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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 THE FISCAL YEAR ENDED APRIL 30, 1996 COMMISSION FILE NUMBER 0-25372
U.S. OFFICE PRODUCTS COMPANY
(Exact name of registrant as specified in its charter)
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DELAWARE 52-1906050
(State or other (I.R.S. Employer
jurisdiction of Identification
incorporation or No.)
organization)
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1440 NEW YORK AVENUE, N.W. SUITE 310, WASHINGTON, D.C. 20005
(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (202) 628-9500
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.001
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 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 statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of July 10, 1996 was $1,126,029,263.
As of July 10, 1996, 34,469,988 shares of the Registrant's Common Stock,
$.001 par value per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Items 10, 11, 12 and 13 of Form 10-K is
incorporated by reference into Part III hereof, from the registrant's proxy
statement, which will be filed with the Securities and Exchange Commission
within 120 days after the close of the fiscal year covered by this Form 10-K,
and certain documents are incorporated by reference into Part IV hereof.
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PART I
ITEM 1. BUSINESS
U.S. Office Products Company (the "Company," or "U.S. Office Products") is
one of the world's largest and fastest growing suppliers of a broad range of
office products to corporate, commercial, industrial and educational customers.
Since its founding, the Company has acquired 65 companies (the "Completed
Acquisitions"); 17 of these acquisitions have closed subsequent to April 30,
1996. In addition, as of July 10, 1996, the Company believed that the
acquisition of an additional 46 companies that sell a variety of office
supplies, office furniture, coffee and breakroom supplies and services and
school supplies and school furniture was probable (the "Pending Acquisitions").
The Company generally has acquired and seeks to acquire companies with
established sales presences and brand names in given geographic markets, and
seeks to achieve operating efficiencies through consolidated purchasing of
products and services and implementation of operational improvements. The
Company's objective is to be the leading single source supplier of a broad array
of office and educational products and services for its corporate, commercial,
industrial, and educational customers. Currently, the Company sells a full range
of over 28,000 office and educational products to customers in 34 states and
internationally.
The Company has an aggressive acquisition program utilizing a "hub and
spoke" strategy for expansion into and around its targeted metropolitan areas.
This strategy involves the acquisition of (i) a larger established, high quality
local company, or hub, and (ii) additional smaller companies, or spokes, in
secondary markets surrounding the hub. Where possible, the operations of the
acquired spokes are integrated into operations of existing hubs, thereby
eliminating a portion of the operating expenses of the acquired spokes. The
Company believes that its decentralized management strategy, which includes the
retention of local management, sales personnel and the names of the acquired
companies, and other operating strategies described below, facilitate the
identification of acquisition candidates and make the Company an attractive
acquiror.
PRINCIPAL PRODUCTS AND SERVICES
During fiscal 1996, the Company offered a broad array of office products and
services to its corporate, commercial and industrial customers. In May 1996, the
Company acquired School Specialty, Inc. ("School Specialty"), a leading supplier
of school supplies and school furniture to the kindergarten through 12th grade
educational market. Through its ongoing acquisition program (including the
Pending Acquisitions), the Company will further expand its capabilities in the
office supplies, office coffee services, office furniture, school supplies and
school furniture markets, both domestically and internationally.
The Company believes that these markets are interrelated because they are
served through similar and sometimes overlapping distribution channels. For
example, many of the companies in the markets in which the Company operates
provide products and services in other markets through the same sales force and
delivery personnel. The Company believes that many of the markets that the
Company serves are fragmented and are currently undergoing consolidation.
Moreover, the Company believes that by participating in this consolidation, it
will be able to leverage its existing sales, warehousing, and distribution
capabilities in various related markets because of the similarity of
distribution systems and route structures and the commonality of customers.
The following are the principal markets that the Company serves:
DOMESTIC OFFICE SUPPLIES
The Company sells office and related supplies in the domestic office
contract stationer market. As of July 10, 1996, the Company served this market
from 27 hubs and 30 spokes located in 27 states. The Pending Acquisitions
include four hubs and 11 spokes, some of which are located in two additional
states, that sell supplies in the office contract stationer market.
The traditional office supplies market in the United States generates
approximately $60 billion in annual sales. The companies servicing this market
include: (i) discount superstore retailers; (ii) mail order marketers; (iii)
traditional retail stores; and (iv) contract stationers. Independent estimates
indicate that the aggregate size of the retail and mail order markets is
approximately $30 billion in annual sales and that the size of the contract
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stationer market is also approximately $30 billion in annual sales. The Company
believes that the office supplies market can be classified by customer type into
three segments: the large corporate segment, the medium corporate segment and
the small office segment.
The LARGE CORPORATE SEGMENT is comprised of companies with 250 or more
employees. These customers often negotiate contract pricing on many of the
office products they routinely purchase and demand a high level of service,
including free, next-day delivery, account relationship managers, credit terms,
and customized billing and information services. This segment has historically
been served by contract stationers.
The MEDIUM CORPORATE SEGMENT is comprised of companies with more than 20,
but fewer than 250, employees. This segment historically has been served
primarily by contract stationers, and, to a much lesser extent, by mail order
marketers and traditional retail dealers. Discount superstore chains and mail
order marketers have attempted to gain market share in this segment by providing
delivery services and allowing credit card purchases. However, the Company
believes that discount superstores and mail order marketers have achieved only
limited penetration because they do not provide the level of service required by
customers in this segment.
The SMALL OFFICE SEGMENT consists of home offices and small businesses with
20 or fewer employees. These customers historically have purchased office
supplies from retail dealers at or near manufacturers' list prices. Discount
superstores and mail order marketers have captured an increasing share of sales
to this segment primarily by offering lower prices and providing a better
product selection than retail dealers.
The Company operates primarily in the medium and large corporate segments of
the office supplies market. A small number of the Company's subsidiaries, and at
least one of the Pending Acquisitions, also operate retail office supply
outlets. Historically, the corporate office supplies segment has been
characterized by numerous contract stationers, most of which operate in only one
metropolitan area and have annual sales of less than $15 million. However, as
the office products industry undergoes rapid consolidation, the Company believes
that many smaller office supply companies will be unable to compete because, in
part, of their inability to service national accounts and either will be
acquired by larger companies or closed. The Company believes that it has five
competitors with revenues in excess of $400 million supplying office products to
the corporate segments, that none of these competitors has a market share in
excess of 10% and that their combined market share is less than 30%. See "--
Competition."
OFFICE COFFEE SERVICES
The Company sells coffee, food, beverages, and related supplies for the
breakroom through its office supplies businesses currently all under the name
"The Coffee Butler." The Pending Acquisitions include 17 companies serving this
market. These Pending Acquisitions will provide the Company with the right to
distribute Starbucks-Registered Trademark- coffee to the corporate office market
in certain geographic regions.
Office coffee services ("OCS") businesses typically provide and install
coffee brewing equipment in a customer's office at no charge but require
customers to purchase, on an ongoing basis, a minimum volume of coffee and
related items from the OCS business. OCS businesses generally also offer a wide
assortment of both coffee and related products, including creamers, sugar,
stirrers, beverages, coffees, teas, sodas, juices and bottled waters, as well as
snack items and all other items that are likely to be found in an employee
"breakroom" or lunch room, including plastic flatware, napkins, paper cups,
straws and similar items. The Company believes that the OCS industry in the
United States generates approximately $2.3 billion in annual sales. The Company
believes that this industry is also highly fragmented, with most companies in
the industry having sales of under $10 million.
OFFICE FURNITURE
The Company sells catalog, contract and remanufactured furniture to the
office furniture market, both through its office supplies businesses and through
two subsidiaries that principally serve the furniture market. The Pending
Acquisitions include six companies that focus on the furniture market.
The Company sells furniture to three different types of customers. The
retail customer typically purchases furniture such as lower-priced chairs and
file cabinets from the Company's office supplies catalogs. The mid-
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market customer typically purchases furniture of higher quality and
functionality, and the large customer buys high-quality furniture of a more
sophisticated design and tends to make project-oriented purchases. The Company
also sells refurbished and remanufactured furniture specially designed for
contract and mid-market customers. To a lesser extent, the Company rents
furniture to various customers on a short-term basis.
The Company believes that there are thousands of companies selling contract
furniture to the corporate, commercial and industrial markets. The Company
believes that the contract office furniture market in North America had sales of
approximately $9.5 billion in 1995.
SCHOOL SUPPLIES AND SCHOOL FURNITURE
The Company sells school and office supplies and school furniture to the
kindergarten through 12th grade educational market primarily through its School
Specialty subsidiary, which recently has acquired two companies serving this
market. The Pending Acquisitions include three companies serving this market.
The Company's school supplies and school furniture business focuses on the
approximately 106,000 private and public schools that serve approximately 49.8
million kindergarten through 12th grade students in the United States.
Categories of sales in the educational market include classroom, art, office and
instructional materials (excluding textbooks), and desks, chairs, tables and
other furniture for classroom, cafeteria, library, locker and laboratory use.
The Company believes that this highly fragmented industry of over 1,000
independent dealers generated sales totaling over $3.0 billion in 1995.
INTERNATIONAL OFFICE PRODUCTS
The Company sells office products and services internationally through Blue
Star Group Limited ("Blue Star") and its subsidiaries in New Zealand. The
Pending Acquisitions include five additional companies in New Zealand and
Australia. The Company's international operations currently include, in addition
to the core office products business, the sale and leasing of telecommunications
and office automation equipment and products, as well as the provision of
related maintenance and system design and implementation services.
The Company believes that the international office supplies industry is
highly fragmented, and that, like the office supplies industry in the United
States, it represents a consolidation opportunity for the Company. According to
independent research estimates, annual sales in the contract stationer market in
developed countries excluding the United States exceed $70 billion. The Company
intends to focus significant attention and resources on international expansion
and expects foreign sales to represent an increasing proportion of the Company's
total sales. The Company's initial acquisition efforts outside of the United
States are expected to focus on companies in English-speaking countries.
ACQUISITION STRATEGY
The Company has an aggressive acquisition program utilizing a "hub and
spoke" strategy for expansion into and around its targeted metropolitan areas.
This strategy involves the acquisition of (i) a larger established, high quality
local company, or hub, in each metropolitan area and (ii) additional smaller
companies, or spokes, in secondary markets surrounding the hub.
In most instances, the Company expects to retain the management, sales
personnel and name of the acquired hub while seeking to improve the Company's
profitability by implementing its operating strategies, rather than bringing in
outside management and converting the local operation to a standardized national
business model. The Company believes that its decentralized management strategy
and other operating strategies make it an attractive acquiror of additional
hubs, particularly for those companies whose owners desire to remain involved in
the day-to-day operations of their companies. The Company also intends to
continue to acquire additional smaller companies, or spokes, in secondary
markets surrounding its hubs. Where possible, the operations of the acquired
spokes are integrated into the operations of existing hubs, thereby eliminating
a portion of the operating expenses of the acquired spokes. The Company believes
that its decentralized management strategy and local presence facilitate the
identification of spoke acquisition candidates.
As consideration for future acquisitions, the Company intends to continue to
use various combinations of shares of the Company's common stock (the "Common
Stock") and cash.
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The Company is actively negotiating to acquire additional office and
educational products businesses, both in the United States and internationally,
consistent with its strategy of pursuing an aggressive acquisition program.
While the Company expects to complete acquisitions in addition to the Pending
Acquisitions, there can be no assurances in this regard.
OPERATING STRATEGY
The Company believes that its decentralized management strategy, coupled
with operating efficiencies, enables it to compete effectively in its target
markets. The Company has implemented programs designed to achieve operating
efficiencies by: (i) increasing sales opportunities by broadening the complement
of products and services it offers; (ii) generating cost savings through volume
purchasing of office products; (iii) combining certain general and
administrative functions at the corporate level and eliminating redundant
facilities; (iv) installing improved operating and technology systems; and (v)
producing a Company-wide proprietary office supplies catalog in order to
increase the percentage of office supplies purchased directly from
manufacturers.
DECENTRALIZED MANAGEMENT. The Company operates with a decentralized
management strategy, rather than a standardized national model. The Company
believes that many customers purchase products based on an established long-term
business relationship with one primary supplier. The Company typically empowers
its experienced local management to foster these long-term relationships and
provide superior customer service. The local management also typically is
empowered to make decisions relating to the day-to-day operations of a
particular location and is primarily responsible for the profitability and
growth of its local business. Local management also participates actively in the
identification of acquisition candidates and the process of integrating newly
acquired companies into U.S. Office Products. The Company believes that this
decentralized management philosophy results in better customer service by
allowing local management the flexibility to implement policies and make
decisions based on the needs and desires of local customers. The Company
encourages its local managers to work collaboratively within geographic regions
and to share successful operating strategies.
BROADENING OFFERED PRODUCTS AND SERVICES. The Company intends to continue
to broaden the complement of products and services it offers at its locations to
increase its sales to existing customers. The Company believes that many of its
subsidiaries can maximize their sales, warehousing and distribution capabilities
by offering a broader array of products or services to their customers. For
example, many of the Company's subsidiaries offer to the same customers office
supplies, contract furniture, and coffee, beverage and snack products and
services. When completed, the Pending Acquisitions will expand the array of
products and services offered through the Company's operations and the Company
expects to continue this strategy. Outside of the United States, the Company
currently also expects to enter into businesses that offer a broad array of
products and services to corporate, commercial, industrial and educational
customers. Some of the Company's current and future subsidiaries (including, for
example, the Company's school supply subsidiaries), however, are likely to
continue to focus on providing a distinct group of products or services to their
customers. Such businesses may operate through sales forces and distribution
systems that are separate from the ones used by the Company's core office
products businesses.
VOLUME PURCHASING. Office product manufacturers historically have offered
more favorable prices and rebates to high volume purchasers. As it has grown,
the Company has negotiated certain additional discounts and rebates with its
suppliers and vendors and believes that it will be able to increase the
discounts and rebates in the future.
COMBINING FUNCTIONS AND FACILITIES. The Company believes that it will be
able to achieve operating efficiencies available to a large company by
eliminating redundant facilities and by combining certain general and
administrative functions at the corporate level to reduce overhead. For example,
the Company has begun to combine at the corporate level: (i) purchasing programs
for office products; (ii) development, implementation and purchasing of computer
systems; (iii) purchasing or leasing of delivery vehicles; and (iv) accounting,
insurance, financial management, marketing and legal support. In addition, the
Company believes that the expansion of operations and the integration of
existing operations and facilities with those acquired in the future
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will offer significant opportunities to achieve operating efficiencies. The
Company has begun to consolidate its warehousing and distribution functions and,
to the extent that the expense can be justified, it intends to continue to
consolidate such functions.
OPERATING AND TECHNOLOGY SYSTEMS. Certain subsidiaries have developed
operating and technology systems designed to improve and enhance their
operations, including computerized inventory management and order processing
systems and warehouse management and distribution systems. Through a custom
bar-coding system, two of the Company's larger subsidiaries process orders and
track inventory and order fulfillment on a real-time basis, forecast demand by
specific inventory item or stock keeping unit ("SKU") and generate customized
usage and billing reports for their customers. The Company believes that this
bar-coding system has significantly increased the speed and accuracy of order
processing and fulfillment at these subsidiaries, while reducing their inventory
investment by increasing inventory turns. To the extent that the expense can be
justified, the Company intends to implement this system at other subsidiaries.
PRODUCTION OF A PROPRIETARY CATALOG. Most office products companies provide
customers with catalogs produced by wholesalers, bearing the name of the office
products company, and listing between 15,000 and 24,000 SKUs. Prior to their
acquisition by the Company, certain subsidiaries published proprietary catalogs
that included the best selling items that they regularly maintained in stock.
These proprietary catalogs have assisted the subsidiaries in reducing their
reliance on wholesalers and enabling them to purchase more items directly from
manufacturers at lower cost. The Company publishes and distributes on a
Company-wide basis a proprietary catalog of its office products including
approximately 4,000 SKUs which is being used in conjunction with wholesaler
produced catalogs. Consistent with the Company's decentralized operating
approach, the Company-wide catalog is customized for each subsidiary so that the
cover bears the name of the subsidiary and the initial pages provide information
specifically about that subsidiary.
OPERATIONS
The discussion that follows focuses on the development of the Company's
operations in its core domestic contract stationer businesses. Through the end
of fiscal 1996, these businesses accounted for the vast majority of the
Company's operations. Many of the operating plans and strategies discussed below
have been applied to the Company's growing OCS businesses, which were integrated
with its contract stationer operations during fiscal 1996. The Company expects
that many of the OCS businesses acquired in the future will be integrated with
the contract stationer operations; however, the Company may operate some OCS
businesses on a stand-alone basis, at least for a period of time. The Company
also expects that some office furniture businesses will be operated on a
stand-alone basis, while others will be integrated with contract stationer
businesses. The Company is operating the majority of its school supplies and
school furniture business separately from its contract stationer businesses. The
Company generally intends to apply to other product and service markets its hub
and spoke approach to acquisitions and intends to emphasize its decentralized
management strategy and obtain efficiencies through the implementation of
programs and systems that are similar, or in some cases identical, to those
being used in the Company's domestic contract stationer businesses. There can be
no assurance that these strategies will prove successful in other product and
service markets.
During fiscal 1996, the Company sold a wide variety of office supplies,
office furniture and other office products directly to corporate, commercial and
industrial customers through a catalog-based system. In addition, the Company
sold coffee, food, beverages and related supplies for the breakroom to these
customers.
The Company generally provides next-day delivery of ordered items and, on
request, same-day delivery. This "just in time" service enables certain
customers to reduce overhead cost by reducing inventory and the associated
personnel and space requirements. The Company believes that many of its
customers purchase office products based on an established long-term business
relationship with one primary supplier. Accordingly, the Company's operations,
and the improvements and enhancements that the Company intends to implement, are
primarily focused on achieving superior customer satisfaction, as well as
operating efficiencies.
The Company obtains office products from many sources, including
manufacturers and wholesalers, and maintains warehouses from which ordered items
are delivered to customers. With respect to office supplies,
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approximately one-third of ordered items are not kept in inventory but are
obtained by the Company from wholesalers with which the Company has
relationships. The Company does not believe that its ability to deliver goods to
its customers is dependent on any particular wholesaler.
MERCHANDISING AND PRODUCTS
The Company sells a full complement of brand name office products, including
paper products, desktop accessories, writing instruments, business machines,
office furniture and breakroom supplies. The Company provides its customers with
one or more catalogs containing full color photographs and descriptions of
offered items.
The Company publishes and distributes to its customers a uniform
Company-wide proprietary catalog of office products including approximately
4,000 best-selling SKUs that it regularly maintains in inventory. See "--
Operating Strategy -- Production of a Proprietary Catalog." Items will be
included or deleted from this proprietary catalog annually, based on an analysis
of the highest selling items. In addition, the Company's subsidiaries provide
customers with additional catalogs that are produced by wholesalers, bear the
name of the Company's local operation, and list between 15,000 and 24,000 SKUs.
Customers are able to select items from either the Company's proprietary catalog
or a wholesaler catalog and receive next-day delivery of ordered items. Because
the Company purchases most of the items listed in the proprietary catalog
directly from the manufacturer at lower costs than from the wholesaler, the
Company is able to offer lower prices to its customers for items in the
proprietary catalog. The Company believes that the proprietary catalog has begun
to improve inventory management, reduce costs by centralizing catalog production
for its subsidiaries, focus its customers on the Company's in-stock items, and
provide an alternative to wholesaler produced catalogs.
ORDER PROCESSING
Orders are received by the Company's sales personnel primarily by telephone
or facsimile. In addition, the Company uses an electronic data interchange
("EDI") system between the Company and certain of its customers. Using this
system, customers are able to place orders directly into the Company's computer
systems, manage their own inventory and generate customized usage reports and
invoices.
Orders to be filled are routed to either the Company's warehouse or, if the
ordered item is not stocked by the Company at its local warehouse, to a
wholesaler. At certain facilities, the Company's order processing system, which
is electronically linked to local wholesalers, determines on a real-time basis
if an ordered item is to be filled from the Company's warehouse or from a
wholesaler. When a customer order needs to be filled from a wholesaler, the
system automatically generates a corresponding order for the wholesaler. The
Company has begun to implement similar systems at additional facilities.
ORDER FULFILLMENT AND DISTRIBUTION
After receiving a customer order, the Company fills the order (excluding
items to be supplied by wholesalers) by "picking" the goods from the Company's
warehouse. At certain facilities, the Company's computer systems automatically
generate "picking" orders arranged according to the location of ordered items
within the Company's warehouse, improving the efficiency of warehouse personnel
in filling orders. The Company also has installed conveyer systems at these
facilities to move orders through the Company's warehouses more efficiently.
When orders have been picked, they are combined with the wholesaler portion of
the order, if required. Finally, delivery-ready orders are staged and loaded
onto trucks on a first-in, last-out basis, based on delivery routes. At these
facilities, staging and loading of trucks and delivery routes are computer
generated to improve delivery and distribution efficiency. The warehouses of two
of the Company's larger subsidiaries have had improved fulfillment rates using
these technology systems. Therefore, the Company intends to implement these
systems as it consolidates additional warehouses.
The Company delivers ordered items using Company-owned trucks, leased trucks
and unaffiliated delivery companies.
INVENTORY MANAGEMENT
The Company has made a substantial investment in developing an extensive
custom bar-coding system at two subsidiaries and believes that it is among the
first office products companies to implement such an extensive
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bar-coding system. This technology enables the Company to track inventory
through prompt recording of both received inventory and outgoing orders,
permitting the Company to restock on a daily basis and further reducing the
Company's reliance on wholesalers. In addition, this system enables the Company
to forecast product demand by SKU, enabling it to select the highest selling
items for its proprietary catalog. The Company believes that this bar-coding
system has been a significant factor in reducing its inventory investment over a
multi-year period by increasing annualized inventory turns at these two
subsidiaries from approximately eight, prior to implementation of this system,
to approximately 14 after implementation. The subsidiaries that do not use the
Company's bar-coding system track inventory by manually entering into their
computer systems inventory received and shipped. The Company intends to
implement this bar-coding system as it consolidates warehouses.
SALES AND MARKETING
The Company believes that its ability to maintain and grow its customer and
revenue base will depend, in part, on its ability to maintain a high level of
customer satisfaction, as well as competitive prices. The Company believes that
its customers typically purchase office products based on an established
long-term business relationship with one primary supplier. The Company
establishes and maintains its relationships with customers by assigning a sales
representative to most customers. Sales representatives, who are compensated
almost exclusively on a commission and/or incentive basis, have frequent contact
with their customers and share responsibility for increasing account penetration
and providing customer service. Sales representatives also are responsible for
marketing efforts directed to prospective customers and for responding to all
bid and/or contract requests for their existing and prospective customers. The
Company emphasizes a team approach, and generally integrates management, sales,
customer service, purchasing and other personnel into the relationship with each
customer. The Company believes that its decentralized management strategy offers
it a competitive advantage because, by not adhering to a standardized national
model, it has greater flexibility to respond to the needs of each local customer
while achieving the buying power and operating efficiencies of a large company.
The Company focuses its marketing efforts on the medium and large corporate
segments of the office products industry. The Company believes that a
significant opportunity exists in the medium corporate segment and that the
larger office products companies with which the Company competes have focused
more on the large corporate segment. The Company sells primarily through direct
contact with customers and potential customers and does not conduct significant
mass market advertising.
The Company continues to leverage its expertise in operations that are not
typical of traditional contract stationers, such as office coffee service
operations, by training its sales personnel in these different areas and
emphasizing a full service approach to its sales. The Company believes that, by
integrating its office products operations with these other related operations,
it can leverage its sales, warehousing and distribution capabilities, while
offering its corporate, commercial and industrial customers a single source
vendor for more of their office requirements.
NON-COMPETITION AGREEMENTS
When acquiring businesses, the Company has required the controlling
stockholders of the selling companies to agree not to compete with the Company
or solicit its customers or employees for up to four years from the date on
which the Company acquired their companies. Selling stockholders who enter into
employment agreements with the Company enter into similar restrictive covenants
that continue for the period of employment plus up to two years after
termination.
COMPETITION
The Company operates in a highly competitive environment. The Company's
competitors in the markets that it serves are generally smaller, independent
companies, many of which are well-established in their markets. In addition, in
the contract stationer market, the Company competes with five large office
products companies, each of which is believed to have annual sales in excess of
$400 million: Boise Cascade Office Products Corporation; Corporate Express,
Inc.; Office Depot, Inc.; BT Office Products International, Inc.; and Staples,
Inc. Two of these five competitors are divisions of discount superstore chains
and two others are owned in substantial portion by large manufacturers of office
products.
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In the contract stationer market, as well as the other markets that it
serves or proposes to serve, the Company believes that customers not only are
concerned with the overall reduction of their office products costs but also
place an emphasis on dependability, superior levels of service and flexible
delivery capabilities. The Company believes that it competes favorably with the
five large companies in the contract stationer market on the basis of service
and price. However, some of these companies have greater financial resources
than the Company.
The Company faces significant competition to acquire additional businesses
as the office products industry undergoes continuing consolidation. Significant
competition exists, or is expected to develop, in the other markets that the
Company serves or is planning to enter, as consolidation occurs (or accelerates)
in those markets. A number of the Company's major competitors are actively
pursuing acquisitions outside of the United States. These companies, or other
large companies, may compete with the Company for acquisitions in markets other
than the market for office products. Such competition could lead to higher
prices being paid for acquired companies. The Company believes that its
decentralized management strategy and other operating strategies make it an
attractive acquiror of other companies. However, no assurance can be given that
the Company's acquisition program will be successful in the future.
EMPLOYEES
As of April 30, 1996, the Company had approximately 5,700 full-time
employees, a small number of which are members of labor unions. The Company
considers its relations with its employees to be satisfactory.
FACTORS AFFECTING THE COMPANY'S BUSINESS
The future operating results of the Company may be affected by a number of
factors, including the matters discussed below.
The Company has an aggressive acquisition strategy that has involved, and is
expected to continue to involve, the acquisition of a significant number of
additional companies in related lines of businesses. There can be no assurance,
however, that acquisitions will occur at the same pace or be available to the
Company on favorable terms, if at all. For example, if the price of a share of
Common Stock declines, the owners of potential acquisition targets may not be
willing to receive shares of Common Stock in exchange for their businesses,
thereby adversely affecting the pace of the Company's acquisition program. Such
an effect on the pace of the Company's acquisition program could further reduce
the price of a share of Common Stock, to the further detriment of the Company's
acquisition strategy. In addition, the consolidation of the contract stationer
industry has reduced the number of larger companies available for sale, which
could lead to higher prices being paid to acquire such companies. The failure to
acquire additional businesses and to acquire such businesses on favorable terms
in accordance with the Company's growth strategy could have a material adverse
impact on future sales and profitability. See "Acquisition Strategy."
The Company's acquisition strategy has resulted in a significant increase in
sales, employees, facilities and distribution systems. While the Company's
decentralized management strategy, together with operating efficiencies
resulting from the elimination of duplicative functions and economies of scale,
may present opportunities to reduce costs, such strategies may initially
necessitate costs and expenditures to expand operational and financial systems
and corporate management and administration. These various costs and possible
cost-savings strategies may make historical operating results not indicative of
future performance. In addition, there can be no assurance that the pace of the
Company's acquisitions will not adversely affect the Company's efforts to
implement its cost-savings strategies and to manage its acquisitions profitably.
The Company operates in a highly competitive environment. Some of the
Company's current and potential competitors are larger than the Company and have
greater financial resources. No assurances can be given that competition will
not have an adverse effect on the Company's business. See "-- Competition."
The Company also expects to focus significant attention and resources on
future international expansion. In addition to the factors described above that
may impact the Company's domestic operations, the Company's operations in
foreign markets are subject to a number of inherent risks, including currency
exchange rates, new and different legal and regulatory requirements,
difficulties in staffing and managing foreign operations, risks specific to
different business lines that the Company may enter, and other factors.
9
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------- --- --------------------------------------------------------------------------
<S> <C> <C>
Jonathan J. Ledecky 38 Chief Executive Officer and Chairman of the Board
Timothy J. Flynn 41 President and Chief Operating Officer; Director
Donald H. Platt 49 Senior Vice President and Chief Financial Officer
Mark D. Director 38 Executive Vice President, General Counsel and Assistant Secretary
Martin S. Pinson 50 Executive Vice President and Secretary
Thomas J. Reaser 47 Executive Vice President; President -- General Office Products, Inc.
