such judicial
proceeding, and
(ii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept, or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
Section 505. Trustee may Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders
of the Notes in respect of which such judgment has been recovered.
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Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or interest
upon presentation of the Notes and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
First: To the payment of all amounts due the Trustee under Section
607;
Second: To the payment of the amounts then due and unpaid upon the
Notes for principal and interest, in respect of which or for the benefit of
which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Notes, for principal and interest, respectively;
Third: To the Company or whomsoever shall be entitled thereto.
Section 507. Limitation on Suits.
No Holder of any Note of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to Notes of that series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Notes of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60 day period by the Holders of a majority
in principal amount of the Outstanding Notes of that series;
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it being understood and intended that no one or more Holders of Notes of any
series shall have any right in any manner whatever by virtue of, or by availing
of, any provision of this Indenture to affect, disturb or prejudice the rights
of any other Holders, of Notes of that or any other series, or to obtain or to
seek to obtain priority or preference over any other Holders or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all the Holders of Notes.
Section 508. Unconditional Right of Holders to Receive Principal and
Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the right which is absolute and unconditional to receive
payment of the principal of and interest on such Note on the respective Stated
Maturity expressed in such Note (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such right shall not be impaired or affected without the consent of such
Holder.
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case the Company, the Trustee
and the Holders shall, subject to any determination in such proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee or
to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
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Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders, as the case may be.
Section 512. Control by Holders.
The Holders of not less than a majority in principal amount of the
Outstanding Notes of any series shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee, with respect to Notes
of that series.
Section 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Notes of any series may on behalf of the Holders of all the Notes of
such series waive any past default hereunder with respect to such series and its
consequences.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
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Section 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Note by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Notes of any
series, or to any suit instituted by any Holder for the enforcement of the
payment of the principal of or interest, if any, on any Note on or after the
respective Stated Maturity expressed in such Note (or, in the case of
redemption, on or after the Redemption Date).
Section 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
Section 601. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default with respect
to Notes of any series,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
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(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; but in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements
of this Indenture.
(b) In case an Event of Default with respect to Notes of any series
has occurred and is continuing, the Trustee shall exercise, with respect to
such series, such of the rights and powers vested in it by this Indenture,
and use the same degree of care and skill in their exercise, as a prudent
man would exercise or use under the circumstances in the conduct of his own
affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of a majority in principal amount of the
Outstanding Notes of any series relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee under this
Indenture with respect to Notes of such series; and
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have
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reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably
assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of
this Section.
Section 602. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder with
respect to Notes of any series, the Trustee shall give to all Holders of Notes
of such series in the manner and to the extent provided in Section 703(c) notice
of such default hereunder known to the Trustee, unless such default shall have
been cured or waived; provided, however, that, except in the case of a default
in the payment of the principal of or interest, if any, on any Note of such
series, the Trustee shall be protected in withholding such notice if and so long
as the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers, of the Trustee in good faith determine
that the withholding of such notice is in the interests of the Holders of Notes
of such series; and provided, further, that in the case of any default of the
character specified in Section 501(4) with respect to Notes of such series no
such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default with respect to Notes of such series.
Section 603. Certain Rights of Trustee.
Except as otherwise provided in Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a
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matter be proved or established prior to taking, suffering or omitting any
action hereunder, the Trustee (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith on its part, rely upon an
Officers' Certificate;
(d) the Trustee may consult with counsel and any Opinion of Counsel or
advice of such counsel, subsequently confirmed in writing, shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, or other paper or document but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books, records
and premises of the Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
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Section 604. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except the Trustee's
certificate of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Notes. The Trustee shall not be accountable for the use or application
by the Company of Notes or the proceeds thereof.
Section 605. May Hold Notes.
The Trustee, any Paying Agent, Note Registrar or any other agent of
the Company or of the Trustee, in its individual or any other capacity, may
become the owner or pledgee of Notes and, subject to Sections 608 and 613, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Note Registrar or such other agent.
Section 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
Section 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it as Trustee, Paying Agent, Note Registrar and
in any other capacity hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of an
express trust);
(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust, including the costs and expenses of
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defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
As security for the performance of the obligations of the Company
under this section the Trustee shall have a lien prior to the Notes upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the benefit of the Holders of particular Notes.
Section 608. Disqualification; Conflicting Interests.
(a) Elimination of Conflicting Interest or Resignation. If the
Trustee has or shall acquire any conflicting interest, as defined in this
Section, then, within 90 days after ascertaining that it has such conflicting
interest, and if the default to which such conflicting interest relates has not
been cured or duly waived or otherwise eliminated before the end of such 90-day
period, the Trustee shall either eliminate such conflicting interest or resign
in the manner and with the effect hereinafter specified in this Article.
(b) Notice of Failure to Eliminate Conflicting Interest or Resign. In
the event that the Trustee shall fail to comply with the provisions of
Subsection (a) of this Section with respect to the Notes of any series the
Trustee shall, within 10 days after the expiration of such 90-day period,
transmit notice of such failure to the Holders of Notes of that series in the
manner and to the extent provided in Section 703(c).
(c) Stay of Duty to Resign. Except in the case of a default in the
payment of the principal of or interest on any Note, or in the payment of any
sinking or purchase fund installment, the Trustee shall not be required to
resign as provided in this Section if the Trustee shall have sustained the
burden of proving, on application to the Commission and after opportunity for
hearing thereon, that
(1) The default under this Indenture may be cured or waived during a
reasonable period under the procedures described in such application, and
(2) A stay of the Trustee's duty to resign will not be inconsistent
with the interests of the Holders.
The filing of such an application shall automatically stay the
performance of the duty to resign until the Commission orders otherwise.
(d) "Conflicting Interest" Defined. For the purposes of this Section
each series issued under this
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Indenture will be considered to have been issued under a separate indenture and
the Trustee shall be deemed to have a conflicting interest with respect to the
Notes of any series if such Notes are in default as defined hereinafter in this
Subsection (exclusive of any period of grace or requirement of notice) and
(1) The Trustee is trustee under this Indenture with respect to
Outstanding Notes of any series other than that series or is trustee under
another indenture under which any other securities, or certificates of
interest or participation in any other securities, of the Company are
outstanding, unless such other indenture is a collateral trust indenture
under which the only collateral consists of Notes issued under this
Indenture, provided that there shall be excluded from the operation of this
paragraph (A) this Indenture with respect to the Notes of any series other
than that series, and (B) any other indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if in the case of any such
indenture or indentures described in subsections (A) or (B) of this sentence
(i) this Indenture and such other indenture or indentures (and
all series of securities issuable hereunder) are wholly unsecured and
rank equally and such other indenture or indentures (and such series)
are specifically described in this Indenture or are hereafter
qualified under TIA, unless the Commission shall have found and
declared by order pursuant to Section 305(b) or Section 307(c) of TIA
that differences exist between the provisions of this Indenture (or
such series) and the provisions of such other indenture or indentures
(or such series) which are so likely to involve a material conflict of
interest as to make it necessary in the public interest or for the
protection of investors to disqualify the Trustee from acting as such
under this Indenture and such other indenture or indentures, or
(ii) The Company shall have sustained the burden of proving, on
application to the Commission and after opportunity for hearing
thereon, that trusteeship under this Indenture and such other
indenture or indentures or under more than one outstanding series
under a single indenture is not so likely to involve a material
conflict of interest as to make it necessary in the public interest or
for the protection of investors to disqualify the
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Trustee from acting as such under one of such indentures or with
respect to such series;
(2) the Trustee or any of its directors or executive officers is an
underwriter for the Company;
(3) the Trustee directly or indirectly controls or is directly or
indirectly controlled by or is under direct or indirect common control with
an underwriter for the Company;
(4) the Trustee or any of its directors or executive officers is a
director, officer, partner, employee, appointee or representative of the
Company, or of an underwriter (other than the Trustee itself) for the
Company who is currently engaged in the business of underwriting, except
that (i) one individual may be a director or an executive officer, or both,
of the Trustee and a director or an executive officer, or both, of the
Company, but may not be at the same time an executive officer of both the
Trustee and the Company; (ii) if and so long as the number of directors of
the Trustee in office is more than nine, one additional individual may be a
director or an executor officer, or both, of the Trustee and a director of
the Company; and (iii) the Trustee may be designated by the Company or by
any underwriter for the Company to act in the capacity of transfer agent,
registrar, custodian, paying agent, fiscal agent, escrow agent, or
depositary, or in any other similar capacity, or subject to the provisions
of paragraph (1) of this Subsection, to act as trustee, whether under an
indenture or otherwise;
(5) 10% or more of the voting securities of the Trustee is
beneficially owned either by the Company or by any director, partner, or
executive officer thereof, or 20% or more of such voting securities is
beneficially owned collectively, by any two or more of such persons; or 10%
or more of the voting securities of the Trustee is beneficially owned either
by an underwriter for the Company or by any director, partner or executive
officer thereof, or is beneficially owned, collectively, by any two or more
such persons;
(6) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default (as hereinafter in this
Subsection defined), (i) 5% or more of the voting securities, or 10% or more
of any other class of security, of the Company not including the Notes
issued under this Indenture and securities issued under any other indenture
under which the Trustee is also trustee, or (ii) 10% or more of any class of
security of an underwriter for the Company;
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(7) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default (as hereinafter in this
Subsection defined), 5% or more of the voting securities of any person who,
to the knowledge of the Trustee, owns 10% or more of the voting securities
of, or controls directly or indirectly or is under direct or indirect common
control with, the Company;
(8) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default (as hereinafter in this
Subsection defined), 10% or more of any class of security of any person who,
to the knowledge of the Trustee, owns 50% or more of the voting securities
of the Company;
(9) the Trustee owns, on the date of default on the Notes (exclusive
of any period of grace or requirement of notice) or any anniversary of such
default while such default upon the Notes remains outstanding, in the
capacity of executor, administrator, testamentary or inter vivos trustee,
guardian, committee or conservator, or in any other similar capacity, an
aggregate of 25% or more of the voting securities, or of any class of
security, of any person, the beneficial ownership of a specified percentage
of which would have constituted a conflicting interest under paragraphs (6),
(7) or (8) of this Subsection. As to any such securities of which the
Trustee acquired ownership through becoming executor, administrator, or
testamentary trustee of an estate which included them, the provisions of the
preceding sentence shall not apply, for a period of two years from the date
of such acquisition, to the extent that such securities included in such
estate do not exceed 25% of such voting securities or 25% of any such class
of security. Promptly after the dates of any such default upon the Notes and
annually each succeeding year that the Notes remain in default, the Trustee
shall make a check of its holdings of such securities in any of the above-
mentioned capacities as of such dates. If the Company fails to make payment
in full of the principal of or interest on, any of the Notes when and as the
same becomes due and payable, and such failure continues for 30 days
thereafter, the Trustee shall make a prompt check of its holdings of such
securities in any of the above-mentioned capacities as of the date of the
expiration of such 30-day period, and after such date, notwithstanding the
foregoing provisions of this paragraph, all such securities so held by the
Trustee, with sole or joint control over such securities vested in it,
shall, but only so long as such failure shall continue, be considered as
though beneficially owned by the Trustee for the purposes of paragraphs (6),
(7) and (8) of this Subsection; or
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(10) except under the circumstances described in paragraphs (1), (3),
(4), (5) or (6) of Subsection 613(b), the Trustee shall become a creditor of
the Company.
For purposes of paragraph (1) of this Subsection and of Subsections
503 and 504, the term "series of securities" or "series" means a series, class
or group of securities issuable under an indenture pursuant to whose terms
holders of one such series may vote to direct the Trustee, or otherwise take
action pursuant to a vote of such Holders, separately from holders of another
such series; provided, that "series of securities" or "series" shall not include
any series of securities issuable under an indenture if all such series rank
equally and are wholly unsecured.
The specification of percentages in paragraphs (5) to (9) inclusive,
of this Subsection, shall not be construed as indicating that the ownership of
such percentages of the securities of a person is or is not necessary or
sufficient to constitute direct or indirect control for the purposes of
paragraphs (3) or (7) of this Subsection.
For the purposes of paragraphs (6), (7), (8) and (9) of this
Subsection only, (i) the terms "security" and "securities" shall include only
such securities as are generally known as corporate securities, but shall not
include any note or other evidence of indebtedness issued to evidence an
obligation to repay moneys lent to a person by one or more banks, trust
companies or banking firms, or any certificate of interest or participation in
any such note or evidence of indebtedness; (ii) an obligation shall be deemed to
be "in default" when a default in payment of principal shall have continued for
30 days or more and shall not have been cured; and (iii) the Trustee shall not
be deemed to be the owner or holder of (A) any security which it holds as
collateral security, as trustee or otherwise, for an obligation which is not in
default as defined in clause (ii) above, or (B) any security which it holds as
collateral security under this Indenture, irrespective of any default hereunder,
or (C) any security which it holds as agent for collection, or as custodian,
escrow agent, or depositary, or in any similar representative capacity.
(e) Definitions of Certain Terms Used in This Section. For the
purposes of this Section:
(1) the term "underwriter" when used with reference to the Company
means every person who, within one year prior to the time as of which the
determination is made, has purchased from the Company with a view to, or has
offered or sold for the Company in connection with, the distribution of any
security of the Company outstanding at such time, or has
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participated or has had a direct or indirect participation in any such
undertaking, or has participated or has had a participation in the direct or
indirect underwriting of any such undertaking, but such term shall not
include a person whose interest was limited to a commission from an
underwriter or dealer not in excess of the usual and customary distributors'
or sellers' commission.
(2) The term "director" means any director of a corporation, or any
individual performing similar functions with respect to any organization
whether incorporated or unincorporated.
(3) The term "person" means an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, an
unincorporated organization, or a government or political subdivision
thereof. As used in this paragraph, the term "trust" shall include only a
trust where the interest or interests of the beneficiary or beneficiaries
are evidenced by a security.
(4) The term "voting security" means any security presently entitling
the owner or holder or holder thereof to vote in the direction or management
of the affairs of a person, or any security issued under or pursuant to any
trust, agreement or arrangement whereby a trustee or trustees or agent or
agents for the owner or holder of such security are presently entitled to
vote in the direction or management of the affairs of a person.
(5) The term "Company" means any obligor (including a guarantor) upon
the Notes.
(6) The term "executive officer" means the president, every vice
president, every trust officer, the cashier, the secretary, and the
treasurer of a corporation, and any individual customarily performing
similar functions with respect to any organization whether incorporated or
unincorporated, but shall not include the chairman of the board of
directors.
(f) Calculation of Percentages of Securities. The percentage of
voting securities and other securities specified in this Section shall be
calculated in accordance with the following provisions:
(1) A specified percentage of the voting securities of the Trustee,
the Company or any other person referred to in this Section (each of whom is
referred to as a "person" in this paragraph) means such amount of the
outstanding voting securities of such person as entitles the holder or
holders thereof to cast such specified percentage of the aggregate votes
which the holders of all the outstanding voting securities of such person
are entitled to cast in the direction or management of the affairs of such
person.
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(2) A specified percentage of a class of securities of a person means
such percentage of the aggregate amount of securities of the class
outstanding.
(3) The term "amount", when used in regard to securities, means the
principal amount if relating to evidences of indebtedness, the number of
shares if relating to capital shares, and the number of units if relating to
any other kind of security.
(4) The term "outstanding" means issued and not held by or for the
account of the issuer. The following securities shall not be deemed
outstanding within the meaning of this definition:
(i) securities of an issuer held in a sinking fund relating to
securities of the issuer of the same class;
(ii) securities of an issuer held in a sinking fund relating to
another class of securities of the issuer, if the obligation evidenced
by such other class of securities is not in default as to principal or
interest or otherwise;
(iii) securities pledged by the issuer thereof as security for an
obligation of the issuer not in default as to principal or interest or
otherwise; and
(iv) securities held in escrow if placed in escrow by the issuer
thereof;
provided, however, that any voting securities of an issuer shall be deemed
outstanding if any person other than the issuer is entitled to exercise the
voting rights thereof.
(5) A security shall be deemed to be of the same class as another
security if both securities confer upon the holder or holders thereof
substantially the same rights and privileges; provided, however, that, in
the case of secured evidences of indebtedness, all of which are issued under
a single indenture, differences in the interest rates or maturity dates of
various series thereof shall not be deemed sufficient to constitute such
series different classes and provided, further, that, in the case of
unsecured evidences of indebtedness, differences in the interest rates or
maturity dates thereof shall not be deemed sufficient to constitute them
securities of different classes, whether or not they are issued under a
single indenture.
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Section 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of the State of California authorized under such laws to exercise
trust powers, and having a combined capital and surplus of at least $50,000,000,
subject to supervision or examination by Federal or State authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
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Section 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time with respect to the Notes of
one or more series by giving written notice thereof to the Company. If an
instrument of acceptance by a successor Trustee shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to such
series.
(c) The Trustee may be removed at any time with respect to the Notes
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Notes of that series, delivered to the Trustee and to the
Company.
(d) If at any time:
(1) the Trustee, after this Indenture shall have been qualified
under TIA, shall fail to comply with Section 608(a) after written
request therefor by the Company or by any Holder who has been a bona
fide Holder of a Note for at least 6 months, subject to the provisions
of Section 608(c), or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or
by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Note for at least 6 months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
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(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
with respect to Notes of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with
respect to Notes of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Notes of one or more
or all of such series and that at any time there shall be only one Trustee
with respect to the Notes of any series). If, within 1 year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to Notes of any series shall be appointed by
Act of the Holders of a majority in principal amount of the Outstanding
Notes of such series delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor
Trustee appointed by the Company. If no successor Trustee with respect to
Notes of any series shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any
Holder who has been a bona fide Holder of a Note for at least 6 months may,
on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Trustee with
respect to Notes of such series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Notes of any series and each appointment
of a successor Trustee with respect to the Notes of any series by mailing
written notice of such event by first-class mail postage prepaid, to the
Holders of Notes of such series as their names and addresses appear in the
Note Register. Each notice shall include the name of the successor Trustee
with respect to the Notes of such series and the address of its principal
corporate trust office.
Section 611. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Notes, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee
an instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the retiring Trustee; but,
on the request of the Company or the successor Trustee, such retiring
Trustee shall, upon
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payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Notes of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Notes of one
or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1)
shall contain such provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, each successor Trustee all the rights,
powers, trusts and duties of the retiring Trustee with respect to the Notes
of that or those series to which the appointment of such successor Trustee
relates, (2) if the retiring Trustee is not retiring with respect to all
Notes, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Notes of that or those series as to
which the retiring Trustee is not retiring shall continue to be vested in
the retiring Trustee, and (3) shall add to or change any of the provisions
of this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust, that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart
from any trust or trusts hereunder administered by any other such Trustee
and that no Trustee shall be responsible for any act or failure to act on
the part of any other Trustee hereunder; and upon the execution and delivery
of such supplemental indenture the resignation or removal of the retiring
Trustee shall become effective to the extent provided therein, such retiring
Trustee shall, with respect to the Notes of that or those series to which
the appointment of such successor Trustee relates, have no further
responsibility for the exercise of rights and powers or for the performance
of the duties and obligations vested in the Trustee under this Indenture,
and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee with respect to the Notes of that or those
series to which the appointment of such successor Trustee relates; but, on
request of the Company or any successor Trustee, such retiring Trustee shall
duly assign, transfer and deliver to such successor Trustee, to the extent
contemplated by such supplemental indenture, the property
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and money held by such retiring Trustee hereunder with respect to the Notes
of that or those series to which the appointment of such successor Trustee
relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts
referred to in paragraphs (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
Section 612. Merger, Conversion or Consolidation.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes.