("GOP"); Director
</TABLE>
JONATHAN J. LEDECKY founded U.S. Office Products Company in October 1994 and
has served since that time as its Chairman and Chief Executive Officer. Prior to
founding the Company, Mr. Ledecky was the President of The Legacy Fund, Inc.
from 1989 to 1994, and, from 1991 to September 1994, he was President and Chief
Executive Officer of Legacy Dealer Capital Fund, Inc., a wholly owned subsidiary
of Steelcase Inc. ("Steelcase"), the nation's largest manufacturer of office
furniture products. Mr. Ledecky served on the Board of Directors of GOP, a
wholly owned subsidiary of the Company, from July 1993 through September 1994,
and from November 1994 to the present. Mr. Ledecky also serves as a director of
each of the Company's other wholly owned subsidiaries. Mr. Ledecky is a graduate
of Harvard College and Harvard Business School.
TIMOTHY J. FLYNN has served as a Director and the President and Chief
Operating Officer of the Company since February 1995. From 1986 through its
acquisition by the Company in February 1995, he served in a variety of positions
at Andrews Office Supply and Equipment Company ("Andrews"), including President,
Executive Vice President and Chief Operating Officer. Mr. Flynn is a former
member of the board of directors of the National Purchasing Association, an
association of office products companies, and the former Vice Chairman of the
Commercial Dealer Division of the Business Products International Association
(formerly known as the National Office Products Association ("NOPA")). Mr. Flynn
received both an undergraduate degree and a Masters in Administration from the
University of Maryland.
DONALD H. PLATT has served as the Senior Vice President and Chief Financial
Officer of the Company since August 1995. From May 1995 until August 1995, Mr.
Platt served as the Company's Senior Vice President -- Corporate Development.
From 1990 through 1993, Mr. Platt served as Dealer Business Consultant and from
1994 through April 1995 as Vice President of Dealer Financing for Steelcase
Financial Services, Inc., a finance subsidiary of Steelcase. Mr. Platt was
responsible for 22 acquisitions and divestitures of independent Steelcase
dealerships in the U.S. and Canada from January 1994 through April 1995. Mr.
Platt has served as a director of 10 different office furniture dealerships,
several of which were also prominent office products dealers. Mr. Platt is a
graduate of Stanford University and the Stanford Graduate School of Business.
MARK D. DIRECTOR has served as Executive Vice President, General Counsel and
Assistant Secretary of the Company since February 1996. From 1990 through
February 1995, Mr. Director was a principal of the law firm of Fields &
Director, P.C., located in Washington, D.C., which he founded after his
association with the law firm of Debevoise & Plimpton. From February 1995 to
September 1995, he served as Vice President, General Counsel and Assistant
Secretary of Radio Movil Digital Americas, Inc. ("RMD"), a company that owns and
operates specialized mobile radio networks throughout South America. In
September 1995, Mr. Director was promoted to Executive Vice President of RMD. He
received his undergraduate degree from Harvard College and his law degree from
Harvard Law School.
MARTIN S. PINSON has served as Executive Vice President and Secretary of the
Company since the Company's organization. He previously served as the Company's
Chief Financial Officer from its inception to August 1995. Mr. Pinson had
previously served from 1991 to 1994 as the President and Chief Executive Officer
of Pinson and Associates, a Washington, D.C. firm providing consulting and
corporate finance services to private and publicly held corporations. Prior to
forming Pinson and Associates, Mr. Pinson was Senior Vice President at
10
<PAGE>
Greater Washington Investors, Inc., a publicly traded venture capital investment
company located in Washington, D.C. Mr. Pinson has served on the board of
directors of more than 15 private and publicly held companies. He received his
undergraduate degree from Union College and his law degree from Georgetown
University.
THOMAS J. REASER is a Director and Executive Vice President of the Company
and the President of GOP. Mr. Reaser has served since July 1993 as the President
of GOP. For more than five years prior to his becoming the President of GOP, Mr.
Reaser held a variety of positions at GOP, including Vice President, Sales and
Marketing. Mr. Reaser is a past governor of NOPA and currently serves as the
President and a director of American Office Products Distributors, a national
trade organization of office products companies.
ITEM 2. PROPERTIES
As of April 30, 1996, the Company operated 215 facilities in various states
and in New Zealand, including one facility located in Washington, D.C. for its
corporate headquarters. Of these facilities, 196 are leased and 19 are owned.
The facilities are used for retail, warehouse and office purposes, or a
combination of these functions. The aggregate square footage for all of the
facilities is approximately 3,073,000 square feet, consisting of 458,000 square
feet for retail use, 1,991,000 square feet for warehouse use, and 624,000 square
feet for office use. At this time, the Company believes its facilities are
suitable for its purposes, having adequate productive capacity for the Company's
present and anticipated needs.
The Company's six largest facilities as of April 30, 1996 are as follows:
<TABLE>
<CAPTION>
APPROXIMATE
TOTAL SQUARE
LOCATION OF FACILITY FOOTAGE
- ------------------------------------------------------------------ ----------------
<S> <C>
Christchurch, New Zealand......................................... 250,000
Atlanta, Georgia.................................................. 178,000
Landover, Maryland................................................ 160,000
Jackson, Mississippi.............................................. 118,000
New Brighton, Minnesota........................................... 105,000
Memphis, Tennessee................................................ 99,000
</TABLE>
The following table sets forth the locations of all the Company's facilities
as of April 30, 1996:
<TABLE>
<CAPTION>
NUMBER OF
LOCATION FACILITIES
- ------------------------------------------------------------------------ ---------------
<S> <C>
DOMESTIC
Alabama............................................................... 8
Arkansas.............................................................. 1
California............................................................ 3
District of Columbia.................................................. 1
Florida............................................................... 10
Georgia............................................................... 6
Illinois.............................................................. 17
Indiana............................................................... 6
Iowa.................................................................. 2
Kentucky.............................................................. 3
Louisiana............................................................. 7
Maryland.............................................................. 5
Michigan.............................................................. 5
Minnesota............................................................. 9
Mississippi........................................................... 12
Missouri.............................................................. 1
Nebraska.............................................................. 1
North Carolina........................................................ 2
Ohio.................................................................. 9
Oregon................................................................ 4
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
LOCATION FACILITIES
- ------------------------------------------------------------------------ ---------------
<S> <C>
Pennsylvania.......................................................... 9
South Carolina........................................................ 5
Tennessee............................................................. 9
Texas................................................................. 1
Virginia.............................................................. 7
INTERNATIONAL
New Zealand........................................................... 39
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation arising in the
normal course of its business. Management believes that none of these actions
will have a material adverse effect on the financial condition, results of
operations or cash flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the Company's stockholders for consideration
during the quarter ended April 30, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) PRICE RANGE OF COMMON STOCK. The Company's Common Stock has traded on
the Nasdaq National Market since February 15, 1995. On July 10, 1996, the last
sale price of the Common Stock was $37.50 per share. The following table sets
forth the range of high and low sale prices for the Common Stock, as reported on
the Nasdaq National Market, for the period from February 15, 1995, the date of
the Company's initial public offering, through July 10, 1996.
<TABLE>
<CAPTION>
HIGH LOW
--------- -----------
<S> <C> <C>
FISCAL YEAR 1995
Fourth fiscal quarter................................................ $ 15.50 $ 10.00(1)
FISCAL YEAR 1996
First fiscal quarter................................................. $ 15.875 $ 10.50
Second fiscal quarter................................................ $ 18.125 $ 13.50
Third fiscal quarter................................................. $ 26.375 $ 16.25
Fourth fiscal quarter................................................ $ 40.00 $ 22.00
FISCAL YEAR 1997
First fiscal quarter through July 10, 1996........................... $ 45.50 $ 33.25
</TABLE>
- ------------------------
(1) Represents the initial public offering price.
(b) APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS. The number of record
holders of the Company's Common Stock as of July 10, 1996 was 307. The Company
believes that a substantially larger number of beneficial owners hold such
shares of Common Stock in depository or nominee form.
(c) DIVIDENDS. The Company does not anticipate paying any cash dividends
on its shares of Common Stock in the foreseeable future because it intends to
retain its earnings, if any, to finance the expansion of its business and for
general corporate purposes. Any payment of future dividends will be at the
discretion of the Board of Directors and will depend upon, among other things,
the Company's earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions with respect to the payment of dividends
and other factors that the Company's Board of Directors deems relevant. In June
1996, the Company entered into a commitment letter with a bank, subject to the
satisfaction of a number of conditions, including the execution of a definitive
credit agreement and related documentation, to provide the $250 million
revolving credit facility (the "Credit Facility"). The Company anticipates that
the Credit Facility will limit its ability to pay dividends.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data for the fiscal years ended April 30, 1996, 1995,
and 1994 have been derived from the Company's consolidated financial statements
that have been audited by Price Waterhouse LLP that appear elsewhere in this
Report. The Selected Financial Data for the fiscal year ended April 30, 1993 has
been derived from audited combined financial statements not included elsewhere
in this Report. The Selected Financial Data for the fiscal year ended April 30,
1992 has been derived from unaudited combined financial statements not included
elsewhere in this Report. These unaudited combined financial statements have
been prepared on the same basis as the audited consolidated financial statements
and, in the opinion of management, contain all adjustments, consisting only of
normal recurring accruals, necessary for a fair presentation of the financial
position and results of operations for the periods presented.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
------------ ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (1):
Revenues.......................................... $ 701,949 $ 355,821 $ 267,774 $ 234,351 $ 205,862
Cost of revenues.................................. 523,409 265,690 192,062 168,913 147,746
------------ ---------- ---------- ---------- ----------
Gross profit.................................... 178,540 90,131 75,712 65,438 58,116
Selling, general and administrative expenses...... 152,796 80,129 68,926 61,546 54,289
Nonrecurring acquisition costs.................... 8,057
Discontinuation of printing division at
subsidiary....................................... 682
------------ ---------- ---------- ---------- ----------
Operating income................................ 17,005 10,002 6,786 3,892 3,827
Interest expense.................................. 6,476 2,310 1,609 1,571 1,866
Interest income................................... (3,097) (376) (172) (13) (23)
Minority interest in subsidiary................... 671 (25) (30)
Other (income) expense............................ (599) 162 (648) (876) (1,903)
------------ ---------- ---------- ---------- ----------
Income before taxes............................... 13,554 7,906 5,997 3,235 3,917
Provision for income taxes........................ 4,814 1,761 1,195 913 661
------------ ---------- ---------- ---------- ----------
Net income........................................ $ 8,740(2) $ 6,145 $ 4,802 $ 2,322 $ 3,256
------------ ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ----------
Net income per share.............................. $ 0.37(2)
------------
------------
Weighted average shares outstanding............... 23,385
</TABLE>
<TABLE>
<CAPTION>
APRIL 30,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (1):
Working capital............................... $ 229,859 $ 34,018 $ 19,741 $ 17,600 $ 17,549
Total assets.................................. 651,527 139,310 73,012 70,610 66,130
Long-term debt, less current portion.......... 157,303 8,632 8,861 5,791 12,389
Stockholders' equity.......................... 305,409 59,306 22,575 21,352 20,698
</TABLE>
- ------------------------
(1) As a result of the substantial continuing interests in the Company of the
former stockholders of the four companies acquired by the Company for a
combination of Common Stock and cash concurrent with the closing of its
initial public offering (the "IPO") (the "Combined Companies"), the
historical financial information of the Combined Companies and the
historical financial information of the businesses that were acquired after
the closing of the IPO in business combinations accounted for under the
pooling-of-interests method (the "Pooled Companies") have been combined on a
historical cost basis in accordance with generally accepted accounting
principles ("GAAP") to present this financial data as if the Combined
13
<PAGE>
Companies and the Pooled Companies had always been members of the same
operating group. The financial information of the businesses acquired in
business combinations accounted for under the purchase method (the
"Purchased Companies") is included from the dates of their respective
acquisitions.
(2) Net income and net income per share includes nonrecurring acquisition costs
incurred in conjunction with the business combinations with the Pooled
Companies and costs associated with the discontinuation of the printing
division at a subsidiary. GAAP requires the Company to expense all
acquisition expenses related to the business combinations accounted for
under the pooling-of-interests method.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The Company's revenues have been derived primarily from the sale of a wide
variety of office supplies, office furniture and other office products to
corporate, commercial and industrial customers. The cost of revenues represents
the purchase price of office supplies, office furniture and other office
products. Cost of revenues includes occupancy and delivery expenses and is
reduced by rebates and discounts on inventory purchases.
For factors that may impact the Company's future results of operations, see
"Business -- Factors Affecting the Company's Business."
RESULTS OF OPERATIONS
The following table sets forth various items as a percentage of revenues for
the three fiscal years ended April 30, 1996.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenues............................................................................... 100.0% 100.0% 100.0%
Cost of revenues....................................................................... 74.6 74.7 71.7
--------- --------- ---------
Gross margin......................................................................... 25.4 25.3 28.3
Selling, general and administrative expenses........................................... 21.8 22.5 25.7
Nonrecurring acquisition costs......................................................... 1.1
Discontinuation of printing division at subsidiary..................................... .1
--------- --------- ---------
Operating income..................................................................... 2.4 2.8 2.6
Other (income) expense:
Interest expense..................................................................... .9 .6 .6
Interest income...................................................................... (.4) (.1) (.1)
Minority interest in net income of subsidiary........................................ .1
Other................................................................................ (.1) .1 (.2)
--------- --------- ---------
Income before provision for income taxes............................................... 1.9 2.2 2.3
Provision for income taxes............................................................. .7 .5 .5
--------- --------- ---------
Net income............................................................................. 1.2% 1.7% 1.8%
--------- --------- ---------
--------- --------- ---------
</TABLE>
YEAR ENDED APRIL 30, 1996 COMPARED TO THE YEAR ENDED APRIL 30, 1995
Revenues increased by 97.3%, from $355.8 million in fiscal 1995 to $701.9
million in fiscal 1996. This increase was due primarily to the 26 acquisitions
completed during fiscal 1996 and accounted for under the purchase method of
accounting, and the five acquisitions completed during fiscal 1995 that were
accounted for under the purchase method of accounting and were included for the
entire 1996 fiscal year (collectively, the "Purchased Companies").
Gross profit increased by 98.1%, from $90.1 million in fiscal 1995 to $178.5
million in fiscal 1996. Gross profit as a percentage of revenues increased from
25.3% in fiscal 1995 to 25.4% in fiscal 1996.
14
<PAGE>
Selling, general and administrative expenses increased by 90.7%, from $80.1
million in fiscal 1995 to $152.8 million in fiscal 1996. Selling, general and
administrative expenses as a percentage of revenues decreased from 22.5% in
ficsal 1995 to 21.8% in fiscal 1996. The increase in selling, general and
administrative expenses is due primarily to the inclusion of the Purchased
Companies. The decrease in selling, general and administrative expenses as a
percentage of revenues is due primarily to the inclusion of the Purchased
Companies, which had lower selling, general and administrative expenses as a
percentage of revenues.
During fiscal 1996, the Company incurred $8.7 million in one-time charges,
which represented 1.2% of revenues. These charges consisted of $8.1 million in
nonrecurring acquisition costs incurred in conjunction with the 14 business
combinations completed during fiscal 1996 that were accounted for under the
pooling-of-interests method of accounting (the "Pooled Companies") and $682,000
associated with the discontinuation of the printing division at a subsidiary,
which consisted primarily of the write-down of printing division assets to their
estimated market value. Generally accepted accounting principles require the
Company to expense all acquisition expenses related to the combinations
accounted for under the pooling-of-interests method of accounting.
Interest expense increased by 180.3%, from $2.3 million in fiscal 1995 to
$6.5 million in fiscal 1996. The increase was due primarily to the increase in
the Company's borrowings. The increase in interest expense was partially offset
by an increase in interest income of $2.7 million for fiscal 1996 compared to
fiscal 1995. The increase in interest income was primarily the result of the
investment by the Company of a portion of the proceeds from the sales of
5,543,045 shares of Common Stock at $23.25 per share, including the
underwriters' over-allotment option of 610,000 shares, and the issuance of
$143,750,000 principal amount of 5 1/2% Convertible Subordinated Notes due 2001
(the "February Notes"), including the underwriters' over-allotment option of
$18,750,000 (the "February Offerings"), at a time when it did not need to borrow
under its line of credit.
Minority interest in net income of subsidiary represents the 49% minority
interest in the net income of the Company's 51% owned subsidiary, Blue Star,
from February 1996, the date of acquisition by the Company. The Company owned
51% of Blue Star until June 1996, when it acquired the remaining 49%.
Other income increased by $761,000 from other expenses of $162,000 in fiscal
1995 to other income of $599,000 in fiscal 1996.
Provision for income taxes increased by 173.4%, from $1.8 million in fiscal
1995 to $4.8 million in fiscal 1996, reflecting an effective income tax rate of
22.3% in fiscal 1995 and 35.5% in fiscal 1996. The increase in income taxes was
primarily due to increased pre-tax income resulting from the inclusion of the
Purchased Companies. The increase in the effective income tax rate is due
primarily to the fact that the pre-tax income of the Pooled Companies that had
elected to be treated as subchapter S corporations prior to their acquisition by
the Company constituted a higher proportion of the total pre-tax income during
fiscal 1995 and to the addition of non-deductible expenses, primarily
non-deductible goodwill relating to the Purchased Companies.
YEAR ENDED APRIL 30, 1995 COMPARED TO THE YEAR ENDED APRIL 30, 1994
Revenues increased by 32.9%, from $267.8 million in fiscal 1994 to $355.8
million in fiscal 1995. This increase was due primarily to the inclusion of the
five Purchased Companies acquired during fiscal 1995 (the "1995 Purchased
Companies").
Gross profit increased by 19.0%, from $75.7 million in fiscal 1994 to $90.1
million in fiscal 1995. Gross profit as a percentage of revenues decreased from
28.3% in fiscal 1994 to 25.3% in fiscal 1995. The decrease as a percentage of
revenues was primarily due to the inclusion of the 1995 Purchased Companies,
which had a higher proportion of sales of traditionally lower margin product
lines, such as business machines and office furniture.
Selling, general and administrative expenses increased by 16.3%, from $68.9
million in fiscal 1994 to $80.1 million in fiscal 1995. Selling, general and
administrative expenses as a percentage of revenues decreased from 25.7% in
fiscal 1994 to 22.5% in fiscal 1995. This decrease was primarily due to the
inclusion of the 1995 Purchased Companies, which had lower selling, general and
administrative expenses as a percentage of revenues.
15
<PAGE>
Interest expense increased by 43.6%, from $1.6 million in fiscal 1994 to
$2.3 million in fiscal 1995. The increase in interest expense was primarily due
to incremental interest expense incurred by the 1995 Purchased Companies and to
higher interest rates. The interest expense was partially offset by an increase
in interest income of $204,000.
Other expense increased from other income of $648,000 in fiscal 1994 to
other expense of $162,000 in fiscal 1995. The primary component of this change
was a decrease in the amortization of deferred revenue associated with a
covenant not to compete of one company, which was amortized using an accelerated
method.
The provision for income taxes increased by 47.4%, from $1.2 million in
fiscal 1994 to $1.8 million in fiscal 1995, reflecting an effective income tax
rate of 19.9% in fiscal 1994 and 22.3% in fiscal 1995. This increase in income
taxes is due primarily to increased pre-tax income. The low effective income tax
rates for fiscal 1994 and fiscal 1995, compared to the federal statutory rate of
34.0% plus state and local taxes, are the result of the election by certain
companies included in the results to be treated as subchapter S corporations
prior to their acquisitions by the Company in transactions accounted for under
the pooling of interests method of accounting.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1996, the Company had cash of $165.7 million and working
capital of $229.9 million. The Company's capitalization at April 30, 1996 was
$462.7 million.
In May and June 1996, the Company completed the sales, in an offshore
offering and in a concurrent private placement in the United States, of 5 1/2%
Convertible Subordinated Notes due 2003 (the "May Notes") in the principal
amount of $230 million, includng the manager's over-allotment option of $30
million principal amount of May Notes (the "May Note Offering"). The net
proceeds to the Company from the May Note Offering, after deducting the
managers' discounts and commissions and offering expenses, were approximately
$223.1 million and are expected to be used for working capital and acquisition
purposes.
In February and March 1996, the Company completed the February Offerings.
The net proceeds to the Company from the February Offerings, after deducting
underwriting discounts and commissions and offering expenses, were approximately
$259.7 million and have been used to repay indebtedness and for acquisition
purposes and are expected to be used for working capital and acquisition
purposes.
In August 1995, the Company completed the sales of 4,025,000 shares of
Common Stock at $14.25 per share, including the underwriters' over-allotment
option of 525,000 shares (the "Second Offering"). The net proceeds to the
Company from the Second Offering, after deducting underwriting discounts and
commissions and offering expenses, were approximately $53.5 million and were
used for working capital and acquisition purposes.
In February 1995, the Company completed its initial public offering, in
which it sold 3,737,500 shares of Common Stock at $10.00 per share including the
underwriters' over-allotment option of 487,500 shares. The net proceeds to the
Company, after deducting underwriting discounts and commissions and offering
expenses, were approximately $32.7 million and were used to repay indebtedness
and for working capital and acquisition purposes.
During fiscal 1996, net cash provided by operating activities was $4.7
million. Net cash used in investing activities during fiscal 1996 was $104.5
million, consisting primarily of net cash paid in acquisitions of $90.2 million,
net cash paid for additions to property and equipment of $8.7 million and an
investment in an affiliate of $5.6 million. Net cash provided by financing
activities during fiscal 1996 was $257.1 million, consisting primarily of $174.7
million from the two public offerings of Common Stock and the public offering of
debt of $138.7 million, net of offering expenses, partially offset by a
reduction in net borrowings of $53.4 million and dividends paid by certain
Pooled Companies prior to their acquisitions by the Company of $3.2 million.
During fiscal 1995, net cash used in operating activities was $445,000. Net
cash used in investing activities during fiscal 1995 was $17.8 million,
consisting primarily of net cash paid in acquisitions of $15.9 million and net
cash paid for additions to property and equipment of $2.2 million. Net cash
provided by financing activities during fiscal 1995 was $19.2 million,
representing proceeds from the initial public offering of $32.7 million, net
16
<PAGE>
of offering expenses, partially offset by payments of $11.3 million to the
stockholders of four of the companies acquired in the intital public offering, a
reduction in net borrowings of $2.0 million and dividends paid by certain Pooled
Companies prior to their acquisitions by the Company of $2.2 million.
During fiscal 1994, net cash provided by operating activities was $5.4
million. Net cash used in investing activities during fiscal 1994 was $1.2
million, consisting primarily of net cash paid for additions to property and
equipment of $1.6 million and partially offset by the receipt of a subchapter S
corporation refund of $602,000. Net cash used in financing activities during
fiscal 1994 was $3.0 million, consisting of dividends paid by certain Pooled
Companies prior to their acquisitions by the Company of $1.6 million and a
reduction in net borrowings of $797,000.
In June 1996, the Company entered into a commitment letter with a bank,
subject to the satisfaction of a number of conditions, including execution of a
definitive credit agreement and related documentation, whereby the bank will
provide the $250 million revolving Credit Facility bearing interest, at the
Company's option, at the bank's base rate, plus an applicable margin of up to
1.25%, or a eurodollar rate plus an applicable margin of up to 2.5%. The Credit
Facility is expected to be secured by all of the assets of the Company and is
expected to contain customary covenants, including financial covenants with
respect to the Company's net worth and fixed charges coverage ratios and a
customary default provision related to non-payment of principal and interest,
default under other debt agreements, bankruptcy and change of control events.
There can be no assurance that the Credit Facility ultimately will be obtained,
or that, if obtained, will be on terms that are favorable to the Company.
The Company currently has a line of credit with a bank that provides the
Company with a $50 million credit facility bearing interest, at the Company's
option, at the prime rate in effect from time to time or a eurodollar rate plus
2.0%. The line of credit is secured by the Company's inventory and receivables
and contains customary covenants, including financial covenants with respect to
the Company's net worth and fixed charge coverage ratios, and customary default
provisions related to non-payment of principal and interest, default under other
debt agreements and bankruptcy. It also provides for a default in the event that
there is a change in control of the Company. The Company was in compliance with
or obtained waivers relating to these covenants as of April 30, 1996. The amount
that is available to be borrowed under the line of credit varies from time to
time, depending upon the level of receivables and inventory available to
collateralize borrowings. Since April 30, 1996, the Company has not provided
certain information required by this facility and has not requested certain
consents in respect of actions taken by the Company since April 30, 1996, which,
if not corrected, could limit the Company's ability to draw funds against this
line of credit. No amounts were outstanding against this facility at April 30,
1996. The Company believes that, if necessary, the information required by the
line of credit facility could be provided, and the necessary consents could be
obtained, to enable the Company to utilize this source of financing, although
there can be no assurances in this regard.
The Company anticipates that its current cash on hand, cash flow from
operations and additional financing expected to be available under the Credit
Facility will be sufficient to meet the Company's liquidity requirements for its
operations through the end of fiscal 1997. However, the Company intends to
continue pursuing acquisitions, which may be funded through a combination of
cash and Common Stock. The timing and size and the associated capital
commitments of such acquisitions are not known. There can be no assurances that
additional sources of financing will not be required during the next twelve
months or thereafter.
FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
The Company's business has been subject to seasonal influences. The
Company's sales and profitability in its office products business have been
lower in the first two quarters of its fiscal year, primarily due to the lower
level of business activity in North America during the summer months. The
Company believes that the Completed Acquisitions and the Pending Acquisitions in
the school supply business and in New Zealand, which have historically had
higher sales and profitability during the Company's first two fiscal quarters,
will nearly offset the seasonality of the Company's existing businesses in the
Company's first fiscal quarter and more than offset such seasonality in the
second fiscal quarter. As the Company's mix of businesses evolves through future
acquisitions, these seasonal fluctuations may continue to change. In addition,
quarterly results also may be materially affected by the timing of acquisitions,
the timing and magnitude of costs related to such acquisitions,
17
<PAGE>
variations in the prices paid by the Company for the products it sells, the mix
of products sold and general economic conditions. Therefore, results for any
quarter are not necessarily indicative of the results that the Company may
achieve for any subsequent fiscal quarter or for a full fiscal year.
The following tables set forth certain unaudited consolidated quarterly
financial data for the fiscal years ended April 30, 1996 and 1995 (in thousands,
except for per share amounts). The information has been derived from unaudited
consolidated financial statements that in the opinion of management reflect all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation of such quarterly information.
<TABLE>
<CAPTION>
FISCAL 1996 QUARTERS
-----------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues................................... $ 121,954 $ 161,903 $ 175,535 $ 242,557 $ 701,949
Gross profit............................... 29,244 38,737 42,851 67,708 178,540
Operating income (1)....................... (1,369) 4,548 4,718 9,108 17,005
Net income (loss) (1)...................... (1,080) 2,865 2,797 4,158 8,740
Net income (loss) per share (1)............ (0.06) 0.13 0.12 0.14 0.37
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1995 QUARTERS
-------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues................................................. $ 73,502 $ 79,084 $ 91,052 $ 112,183 $ 355,821
Gross profit............................................. 19,700 20,879 23,196 26,356 90,131
Operating income......................................... 2,782 2,631 2,615 1,974 10,002
Net income............................................... 2,010 1,770 1,668 697 6,145
</TABLE>
- ------------------------
(1) Includes one-time charges of $4,671, $599, $1,505 and $1,964 for the first,
second, third and fourth quarters of fiscal 1996, respectively. These
charges consist of nonrecurring acquisition costs incurred in connection
with business combinations accounted for under the pooling-of-interests
method of accounting and costs associated with the discontinuation of the
printing division at one subsidiary. Under GAAP, acquisition costs incurred
in conjunction with pooling-of-interests combinations must be recorded as
expense.