Section 613. Preferential Collection of Claims Against Company.
(a) Segregation and Apportionment of Certain Collections by Trustee;
Certain Exceptions. Subject to Subsection (b) of this Section, if the Trustee
shall be or shall become a creditor, directly or indirectly, secured or
unsecured, of the Company within three months prior to a default, as defined in
Subsection (c) of this Section, or subsequent to such a default, then, unless
and until such default shall be cured, the Trustee shall set apart and hold in a
special account for the benefit of the Trustee individually, the Holders of the
Notes and the holders of other indenture securities (as defined in Subsection
(c) of this Section):
(1) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or interest,
effected after the beginning of such three month period and valid as against
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the Company and its other creditors, except any such reduction resulting
from the receipt or disposition of any property described in paragraph (2)
of this Subsection, or from the exercise of any right of set-off which the
Trustee could have exercised if a petition in bankruptcy had been filed by
or against the Company upon the date of such default; and
(2) all property received by the Trustee in respect of any claim as
such creditor, either as security therefor, or in satisfaction or
compensation thereof, or otherwise, after the beginning of any such three
month period, or an amount equal to the proceeds of any such property, if
disposed of, subject, however, to the rights, if any, of the Company and its
other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the
Trustee
(A) to retain for its own account (i) payments made on account of any
such claim by any Person (other than the Company) who is liable thereon, and
(ii) the proceeds of the bona fide sale of any such claim by the Trustee to
a third person, and (iii) distributions made in cash, securities or other
property in respect of claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Federal
Bankruptcy Act or applicable State law;
(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the
beginning of such three month period;
(C) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security for
any such claim, if such claim was created after the beginning of such three
month period and such property was received as security therefor
simultaneously with the creation thereof, and if the Trustee shall sustain
the burden of proving that at the time such property was so received the
Trustee had no reasonable cause to believe that a default as defined in
Subsection (c) of this Section would occur within three months; or
(D) to receive payment on any claim referred to in paragraph (B) or
(C), against the release of any property held as security for such claim as
provided in paragraph (B) or (C), as the case may be, to the extent of the
fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted
after the beginning of such three month
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period for property held as security at the time of such substitution shall, to
the extent of the fair value of the property released, have the same status as
the property released, and, to the extent that any claim referred to in any of
such paragraphs is created in renewal of or in substitution for or for the
purpose of repaying or refunding any preexisting claim of the Trustee as such
creditor, such claim shall have the same status as such preexisting claim.
If the Trustee shall be required to account, the funds and property
held in such special account and the proceeds thereof shall be apportioned
between the Trustee, the Holders and the holders of other indenture securities
in such manner that the Trustee, the Holders and the holders of other indenture
securities realize, as a result of payments from such special account and
payment of dividends on claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Federal
Bankruptcy Act or applicable State law, the same percentage of their respective
claims, figured before crediting to the claim of the Trustee anything on account
of the receipt by it from the Company of the funds and property in such special
account and before crediting to the respective claims of the Trustee and the
Holders and the holders of other indenture securities dividends on claims filed
against the Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Federal Bankruptcy Act or applicable State law,
but after crediting thereon receipts on account of the indebtedness represented
by their respective claims from all sources other than from such dividends and
from the funds and property so held in such special account. As used in this
paragraph, with respect to any claim, the term "dividends" shall include any
distribution with respect to such claim, in bankruptcy or receivership or in
proceedings for reorganization pursuant to the Federal Bankruptcy Act or
applicable State law, whether such distribution is made in cash, securities, or
other property, but shall not include any such distribution with respect to the
secured portion, if any, of such claim. The court in which such bankruptcy,
receivership or proceedings for reorganization is pending shall have
jurisdiction (i) to apportion between the Trustee and the Holders and the
holders of other indenture securities, in accordance with the provisions of this
paragraph, the funds and property held in such special account and proceeds
thereof, or (ii) in lieu of such apportionment, in whole or in part to give to
the provisions of this paragraph due consideration in determining the fairness
of the distributions to be made to the Trustee and the Holders and the holders
of other indenture securities with respect to their respective claims, in which
event it shall not be necessary to liquidate or to appraise the value of any
securities or other property held in such special account or as security for any
such claim, or to make a specific allocation of such distributions as between
the secured and unsecured portions of such claims, or otherwise to
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apply the provisions of this paragraph as a mathematical formula.
Any Trustee which has resigned or been removed after the beginning of
such three month period shall be subject to the provisions of this Subsection as
though such resignation or removal had not occurred. If any Trustee has
resigned or been removed prior to the beginning of such three month period, it
shall be subject to the provisions of this Subsection if and only if the
following conditions exist:
(1) the receipt of property or reduction of claim which would have
given rise to the obligation to account, if such Trustee had continued as
Trustee, occurred after the beginning of such three month period; and
(2) such receipt of property or reduction of claim occurred within
three months after such resignation or removal.
(b) Certain Creditor Relationships Excluded from Segregation and
Apportionment. There shall be excluded from the operation of Subsection (a) of
this Section a creditor relationship arising from
(1) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year or
more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction, or by this Indenture, for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advances and of the circumstances surrounding the
making thereof is given to the Holders at the time and in the manner
provided in this Indenture;
(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction as defined in Subsection (c) of this
Section;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25(a) of the Federal Reserve Act,
as amended,
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which is directly or indirectly a creditor of the Company; or
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper as defined in Subsection (c) of
this Section.
(c) Definitions of Certain Terms Used in This Section. For the
purposes of this Section only:
(1) The term "default" means any failure to make payment in full
of the principal of or interest on any of the Notes or upon the other
indenture securities when and as such principal or interest becomes due and
payable.
(2) the term "other indenture securities" means securities upon
which the Company is an obligor outstanding under any other indenture (i)
under which the Trustee is also trustee, (ii) which contains provisions
substantially similar to the provisions of this Section, and (iii) under
which a default exists at the time of the apportionment of the funds and
property held in such special account.
(3) The term "cash transaction" means any transaction in which
full payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other orders
drawn upon banks or bankers and payable upon demand.
(4) The term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacture, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation.
(5) The term "Company" means any obligor upon the Notes.
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Section 614. Records Available to California Commissioner of
Corporations.
The Trustee will permit inspection of its records relative to the
Notes by the California Commissioner of Corporations at its Corporate Trust
Office at all reasonable times during regular business hours.
Section 615. Appointment of Authenticating Agent.
So long as any of the Notes remain outstanding, there may be an
Authenticating Agent or Agents appointed by the Trustee to act on its behalf
with respect to one or more series of Notes in connection with the
authentication of the Notes of such series as set forth in Article Three and
Section 1108 of this Indenture. For all purposes of this Indenture, the
authentication and delivery of Notes by the Authenticating Agent pursuant to
this Section shall be deemed to be authentication and delivery of such Notes "by
the Trustee." Each such Authenticating Agent, if any, shall at all times be a
corporation organized and doing business under the laws of the United States or
of any State or of the District of Columbia, authorized under such laws to act
as Authenticating Agent, having a combined capital and surplus of at least Five
Million Dollars ($5,000,000), subject to supervision or examination by Federal,
State or District of Columbia authority. If such corporation publishes reports
of condition at least annually, pursuant to the law or to the requirements of
the aforesaid supervising or examining authority, then for the purposes of this
Section 615 the combined capital and surplus of such corporation shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency business
of any Authenticating Agent, shall be the successor of the Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section 615 without the execution or filing of any paper or any further act on
the part of the Trustee or the Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written notice
of termination to such Authenticating Agent and to the Company. Upon receiving
such a notice of resignation or upon such termination, or in case at any time
any Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 615, the Trustee promptly may appoint a
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successor Authenticating Agent and shall give written notice of such
appointment to the Company, and shall cause a notice of any such appointment to
be mailed to the Holders of Notes of the series with respect to which such
Authenticating Agent shall act at their addresses as they shall appear on the
Note Register. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers, duties
and responsibilities of its predecessor hereunder, with like effect as if
originally named as Authenticating Agent hereunder. No successor Authenticating
Agent shall be appointed unless eligible under the provisions of this Section
615.
The Trustee agrees to pay to the Authenticating Agent from time to
time reasonable compensation for its services, and the Trustee shall be entitled
to be reimbursed for such payments subject to the provisions of Section 607.
If any Authenticating Agent is appointed with respect to any series of
Notes hereunder the Form of Trustee's Certificate of Authentication as set forth
in Section 204 hereof shall include authentication on behalf of the Trustee by
the Authenticating Agent by its authorized officers.
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ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of
Holders.
The Company will furnish or cause to be furnished to the Trustee semi-
annually, not less than 45 days nor more than 60 days after each semi-annual
interest payment date, and at such other times as the Trustee may request in
writing, within 30 days after receipt by the Company of any such request, a list
in such form as the Trustee may reasonably require containing all the
information in the possession or control of the Company, or any of its Paying
Agents other than the Trustee, as to the names and addresses of the Holders,
obtained since the date as of which the next previous list, if any, was
furnished; provided, however, that no such list need include any names and
addresses received by the Trustee in its capacity as Note Registrar. Any such
list may be dated as of a date not more than 15 days prior to the time such
information is furnished or caused to be furnished and need not include
information received after such date.
Section 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of Holders (i)
contained in the most recent list furnished to it as provided in Section 701,
(ii) received by it in the capacity of Paying Agent or Note Registrar (if so
acting) hereunder, and (iii) filed with it within the 2 preceding years pursuant
to Section 703(c)(2).
The Trustee may (i) destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished, (ii) destroy any
information received by it as Paying Agent or Note Registrar (if so acting)
hereunder upon delivering to itself as Trustee, not earlier than 45 days after
an interest payment date of the Notes, a list containing the names and addresses
of the Holders obtained from such information since the delivery of the next
previous list, if any, (iii) destroy any list delivered to itself as Trustee
which was compiled from information received by it as Paying Agent or Note
Registrar (if so acting) hereunder upon the receipt of a new list so delivered,
and (iv) destroy not earlier than 2 years after filing, any information filed
with it pursuant to Section 703(a)(2).
(b) If three or more Holders (hereinafter referred to as "applicants")
apply in writing to the Trustee, and furnish to the Trustee reasonable proof
that each such applicant has owned a Note for a period of at least six months
preceding the date of such application, and such application
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states that the applicants desire to communicate with other Holders with respect
to their rights under this Indenture or under the Notes and is accompanied by a
copy of the form of proxy or other communication which such applicants propose
to transmit, then the Trustee shall, within five business days after the receipt
of such application, at its election, either
(i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 702(a), or
(ii) inform such applicants as to the approximate number of Holders
whose names and addresses appear in the information preserved at the time by
the Trustee in accordance with Section 702(a), and as to the approximate
cost of mailing to such Holders the form of proxy or other communication, if
any, specified in such application.
If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder whose name and address appears in the
information preserved at the time by the Trustee in accordance with Section
702(a), a copy of the form of proxy or other communication which is specified in
such request, with reasonable promptness after a tender to the Trustee of the
material to be mailed and of payment, or provision for the payment of the
reasonable expenses of mailing, unless within five days after such tender, the
Trustee shall mail to such applicants and file with the Commission, together
with a copy of the material to be mailed, a written statement to the effect
that, in the opinion of the Trustee, such mailing would be contrary to the best
interests of the Holders or would be in violation of applicable law. Such
written statement shall specify the basis of such opinion. If the Commission,
after opportunity for a hearing upon the objections specified in the written
statement so filed, shall enter an order refusing to sustain any of such
objections or if, after the entry of an order sustaining one or more of such
objections, the Commission shall find, after notice and opportunity for hearing,
that all the objections so sustained have been met and shall enter an order so
declaring, the Trustee shall mail copies of such material to all such Holders
with reasonable promptness after the entry of such order and the renewal of such
tender; otherwise the Trustee shall be relieved of any obligation or duty to
such applicants respecting their application.
(c) Each and every Holder of the Notes, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any Paying Agent nor any Note Registrar shall be held accountable by
reason of the disclosure of any such information as to the names and addresses
of the Holders in accordance with Section 702(b), regardless of the source from
which such information
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was derived, and that the Trustee shall not be held accountable by reason of
mailing any material pursuant to a request made under Section 702(b).
Section 703. Reports by Trustee.
(a) Within 60 days after May 15 of each year commencing with the year
1995, the Trustee shall transmit to all Holders, as provided in Subsection (c)
of this Section, a brief report dated as of such May 15 with respect to any of
the following events which may have occurred within the previous 12 months (but
if no such event has occurred within such period no report need be transmitted):
(1) any change to its eligibility under Section 609 and its
qualifications under Section 608;
(2) the creation of or any material change to a relationship
specified in paragraphs (1) through (10) of Subsection 608(d);
(3) the character and amount of any advances (and if the Trustee
elects so to state, the circumstances surrounding the making thereof) made
by the Trustee (as such) which remain unpaid on the date of such report, and
for the reimbursement of which it claims or may claim a lien or charge,
prior to that of the Notes, on any property or funds held or collected by it
as Trustee, except that the Trustee shall not be required (but may elect) to
report such advances if such advances so remaining unpaid aggregate not more
than 1/2 of 1% of the principal amount of the Notes Outstanding on the date
of such report;
(4) any change to the amount, interest rate and maturity date of
all other indebtedness owing by the Company (or by any other obligor on the
Notes) to the Trustee in its individual capacity, on the date of such
report, with a brief description of any property held as collateral security
therefor, except an indebtedness based upon a creditor relationship arising
in any manner described in Section 613(b) (2), (3), (4) or (6);
(5) any change to the property and funds, if any, physically in
the possession of the Trustee as such on the date of such report;
(6) any additional issue of Notes which the Trustee has not
previously reported; and
(7) any action taken by the Trustee in the performance of its
duties hereunder which it has not previously reported and which in its
opinion materially affects the Notes, except action in respect of a default,
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notice of which has been or is to be withheld by the Trustee in accordance
with Section 602.
(b) The Trustee shall transmit to all Holders, as provided in
Subsection (c) of this Section, a brief report with respect to the character and
amount of any advances (and if the Trustee elects so to state, the circumstances
surrounding the making thereof) made by the Trustee (as such) since the date of
the last report transmitted pursuant to Subsection (a) of this Section (or if no
such report has yet been so transmitted, since the date of execution of this
instrument) for the reimbursement of which it claims or may claim a lien or
charge, prior to that of the Notes, on property or funds held or collected by it
as Trustee, and which it has not previously reported pursuant to this
Subsection, except that the Trustee shall not be required (but may elect) to
report such advances if such advances remaining unpaid at any time aggregate 10%
or less of the principal amount of the Notes Outstanding at such time, such
report to be transmitted within 90 days after such time.
(c) Reports pursuant to this Section shall be transmitted by mail:
(1) to all Holders, as the names and addresses of such Holders
appear in the Note Register;
(2) to such Holders of Notes as have, within the 2 years preceding
such transmission, filed their names and addresses with the Trustee for that
purpose; and
(3) except in the case of reports pursuant to Subsection (b) of
this Section, to each Holder whose name and address is preserved at the time
by the Trustee, as provided in Section 7.02(a).
(d) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which the
Notes are listed and also with the Commission. The Company will notify the
Trustee when the Notes are listed on any stock exchange.
Section 704. Reports by Company.
The Company will
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the
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Securities Exchange Act of 1934; or, if the Company is not required to file
information, documents or reports pursuant to either of said Sections, then
it will file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(2) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(3) transmit to the Holders, within 30 days after the filing
thereof with the Trustee, in the manner and to the extent provided in
Section 703(c), such summaries of any information, documents and reports
required to be filed by the Company pursuant to paragraphs (1) and (2) of
this Section as may be required by rules and regulations prescribed from
time to time by the Commission;
(4) upon request, file with the California Commissioner of
Corporations a copy of the annual report filed with the Trustee pursuant to
paragraph (1) of this Section; and
(5) file with the Trustee written notice 10 days prior to the
issuance, assumption or guarantee by the Company or any Restricted
Subsidiary of any Debt (as that term is defined in Article Ten) secured by a
mortgage (as that term is defined in Article Ten) which would require the
Notes to be secured pursuant to Section 1006.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 801. Company May Consolidate, Merge or Convey Properties only
on Certain Terms.
The Company shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:
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(1) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer the
properties and assets of the Company substantially as an entirety shall be a
corporation organized and existing under the laws of the United States of
America or any State or the District of Columbia, and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual payment
of the principal of and interest on all the Notes and the performance of
every covenant of this Indenture on the part of the Company to be performed
or observed; and
(2) immediately after giving effect to such transaction, no Event
of Default, and no event which, after notice or lapse of time, or both,
would become an Event of Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger, conveyance or transfer and such supplemental indenture comply with
this Article and that all conditions precedent herein provided for relating
to such transaction have been complied with.
Section 802. Successor Corporations Substituted.
Upon any consolidation or merger, or any conveyance or transfer of the
properties and assets of the Company, substantially as an entirety in accordance
with Section 801, the successor corporation formed by such consolidation or into
which the Company is merged or to which such conveyance or transfer is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
corporation had been named as the Company herein, and in the case of any such
conveyance or transfer, the Person named as the "Company" in the first paragraph
of this Indenture or any successor corporation which shall theretofore have
become such in the manner prescribed in this Article shall be released from its
liability as obligor and maker on any of the Notes and from its covenants and
agreements under this Indenture and may be dissolved and liquidated.
Section 803. Restrictions Upon Mergers, Consolidations and Sales and
Purchases of Assets.