INFLATION
The Company does not believe that inflation has had a material impact on its
results of operations during fiscal 1996, 1995 or 1994.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Accountants........................................................................ 19
Consolidated Balance Sheet as of April 30, 1996 and 1995................................................. 20
Consolidated Statement of Income for the years ended April 30, 1996, 1995 and 1994....................... 21
Consolidated Statement of Stockholders' Equity for the fiscal years ended April 30, 1994, 1995 and
1996.................................................................................................... 22
Consolidated Statement of Cash Flows for years ended April 30, 1996, 1995 and 1994....................... 23
Notes to Consolidated Financial Statements............................................................... 25
FINANCIAL STATEMENT SCHEDULES:
For the fiscal year ended April 30, 1994, 1995, 1996
Schedule II Valuation of Qualifying Account and Reserves............................................... 38
</TABLE>
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
U.S. Office Products Company
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of U.S. Office Products Company and its subsidiaries at April 30, 1996
and 1995, and the results of their operations and their cash flows for each of
the three fiscal years in the period ended April 30, 1996, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
May 31, 1996, except as to Note 15,
which is as of July 10, 1996
19
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
APRIL 30
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................... $ 165,659 $ 8,412
Accounts receivable, less allowance for doubtful accounts of $2,784 and $486,
respectively........................................................................... 126,159 62,050
Lease receivables....................................................................... 24,807
Inventories............................................................................. 71,306 26,275
Prepaid expenses and other current assets............................................... 18,463 4,274
---------- ----------
Total current assets.................................................................. 406,394 101,011
Property and equipment, net............................................................... 50,529 16,376
Intangible assets, net.................................................................... 133,803 20,268
Lease receivables......................................................................... 47,005
Other assets.............................................................................. 13,796 1,655
---------- ----------
Total assets.......................................................................... $ 651,527 $ 139,310
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt......................................................................... $ 86,260 $ 26,681
Accounts payable........................................................................ 63,763 25,708
Accrued compensation.................................................................... 12,754 7,428
Other accrued liabilities............................................................... 13,758 7,176
---------- ----------
Total current liabilities............................................................. 176,535 66,993
Long-term debt............................................................................ 157,303 8,632
Deferred income taxes..................................................................... 6,148 4,347
Other long-term liabilities............................................................... 109 32
---------- ----------
Total liabilities..................................................................... 340,095 80,004
---------- ----------
Minority interest......................................................................... 6,023
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 500,000 shares authorized, none outstanding...........
Common stock, $.001 par value 100,000,000 shares authorized, 30,867,504 and 16,931,352
shares issued and outstanding, respectively............................................ 31 17
Additional paid-in capital.............................................................. 279,306 38,822
Cumulative translation adjustment....................................................... 483
Retained earnings....................................................................... 25,589 20,467
---------- ----------
Total stockholders' equity............................................................ 305,409 59,306
---------- ----------
Total liabilities and stockholders' equity............................................ $ 651,527 $ 139,310
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED APRIL 30,
-----------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenues...................................................................... $ 701,949 $ 355,821 $ 267,774
Cost of revenues.............................................................. 523,409 265,690 192,062
--------- --------- ---------
Gross profit.............................................................. 178,540 90,131 75,712
Selling, general and administrative expenses.................................. 152,796 80,129 68,926
Nonrecurring acquisition costs................................................ 8,057
Discontinuation of printing division at subsidiary............................ 682
--------- --------- ---------
Operating income.......................................................... 17,005 10,002 6,786
Other (income) expense:
Interest expense............................................................ 6,476 2,310 1,609
Interest income............................................................. (3,097) (376) (172)
Minority interest in net income of subsidiary............................... 671
Other....................................................................... (599) 162 (648)
--------- --------- ---------
Income before provision for income taxes...................................... 13,554 7,906 5,997
Provision for income taxes.................................................... 4,814 1,761 1,195
--------- --------- ---------
Net income.................................................................... $ 8,740 $ 6,145 $ 4,802
--------- --------- ---------
--------- --------- ---------
Weighted average common shares outstanding.................................... 23,385
Net income per share.......................................................... $ 0.37
---------
---------
Unaudited pro forma net income (see Note 9)................................... $ 7,294 $ 4,521 $ 3,558
--------- --------- ---------
--------- --------- ---------
Unaudited pro forma net income per share...................................... $ 0.31
---------
---------
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED APRIL 30, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
------------------ PAID-IN TRANSLATION RETAINED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL ADJUSTMENT EARNINGS STOCK EQUITY
---------- ------ ---------- ----------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at April 30, 1993............... 8,440,852 $ 9 $ 8,487 $17,836 $(5,048 ) $ 21,284
Transactions of Combined Companies:
Dividends........................... (55 ) (55)
Purchase of treasury stock.......... (2,514 ) (2,514)
Adjustment to conform fiscal year-ends
of certain Combined Companies........ 273 273
Dividends of certain Pooled
Companies............................ (1,857 ) (1,857)
Net income............................ 4,802 4,802
--
---------- ---------- --- -------- -------- ------------
Balance at April 30, 1994............... 8,440,852 9 8,487 20,999 (7,562 ) 21,933
Transactions of Combined Companies:
Issuance of common stock............ 251 251
Capital contributed by principal
stockholder........................ 1,249 1,249
Dividends........................... (162 ) (162)
Issuance of common stock in
conjunction with the formation of
U.S. Office Products................. 800,000 1 1
Issuance of common stock in the
initial public offering, net of
offering expenses of $4,686.......... 3,737,500 3 32,686 32,689
Issuance of common stock to the
stockholders of the Combined
Companies............................ 3,078,000 3 (3 )
Distributions to the stockholders of
the Combined Companies............... (11,300 ) (11,300)
Issuance of common stock in
acquisition.......................... 875,000 1 8,749 8,750
Adjustment to conform the year-ends of
certain Pooled Companies............. 2,235 2,235
Adjustment to stockholders' equity
accounts to reflect the Mergers...... (12,597 ) 5,035 7,562
Dividends of certain Pooled
Companies............................ (2,485 ) (2,485)
Net income............................ 6,145 6,145
--
---------- ---------- --- -------- -------- ------------
Balance at April 30, 1995............... 16,931,352 17 38,822 20,467 59,306
Issuance of common stock in the second
public offering, net of offering
expenses of $3,902................... 4,025,000 4 53,450 53,454
Issuance of common stock in the third
public offering, net of offering
expenses of $7,594................... 5,543,045 6 121,276 121,282
Issuance of common stock in
acquisitions......................... 3,885,349 4 60,363 60,367
Issuance of common stock for stock
options exercised, including tax
benefits............................. 63,350 1,023 1,023
Issuance of common stock to repay
indebtedness......................... 419,408 3,855 3,855
Adjustment to conform the year-ends of
certain Pooled Companies............. (370 ) (370)
Capital contribution by former
shareholders of pooled company....... 517 517
Dividends of certain Pooled
Companies............................ (3,248 ) (3,248)
Cumulative translation adjustment..... $ 483 483
Net income............................ 8,740 8,740
--
---------- ---------- --- -------- -------- ------------
Balance at April 30, 1996............... 30,867,504 $ 31 $ 279,306 $ 483 $25,589 $ $ 305,409
--
--
---------- ---------- --- -------- -------- ------------
---------- ---------- --- -------- -------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR
ENDED APRIL 30,
--------------------------------
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................................................. $ 8,740 $ 6,145 $ 4,802
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization............................................................ 7,534 3,103 2,939
Amortization of deferred revenue......................................................... (150) (402)
Deferred income taxes.................................................................... (845) 91 (20)
Gain on disposal of equipment............................................................ (133)
Minority interest in net income of subsidiary............................................ 671
Changes in current assets and liabilities (net of assets acquired and liabilities assumed
in business combinations):
Accounts receivable.................................................................... 6,739 (13,088) (2,082)
Lease receivables...................................................................... (17,654)
Inventories............................................................................ 4,948 (729) (929)
Prepaid expenses and other current assets.............................................. (5,480) (980) (521)
Accounts payable....................................................................... (148) 1,849 1,272
Accrued liabilities.................................................................... 373 3,314 312
---------- --------- ---------
Net cash provided by (used in) operating activities.................................. 4,745 (445) 5,371
---------- --------- ---------
Cash flows from investing activities:
Additions to property and equipment, net of disposals...................................... (8,748) (2,186) (1,646)
Cash paid in acquisitions, net of cash received............................................ (90,184) (15,868)
Investment in affiliate.................................................................... (5,603)
Refund of S corporation deposit............................................................ 164 602
Decrease (increase) in note receivable from stockholder.................................... 145 (145)
Other...................................................................................... (84) 95 (20)
---------- --------- ---------
Net cash used in investing activities................................................ (104,455) (17,814) (1,209)
---------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock..................................................... 174,736 32,689
Proceeds from issuance of long-term debt................................................... 142,621 1,245
Payments of long-term debt................................................................. (14,583) (5,246) (2,101)
Proceeds from (payments of) short-term debt, net........................................... (42,686) 1,984 1,304
Payments of dividends...................................................................... (3,248) (2,227) (1,589)
Proceeds from exercise of stock options.................................................... 597
Capital contributed by Combined Company stockholder........................................ 1,500
Payments to stockholders of Combined Companies............................................. (11,300)
Net change in cash due to conforming fiscal year-end of certain Combined Companies......... 230
Purchases of treasury stock................................................................ (715)
Loan to officer of Combined Company........................................................ (125)
Net change in cash due to conforming fiscal year-end of certain Pooled Companies........... (370) 601
---------- --------- ---------
Net cash provided by (used in) financing activities.................................. 257,067 19,246 (2,996)
---------- --------- ---------
Effect of exchange rates on cash and cash equivalents........................................ (110)
Net increase in cash and cash equivalents.................................................... 157,247 987 1,166
Cash and cash equivalents at beginning of period............................................. 8,412 7,425 6,259
---------- --------- ---------
Cash and cash equivalents at end of period................................................... $ 165,659 $ 8,412 $ 7,425
---------- --------- ---------
---------- --------- ---------
Supplemental disclosure of cash flow information:
Interest paid.............................................................................. $ 5,258 $ 2,119 $ 1,667
Income taxes paid.......................................................................... $ 7,261 $ 918 $ 1,266
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS)
The Company issued common stock, notes payable and cash in connection with
certain business combinations in fiscal years ended April 30, 1996, 1995 and
1994. The fair values of the assets and liabilities of the acquired companies at
the dates of the acquisitions are presented as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR
ENDED APRIL 30,
--------------------------------
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Accounts receivable................................................... $ 70,418 $ 15,350 $
Inventories........................................................... 49,758 10,331
Prepaid expenses and other current assets............................. 8,506 448
Property and equipment................................................ 30,442 3,248
Intangible assets..................................................... 115,154 19,635
Lease receivables..................................................... 55,095
Other assets.......................................................... 1,101 339
Short-term debt....................................................... (102,033) (7,310)
Accounts payable...................................................... (38,083) (9,180)
Accrued liabilities................................................... (16,019) (2,958)
Long-term debt........................................................ (15,771) (1,848)
Deferred income taxes................................................. (1,635)
Other long-term liabilities........................................... (247) (437)
Minority interest..................................................... (5,349)
---------- --------- ---------
Net assets acquired................................................. $ 151,337 $ 27,618 $
---------- --------- ---------
---------- --------- ---------
The acquisitions were funded as follows:
Common stock.......................................................... $ 60,367 $ 8,750
Notes payable......................................................... 786 3,000
Cash.................................................................. 90,184 15,868
---------- --------- ---------
$ 151,337 $ 27,618 $
---------- --------- ---------
---------- --------- ---------
</TABLE>
Noncash transactions:
- - During fiscal 1996, one Pooled Company converted $1,385 of notes payable to
common stock.
- - During fiscal 1996, the Company issued 194,447 shares of common stock to
repay $2,470 of indebtedness.
- - During fiscal 1996, the Company recorded additional paid-in capital of
approximately $483 related to the tax benefit on stock options exercised.
- - During fiscal 1994, one Combined Company issued $1,800 of debt in exchange
for nonvoting shares of common stock.
See accompanying notes to consolidated financial statements.
24
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1 -- BUSINESS ORGANIZATION
U.S. Office Products Company ("U.S. Office Products" and the "Company") was
founded in October 1994 to create a nationwide office products supplier,
primarily to corporate, commercial and industrial customers.
Concurrent with the closing of its initial public offering (the "IPO") in
February 1995, the Company acquired four companies for a combination of its
common stock and cash which are referred to herein as the "Combined Companies"
and acquired two companies in business combinations accounted for under the
purchase method. The six companies are referred to as the "Founding Companies."
Simultaneously with the closing of the IPO, U.S. Office Products acquired by
merger each of the Combined Companies (the "Mergers"). The accompanying
consolidated financial statements and related notes to consolidated financial
statements are representative of what the financial position, results of
operations and cash flows would have been if U.S. Office Products and the
Combined Companies had been combined on May 1, 1993. The assets and liabilities
of the Combined Companies are reflected at their historical amounts. Capital
stock of the Combined Companies is included in additional paid-in capital. The
Combined Companies previously reported on fiscal years ending other than April
30. Commencing on May 1, 1994, the fiscal year-ends were changed to April 30
which resulted in an adjustment to retained earnings during fiscal 1994 of $273
which resulted from revenues of $8,983 and expenses of $8,710.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements and related notes to
consolidated financial statements include the accounts of U.S. Office Products,
the Combined Companies and the companies acquired in business combinations
accounted for under the purchase method (the "Purchased Companies") from their
respective acquisition dates and give retroactive effect to the results of the
companies acquired in business combinations accounted for under the
pooling-of-interests method (the "Pooled Companies") for all periods presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
DEFINITION OF FISCAL YEAR
As used in these consolidated financial statements and related notes to
consolidated financial statements, "fiscal 1996," "fiscal 1995" and "fiscal
1994" refer to the Company's fiscal years ended April 30, 1996, 1995 and 1994,
respectively.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its majority owned subsidiaries. All significant intercompany transactions
and accounts have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers temporary cash investments with original maturities of
three months or less from the date of purchase to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents and
trade accounts receivable. The Company invests a portion of its cash in highly
rated corporate commercial paper with original maturities of 30 days or less and
in overnight
25
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
investments collateralized by U.S. government securities. Receivables arising
from sales to customers are not collateralized and, as a result, management
continually monitors the financial condition of its customers to reduce the risk
of loss.
INVENTORIES
Inventories are stated at the lower of cost or market with cost determined
on a first-in, first-out (FIFO) basis and consist primarily of product held for
sale.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Additions and improvements are
capitalized. Maintenance and repairs are expensed as incurred. Depreciation of
property and equipment is calculated using the straight-line method over the
estimated useful lives of the respective assets. The estimated useful lives
range from 25 to 40 years for buildings and its components and 5 to 15 years for
furniture, fixtures and equipment. Property and equipment leased under capital
leases are being amortized over the lesser of their useful lives or their lease
terms.
INTANGIBLE ASSETS
Intangible assets consist primarily of goodwill, which represents the excess
of cost over the fair value of assets acquired in business combinations
accounted for under the purchase method. Goodwill is amortized on a
straight-line basis over an estimated useful life of 40 years. Management
periodically evaluates the recoverability of goodwill, which would be adjusted
for a permanent decline in value, if any, by comparing anticipated undiscounted
future cash flows from operations to net book value.
TRANSLATION OF FOREIGN CURRENCIES
Balance sheet accounts of foreign subsidiaries are translated using the
year-end exchange rate, and statement of income accounts are translated using
the average exchange rate for the year. Translation adjustments are recorded as
a separate component of stockholders' equity.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company's majority owned foreign subsidiary has entered into forward
foreign currency exchange contracts (the "Exchange Contracts") with
counterparties to hedge the exposure to foreign currency fluctuations to the
extent permissible by hedge accounting requirements. At April 30, 1996, the
Exchange Contracts, in the notional amount of $4,616, hedge approximately $5,292
of foreign currency denomininated assets. Discounts or premiums on the Exchange
Contracts are amortized over the life of the contracts.
The Company's majority owned foreign subsidiary has also entered into
interest rate swap agreements (the "Swap Agreements") with counterparties to
convert the interest rates associated with certain outstanding debt from
variable rates to fixed rates. The notional amount of the Swap Agreements was
$43,000 at April 30, 1996. The market risks associated with these Swap
Agreements result from short-term fluctuations in interest rates. The credit
risks related to non-performance of the Swap Agreements by the counterparties
are not deemed to be significant, however, non-performance would result in the
Company terminating the Swap Agreements and recognizing a gain or loss,
depending on the fair market value of the Swap Agreements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 107,
"Disclosure About Fair Value of Financial Instruments," the Company has
estimated the fair value of its financial instruments using the following
methods and assumptions:
- The carrying amount of cash and cash equivalents, accounts receivable and
accounts payable approximates fair value;
26
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- The fair value of the 5 1/2% Convertible Subordinated Notes due 2001 is
based on quoted market prices;
- The carrying amounts of the Company's debt, other than the 5 1/2%
Convertible Subordinated Notes due 2001, approximates fair value,
estimated by discounted cash flow analyses based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," except for one Combined Company and certain
Pooled Companies which were organized as subchapter S corporations prior to
being acquired by the Company. The asset and liability approach used in SFAS 109
requires the recognition of deferred tax assets and liabilities for the tax
consequences of temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities.
TAXES ON UNDISTRIBUTED EARNINGS
No provision is made for U.S. income taxes on earnings of subsidiary
companies which the Company controls but does not include in the consolidated
federal income tax return since it is management's practice and intent to
permanently reinvest the earnings.
REVENUE RECOGNITION
Revenue is recognized upon the delivery of office products to customers. The
Company also leases equipment to customers under both short-term and long-term
lease agreements. Revenue related to the short-term leases is recognized on a
monthly basis over the life of the lease. Certain long-term leases qualify as
sales-type leases and, accordingly, the present value of the future lease
payments is recognized as income upon delivery of the equipment to the customer.
COST OF REVENUES
Vendor rebates are recognized on an accrual basis in the period earned and
are recorded as a reduction to cost of revenues. Delivery and occupancy costs
are included as an increase to cost of revenues.
NONRECURRING ACQUISITION COSTS
Nonrecurring acquisition costs represent acquisition costs incurred by the
Company in business combinations accounted for under the pooling-of-interests
method. These costs include legal and accounting fees, investment banking fees,
recognition of transaction related obligations and various other acquisition
related costs.
DISCONTINUATION OF PRINTING DIVISION AT SUBSIDIARY
During fiscal 1996 the Company discontinued the printing division at one of
its subsidiaries and incurred a one time charge of $682, which consisted
primarily of the write down of printing division assets to their estimated
market value.
NET INCOME PER SHARE
Net income per share for fiscal 1996 is calculated by dividing net income by
the weighted average number of common shares outstanding during the year
including common stock equivalents, if dilutive.
Net income per share for fiscal 1995 and fiscal 1994 has not been presented
as it is not considered meaningful due to the Mergers and the IPO in conjunction
with the formation of the Company during fiscal 1995.
27
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued SFAS 123,
"Accounting for Stock Based Compensation." SFAS 123 established a fair value
based method of accounting for employee stock based compensation plans and
encourages companies to adopt that method. However, it also allows companies to
continue to apply the intrinsic value based method currently prescribed under
APB Opinion No. 25, provided certain pro forma disclosures are made. SFAS 123 is
not required to be adopted by the Company until fiscal 1997. The Company
currently intends to continue to apply the accounting method prescribed by APB
Opinion 25 and, accordingly, the adoption of SFAS 123 will not have a material
impact on the Company.
In March, 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This statement requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying value of the asset may not be recoverable. SFAS 121 is not required to
be adopted by the Company until fiscal 1997. The Company does not anticipate
that SFAS 121 will have a material effect on the Company's operating results.
NOTE 3 -- BUSINESS COMBINATIONS
POOLING-OF-INTERESTS METHOD
In fiscal 1996, the Company issued 8,440,852 shares of common stock to
acquire 14 companies in acquisitions accounted for under the
pooling-of-interests method. The Company's consolidated financial statements
give retroactive effect to the acquisitions of the Pooled Companies for all
periods presented. Certain of the Pooled Companies previously reported on fiscal
years ending other than April 30. The results of these Pooled Companies were
previously reported on June 30, September 30 and December 31 year-ends.
The accounts of these Pooled Companies for the years ended December 31, 1993
and 1994, for the years ended June 30, 1994 and 1995 and for the years ended
September 30, 1994 and 1995 have been combined with the accounts of U.S. Office
Products for the years ended April 30, 1994 and 1995, respectively. Commencing
on May 1, 1995, the year-ends of these companies were changed to April 30,
resulting in an increase to retained earnings of $2,235 during fiscal 1995 and a
reduction to retained earnings of $370 during fiscal 1996. Following is a
summary of the results related to the adjustments to retained earnings:
<TABLE>
<CAPTION>
FOR THE FISCAL
YEAR ENDED APRIL 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Revenues................................................................ $ (25,037) $ 55,126
Costs and expenses...................................................... (24,667) 52,891
--------- ---------
Net income............................................................ $ (370) $ 2,235
--------- ---------
--------- ---------
</TABLE>
28
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 3 -- BUSINESS COMBINATIONS (CONTINUED)
The separate results of operations of U.S. Office Products Company and the
Pooled Companies for periods prior to the mergers are presented below:
<TABLE>
<CAPTION>
U.S. OFFICE POOLED
FOR THE YEAR ENDED APRIL 30, PRODUCTS COMPANIES COMBINED
- --------------------------------------------------------- ----------- ----------- ----------
<S> <C> <C> <C>
1996
Revenue................................................ $ 488,670 $ 213,279 $ 701,949
Net income............................................. $ 7,828 $ 912 $ 8,740
1995
Revenue................................................ $ 120,479 $ 235,342 $ 355,821
Net income............................................. $ 1,514 $ 4,631 $ 6,145
1994
Revenue................................................ $ 76,541 $ 191,233 $ 267,774
Net income............................................. $ 1,114 $ 3,688 $ 4,802
</TABLE>
PURCHASE METHOD
In fiscal 1996, the Company made 26 acquisitions accounted for under the
purchase method for an aggregate purchase price of $151,337 consisting of
$90,184 of cash, $786 of notes payable and 3,885,349 shares of common stock with
a market value of $60,367. The total assets related to these 26 acquisitions
were $330,474, including goodwill of $115,154. The results of these acquisitions
have been included in the Company's results from their respective dates of
acquisition.
In fiscal 1995, in addition to the Mergers, the Company made five
acquisitions accounted for under the purchase method for an aggregate purchase
price of $27,618, consisting of $15,868 of cash, $3,000 of notes payable and
875,000 shares of common stock with a market value of $8,750. The total assets
related to these five acquisitions were $49,351, including goodwill of $19,635.
The results of these acquisitions have been included in the Company's results
from their respective dates of acquisition.
The following presents the unaudited pro forma results of operations of the
Company for the fiscal years ended April 30, 1996 and 1995 as if the purchase
acquisitions described above had been consummated as of the beginning of fiscal
1995. The results presented below include certain pro forma adjustments to
reflect the amortization of intangible assets, adjustments in executive
compensation and the inclusion of a federal income tax provision:
<TABLE>
<CAPTION>
FOR THE FISCAL
YEAR ENDED APRIL 30,
------------------------
1996 1995
------------ ----------
<S> <C> <C>
Revenues............................................................ $ 1,009,903 $ 856,400
Net income.......................................................... 11,791 6,827
Net income per share................................................ 0.38 0.22
</TABLE>
The unaudited pro forma results of operations are prepared for comparative
purposes only and do not necessarily reflect the results that would have
occurred had the acquisitions occurred at the beginning of fiscal 1995 or the
results which may occur in the future.
29
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 4 -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Land................................................................... $ 2,918 $ 1,668
Buildings.............................................................. 18,508 10,289
Furniture and fixtures................................................. 30,277 9,562
Warehouse equipment.................................................... 9,388 7,381
Equipment under capital leases......................................... 5,774 2,778
Leasehold improvements................................................. 4,077 2,642
--------- ---------
70,942 34,320
Less: Accumulated depreciation......................................... (20,413) (17,944)
--------- ---------
Net property and equipment............................................. $ 50,529 $ 16,376
--------- ---------
--------- ---------
</TABLE>
Depreciation expense for the fiscal years ended April 30, 1996, 1995 and
1994 was $5,332, $2,561 and $2,450, respectively.
The Company also leases equipment to customers under cancellable operating
leases. At April 30, 1996 the cost and accumulated depreciation of this
equipment was $6,456 and $1,722, respectively.
NOTE 5 -- INTANGIBLE ASSETS
Intangible assets and accumulated amortization consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
---------------------
1996 1995
---------- ---------
<S> <C> <C>
Goodwill............................................................... $ 135,756 $ 21,046
Other.................................................................. 389 410
---------- ---------
136,145 21,456
Less: Accumulated amortization......................................... (2,342) (1,188)
---------- ---------
$ 133,803 $ 20,268
---------- ---------
---------- ---------
</TABLE>
Amortization expense for the fiscal years ended April 30, 1996, 1995 and
1994 was $1,978, $542 and $489, respectively.
NOTE 6 -- LEASE RECEIVABLES
Lease receivables represent the present value of future lease payments
related to equipment sold to customers as sales type leases. The future minimum
lease payments to be received are as follows:
<TABLE>
<S> <C>
1997.............................................................. $ 34,146
1998.............................................................. 29,885
1999.............................................................. 17,181
2000.............................................................. 5,800
2001 and thereafter............................................... 1,647
---------
Total lease receivables........................................... 88,659
Less: Amounts representing interest............................... (16,847)
---------
Present value of lease receivables................................ $ 71,812
---------
---------
</TABLE>
30
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 7 -- OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Investment................................................................ $ 6,575
Debt issue costs, net..................................................... 5,167
Cash surrender value of life insurance.................................... 850 $ 845
Other..................................................................... 1,204 810
--------- ---------
$ 13,796 $ 1,655
--------- ---------
--------- ---------
</TABLE>
The investment is recorded at cost, which approximates market value.
NOTE 8 -- CREDIT FACILITIES
SHORT-TERM DEBT
Short-term debt consists of the following:
<TABLE>
<CAPTION>
APRIL 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Bank lines of credit, secured by accounts receivable and inventory, interest rates
ranging from prime to prime plus 1.0% (9.0% to 10.0% at April 30, 1995).......... $ 21,520
Annual renewal loans provided by banks and other financial institutions of foreign
subsidiary secured by lease receivables of foreign subsidiary. Interest rates
ranging from 7.8% to 10.2% at April 30, 1996..................................... $ 67,456
Bank lines of credit of foreign subsidiary operations secured by assets of those
operations. Interest rates ranging from 9.2% to 9.8% at April 30, 1996........... 12,731
Other............................................................................. 1,196
Current maturities of long-term debt.............................................. 6,073 3,965
--------- ---------
Total short-term debt............................................................. $ 86,260 $ 26,681
--------- ---------
--------- ---------
</TABLE>
The Company currently has a line of credit with a bank that provides the
Company with a $50 million credit facility bearing interest, at the Company's
option, at the prime rate in effect from time to time or a eurodollar rate plus
2.0%. The line of credit is secured by the Company's inventory and receivables
and contains customary covenants, including financial covenants with respect to
the Company's net worth and fixed charge coverage ratios, and customary default
provisions related to non-payment of principal and interest, default under other
debt agreements and bankruptcy. It also provides for a default in the event that
there is a change in control of the Company. The Company was in compliance with
or obtained waivers relating to these covenants as of April 30, 1996. The amount
that is available to be borrowed under the line of credit varies from time to
time, depending upon the level of receivables and inventory available to
collateralize borrowings. Since April 30, 1996, the Company has not provided
certain information required by this facility and has not requested certain
consents in respect of actions taken by the Company since April 30, 1996, which,
if not corrected, could limit the Company's ability to draw funds against this
line of credit. No amounts were outstanding against this facility at April 30,
1996. The Company believes that, if necessary, the information required by the
line of credit facility could be provided and the necessary consents could be
obtained to enable the Company to utilize this source of financing, although
there can be no assurances in this regard.
31
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 8 -- CREDIT FACILITIES (CONTINUED)
LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
APRIL 30,
---------------------
1996 1995
---------- ---------
<S> <C> <C>
Notes payable, secured by certain assets of the Company, interest rates ranging
from 8.0% to 10.0%, maturities from October 1996 through 2003................... $ 10,548
Convertible Subordinated Notes due 2001, interest at 5 1/2%, convertible into
shares of common stock at any time prior to maturity at a conversion price of
$28.50 per share, subject to adjustment in certain events....................... $ 143,750
Debt facility payable over five years secured by lease receivables of the
Company's foreign subsidiaries. Interest rates ranging from 11.0% to 12.0% at
April 30, 1996.................................................................. 8,943
Other............................................................................ 6,306
Capital lease obligations........................................................ 4,093 562
Notes payable to related party................................................... 284 1,487
---------- ---------
163,376 12,597
Less: Current maturities of long-term debt....................................... (6,073) (3,965)
---------- ---------
Total long-term debt......................................................... $ 157,303 $ 8,632
---------- ---------
---------- ---------
</TABLE>
The 5 1/2% Convertible Subordinated Notes due 2001 (the "Notes") are
redeemable, in whole or in part, at the Company's option at specified redemption
prices on or after February 3, 1998, but may not be redeemed prior to February
2, 1999 unless the closing price of the common stock is at least 150% of the
conversion price for a period of time prior to the notice of redemption. Costs
incurred in connection with the issuance of the Notes are included in other
assets and are being amortized over the five year period of maturity. The fair
value of the Notes at April 30, 1996, based upon quoted market prices, totaled
$211,313.