If, upon any consolidation or merger of the Company or any Restricted
Subsidiary (as that term is defined in Section 1008) with or into any other
corporation or corporations (whether or not affiliated with the Company), or
successive consolidations or mergers in which the Company or
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any Restricted Subsidiary or their successors shall be a party or parties, or
upon any sale, conveyance or lease of the property of the Company as an entirety
or substantially as an entirety to any other corporation (whether or not
affiliated with the Company), any Principal Property of the Company or of any
Restricted Subsidiary owned immediately prior thereto would thereupon become
subject to any mortgage, pledge, lien or encumbrance (such mortgages, pledges,
liens or encumbrances being hereinafter called "Mortgages"), the Company or any
such Restricted Subsidiary, prior to such consolidation, merger, sale,
conveyance or lease, shall by indenture supplemental hereto secure the due and
punctual payment of the principal of and interest on the Notes (equally and
ratably with any other indebtedness of the Company then entitled thereto) by a
direct lien on all such Principal Property of the Company or any such Restricted
Subsidiary, prior to all liens other than any theretofore existing thereon,
unless such Mortgages would be permitted by Section 1006, treating, for the
purposes of Section 1006, the indebtedness of the other corporation secured by
Mortgages as Debt, as that term is defined in Section 1006.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures Without Consent
of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the
Company, and the assumption by any such successor of the covenants of the
Company herein and in the Notes contained; or
(2) to add to the covenants of the Company, for the benefit of the
Holders of all or any series of Notes (and if such covenants are to be for
the benefit of less than all series of Notes, stating that such covenants
are expressly being included solely for the benefit of such series) or to
surrender any right or power herein conferred upon the Company; or
(3) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make
any other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this
Indenture, provided such action
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shall not adversely affect the interest of the Holders of Notes of any
series in any material respect; or
(4) to establish the form or terms of Notes of any series as
permitted by Sections 201 and 301; or
(5) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes of one or more
series and to add to or change any of the provisions of this Indenture as
shall be necessary to provide for or facilitate the administration of the
trusts hereunder by more than one Trustee, pursuant to the requirements of
Section 611(b); or
(6) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualification
of this Indenture under TIA, or under any similar federal statute hereafter
enacted, and to add to this Indenture such other provisions as may be
expressly permitted by TIA, excluding, however, the provisions referred to
in Section 316(a)(2) of TIA as in effect at the date as of which this
instrument was executed or any corresponding provision in any similar
federal statute hereafter enacted.
Section 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than 66 2/3% in principal
amount of the Outstanding Notes of each series affected by such supplemental
indenture, by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of Notes
of such series under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount thereof
or the interest thereon, or change the coin or currency in which any Note or
the interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date); or
(2) reduce the percentage in principal amount of the Outstanding
Notes of any series, the consent of whose Holders is required for any such
supplemental indenture,
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or the consent of whose Holders is required for any waiver (of compliance
with certain provisions of this Indenture or certain defaults hereunder and
their consequences) provided for in this Indenture; or
(3) modify any of the provisions of this Section or Section 513,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Note affected thereby; provided, however,
that this clause shall not be deemed to require the consent of any Holder
with respect to changes in the references to "the Trustee" and concomitant
changes in this Section and Section 1002 or the deletion of this proviso,
in accordance with the requirements of Sections 611(b) and 901(5).
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Notes, or which modifies the
rights of the Holders of Notes of such series with respect to such covenant or
other provision, shall be deemed not to affect the rights under this Indenture
of the Holders of Notes of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not
(except to the extent required in the case of a supplemental indenture entered
into under Section 901(4)) be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby.
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Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of TIA as then in effect.
Section 906. Reference in Notes to Supplemental Indentures.
Notes of any series authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes of any series so modified as to conform, in the opinion of the Trustee
and the Board of Directors, to any such supplemental indenture may be prepared
and executed by the Company and authenticated and delivered by the Trustee or
the Authenticating Agent, if any, in exchange for Outstanding Notes of such
series.
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ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal and Interest.
The Company will duly and punctually pay the principal of and
interest, if any, on the Notes in accordance with the terms of the Notes and
this Indenture.
Section 1002. Maintenance of Office or Agency.
The Company will maintain an office or agency in the City of Los
Angeles, State of California, and may maintain an office or agency in the
Borough of Manhattan, City and State of New York, where Notes may be presented
or surrendered for payment, where Notes may be presented or surrendered for
registration, transfer or exchange and where notices and demands to or upon the
Company in respect of the Notes and this Indenture may be served on the Company.
The Company hereby initially designates and appoints First Interstate Bank of
California, or any successor to its business, as Paying Agent in respect of the
Notes where Notes may be presented or surrendered for payment, and as the office
or agency where the Notes may be presented or surrendered for registration,
transfer or exchange and where notices or demands in respect of the Notes and
this Indenture may be served on the Company, in the City of Los Angeles, State
of California. The Company will give prompt written notice to the Trustee of
the location, and of any change in the location, of such office or agency. If
at any time the Company shall fail to maintain such office or agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee its agent to
receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Notes of any series may be presented or
surrendered for payment, where the Notes of any series may be presented or
surrendered for registration, transfer or exchange and where notice and demands
in respect of the Notes of such series and this Indenture may be served on the
Company, and may from time to time rescind such designations. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
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Section 1003. Money for Note Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Notes, it will, on or before each due date of the
principal of or interest, if any, on any of the Notes of that series, segregate
and hold in trust for the benefit of the Holders of such Notes or the Trustee a
sum sufficient to pay the principal or interest so becoming due until such sums
shall be paid to such Holders or otherwise disposed of as herein provided, and
will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have appointed one or more Paying Agents for
any series of Notes, it will, prior to each due date of the principal of, or
interest, if any, on any Notes of that series, deposit with a Paying Agent a sum
sufficient to pay the principal or interest so becoming due, such sum to be held
in trust for the benefit of the Holders of such Notes or the Trustee, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any series of Notes other
than the Trustee to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions of
this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of or
interest, if any, on Notes of that series in trust for the benefit of the
Holders of such Notes or the Trustee until such sums shall be paid to such
Holders or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Notes of that series) in the making of any payment of
principal or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
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Any money deposited with the Trustee or any Paying Agent or then held
by the Company, in trust for the payment of the principal of or interest, if
any, on any Note of any series and remaining unclaimed for six years after such
principal or interest has become due and payable shall be paid to the Company on
Company Request, or (if then held by the Company) shall be discharged from such
trust; and the Holder of such Note shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease, provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be mailed to the Holder of
such Note, at his last address as it appears in the Note Register, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such mailing, any unclaimed
balance of such money then remaining will be repaid to the Company.
Section 1004. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
government charges levied or imposed upon it or upon its income, profits or
property, and (2) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a lien upon its property; provided, however, that
the Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings.
Section 1005. Maintenance of Properties.
The Company will cause all its properties used or useful in the
conduct of its business to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the operation and maintenance of any of
its properties if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its business and not disadvantageous in any material
respect to the Holders.
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Section 1006. Restrictions Upon Mortgage, Lien, or Pledge of
Property.
(a) The Company will not, nor will it permit any Subsidiary (as
hereinafter defined) to, issue, assume or guarantee any debt for money borrowed
(hereinafter in this Article Ten referred to as "Debt") secured by mortgage,
pledge, lien or other encumbrance (mortgages, pledges, liens and other
encumbrances being hereinafter called "mortgage" or "mortgages") upon any
Principal Property (as hereinafter defined) of the Company or any Restricted
Subsidiary (as hereinafter defined) or on any shares of stock or indebtedness of
any Restricted Subsidiary (whether such Principal Property, shares of stock or
indebtedness is now owned or hereafter acquired) without in any such case
effectively providing, concurrently with the issuance, assumption or guaranty of
any such Debt, that the Notes (together with, if the Company shall so determine,
any other indebtedness of or guaranteed by the Company or such Restricted
Subsidiary ranking equally with the Notes then existing or thereafter created)
shall be secured equally and ratably with such Debt; provided, however, that the
foregoing restrictions shall not apply to
(1) mortgages on property, shares of stock or indebtedness of or
guaranteed by any corporation existing at the time such corporation becomes
a Restricted Subsidiary;
(2) mortgages on property existing at the time of acquisition of such
property by the Company or a Restricted Subsidiary, or mortgages to secure
the payment of all or any part of the purchase price of such property upon
the acquisition of such property by the Company or a Restricted Subsidiary
or to secure any Debt incurred or guaranteed by the Company or a Restricted
Subsidiary prior to, at the time of, or within 120 days after the later of
the acquisition, completion of construction (including any improvements on
an existing property) or commencement of full operation of such property,
which Debt is incurred or guaranteed for the purpose of financing all or any
part of the purchase price thereof or construction or improvements thereon;
provided, however, that in the case of any such acquisition, construction or
improvement the mortgage shall not apply to any property theretofore owned
by the Company or a Restricted Subsidiary other than, in the case of any,
such construction or improvement, any theretofore unimproved real property
on which the property so constructed, or the improvement, is located;
(3) mortgages securing Debt of a Restricted Subsidiary owing to the
Company or to another Restricted Subsidiary;
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(4) mortgages on property of a corporation existing at the time such
corporation is merged into or consolidated with the Company or a Restricted
Subsidiary or at the time of a purchase, lease or other acquisition of the
properties of a corporation or firm as an entirety or substantially as an
entirety by the Company or a Restricted Subsidiary;
(5) mortgages on property of the Company or a Restricted Subsidiary in
favor of the United States of America or any State thereof, or any
department, agency or instrumentality or political subdivision of the United
States of America or any State thereof, or in favor of any other country, or
any political subdivision thereof, to secure partial, progress, advance or
other payments pursuant to any contract or statute or to secure any
indebtedness incurred or guaranteed for the purpose of financing all or any
part of the purchase price or the cost of construction of the property
subject to such mortgages (including, but not limited to, mortgages incurred
in connection with pollution control industrial revenue or similar
financings);
(6) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any mortgage referred to in
the foregoing clauses (1) to (5), inclusive; provided, however, that the
principal amount of Debt secured thereby shall not exceed the principal
amount of Debt so secured at the time of such extension, renewal or
replacement, and that such extension, renewal or replacement shall be
limited to all or a part of the property which secured the mortgage so
extended, renewed or replaced (plus improvements and construction on such
property);
(7) liens imposed by law, such as mechanics', workmen's, repairmen's,
materialmen's, carriers', warehousemen's, vendors' or other similar liens
arising in the ordinary course of business, or governmental (federal, state
or municipal) liens arising out of contracts for the sale of products or
services by the Company or any Restricted Subsidiary, or deposits or pledges
to obtain the release of any of the foregoing liens;
(8) pledges or deposits under worker's compensation laws or similar
legislation and liens of judgments thereunder which are not currently
dischargeable, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of money) or leases to which the
Company or any Restricted Subsidiary is a party, or deposits to secure
public or statutory obligations of the Company or any Restricted Subsidiary,
or deposits in connection with obtaining or maintaining self-insurance or to
obtain the benefits of any law,
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regulation or arrangement pertaining to unemployment insurance, old age
pensions, social security or similar matters, or deposits of cash or
obligations of the United States of America to secure surety, appeal or
customs bonds to which the Company or any Restricted Subsidiary is a party,
or deposits in litigation or other proceedings such as, but not limited to,
interpleader proceedings;
(9) liens created by or resulting from any litigation or other
proceeding which is being contested in good faith by appropriate
proceedings, including liens arising out of judgments or awards against the
Company or any Restricted Subsidiary with respect to which the Company or
such Restricted Subsidiary is in good faith prosecuting an appeal or
proceedings for review; or liens incurred by the Company or any Restricted
Subsidiary for the purpose of obtaining a stay or discharge in the course of
any litigation or other proceeding to which the Company or such Restricted
Subsidiary is a party; or
(10) liens for taxes or assessments or governmental charges or levies
not yet due or delinquent, or which can thereafter be paid without penalty,
or which are being contested in good faith by appropriate proceedings;
landlord's liens on property held under lease; and any other liens or
charges incidental to the conduct of the business of the Company or any
Restricted Subsidiary or the ownership of the property and assets of any of
them which were not incurred in connection with the borrowing of money or
the obtaining of advances or credit and which do not, in the opinion of the
Company, materially impair the use of such property in the operation of the
business of the Company or such Restricted Subsidiary or the value of such
property for the purposes of such business.
(b) Notwithstanding the foregoing provisions of this Section 1006, the
Company and any one or more Subsidiaries may issue, assume or guarantee Debt
secured by mortgage which would otherwise be subject to the foregoing
restrictions in an aggregate amount which, together with all other Debt of the
Company and its Restricted Subsidiaries which (if originally issued, assumed or
guaranteed at such time) would otherwise be subject to the foregoing
restrictions (not including Debt permitted to be secured under clauses (1)
through (10) above), does not at the time exceed 10% of the shareholders' equity
of the Company and its consolidated Subsidiaries, as shown on the audited
consolidated financial statements of the Company as of the end of the fiscal
year preceding the date of determination.
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Section 1007. Restrictions Upon Sale and Leaseback Transactions.
The Company will not, nor will it permit any Restricted Subsidiary to
enter into any arrangement with any person providing for the leasing by the
Company or any Restricted Subsidiary of any Principal Property of the Company or
any Restricted Subsidiary, whether such Principal Property is now owned or
hereafter acquired (except for temporary leases for a term of not more than
three years, except for leases between the Company and a Restricted Subsidiary
or between Restricted Subsidiaries and except for leases of a Principal Property
entered into within 120 days after the later of the acquisition, completion of
construction or commencement of full operation of such Principal Property),
which property has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such person (herein referred to as a "Sale and
Leaseback Transaction"), unless
(1) the Company or such Restricted Subsidiary would be entitled,
pursuant to the provisions of Section 1006, to issue, assume or guarantee
Debt secured by a mortgage upon such property at least equal in amount to
the Attributable Debt (as hereinafter defined) in respect of such Sale and
Leaseback Transaction without equally and ratably securing the Notes,
provided, however, that from and after the date on which such Sale and
Leaseback Transaction becomes effective, the Attributable Debt in respect of
such Sale and Leaseback Transaction shall be deemed for all purposes under
Sections 1006 and 1007 to be Debt subject to the provisions of Section 1006;
or
(2) the Company shall apply an amount in cash equal to the Attributable
Debt in respect of such Sale and Leaseback Transaction to the retirement
(other than any mandatory retirement or by way of payment at maturity),
within 90 days of the effective date of any such Sale and Leaseback
Transaction, of Debt of the Company or any Restricted Subsidiary (other than
Debt owned by the Company or any Restricted Subsidiary and other than Debt
of the Company which is subordinated to the Notes) which by its terms
matures at, or is extendible or renewable at the sole option of the obligor
without requiring the consent of the obligee to, a date more than twelve
months after the date of the creation of such Debt.
Section 1008. Certain Definitions.
As used in this Article Ten,
"Attributable Debt" in respect of any Sale and Leaseback Transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in the terms of the lease) of the obligation of the lessee
for net rental payments during the remaining term of the lease
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(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Net rental payments" under any lease for any period means the sum of
the rental and other payments required to be paid in such period by the lessee
thereunder, not including, however, any amounts required to be paid by such
lessee (whether or not designated as rental or additional rental) on account of
maintenance and repairs, insurance, taxes, assessments, or similar charges
required to be paid by such lessee thereunder or any amounts required to be paid
by such lessee thereunder contingent upon the amount of sales, maintenance and
repairs, insurance, taxes, assessments, or similar charges.
"Principal Property" means any manufacturing plant or facility located
within the United States of America (other than its territories or possessions)
and owned by the Company or any Subsidiary, except any such plant or facility
which, in the opinion of the Board of Directors of the Company, is not of
material importance to the business conducted by the Company and its
Subsidiaries, taken as a whole.
"Restricted Subsidiary" means any Subsidiary which owns or leases a
Principal Property.
Section 1009. Statement as to Compliance.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year commencing with the fiscal year ending December 31, 1995, a
written statement signed by the Chairman of the Board, President, an Executive
Vice President, a Senior Vice President or a Vice President and by the Treasurer
or an Assistant Treasurer of the Company, stating, as to each signer thereof,
that
(1) a review of the activities of the Company during such year and of
performance under this Indenture has been made under his supervision, and
(2) to the best of his knowledge, based on such review, the Company
has fulfilled all its obligations under this Indenture throughout such year,
or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to him and the nature and status thereof.
Section 1010. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the rights (charter and statutory) and franchises of the Company
or any Subsidiary; provided, however, that the Company shall not be required to
preserve any such right or franchise if the
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Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company) and any Subsidiary and that the loss
thereof is not disadvantageous in any material respect to the Holders.
ARTICLE ELEVEN
REDEMPTION OF NOTES
Section 1101. Right of Redemption.
At any time after the date specified for that purpose as contemplated
by Section 301 the Company may, at its election, pay off and redeem the Notes as
a whole at any time, or in part from time to time, in accordance with the terms
and conditions set forth in said Notes.
Section 1102. Applicability of Article.
Redemption of Notes at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
Section 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes shall be evidenced by
a Company Order. In case of any redemption at the election of the Company of
less than all of the Notes of any series, the Company shall, at least 45 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee) notify the Trustee of such Redemption Date and
of the principal amount of Notes of such series to be redeemed.
Section 1104. Selection by Trustee of Notes to be Redeemed.
If less than all the Notes of any series are to be redeemed, the
particular Notes to be redeemed shall be selected not more than 60 days prior to
the Redemption Date by the Trustee, from the Outstanding Notes of such series
not previously called for redemption, by such method as the Trustee shall deem
fair and appropriate and which may provide for the selection for redemption of
portions of the principal of Notes of such series of a denomination larger than
$1,000. The portions of the principal of Notes of such series so selected for
partial redemption shall be equal to $1,000 or the smallest authorized
denomination of the Notes of such series, whichever is greater, or a multiple
thereof.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case
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of any Note selected for partial redemption, the principal amount thereof to be
redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Notes shall relate, in
the case of any Note redeemed or to be redeemed only in part, to the portion of
the principal of such Note which has been or is to be redeemed.
Section 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Notes to be redeemed, at his address appearing in the
Note Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Notes of any series are to be
redeemed, the identification (and, in the case of partial redemption, the
respective principal amounts) of the Notes to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon such Note, and that interest thereon shall cease to accrue
from and after said date, and
(5) the place where such Notes are to be surrendered for payment of
the Redemption Price.
Notice of redemption of Notes to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
Section 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of all the Notes which are to be
redeemed on that date.
Section 1107. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company
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shall default in the payment of the Redemption Price) such Notes shall cease to
bear interest. Upon surrender of such Notes for redemption in accordance with
said notice, such Note shall be paid by the Company at the Redemption Price.
Installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Notes registered as such on the
relevant Record Dates according to their terms.
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal shall, until paid, bear interest from the
Redemption Date at the rate borne by the Note.
Section 1108. Notes Redeemed in Part.
Any Note which is to be redeemed only in part shall be surrendered at
the office or agency of the Company specified in the notice of redemption (with,
if the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing) and
the Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Note without service charge, a new Note or Notes of the same
series, of any authorized denomination as requested by such Holder in aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Note so surrendered.
ARTICLE TWELVE
SINKING FUNDS
Section 1201. Applicability of Article.
The provisions of this Article shall be applicable if any sinking fund
is to be provided for the retirement of Notes of any series except as otherwise
specified as contemplated by Section 301 for Notes of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Notes of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such an amount provided for by the terms
of Notes of any series is herein referred to as an "optional sinking fund
payment." If provided for by the terms of Notes of any series, the cash amount
of any sinking fund payment may be subject to reduction as provided in Section
1202. Each sinking fund payment shall be applied to the redemption of Notes of
any series as provided for by the terms of Notes of such series.
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Section 1202. Satisfaction of Sinking Fund Payments with Notes.
The Company (1) may deliver Outstanding Notes of a series (other than
any previously called for redemption) and (2) may apply as a credit Notes of a
series which have been redeemed either at the election of the Company pursuant
to the terms of such Notes or through the application of permitted optional
sinking fund payments pursuant to the terms of such Notes, in each case in
satisfaction of all or any part of any sinking fund payment with respect to the
Notes of such series required to be made pursuant to the terms of such Notes as
provided for by the terms of such Series; provided that such Notes have not been
previously so credited. Such Notes shall be received and credited for such
purpose by the Trustee at the Redemption Price specified in such Notes for
redemption through operation of the sinking fund and the amount of such sinking
fund payment shall be reduced accordingly.