MATURITIES OF LONG-TERM DEBT
Maturities on long-term debt, including capital lease obligations, are as
follows:
<TABLE>
<S> <C>
1997...................................................... $ 6,073
1998...................................................... 6,137
1999...................................................... 3,810
2000...................................................... 1,144
2001...................................................... 144,445
Thereafter................................................ 1,767
---------
$ 163,376
---------
---------
</TABLE>
NOTE 9 -- INCOME TAXES
U.S. Office Products will file a consolidated federal income tax return for
periods subsequent to the Mergers described in Note 1. Each of the Combined
Companies and Pooled Companies will file "short-period" federal tax returns
through the dates of the Mergers and business combinations.
32
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 9 -- INCOME TAXES (CONTINUED)
The provision for income taxes consists of:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR
ENDED APRIL 30,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Income taxes currently payable:
Federal.................................................................. $ 3,589 $ 1,354 $ 975
State.................................................................... 1,385 316 240
Foreign taxes currently payable.......................................... 685
--------- --------- ---------
5,659 1,670 1,215
--------- --------- ---------
Deferred income tax expense (benefit)...................................... (845) 91 (20)
--------- --------- ---------
Total provision for income taxes......................................... $ 4,814 $ 1,761 $ 1,195
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred taxes are comprised of the following:
<TABLE>
<CAPTION>
APRIL 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Current deferred tax assets:
Inventory......................................................................... $ 127 $ 137
Allowance for doubtful accounts................................................... 781 90
Accrued liabilities............................................................... 50 256
--------- ---------
Total current deferred tax assets............................................... 958 483
--------- ---------
Long-term deferred tax liabilities:
Property and equipment............................................................ (2,665) (964)
Internal Revenue Service tax assessment........................................... (3,383) (3,383)
Other............................................................................. (100)
--------- ---------
Total long-term deferred tax liabilities........................................ (6,148) (4,347)
--------- ---------
Net deferred tax asset (liability).............................................. $ (5,190) $ (3,864)
--------- ---------
--------- ---------
</TABLE>
The Internal Revenue Service ("IRS") tax assessment relates to the deferral
of a gain on the sale of land and building by a subsidiary of the Company. The
IRS has determined that a portion of the gain recorded by the subsidiary does
not qualify for deferral and has required that the Company pay additional taxes.
The subsidiary has recorded a deferred tax liability as a result of the
assessment and the related interest. The Company has filed an appeal with the
IRS relating to the above assessment; however, the IRS has not yet responded to
the appeal.
33
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 9 -- INCOME TAXES (CONTINUED)
The Company's effective income tax rate varied from the U.S. federal
statutory tax rate as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR
ENDED APRIL 30,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
U.S. federal statutory rate................................................ 35.0% 34.0% 34.0%
State income taxes, net of federal income tax benefit...................... 5.4 4.1 4.0
Subchapter S corporation income not subject to corporate level taxation.... (12.1) (19.7) (21.1)
Foreign earnings not subject to U.S. taxes................................. (.6)
Minority interest in foreign taxes......................................... 2.5
Nondeductible goodwill..................................................... 2.6 1.4
Other...................................................................... 2.7 2.5 3.0
----- ----- -----
Effective tax rate......................................................... 35.5% 22.3% 19.9%
----- ----- -----
----- ----- -----
</TABLE>
One Combined Company and certain Pooled Companies were organized as
subchapter S corporations prior to the closing of their acquisitions by the
Company and, as a result, the federal tax on their income was the responsibility
of their individual stockholders. Accordingly, the Combined Company and the
specific Pooled Companies provided no federal income tax expense prior to these
acquisitions by the Company.
The following unaudited pro forma income tax information is presented in
accordance with SFAS 109 as if the Combined Company and the specific Pooled
Companies had been subject to federal income taxes for the entire periods
presented.
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR
ENDED APRIL 30,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net income per consolidated statement of operations........................ $ 8,740 $ 6,145 $ 4,802
Pro forma income tax provision adjustment.................................. 1,446 1,624 1,244
--------- --------- ---------
Pro forma net income....................................................... $ 7,294 $ 4,521 $ 3,558
--------- --------- ---------
--------- --------- ---------
</TABLE>
NOTE 10 -- LEASE COMMITMENTS
The Company leases various types of retail, warehouse and office space and
equipment, furniture and fixtures under noncancellable lease agreements which
expire at various dates. Future minimum lease payments under noncancellable
capital and operating leases are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- -----------
<S> <C> <C>
1997.................................................................... $ 1,110 $ 8,015
1998.................................................................... 1,206 6,210
1999.................................................................... 664 5,098
2000.................................................................... 426 4,130
2001.................................................................... 318 2,918
Thereafter.............................................................. 2,541 1,804
--------- -----------
Total minimum lease payments............................................ 6,265 $ 28,175
-----------
-----------
Less: Amounts representing interest..................................... (2,172)
---------
Present value of net minimum lease payments............................. $ 4,093
---------
---------
</TABLE>
34
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 10 -- LEASE COMMITMENTS (CONTINUED)
Rent expense for all operating leases for the fiscal years ended April 30,
1996, 1995 and 1994 was $8,241, $3,206 and $2,848, respectively.
NOTE 11 -- COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is, from time to time, a party to litigation arising in the
normal course of its business. Management believes that none of this litigation
will have a material adverse effect on the financial position, results of
operations or cash flows of the Company.
POSTEMPLOYMENT BENEFITS
The Company has entered into employment agreements with several employees
that would result in payments to these employees upon change in control or
certain other events. No amounts have been accrued at April 30, 1996 or 1995
related to these agreements.
NOTE 12 -- EMPLOYEE BENEFIT PLANS
Certain subsidiaries of the Company have qualified defined contribution
benefit plans, which allow for voluntary pre-tax contributions by the employees.
The subsidiaries pay all general and administrative expenses of the plans and in
some cases making matching contributions on behalf of the employees. For the
fiscal years ended April 30, 1996, 1995 and 1994, the subsidiaries incurred
expenses totaling $683, $450 and $220, respectively, related to these plans.
One Combined Company entered into agreements with three officers which
provided for future compensation to those officers subsequent to termination of
employment with the Combined Company for a period of five years. The future
compensation would not be received, however, in the event that an officer
received payment under that Company's Restricted Stock Purchase Plan (the
"Purchase Plan")in excess of the purchase price of the stock paid by the
officer. No compensation expense was recorded with respect to the agreement
related to two of the officers, as it was probable that they would receive
payment under the Restricted Stock Purchase Plan. Future compensation expense of
approximately $1,030 was being recognized as expense for the third officer over
the estimated term of the officer's service to the Company of approximately
eleven years. The compensation expense equaled $95 in fiscal 1994 and $71 in
fiscal 1995. The agreements were terminated upon closing of the Merger.
The Purchase Plan was considered to be compensatory, for the benefit of
certain officers. Two of these officers each purchased 1,000 shares of stock for
$1 under the Purchase Plan. The stock was restricted and could only be purchased
by the Combined Company at specified prices that varied upon the occurrence of
certain events. As a result, the Combined Company's future compensation expense
of $1,398, under this Purchase Plan, was being recognized as expense over the
expected periods of the officers' future service to the Combined Company of 20
and 28 years. Compensation expense of approximately $60 and $45 was recognized
in fiscal years 1994 and 1995, respectively. The Plan was terminated upon
closing of the Merger.
NOTE 13 -- STOCKHOLDERS' EQUITY
LONG-TERM COMPENSATION PLAN
In October 1994, the Board of Directors and the Company's stockholders
approved the Company's 1994 Long-Term Compensation Plan (the "Plan"). The
purpose of the Plan is to provide directors, officers, key employees and
consultants with additional incentives by increasing their ownership interests
in the Company. The maximum number of options to purchase Common Stock granted
in any calendar or fiscal year under the Plan is equal to the greater of 855,000
shares or 15% of the aggregate number of shares of the Common Stock outstanding
at the time an award is granted, less, in each case, the number of shares
subject to previously outstanding awards under the Plan.
35
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 13 -- STOCKHOLDERS' EQUITY (CONTINUED)
Under the provisions of the Plan, non-qualified stock options and other
stock awards are granted at prices not less than fair market value at the date
of grant. A summary of option transactions follows:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE EXPIRATION
SHARES RANGE PER SHARE DATE
---------- ----------------- -------------
<S> <C> <C> <C>
Outstanding at April 30, 1994............................ -- -- --
Granted................................................ 629,500 $ 8.00 - $10.00 2004
Cancelled.............................................. (7,000) $10.00 2004
---------- ----------------- -------------
Outstanding at April 30, 1995............................ 622,500 $ 8.00 - $10.00 2004
Granted................................................ 2,764,591 $11.31 - $31.75 2004 - 2006
Exercised.............................................. (63,350) $ 8.00 - $10.00 2004
Cancelled.............................................. (16,200) $10.00 - $17.13 2004 - 2005
---------- ----------------- -------------
Outstanding at April 30, 1996............................ 3,307,541 $ 8.00 - $31.75 2004 - 2006
---------- ----------------- -------------
---------- ----------------- -------------
Exercisable at April 30, 1996............................ 132,867 $ 8.00 - $10.00 2004
---------- ----------------- -------------
---------- ----------------- -------------
</TABLE>
Non-qualified options are generally exercisable beginning one year from the
date of grant in cumulative yearly amounts of 25% of the shares under option and
generally expire ten years from the date of grant.
Subsequent to year-end, the Company granted options to purchase 1,087,550
shares of common stock at exercise prices ranging from $36.00 to $44.875 per
share.
COMMON STOCK
In November 1994, the Board of Directors of the Company approved a one
thousand-for-one split of the Company's common stock and changed the par value
of common stock from $1 per share to $.001 per share. The consolidated financial
statements have been adjusted to reflect the stock split. In February 1995, the
stockholders approved the amendment to the Company's Amended and Restated
Certificate of Incorporation to increase the number of authorized shares of
common stock from 25,000,000 to 100,000,000 shares.
NOTE 14 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL 1996 QUARTERS
----------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues............................................. $ 121,954 $ 161,903 $ 175,535 $ 242,557 $ 701,949
Gross profit......................................... 29,244 38,737 42,851 67,708 178,540
Operating income..................................... (1,369) 4,548 4,718 9,108 17,005
Net income (loss).................................... (1,080) 2,865 2,797 4,158 8,740
Pro forma net income (loss) (see Note 9)............. (1,407) 2,374 2,288 4,039 7,294
Net income (loss) per share.......................... (.06) .13 .12 .14 .37
Pro forma net income (loss) per share................ (.08) .11 .10 .13 .31
<CAPTION>
FISCAL 1995 QUARTERS
----------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues............................................. $ 73,502 $ 79,084 $ 91,052 $ 112,183 $ 355,821
Gross profit......................................... 19,700 20,879 23,196 26,356 90,131
Operating income..................................... 2,782 2,631 2,615 1,974 10,002
Net income........................................... 2,010 1,770 1,668 697 6,145
Pro forma net income (See Note 9).................... 1,412 1,217 1,305 587 4,521
</TABLE>
36
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 15 -- SUBSEQUENT EVENTS (UNAUDITED)
BUSINESS COMBINATIONS SUBSEQUENT TO YEAR-END
Subsequent to the completion of fiscal 1996, the Company issued 1,843,172
shares of common stock to acquire three companies in business combinations
accounted for under the pooling-of-interests method. The Company also acquired
14 companies and the remaining 49% of Blue Star in business combinations
accounted for under the purchase method for $65,333, consisting of 1,663,692
shares of common stock with a market value of $44,149 and cash of $21,184. In
addition, the Company considers the consummation to be probable of a total of 46
additional businesses (the "Pending Acquisitions"). The Pending Acquisitions
provide for consideration of $286,740, consisting of 7,206,323 shares of common
stock with a market value of $254,659 and cash of $32,081.
The following presents the unaudited pro forma results of operations of the
Company for fiscal 1996 as if the acquisitions described above had been
consummated as of the beginning of fiscal 1996. The results presented below
include certain pro forma adjustments to reflect the amortization of intangible
assets, reductions in executive compensation, the inclusion of a federal income
tax provision and the removal of certain restructuring costs:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED APRIL 30,
1996
----------------
<S> <C>
Revenues.......................................... $ 1,735,166
Net income........................................ 28,152
Net income per share.............................. .71
</TABLE>
The unaudited pro forma results of operations are prepared for comparative
purposes only and do not necessarily reflect the results that would have
occurred had the acquisitions occurred at the beginning of fiscal 1996, or the
results which may occur in the future.
ISSUANCE OF CONVERTIBLE SUBORDINATED NOTES
In May 1996, the Company completed an offshore offering and a concurrent
private placement of $230,000, principal amount of 5 1/2% Convertible
Subordinated Notes due 2003, including the underwriters' over-allotment option
of $30,000. The underwriters exercised their over-allotment option in June 1996.
The net proceeds to the Company, after deducting underwriting discounts and
commissions and offering expenses, were approximately $223,000.
REVOLVING CREDIT FACILITY
In June 1996, the Company entered into a commitment letter with a bank,
subject to the satisfaction of a number of conditions, including execution of a
definitive credit agreement and related documentation, pursuant to which a
syndicate of financial institutions with the bank, as agent, will provide a
$250,000 revolving credit facility (the "Credit Facility") bearing interest, at
the Company's option, at the bank's base rate, plus an applicable margin of up
to 1.25%, or a eurodollar rate plus an applicable margin of up to 2.5%. The
Credit Facility is expected to be secured by all of the assets of the Company
and is expected to contain customary covenants, including financial covenants
with respect to the Company's net worth and fixed charges coverage ratio and
customary default provisions relating to non-payment of principal and interest,
default under other debt agreements, bankruptcy and changes of control events.
37
<PAGE>
SCHEDULE II
U.S. OFFICE PRODUCTS COMPANY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FISCAL YEARS ENDED APRIL 30, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
ADDITIONS
----------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND CHARGED TO END OF
DESCRIPTION DATE PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS DATE PERIOD
- --------------------- -------------- ------------ ------------ -------------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts... May 1, 1993 $ 310,000 $ 279,000 $ (240,000)(b) April 30, 1994 $ 349,000
May 1, 1994 349,000 454,000 $ 182,000(a) (499,000)(b) April 30, 1995 486,000
May 1, 1995 486,000 1,083,000 2,114,000(a) (899,000)(b) April 30, 1996 2,784,000
Accumulated
Amortization of
Intangibles......... May 1, 1993 $ 1,056,000 $ 489,000 April 30, 1994 $ 1,545,000
May 1, 1994 1,545,000 542,000 $ (899,000)(c) April 30, 1995 1,188,000
May 1, 1995 1,188,000 1,978,000 (824,000)(c) April 30, 1996 2,342,000
</TABLE>
- ------------------------
(a) Allowance for doubtful accounts acquired in purchase acquisitions.
(b) Represents write-offs of uncollectible accounts receivable.
(c) Represents write-offs of fully amortized intangible assets.
38
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
The information required by Part III is omitted from this Annual Report on
Form 10-K and is incorporated by reference from the definitive proxy statement
with respect to the 1996 Annual Meeting of Stockholders (the "Proxy Statement")
which the Company will file with the Securities and Exchange Commission (the
"Commission") not later than 120 days after the end of the fiscal year covered
by this Report.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) IDENTIFICATION OF DIRECTORS. Information required by this Item will be
set forth under the caption "Proposal 1, Election of Directors -- Nominees for
Election at this Annual Meeting", which information is incorporated herein by
reference.
(b) IDENTIFICATION OF EXECUTIVE OFFICERS. Information required by this
Item is set forth under the caption "Executive Officers of the Company" under
Part I, Item 1 of this Report, which information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item will be set forth under the captions
"Executive Compensation" and "Proposal 1, Election of Directors -- Directors'
Remuneration" in the Proxy Statement, which information is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item will be set forth under the caption "Stock
Ownership" in the Proxy Statement, which information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item will be set forth under the caption
"Certain Transactions" in the Proxy Statement, which information is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS.
1. FINANCIAL STATEMENTS (See Item 8 hereof.)
Report of Independent Accountants
Consolidated Balance Sheet as of April 30, 1996 and 1995
Consolidated Statement of Income for the years ended April 30, 1996,
1995 and 1994
Consolidated Statement of Stockholders' Equity for the fiscal years
ended April 30, 1996, 1995 and 1994
Consolidated Statement of Cash Flows for years ended April 30, 1996,
1995 and 1994
Notes to Consolidated Financial Statements
Quarterly Financial Data (unaudited)
2. FINANCIAL STATEMENT SCHEDULES (See Item 8 hereof.)
Schedule II -- Valuation and Qualifying Accounts and Reserves.
All schedules, other than those outlined above, are omitted as the
information is not required or is otherwise furnished.
39
<PAGE>
3. EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of U.S. Office Products Company (Exhibit 3.1 of the
Company's Registration Statement on Form S-1 (File No. 33-80553) is hereby incorporated by reference)
3.2 Amended and Restated Bylaws of U.S. Office Products Company.
4.1 Form of Indenture relating to the Company's $143.75 million 5 1/2% Convertible Subordinated Notes due
2001 (including form of Note) (Exhibit 4.1 of the Company's Registration Statement on Form S-1 (File
No. 33-80553) is hereby incorporated by reference)
4.2 Form of Indenture relating to the Company's $230.0 million 5 1/2% Convertible Subordinated Notes due
2003 (including form of Note)
4.3 Registration Rights Agreement, dated as of May 22, 1996, by and among the Company and Robertson Stephens
& Company LLC and Natwest Securities Limited, as Managers
*10.1 U.S. Office Products Company Amended and Restated 1994 Long-Term Incentive Plan, as amended (Exhibit A
to the Company's Proxy Statement, dated August 28, 1995, is hereby incorporated by reference)
*10.2 Form of Employment Agreement for Jonathan J. Ledecky (Exhibit 10.3 of the Company's Registration
Statement on Form S-1 (File No. 33-88096) is hereby incorporated by reference)
*10.3 Employment Agreement for Timothy Flynn (Exhibit 10.4 of the Company's Post-Effective Amendment No. 6 to
the Registration Statement on Form S-1 (File No. 33-89978) is hereby incorporated by reference)
*10.4 Employment Agreement for Thomas Reaser (Exhibit 10.5 of the Company's Post-Effective Amendment No. 6 to
the Registration Statement on Form S-1 (File No. 33-89978) is hereby incorporated by reference)
*10.5 Employment Agreement for Jack L. Becker (Exhibit 10.6 of the Company's Post-Effective Amendment No. 6 to
the Registration Statement on Form S-1 (File No. 33-89978) is hereby incorporated by reference)
*10.6 Employment Agreement for Ralph K. Burgess (Exhibit 10.7 of the Company's Post-Effective Amendment No. 6
to the Registration Statement on Form S-1 (File No. 33-89978) is hereby incorporated by reference)
*10.7 Employment Agreement for Martin S. Pinson (Exhibit 10.13 of the Company's Registration Statement on Form
S-1 (File No. 33-93956) is hereby incorporated by reference)
*10.8 Employment Agreement for Donald H. Platt (Exhibit 10.14 of the Company's Post-Effective Amendment No. 2
to the Registration Statement on Form S-1 (File No. 33-89978) is hereby incorporated by reference)
*10.9 Form of Employment Agreement for Roger Choquette (Exhibit 10.15 of the Company's Post-Effective
Amendment No. 2 to the Registration Statement on Form S-1 (File No. 33-89978) is hereby incorporated by
reference)
*10.10 Employment Agreement for Clifton B. Phillips (Exhibit 10.21 of the Company's Pre-Effective Amendment No.
1 to the Registration Statement on Form S-1 (File No. 33-80117) is hereby incorporated by reference)
*10.11 Employment Agreement for David Gezon (Exhibit 10.22 of the Company's Pre-Effective Amendment No. 1 to
the Registration Statement on Form S-1 (File No. 33-80117) is hereby incorporated by reference)
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
*10.12 Employment Agreement for David C. Copenhaver (Exhibit 10.23 of the Company's Pre-Effective Amendment No.
1 to the Registration Statement on Form S-1 (File No. 33-80117) is hereby incorporated by reference)
*10.13 Employment Agreement for Mark A. Sorgenfrei (Exhibit 10.24 of the Company's Pre-Effective Amendment No.
1 to the Registration Statement on Form S-1 (File No. 33-80117) is hereby incorporated by reference)
*10.14 Employment Agreement for Mark D. Director
10.15 Credit and Security Agreement, dated June 26, 1995, between the Company and First Bank National
Association (Exhibit 10.12 of the Company's Post-Effective Amendment No. 2 to the Registration
Statement on Form S-1 (File No. 33-89978) is hereby incorporated by reference)
10.16 Agreement and Plan of Reorganization, dated as of December 29, 1994, by and among U.S. Office Supply
Company, Andrews Acquisition Corp., Andrews Office Supply & Equipment Company, and the Stockholders
named therein (Exhibit 2.1 of the Company's Registration Statement on Form S-1 (File No. 33-88096) is
hereby incorporated by reference)
10.17 Agreement and Plan of Reorganization, dated as of November 18, 1994, by and among U.S. Office Supply
Company, Sharp Pencil Holdings, Inc., GOP Acquisition Corp., General Office Products Company, Sharp
Pencil Holdings, Inc. and the Stockholders named therein (Exhibit of the Company's Registration
Statement on Form S-1 (File No. 33-88096) is hereby incorporated by reference)
10.18 Agreement and Plan of Reorganization, dated as of November 18, 1994, by and among U.S. Office Supply
Company, Burgess Acquisition Corp., Burgess, Anderson & Tate, Inc. and the Stockholders named therein
(Exhibit 2.3 of the Company's Registration Statement on Form S-1 (File No. 33-88096) is hereby
incorporated by reference)
10.19 Agreement and Plan of Reorganization, dated as of December 2, 1994, by and among U.S. Office Supply
Company, Dameron-Pierson Acquisition Corp., Dameron-Pierson Company, Limited and the Stockholders named
therein (Exhibit 2.4 of the Company's Registration Statement on Form S-1 (File No. 33-88096) is hereby
incorporated by reference)
10.20 Agreement and Plan of Reorganization, dated as of December 20, 1994, by and among U.S. Office Supply
Company, Office Works Acquisition Corp., The Office Works, Inc. and the Stockholders named therein
(Exhibit 2.5 of the Company's Registration Statement on Form S-1 (File No. 33-88096) is hereby
incorporated by reference)
10.21 Asset Purchase Agreement dated as of December 22, 1994, by and among U.S. Office Supply Company, DeKalb
Acquisition Corp. and DeKalb Office Environments, Inc. (Exhibit 2.6 of the Company's Registration
Statement on Form S-1 (File No. 33-88096) is hereby incorporated by reference)
10.22 Merger Agreement, dated as of January 31, 1996, by and among U.S. Office Products Company, Oak Brook
Office Supply & Equipment Corporation, Oak Brook Acquisition Corp., and the Stockholders named therein
(Exhibit 2.7 of the Company's Post-Effective Amendment No. 1 to Form S-1 (File No.33-80117) is hereby
incorporated by reference)
10.23 Stock Purchase Agreement, dated as of January 31, 1996, by and between U.S. Office Products Company and
Eric John Watson (Exhibit 2.8 of the Company's Post-Effective Amendment No. 1 to Form S-1 (File No.
33-80117) is hereby incorporated by reference)
10.24 Amendment to Stock Purchase Agreement, dated as of June 20, 1996, by and between the Company and Eric
John Watson
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.25 Merger Agreement dated March 15, 1995 among U.S. Office Products Company, the H.H. West Company, a
Wisconsin corporation, the H.H. West Company, a Delaware corporation and the stockholders named therein
(Exhibit 2.1 to the Company's Form 8-K (Commission file No. 0-25372) dated March 15, 1995 is hereby
incorporated by reference)
10.26 Merger Agreement, dated as of May 16, 1995, among U.S. Office Products Company, Coffee Butler
Acquisition Corp., Coffee Butler Service, Inc., and the stockholders named therein (Exhibit 2.1 of the
Current Report on Form 8-K dated May 16, 1995, filed with the Commission on May 22, 1995 (Commission
file No. 0-25372), is hereby incorporated by reference)
10.27 Merger Agreement, dated as of June 8, 1995, among U.S. Office Products Company, C.W. Mills Paper
Company, C.W. Mills Acquisition Corp. and the stockholders named therein (Exhibit 10.10 of the
Company's Registration Statement on Form S-1 (File No. 33-93956) is hereby incorporated by reference)
10.28 Merger Agreement dated as of June 12, 1995, among U.S. Office Products Company, Mills Morris Arrow,
Inc., Mills Morris Arrow Acquisition Corp. and the stockholders named therein (Exhibit 10.11 of the
Company's Registration Statement on Form S-1 (File No. 33-93956) is hereby incorporated by reference)
10.29 Amendment No. 1 to Merger Agreement, dated as of July 27, 1995, among U.S. Office Products Company,
Coffee Butler Acquisition Corp., Coffee Butler Service, Inc., and the stockholders named therein
(Exhibit 10.16 Company's Registration Statement on Form S-1 (File No. 33-93956) is hereby incorporated
by reference)
10.30 Amendment No. 1 to Merger Agreement, dated as of July 27, 1995, among U.S. Office Products Company, C.W.
Mills Paper Company, C.W. Mills Acquisition Corp. and the stockholders named therein (Exhibit 10.17 of
the Company's Registration Statement on Form S-1 (File No. 33-93956) is hereby incorporated by
reference)
10.31 Amendment No. 1 to Merger Agreement, dated as of July 27, 1995, among U.S. Office Products Company,
Mills Morris Arrow, Inc., Mills Morris Arrow Acquisition Corp. and the stockholders named therein
(Exhibit 10.18 of the Company's Registration Statement on Form S-1 (File No. 33-93956) is hereby
incorporated by reference)
10.32 Asset Purchase Agreement, dated as of August 16, 1995, among OSCO Acquisition Corp., MISSCO Corporation
of Jackson and U.S. Office Products Company (Exhibit 10.19 of the Company's Post-Effective Amendment
No. 6 to the Registration Statement on Form S-1 (File No. 33-89978) is hereby incorporated by
reference)
10.33 Form of Merger Agreement, dated as of August 16, 1995, among U.S. Office Products Company, Smith-Wilson
Co., a Florida corporation, Smith-Wilson Acquisition Corp., a Delaware corporation, Copenhaver
Holdings, Incorporated, a Florida corporation and the stockholders named therein (Exhibit 10.20 of the
Company's Post-Effective Amendment No. 5 to the Registration Statement on Form S-1 (File No. 33-89978)
is hereby incorporated by reference)
10.34 Assets Purchase Agreement, dated as of January 12, 1996, among U.S. Office Products Company, Emmons-Napp
Office Products, Inc. and EN Acquisition Corp. (Exhibit 2.1 of the Company's Current Report on Form 8-K
(File No. 0-25372), filed on January 31, 1996, is hereby incorporated by reference)
10.35 Agreement and Plan of Reorganization, dated as of January 10, 1996, by and among U.S. Office Products
Company, National Office Supply, Inc., Tuscarawas Office Supply, Inc., Stark Office Supply, Inc. and
NST Acquisition Corp. (Exhibit 2.2 of the Company's Current Report on Form 8-K (File No. 0-25372),
filed on January 31, 1996, is hereby incorporated by reference)
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.36 Amendment No. 2 to Merger Agreement, dated August 10, 1995, by and among C.W. Mills, C.W. Mills
Acquisition Corp., U.S. Office Products Company and certain stockholders named therein (Exhibit 2.1 of
the Company's Current Report on Form 8-K (File No. 0-25372), filed on February 21, 1996, is hereby
incorporated by reference)
10.37 Agreement and Plan of Reorganization, dated as of April 29, 1996, by and among School Specialty, School
Acquisition Corp, U.S. Office Products Company and certain other investors of School Specialty named
therein (Exhibit 2.2 of the Company's Current Report on Form 8-K (File No. 0-25372), filed on May 17,
1996, is hereby incorporated by reference)
11 Statement Re Computation of Per Share Earnings
21.1 List of subsidiaries of U.S. Office Products Company
23.1 Consent of Price Waterhouse LLP
27 Financial Data Schedule
<FN>
- ------------------------
*Management contract or compensatory plan or arrangement.
</TABLE>
(b) REPORTS ON FORM 8-K. During the last quarter of the fiscal year
covered by this report, the Company filed the following Current Reports on Form
8-K:
i. Form 8-K dated August 2, 1995 and filed with the Commission on
February 21, 1996 reporting information under Item 2.
ii. Form 8-K dated August 18, 1995 and filed with the Commission on
February 21, 1996 reporting information under Item 2.
iii. Form 8-K dated October 18, 1995 and filed with the Commission on
February 21, 1996 reporting information under Item 2.
iv. Form 8-K dated March 7, 1996 and filed with the Commission on March
27, 1996 reporting informatiom under Items 5 and 7.