Section 1203. Redemption of Notes for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Notes, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash and the portion thereof, if any,
which is to be satisfied by delivering and crediting Notes of that series
pursuant to Section 1202 and will also deliver to the Trustee any Notes to be so
delivered. Not less than 30 days before each such sinking fund payment date the
Trustee shall select the Notes to be redeemed upon such sinking fund payment
date in the manner specified in Section 1104 and cause notice of the redemption
thereof to be given in the name of and at the expense of the Company in the
manner provided in Section 1105. Such notice having been duly given, the
redemption of such Notes shall be made upon the terms and in the manner stated
in Sections 1107 and 1108.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed in the City of Los Angeles and State of California and as of the
day and year first above written.
NEW TMC INC., a Delaware corporation
By: /s/ James F. Guthrie
------------------------------
James F. Guthrie
Vice President and Chief
Financial Officer
By: /s/ O. Jean Williams
------------------------------
O. Jean Williams
Secretary
FIRST INTERSTATE BANK OF CALIFORNIA, as Trustee
By: /s/ Lisa Mason
------------------------------
Assistant Vice President
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STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
On January 30, 1995, before me, Michelle Chan, a Notary Public in and
for said State, personally appeared Lisa Mason, proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument, and acknowledged to me that she executed the same in her authorized
capacity, and that by signature on the instrument the person, or the entity upon
behalf of which the person acted, executed the instrument.
WITNESS my hand and offical seal.
/s/ Michelle Chan
-----------------------------------
(NOTARY SEAL)
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STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
On January 27, 1995, before me, Michelle Chan, a Notary Public in and
for said State, personally appeared O. Jean Williams, proved to me on the basis
of satisfactory evidence to be the person whose name is subscribed to the within
instrument, and acknowledged to me that she executed the same in her authorized
capacity, and that by her signature on the instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Michelle Chan
-----------------------------------
(NOTARY SEAL)
STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
On January 27, 1995, before me, Michelle Chan, a Notary Public in and
for said State, personally appeared James F. Guthrie, proved to me on the basis
of satisfactory evidence to be the person whose name is subscribed to the within
instrument, and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and offical seal.
/s/ Michelle Chan
-----------------------------------
(NOTARY SEAL)
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EXHIBIT 4.2
REGISTERED REGISTERED
NUMBER
RU
NEW TMC INC.
71/4% DEBENTURE DUE MARCH 1, 2013
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 887364 AA 5
NEW TMC INC., a Delaware corporation (the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to
71/4% 71/4%
DUE DUE
MARCH 1, MARCH 1,
2013 2013
, or registered assigns, the principal sum of
on March 1, 2013, and to pay interest thereon, at the rate of 71/4% per annum,
from January 30, 1995 or from the most recent date to which interest has been
paid or duly provided for. Interest is payable on March 1 and September 1 of
each year through March 1, 2013, beginning March 1, 1995. The interest so
payable will, subject to certain exceptions provided in the Indenture
hereinafter referred to, be paid to the person in whose name this Debenture is
registered at the close of business on February 15 and August 15 respectively
(whether or not such date is a Business Day) and at maturity to the person to
whom principal is payable. Payment of the principal of and interest on this
Debenture will be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, City of New York, and the City of Los
Angeles, in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
--------
however, that payment of interest may be made at the option of the Company by
- -------
check drawn on a bank doing business in the State of California and mailed from
the State of California to the address of the person entitled thereto as such
address shall appear on the Note Register. The Company may also appoint
additional paying agents.
This Debenture is one of a duly authorized issue of 71/4% Debentures due March
1, 2013, of the Company (the "Debentures"), which have been issued under and are
governed by the terms of an Indenture between the Company and First Interstate
Bank of California as Trustee, dated as of January 30, 1995 (the "Indenture").
The provisions of this Debenture are continued on the reverse hereof and the
provisions there set forth shall for all purposes have the same effect as though
fully set forth at this place.
Unless the certificate of authentication hereon has been executed by or on
behalf of First Interstate Bank of California, the Trustee under the Indenture,
or its successor thereunder, by the manual signature of one of its, or its
Authenticating Agent's, authorized signatories, this Debenture shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
in the City of Los Angeles, State of California.
DATE:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION NEW TMC INC.
This is one of the Notes referred to in Attest: By
the within mentioned Indenture.
FIRST INTERSTATE BANK OF CALIFORNIA,
as Trustee
By [SEAL]
Authorized Signatory /s/ O. Jean Williams
---------------------------------
Secretary
/s/ Robert F. Erburu
---------------------------------
Chairman of the Board
<PAGE>
NEW TMC INC.
This Debenture is one of a duly authorized issue of Notes of the Company
designated as its 71/4% Debentures due March 1, 2013 (the "Debentures"), limited
in aggregate principal amount to $150,000,000, all issued or to be issued under
an Indenture dated as of January 30, 1995 (the "Indenture"), between the Company
and First Interstate Bank of California, Trustee (the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the respective rights thereunder of the Company, the Trustee and the Holders of
the Debentures, and the terms upon which the Debentures are, and are to be,
authenticated and delivered.
The Debentures of this series are not redeemable prior to maturity. If an
Event of Default, as defined in the Indenture, shall occur and be continuing,
the principal of all the Debentures may be declared due and payable in the
manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debentures under the Indenture at
any time by the Company with the consent of the Holders of 662/3% in aggregate
principal amount of the Debentures at the time Outstanding as defined in the
Indenture. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Debentures at the
time Outstanding, as defined in the Indenture, on behalf of the Holders of all
the Debentures, by written consent to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Debenture shall be conclusive and binding upon such Holder and upon all
future Holders of this Debenture and of any Debenture issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this Debenture or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this
Debenture at the times, place and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, this Debenture is transferable on the Note Register of the Company, upon
surrender of this Debenture for transfer at the office or agency of the Company
in the Borough of Manhattan, City and State of New York, and City of Los
Angeles, State of California, or such other office or agency as the Company may
maintain for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Note
Registrar duly executed by, the registered Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Debentures, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees. The Company may also designate additional
offices or agencies for such transfer.
As provided in the Indenture and subject to certain limitations therein set
forth, Debentures are exchangeable for a like aggregate principal amount of
Debentures of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge will be made for any such transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
The Company, the Trustee and any agent of the Company or of the Trustee may
treat the person in whose name this Debenture is registered as the absolute
owner hereof for the purpose of receiving payment as herein provided and for all
other purposes whether or not this Debenture be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice or knowledge
to the contrary.
All terms used in this Debenture which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
___________________
The following abbreviations, when used in the inscription on the face of the
within Debenture, 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 entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act .......................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s)
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________
_______________________________________
- --------------------------------------------------------------------------------
(Name and Address of Assignee, including zip code, must be printed or
typewritten.)
- --------------------------------------------------------------------------------
the within Debenture, and all rights thereunder, hereby irrevocably constituting
and appointing
- ---------------------------------------------------------------------- Attorney
to transfer said Debenture on the books of the Company, with full power
of substitution in the premises.
Dated:
----------------------------------------
NOTICE: The signature to this
assignment must correspond with the name
as it appears upon the face of the
within Debenture in every particular
without alteration or enlargement or any
change whatever.
SIGNATURE GUARANTY
Signature(s) must be guaranteed by
an eligible guarantor institution
which is a participant in a Securities
Transfer Association recognized
program.
By:
------------------------------------
<PAGE>
EXHIBIT 4.3
REGISTERED REGISTERED
NUMBER
RU
NEW TMC INC.
71/2% DEBENTURE DUE JULY 1, 2023
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 887364 AB 3
NEW TMC INC., a Delaware corporation (the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to
71/2% 71/2%
DUE DUE
JULY 1, JULY 1,
2023 2023
, or registered assigns, the principal sum of
on July 1, 2023, and to pay interest thereon, at the rate of 71/2% per annum,
from January 30, 1995 or from the most recent date to which interest has been
paid or duly provided for. Interest is payable on January 1 and July 1 of each
year through July 1, 2023, beginning July 1, 1995. The interest so payable will,
subject to certain exceptions provided in the Indenture hereinafter referred to,
be paid to the person in whose name this Debenture is registered at the close of
business on December 15 and June 15 respectively (whether or not such date is a
Business Day) and at maturity to the person to whom principal is payable.
Payment of the principal of and interest on this Debenture will be made at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, City of New York, and the City of Los Angeles, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
-----------------
of interest may be made at the option of the Company by check drawn on a bank
doing business in the State of California and mailed from the State of
California to the address of the person entitled thereto as such address shall
appear on the Note Register. The Company may also appoint additional paying
agents.
This Debenture is one of a duly authorized issue of 71/2% Debentures due
July 1, 2023, of the Company (the "Debentures"), which have been issued under
and are governed by the terms of an Indenture between the Company and First
Interstate Bank of California as Trustee, dated as of January 30, 1995 (the
"Indenture").
The provisions of this Debenture are continued on the reverse hereof and the
provisions there set forth shall for all purposes have the same effect as though
fully set forth at this place.
Unless the certificate of authentication hereon has been executed by or on
behalf of First Interstate Bank of California, the Trustee under the Indenture,
or its successor thereunder, by the manual signature of one of its, or its
Authenticating Agent's, authorized signatories, this Debenture shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
in the City of Los Angeles, State of California.
DATE:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION NEW TMC INC.
This is one of the Notes referred to in Attest By
the within mentioned Indenture.
FIRST INTERSTATE BANK OF CALIFORNIA,
as Trustee
By [SEAL APPEARS HERE]
Authorized Signatory /s/ O. Jean Williams
--------------------------------
Secretary
/s/ Robert F. Erburu
--------------------------------
Chairman of the Board
<PAGE>
NEW TMC INC.
This Debenture is one of a duly authorized issue of Notes of the Company
designated as its 71/2% Debentures due July 1, 2023 (the "Debentures"), limited
in aggregate principal amount to $100,000,000, all issued or to be issued under
an Indenture dated as of January 30, 1995 (the "Indenture"), between the Company
and First Interstate Bank of California, Trustee (the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the respective rights thereunder of the Company, the Trustee and the Holders of
the Debentures, and the terms upon which the Debentures are, and are to be,
authenticated and delivered.
The Debentures of this series are not redeemable prior to maturity.
If an Event of Default, as defined in the Indenture, shall occur and be
continuing, the principal of all the Debentures may be declared due and payable
in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debentures under the Indenture at
any time by the Company with the consent of the Holders of 662/3% in aggregate
principal amount of the Debentures at the time Outstanding as defined in the
Indenture. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Debentures at the
time Outstanding, as defined in the Indenture, on behalf of the Holders of all
the Debentures, by written consent to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Debenture shall be conclusive and binding upon such Holder and upon all
future Holders of this Debenture and of any Debenture issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this Debenture or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this
Debenture at the times, place and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, this Debenture is transferable on the Note Register of the Company, upon
surrender of this Debenture for transfer at the office or agency of the Company
in the Borough of Manhattan, City and State of New York, and City of Los
Angeles, State of California, or such other office or agency as the Company may
maintain for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Note
Registrar duly executed by, the registered Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Debentures, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees. The Company may also designate additional
offices or agencies for such transfer.
As provided in the Indenture and subject to certain limitations therein set
forth, Debentures are exchangeable for a like aggregate principal amount of
Debentures of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge will be made for any such transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
The Company, the Trustee and any agent of the Company or of the Trustee may
treat the person in whose name this Debenture is registered as the absolute
owner hereof for the purpose of receiving payment as herein provided and for all
other purposes whether or not this Debenture be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice or knowledge
to the contrary.
All terms used in this Debenture which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
_____________________
The following abbreviations, when used in the inscription on the face of the
within Debenture, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ........... Custodian ...........
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act..............................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s)
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
______________________________________
________________________________________________________________________________
(Name and Address of Assignee, including zip code, must be printed or
typewritten.)
________________________________________________________________________________
the within Debenture, and all rights thereunder, hereby irrevocably constituting
and appointing
________________________________________________________________________Attorney
to transfer said Debenture on the books of the Company, with full power of
substitution in the premises.
Dated:
_________________________________________
NOTICE: The signature to this
assignment must correspond with the name
as it appears upon the face of the within
Debenture in every particular without
alteration or enlargement or any change
whatever.
SIGNATURE GUARANTY
Signature(s) must be guaranteed by an
eligible guarantor institution which is
a participant in a Securities Transfer
Association recognized program.
By:_____________________________________
<PAGE>
EXHIBIT 10.10
[Letterhead of Times Mirror]
PERSONAL & CONFIDENTIAL Robert F. Erburu
- ----------------------- Chairman of the Board, President
and Chief Executive Officer
May 1, 1995, amended and restated as of August 28, 1995
Mr. Mark H. Willes
320 Ridge Circle
Wayzata, Minnesota 55391
Dear Mark:
On behalf of the Times Mirror Board of Directors (the "Board"), I am pleased to
confirm our invitation to you to join The Times Mirror Company (the "Company")
as Chairman, President and Chief Executive Officer. This letter ("Letter") sets
forth the details of our offer, including your compensation and benefits.
1. Specific Position; Duties and Responsibilities. Your initial position will
----------------------------------------------
be that of President and Chief Executive Officer, which you will assume
following your retirement from General Mills on June 1, 1995 (when you will
become an employee of the Company). On January 1, 1996 you will succeed me as
Chairman of the Board. The duties which may be assigned to you shall be the
usual and customary duties of those offices and will be consistent with the
provisions of the charter documents of the Company or applicable law. You shall
have such corporate power and authority as shall reasonably be required to
enable the discharge of duties in any office that may be held.
2. Compensation.
------------
(a) Base Salary. Your starting base salary will be $750,000 per year,
-----------
which will be paid in equal periodic installments at the Company's regular
payroll intervals (currently biweekly). Your salary will be reviewed as of
January 1, 1996 and annually thereafter and may be increased at the discretion
of the Executive Personnel and Compensation Committee ("Compensation Committee")
of the Board in accordance with the Company's executive compensation philosophy
and programs then in effect. (A copy of the current executive compensation
philosophy and programs of the Company has been provided to you.) Beginning in
1996, you will be eligible to defer a portion of your base salary into the
Deferred Compensation Plan for Executives (the "Deferred Compensation Plan") in
accordance with the terms of that plan.
<PAGE>
Mr. Mark H. Willes
Page 2
(b) Annual Bonus Incentive Award. You will become a participant in the
----------------------------
Corporate Officer's Bonus Incentive Plan as of your start date. Your annual
bonus incentive target for 1995 will be $450,000. However, your bonus incentive
award for 1995 will be no less than your target amount prorated to reflect your
actual months of service during 1995. The Compensation Committee in its sole
discretion may approve an award for 1995 which is larger than the guaranteed
amount. In future years, your bonus incentive award will be dependent upon
corporate and individual performance as determined by the Compensation Committee
and the amount of bonus incentive award that you actually receive may be more or
less than your target amount, from 0% to 200% of the target.
For each year after 1995, your bonus incentive target will be reviewed and
may be increased by the Compensation Committee. Beginning in 1996, you will be
eligible to elect to defer all or a portion of your annual bonus incentive award
into the Deferred Compensation Plan in accordance with the terms of that plan.
(c) Stock Options. You will be granted on May 1, 1995, a performance
-------------
vesting option to purchase 108,000 shares of Times Mirror common stock under the
1992 Key Employee Long-Term Incentive Plan. The purchase price of those shares
subject to the option will be at the "fair market value" of Times Mirror common
stock on May 1, 1995, the date of your election by the Board. The term of the
option will be ten (10) years and the timing of the right to exercise all or a
portion of the option may accelerate in accordance with a schedule based on the
performance of the Company.
(d) Deferred Cash Incentive Award. As of your start date, you will be
-----------------------------
eligible to participate in the 1992 Key Employee Long-Term Incentive Plan, under
which you will be eligible for a target Deferred Cash Incentive Award of
$600,000. The payment of the Deferred Cash Incentive Award is based on the
performance of the Company measured over a three year performance cycle -- the
first cycle in which you will participate is called Cycle IV (1995 - 1997).
Performance is based on the Times Mirror Value Management Total Shareholder
Return ("TMVM TSR"). Depending on the TMVM TSR performance compared to
specified goals, any payout of the Deferred Cash Incentive Award will be
determined according to a schedule and may vary from 0% to 200%.
(e) Restricted Stock. You will participate in the 1987 Restricted Stock
----------------
Plan under which the Company will sell to you as of your start date, 35,000
shares of its common stock at a price of one dollar ($1.00) per share. These
shares are subject to certain restrictions which prohibit sale, transfer or
hypothecation until the restrictions are
<PAGE>
Mr. Mark H. Willes
Page 3
removed. The restrictions on these shares lapse in 25 percent (25%) increments
on the 2nd, 3rd, 4th and 5th anniversaries from the date of sale.
(f) Retirement Benefits. You will be eligible to participate in the
-------------------
Company's retirement plans, which currently include a defined benefit Pension
Plan and a 401(k) Savings Plan, in accordance with the terms of those plans, and
the Company's Excess Pension Plan, which is designed to provide pension benefits
which would otherwise have been payable under the Pension Plan except for legal
limitations.
In addition, the Company will pay you a supplemental pension benefit upon
your termination of employment with the Company, which is equal to the greater
of: (i) the retirement benefits that you would receive as a participant in the
Company's Supplemental Executive Retirement Plan (the "SERP") calculated in
accordance with the terms of the SERP; or (ii) retirement benefits equal to the
difference between (a) the projected benefit that you would have earned under
the General Mills Retirement Income Plan ("RIP"), and any non-qualified defined
benefit retirement plans designed to supplement the RIP ("RIP supplements"),
determined as of your termination of employment with the Company as if you had
continued in employment with General Mills to that date, assuming your covered
compensation with General Mills had increased at 5% each year to your
termination date and the provisions of the RIP currently in effect remain
unchanged to your termination date less (b) the amount of benefit you are
entitled to receive from General Mills under either the RIP or the RIP
supplements payable as of your termination date with the Company less (c) any
pension benefits that you may be entitled to receive from the Company under the
Times Mirror Pension Plan and the Times Mirror Excess Pension Plan as a result
of your employment with the Company as of your termination date.
Any supplemental pension benefit paid pursuant to this paragraph 2 (f)
shall be considered a non-qualified retirement benefit which will be unfunded,
payable solely from the general assets of the Company, and will represent an
unsecured promise to pay.
(g) Life Insurance and Health and Welfare Benefits. One month after your
----------------------------------------------
start date, you will be eligible to participate in the Company's life and health
and welfare plans in accordance with the terms of those plans. These coverages
currently include the benefits outlined in this section; however, these benefits
may be changed at any time by the Company in accordance with the operation of
these plans.
<PAGE>
Mr. Mark H. Willes
Page 4
Life insurance -- You will be eligible for Company-paid life insurance in
the amount of $1,000,000 (1 1/2 times your annual base salary to a maximum
of $1 million). In addition, subject to evidence of good health, you will
be able to purchase optional Group Universal Life coverage from 1 - 5 times
your annual base salary up to a maximum of $1 million. The Company will pay
you an additional bonus amount each year equal to the estimated tax impact
of the imputed income from the value of Company-paid life insurance in
excess of $50,000.
AD&D insurance -- You will be able to purchase optional Accidental
Death & Dismemberment (AD&D) coverage from 1 - 5 times your annual
base salary to a maximum of $1 million. This coverage provides an
additional death benefit in the event you die as a result of an
accident.
Group Medical, Dental and Vision insurance -- You may purchase Company
subsidized health care coverage, which includes options for a managed
choice medical plan, preferred provider plan and several HMOs, details
of which will be provided to you upon your start date. You may elect
medical only, medical and dental, or dental coverage only for you and
your eligible dependents. Vision care is available only as an option
for you if you purchase medical coverage.
Disability insurance -- The Company currently provides full salary
continuation as a short-term disability benefit for the first 6 months
of any disability. You may purchase employee-paid long-term
disability insurance which will provide disability payments after 6
months of disability of 60% of your base salary to a maximum monthly
benefit of $25,000.
Business travel accident insurance -- As of your start date, you will
automatically be covered by $500,000 of additional life insurance
payable in the event you die as a result of an accident while on
Company business.
Tax saver accounts -- As of your start date, you will be eligible to
participate in the health care and dependent care tax saver accounts,
which let you use before-tax dollars to pay for certain out-of-pocket
health care and dependent care expenses, up to a maximum of $5,000 for
each account per year.
<PAGE>
Mr. Mark H. Willes
Page 5
(h) Vacation. You will not accrue vacation days or personal holidays and
--------
will not be charged for time away from the office.
(i) Deferred Compensation Plan for Executives. You will be eligible to
-----------------------------------------
participate in the Deferred Compensation Plan in accordance with the terms of
that plan. Under this plan, beginning in 1996, you may elect to defer payment
of a portion of your base salary and/or all or a portion of your annual bonus
incentive and/or your deferred cash incentive award(s).
(j) Other Fringe Benefits. You shall be entitled to fringe benefits in
---------------------
accordance with the plans, practices, programs and policies as in effect
generally with respect to other senior officers of the Company, including the
benefits outlined in this section. These benefits, which are subject to change,
currently include use of executive dining room and health center, financial
planning services (with a maximum reimbursement of $10,000 in the first year and
up to $5,000 for each year thereafter), an annual executive physical, an annual
allowance for spousal travel and club memberships (in your case $15,000 per
annum), and a matching gifts program. You will also have a car and driver made
available to you for your business use.
(k) Relocation Expenses. The Company will:
-------------------
(i) pay all of your moving expenses, including costs of moving,
any real estate commissions on the sale of your present home, all
closing costs on the sales of your present home and the purchase of
a new home, any loan origination fees and points incurred in
connection with the purchase of a new home, a miscellaneous expense
allowance equal to one month's base salary, and a gross-up payment
to make you "whole" with respect to payment of federal, state, and
local income taxes on reimbursements for any expenses which are not
deductible for income tax purposes;
(ii) pay all of the costs of owning and maintaining or renting a
home in the Los Angeles area during the period in which you are
living in Los Angeles and attempting to sell your home in Minnesota;
(iii) Subject to final approval by the Compensation Committee, pay
an amount equal to the difference, if greater, between the amount
that you pay in mortgage interest payments, property taxes,
homeowner's insurance, and neighborhood association fees for your
Minnesota
<PAGE>
Mr. Mark H. Willes
Page 6
residence and the same or similar fees that you incur following the
purchase of your permanent Los Angeles residence for a period of up
to ten (10) years (which amount will be grossed up to account for
the additional tax burden resulting from this payment); and
(iv) pay an amount equal to the costs and expenses incident to
obtaining a loan or financing the purchase of your Los Angeles
residence (which amount will be grossed up to offset the additional
income tax burden resulting from this payment).
In addition, at your option, the Company or its designee shall purchase
your present home. The cash purchase price will be established as the average
of two independent appraisals which shall be based on an assumption of resale of
the property by the Company or its designee within six months of the date of
appraisal; provided however, that in the event that the two appraisals vary
from each other by more than five percent (5%) of the higher of the two
appraisals, then a third independent appraisal shall be ordered. The appraised
value shall then be computed by averaging the two closest appraisals. Your
option to have the Company purchase your present home shall expire twelve (12)
months after your purchase of a new home in connection with your relocation to
California.
(l) Expenses. You shall be entitled to receive reimbursement for all
--------
reasonable expenses incurred by you in connection with your employment with the
Company in accordance with policies, practices and procedures as in effect
generally with respect to other senior officers of the Company.
3. Severance Allowance. If, prior to age sixty (60), you shall terminate
-------------------
employment for Good Reason or if the Company shall terminate your employment
other than for Cause or Disability, the Company shall pay you the following
amounts:
Compensation continuation -- The Company shall pay to you the sum of your
then current base salary plus your target bonus amount, in equivalent
periodic installments at the Company's regular payroll intervals, for two
(2) years after your termination of employment. This amount will not be
changed after your termination of employment.
Annual bonus incentive award -- At the beginning of the year following your
termination, you shall receive payment of your annual bonus incentive award
paid at 100% of target prorated for the number of months you actually
worked
<PAGE>
Mr. Mark H. Willes
Page 7
during your year of termination (or such amount shall be deferred in
accordance with any election you may have made under the Deferred
Compensation Plan).
Stock Options and Deferred Cash Incentive Award -- For purposes of
payments under the 1992 Key Employee Long-Term Incentive Plan, your
termination of employment will be considered as an early retirement
and the rules regarding the exercise of your stock options and the
payment of your Deferred Cash Incentive Award(s) shall be determined
under the terms of the plan. Under the current terms of the plan, you
shall continue to be eligible to exercise your stock options within
three years from the date of early retirement. The payment of your
Deferred Cash Incentive Award(s) will be paid at the end of the
cycle(s), based on the payout according to performance during the
cycle and prorated for the number of months of your employment during
the cycle(s) (or such amount(s) shall be deferred in accordance with
any election you may have made under the Deferred Compensation Plan).
Restricted Stock -- With the consent of the Board the termination of
your employment will be considered an early retirement and the Company
will not exercise its right to repurchase such shares and restrictions
imposed on the shares purchased will be removed.
Retirement Benefits -- Benefits under the qualified retirement plans
and the Company's Excess Pension Plan shall be paid in accordance with
the terms of those plans. In addition, the Company will pay you the
supplemental pension amount, determined as if your employment ended as
of the end of the two years of compensation continuation.
Health and Welfare Benefits -- You will be eligible for continued
benefit coverages in accordance with COBRA and the terms of these
plans. The Company will pay you an amount equal to the cost of the
COBRA premiums for the period of time that coverage is available.
Other Benefits -- Benefits under other programs shall be paid to you
in accordance with their terms, except that the Company will continue
to provide benefits for financial counseling services for one (1) year
after your termination of employment.
(a) Good Reason. Good Reason shall mean the assignment to you of any
-----------
duties inconsistent in any respect with your position (including status,
offices, titles and
<PAGE>
Mr. Mark H. Willes
Page 8
reporting requirements), authority, duties or responsibilities as contemplated
by this Letter or any other action by the Company which results in a diminution
in such position, authority, duties or responsibilities.
(b) Cause. Cause shall mean (i) the willful and continued failure by you
-----
to perform substantially your duties with the Company (other than such failure
resulting from incapacity due to physical or mental illness) which is not
remedied in a reasonable period of time after a written demand for substantial
performance is delivered to you by the Board or the Chairman of the Compensation
Committee which specifically identifies the manner in which the Board or the
Chairman believes that you have not substantially performed your duties; (ii)
your commission of an act of fraud or embezzlement against the Company or one of
its subsidiaries; or (iii) your conviction of a felony.
4. Other conditions of employment. Consistent with our standard practice,
------------------------------
this offer of employment and Letter is contingent on your successful completion
of a pre-employment physical examination, including an alcohol and drug screen,
prior to joining the Company. Finally, you will also be required to comply with
the Company's Code of Conduct as a condition of your employment.
We look forward to your joining The Times Mirror Company. Your signing this
Letter and returning it to me will indicate your acceptance of our offer.
Sincerely,
/s/ Bob
Robert F. Erburu
Chairman, President and CEO
The Times Mirror Company
<PAGE>
Mr. Mark H. Willes
Page 9
I have read the terms of this Letter and I accept the offer of employment with
the Times Mirror Company as Chairman, President and Chief Executive Officer.
/s/ Mark H. Willes
- --------------------------
Mark H. Willes
cc: Clayton W. Frye, Jr.
<PAGE>
EXHIBIT 10.12
THE TIMES MIRROR COMPANY
1996 MANAGEMENT INCENTIVE PLAN
SECTION 1. PURPOSE OF PLAN
The purpose of this 1996 Management Incentive Plan ("Plan") of The Times
Mirror Company, a Delaware corporation (the "Company"), is to enable the
Company to attract, retain and motivate its management and other key
employees, and to further align the interests of such employees with those of
the stockholders of the Company, by providing for or increasing the
proprietary interest of such employees in the Company.
SECTION 2. ADMINISTRATION OF THE PLAN
2.1 Composition of Committee. The Plan shall be administered by one or more
committees (any such committee, the "Committee") of the Board of Directors of
the Company (the "Board"). If no persons are designated by the Board to serve
on the Committee, the Plan shall be administered by the Board and all
references herein to the Committee shall refer to the Board. The Board shall
have the sole discretion to appoint, add, remove or replace members of the
Committee, and shall have the sole authority to fill vacancies on the
Committee. Unless otherwise provided by the Board: (i) with respect to any
Award (as defined in Section 5) for which the Committee determines that it is
necessary or desirable for the grant or issuance thereof to be exempt under
Rule 16b-3 of the Securities Exchange Act of 1934 (the "Exchange Act"), the
Committee shall consist of two or more directors who are permitted under that
Rule to make grants or awards that are exempt from the operation of Exchange
Act Section 16(b), and (ii) with respect to any Award that is intended to
qualify as "performance based compensation" under Section 162(m)(4)(C) of the
Internal Revenue Code (the "Code"), the Committee shall consist of two or more
directors, each of whom is an "outside director" (as such term is defined
under Section 162(m) of the Code). With respect to any Award that is not
intended to satisfy the conditions of Exchange Act Rule 16b-3 or Code Section
162(m)(4)(C), the Committee may delegate all or any of its responsibilities
hereunder to any director(s) or, except to the extent prohibited under
applicable law, to any officer(s) of the Company (any of whom also may be a
Participant (as defined in Section 4) who has been granted or is eligible to
be granted Awards under the Plan), and in the context of such Awards,
references in this Plan to the "Committee" shall refer to both the Committee
and, unless otherwise provided by the Committee, to any such delegate(s) of
the Committee.
2.2 Committee Action. A majority of the Committee's members shall constitute
a quorum, and all determinations of the Committee shall be made by not less
than a majority of its members. Any decision or determination reduced to
writing and signed by a majority of the members (whether in counterpart or on
the same copy) shall be fully as effective as if it had been made by a
majority vote
1
<PAGE>
of its members at a meeting duly called and held. The Committee may designate
the Secretary of the Company or other Company employees to assist the
Committee in the administration of the Plan, and may grant authority to such
persons to execute agreements evidencing Awards made under this Plan or other
documents entered into under this Plan on behalf of the Committee or the
Company.
2.3 Committee Expenses. All expenses and liabilities incurred by the
Committee in the administration of the Plan shall be borne by the Company. The
Committee may employ attorneys, consultants, accountants or other persons.
2.4 Powers of the Committee. Subject to the express provisions of this Plan,
the Committee shall be authorized and empowered to do all things necessary or
desirable in connection with the administration of this Plan with respect to
the Awards over which such Committee has authority, including, without
limitation, the following:
(a) to prescribe, amend and rescind rules and regulations relating to
this Plan and to define terms not otherwise defined herein; provided that,
unless the Committee shall specify otherwise, for purposes of this Plan (i)
the term "fair market value" shall mean, as of any date, the mean between
the high and the low market prices for a Share reported for that date on
the composite tape for securities listed on the New York Stock Exchange or,
if no Shares traded on the New York Stock Exchange on the date in question,
then for the next preceding date for which Shares traded on the New York
Stock Exchange; and (ii) the term "Company" shall mean the Company and its
subsidiaries and affiliates, unless the context otherwise requires;
(b) to determine which persons are Employees (as defined in Section 4
hereof), to which of such Employees, if any, Awards shall be granted
hereunder and the timing of any such Awards;
(c) to determine the number of Shares subject to Awards and the exercise
or purchase price of such Shares;
(d) to establish and verify the extent of satisfaction of any performance
goals applicable to Awards;
(e) to prescribe and amend the terms of the agreements evidencing Awards
made under this Plan (which need not be identical);
(f) to determine whether, and the extent to which, adjustments are
required pursuant to Section 11 hereof;
(g) to interpret and construe this Plan, any rules and regulations under
the Plan and the terms and conditions of any Award granted hereunder, and
to make exceptions to any such provisions in good faith and for the benefit
of the Company; and
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(h) to make all other determinations deemed necessary or advisable for
the administration of the Plan.
2.5 Determinations of the Committee. All decisions, determinations and
interpretations by the Committee or the Board regarding the Plan shall be
final and binding on all Employees and Participants. The Committee or the
Board, as applicable, shall consider such factors as it deems relevant, in its
sole and absolute discretion, to making such decisions, determinations and
interpretations including, without limitation, the recommendations or advice
of any officer of the Company or Employee and such attorneys, consultants and
accountants as it may select.
SECTION 3. STOCK SUBJECT TO PLAN
3.1 Aggregate Limits. Subject to adjustment as provided in Section 11, at
any time, the aggregate number of shares of the Company's Series A Common
Stock, $1 par value ("Shares"), issued and issuable pursuant to all Awards
(including all ISOs (as defined in Section 5.1 hereof)) granted under this
Plan shall not exceed 14,500,000; provided that no more than 2,000,000 of such
Shares may be issued pursuant to all Annual Incentive Bonuses, Performance
Stock Awards and Restricted Stock Awards granted under the Plan. The Shares
subject to the Plan may be either Shares reacquired by the Company, including
Shares purchased in the open market, or authorized but unissued Shares.
3.2 Code Section 162(m) Limits. The aggregate number of Shares subject to
Options granted under this Plan during any calendar year to any one Employee
shall not exceed 500,000. The aggregate number of Shares issued or issuable
under any Annual Incentive Bonus or Performance Stock Awards granted under
this Plan during any calendar year to any one Employee shall not exceed
500,000. Notwithstanding anything to the contrary in the Plan, the foregoing
limitations (i) shall not apply if such limitations are not required in order
for Awards to qualify as "performance based compensation" under Code Section
162(m); and (ii) shall be subject to adjustment under Section 11 only to the
extent that such adjustment will not affect the status of any Award intended
to qualify as "performance based compensation" under Code Section 162(m).
3.3 ISO Limits. The aggregate number of Shares issued and issuable pursuant
to all ISOs granted under this Plan shall not exceed 14,500,000. Such maximum
number does not include the number of Shares subject to the unexercised
portion of any ISO granted under this Plan that expires or is terminated.
Notwithstanding anything to the contrary in the Plan, such aggregate number of
Shares shall be subject to adjustment under Section 11 only to the extent that
such adjustment will not affect the status of any ISO granted under this Plan.
3.4 Issuance of Shares. For purposes of Section 3.1, the aggregate number of
Shares issued under this Plan at any time shall equal only the number of
Shares actually issued upon exercise or
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settlement of an Award and not returned to the Company upon cancellation,
expiration or forfeiture of an Award or in payment or satisfaction of the
purchase price, exercise price or tax withholding obligation of an Award.
SECTION 4. PERSONS ELIGIBLE UNDER PLAN
Any person, including any director of the Company, who is an employee,
prospective employee, consultant or advisor of the Company (an "Employee")
shall be eligible to be considered for the grant of Awards hereunder. For
purposes of this Plan, the Chairman of the Board's status as an Employee shall
be determined by the Board. For purposes of Awards addressed in Section 10.5,
the term "Employee" shall also include a former Employee or any person
(including any estate) who is a beneficiary of a former Employee. A
"Participant" is any current or former Employee to whom an Award has been made
and any person (including any estate) to whom an Award has been assigned or
transferred pursuant to Section 10.1.
SECTION 5. PLAN AWARDS
5.1 Award Types. The Committee, on behalf of the Company, is authorized
under this Plan to enter into certain types of arrangements with Employees and
to confer certain benefits on them. The following such arrangements or
benefits are authorized under the Plan if their terms and conditions are not
inconsistent with the provisions of the Plan: Stock Options, Restricted Stock,
Performance Stock and Annual Incentive Bonuses. Such arrangements and benefits
are sometimes referred to herein as "Awards." The authorized types of
arrangements and benefits for which Awards may be granted are defined as
follows:
Stock Options: A Stock Option is a right granted under Section 6 to
purchase a number of Shares at such exercise price, at such times, and on
such other terms and conditions as are specified in or determined pursuant
to the agreement evidencing the Award (the "Option Agreement"). Options
intended to qualify as Incentive Stock Options ("ISOs") pursuant to Code
Section 422 and Options which are not intended to qualify as ISOs
("Nonqualified Options") may be granted under Section 6 as the Committee in
its sole discretion shall determine.
Annual Incentive Bonus: An Annual Incentive Bonus is a bonus opportunity
awarded under Section 7 pursuant to which a Participant may become entitled
to receive an amount based on satisfaction of such performance criteria as
are specified in the agreement evidencing the Award (the "Annual Incentive
Bonus Agreement").
Performance Stock: Performance Stock is an award of Shares made under
Section 8, the grant, issuance, retention and/or vesting of which is
subject to such performance and other conditions as are expressed in the
agreement evidencing the Award (the "Performance Stock Agreement").
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Restricted Stock: Restricted Stock is a right granted under Section 9 to
Shares issued or issuable under the Plan but subject during specified
periods of time to such conditions on vesting, restrictions on
transferability and/or repurchase rights as are expressed in the agreement
evidencing the Award (the "Restricted Stock Agreement").
5.2 Grants of Awards. An Award may consist of one such arrangement or
benefit or two or more of them in tandem or in the alternative.
5.3 Method of Share Acquisition. Shares may be issued pursuant to an Award
for any lawful consideration as determined by the Committee, including,
without limitation, services rendered by the recipient of such Award.
SECTION 6. STOCK OPTION GRANTS
The Committee may grant an Option or provide for the grant of an Option,
either from time-to-time in the discretion of the Committee or automatically
upon the occurrence of specified events, including, without limitation, the
achievement of performance goals, the satisfaction of an event or condition
within the control of the recipient of the Award or within the control of
others, the exercise or settlement of a previous Option or a Change of
Control.