FINANCIAL STATEMENTS FILED:
(a) Pro forma financial information as of January 31, 1996 and for
the year ended April 30, 1995 and the nine months ended January
31, 1995 and 1996, reflecting pending and consummated
acquisitions by the Company.
(b) Pro forma financial information for the year ended April 30,
1994 and 1993, reflecting pending and consummated acquisitions by
the Company accounted for under the pooling-of-interests method.
(c) Consolidated financial statements of School Specialty, Inc. as
of December 31, 1995 and 1994 and for the years then ended.
(d) Financial statements of The J. Thayer Company as of December 31,
1995 and for the year then ended.
(e) Consolidated financial statements of Radar Holdings Corporation
as of June 30, 1995 and for the year then ended and as of
December 31, 1995 and for the six months ended December 31, 1995
and 1994.
(f) Consolidated financial statements of Raleigh Office Supply
Company as of August 31, 1995 and for the year then ended and as
of November 30, 1995 and for the three months ended November 30,
1995 and 1994.
43
<PAGE>
(g) Consolidated financial statements of Kentwood Office Furniture,
Inc. as of December 31, 1995 and 1994 and for the years then
ended.
(h) Consolidated financial statements of U-Bix Business Machines
Limited as of June 30, 1995 and for the year then ended and for
the six months ended December 31, 1995.
v. Form 8-K dated April 19, 1996 and filed with the Commission on April
19, 1996 reporting information under Items 5 and 7.
FINANCIAL STATEMENTS FILED: Supplemental consolidated financial
statements as of April 30, 1995 and 1994 and for each year in the
three year period ended April 30, 1995 and as of January 31, 1996 and
for the nine months ended January 31, 1996 and 1995 (unaudited).
44
<PAGE>
SIGNATURES
Pursuant to the requirements 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, in the City of Washington,
District of Columbia, on July 15, 1996.
U.S. OFFICE PRODUCTS COMPANY
By: /s/ JONATHAN J. LEDECKY
-----------------------------------
Name: Jonathan J. Ledecky
Title: Chief Executive Officer
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 and
in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- ------------------------------------------------ ----------------------------------------------- --------------
/s/ JONATHAN J. LEDECKY
- -------------------------------------- Chairman of the Board and Chief Executive July 15, 1996
Jonathan J. Ledecky Officer (Principal Executive Officer)
/S/ DONALD H. PLATT
- -------------------------------------- Chief Financial Officer (Principal Financial July 15, 1996
Donald H. Platt Officer and Principal Accounting Officer)
/s/ TIMOTHY J. FLYNN
- -------------------------------------- Director July 15, 1996
Timothy J. Flynn
/s/ THOMAS J. REASER
- -------------------------------------- Director July 15, 1996
Thomas J. Reaser
/s/ JOHN K. BURGESS
- -------------------------------------- Director July 15, 1996
John K. Burgess
/s/ JACK L. BECKER, JR.
- -------------------------------------- Director July 15, 1996
Jack L. Becker, Jr.
/s/ CLIFTON B. PHILLIPS
- -------------------------------------- Director July 8, 1996
Clifton B. Phillips
/s/ MILTON H. KUYERS
- -------------------------------------- Director July 10, 1996
Milton H. Kuyers
/s/ ALLON H. LEFEVER
- -------------------------------------- Director July 9, 1996
Allon H. Lefever
/s/ EDWARD J. MATHIAS
- -------------------------------------- Director July 9, 1996
Edward J. Mathias
</TABLE>
45
<PAGE>
<TABLE>
<S> <C> <C>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- ------------------------------------------------ ----------------------------------------------- --------------
/s/ JOHN A. QUELCH
- -------------------------------------- Director July 15, 1996
John A. Quelch
/s/ DAVID C. GEZON
- -------------------------------------- Director July 15, 1996
David C. Gezon
/s/ DAVID C. COPENHAVER
- -------------------------------------- Director July 9, 1996
David C. Copenhaver
/s/ MARK A. SORGENFREI
- -------------------------------------- Director July 9, 1996
Mark A. Sorgenfrei
</TABLE>
46
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<C> <S> <C>
3.1 Amended and Restated Certificate of Incorporation of U.S. Office Products Company (Exhibit 3.1
of the Company's Registration Statement on Form S-1 (File No. 33-80553) is hereby incorporated
by reference)
3.2 Amended and Restated Bylaws of U.S. Office Products Company.
4.1 Form of Indenture relating to the Company's $143.75 million 5 1/2% Convertible Subordinated
Notes due 2001 (including form of Note) (Exhibit 4.1 of the Company's Registration Statement on
Form S-1 (File No. 33-80553) is hereby incorporated by reference)
4.2 Form of Indenture relating to the Company's $230.0 million 5 1/2% Convertible Subordinated Notes
due 2003 (including form of Note)
4.3 Registration Rights Agreement, dated as of May 22, 1996, by and among the Company and Robertson
Stephens & Company LLC and Natwest Securities Limited, as Managers
10.1 U.S. Office Products Company Amended and Restated 1994 Long-Term Incentive Plan, as amended
(Exhibit A to the Company's Proxy Statement, dated August 28, 1995, is hereby incorporated by
reference)
10.2 Form of Employment Agreement for Jonathan J. Ledecky (Exhibit 10.3 of the Company's Registration
Statement on Form S-1 (File No. 33-88096) is hereby incorporated by reference)
10.3 Employment Agreement for Timothy Flynn (Exhibit 10.4 of the Company's Post-Effective Amendment
No. 6 to the Registration Statement on Form S-1 (File No. 33-89978) is hereby incorporated by
reference)
10.4 Employment Agreement for Thomas Reaser (Exhibit 10.5 of the Company's Post-Effective Amendment
No. 6 to the Registration Statement on Form S-1 (File No. 33-89978) is hereby incorporated by
reference)
10.5 Employment Agreement for Jack L. Becker (Exhibit 10.6 of the Company's Post-Effective Amendment
No. 6 to the Registration Statement on Form S-1 (File No. 33-89978) is hereby incorporated by
reference)
10.6 Employment Agreement for Ralph K. Burgess (Exhibit 10.7 of the Company's Post-Effective
Amendment No. 6 to the Registration Statement on Form S-1 (File No. 33-89978) is hereby
incorporated by reference)
10.7 Employment Agreement for Martin S. Pinson (Exhibit 10.13 of the Company's Registration Statement
on Form S-1 (File No. 33-93956) is hereby incorporated by reference)
10.8 Employment Agreement for Donald H. Platt (Exhibit 10.14 of the Company's Post-Effective
Amendment No. 2 to the Registration Statement on Form S-1 (File No. 33-89978) is hereby
incorporated by reference)
10.9 Form of Employment Agreement for Roger Choquette (Exhibit 10.15 of the Company's Post-Effective
Amendment No. 2 to the Registration Statement on Form S-1 (File No. 33-89978) is hereby
incorporated by reference)
10.10 Employment Agreement for Clifton B. Phillips (Exhibit 10.21 of the Company's Pre-Effective
Amendment No. 1 to the Registration Statement on Form S-1 (File No. 33-80117) is hereby
incorporated by reference)
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<C> <S> <C>
10.11 Employment Agreement for David Gezon (Exhibit 10.22 of the Company's Pre-Effective Amendment No.
1 to the Registration Statement on Form S-1 (File No. 33-80117) is hereby incorporated by
reference)
10.12 Employment Agreement for David C. Copenhaver (Exhibit 10.23 of the Company's Pre-Effective
Amendment No. 1 to the Registration Statement on Form S-1 (File No. 33-80117) is hereby
incorporated by reference)
10.13 Employment Agreement for Mark A. Sorgenfrei (Exhibit 10.24 of the Company's Pre-Effective
Amendment No. 1 to the Registration Statement on Form S-1 (File No. 33-80117) is hereby
incorporated by reference)
10.14 Employment Agreement for Mark D. Director
10.15 Credit and Security Agreement, dated June 26, 1995, between the Company and First Bank National
Association (Exhibit 10.12 of the Company's Post-Effective Amendment No. 2 to the Registration
Statement on Form S-1 (File No. 33-89978) is hereby incorporated by reference)
10.16 Agreement and Plan of Reorganization, dated as of December 29, 1994, by and among U.S. Office
Supply Company, Andrews Acquisition Corp., Andrews Office Supply & Equipment Company, and the
Stockholders named therein (Exhibit 2.1 of the Company's Registration Statement on Form S-1
(File No. 33-88096) is hereby incorporated by reference)
10.17 Agreement and Plan of Reorganization, dated as of November 18, 1994, by and among U.S. Office
Supply Company, Sharp Pencil Holdings, Inc., GOP Acquisition Corp., General Office Products
Company, Sharp Pencil Holdings, Inc. and the Stockholders named therein (Exhibit of the
Company's Registration Statement on Form S-1 (File No. 33-88096) is hereby incorporated by
reference)
10.18 Agreement and Plan of Reorganization, dated as of November 18, 1994, by and among U.S. Office
Supply Company, Burgess Acquisition Corp., Burgess, Anderson & Tate, Inc. and the Stockholders
named therein (Exhibit 2.3 of the Company's Registration Statement on Form S-1 (File No.
33-88096) is hereby incorporated by reference)
10.19 Agreement and Plan of Reorganization, dated as of December 2, 1994, by and among U.S. Office
Supply Company, Dameron-Pierson Acquisition Corp., Dameron-Pierson Company, Limited and the
Stockholders named therein (Exhibit 2.4 of the Company's Registration Statement on Form S-1
(File No. 33-88096) is hereby incorporated by reference)
10.20 Agreement and Plan of Reorganization, dated as of December 20, 1994, by and among U.S. Office
Supply Company, Office Works Acquisition Corp., The Office Works, Inc. and the Stockholders
named therein (Exhibit 2.5 of the Company's Registration Statement on Form S-1 (File No.
33-88096) is hereby incorporated by reference)
10.21 Asset Purchase Agreement dated as of December 22, 1994, by and among U.S. Office Supply Company,
DeKalb Acquisition Corp. and DeKalb Office Environments, Inc. (Exhibit 2.6 of the Company's
Registration Statement on Form S-1 (File No. 33-88096) is hereby incorporated by reference)
10.22 Merger Agreement, dated as of January 31, 1996, by and among U.S. Office Products Company, Oak
Brook Office Supply & Equipment Corporation, Oak Brook Acquisition Corp., and the Stockholders
named therein (Exhibit 2.7 of the Company's Post-Effective Amendment No. 1 to Form S-1 (File
No.33-80117) is hereby incorporated by reference)
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<C> <S> <C>
10.23 Stock Purchase Agreement, dated as of January 31, 1996, by and between U.S. Office Products
Company and Eric John Watson (Exhibit 2.8 of the Company's Post-Effective Amendment No. 1 to
Form S-1 (File No. 33-80117) is hereby incorporated by reference)
10.24 Amendment to Stock Purchase Agreement, dated as of June 20, 1996, by and between the Company and
Eric John Watson
10.25 Merger Agreement dated March 15, 1995 among U.S. Office Products Company, the H.H. West Company,
a Wisconsin corporation, the H.H. West Company, a Delaware corporation and the stockholders
named therein (Exhibit 2.1 to the Company's Form 8-K (Commission file No. 0-25372) dated March
15, 1995 is hereby incorporated by reference)
10.26 Merger Agreement, dated as of May 16, 1995, among U.S. Office Products Company, Coffee Butler
Acquisition Corp., Coffee Butler Service, Inc., and the stockholders named therein (Exhibit 2.1
of the Current Report on Form 8-K dated May 16, 1995, filed with the Commission on May 22, 1995
(Commission file No. 0-25372), is hereby incorporated by reference)
10.27 Merger Agreement, dated as of June 8, 1995, among U.S. Office Products Company, C.W. Mills Paper
Company, C.W. Mills Acquisition Corp. and the stockholders named therein (Exhibit 10.10 of the
Company's Registration Statement on Form S-1 (File No. 33-93956) is hereby incorporated by
reference)
10.28 Merger Agreement dated as of June 12, 1995, among U.S. Office Products Company, Mills Morris
Arrow, Inc., Mills Morris Arrow Acquisition Corp. and the stockholders named therein (Exhibit
10.11 of the Company's Registration Statement on Form S-1 (File No. 33-93956) is hereby
incorporated by reference)
10.29 Amendment No. 1 to Merger Agreement, dated as of July 27, 1995, among U.S. Office Products
Company, Coffee Butler Acquisition Corp., Coffee Butler Service, Inc., and the stockholders
named therein (Exhibit 10.16 Company's Registration Statement on Form S-1 (File No. 33-93956)
is hereby incorporated by reference)
10.30 Amendment No. 1 to Merger Agreement, dated as of July 27, 1995, among U.S. Office Products
Company, C.W. Mills Paper Company, C.W. Mills Acquisition Corp. and the stockholders named
therein (Exhibit 10.17 of the Company's Registration Statement on Form S-1 (File No. 33-93956)
is hereby incorporated by reference)
10.31 Amendment No. 1 to Merger Agreement, dated as of July 27, 1995, among U.S. Office Products
Company, Mills Morris Arrow, Inc., Mills Morris Arrow Acquisition Corp. and the stockholders
named therein (Exhibit 10.18 of the Company's Registration Statement on Form S-1 (File No.
33-93956) is hereby incorporated by reference)
10.32 Asset Purchase Agreement, dated as of August 16, 1995, among OSCO Acquisition Corp., MISSCO
Corporation of Jackson and U.S. Office Products Company (Exhibit 10.19 of the Company's
Post-Effective Amendment No. 6 to the Registration Statement on Form S-1 (File No. 33-89978) is
hereby incorporated by reference)
10.33 Form of Merger Agreement, dated as of August 16, 1995, among U.S. Office Products Company,
Smith-Wilson Co., a Florida corporation, Smith-Wilson Acquisition Corp., a Delaware
corporation, Copenhaver Holdings, Incorporated, a Florida corporation and the stockholders
named therein (Exhibit 10.20 of the Company's Post-Effective Amendment No. 5 to the
Registration Statement on Form S-1 (File No. 33-89978) is hereby incorporated by reference)
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<C> <S> <C>
10.34 Assets Purchase Agreement, dated as of January 12, 1996, among U.S. Office Products Company,
Emmons-Napp Office Products, Inc. and EN Acquisition Corp. (Exhibit 2.1 of the Company's
Current Report on Form 8-K (File No. 0-25372), filed on January 31, 1996, is hereby
incorporated by reference)
10.35 Agreement and Plan of Reorganization, dated as of January 10, 1996, by and among U.S. Office
Products Company, National Office Supply, Inc., Tuscarawas Office Supply, Inc., Stark Office
Supply, Inc. and NST Acquisition Corp. (Exhibit 2.2 of the Company's Current Report on Form 8-K
(File No. 0-25372), filed on January 31, 1996, is hereby incorporated by reference)
10.36 Amendment No. 2 to Merger Agreement, dated August 10, 1995, by and among C.W. Mills, C.W. Mills
Acquisition Corp., U.S. Office Products Company and certain stockholders named therein (Exhibit
2.1 of the Company's Current Report on Form 8-K (File No. 0-25372), filed on February 21, 1996,
is hereby incorporated by reference)
10.37 Agreement and Plan of Reorganization, dated as of April 29, 1996, by and among School Specialty,
School Acquisition Corp, U.S. Office Products Company and certain other investors of School
Specialty named therein (Exhibit 2.2 of the Company's Current Report on Form 8-K (File No.
0-25372), filed on May 17, 1996, is hereby incorporated by reference)
11 Statement Re Computation of Per Share Earnings
21.1 List of subsidiaries of U.S. Office Products Company
23.1 Consent of Price Waterhouse LLP
27 Financial Data Schedule
</TABLE>
50
<PAGE>
APPROVED AND ADOPTED
BY THE BOARD OF DIRECTORS
MARCH 11, 1996
AMENDED AND RESTATED
BY-LAWS
OF
U.S. OFFICE PRODUCTS COMPANY
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders
of the Corporation shall be held on such date, at such time and at such place
within or without the State of Delaware as may be designated by the Board of
Directors, for the purpose of electing Directors and for the transaction of such
other business as may be properly brought before the meeting.
SECTION 2. SPECIAL MEETINGS. Except as otherwise provided in the
Certificate of Incorporation, a special meeting of the stockholders of the
Corporation may be called at any time by the Board of Directors, the Chairman of
the Board or the President and shall be called by the Chairman of the Board, the
President or the Secretary at the request in writing of stockholders holding
together at least twenty-five percent of the number of shares of stock
outstanding and entitled to vote at such meeting. Any special meeting of the
stockholders shall be held on such date, at such time and at such place within
or without the State of Delaware as the Board of Directors or the officer
calling the meeting may designate. At a special meeting of the stockholders, no
business shall be transacted and no corporate action shall be taken other than
that stated in the notice of the meeting unless all of the stockholders are
present in person or by proxy, in which case any and all business may be
transacted at the meeting even though the meeting is held without notice.
SECTION 3. NOTICE OF MEETINGS. Except as otherwise provided in
these By-Laws or by law, a written notice of each meeting of the stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of the Corporation entitled to vote at
such meeting at his address as it appears on the records of the Corporation.
The notice shall state the place, date and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called.
SECTION 4. QUORUM. At any meeting of the stockholders, the holders
of a majority in number of the total outstanding shares of stock of the
Corporation entitled to vote at such meeting, present in person or represented
by proxy, shall constitute a quorum of the stockholders for all purposes, unless
the representation of a larger number of shares shall be required by law, by the
Certificate of Incorporation or by these By-Laws, in which case the
representation of the number of shares so
<PAGE>
required shall constitute a quorum; provided that at any meeting of the
stockholders at which the holders of any class of stock of the Corporation
shall be entitled to vote separately as a class, the holders of a majority in
number of the total outstanding shares of such class, present in person or
represented by proxy, shall constitute a quorum for purposes of such class
vote unless the representation of a larger number of shares of such class
shall be required by law, by the Certificate of Incorporation or by these
By-Laws.
SECTION 5. ADJOURNED MEETINGS. Whether or not a quorum shall be
present in person or represented at any meeting of the stockholders, the holders
of a majority in number of the shares of stock of the Corporation present in
person or represented by proxy and entitled to vote at such meeting may adjourn
from time to time; provided, however, that if the holders of any class of stock
of the Corporation are entitled to vote separately as a class upon any matter at
such meeting, any adjournment of the meeting in respect of action by such class
upon such matter shall be determined by the holders of a majority of the shares
of such class present in person or represented by proxy and entitled to vote at
such meeting. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the stockholders, or the holders of any class of stock entitled to vote
separately as a class, as the case may be, may transact any business which might
have been transacted by them at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the adjourned meeting.
SECTION 6. ORGANIZATION. The Chairman of the Board or, in his
absence, the President or any Vice President shall call all meetings of the
stockholders to order, and shall act as Chairman of such meetings. In the
absence of the Chairman of the Board, the President and all of the Vice
Presidents, the holders of a majority in number of the shares of stock of the
Corporation present in person or represented by proxy and entitled to vote at
such meeting shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all
meetings of the stockholders; but in the absence of the Secretary, the Chairman
may appoint any person to act as Secretary of the meeting. It shall be the duty
of the Secretary to prepare and make, at least ten days before every meeting of
stockholders, a complete list of stockholders entitled to vote at such 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, either at a place within the city where the meeting is to be
held, which
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<PAGE>
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, for the ten days
next preceding the meeting, to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours, and shall be
produced and kept at the time and place of the meeting during the whole time
thereof and subject to the inspection of any stockholder who may be present.
SECTION 7. VOTING. Except as otherwise provided in the Certificate
of Incorporation or by law, each stockholder shall be entitled to one vote for
each share of the capital stock of the Corporation registered in the name of
such stockholder upon the books of the Corporation. Each stockholder entitled
to vote at a meeting of stockholders or to express consent or dissent to
corporate action in writing without a meeting may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
When directed by the presiding officer or upon the demand of any stockholder,
the vote upon any matter before a meeting of stockholders shall be by ballot.
Except as otherwise provided by law or by the Certificate of Incorporation,
Directors shall be elected by a plurality of the votes cast at a meeting of
stockholders by the stockholders entitled to vote in the election and, whenever
any corporate action, other than the election of Directors is to be taken, it
shall be authorized by a majority of the votes cast at a meeting of stockholders
by the stockholders entitled to vote thereon.
Shares of the capital stock of the Corporation belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be counted
for quorum purposes.
SECTION 8. INSPECTORS. When required by law or directed by the
presiding officer or upon the demand of any stockholder entitled to vote, but
not otherwise, the polls shall be opened and closed, the proxies and ballots
shall be received and taken in charge, and all questions touching the
qualification of voters, the validity of proxies and the acceptance or
rejection of votes shall be decided at any meeting of the stockholders by two
or more Inspectors who may be appointed by the Board of Directors before the
meeting, or if not so appointed, shall be appointed by the presiding officer
at the meeting. If any person so appointed fails to appear or act, the
vacancy may be filled by appointment in like manner.
SECTION 9. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless
otherwise provided in the Certificate of Incorporation, any action required
to be taken or which may be taken at any annual or special meeting of the
stockholders of the Corporation,
-3-
<PAGE>
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Prompt
notice of the taking of any such corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have
not consented in writing.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. NUMBER AND TERM OF OFFICE. The business and affairs of
the Corporation shall be managed by or under the direction of a Board of
Directors, none of whom need be stockholders of the Corporation. The number of
Directors constituting the Board of Directors shall be fixed from time to time
by resolution passed by a majority of the Board of Directors. The Directors
shall, except as hereinafter otherwise provided for filling vacancies, be
elected at the annual meeting of stockholders, and shall hold office until their
respective successors are elected and qualified or until their earlier
resignation or removal.
SECTION 2. REMOVAL, VACANCIES AND ADDITIONAL DIRECTORS. The
stockholders may, at any special meeting the notice of which shall state that it
is called for that purpose, remove, with or without cause, any Director and fill
the vacancy; provided that whenever any Director shall have been elected by the
holders of any class of stock of the Corporation voting separately as a class
under the provisions of the Certificate of Incorporation, such Director may be
removed and the vacancy filled only by the holders of that class of stock voting
separately as a class. Vacancies caused by any such removal and not filled by
the stockholders at the meeting at which such removal shall have been made, or
any vacancy caused by the death or resignation of any Director or for any other
reason, and any newly created directorship resulting from any increase in the
authorized number of Directors, may be filled by the affirmative vote of a
majority of the Directors then in office, although less than a quorum, and any
Director so elected to fill any such vacancy or newly created directorship shall
hold office until his successor is elected and qualified or until his earlier
resignation or removal.
When one or more Directors shall resign effective at a future date,
a majority of the Directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office as herein provided in connection with
the filling of other vacancies.
-4-
<PAGE>
SECTION 3. PLACE OF MEETING. The Board of Directors may hold its
meetings in such place or places in the State of Delaware or outside the State
of Delaware as the Board from time to time shall determine.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such times and places as the Board from time to time
by resolution shall determine. No notice shall be required for any regular
meeting of the Board of Directors; but a copy of every resolution fixing or
changing the time or place of regular meetings shall be mailed to every Director
at least five days before the first meeting held in pursuance thereof.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held whenever called by direction of the Chairman of the
Board, the President or by any two of the Directors then in office.
Notice of the day, hour and place of holding of each special meeting
shall be given by mailing the same at least two days before the meeting or by
causing the same to be transmitted by telegraph, cable or wireless at least one
day before the meeting to each Director. Unless otherwise indicated in the
notice thereof, any and all business other than an amendment of these By-Laws
may be transacted at any special meeting, and an amendment of these By-Laws may
be acted upon if the notice of the meeting shall have stated that the amendment
of these By-Laws is one of the purposes of the meeting. At any meeting at which
every Director shall be present, even though without any notice, any business
may be transacted, including the amendment of these By-Laws.
SECTION 6. QUORUM. Subject to the provisions of Section 2 of this
Article II, a majority of the members of the Board of Directors in office (but
in no case less than one-third of the total number of Directors nor less than
two Directors) shall constitute a quorum for the transaction of business and the
vote of the majority of the Directors present at any meeting of the Board of
Directors at which a quorum is present shall be the act of the Board of
Directors. If at any meeting of the Board there is less than a quorum present,
a majority of those present may adjourn the meeting from time to time.
SECTION 7. ORGANIZATION. The Chairman of the Board shall preside
at all meetings of the Board of Directors. In the absence of the Chairman of
the Board, an acting Chairman shall be elected from the Directors present to
preside at such meeting. The Secretary of the Corporation shall act as
Secretary of all meetings of the Directors; but in the absence of the Secretary,
the Chairman may appoint any person to act as Secretary of the meeting.
-5-
<PAGE>
SECTION 8. COMMITTEES. The Board of Directors 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. The
Board may designate one or more Directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided by resolution passed by a majority of the whole Board, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and the affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to amending
the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending these By-Laws; and unless such resolution, these By-
laws, or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
SECTION 9. CONFERENCE TELEPHONE MEETINGS. Unless otherwise
restricted by the Certificate of Incorporation or by these By-Laws, the members
of the Board of Directors or any committee designated by the Board, may
participate in a meeting of the Board or such committee, as the case may be, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting.
SECTION 10. CONSENT OF DIRECTORS OR COMMITTEE IN LIEU OF MEETING.
Unless otherwise restricted by the Certificate of Incorporation or by these By-
Laws, any action required or permitted to be taken at any meeting of the Board
of Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the Board or committee, as the case may be.
-6-
<PAGE>
ARTICLE XII
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a
Chairman of the Board, a President, one or more Vice Presidents, a Secretary and
a Treasurer, and such additional officers, if any, as shall be elected by the
Board of Directors pursuant to the provisions of Section 7 of this Article III.
The Chairman of the Board, the President, one or more Vice Presidents, the
Secretary and the Treasurer shall be elected by the Board of Directors at its
first meeting after each annual meeting of the stockholders. The failure to
hold such election shall not of itself terminate the term of office of any
officer. All officers shall hold office at the pleasure of the Board of
Directors. Any officer may resign at any time upon written notice to the
Corporation. Officers may, but need not, be Directors. Any number of offices
may be held by the same person.
All officers, agents and employees shall be subject to removal,
with or without cause, at any time by the Board of Directors. The removal of
an officer without cause shall be without prejudice to his contract rights,
if any. The election or appointment of an officer shall not of itself create
contract rights. All agents and employees other than officers elected by the
Board of Directors shall also be subject to removal, with or without cause,
at any time by the officers appointing them.
Any vacancy caused by the death of any officer, his resignation, his
removal, or otherwise, may be filled by the Board of Directors, and any officer
so elected shall hold office at the pleasure of the Board of Directors.
In addition to the powers and duties of the officers of the
Corporation as set forth in these By-Laws, the officers shall have such
authority and shall perform such duties as from time to time may be determined
by the Board of Directors.
SECTION 2. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. The
Chairman of the Board shall be the chief executive officer of the Corporation
and, subject to the control of the Board of Directors, shall have general charge
and control of all its business and affairs and shall have all powers and shall
perform all duties incident to the office of Chairman of the Board. He shall
preside at all meetings of the stockholders and at all meetings of the Board of
Directors and shall have such other powers and perform such other duties as may
from time to time be assigned to him by these By-Laws or by the Board of
Directors. All actions heretofore taken by the Chairman of the Board in the
name or on behalf of the Corporation, including the execution and delivery in
the name and on behalf of the Corporation of agreements, bonds, contracts,
deeds, mortgages, certificates for shares of stock of the Corporation and other
instruments, documents and certificates are in all respects
-7-
<PAGE>
ratified, approved, confirmed and adopted as of the date of such action,
execution or delivery, with the same effect as if expressly authorized by the
By-laws of the Corporation on the date thereof.
SECTION 3. POWERS AND DUTIES OF THE PRESIDENT. The President shall
be the chief operating officer of the Corporation and, subject to the control of
the Board of Directors and the Chairman of the Board, shall have general charge
and control of all its operations and shall have all powers and shall perform
all duties incident to the office of President. In the absence of the Chairman
of the Board, he shall preside at all meetings of the stockholders and at all
meetings of the Board of Directors and shall have such other powers and perform
such other duties as may from time to time be assigned to him by these By-Laws
or by the Board of Directors or the Chairman of the Board.
SECTION 4. POWERS AND DUTIES OF THE VICE PRESIDENTS. Each Vice
President shall have all powers and shall perform all duties incident to the
office of Vice President and shall have such other powers and perform such other
duties as may from time to time be assigned to him by these By-Laws or by the
Board of Directors, the Chairman of the Board or the President.
SECTION 5. POWERS AND DUTIES OF THE SECRETARY. The Secretary shall
keep the minutes of all meetings of the Board of Directors and the minutes of
all meetings of the stockholders in books provided for that purpose; he shall
attend to the giving or serving of all notices of the Corporation; he shall have
custody of the corporate seal of the Corporation and shall affix the same to
such documents and other papers as the Board of Directors, the Chairman of the
Board or the President shall authorize and direct; he shall have charge of the
stock certificate books, transfer books and stock ledgers and such other books
and papers as the Board of Directors, the Chairman of the Board or the President
shall direct, all of which shall at all reasonable times be open to the
examination of any Director, upon application, at the office of the Corporation
during business hours; and he shall have all powers and shall perform all duties
incident to the office of Secretary and shall also have such other powers and
shall perform such other duties as may from time to time be assigned to him by
these By-Laws or by the Board of Directors, the Chairman of the Board or the
President.
SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall
have custody of, and when proper shall pay out, disburse or otherwise dispose
of, all funds and securities of the Corporation which may have come into his
hands; he may endorse on behalf of the Corporation for collection checks, notes
and other obligations and shall deposit the same to the credit of the
Corporation in such bank or banks or depositary or depositaries as the Board of
Directors may designate; he shall sign all receipts and vouchers for payments
made to the Corporation; he
-8-
<PAGE>
shall enter or cause to be entered regularly in the books of the Corporation
kept for the purpose full and accurate accounts of all moneys received or
paid or otherwise disposed of by him and whenever required by the Board of
Directors, the Chairman of the Board or the President shall render statements
of such accounts; he shall, at all reasonable times, exhibit his books and
accounts to any Director of the Corporation upon application at the office of
the Corporation during business hours; and he shall have all powers and he
shall perform all duties incident to the office of Treasurer and shall also
have such other powers and shall perform such other duties as may from time
to time be assigned to him by these By-Laws or by the Board of Directors, the
Chairman of the Board or the President.
SECTION 7. ADDITIONAL OFFICERS. The Board of Directors may from
time to time elect such other officers (who may but need not be Directors),
including a Controller, Assistant Treasurers, Assistant Secretaries and
Assistant Controllers, as the Board may deem advisable and such officers shall
have such authority and shall perform such duties as may from time to time be
assigned to them by the Board of Directors, the Chairman of the Board or the
President.
The Board of Directors may from time to time by resolution delegate
to any Assistant Treasurer or Assistant Treasurers any of the powers or duties
herein assigned to the Treasurer; and may similarly delegate to any Assistant
Secretary or Assistant Secretaries any of the powers or duties herein assigned
to the Secretary.
SECTION 8. GIVING OF BOND BY OFFICERS. All officers of the
Corporation, if required to do so by the Board of Directors, shall furnish bonds
to the Corporation for the faithful performance of their duties, in such
penalties and with such conditions and security as the Board shall require.
SECTION 9. VOTING UPON STOCKS. Unless otherwise ordered by the
Board of Directors, the Chairman of the Board, the President or any Vice
President shall have full power and authority on behalf of the Corporation to
attend and to act and to vote, or in the name of the Corporation to execute
proxies to vote, at any meeting of stockholders of any corporation in which the
Corporation may hold stock, and at any such meeting shall possess and may
exercise, in person or by proxy, any and all rights, powers and privileges
incident to the ownership of such stock. The Board of Directors may from time
to time, by resolution, confer like powers upon any other person or persons.
SECTION 10. COMPENSATION OF OFFICERS. The officers of the
Corporation shall be entitled to receive such compensation for their services as
shall from time to time be determined by the Board of Directors.
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<PAGE>
ARTICLE XIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. NATURE OF INDEMNITY. 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, by reason of the fact that he is or
was or has agreed to become a Director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as a
Director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by reason
of the fact that he is or was or has agreed to become an employee or agent of
the Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, 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; except that in the case of
an action or suit by or in the right of the Corporation to procure a judgment in
its favor (1) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (2) 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 to the Corporation unless and only to the extent that the
Delaware 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 Delaware Court of
Chancery or such other court shall deem proper.
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
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
SECTION 2. SUCCESSFUL DEFENSE. To the extent that a Director,
officer, employee or agent of the Corporation has been
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<PAGE>
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1 of this Article IV 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 3. DETERMINATION THAT INDEMNIFICATION IS PROPER. Any
indemnification of a Director or officer of the Corporation under Section 1 of
this Article IV (unless ordered by a court) shall be made by the Corporation
unless a determination is made that indemnification of the Director or officer
is not proper in the circumstances because he has not met the applicable
standard of conduct set forth in Section 1. Any indemnification of an employee
or agent of the Corporation under Section 1 (unless ordered by a court) may be
made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1. Any such determination
shall be made (1) by the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit or proceeding,
or (2) 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 (3) by the stockholders.
SECTION 4. ADVANCE PAYMENT OF EXPENSES. Unless the Board of
Directors otherwise determines in a specific case, expenses incurred by a
Director or officer in defending a civil or criminal action, suit or proceeding
shall be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
Director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized in
this Article IV. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of Directors deems
appropriate. The Board of Directors may authorize the Corporation's legal
counsel to represent such Director, officer, employee or agent in any action,
suit or proceeding, whether or not the Corporation is a party to such action,
suit or proceeding.
SECTION 5. SURVIVAL; PRESERVATION OF OTHER RIGHTS. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware General Corporation Law are in effect and any repeal
or modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit, or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a contract right may not be
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modified retroactively without the consent of such Director, officer, employee
or agent.
The indemnification provided by this Article IV shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, 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, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person. The
corporation may enter into an agreement with any of its Directors, officers,
employees or agents providing for indemnification and advancement of expenses,
including attorneys' fees, that may change, enhance, qualify or limit any right
to indemnification or advancement of expenses created by this Article IV.
SECTION 6. SEVERABILITY. If this Article IV or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each Director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgment, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article IV that shall not have been invalidated and to the
fullest extent permitted by applicable law.
SECTION 7. SUBROGATION. In the event of payment of indemnification
to a person described in Section 1 of this Article IV, the Corporation shall be
subrogated to the extent of such payment to any right of recovery such person
may have and such person, as a condition of receiving indemnification from the
Corporation, shall execute all documents and do all things that the Corporation
may deem necessary or desirable to perfect such right of recovery, including the
execution of such documents necessary to enable the Corporation effectively to
enforce any such recovery.
SECTION 8. NO DUPLICATION OF PAYMENTS. The Corporation shall not
be liable under this Article IV to make any payment in connection with any claim
made against a person described in Section 1 of this Article IV to the extent
such person has otherwise received payment (under any insurance policy, by-law
or otherwise) of the amounts otherwise indemnifiable hereunder.
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ARTICLE V
STOCK-SEAL-FISCAL YEAR
SECTION 1. CERTIFICATES FOR SHARES OF STOCK. The certificates for
shares of stock of the Corporation shall be in such form, not inconsistent with
the Certificate of Incorporation, as shall be approved by the Board of
Directors. All certificates shall be signed by the Chairman of the Board, the
President or a Vice President and by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer, and shall not be valid unless so
signed.
In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates had not ceased
to be such officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively numbered
as the same are issued. The name of the person owning the shares represented
thereby with the number of such shares and the date of issue thereof shall be
entered on the books of the Corporation.
Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be cancelled, and no new certificates shall be
issued until former certificates for the same number of shares have been
surrendered and cancelled.
SECTION 2. LOST, STOLEN OR DESTROYED CERTIFICATES. Whenever a
person owning a certificate for shares of stock of the Corporation alleges that
it has been lost, stolen or destroyed, he shall file in the office of the
Corporation an affidavit setting forth, to the best of his knowledge and belief,
the time, place and circumstances of the loss, theft or destruction, and, if
required by the Board of Directors, a bond of indemnity or other indemnification
sufficient in the opinion of the Board of Directors to indemnify the Corporation
and its agents against any claim that may be made against it or them on account
of the alleged loss, theft or destruction of any such certificate or the
issuance of a new certificate in replacement therefor. Thereupon the
Corporation may cause to be issued to such person a new certificate in
replacement for the certificate alleged to have been lost, stolen or destroyed.
Upon the stub of every new certificate so issued shall be noted the fact of such
issue and the number, date and the name of the registered owner of the lost,
stolen or destroyed certificate in lieu of which the new certificate is issued.
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SECTION 3. TRANSFER OF SHARES. Shares of stock of the Corporation
shall be transferred on the books of the Corporation by the holder thereof, in
person or by his attorney duly authorized in writing, upon surrender and
cancellation of certificates for the number of shares of stock to be
transferred, except as provided in Section 2 of this Article IV.
SECTION 4. REGULATIONS. The Board of Directors shall have power
and authority to make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
SECTION 5. RECORD DATE. 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 to express consent to corporate
action in writing without a meeting or to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, as the case may be, the Board of Directors may fix, in
advance, a record date, which shall not be (i) more than sixty (60) nor less
than ten (10) days before the date of such meeting, or (ii) in the case of
corporate action to be taken by consent in writing without a meeting, prior to,
or more than ten (10) days after, the date upon which the resolution fixing the
record date is adopted by the Board of Directors, or (iii) more than sixty (60)
days prior to any other action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is necessary, shall be
the day on which the first written consent is delivered to the Corporation; and
the record date for determining stockholders for any other purpose shall be at
the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
SECTION 6. DIVIDENDS. Subject to the provisions of the Certificate
of Incorporation, the Board of Directors shall have power to declare and pay
dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law.
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Subject to the provisions of the Certificate of Incorporation, any
dividends declared upon the stock of the Corporation shall be payable on such
date or dates as the Board of Directors shall determine. If the date fixed for
the payment of any dividend shall in any year fall upon a legal holiday, then
the dividend payable on such date shall be paid on the next day not a legal
holiday.
SECTION 7. CORPORATE SEAL. The Board of Directors shall provide a
suitable seal, containing the name of the Corporation, which seal shall be kept
in the custody of the Secretary. A duplicate of the seal may be kept and be
used by any officer of the Corporation designated by the Board of Directors, the
Chairman of the Board or the President.
SECTION 8. FISCAL YEAR. The fiscal year of the Corporation shall
be such fiscal year as the Board of Directors from time to time by resolution
shall determine.
ARTICLE VI
MISCELLANEOUS PROVISIONS.
SECTION 1. CHECKS, NOTES, ETC. All checks, drafts, bills of
exchange, acceptances, notes or other obligations or orders for the payment of
money shall be signed and, if so required by the Board of Directors,
countersigned by such officers of the Corporation and/or other persons as the
Board of Directors from time to time shall designate.
Checks, drafts, bills of exchange, acceptances, notes, obligations
and orders for the payment of money made payable to the Corporation may be
endorsed for deposit to the credit of the Corporation with a duly authorized
depository by the Treasurer and/or such other officers or persons as the Board
of Directors from time to time may designate.
SECTION 2. LOANS. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized to do so, any officer or agent of the Corporation
may effect loans and advances for the Corporation from any bank, trust company
or other institution or from any firm, corporation or individual, and for such
loans and advances may make, execute and deliver promissory notes, bonds or
other evidences of indebtedness of the Corporation. When authorized so to do,
any officer or agent of the Corporation may pledge, hypothecate or transfer, as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Corporation, any and all stocks, securities and other
personal property at any time held by the Corporation, and to that end may
endorse, assign and deliver the same. Such authority may be general or confined
to specific instances.
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SECTION 3. CONTRACTS. Except as otherwise provided in these By-
Laws or by law or as otherwise directed by the Board of Directors, the Chairman
of the Board, the President or any Vice President shall be authorized to execute
and deliver, in the name and on behalf of the Corporation, all agreements,
bonds, contracts, deeds, mortgages, and other instruments, either for the
Corporation's own account or in a fiduciary or other capacity, and the seal of
the Corporation, if appropriate, shall be affixed thereto by any of such
officers or the Secretary or an Assistant Secretary. The Board of Directors,
the Chairman of the Board, the President or any Vice President designated by the
Board of Directors, the Chairman of the Board or the President may authorize any
other officer, employee or agent to execute and deliver, in the name and on
behalf of the Corporation, agreements, bonds, contracts, deeds, mortgages, and
other instruments, either for the Corporation's own account or in a fiduciary or
other capacity, and, if appropriate, to affix the seal of the Corporation
thereto. The grant of such authority by the Board or any such officer may be
general or confined to specific instances.
SECTION 4. WAIVERS OF NOTICE. Whenever any notice whatever is
required to be given by law, by the Certificate of Incorporation or by these By-
Laws to any person or persons, a waiver thereof in writing, signed by the person
or persons entitled to the notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
SECTION 5. OFFICES OUTSIDE OF DELAWARE. Except as otherwise
required by the laws of the State of Delaware, the Corporation may have an
office or offices and keep its books, documents and papers outside of the State
of Delaware at such place or places as from time to time may be determined by
the Board of Directors or the Chairman of the Board.
ARTICLE VII
AMENDMENTS
These By-Laws and any amendment thereof may be altered, amended or
repealed, or new By-Laws may be adopted, by the Board of Directors at any
regular or special meeting by the affirmative vote of a majority of all of the
members of the Board, provided in the case of any special meeting at which all
of the members of the Board are not present, that the notice of such meeting
shall have stated that the amendment of these By-Laws was one of the purposes of
the meeting; but these By-Laws and any amendment thereof may be altered, amended
or repealed or new By-Laws may be adopted by the holders of a majority of the
total outstanding stock of the Corporation entitled to vote at any annual
meeting or at any special meeting, provided, in the case of any special meeting,
that notice of such proposed alteration, amendment, repeal or adoption is
included in the notice of the meeting.
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- --------------------------------------------------------------------------------
U.S. OFFICE PRODUCTS COMPANY
AND
THE CHASE MANHATTAN BANK, N.A.
Trustee
INDENTURE
Dated as of May 22, 1996
5-1/2% Convertible Subordinated Notes Due 2003
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- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.1 Form and Dating. . . . . . . . . . . . . . . . . . . . . 10
Section 2.2 Execution and Authentication . . . . . . . . . . . . . . 13
Section 2.3 Registrar and Paying Agent . . . . . . . . . . . . . . . 13
Section 2.4 Paying Agent to Hold Assets
in Trust . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.5 Noteholder Lists.. . . . . . . . . . . . . . . . . . . . 15
Section 2.6 Transfer and Exchange; Restrictions on
Transfer . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.7 Exchange . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.8 Replacement Notes. . . . . . . . . . . . . . . . . . . . 25
Section 2.9 Outstanding Notes. . . . . . . . . . . . . . . . . . . . 26
Section 2.10 Treasury Notes . . . . . . . . . . . . . . . . . . . . . 27
Section 2.11 Temporary Notes. . . . . . . . . . . . . . . . . . . . . 27
Section 2.12 Cancellation . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.13 Payment. . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.14 Defaulted Interest.. . . . . . . . . . . . . . . . . . . 29
Section 2.15 Computation of Interest. . . . . . . . . . . . . . . . . 30
ARTICLE III
REDEMPTION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.1 Redemption . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.2 Notice of Redemption; Selection
of Notes . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.3 Payment of Notes Called
for Redemption . . . . . . . . . . . . . . . . . . . . . 33
Section 3.4 Conversion Arrangement on Call
for Redemption . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IV
SUBORDINATION OF NOTES. . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.1 Agreement of Subordination . . . . . . . . . . . . . . . 35
Section 4.2 Payments to Noteholders. . . . . . . . . . . . . . . . . 35
Section 4.3 Subrogation of Notes . . . . . . . . . . . . . . . . . . 38
Section 4.4 Authorization by Noteholders . . . . . . . . . . . . . . 39
Section 4.5 Notice to Trustee. . . . . . . . . . . . . . . . . . . . 39
Section 4.6 Trustee's Relation to Senior
Indebtedness . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.7 No Impairment of Subordination . . . . . . . . . . . . . 41
Section 4.8 Certain Conversions Deemed Payment . . . . . . . . . . . 41
<PAGE>
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . 42
Section 5.1 Payment of Principal, Premium
and Interest . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.2 Maintenance of Office or Agency. . . . . . . . . . . . . 42
Section 5.3 Appointments to Fill Vacancies in
Trustee's Office . . . . . . . . . . . . . . . . . . . . 44
Section 5.4 Provisions as to Paying Agent. . . . . . . . . . . . . . 44
Section 5.5 Existence. . . . . . . . . . . . . . . . . . . . . . . . 45
Section 5.6 Stay, Extension and Usury Laws . . . . . . . . . . . . . 45
Section 5.7 Compliance Certificate . . . . . . . . . . . . . . . . . 46
Section 5.8 Further Instruments and Acts . . . . . . . . . . . . . . 46
Section 5.9 Rule 144A Information. . . . . . . . . . . . . . . . . . 46
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE . . . . . 46
Section 6.1 Noteholders' Lists . . . . . . . . . . . . . . . . . . . 46
Section 6.2 Preservation and Disclosure of Lists . . . . . . . . . . 47
Section 6.3 Reports by Trustee . . . . . . . . . . . . . . . . . . . 47
Section 6.4 Reports by Company . . . . . . . . . . . . . . . . . . . 47
ARTICLE VII
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.1 Events of Default. . . . . . . . . . . . . . . . . . . . 48
Section 7.2 Payments of Notes on Default; Suit
Therefor . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.3 Application of Monies Collected by
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.4 Proceedings by Noteholder. . . . . . . . . . . . . . . . 55
Section 7.5 Proceedings by Trustee . . . . . . . . . . . . . . . . . 56
Section 7.6 Remedies Cumulative and Continuing . . . . . . . . . . . 56
Section 7.7 Direction of Proceedings and Waiver
of Defaults by Majority of Noteholders . . . . . . . . . 56
Section 7.8 Notice of Defaults . . . . . . . . . . . . . . . . . . . 57
Section 7.9 Undertaking to Pay Costs . . . . . . . . . . . . . . . . 57
Section 7.10 Delay or Omission Not Waiver . . . . . . . . . . . . . . 57
ARTICLE VIII
CONCERNING THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.1 Duties and Responsibilities of Trustee . . . . . . . . . 58
Section 8.2 Reliance on Documents, Opinions, Etc.. . . . . . . . . . 59
Section 8.3 No Responsibility for Recitals, Etc. . . . . . . . . . . 60
Section 8.4 Trustee, Paying Agents, Conversion Agents
or Registrar May Own Notes . . . . . . . . . . . . . . . 60
Section 8.5 Monies to Be Held in Trust . . . . . . . . . . . . . . . 61
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Section 8.6 Compensation and Expenses of Trustee;
Indemnification. . . . . . . . . . . . . . . . . . . . . 61
Section 8.7 Officers' Certificate as Evidence. . . . . . . . . . . . 62
Section 8.8 Conflicting Interests of Trustee . . . . . . . . . . . . 62
Section 8.9 Eligibility of Trustee . . . . . . . . . . . . . . . . . 62
Section 8.10 Resignation or Removal of Trustee. . . . . . . . . . . . 63
Section 8.11 Acceptance by Successor Trustee. . . . . . . . . . . . . 65
Section 8.12 Succession by Merger, Etc. . . . . . . . . . . . . . . . 66
Section 8.13 Limitation on Rights of Trustee
as Creditor. . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE IX
CONCERNING THE NOTEHOLDERS. . . . . . . . . . . . . . . . . . . . . . . 67
Section 9.1 Action by Noteholders. . . . . . . . . . . . . . . . . . 67
Section 9.2 Proof of Execution by Noteholders. . . . . . . . . . . . 67
Section 9.3 Who Are Deemed Absolute Owners . . . . . . . . . . . . . 67
Section 9.4 Company-Owned Notes Disregarded. . . . . . . . . . . . . 68
Section 9.5 Revocation of Consents; Future Holders
Bound. . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE X
NOTEHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.1 Purpose of Meetings. . . . . . . . . . . . . . . . . . . 69
Section 10.2 Call of Meetings by Trustee. . . . . . . . . . . . . . . 69
Section 10.3 Call of Meetings by Company or
Noteholders. . . . . . . . . . . . . . . . . . . . . . . 70
Section 10.4 Qualifications for Voting. . . . . . . . . . . . . . . . 70
Section 10.5 Regulations. . . . . . . . . . . . . . . . . . . . . . . 70
Section 10.6 Voting . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 10.7 No Delay of Rights by Meeting. . . . . . . . . . . . . . 71
ARTICLE XI
SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 11.1 Supplemental Indentures Without Consent
of Noteholders . . . . . . . . . . . . . . . . . . . . . 72
Section 11.2 Supplemental Indentures with Consent
of Noteholders . . . . . . . . . . . . . . . . . . . . . 73
Section 11.3 Effect of Supplemental Indentures. . . . . . . . . . . . 74
Section 11.4 Notation on Notes. . . . . . . . . . . . . . . . . . . . 74
Section 11.5 Evidence of Compliance of Supplemental
Indenture to Be Furnished Trustee. . . . . . . . . . . . 74
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE . . . . . . . . . . . 75
Section 12.1 Company May Consolidate, Etc. on
Certain Terms. . . . . . . . . . . . . . . . . . . . . . 75
Section 12.2 Successor Corporation to Be
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Substituted. . . . . . . . . . . . . . . . . . . . . . . 75
Section 12.3 Opinion of Counsel to Be Given
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE . . . . . . . . . . . . . . . . 76
Section 13.1 Discharge of Indenture . . . . . . . . . . . . . . . . . 76
Section 13.2 Deposited Monies to Be Held in Trust
by Trustee . . . . . . . . . . . . . . . . . . . . . . . 77
Section 13.3 Paying Agent to Repay Monies Held. . . . . . . . . . . . 77
Section 13.4 Return of Unclaimed Monies . . . . . . . . . . . . . . . 77
Section 13.5 Reinstatement. . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS . . . . 78
Section 14.1 Indenture and Notes Solely Corporate
Obligations. . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE XV
CONVERSION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 15.1 Right to Convert . . . . . . . . . . . . . . . . . . . . 79
Section 15.2 Exercise of Conversion Privilege;
Issuance of Common Stock on Conversion;
No Adjustment for Interest or Dividends. . . . . . . . . 79
Section 15.3 Cash Payments in Lieu of Fractional
Shares . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 15.4 Conversion Price . . . . . . . . . . . . . . . . . . . . 81
Section 15.5 Adjustment of Conversion Price . . . . . . . . . . . . . 81
Section 15.6 Effect of Reclassification, Consolidation,
Merger or Sale . . . . . . . . . . . . . . . . . . . . . 93
Section 15.7 Taxes on Shares Issued.. . . . . . . . . . . . . . . . . 95
Section 15.8 Reservation of Shares; Shares to Be Fully
Paid; Listing of Common Stock. . . . . . . . . . . . . . 95
Section 15.9 Responsibility of Trustee. . . . . . . . . . . . . . . . 96
Section 15.10 Notice to Holders Prior to Certain
Actions. . . . . . . . . . . . . . . . . . . . . . . . . 97
ARTICLE XVI
REPURCHASE UPON A DESIGNATED EVENT. . . . . . . . . . . . . . . . . . . 98
Section 16.1 Repurchase Right . . . . . . . . . . . . . . . . . . . . 98
Section 16.2 Notices; Method of Exercising
Repurchase Right, Etc. . . . . . . . . . . . . . . . . . 98
Section 16.3 Certain Definitions. . . . . . . . . . . . . . . . . . . 100
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ARTICLE XVII
MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 102
Section 17.1 Provisions Binding on Company's
Successors . . . . . . . . . . . . . . . . . . . . . . . 102
Section 17.2 Official Acts by Successor Corporation . . . . . . . . . 102
Section 17.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 17.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . 103
Section 17.5 Evidence of Compliance with Conditions
Precedent; Certificates to Trustee . . . . . . . . . . . 103
Section 17.6 Legal Holidays . . . . . . . . . . . . . . . . . . . . . 103
Section 17.7 No Security Interest Created . . . . . . . . . . . . . . 104
Section 17.8 Trust Indenture Act. . . . . . . . . . . . . . . . . . . 104
Section 17.9 Benefits of Indenture. . . . . . . . . . . . . . . . . . 104
Section 17.10 Table of Contents, Headings, Etc . . . . . . . . . . . . 104
Section 17.11 Authenticating Agent . . . . . . . . . . . . . . . . . . 104
Section 17.12 Execution in Counterparts. . . . . . . . . . . . . . . . 105
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INDENTURE dated as of May 22, 1996 between U.S. Office Products Company, a
Delaware corporation (hereinafter sometimes called the "Company", as more fully
set forth in Section 1.1), and The Chase Manhattan Bank, a national association
(hereinafter sometimes called the "Trustee", as more fully set forth in Section
1.1).
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly authorized
the issue of its 5-1/2% Convertible Subordinated Notes due 2003 (hereinafter
sometimes called the "Notes"), in an aggregate principal amount not to exceed
$230,000,000 and, to provide the terms and conditions upon which the Notes are
to be authenticated, issued and delivered, the Company has duly authorized the
execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be borne by the
Notes, a form of assignment, a form of option to elect repayment upon a
Designated Event, a form of conversion notice and a certificate of transfer to
be borne by the Notes are to be substantially in the forms hereinafter provided
for; and
WHEREAS, all acts and things necessary to make the Notes, when executed by
the Company and authenticated and delivered by the Trustee or a duly authorized
authenticating agent, as in this Indenture provided, the valid, binding and
legal obligations of the Company, and to constitute these presents a valid
agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes are,
and are to be, authenticated, issued and delivered, and in consideration of the
premises and of the purchase and acceptance of the Notes by the holders thereof,
the Company covenants and agrees with the Trustee for the equal and
proportionate benefit of the respective holders from time to time of the Notes
(except as otherwise provided below), as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The terms defined in this Section 1.1 (except
as herein otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section 1.1. All other
terms used in this Indenture, which are defined in the Trust Indenture Act or
which are by reference therein defined in the Securities Act
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(except as herein otherwise expressly provided or unless the context otherwise
requires) shall have the meanings assigned to such terms in said Trust Indenture
Act and in said Securities Act as in force at the date of the execution of this
Indenture. The words "herein," "hereof," "hereunder," and words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other Subdivision. The terms defined in this Indenture include the
plural as well as the singular.
ACCREDITED INVESTOR NOTES: "Accredited Investor Notes" shall have the
meaning specified in Section 2.1(b).
ADDITIONAL AMOUNTS: "Additional Amounts" shall have the meaning specified
in Section 2 of the form of Registered Note and Bearer Note attached hereto as
Exhibit A.
AFFILIATE: The term "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 or cause the direction of the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
AGENT: "Agent" shall have the meaning set forth in Section 2.3.
AUTHORIZED NEWSPAPER: "Authorized Newspaper" means a leading newspaper, in
an official language of the country of publication or in the English language,
customarily published on each Business Day whether or not published on
Saturdays, Sundays or holidays, and of general circulation in the place in
connection with which the term is used or in the financial community of such
place. If by reason of the temporary or permanent suspension of publication of
any newspaper or by reason of any other cause it shall be impossible to make
publication of such notice in an Authorized Newspaper as herein provided, then
such publication or other notice in lieu thereof as shall be made by the Trustee
shall constitute sufficient publication of such notice, if such publication or
other notice shall, so far as may be possible, approximate the terms and
conditions of the publication in lieu of which it is given.
BEARER NOTES: "Bearer Notes" shall have the meaning set forth in Section
2.1(c).
BOARD OF DIRECTORS: The term "Board of Directors" means the Board of
Directors of the Company or a committee of such Board duly authorized to act for
it hereunder.
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BOARD RESOLUTION: The term "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, or duly authorized committee thereof (to
the extent permitted by applicable law), and to be in full force and effect on
the date of such certification.
BUSINESS DAY: The term "Business Day" means, with respect to any act that
is to occur hereunder or under the Notes, each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which the banking institutions in the
city in which such act is to occur are authorized or obligated by law,
regulation or executive order to close or be closed.
CEDEL: "Cedel" means Cedel Bank, societe anonyme.
COMMISSION: The term "Commission" means the Securities and Exchange
Commission.
COMMON DEPOSITARY: "Common Depositary" means The Chase Manhattan Bank,
N.A. (London office), as depositary for Cedel and Euroclear.
COMMON STOCK: The term "Common Stock" means any stock of any class of the
Company which has no preference in respect of dividends or of amounts payable in
the event of any voluntary or involuntary liquidation, dissolution or winding up
of the Company and which is not subject to redemption by the Company. Subject
to the provisions of Section 15.6, however, shares issuable on conversion of
Notes shall include only shares of the class designated as common stock of the
Company at the date of this Indenture or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which have
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which are not subject to redemption by the Company; provided that if at any
time there shall be more than one such resulting class, the shares of each such
class then so issuable shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.