6.1 Option Agreement. Each Option Agreement shall contain provisions
regarding (a) the number of Shares which may be issued upon exercise of the
Option, (b) the purchase price of the Shares and the means of payment for the
Shares, (c) the term of the Option, (d) such terms and conditions of
exercisability as may be determined from time to time by the Committee, (e)
restrictions on the transfer of the Option and forfeiture provisions, and (f)
such further terms and conditions, in each case not inconsistent with the Plan
as may be determined from time to time by the Committee. Option Agreements
evidencing ISOs shall contain such terms and conditions as may be necessary to
comply with the applicable provisions of Section 422 of the Code.
6.2 Option Price. The price per Share of the Shares subject to each Option
granted under the Plan shall be not less than 100% of the fair market value of
such Stock on the date the Option is granted, except that the Committee may
specifically provide that the exercise price of an Option may be higher or
lower in the case of an Option granted to employees of a company acquired by
the Company in assumption and substitution of options held by such employees
at the time such company is acquired.
6.3 Option Term. The "Term" of each Option granted under the Plan, including
any ISOs, shall be ten (10) years from the date of its grant, unless the
Committee in its sole discretion shall provide for a shorter Term.
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6.4 Option Vesting. The ability to exercise Options granted under the Plan
shall be subject to the following provisions:
(a) Options granted under the Plan shall be exercisable at such time and
in such installments during the period prior to the expiration of the
Option's Term as determined by the Committee in its sole discretion. The
Committee shall have the right to make the timing of the ability to
exercise any Option granted under the Plan subject to such performance
requirements as deemed appropriate by the Committee. At any time after the
grant of an Option the Committee may, in its sole discretion, reduce or
eliminate any restrictions surrounding any Participant's right to exercise
all or part of the Option.
(b) Notwithstanding any other provision of this Plan, the aggregate fair
market value (determined at the time that the ISO is granted) of the Shares
with respect to which Options that are intended to qualify as ISOs are
exercisable for the first time by a Participant during any calendar year
(under this Plan and any other plans of the Company) shall not exceed
$100,000.
6.5 Termination of Employment. Subject to Section 12, upon a termination of
employment by a Participant prior to the full exercise of an Option, the
following procedures shall apply unless determined otherwise by the Committee
in its sole discretion or, in the case of an ISO, unless other procedures are
necessary to comply with the provisions of Section 422, 424 or 425 of the
Code:
(a) Death or Disability. Upon the death of the Employee or a
determination of the Employee's disability, or upon any other termination
of an Employee's employment with the Company for which the Committee so
provides, and prior to the full exercise of an Option, any remaining
unexercised portion of the Option shall become immediately available for
exercise by the Participant, and shall be exercisable until the expiration
of the remaining Term of the Option.
(b) Normal Retirement. Upon the Normal Retirement of an Employee, or in
other circumstances specified by the Committee, prior to the full exercise
of an Option, the portion of the Option eligible for exercise shall be
determined by (i) multiplying the number of shares represented by the
Option by a ratio equal to the number of full months of the Employee's
service with the Company following the date of grant of the Option divided
by 36, which result shall not be less than the number of shares represented
by the Option available, or previously available, for exercise, and (ii)
subtracting from this amount any shares represented by the Option that were
previously exercised by the Participant. Any portion of an Option made
eligible for exercise based on this calculation may not be exercised unless
and until any performance restrictions associated with the Option are
satisfied. Once such portion of the Option is available for exercise, it
may be exercised by the Participant until the expiration of the remaining
Term of the Option. Unless otherwise specified by the Committee, Normal
Retirement shall be the Employee's termination of employment at or after
attainment of age 65.
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(c) Early Retirement. Upon the Early Retirement of an Employee, or in
other circumstances specified by the Committee, prior to the full exercise
of an Option, the portion of the Option eligible for exercise shall be
determined by (i) multiplying the number of shares represented by the
Option by a ratio equal to the number of full months of the Employee's
service with the Company following the date of grant of the Option divided
by 48, which result shall not be less than the number of shares represented
by the Option available, or previously available, for exercise, and (ii)
subtracting from this amount any shares represented by the Option that were
previously exercised by the Participant. Any portion of an Option made
eligible for exercise based on this calculation may not be exercised unless
and until any performance restrictions associated with the Option are
satisfied. Once such portion of the Option is available for exercise, it
may be exercised by the Participant until the expiration of the remaining
Term of the Option. Unless otherwise specified by the Committee, Early
Retirement shall be the Employee's termination of employment between ages
55 and 65, provided the Employee has at least 5 years of service with the
Company as of termination of employment.
(d) Other Forms of Termination. Upon a termination of an Employee's
employment for any reason other than death, disability or retirement or in
other circumstances specified by the Committee, and prior to the full
exercise of an Option, the right to exercise any portion of that Option not
already available for exercise on the date of such termination of
employment shall be forfeited. In such event, any portion of the Option
that is available for exercise as of the date of the Employee's termination
of employment must be exercised within the shorter of 30 days following the
Employee's termination of employment or the remaining Term of the Option.
6.6 Option Exercise.
(a) Partial Exercise. An exercisable Option may be exercised in whole or in
part. However, an Option shall not be exercisable with respect to fractional
Shares and the Committee may require, by the terms of the Option Agreement, a
partial exercise to include a minimum number of Shares.
(b) Manner of Exercise. All or a portion of an exercisable Option shall be
deemed exercised upon delivery to the representative of the Company designated
for such purpose by the Committee all of the following: (i) notice of exercise
specifying the number of Shares to be purchased signed by the Participant,
(ii) full payment of the exercise price for such number of Shares, (iii) such
representations and documents as the Committee, in its sole discretion, deems
necessary or advisable to effect compliance with all applicable provisions of
the Securities Act of 1933, as amended, and any other federal, state or
foreign securities laws or regulations, (iv) in the event that the Option
shall be exercised pursuant to Section 10.1 by any person or persons other
than the Employee, appropriate proof of the right of such person or persons to
exercise the Option, and (v) such representations and
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documents as the Committee, in its sole discretion, deems necessary or
advisable to provide for the tax withholding pursuant to Section 13. Unless
provided otherwise by the Committee, no Participant shall have any right as a
stockholder with respect to any Shares purchased pursuant to any Option until
the registration of Shares in the name of such person, and no adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities
or other property) or distributions or other rights for which the record date
is prior to the date such Shares are so registered. Shares shall be so
registered as soon as administratively practicable after exercise of any
Option, subject to reasonable delays and to delays beyond the reasonable
control of the Company such as but not limited to completion of registration
of said Shares with the Securities and Exchange Commission or compliance with
any federal or state laws, rules or regulations.
(c) Payment of Exercise Price. The exercise price of an Option shall be paid
in the form of one of more of the following, as the Committee shall specify,
either through the terms of the Option Agreement or at the time of exercise of
an Option: (i) cash or certified or cashiers' check, (ii) shares of capital
stock of the Company that have been held by the Participant for such period of
time as the Committee may specify, (iii) other property deemed acceptable by
the Committee, (iv) a reduction in the number of Shares or other property
otherwise issuable pursuant to such Option, (v) a promissory note of or other
commitment to pay by the Participant or of a third party, the terms and
conditions of which shall be determined by the Committee, or (vi) any
combination of (i) through (v).
6.7 Executive Stock Purchase Options. Notwithstanding anything to the
contrary in this Article VI, the Committee may grant one or more Employees who
are subject to Exchange Act Section 16 one or a series of Options to purchase
up to a maximum number and/or maximum aggregate purchase price of Shares as
the Committee may specify, and may permit the exercise price of any such
Options to be paid with amounts accumulated through payroll deductions, and
may specify such other terms and conditions to be applicable to any such
Options and/or to any Shares purchased upon exercise of any such Options as
are generally applicable to options granted and Shares purchased under the
Company's 1996 Employee Stock Purchase Plan or as the Committee in its sole
discretion shall specify. The term of any Option granted under this Section
6.7 shall not exceed twenty-seven (27) months. Notwithstanding anything to the
contrary in Section 6.2, the exercise price of any Option granted under this
Section 6.7 shall be the lesser of such percentage, as specified by the
Committee (which shall not be less than seventy-five percent (75%)), of (1)
the fair market value per Share on the date the Option is granted; or (2) the
fair market value per Share on the expiration date of the Option.
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SECTION 7. ANNUAL INCENTIVE BONUS
Each Annual Incentive Bonus Award will confer upon the Employee the
opportunity to earn a future payment tied to the level of achievement with
respect to one or more performance criteria established for a fiscal year.
7.1 Annual Incentive Bonus Agreement. Each Annual Incentive Bonus Agreement
shall contain provisions regarding (a) the target and maximum amount payable
to the Participant as an Annual Incentive Bonus, (b) the performance criteria
and level of achievement versus these criteria which shall determine the
amount of such payment, (c) the fiscal year as to which performance shall be
measured for determining the amount of any payment, (d) the timing of any
payment earned by virtue of performance, (e) restrictions on the alienation or
transfer of the Annual Incentive Bonus prior to actual payment, (f) forfeiture
provisions, and (g) such further terms and conditions, in each case not
inconsistent with the Plan as may be determined from time to time by the
Committee. The maximum amount payable as an Annual Incentive Bonus may be a
multiple of the target amount payable, but the maximum amount payable pursuant
to that portion of an Annual Incentive Bonus Award granted under this Plan for
any fiscal year to any Participant that is intended to satisfy the
requirements for "performance based compensation" under Code Section 162(m)
shall not exceed five million dollars ($5,000,000).
7.2 Performance Criteria. The Committee shall establish the performance
criteria and level of achievement versus these criteria which shall determine
the target and maximum amount payable under an Annual Incentive Bonus Award,
which criteria may be based on financial performance and/or personal
performance evaluations. The Committee may specify the percentage of the
target Annual Incentive Bonus that is intended to satisfy the requirements for
"performance-based compensation" under Code Section 162(m). Notwithstanding
anything to the contrary herein, the performance criteria for any portion of
an Annual Incentive Bonus that is intended by the Committee to satisfy the
requirements for "performance-based compensation" under Code Section 162(m)
shall be a measure based on one or more Qualifying Performance Criteria (as
defined in Section 10.2 hereof) selected by the Committee and specified at the
time the Annual Incentive Bonus Award is granted. The Committee shall certify
the extent to which any Qualifying Performance Criteria has been satisfied,
and the amount payable as a result thereof, prior to payment of any Annual
Incentive Bonus that is intended by the Committee to satisfy the requirements
for "performance-based compensation" under Code Section 162(m).
7.3 Timing of Payment. The Committee shall determine the timing of payment
of any Annual Incentive Bonus. The Committee may provide for or, subject to
such terms and conditions as the Committee may specify, may permit a
Participant to elect for the payment of any Annual Incentive Bonus to be
deferred to a specified date or event.
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7.4 Termination of Employment. Subject to Section 12, upon a termination of
employment by an Employee prior to the end of a fiscal year, the following
procedures shall apply as to any Annual Incentive Bonus Award for such fiscal
year, unless determined otherwise by the Committee in its sole discretion:
(a) Death, Disability or Retirement. Following the death or retirement of
the Employee or a determination of the Employee's disability, the
Participant shall be entitled to receive a pro-rata portion of any Annual
Incentive Bonus Award amount payable based upon performance for such fiscal
year. Such pro-rata portion shall be determined by multiplying (i) the
amount of the Annual Incentive Bonus Award that the Committee determines,
either upon completion of the fiscal year or based upon an evaluation
during the fiscal year Performance Period, would have been payable to the
Participant for the fiscal year, times (ii) a ratio equal to the number of
full months of the Employee's employment with the Company during the fiscal
year divided by 12.
(b) Other Forms of Termination. Subject to Section 12, unless the
Committee provides otherwise, upon a termination of an Employee's
employment with the Company for any reason other than death, disability, or
retirement prior to the end of a fiscal year, the right to receive any
payment from the Annual Incentive Bonus for that fiscal year shall be
forfeited.
7.5 Discretionary Adjustments. Notwithstanding satisfaction of any
performance goals, the amount paid under an Annual Incentive Bonus Award on
account of either financial performance or personal performance evaluations
may be reduced by the Committee on the basis of such further considerations as
the Committee in its sole discretion shall determine.
7.6 Form of Payment. The Committee may provide for any such Participant(s)
as it shall designate to have the option for his or her Annual Incentive
Bonus, or such portion thereof as the Committee may specify, to be paid in
whole or in part in Shares on the following terms and conditions:
(a) The number of Shares issued in the name of the Participant shall be
determined by dividing the amount of the Annual Incentive Bonus which the
Committee has permitted the Participant, and the Participant has elected,
to receive in the form of Shares by fifty percent of the fair market value
of a Share as of such date as the Committee may specify.
(b) Fifty percent of the Shares issued in the name of the Participant
shall be fully vested on the date of issuance (such vested Shares, the
"Bonus Shares") and shall be held in escrow by the Company or by such agent
as the Committee may select but, subject to Section 7.6(c), may be
withdrawn from escrow by the Participant at any time.
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(c) The remaining Shares issued in the name of the Participant (the
"Matching Shares") shall be held in escrow by the Company or by such agent
and shall remain unvested and subject to forfeiture unless and until the
corresponding number of Bonus Shares have been held in escrow for four (4)
years from the date of their issuance (such condition, the "Holding Period
Requirement"). Upon satisfaction of the Holding Period Requirement, the
Matching Shares shall become vested and such Matching Shares and the
corresponding Bonus Shares shall be released from the escrow. The Committee
may provide that a temporary withdrawal of Bonus Shares from escrow in
order to pay the exercise price of a stock option granted by the Company
(regardless of whether granted under this Plan) shall not result in
forfeiture of any Matching Shares if the Participant instructs the Company
to deposit into the escrow a number of Shares issued upon exercise of such
stock option equal to the number of Bonus Shares withdrawn for purposes of
exercising such stock option, and the subsequent holding period of such
redeposited Shares shall be added to the prior holding period of such
withdrawn Bonus Shares for purposes of satisfying the Holding Period
Requirement. Subject to the preceding sentence and to Section 7.6(d), in
the event that any of a Participant's Bonus Shares are withdrawn from
escrow prior to satisfaction of the Holding Period Requirement, a
corresponding number of Matching Shares shall be forfeited and transferred
back to the Company.
(d) Upon a termination of employment by an Employee prior to satisfaction
of the Holding Period Requirement for any Bonus Shares under Section
7.6(c), the following procedures shall apply as to any Matching Shares held
in the name of the Participant, unless determined otherwise by the
Committee in its sole discretion: (i) upon the death or retirement of the
Employee or a determination of the Employee's disability, or upon any other
termination of an Employee's employment with the Company for which the
Committee so provides, and provided that the Holding Period Requirement
under Section 7.6(c) is satisfied, Matching Shares shall become vested on
the same terms and at the same time as if the Employee's employment with
the Company had continued; and (ii) upon a termination of an Employee's
employment for any reason other than death, disability or retirement or in
other circumstances specified by the Committee, and prior to the
satisfaction of the Holding Period Requirement under Section 7.6(c), all
unvested Matching Shares shall be forfeited and transferred back to the
Company. The Committee may provide as a further condition to the vesting of
Matching Shares that following the retirement of the Employee or a
determination of the Employee's disability, or such other termination for
which the Committee so provides, any Matching Shares shall be forfeited if
the Participant competes with the Company during the four year holding
period provided for under Section 7.6(c).
(e) Except to the extent provided otherwise by the Committee, a
Participant shall be entitled to vote and to receive dividends on any Bonus
Shares and Matching Shares held in escrow pursuant to this Section 7.6.
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(f) Notwithstanding the terms of Section 7.6(a) through (e), the
Committee may specify such other methods or formula by which Shares shall
be valued for purposes of determining the number of Shares issuable in
settlement of any Annual Incentive Bonus, and may alter or waive any of the
provisions of Section 7.6(a) through (e) or may impose such further or
different conditions upon the grant, retention and/or vesting of such
Shares as it shall determine in its sole discretion.
SECTION 8. PERFORMANCE STOCK
Performance Stock consists of an award of Shares, the grant, issuance,
retention and/or vesting of which shall be subject to such performance
conditions and to such further terms and conditions as the Committee deems
appropriate.
8.1 Performance Stock Agreement. Each Performance Stock Agreement shall
contain provisions regarding (a) the number of Shares subject to such Award or
a formula for determining such, (b) the performance criteria and level of
achievement versus these criteria which shall determine the number of Shares
granted, issued, retainable and/or vested, (c) the period as to which
performance shall be measured for determining achievement of performance (a
"Performance Period"), (d) forfeiture provisions, and (e) such further terms
and conditions, in each case not inconsistent with the Plan as may be
determined from time to time by the Committee.
8.2 Performance Criteria. The grant, issuance, retention and/or vesting of
each Performance Share shall be subject to such performance criteria and level
of achievement versus these criteria as the Committee shall determine, which
criteria may be based on financial performance and/or personal performance
evaluations. Notwithstanding anything to the contrary herein, the performance
criteria for any Performance Stock that is intended by the Committee to
satisfy the requirements for "performance-based compensation" under Code
Section 162(m) shall be a measure based on one or more Qualifying Performance
Criteria selected by the Committee and specified at the time the Performance
Stock Award is granted.
8.3 Termination of Employment. Subject to Section 12, upon a termination of
employment by an Employee prior to the end of a Performance Period, the
following procedures shall apply as to any Performance Stock Awards granted to
such Employee, unless determined otherwise by the Committee in its sole
discretion:
(a) Death, Disability or Retirement. Following the death or retirement of
the Employee or a determination of the Employee's disability, the
Participant shall be entitled to a pro-rata portion of any Performance
Stock Award. Such pro-rata portion shall be determined by multiplying (i)
the number of Shares as to which the Committee determines, either upon
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completion of the Performance Period or based upon an evaluation during the
Performance Period, the performance criteria applicable to such Award has
been or would have been satisfied, times (ii) a ratio equal to the number
of full months of the Employee's employment with the Company divided by the
number of months in the performance period for such Award.
(b) Other Forms of Termination. Subject to Section 12, unless the
Committee provides otherwise, upon a termination of an Employee's
employment with the Company for any reason other than death, disability, or
retirement prior to the end of a Performance Period, the right to any
Performance Stock as to which the performance criteria and any other
condition has not then been satisfied shall be forfeited.
8.4 Discretionary Adjustments. Notwithstanding satisfaction of any
performance goals, the number of Shares granted, issued, retainable and/or
vested under a Performance Stock Award on account of either financial
performance or personal performance evaluations may be reduced by the
Committee on the basis of such further considerations as the Committee in its
sole discretion shall determine.
SECTION 9. RESTRICTED STOCK
Restricted Stock consists of Shares which are registered or are issuable by
the Company in the name of an Employee in exchange for such cash or other
consideration as determined by the Committee. Restricted Stock may, but need
not, be subject during specified periods of time to such conditions to
vesting, to restrictions on their sale or other transfer by the Participant
and/or to repurchase rights as may be determined by the Committee. The
transfer and sale of Shares pursuant to Restricted Stock Awards shall be
subject to the following terms and conditions:
9.1. Numbers of Shares. The number of Shares to be transferred or sold by
the Company to an Employee pursuant to a Restricted Stock award shall be
determined by the Committee.