COMPANY: The term "Company" means U.S. Office Products Company, a Delaware
corporation, and subject to the provisions of Article XII, shall include its
successors and assigns.
CONVERSION AGENT: "Conversion Agent" means Chase Manhattan Bank Luxembourg
S.A., in its capacity as Conversion Agent pursuant to its appointment under
Section 2.3, and its successor or successors.
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CORPORATE TRUST OFFICE: The term "Corporate Trust Office," or other
similar term, means the office of the Trustee at which at any particular time
its corporate trust business shall be principally administered and such other
offices as the Trustee may designate from time to time.
COUPON: "Coupon" means any interest coupon appertaining to any Note.
DEFAULT: The term "default" means any event that is, or after notice or
passage of time, or both, would be, an Event of Default.
DEFAULTED INTEREST: "Defaulted Interest" shall have the meaning specified
in Section 2.14.
DEPOSITARY: "Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the person specified in Section 2.3,
until a successor shall have been appointed and become such pursuant to the
applicable provisions of this Indenture, and, thereafter, such successor.
DESIGNATED SENIOR INDEBTEDNESS: The term "Designated Senior Indebtedness"
means the Line of Credit and any other Senior Indebtedness if the instrument
creating or evidencing the same or the assumption or guarantee thereof (or
related agreements or documents to which the Company is a party) expressly
provides that such Indebtedness shall be "Designated Senior Indebtedness" for
purposes of this Indenture (provided that such instrument, agreement or other
document may place limitations and conditions on the right of such Senior
Indebtedness to exercise the rights of Designated Senior Indebtedness).
DTC: "DTC" means the Depository Trust Company.
EUROCLEAR OPERATOR: "Euroclear Operator" means Morgan Guaranty Trust
Company of New York, Brussels office, as operator of the Euroclear system.
EXCHANGE ACT: The term "Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
EVENT OF DEFAULT: The term "Event of Default" means any event specified in
Section 7.1(a), (b), (c), (d), (e), (f) or (g), continued for the period of
time, if any, and after the giving of notice, if any, therein designated.
INDENTURE: The term "Indenture" means this instrument as originally
executed or, if amended or supplemented as herein provided, as so amended or
supplemented.
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INTEREST PAYMENT DATE: "Interest Payment Date" means the stated due date of
an installment of interest on the Notes.
INTEREST RECORD DATE: "Interest Record Date" means an Interest Record Date
specified in the Notes whether or not such Interest Record Date is a Business
Day.
LINE OF CREDIT: The term "Line of Credit" means the Credit and Security
Agreement, dated June 26, 1995, between the Company and First Bank National
Association, as the same has been and may be amended from time to time.
LONDON OFFICE: "London Office" has the meaning specified in Section 2.3.
MANAGERS: "Managers" means Robertson, Stephens & Company LLC and NatWest
Securities Limited.
NOTE OR NOTES: The terms "Note" or "Notes" means any Note or Notes, as the
case may be, authenticated and delivered under this Indenture.
NOTEHOLDER OR HOLDER: The terms "Noteholder" or "holder" as applied to any
Registered Note, or other similar terms (but excluding the term "beneficial
holder"), means any person in whose name at the time a particular Note is
registered on the Note register, and as applied to any Bearer Note, means any
bearer of such Bearer Note, and as applied to a Coupon, any bearer thereof.
OFFICERS' CERTIFICATE: The term "Officers' Certificate", when used with
respect to the Company, means a certificate signed by the Chief Executive
Officer, President, or any Vice President (whether or not designated by a number
or numbers or word added before or after the title "Vice President") and by the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Company, which is delivered to the Trustee. Each such certificate shall
include the statements provided for in Section 17.5 if and to the extent
required by the provisions of such Section.
OPINION OF COUNSEL: The term "Opinion of Counsel" means an opinion in
writing signed by legal counsel, who may be an employee of or counsel to the
Company, or other counsel acceptable to the Trustee, which is delivered to the
Trustee. Each such opinion shall include the statements provided for in Section
17.5 if and to the extent required by the provisions of such Section.
OUTSTANDING: The term "outstanding," when used with reference to Notes,
means, subject to the provisions of Section 9.4, as of any particular time, all
Notes authenticated and delivered by the Trustee under this Indenture, except
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(a) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes, or portions thereof, for the payment, redemption or
repurchase of which monies in the necessary amount shall have been
deposited in trust with the Trustee or with any paying agent (other than
the Company) or shall have been set aside and segregated in trust by the
Company (if the Company shall act as its own paying agent); PROVIDED that
if such Notes are to be redeemed or repurchased, as the case may be, prior
to the maturity thereof, notice of such redemption or repurchase, as the
case may be, shall have been given as provided in Section 3.2 or Article
XVI, respectively, or provision satisfactory to the Trustee shall have been
made for giving such notice; PROVIDED FURTHER that if any Notes are not
redeemed on a date fixed for redemption or repurchased on a repurchase
date, then such Notes shall be deemed outstanding until all principal of
and premium, if any, and accrued interest on such Notes has been paid in
full in accordance with the terms of this Indenture;
(c) Notes in lieu of which, or in substitution for which, other Notes
shall have been authenticated and delivered pursuant to the terms of
Section 2.6 unless proof satisfactory to the Trustee is presented that any
such Notes are held by bona fide holders in due course; and
(d) Notes converted into Common Stock pursuant to Article XV and
Notes deemed not outstanding pursuant to Section 3.2.
PAYING AGENT: "Paying Agent" means The Chase Manhattan Bank, N.A., in its
capacity as Paying Agent pursuant to its appointment under Section 2.3 and its
successor or successors.
PERSON: The term "person" means a corporation, an association, a
partnership, an individual, a joint venture, a joint stock company, a trust, an
unincorporated organization or a government or an agency or a political
subdivision thereof.
PREDECESSOR NOTE: The term "Predecessor Note" of any particular Note means
every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purposes of this definition, any
Note authenticated and delivered under Section 2.6 in lieu of a lost, destroyed
or stolen Note shall be deemed to evidence the same debt as the lost, destroyed
or stolen Note that it replaces.
PRINCIPAL CORPORATE TRUST OFFICE: "Principal Corporate Trust Office" shall
have the meaning specified in Section 2.3.
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QIBS: "QIBs" shall have the meaning specified in Section 2.1(b).
REGISTRATION RIGHTS AGREEMENT: "Registration Rights Agreement" means the
registration rights agreement, dated as of May 22, 1996, between the Managers
and the Company.
RESPONSIBLE OFFICER: The term "Responsible Officer", when used with
respect to the Trustee, means an officer of the Trustee assigned to the
Corporate Trust Office of the Trustee, and any other officer of the Trustee to
whom such matter is referred to because of his knowledge of and familiarity with
the particular subject.
SECURITIES ACT: The term "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
SENIOR INDEBTEDNESS: The term "Senior Indebtedness" means the principal
of, premium, if any, interest on, and any other payment due pursuant to, any of
the following, whether outstanding on the date of the Indenture or thereafter
incurred or created:
(a) All secured indebtedness of the Company for money borrowed
(including (i) secured indebtedness under the Line of Credit, (ii) any
indebtedness secured by a security interest, mortgage, conditional sales
contract or other lien on the assets of the Company which is (x) given to
secure all or part of the purchase price of property subject thereto,
whether given to the vendor of such property or to another, or (y) existing
on property at the time of acquisition thereof and (iii) secured
indebtedness for borrowed money from banks, insurance companies and other
financial institutions);
(b) All secured indebtedness of the Company evidenced by notes,
debentures, bonds or other securities (including but not limited to those
which are convertible or exchangeable for securities of the Company);
(c) All secured indebtedness of the Company due and owing with
respect to letters of credit and bank guarantees (including, but not
limited to, reimbursement obligations with respect thereto);
(d) All secured indebtedness or other secured obligations of the
Company due and owing with respect to interest rate and currency swap
agreements, cap, floor and collar agreements, currency spot and forward
contracts and other similar agreements and arrangements;
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(e) All secured indebtedness consisting of commitment or standby fees
due and payable to lending institutions with respect to credit facilities
or letter of credit available to the Company;
(f) All secured indebtedness of others of the kinds described in any
of the preceding clauses (a), (b), (c), (d) or (e) assumed by or guaranteed
in any manner by the Company or in effect guaranteed by the Company through
an agreement to purchase, contingent or otherwise; and
(g) All secured renewals, extensions, refundings, deferrals,
amendments or modifications of secured indebtedness of the kinds described
in any of the preceding clauses (a), (b), (c), (d), (e) or (f);
unless in the case of any particular indebtedness, obligation, renewal,
extension, deferral, refunding, amendment, or modification, the instrument or
other document creating or evidencing the same or the assumption or guarantee of
the same expressly provides that such indebtedness, obligation, renewal,
extension, refunding, deferral, amendment or modification is subordinate to, is
PARI PASSU with, or is not superior to, the Notes. Notwithstanding the
foregoing, Senior Indebtedness shall not include (i) any indebtedness of any
kind of the Company to any Subsidiary of the Company, a majority of the voting
stock of which is owned, directly or indirectly, by the Company, (ii)
indebtedness for trade payables or constituting the deferred purchase price of
assets or services incurred in the ordinary course of business, and (iii)
conditional obligations of the Company based on future performance of the
Company or any Subsidiary (including, without limitation, earn out agreements or
similar arrangements) entered into in connection with acquisitions.
SIGNIFICANT SUBSIDIARY: The term "Significant Subsidiary" means, with
respect to any person, a Subsidiary of such person that would constitute a
significant subsidiary, as such term is defined under Rule 1-02 of Regulation
S-X of the Commission.
STATED MATURITY: "Stated Maturity," when used in connection with any Note,
means May 15, 2003.
SUBSIDIARY: The term "Subsidiary" means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries. For the purposes of this definition, "voting stock" means
stock which ordinarily has voting power for the election of directors, whether
at all times or only so long as no senior class of stock has such voting power
by reason of any contingency.
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TRUST INDENTURE ACT: The term "Trust Indenture Act" means the Trust
Indenture Act of 1939, as amended, as it was in force at the date of execution
of this Indenture, except as provided in Sections 11.3 and 15.6; PROVIDED,
HOWEVER, that in the event the Trust Indenture Act of 1939 is amended after the
date hereof, the term "Trust Indenture Act" shall mean, to the extent required
by such amendment, the Trust Indenture Act of 1939 as so amended.
TRUSTEE: The term "Trustee" means The Chase Manhattan Bank, N.A., and its
successors and any corporation resulting from or surviving any consolidation or
merger to which it or its successors may be a party and any successor trustee at
the time serving as successor trustee hereunder.
In addition to the foregoing defined terms (except as herein otherwise
expressly provided or unless the context otherwise requires), the following
terms shall have the respective meanings specified in the following Sections and
any other terms defined herein shall have the meanings assigned thereto:
Term Section
---- -------
beneficial owner 16.3
Change in Control 16.3
Closing Price 15.5(h)
Company Notice 16.2
Continuing Director 16.3
Conversion Price 15.4
Covenant Default 7.1(d)
Current Market Price 15.5(h)
Designated Event 16.3
"ex" date 15.5(h)
Exchange Date 2.7(d)
Expiration Time 15.5(f)
fair market value 15.5(h)
junior securities 4.8
non-electing share 15.6
Note Registrar 2.3
Offer Expiration Time 15.5(g)
Payment Blockage Notice 4.2
Permitted Investor 16.3
person or group 16.3
Purchased Common Shares 15.5(g)
Purchased Shares 15.5(f)
Record Date 15.5(h)
Registered Accredited 2.1(e)
Investor Notes
Registered Regulation S Notes 2.1(c)
Registered Notes 2.1(c)
Registrar 2.3
Regulation S Global Note 2.1(c)
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Resale Restriction 2.6(i)
Termination Date
Restricted Note 2.1(f)
Rule 144A Global Note 2.1(d)
Rule 144 Notes 2.1(b)
Removal Notice 8.10(b)
repurchase date 16.1
Repurchase Price 16.1
Securities 15.5(d)
Subordinated Indebtedness 4.1
Termination of Trading 16.3
Trading Day 15.5(h)
Trigger Event 15.5(d)
Voting Stock 16.3
ARTICLE II
THE NOTES
Section 2.1 FORM AND DATING.
(a) The Company has, by the Subscription Agreement, agreed to issue
and sell to the Managers up to U.S. $230,000,000 aggregate principal amount of
its 5-1/2% Convertible Subordinated Notes due 2003.
(b) Pursuant to the Subscription Agreement, the Managers may resell
the Notes to (i) persons who are not "U.S. Persons" (as such term is defined in
Regulation S promulgated by the Commission pursuant to the Securities Act) in
transactions that meet the requirements of Regulation S, (ii) "qualified
institutional buyers" (as such term is defined in Rule 144A promulgated by the
Commission pursuant to the Securities Act and hereinafter referred to as "QIBs")
in reliance on Rule 144A (the Notes that are resold by the Managers pursuant to
Rule 144A being hereinafter referred to as the "Rule 144A Notes"), and (iii)
institutional "accredited investors" (within the meaning of Rule
501(a)(1),(2),(3) or (7) promulgated by the Commission pursuant to the
Securities Act) (the Notes that are resold by the Managers to institutional
"accredited investors" being hereinafter referred to as the "Accredited Investor
Notes").
(c) The Notes will initially be issued in the form of a temporary
global note in bearer form without coupons or conversion rights in the aggregate
principal amount of the entire issue of Notes less the aggregate principal
amount of the Rule 144A Notes and Accredited Investor Notes concurrently issued,
substantially in the form of Exhibit B hereto (the "Regulation S Global Note").
As hereinafter provided, the Regulation S Global Note may subsequently be
exchanged for Notes in printed definitive form either as (i)
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bearer Notes ("Bearer Notes") in denominations of U.S. $1,000 and U.S. $10,000
and in integral multiples of U.S. $10,000 and with interest Coupons attached
thereto, representing the semi-annual interest payable thereon, or (ii) fully
registered Notes ("Registered Regulation S Notes") in denominations of U.S.
$1,000 and integral multiples thereof, without interest Coupons attached
thereto. Bearer Notes shall be substantially in the form of Exhibit A hereto,
including the Coupons set forth therein but excluding the bracketed legends, the
bracketed schedule and the information appearing therein that relates to the
Registered Notes only. Registered Regulation S Notes shall be substantially in
the form of Exhibit A hereto excluding the bracketed legends. The Notes which
are not Bearer Notes or the Regulation S Global Note are hereinafter
collectively referred to as the "Registered Notes."
(d) The Rule 144A Notes will initially be issued in the form of a
global note in the aggregate principal amount of the Rule 144A Notes, which note
shall be in substantially the form of Exhibit A hereto, including the bracketed
legends relating to clearance and settlement through The Depository Trust
Company and restrictions on transfer imposed under the Securities Act and
including the bracketed schedule but excluding the Coupons, and is hereinafter
referred to as the "Rule 144A Global Note."
(e) The Accredited Investor Notes will initially be issued in fully
registered form in denominations of U.S. $1,000 and integral multiples thereof,
which Notes shall be in substantially the form of Exhibit A hereto, excluding
the bracketed legend relating to clearance and settlement through The Depository
Trust Company and excluding the bracketed legend relating to restrictions on
transfer imposed under the Securities Act, the Coupons and the bracketed
schedule, and are hereinafter collectively referred to as "Registered Accredited
Investor Notes."
(f) During the period beginning on the Closing Date and ending on the
date which is three years after the Closing Date (or such shorter period as
shall be permitted as a result of an amendment to the rules under the Securities
Act in respect thereof), all Rule 144A Notes and all Accredited Investor Notes,
and all Notes issued upon registration of transfer of or in exchange for such
Notes, shall be "Restricted Notes" and shall be subject to the restrictions on
transfer in Section 2.6 hereof; PROVIDED, HOWEVER, that the term "Restricted
Notes" shall not include (i) Registered Notes which are issued upon transfer of
or in exchange for either Bearer Notes or Registered Regulation S Notes or (ii)
Registered Notes as to which such restrictions on transfer have been terminated
in accordance with Section 2.6(i) hereof. All Restricted Notes shall bear the
legend required by Section 2.6(h) hereof.
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(g) The Registered Notes, the Bearer Notes and the Regulation S
Global Note shall contain 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, consistent herewith, be determined by the
officer of the Company executing such Notes, as evidenced by his execution of
such Notes.
(h) The Company in issuing the Notes shall use CUSIP numbers, and the
Trustee may use such CUSIP numbers in any notice of redemption with respect to
the Notes. The Company shall obtain one CUSIP number for the Rule 144A Notes
and one for the Registered Notes that are not Restricted Notes. In addition,
the Company shall obtain an ISIN number and a Common Code for the Regulation S
Global Note, the Bearer Notes and the Registered Regulation S Notes.
(i) Bearer Notes may not be offered or sold during the 60-day period
beginning on the Closing Date, or at any time if part of a Manager's unsold
allotment, to a person who is within the United States or to a United States
person other than (a) foreign branches of United States financial institutions
if such institutions agree in writing to comply with the requirements of Section
165(j)(3)(A), (B), or (C) of the Code, and the regulations thereunder, (b)
United States offices of exempt distributors, or (c) United States offices of
international organizations or foreign central banks. United States tax laws
and regulations also require that Bearer Notes not be delivered within the
United States.
(j) The Notes and the Trustee's certificate of authentication, in
respect thereof, shall be substantially in the forms included in Exhibits A and
B hereto, as applicable. The Notes may have notations, legends or endorsements
required by law, stock exchange rule or usage. The Company shall approve the
forms of the Notes and any notation, legend or endorsement on them. Any such
notations, legends or endorsements not contained in the forms of Notes attached
as Exhibits A and B hereto shall be delivered in writing to the Trustee. Each
Note shall be dated the date of its authentication, except that Bearer Notes
shall be dated May 22, 1996.
(k) The terms and provisions contained in the forms of Notes shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
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Section 2.2 EXECUTION AND AUTHENTICATION.
An authorized Officer of the Company shall sign each Note and each
Coupon for the Company by manual or facsimile signature. The Company's seal
shall be impressed, affixed, imprinted or reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note or a related Coupon was an
Officer at the time of such execution but no longer holds that office at the
time the Trustee authenticates the Note, the Note and such Coupon shall be valid
nevertheless and the Company shall nevertheless be bound by the terms of the
Notes, the Coupons and the Indenture.
A Note and the related Coupons shall not be valid until an authorized
signatory of the Trustee manually signs the certificate of authentication on the
Note but such signature shall be conclusive evidence that the Note has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate the Notes for original issue in the
aggregate principal amount of up to U.S. $230,000,000 upon a written order of
the Company in the form of an Officers' Certificate. The Officers' Certificate
shall specify the amount of Notes to be authenticated and the date on which the
Notes are to be authenticated. The aggregate principal amount of Notes
outstanding at any time may not exceed U.S. $230,000,000, except as otherwise
provided herein. Upon the written order of the Company in the form of an
Officers' Certificate, the Trustee shall authenticate Notes in substitution of
Notes originally issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless otherwise provided in the appointment, an
authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such authenticating agent. An authenticating agent has the
same rights as an Agent to deal with the Company, any Affiliate of the Company,
or any of their respective Subsidiaries.
Section 2.3 REGISTRAR AND PAYING AGENT.
The Company hereby appoints The Chase Manhattan Bank, N.A., at present
having its principal corporate trust office at 4 Chase MetroTech Center, Third
Floor, Brooklyn, New York 11245 (together with such other offices as the Trustee
may designate for such purposes, the "Principal Corporate Trust Office"), as its
Trustee in respect of the Notes upon the terms and subject to the conditions
herein set forth (The Chase Manhattan Bank, N.A. and its successor or successors
as such Trustee qualified and appointed in
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accordance with Article VIII hereof are herein called the "Trustee"). The
Trustee shall have the powers and authority granted to and conferred upon it
herein and in the Notes, and such further powers and authority, acceptable to
it, to act on behalf of the Company as the Company may hereafter grant to or
confer upon it in writing.
The Company hereby appoints the Principal Corporate Trust Office of
The Chase Manhattan Bank, N.A. in The City of New York and the London office of
The Chase Manhattan Bank, N.A. located at Woolgate House, Coleman Street, London
EC2P 2HD, England (together with such other offices as the Trustee may designate
for such purposes, the "London Office"), as its Paying Agent in respect of the
Notes upon the terms and subject to the conditions herein set forth. The Paying
Agent shall have the powers and authority granted to and conferred upon it
herein and in the Notes, and such further powers and authority, acceptable to
it, to act on behalf of the Company as the Company may hereafter grant to or
confer upon it in writing. The Company may appoint one or more additional
Paying Agents from time to time and may authorize the Paying Agent to cooperate
with one or more additional Paying Agents. As used herein, "paying agencies"
shall mean paying agencies maintained by the Company as provided in Section 5.4
hereof.
The Company hereby appoints the Principal Corporate Trust Office of
Chase Manhattan Bank Luxembourg S.A. and the London Office of The Chase
Manhattan Bank, N.A. (together with such other offices as the Trustee may
designate for such purposes) as its Conversion Agent in respect of the Notes
upon the terms and subject to the conditions herein set forth, and the
Registrar, the Paying Agent, the Conversion Agent, the Transfer Agents (as
defined in Section 5.2 hereof) and the Trustee are sometimes herein referred to
severally as an "Agent" and, collectively, as the "Agents". The Conversion
Agent shall have the powers and authority granted to and conferred upon it
herein and in the Notes, and such further powers and authority, acceptable to
it, to act on behalf of the Company as the Company may hereafter grant to or
confer upon it in writing. As used herein, "conversion agencies" shall mean
conversion agencies maintained by the Company as provided in Section 5.2 hereof.
The Company shall cause to be kept at the Principal Corporate Trust
Office of the Trustee a register (the register maintained in such office being
herein referred to as the "Note Register") in which, subject to such reasonable
regulations as the Trustee may prescribe, the Company shall provide for the
registration of Registered Notes and of transfers of Registered Notes. The
Trustee is hereby appointed Registrar ("Registrar") for the purpose of
registering Registered Notes and transfers of Registered Notes as herein
provided. The Company may have one or more co-Registrars.
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The Company shall enter into an appropriate written agency agreement
with any Agent not a party to this Indenture, which agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
promptly notify the Trustee in writing of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent the Trustee
shall act as such.
The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the Rule 144A Global Notes.
The Company initially appoints the Trustee to act as Notes Custodian
with respect to the Rule 144A Global Notes.
Section 2.4 PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, premium, if any, interest on or Additional Amounts with respect
to, the Notes (whether such assets have been distributed to it by the Company or
any other obligor on the Notes), and shall notify the Trustee in writing of any
Default in making any such payment. The Company at any time may require a
Paying Agent to distribute all assets held by it to the Trustee and account for
any assets disbursed and the Trustee may at any time during the continuance of
any Payment Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to account for any
assets distributed. Upon distribution to the Trustee of all assets that shall
have been delivered by the Company to the Paying Agent, the Paying Agent (if
other than the Company or an Affiliate of the Company) shall have no further
liability for such assets. If the Paying Agent pays out any amount due under
the terms of the Notes on or after the due date therefor on the assumption that
the corresponding payment for such amount has been or will be made by the
Company and such payment has in fact not been so made by the Company prior to
the time that the Paying Agent makes such payment, then the Company shall on
demand reimburse the Paying Agent for the relevant amount, and pay interest to
the Paying Agent on such amount from the date on which it is paid out to the
date of reimbursement at a rate per annum equal to the cost to the Paying Agent
of funding the amount paid out, as certified by the Paying Agent and expressed
as a rate per annum.
Section 2.5 NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
holders of Registered Notes. If the Trustee
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is not the Registrar, the Company shall furnish to the Trustee on or before the
third Business Day preceding each Interest Payment Date and at such other times
as the Trustee may request in writing a list in such form and as of such date as
the Trustee reasonably may require of the names and addresses of holders of
Registered Notes.
Section 2.6 TRANSFER AND EXCHANGE; RESTRICTIONS ON TRANSFER.
(a) Upon surrender for registration of transfer of any Registered
Note at any office or agency designated for such purpose by the Company pursuant
to Section 4.2 hereof, the Company shall execute, and the Trustee shall
authenticate, register and deliver, in the name of the designated transferee or
transferees, one or more new Registered Notes of any authorized denominations
and of a like aggregate principal amount and bearing such restrictive legends as
may be required by this Indenture; PROVIDED, HOWEVER, that, with respect to any
Registered Note that is a Restricted Note, the Trustee shall not register the
transfer of such Note unless the conditions in Section 2.6(b) hereof shall have
been satisfied. The holder of each Restricted Note, by such holder's acceptance
thereof, agrees to be bound by the transfer restrictions set forth herein and in
the legend on such Restricted Note.
(b) Whenever any Restricted Note is presented or surrendered for
registration of transfer or exchange for a Registered Note registered in a name
other than that of the holder, no registration of transfer or exchange shall be
made unless:
(1) The registered holder presenting such Restricted Note for
transfer shall have certified to the Trustee in writing that such
registered holder is transferring such Restricted Note to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities
Act) in compliance with the exemption from registration under the
Securities Act provided by Rule 144A thereunder (or a successor
provision);
(2) The registered holder presenting such Restricted Note for
transfer shall have certified to the Trustee in writing that such
registered holder is transferring such Restricted Note outside the
United States in a transaction meeting the requirements of Rule 904 of
Regulation S under the Securities Act;
(3)(A) The registered holder presenting such Restricted Note for
transfer shall have certified to the Trustee in writing that such
registered holder is transferring such Restricted Note to an
institutional "accredited investor" (within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act) in
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a transaction not involving any general solicitation or general
advertising; and (B) a broker or dealer registered under Section 15 of
the Exchange Act shall have certified to the Trustee in writing that:
(x) each person who will become a beneficial owner of the Restricted
Note upon transfer is an institutional "accredited investor" (as such
term is defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act); (y) no general solicitation or general advertising
was made or used by such broker or dealer in connection with the offer
and sale of such Restricted Note to such person(s); and (z) such
institutional "accredited investor" has been informed that the Notes
have not been registered under the Securities Act and are subject to
the restrictions on transfer set forth in the Notes and this
Indenture;
(4) The registered holder presenting such Restricted Note for
transfer shall have certified to the Trustee in writing that the
registered holder is transferring the Registered Note to the Company;
or
(5) The registered holder presenting such Restricted Note for
transfer shall have delivered an opinion of counsel acceptable in form
and substance to the Company, that the transfer is being made pursuant
to another available exemption from, or a transaction not otherwise
subject to, the registration requirements of the Securities Act.
For purposes of this Section 2.6(b), any such certification to the
Trustee in writing shall be in the form of the Transfer Notice set forth on the
reverse of such Note. In the case of a transfer pursuant to the foregoing
clauses (ii), (iii) or (v) above, the Company may require that the registered
holder deliver an opinion of counsel, certifications or other information
acceptable to it in form and substance.
(c) (i) Bearer Notes may, at the option of the holder thereof, be
exchanged for an equal aggregate principal amount of Registered Regulation S
Notes in denominations of $1,000 and integral multiples thereof without Coupons
and/or Bearer Notes of authorized denominations, upon surrender of the Bearer
Notes to be exchanged at any office or agency outside the United States
designated for such purpose by the Company pursuant to Section 5.2 hereof, with
all unmatured Coupons and all matured Coupons in default thereto appertaining.
If such holder is unable to produce any such unmatured Coupon or Coupons or
matured Coupon or Coupons in default, such exchange may be effected if the
Bearer Notes are accompanied by payment in funds acceptable to the Company in an
amount equal to the face amount of such missing Coupon or Coupons or the
surrender of such missing Coupon or Coupons may be waived by
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the Company if there be furnished to it and the Trustee such security or
indemnity as it may require to save it, the Trustee, the Paying Agent and any
paying agency harmless. If thereafter the holder of such Note shall surrender
to any paying agency any such missing Coupon or Coupons in respect of which such
a payment shall have been made, such holder shall be entitled to receive the
amount of such payment from the Company; PROVIDED, HOWEVER, that, except as
otherwise provided in the form of Bearer Note set forth in Exhibit A hereto,
interest represented by Coupons shall be payable only upon presentation and
surrender of those Coupons outside of the United States, its territories and its
possessions. Bearer Notes and Coupons are transferable upon delivery.
(ii) The Trustee shall maintain a separate Registrar for all
Registered Notes that were previously held as Bearer Notes.