9.2. Sale Price. Subject to the requirements of applicable law, the
Committee shall determine the price, if any, at which Shares of Restricted
Stock shall be sold or awarded to an Employee, which may vary from time to
time and among Employees and which may be below the fair market value of such
Shares at the date of grant or issuance.
9.3. Conditions. All Shares transferred or sold as Restricted Stock
hereunder shall be subject to such restrictions or conditions as the Committee
may determine, including, without limitation any or all of the following:
(a) a prohibition against the sale, transfer, pledge or other encumbrance
of the Shares, such prohibition to lapse at such time or times as the
Committee shall determine (whether in annual
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or more frequent installments, at the time of the death, disability or
retirement of the holder of such Shares, or otherwise);
(b) a requirement that the holder of Shares forfeit or resell back to the
Company at a price specified by the Committee (which price may be more than
the price, if any, paid by the Employee for such Shares) all or part of
such Shares in the event of termination of employment during any period in
which such Shares are subject to conditions; and
(c) such other conditions or restrictions as the Committee may deem
advisable.
9.4. Escrow. In order to enforce the restrictions imposed by the Committee
pursuant to Section 9.3 with respect to any Shares of Restricted Stock
registered in the name of the Participant, such Shares may be held in escrow
by the Company or its agent or subject to stop transfer or other restrictions
or legends as the Committee shall determine. Unless provided otherwise by the
Committee, a Participant shall be entitled to vote and to receive dividends on
any shares of Restricted Stock as to which the restrictions have not lapsed.
9.5. End of Conditions. Subject to Section 12, as soon as administratively
practicable after any Shares of Restricted Stock cease to be subject to
forfeiture, resale, nontransferability or other conditions or restrictions,
such Shares will be registered in the name of the Participant free of all
restrictions and conditions, subject to reasonable delays and to delays beyond
the reasonable control of the Company.
9.6 Termination of Employment. Subject to Section 12, upon a termination of
employment by an Employee prior to the vesting of or the lapsing of
restrictions on Restricted Stock, the following procedures shall apply as to
any Restricted Stock Awards granted to such Employee, unless determined
otherwise by the Committee in its sole discretion:
(a) Death, Disability or Retirement. Upon the death or retirement of the
Employee or a determination of the Employee's disability prior to the
vesting or lapsing of restrictions on Restricted Stock, or upon any other
termination of an Employee's employment with the Company for which the
Committee so provides, any remaining unvested or restricted portion of the
Restricted Stock Award shall become vested and/or unrestricted on the same
terms and at the same time as if the Employee's employment with the Company
had continued.
(b) Other Forms of Termination. Upon a termination of an Employee's
employment for any reason other than death, disability or retirement or in
other circumstances specified by the Committee, and prior to the vesting or
lapsing of restrictions on Restricted Stock, the right to any portion of
the Restricted Stock Award that has not vested or that remains subject to
restrictions on the date of such termination of employment shall be
forfeited.
14
<PAGE>
SECTION 10. OTHER PROVISIONS APPLICABLE TO AWARDS
10.1 Transferability. Unless the agreement evidencing an Award (or an
amendment thereto authorized by the Committee) expressly states that the Award
is transferable as provided hereunder, no Award granted under the Plan, nor
any interest in such Award, may be sold, assigned, conveyed, gifted, pledged,
hypothecated or otherwise transferred in any manner prior to the vesting or
lapse of any and all restrictions applicable thereto, other than by will or
the laws of descent and distribution. The Committee may in its sole discretion
grant an Award or amend an outstanding Award to provide that the Award is
transferable or assignable to a member or members of the Employee's "family,"
as such term is defined under Code Section 267(c)(4), or to a trust for the
benefit of a member or members of the Employee's family, or to a partnership
whose only partners are members of the Employee's family, or to a charitable
institution, provided that (i) no consideration is given in connection with
the transfer of such Award, and (ii) following any such transfer or assignment
the Award will remain subject to substantially the same terms applicable to
the Award while held by the Employee, as modified as the Committee in its sole
discretion shall determine appropriate, and the Participant shall execute an
agreement agreeing to be bound by such terms.
10.2 Qualifying Performance Criteria. For purposes of this Plan, the term
"Qualifying Performance Criteria" shall mean any one or more of the following
performance criteria, either individually, alternatively or in any
combination, applied to either the Company as a whole or to a business unit or
subsidiary, either individually, alternatively or in any combination, and
measured either on an absolute basis or relative to a pre-established target,
to previous years' results or to a designated comparison group, in each case
as specified by the Committee in the Award: (a) cash flow, (b) earnings per
share (including earnings before interest, taxes and amortization), (c) return
on equity, (d) total stockholder return, (e) return on capital, (f) return on
assets or net assets, (g) revenue, (h) income or net income, (i) operating
income or net operating income, (j) operating profit or net operating profit,
(k) operating margin, (l) return on operating revenue, and (m) market share or
circulation.
10.3 Dividends. Unless otherwise provided by the Committee, no adjustment
shall be made in Shares issuable under Awards on account of cash dividends
which may be paid or other rights which may be issued to the holders of Shares
prior to their issuance under any Award. The Committee shall specify whether
dividends or dividend equivalent amounts shall be paid to any Participant with
respect to the Shares subject to any Award that have not vested or been issued
or that are subject to any restrictions or conditions on the record date for
dividends.
10.4 Consideration for Issuance of Shares. Any issuance of Shares may be
conditioned upon payment of an amount equal to the minimum amount, if any,
required by applicable law for the issuance of such Shares. The absence of any
such condition shall be deemed to reflect a determination
15
<PAGE>
by the Committee that non-cash consideration in an amount at least equal to
the minimum amount, if any, required by law has been or will be received prior
to the issuance of such Shares.
10.5 Conditions for Issuance of Awards. The Committee may, in its sole
discretion and on such terms as it may specify, require as a condition to the
grant of any Award that the Employee surrender for cancellation some or all of
any previously granted employee benefit arrangement (including other Awards),
or any rights under any such employee benefit arrangement. Any such Award
which is conditioned upon the surrender and cancellation of another employee
benefit arrangement or of rights thereunder may contain such other terms as
the Committee deems appropriate and shall be subject to such terms without
regard to number of Shares (if any), exercise or purchase price, term or other
conditions of the surrendered arrangement or rights.
10.6 Agreements Evidencing Awards. The Committee shall, subject to
applicable law, determine the date an Award is deemed to be granted, which for
purposes of this Plan shall not be affected by the fact that an Award is
contingent on subsequent stockholder approval of the Plan. The Committee or,
except to the extent prohibited under applicable law, its delegate(s) may
establish the terms of agreements evidencing Awards under this Plan and may,
but need not, require as a condition to any such agreement's effectiveness
that such agreement be executed by the Participant and that such Participant
agree to such further terms and conditions as specified in such agreement,
including without limitation a requirement that the Participant agree to
submit any dispute with the Company related to the Participant's employment to
binding arbitration, a requirement that the Participant not compete with the
Company and/or a requirement that the Participant not participate in any
Change of Control Transaction. The grant of an Award under this Plan shall not
confer any rights upon the Participant holding such Award other than such
terms, and subject to such conditions, as are specified in this Plan as being
applicable to such type of Award (or to all Awards) or as are expressly set
forth in the Agreement evidencing such Award.
10.7 Tandem Stock or Cash Rights. Either at the time an Award is granted or
by subsequent action, the Committee may, but need not, provide that an Award
shall contain as a term thereof, a right, either in tandem with the other
rights under the Award or as an alternative thereto, of the Participant to
receive, without payment to the Company, a number of Shares, cash or a
combination thereof, the amount of which is determined by reference to the
value of the Award.
SECTION 11. CHANGES IN CAPITAL STRUCTURE
11.1 No Preferential Rights. The existence of outstanding Awards shall not
affect in any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations, reorganizations,
exchanges, or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issuance of
any Shares or other
16
<PAGE>
securities or subscription rights thereto, or any issuance of bonds,
debentures, preferred or prior preference stock ahead of or affecting the
Shares or the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.
11.2 Adjustment in Shares. If the outstanding securities of the class then
subject to this Plan are increased, decreased or exchanged for or converted
into cash, property or a different number or kind of shares or securities, or
if cash, property or shares or securities are distributed in respect of such
outstanding securities, in either case as a result of a reorganization,
merger, consolidation, recapitalization, restructuring, reclassification,
dividend (other than a regular, quarterly cash dividend) or other
distribution, stock split, reverse stock split, spin-off or the like, or if
substantially all of the property and assets of the Company are sold, then,
unless the terms of such transaction shall provide otherwise, the Committee
shall make appropriate and proportionate adjustments in (i) the number and
type of shares or other securities or cash or other property that may be
acquired pursuant to Awards theretofore granted under this Plan and the
exercise or settlement price of such Awards, provided, however, that such
adjustment shall be made in such a manner that will not affect
the status of any Award intended to qualify as an ISO under Code Section 422
or as "performance based compensation" under Code Section 162(m), and (ii) the
maximum number and type of shares or other securities that may be issued
pursuant to such Awards thereafter granted under this Plan.
SECTION 12. CHANGE OF CONTROL
12.1 Effect of Change of Control. The Committee may through the terms of the
Award or otherwise provide that any or all of the following shall occur,
either immediately upon the Change of Control or a Change of Control
Transaction, or upon termination of the Employee's employment following a
Change of Control or a Change of Control Transaction: (a) in the case of an
Option, the Participant's ability to exercise any portion of the Option not
previously exercisable, (b) in the case of an Annual Incentive Bonus, the
right to receive a payment equal to the target amount payable or, if greater,
a payment based on performance through a date determined by the Committee
prior to the Change of Control, and (c) in the case of Shares issued in
payment of any Annual Incentive Bonus, and/or in the case of Performance Stock
or Restricted Stock, the lapse and expiration on any conditions to the grant,
issuance, retention, vesting or transferability of, or any other restrictions
applicable to, such Award. The Committee also may, through the terms of the
Award or otherwise, provide for an absolute or conditional exercise, payment
or lapse of conditions or restrictions on an Award which shall only be
effective if, upon the announcement of a Change of Control Transaction, no
provision is made in such Change of Control Transaction for the exercise,
payment or lapse of conditions or restrictions on the Award, or other
procedure whereby the Participant may realize the full benefit of the Award.
17
<PAGE>
12.2 Definitions. Unless the Committee or the Board shall provide otherwise,
"Change of Control" shall mean an occurrence of any of the following events:
(a) an acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "person or group"
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
immediately after which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 under the Exchange Act) of more than fifty percent (50%)
of the combined voting power of the Company's then outstanding Voting
Securities; (b) the Board ceases for any reason to have at least a majority of
"unaffiliated directors" (defined as all members of the Board except those who
are or were proposed for nomination as a member of the Board by, or are
otherwise "affiliated" or "associated" (as those terms are used for purposes
of Rule 12b-2 under the Exchange Act) with a Person who has Beneficial
Ownership of ten percent (10%) or more of the combined voting power of the
Company (except to the extent such Person had such Beneficial Ownership prior
to the effective date of the Plan)); (c) approval by the stockholders of (i) a
merger, consolidation or reorganization involving the Company, unless either
(A) the stockholders of the Company immediately before such merger,
consolidation or reorganization own, directly or indirectly immediately
following such merger, consolidation or reorganization, at least seventy-five
percent (75%) of the combined voting power of any company resulting from such
merger, consolidation or reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership immediately before such
merger, consolidation or reorganization, or (B) at least a majority of the
members of the Board of Directors of the Surviving Corporation are
Unaffiliated Directors who were directors of the Company immediately prior to
the execution of the agreement providing for such merger, consolidation or
reorganization, and (C) the Surviving Corporation shall adopt or assume this
Plan and a Participant's Awards under the Plan, or (ii) a complete liquidation
or dissolution of the Company; or (d) such other events as the Committee or
the Board from time to time may specify. "Change of Control Transaction" shall
mean any tender offer, offer, exchange offer, solicitation, merger,
consolidation, reorganization or other transaction which is intended to or
reasonably expected to result in a change of control.
SECTION 13. TAXES
13.1 Withholding Requirements. The Committee may make such provisions or
impose such conditions as it may deem appropriate for the withholding or
payment by the Employee or Participant, as appropriate, of any taxes which it
determines are required in connection with any Awards granted under this Plan,
and a Participant's rights in any Award are subject to satisfaction of such
conditions.
13.2 Payment of Withholding Taxes. Notwithstanding the terms of Section 13.1
hereof, the Committee may provide in the agreement evidencing an Award or
otherwise that all or any portion
18
<PAGE>
of the taxes required to be withheld by the Company or, if permitted by the
Committee, desired to be paid by the Participant, in connection with the
exercise of a Nonqualified Option or the exercise, vesting, settlement or
transfer of any other Award shall be paid or, at the election of the
Participant, may be paid by the Company withholding shares of the Company's
capital stock otherwise issuable or subject to such Award, or by the
Participant delivering previously owned shares of the Company's capital stock,
in each case having a fair market value equal to the amount required or
elected to be withheld or paid. Any such elections are subject to such
conditions or procedures as may be established by the Committee and may be
subject to disapproval by the Committee.
SECTION 14. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue the Plan or any agreement
evidencing an Award made under the Plan, but no amendment or alteration shall
be made which would impair the rights of any Award holder, without such
holder's consent, under any Award theretofore granted, provided that no such
consent shall be required if the Committee determines in its sole discretion
and prior to the date of any Change of Control that such amendment or
alteration is not reasonably likely to significantly diminish the benefits
provided under such Award, or that any such diminishment has been adequately
compensated. The Committee may determine whether or not any amendment to a
previously granted Award is, for purposes of the Plan, deemed to be a
cancellation and new grant of the Award. Notwithstanding the foregoing, if an
amendment to the Plan would affect the ability of Awards granted under the
Plan to comply with Rule 16b-3 under the Exchange Act or Section 162(m) or 422
or other applicable provisions of the Code, and if the Committee determines
that it is necessary or desirable for any Awards theretofore or thereafter
granted that are intended to comply with any such provision to so comply, or
otherwise is required under any applicable law, rule or regulation, the
amendment shall be approved by the Company's stockholders to the extent
required for such Awards to continue to comply with Rule 16b-3 under the
Exchange Act, Section 162(m) or Section 422 of the Code, or other applicable
provisions of or rules under the Code.
SECTION 15. COMPLIANCE WITH OTHER LAWS AND REGULATIONS
The Plan, the grant and exercise of Awards thereunder, and the obligation of
the Company to sell, issue or deliver Shares under such Awards, shall be
subject to all applicable federal, state and foreign laws, rules and
regulations and to such approvals by any governmental or regulatory agency as
may be required. The Company shall not be required to register in a
Participant's name or deliver any Shares prior to the completion of any
registration or qualification of such Shares under any federal, state or
foreign law or any ruling or regulation of any government body which the
Committee shall, in its sole discretion, determine to be necessary or
advisable. This Plan is intended to constitute an unfunded arrangement for a
select group of management or other key employees.
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<PAGE>
Without amending the Plan, the Committee may grant Awards to Employees who
are foreign nationals or are employed in foreign countries on such terms and
conditions different from those specified in the Plan as may in the judgment
of the Committee be necessary or desirable to foster and promote achievement
of the purposes of the Plan, and, in furtherance of such purposes, the
Committee may make such modifications, amendments, procedures, and the like,
and may waive such requirements, conditions or terms, as may be necessary or
advisable to comply with provisions of laws or practices of other countries in
which the Company operates or has employees.
SECTION 16. PURCHASE FOR INVESTMENT
No Option shall be exercisable unless a registration statement with respect
to the Option is effective or the Company has determined that such
registration is unnecessary. Unless the Awards and Shares covered by this Plan
have been registered under the Securities Act of 1933, as amended, or the
Company has determined that such registration is unnecessary, each person
receiving an Award and/or Shares pursuant to any Award may be required by the
Company to give a representation in writing that such person is acquiring such
Shares for his or her own account for investment and not with a view to, or
for sale in connection with, the distribution of any part thereof.
SECTION 17. NO RIGHT TO COMPANY EMPLOYMENT
Nothing in this Plan or as a result of any Award granted pursuant to this
Plan shall confer on any individual any right to continue in the employ of the
Company or interfere in any way with the right of the Company to terminate an
individual's employment at any time. The Award agreements may contain such
provisions as the Committee may approve with reference to the effect of
approved leaves of absence.
SECTION 18. LIABILITY OF COMPANY
The Company which is in existence or hereafter comes into existence shall
not be liable to a Participant, an Employee or other persons as to:
18.1 The Non-Issuance of Shares. The non-issuance or sale of Shares as to
which the Company has been unable to obtain from any regulatory body having
jurisdiction the authority deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any Shares hereunder; and
18.2 Tax Consequences. Any tax consequence expected, but not realized, by
any Employee, Participant or other person due to the receipt, exercise or
settlement of any Award granted hereunder.
20
<PAGE>
SECTION 19. EFFECTIVENESS AND EXPIRATION OF PLAN
The Plan shall be effective on the date the Board adopts the Plan. All
Awards granted under this Plan are subject to, and may not be exercised
before, the approval of this Plan by the stockholders prior to the first
anniversary date of the effective date of the Plan, by the affirmative vote of
the holders of a majority of the outstanding shares of the Company present, or
represented by proxy, and entitled to vote, at a meeting of the Company's
stockholders or by written consent in accordance with the laws of the State of
Delaware; provided that if such approval by the stockholders of the Company is
not forthcoming, all Awards previously granted under this Plan shall be void.
If the stockholders of the Company fail to approve the Plan within twelve
months of the date the Board approved the Plan, the Plan shall terminate and
all Awards previously granted under the Plan shall become void and of no
effect. No Award granted under this Plan shall have a term of more than ten
years from the date it is granted. No Awards shall be granted pursuant to the
Plan more than ten (10) years after the effective date of the Plan.
SECTION 20. NON-EXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the Plan
to the stockholders of the Company for approval shall be construed as creating
any limitations on the power of the Board or the Committee to adopt such other
incentive arrangements as it or they may deem desirable, including without
limitation, the granting of restricted stock or stock options otherwise than
under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
SECTION 21. GOVERNING LAW
This Plan and any agreements hereunder shall be interpreted and construed in
accordance with the laws of the State of Delaware and applicable federal law.
The Committee may provide that any dispute as to any Award shall be presented
and determined in such forum as the Committee may specify, including through
binding arbitration. Any reference in this Plan or in the agreement evidencing
any Award to a provision of law or to a rule or regulation shall be deemed to
include any successor law, rule or regulation of similar effect or
applicability.
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<PAGE>
EXHIBIT 10.13
THE TIMES MIRROR COMPANY
NON-EMPLOYEE DIRECTORS STOCK PLAN
1. Purpose of the Plan. Under this Non-Employee Directors Stock Plan (the
"Directors Plan") of The Times Mirror Company, a Delaware corporation (the
"Company"), shares of the Company's Series A Common Stock, $1.00 par value
("Common Stock"), shall be issued to participants in partial compensation for
their service as directors of the Company. This Directors Plan is designed to
promote the long-term growth and financial success of the Company by enabling
the Company to attract, retain and motivate such persons by providing for or
increasing their proprietary interest in the Company.
2. Definitions. For purposes of this Directors Plan:
(a) The term "Announcement Date Market Price" shall mean, with respect to
any Payment Date, the Fair Market Value of the Common Stock of the Company
over the five business days preceding the Payment Date.
(b) The term "Board" shall mean the Company's Board of Directors.
(c) The term "Fair Market Value" shall mean, as of any date, and unless
the Committee shall specify otherwise, the mean between the high and the
low market prices for the Common Stock reported for that date on the
composite tape for securities listed on the New York Stock Exchange or, if
the Common Stock did not trade on the New York Stock Exchange on the date
in question, then for the next preceding date for which the Common Stock
traded on the New York Stock Exchange.
(d) The term "Participant" shall mean any person who on a Payment Date is
a Director on the Board and is not an employee of the Company or a
subsidiary of the Company. For purposes of this Section 2(d), unless the
Board provides otherwise, a person shall not be considered an employee
solely by reason of serving as Chairman of the Board.
(e) The term "Payment Date" shall mean the date on which directors'
retainer fees are paid by the Company.
(f) The term "Retainer Amount" shall mean one-half of the aggregate
dollar amount declared by the Board to be payable as a quarterly directors'
retainer, including any retainer for chairing the Board or a Committee of
the Board, to each non-employee director of the Company, as determined from
time to time by the Board.
(g) The term "Shares" shall mean shares of Common Stock granted under
this Plan.
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<PAGE>
3. Effective Date. This Directors Plan shall be effective for the first
Payment Date occurring after approval of this Directors Plan by the
affirmative vote of the holders of a majority of the outstanding shares of the
Company present, or represented by proxy, and entitled to vote at a meeting of
the Company's stockholders or by written consent in accordance with the laws
of the State of Delaware; provided, that if such approval by the stockholders
of the Company is not forthcoming, this Directors Plan shall be of no effect.
Common Stock may not be issued under this Directors Plan after termination of
this Directors Plan by the Board, after issuance of all of the Shares
authorized for issuance under this Directors Plan or more than ten years after
the date of stockholder approval of this Directors Plan, whichever is earlier.
4. Plan Operation. This Directors Plan is intended to operate in a manner
that meets the requirements of a formula plan under Rule 16b-3 (or its
successor) adopted under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in a manner that does not affect the status of
Participants as "disinterested administrators" under such Rule 16b-3.
Accordingly this Directors Plan is intended to be self-governing and requires
no discretionary action by any administrative body with regard to any
transaction under this Directors Plan. Subject to the foregoing, this Plan
shall be administered by the Executive Personnel and Compensation Committee of
the Board (or any successor committee designated by the Board), and all
decisions, determinations and interpretations by the Committee regarding the
Plan shall be final and binding on all current, future and former
Participants. Such Committee may delegate to one or more of its members or to
any person or persons such ministerial duties as it may deem advisable. To the
extent any provision of this Directors Plan or action taken hereunder fails to
so operate under Rule 16b-3, such provision or action shall be deemed null and
void and shall be conformed so as to so operate, to the extent permitted by
law and deemed advisable by the Board.
5. Stock Subject to Directors Plan. The maximum number of Shares that may be
issued hereunder shall be 500,000, subject to adjustments under Section 6.
6. Adjustments. If the outstanding securities of the class then subject to
this Plan are increased, decreased or exchanged for or converted into cash,
property or a different number or kind of shares or securities, or if cash,
property or shares or securities are distributed in respect of such
outstanding securities, in either case as a result of a reorganization,
merger, consolidation, recapitalization, restructuring, reclassification,
dividend (other than a regular, quarterly cash dividend) or other
distribution, stock split, reverse stock split, spin-off or the like, or if
substantially all of the property and assets of the Company are sold, then,
unless the terms of such transaction shall provide otherwise, the Board shall
make an appropriate adjustment in the number and/or type of shares or
securities which may thereafter be issued under this Directors Plan.
2
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7. Stock Grants. Commencing on the first Payment Date for which this
Directors Plan is effective, and on each Payment Date thereafter during the
term of this Directors Plan, each Participant shall be granted a number of
Shares equal to the Retainer Amount divided by the Announcement Date Market
Price, rounded up to the nearest whole number of Shares. If on any date upon
which Shares are to be granted under this Directors Plan the number of Shares
remaining available under the Directors Plan is less than the number of Shares
required for all grants to be made on such date, then a proportionate amount
of such available number of Shares shall be granted to each Participant, and
in lieu of the Shares that otherwise would be issuable, the Participants shall
be paid an amount in cash equal to the Retainer Amount minus the aggregate
Announcement Date Market Price of the Shares then issued to each Participant.
8. Restrictions on Shares. If and to the extent that such is necessary in
order for the grant of Shares under this Directors Plan to be exempt from
Section 16(b) of the Exchange Act, Shares granted to a Participant under this
Plan shall not be transferable until six months after the date of grant.
9. Amendment and Termination. The Board may alter, amend, suspend, or
terminate this Directors Plan, provided that no such action shall deprive any
Participant, without his or her consent, of any Shares theretofore issued
under this Directors Plan, and provided further that the provisions of this
Directors Plan designating persons eligible to participate in the Directors
Plan and specifying the Retainer Amount and the amount and timing of grants
under this Directors Plan shall not be amended more than once every six months
other than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder, unless such
restriction on amendments to this Directors Plan is not necessary in order for
the Participants to remain "disinterested administrators" under Exchange Act
Rule 16b-3.
10. Taxes. The Board may make such provisions or impose such conditions as
it may deem appropriate for the withholding or payment by a Participant of any
taxes which it determines are necessary or appropriate in connection with any
issuance of Shares under this Plan, and a Participant's rights in any Shares
are subject to satisfaction of such conditions. The Company and any affiliate
of the Company shall not be liable to a Participant or any other persons as to
any tax consequence expected, but not realized, by any Participant or other
person due to the receipt of any Shares granted hereunder.
11. Compliance with Law. Shares shall not be issued under this Directors
Plan unless and until counsel for the Company shall be satisfied that any
conditions necessary for such issuance to comply with applicable federal,
state or local tax, securities or other laws or rules or applicable securities
exchange requirements have been fulfilled.
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12. Governing Law; Miscellaneous. This Directors Plan and any rights
hereunder shall be interpreted and construed in accordance with the laws of
the State of Delaware and applicable federal law. Neither this Directors Plan
nor any action taken pursuant thereto shall be construed as giving any
Participant any right to be retained in the service of the Company or
nominated for re-election to the Board.
13. Arbitration. Any claim, dispute or other matter in question of any kind
relating to this Plan shall be settled by arbitration in accordance with the
Rules of the American Arbitration Association, which proceedings shall be held
in the city in which the Company's executive offices are located. Notice of
demand for arbitration shall be made in writing to the opposing party and to
the American Arbitration Association within a reasonable time after the claim,
dispute or other matter in question has arisen. In no event shall a demand for
arbitration be made after the date when the applicable statute of limitations
would bar the institution of a legal or equitable proceeding based on such
claim, dispute or other matter in question. The decision of the arbitrators
shall be final and may be enforced in any court of competent jurisdiction.
4
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EXHIBIT 11
PAGE 1 OF 2
THE TIMES MIRROR COMPANY
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
PRIMARY
Average shares outstanding............... 113,797,192 128,611,404 128,587,823
Dilutive stock options based on the
treasury stock method using average
market price............................ * 195,752 153,081
----------- ----------- -----------
Total................................. 113,797,192 128,807,156 128,740,904
=========== =========== ===========
Income (loss) from continuing operations. $ (338,983) $ 132,223 $ 51,669
Discontinued operations.................. 1,578,458 53,126 265,490
Extraordinary loss on early retirement of
debt, net of income taxes............... (12,232)
----------- ----------- -----------
Income before cumulative effect of
changes in accounting principles........ 1,239,475 173,117 317,159
Cumulative effect of changes in
accounting principles................... (12,724)
----------- ----------- -----------
Net income............................... $ 1,226,751 $ 173,117 $ 317,159
=========== =========== ===========
Preferred dividends...................... $ 44,003 $ -- $ --
=========== =========== ===========
Cash paid in excess of liquidation value
for Series B preferred stock
repurchases............................. $ 43,085 $ -- $ --
=========== =========== ===========
Earnings applicable to common
shareholders............................ $ 1,139,663 $ 173,117 $ 317,158
=========== =========== ===========
Primary earnings (loss) per common share:
Continuing operations.................. $ (3.74) $ 1.03 $ .40
Discontinued operations................ 13.87 .41 2.06
Extraordinary loss..................... (.09)
Cumulative effect of changes in
accounting principles................. (.11)
----------- ----------- -----------
Primary earnings per common share........ $ 10.02 $ 1.35 $ 2.46
=========== =========== ===========
FULLY DILUTED
Average shares outstanding............... 113,797,192 128,611,404 128,587,823
Common shares assumed issued upon
conversion of Series B preferred stock.. 6,491,063
Dilutive stock options based on the
treasury stock method using year-end
market price, if higher than average
market price............................ 2,713,190 195,752 258,897
----------- ----------- -----------
Total................................. 123,001,445 128,807,156 128,846,720
=========== =========== ===========
Income (loss) from continuing operations. $ (338,983) $ 132,223 $ 51,669
Discontinued operations.................. 1,578,458 53,126 265,490
Extraordinary loss on early retirement of
debt, net of income taxes............... (12,232)
----------- ----------- -----------
Income before cumulative effect of
changes in accounting principles........ 1,239,475 173,117 317,159
Cumulative effect of changes in
accounting principles................... (12,724)
----------- ----------- -----------
Net income............................... $ 1,226,751 $ 173,117 $ 317,159
=========== =========== ===========
Preferred dividends...................... $ 27,452
===========
Cash paid in excess of liquidation value
for Series B preferred stock
repurchases............................. $ 43,085
===========
Earnings applicable to common
shareholders............................ $ 1,156,214 $ 173,117 $ 317,159
=========== =========== ===========
Fully diluted earnings (loss) per common
share:
Income before cumulative effect of
changes in accounting principles...... $ 9.50 $ 1.35 $ 2.46
Cumulative effect of changes in
accounting principles................. (.10)
----------- ----------- -----------
Fully diluted earnings per common share.. $ 9.40 $ 1.35 $ 2.46
=========== =========== ===========
</TABLE>
- -------
* Less than 3% dilution: common stock equivalents of 1,653,088 are not added
to weighted average shares.
<PAGE>
EXHIBIT 11
PAGE 2 OF 2
THE TIMES MIRROR COMPANY
COMPUTATION OF EARNINGS PER SHARE (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOURTH QUARTER
ENDED DECEMBER 31
------------------------
1995 1994
----------- -----------
<S> <C> <C>
PRIMARY
Average shares outstanding........................... 108,164,728 128,615,548
Dilutive stock options based on the treasury stock
method using average market price................... * 135,684
----------- -----------
Total............................................. 108,164,728 128,751,232
=========== ===========
Income (loss) from continuing operations............. $ (141,632) $ 51,650
Discontinued operations.............................. 13,305
Extraordinary loss on early retirement of debt, net
of income taxes..................................... (12,232)
----------- -----------
Net income (loss).................................... $ (141,632) $ 52,723
=========== ===========
Preferred dividends.................................. $ 12,052 $ --
=========== ===========
Cash paid in excess of liquidation value for Series B
preferred stock repurchases......................... $ 21,818 $ --
=========== ===========
Earnings (loss) applicable to common shareholders.... $ (175,502) $ 52,723
=========== ===========
Primary earnings (loss) per common share:
Continuing operations.............................. $ (1.62) $ .40
Discontinued operations............................ .10
Extraordinary loss................................. (.09)
Cumulative effect of changes in accounting
principles........................................
----------- -----------
Primary earnings (loss) per common share............. $ (1.62) $ .41
=========== ===========
FULLY DILUTED
Average shares outstanding........................... 108,164,728 128,615,548
Common shares assumed issued upon conversion of
Series B preferred stock............................ 7,789,276
Dilutive stock options based on the treasury stock
method using year-end market price, if higher than
average market price................................ 2,713,190 135,684
=========== ===========
Total............................................. 118,667,194 128,751,232
=========== ===========
Income (loss) from continuing operations............. $ (141,632) $ 51,650
Discontinued operations.............................. 13,305
Extraordinary loss on early retirement of debt, net
of income taxes..................................... (12,232)
----------- -----------
Net income (loss).................................... $ (141,632) $ 52,273
=========== ===========
Preferred dividends.................................. $ 8,236 $ --
=========== ===========
Cash paid in excess of liquidation value for Series B
preferred stock repurchases......................... $ 21,818 $ --
=========== ===========
Earnings (loss) applicable to common shareholders.... $ (171,686) $ 52,273
=========== ===========
Fully diluted earnings (loss) per common share:
Income before cumulative effect of changes in
accounting principles............................. $ * $ .41
Cumulative effect of changes in accounting
principles........................................
----------- -----------
Fully diluted earnings (loss) per common share....... $ * $ .41
=========== ===========
</TABLE>
- --------
* Antidilutive due to loss: common stock equivalents of 2,388,829 are not
added to weighted average shares.
<PAGE>
EXHIBIT 12
PAGE 1 OF 2
THE TIMES MIRROR COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------
1995 1994 1993 1992 1991
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Fixed Charges
Interest expense............. $ 29,467 $ 69,322 $ 84,054 $ 74,281 $ 76,724
Interest related to ESOP(a).. 1,376 2,611 4,113 5,074
Capitalized interest......... 485 1,142 391 3,963 13,537
Portion of rents deemed to be
interest.................... 22,180 20,418 21,007 21,857 21,190
Amortization of debt expense. 411 339 995 600 866
--------- -------- -------- -------- --------
Total Fixed Charges....... $ 52,543 $ 92,597 $109,058 $104,814 $117,391
========= ======== ======== ======== ========
Earnings (Loss)
Income (loss) from continuing
operations before income
taxes....................... $(455,013) $257,899 $109,785 $ (7,102) $ 55,348
Fixed charges, less
capitalized interest and
interest related to ESOP
(a)......................... 52,058 90,079 106,056 96,738 98,780
Amortization of capitalized
interest.................... 4,475 4,229 4,222 5,963 4,576
Distributed income from less
than 50% owned
unconsolidated affiliates... 352 292 281 214 190
Subtract: equity loss
(income) from less than 50%
owned unconsolidated
affiliates.................. (615) 1,158 1,067 2,025 (2,857)
--------- -------- -------- -------- --------
Total Earnings (Loss)..... $(398,743) $353,657 $221,411 $ 97,838 $156,037
========= ======== ======== ======== ========
Ratio of earnings to fixed
charges...................... (b) 3.8x 2.0x (c) 1.3x
</TABLE>
- --------
(a) The Company guaranteed repayment of debt of the Employee Stock Ownership
Plan and, accordingly, included the related interest in fixed charges.
This debt was repaid on December 15, 1994.
(b) Earnings are approximately $451 million lower than the amount needed to
cover fixed charges in this year, as earnings in 1995 were impacted by
approximately $768 million in restructuring charges.
(c) Earnings are approximately $7 million lower than the amount needed to
cover fixed charges in this year, as earnings in 1992 were impacted by
over $200 million in restructuring charges.
<PAGE>
EXHIBIT 12
PAGE 2 OF 2
THE TIMES MIRROR COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
-------------
<S> <C>
Fixed Charges
Interest expense.................................. $ 29,467
Capitalized interest.............................. 485
Portion of rents deemed to be interest............ 22,180
Amortization of debt expense...................... 411
---------
Total Fixed Charges............................ $ 52,543
Preferred Stock Dividend Requirements.............. 74,581
---------
Fixed Charges and Preferred Stock Dividends.... $ 127,124
=========
Earnings (Loss)
Loss from continuing operations before income
taxes............................................ $(455,013)
Fixed charges, less capitalized interest.......... 52,058
Amortization of capitalized interest.............. 4,475
Distributed income from less than 50% owned
unconsolidated affiliates........................ 352
Subtract: Equity income from less than 50% owned
unconsolidated affiliates........................ (615)
---------
Total Loss..................................... $(398,743)
=========
Ratio of earnings to fixed charges and preferred
stock dividends................................... (a)
</TABLE>
- --------
(a) Earnings are approximately $526 million lower than the amount needed to
cover fixed charges and preferred stock dividends in this year, as
earnings were impacted by approximately $768 million in restructuring
charges.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE TIMES MIRROR COMPANY
AS OF MARCH 1, 1996*
<TABLE>
<CAPTION>
STATE OF
NAME INCORPORATION
---- -------------
<S> <C>
The Baltimore Sun Company................................... Maryland
The Hartford Courant Company................................ Connecticut
Jeppesen & Co., GmbH**...................................... Germany
Jeppesen Sanderson, Inc. ................................... Delaware
LOS ANGELES TIMES***........................................
Matthew Bender & Company, Incorporated**.................... New York
The Morning Call, Inc. ..................................... Pennsylvania
Mosby-Year Book, Inc. ...................................... Missouri
Newsday, Inc.**............................................. New York
Times Mirror Higher Education Group, Inc. .................. Delaware
Times Mirror International Publishers U.S. Inc.**........... Delaware
Times Mirror Magazines, Inc.**.............................. New York
</TABLE>
- --------
* The names of certain other subsidiaries have been omitted because,
considered in the aggregate as a single subsidiary, they would not
constitute a significant subsidiary.
** 100% owned by a wholly-owned subsidiary of the Registrant. (All other
subsidiaries listed above are wholly-owned by the Registrant.)
*** THE LOS ANGELES TIMES is an operating division of the Registrant, rather
than a separately incorporated subsidiary.
<PAGE>
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No.
33-62165 on Form S-3 and Registration Statement No. 33-88618 on Form S-8 with
respect to the consolidated financial statements and financial statement
schedule of The Times Mirror Company included in the Annual Report (Form 10-K)
for the year ended December 31, 1995.
ERNST & YOUNG LLP
Los Angeles, California
March 28, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FOURTH
QUARTER 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 182,901
<SECURITIES> 72,806
<RECEIVABLES> 641,364
<ALLOWANCES> 79,536
<INVENTORY> 173,568
<CURRENT-ASSETS> 1,248,037
<PP&E> 2,078,439
<DEPRECIATION> 903,608
<TOTAL-ASSETS> 3,817,159
<CURRENT-LIABILITIES> 1,035,190
<BONDS> 0
0
576,379
<COMMON> 105,698
<OTHER-SE> 1,124,159
<TOTAL-LIABILITY-AND-EQUITY> 3,817,159
<SALES> 3,448,287
<TOTAL-REVENUES> 3,448,287
<CGS> 1,843,475
<TOTAL-COSTS> 1,843,475
<OTHER-EXPENSES> 634,077
<LOSS-PROVISION> 25,184
<INTEREST-EXPENSE> 29,467
<INCOME-PRETAX> (455,013)
<INCOME-TAX> (116,030)
<INCOME-CONTINUING> (338,983)
<DISCONTINUED> 1,578,458
<EXTRAORDINARY> 0
<CHANGES> (12,724)
<NET-INCOME> 1,226,751
<EPS-PRIMARY> 10.02
<EPS-DILUTED> 9.40
</TABLE>