(d) Registered Notes may, at the option of the holder thereof, be
exchanged for Registered Notes of any other authorized denominations and of a
like aggregate principal amount, upon surrender of the Registered Notes to be
exchanged at any office or agency designated for such purpose by the Company
pursuant to Section 5.2 hereof. Registered Notes shall not be exchangeable for
Bearer Notes. Whenever any Registered Notes are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and deliver, the
Registered Notes which the holder making the exchange is entitled to receive.
If the Registered Note so surrendered for exchange is a Registered Accredited
Investor Note and the holder thereof requests in writing that such Registered
Accredited Investor Note be exchanged for an interest in the Rule 144A Global
Note, such Registered Accredited Investor Note will be exchangeable into an
equal aggregate principal amount of beneficial interests in the Rule 144A Global
Note; PROVIDED, HOWEVER, that, if such Registered Accredited Investor Note is a
Restricted Note, such exchange may only be made if such holder certifies to the
Trustee in writing that such holder is a QIB by completing the Transfer Notice
on the reverse of such Note. Upon any exchange as provided in the immediately
preceding sentence, the Trustee shall cancel such Registered Accredited Investor
Note and cause, or direct any custodian for the Rule 144A Global Note to cause,
in accordance with the standing instructions and procedures existing between the
Depositary and any such custodian, the aggregate principal amount of Notes
represented by the Rule 144A Global Note to be increased accordingly. If no
Rule 144A Global Notes are then outstanding, the Company shall issue and the
Trustee shall authenticate a new Rule 144A Global Note in the appropriate
principal amount.
(e) Any person having a beneficial interest in a Rule 144A Global
Note may upon request exchange such beneficial interest for a Registered Note
only as provided in this paragraph. Upon receipt by the Company and the Trustee
of (i) written instructions
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(or such other form of instructions as is customary) on behalf of any person
having a beneficial interest in a Rule 144A Global Note and (ii) in the case of
a Restricted Note, the following additional information and documents (all of
which may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the
person designated as being the beneficial owner, a certification to
that effect from such person; or
(B) if such beneficial interest is being transferred to a person
other than the person designated as being the beneficial owner, a
certificate from such person that the provisions of Section 2.6(b)
hereof have been satisfied;
in which case the Trustee or any custodian for the Rule 144A Global Note, at the
direction of the Trustee shall, in accordance with the standing instructions and
procedures existing between the Depositary and such custodian, cause the
aggregate principal amount of the Rule 144A Global Note to be reduced
accordingly and, following such reduction, the Company shall execute and the
Trustee shall authenticate and deliver to the transferee a Registered Note in
the appropriate principal amount and, if such Registered Note is a Restricted
Note, including the appropriate legend. Registered Notes issued in exchange for
a beneficial interest in the Rule 144A Global Note pursuant to this paragraph
shall be registered in such names and in such authorized denominations as the
Trustee shall be instructed in writing. The Trustee shall deliver such
Registered Notes to the persons in whose names such Notes are so registered.
(f) Notwithstanding any other provision of this Indenture (other than
the provisions set forth in Section 2.6(e) hereof), the Rule 144A Global Note
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(g) If at any time (i) the Depositary for the Rule 144A Global Note
notifies the Company and the Company notifies the Trustee in writing that the
Depositary is unwilling or unable to continue as Depositary for the Rule 144A
Global Note and a successor Depositary for the Rule 144A Global Note is not
appointed by the Company within 90 days after delivery of such notice, or (ii)
the Company, at its sole discretion, notifies the Trustee in writing that it
elects to cause the issuance of Registered Notes under this Indenture, then the
Company shall execute, and the Trustee shall authenticate and deliver,
Registered Notes in an aggregate principal amount equal to the principal amount
of the
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Rule 144A Global Note in exchange for such Rule 144A Global Note (registered in
the names and denominations specified by the Depositary).
(h) Each certificate evidencing Restricted Notes shall bear a legend
in substantially the following form:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM,
OR NOT SUBJECT TO, REGISTRATION. EACH PURCHASER OF THIS SECURITY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER.
THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, REPRESENTS,
ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE COMPANY THAT: (I) IT
HAS ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS (OR
SUCH SHORTER PERIOD AS SHALL BE PERMITTED AS A RESULT OF AN AMENDMENT
TO THE RULES UNDER THE SECURITIES ACT IN RESPECT THEREOF) AFTER THE
LATER OF THE DATE OF ORIGINAL ISSUANCE HEREOF AND THE LAST DATE ON
WHICH THE COMPANY OR ANY AFFILIATED PERSON OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) (THE
"RESALE RESTRICTION TERMINATION DATE") EXCEPT (A) TO THE COMPANY, (B)
PURSUANT TO A CURRENT REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY
IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) IN A TRANSACTION ARRANGED
BY A BROKER OR DEALER REGISTERED UNDER THE UNITED STATES SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" (WITHIN THE MEANING OF SUBPARAGRAPHS (a)(1), (2), (3) OR (7)
OF RULE 501 UNDER THE SECURITIES ACT) THAT IS ACQUIRING THIS SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO,
OR FOR
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OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE,
IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE. IF
ANY RESALE OR OTHER TRANSFER OF THIS SECURITY IS PROPOSED TO BE MADE
PURSUANT TO CLAUSE (II)(E) ABOVE PRIOR TO THE DATE WHICH IS THREE
YEARS (OR SUCH SHORTER PERIOD AS SHALL BE PERMITTED AS A RESULT OF AN
AMENDMENT TO THE RULES UNDER THE SECURITIES ACT IN RESPECT THEREOF)
AFTER THE DATE OF ORIGINAL ISSUANCE HEREOF, THE TRANSFEROR SHALL
DELIVER A LETTER FROM THE TRANSFEREE CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS SECURITY. ANY OFFER, SALE OR OTHER DISPOSITION
PURSUANT TO THE FOREGOING CLAUSES (II)(D),(E) AND (F) IS SUBJECT TO
THE RIGHT OF THE ISSUER OF THIS SECURITY AND THE TRUSTEE TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER
INFORMATION ACCEPTABLE TO THEM IN FORM AND SUBSTANCE. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED MAY
22, 1996 BETWEEN THE COMPANY AND ROBERTSON, STEPHENS & COMPANY LLC AND
NATWEST SECURITIES LIMITED, A COPY OF WHICH MAY BE OBTAINED FROM THE
COMPANY OR THE TRUSTEE.
(i) The restrictions imposed by Section 2.6(b) upon the
transferability of any particular Restricted Note shall cease and terminate (i)
when such Restricted Note has been (x) sold pursuant to an effective
registration statement under the Securities Act or (y) transferred pursuant to
Rule 144 under the Securities Act (or any successor provisions thereto), unless
the holder is an affiliate of the Company within the meaning of said Rule 144
(or such successor provision) or (ii) upon the date which is three years (or
such shorter period as shall be permitted as a result of an amendment to the
rules under the Securities Act in respect thereof) after the later of the date
of original issue and the last date on which the Company or any Affiliate of the
Company was the owner of such Restricted Note (or any predecessor security) (the
"Resale Restriction Termination Date"). Any Restricted Note as to which such
restrictions on transfer shall have expired in accordance with their terms or
shall have terminated may, upon surrender of such Restricted Note for exchange
to the Trustee in accordance with the provisions of this Section 2.6(i)
(accompanied,
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in the event that such restrictions on transfer have terminated by reason of a
transfer pursuant to Rule 144 (or any successor provision), by an opinion of
counsel reasonably acceptable to the Company, addressed to the Company and the
Trustee and in form and scope satisfactory to the Company, to the effect that
the transfer of such Restricted Note has been made in compliance with Rule 144
(or such successor provision)), be exchanged for a new Registered Note, of like
tenor and aggregate principal amount, which shall not bear the restrictive
legend required by Section 2.6(h) hereof. The Company shall promptly inform the
Trustee in writing of the effective date of any registration statement
registering the Notes under the Securities Act.
(j) The transfer and exchange of the Rule 144A Global Note or
beneficial interest therein shall be effected through the Depositary, in
accordance with this Indenture and the procedures of the Depositary therefor,
which shall include restrictions on transfer comparable to those set forth
herein to the extent required by the Securities Act.
(k) At such time as all beneficial interests in the Rule 144A Global
Note have either been exchanged for Registered Notes, redeemed, repurchased or
cancelled, the Rule 144A Global Note shall be returned to or retained and
cancelled by the Trustee. At any time prior to such cancellation, if any
beneficial interest in the Rule 144A Global Note is exchanged for Registered
Notes, redeemed, repurchased or cancelled, the principal amount of Notes
represented by the Rule 144A Global Note shall be reduced accordingly and an
endorsement shall be made on the Rule 144A Global Note, by the Trustee or any
custodian therefor, at the direction of the Trustee, to reflect such reduction.
(l) All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same
obligations, and entitled to the same benefits under this Indenture, as the
Notes surrendered upon such registration of transfer or exchange.
(m) Every Registered Note presented for registration of transfer or
surrendered for exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company, the Trustee and the
Transfer Agent to which such Note is presented or surrendered and the Registrar,
duly executed by the holder thereof or his attorney duly authorized in writing.
All such instruments shall comply with the applicable provisions of this Section
2.6. The registration of the transfer of a Registered Note by the Registrar
shall be deemed to be the written acknowledgment of such transfer on behalf of
the Company.
(n) No service charge shall be made for any registration of transfer
or exchange, but the Company or the Transfer Agent may
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require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.7 hereof or not
involving any registration of transfer.
(o) Neither the Company nor the Trustee nor any of the offices or
agencies designated for the purposes specified in Section 5.2 hereof nor any
Transfer Agent shall be required (i) to exchange Bearer Notes for Registered
Notes during the period between the close of business on any Interest Record
Date and the opening of business on the next succeeding Interest Payment Date,
(ii) to exchange any Bearer Note (or portion thereof) for a Registered Note if
the Company shall determine and inform the Trustee in writing that, as a result
thereof, the Company may incur adverse consequences under the federal income tax
laws and regulations (including proposed regulations) of the United States in
effect or proposed at the time of such exchange, or (iii) in the event of a
redemption in part, (A) to register the transfer or exchange of Registered Notes
or to exchange any Bearer Notes for Registered Notes during a period of 15 days
immediately preceding the date notice is given pursuant to Section 3.2 hereof
identifying the serial numbers of any Notes to be redeemed, or (B) to register
the transfer or exchange of any Registered Note so selected for redemption in
whole or in part, except portions not being redeemed of Notes being redeemed in
part, or (C) to exchange any Bearer Note called for redemption; PROVIDED,
HOWEVER, that a Bearer Note called for redemption may be exchanged, on the terms
and conditions set forth above, for a Registered Note that is simultaneously
surrendered, with written instruction for payment on the date fixed for
redemption, unless the date fixed for redemption is between the close of
business on any Interest Record Date and the close of business on the next
succeeding Interest Payment Date, in which case such exchange may only be made
prior to the Interest Record Date immediately preceding the date fixed for
redemption.
Section 2.7 EXCHANGE.
(a) At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by the
Company in accordance with this Indenture to the Trustee for authentication
together with an Officers' Certificate of the Company directing such
authentication, and the Trustee shall thereupon authenticate and make such Notes
available for delivery upon and in accordance with the written order of the
Company. No Note shall be valid or enforceable for any purpose unless and until
the certificate of authentication thereon shall have been manually signed by a
duly authorized signatory of the Trustee and such duly executed certificate of
authentication on any Note shall be conclusive evidence that the Note has been
duly authenticated and delivered hereunder.
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(b) The Regulation S Global Note, the Rule 144A Global Note and the
Registered Accredited Investor Notes will be issued upon payment to the Company
or its order in United States dollars by wire transfer to a United States dollar
account designated by the Company, at 3:00 p.m., London time, on the "Closing
Date." Such payment will be made (1) upon authorization from the Managers, (2)
against delivery as provided in Section 2.7(c) hereof of the amount, if any, of
Rule 144A Notes and Accredited Investor Notes as the Managers may request and as
they shall direct, and (3) against the delivery of the Regulation S Global Note
for the balance of the Notes to the Common Depositary. The Regulation S Global
Note shall be held on deposit with the Common Depositary for the accounts of the
Euroclear Operator and Cedel for credit to the Managers' Notes Clearance
Accounts (or to such other accounts as the Managers may have specified) with the
Euroclear Operator or Cedel.
(c) On the Closing Date, the Company shall execute and deliver to (i)
the Managers, at the offices of Robertson, Stephens & Company LLC in the city of
New York, temporary Registered Accredited Investor Notes (which shall have been
duly authenticated by the Trustee and which may be in typewritten form) in
respect of the Accredited Investor Notes and (ii) the Depositary, at its office
in New York, the Rule 144A Global Note (which shall have been duly authenticated
by the Trustee and which may be in typewritten form) in respect of the Rule 144A
Notes. On or before the Exchange Date (as defined in Section 2.7(d)), the
Company will execute and deliver to the Trustee at the Principal Corporate Trust
Office, Registered Accredited Investor Notes in the aggregate principal amount
of the Registered Accredited Investor Notes outstanding. At the request of a
holder of temporary Registered Accredited Investor Notes, the Trustee shall
deliver to such holder Registered Accredited Investor Notes in exchange for an
equal aggregate principal amount of temporary Registered Accredited Investor
Notes.
(d) On or before the Exchange Date, the Company will execute and
deliver to the Trustee, at its office in London, definitive Registered
Regulation S Notes and Bearer Notes in the aggregate principal amount
outstanding in the Regulation S Global Note and in such proportion of Registered
Regulation S Notes to Bearer Notes as the Trustee may specify. "Exchange Date"
means the date following the expiration of the 60-day period commencing on the
Closing Date. On or after the Exchange Date, the Regulation S Global Note may
be surrendered to the Trustee at its London office to be exchanged, as a whole
or in part, for definitive Bearer Notes without charge, and the Trustee shall
authenticate and deliver, in exchange for such Regulation S Global Note or the
portions thereof to be exchanged, an equal aggregate principal amount of
definitive Bearer Notes, but only upon presentation to the Trustee at its London
Office of a certificate of the Euroclear Operator or Cedel with respect to the
Regulation S Global Note or portions thereof
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being exchanged, to the effect that it has received a certificate or
certificates satisfactory to it with respect to non-U.S. Person beneficial
ownership on the part of the holders of the Notes accepted for clearance through
Euroclear or Cedel, as appropriate, dated no earlier than 15 days prior to the
Exchange Date and signed by the person appearing in its records as the owner of
the Regulation S Global Note or portions thereof being exchanged. Similarly,
after the Exchange Date, portions of the Regulation S Global Note may be
exchanged for an equal aggregate principal amount of definitive Registered
Regulation S Notes upon presentation to the Trustee at its office in Luxembourg
of a request for such exchange accompanied by a certification of non-U.S.
beneficial ownership.
(e) The definitive Notes and Coupons shall be printed, lithographed
or engraved or produced by any combination of these methods or may be produced
in any other manner permitted by the rules of any securities exchange on which
the Notes may be listed, all as determined by the Officers executing such Notes
and Coupons, as evidenced by such execution.
(f) Bearer Notes and Registered Notes may only be issued in exchange
for interests in the temporary Regulation S Global Note upon receipt of
certification of non-U.S. beneficial ownership and undertakings not to resell
the related security in the United States or in contravention of restrictions on
resale to U.S. Persons. Bearer Notes will be delivered only outside the United
States, its territories or its possessions.
(g) The delivery to the Trustee by the Euroclear Operator or Cedel of
any certificate referred to above may be relied upon by the Company and the
Trustee as conclusive evidence that a corresponding certificate or certificates
has or have been delivered to the Euroclear Operator or Cedel pursuant to the
terms of this Indenture.
(h) Upon any such exchange of a portion of the Regulation S Global
Note for a definitive Bearer Note or Notes or a definitive Registered Regulation
S Note or Notes, the Regulation S Global Note shall be endorsed by the Trustee
to reflect the reduction of its principal amount by an amount equal to the
aggregate principal amount of such definitive Note or Notes. Until so exchanged
in full for definitive Notes, the Regulation S Global Note shall in all respects
be entitled to the same benefits under this Indenture as definitive Notes
authenticated and delivered hereunder, except that neither the holder thereof
nor the beneficial owners of the Regulation S Global Note shall be entitled to
receive payment of interest thereon or exercise conversion rights with respect
thereto.
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Section 2.8 REPLACEMENT NOTES.
If a mutilated Note or a Note with a mutilated Coupon appertaining
thereto is surrendered to the Trustee or if the holder of a Note or Coupon
claims and submits to the Trustee an affidavit or other evidence, satisfactory
to the Trustee, to the effect that the Note or Coupon has been lost, destroyed
or wrongfully taken, the Company shall issue and the Trustee shall authenticate
and deliver, in lieu of any such lost, destroyed or wrongfully taken Note or in
exchange for the Note to which a lost, destroyed or wrongfully taken Coupon
appertains (with all appurtenant Coupons not lost, destroyed or wrongfully
taken) a replacement Note with Coupons corresponding to the Coupons, if any,
appertaining to such lost, destroyed or wrongly taken Note or to the Note to
which such lost, destroyed or wrongfully taken Coupon appertains, if the
Trustee's requirements are met. If required by the Trustee or the Company, such
holder must provide an indemnity bond or other indemnity, sufficient in the
judgment of both the Company and the Trustee, to protect the Company, the
Trustee or any Agent from any loss which any of them may suffer if a Note or
Coupon is replaced. The Company may charge such holder for its reasonable,
out-of-pocket expenses in replacing a Note or Coupon.
In case any such lost, destroyed or wrongfully taken Note or Coupon
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 or Coupon; PROVIDED, HOWEVER,
that principal of and any premium and interest on Bearer Notes shall, except as
otherwise provided in the Bearer Notes, be payable only at an office or agency
located outside the United States and its possessions.
Every replacement Note or Coupon is an additional obligation of the
Company.
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 or Coupons.
Section 2.9 OUTSTANDING NOTES.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee (including any Note represented by a Rule 144A
Global Note or a Regulation S Global Note) except those cancelled by it, those
delivered to it for cancellation, those reductions in the interest in a Global
Note effected by the Trustee hereunder and those described in this Section 2.9
as not outstanding. A Note does not cease to be outstanding because the Company
or an Affiliate of the Company holds the Note, except as provided in Section
2.10 hereof.
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If a Note is replaced pursuant to Section 2.8 hereof (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.8 hereof.
If on a date fixed for redemption the Paying Agent (other than the
Company or an Affiliate of the Company) holds Cash or U.S. Government
Obligations sufficient to pay all of the principal and interest due on the Notes
payable on that date in accordance with Section 3.3 hereof and payment of the
Notes called for redemption is not otherwise prohibited pursuant to Article IV
hereof or otherwise, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
Section 2.10 TREASURY NOTES.
In determining whether the holders of the required principal amount of
Notes have concurred in any direction, amendment, supplement, waiver or consent,
Notes owned by the Company or an Affiliate of the Company shall be disregarded,
except that, for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, amendment, supplement, waiver or
consent, only Notes that the Trustee actually knows are so owned shall be
disregarded.
Section 2.11 TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company reasonably and in good faith considers appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as permanent Notes authenticated and delivered
hereunder, except as provided in Section 2.7(h) hereof.
Section 2.12 CANCELLATION.
The Company at any time may deliver Notes or Coupons to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Notes or Coupons surrendered to them for transfer, exchange or
payment. The Trustee, or at the direction of the Trustee, the Registrar or the
Paying Agent (other than the Company or an Affiliate of the Company), and no one
else, shall cancel and, at the written direction of the Company, shall
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dispose of all Notes or Coupons surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.8 hereof, the Company may not issue new
Notes or Coupons to replace Notes or Coupons that have been paid or delivered to
the Trustee for cancellation. No Notes shall be authenticated in lieu of or in
exchange for any Notes cancelled as provided in this Section 2.12, except as
expressly permitted in the form of Notes and as permitted by this Indenture.
Section 2.13 PAYMENT.
(a) The Company will pay or cause to be paid to the Paying Agent the
amounts, at the times and for the purposes, set forth herein and in the text of
the Notes, and the Company hereby authorizes and directs the Paying Agent to
make payment of the principal of, premium, if any, and interest on and
Additional Amounts, if any, on the Notes from such payments.
(b) At least 15 days prior to the date on which any payment of
Additional Amounts shall be required to be made pursuant to Section 2 of the
Notes, the Company will furnish the Paying Agent, each other paying agency of
the Company and the Trustee with a certificate of one of its duly authorized
officers instructing the Paying Agent and each other paying agency of the
Company as to the amounts required (i) to be deducted or withheld for or on
account of any taxes described in Section 2 of the Notes from a payment to be
made on that date and (ii) to be paid to each holder of Notes or Coupons as
Additional Amounts pursuant to that paragraph. If the foregoing amounts are not
uniform for all holders, then the Company's certificate shall specify by country
of residence or other factor the amounts required to be deducted or withheld and
to be paid as Additional Amounts for each holder or class of holders of the
Notes or Coupons. In the absence of its receipt of any such certificate from
the Company, the Paying Agent may make payment without deduction or withholding.
The Company hereby agrees to indemnify the Paying Agent, each other paying
agency of the Company and the Trustee for, and to hold them harmless against,
any loss, liability or expense reasonably incurred without negligence or willful
misconduct on their part, arising out of or in connection with actions taken or
omitted by any of them in reliance on any certificate furnished pursuant to this
Section.
(c) Interest on any Registered Note that is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the person in whose name that Note is registered at the close of business on
the Interest Record Date even if such Registered Note is cancelled after such
Interest Record Date. In case a Bearer Note is surrendered for exchange for a
Registered Note after the close of business on any Interest Record Date and
before the opening of business on the next
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succeeding Interest Payment Date, the Trustee shall not be required to perform
such transfer or exchange of such Note.
(d) If a Registered Note is converted after the close of business on
an Interest Record Date and before the opening of business on the next
succeeding Interest Payment Date, the interest due on such Interest Payment Date
shall be paid on such Interest Payment Date to the person in whose name that
Note is registered at the close of business on that Interest Record Date.
(e) In order to provide for the payment of the principal of, premium,
if any, and interest on the Notes (and Additional Amounts, if any, with respect
thereto) as the same shall become due and payable, the Company shall pay to the
Paying Agent to accounts specified by the Paying Agent, in cash or same day
funds, the following amounts (and the Company shall give notice to the Trustee
at least one full Business Day prior to the date payment is due to the Paying
Agent as to the means of such payment), to be held and applied by the Paying
Agent as hereinafter set forth:
(1) The Company shall pay to the Paying Agent on the Business
Day immediately prior to each Interest Payment Date an amount
sufficient to pay the interest due on (and Additional Amounts, if any,
on) all the Notes outstanding on such Interest Payment Date, and the
Paying Agent shall apply the amounts so paid to it to the payment of
such interest (and Additional Amounts, if any) on such Interest
Payment Date.
(2) If the Company shall elect, or shall be required, to redeem
all or any part of the Notes in accordance with Article III hereof,
the Company will pay to the Paying Agent (other than the Company or an
Affiliate of the Company) on the Business Day immediately prior to the
date fixed for redemption thereof an amount sufficient (with any
amount then held by the Paying Agent and available for the purpose) to
pay the Redemption Price of the Notes called for redemption or
entitled to be redeemed, together with accrued interest thereon (and
Additional Amounts, if any, with respect thereto) to the date fixed
for redemption and not paid pursuant to clause (e)(i) of this Section
2.13, and the Paying Agent shall apply such amount to the payment of
the Redemption Price and accrued interest (and Additional Amounts, if
any) in accordance with the terms of Article III hereof.
(3) On the Business Day immediately prior to the Stated Maturity
of the Notes, the Company shall pay to the Paying Agent an amount
which, together with any amounts then held by the Paying Agent, and
available for payment thereof, shall be equal to the entire amount of
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principal and interest (and Additional Amounts, if any) to be due on
such maturity date on all the Notes then outstanding, and the Paying
Agent shall apply such amount to the payment of the principal of and
interest on (and Additional Amounts, if any, on) the Notes in
accordance with the terms of the Notes.
Section 2.14 DEFAULTED INTEREST.
Any interest on any Registered Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date plus, to the
extent lawful any interest payable on the defaulted interest (herein called
"Defaulted Interest") shall forthwith cease to be payable to the registered
holder on the relevant Interest Record Date, and such Defaulted Interest may be
paid by the Company, at its election in each case, as provided in clause (1) or
(2) below:
(1) The Company may make payment of any Defaulted Interest to the
holder of a Registered Note on a subsequent record date established by notice
given by mail by or on behalf of the Company to such holder not less than 15
days preceding such subsequent record date, such record date to be not less than
10 days preceding the date of payment of such Defaulted Interest.
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause, such manner shall be deemed
reasonably practicable by the Trustee.
Any Defaulted Interest payable in respect of any Bearer Note shall be
payable pursuant to such procedures as may be satisfactory to the Trustee in
such manner that there is no discrimination between the holders of Registered
Notes and Bearer Notes, and notice of the payment date therefor shall be given
by the Trustee, in the name and at the expense of the Company, in the manner
provided in Section 17.3 hereof.
Subject to the foregoing provisions of this Section 2.14, each Note
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Note shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Note.
Section 2.15 COMPUTATION OF INTEREST.
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
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ARTICLE III
REDEMPTION OF NOTES
Section 3.1 REDEMPTION. The Company may, at its option, redeem all or
from time to time any part of the Notes on any date prior to maturity, upon
notice as set forth in Section 3.2, and at the optional redemption prices set
forth in the form of Note attached as Exhibit A hereto, together with accrued
interest, if any, to, but excluding, the date fixed for redemption, PROVIDED,
HOWEVER, that no such redemption shall be effected before May 22, 1998, PROVIDED
further that the Company may not redeem the Notes prior to May 15, 1999 unless
the closing price of the Common Stock on the principal stock exchange market on
which the Common Stock is then quoted or admitted to trading equals or exceeds
150% of the Conversion Price for at least 20 Trading Days within a period of 30
consecutive Trading Days ending on the fifth Trading Day prior to the date the
notice of redemption is first mailed to the holders of the Notes, and in no
event shall any notice of redemption be given if such redemption would cause the
Company to be in default under the Line of Credit.
Section 3.2 NOTICE OF REDEMPTION; SELECTION OF NOTES. In case the
Company shall desire to exercise the right to redeem all or, as the case may be,
any part of the Notes pursuant to Section 3.1, it shall fix a date for
redemption. The Company shall, at least 75 days (or such shorter period as
shall be reasonably acceptable to the Trustee) before the date fixed for
redemption, give written notice to the Agents of its election to redeem the
outstanding Notes on the date fixed for redemption and state in such notice that
the conditions precedent to such redemption have occurred and describe them, and
shall request the Trustee to arrange for publication and mailing of the notice
specified in the next paragraph.
In the case that the Company shall give notice to the Agents of its
election to redeem the Notes, the Trustee shall cause to be given to the holders
of the Notes on behalf of and at the expense of the Company a notice of
redemption in accordance with Section 17.3 hereof. The Trustee shall send a
copy of such notice to the Company, the Paying Agent (if different from the
Trustee) and each other paying agency of the Company. In the case of a
redemption in whole, notice will be given once not more than 60 days and not
less than 45 days prior to the date fixed for redemption. In the case of a
partial redemption, notice will be given twice, the first such notice to be
given not more than 60 days nor less than 45 days prior to the date fixed for
redemption and the second such notice to be given not more than 45 days and not
less than 30 days prior to the date fixed for redemption.
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Each such notice of redemption shall specify the aggregate principal amount
of Notes to be redeemed, the date fixed for redemption, the redemption price at
which Notes are to be redeemed, the place or places of payment, that payment
will be made upon presentation and surrender of such Notes, together with, in
the case of Bearer Notes, with all appurtenant Coupons, if any, maturing
subsequent to the date fixed for redemption, that interest accrued to, but
excluding, the date fixed for redemption will be paid as specified in said
notice, and that on and after said date interest thereon or on the portion
thereof to be redeemed will cease to accrue. Such notice shall also state the
current Conversion Price and that the right to convert such Notes or portions
thereof into Common Stock will expire at the close of business on the Trading
Day next preceding the date fixed for redemption (unless the Company fails to
redeem such Notes on such date). If fewer than all the Notes are to be
redeemed, the notice of redemption shall identify the Notes to be redeemed. In
case any Note is to be redeemed in part only, the notice of redemption shall
state the portion of the principal amount thereof to be redeemed and shall state
that on and after the date fixed for redemption, upon surrender of such Note, a
new Note or Notes in principal amount equal to the unredeemed portion thereof
will be issued.
On or prior to the date fixed for redemption specified in the notice of
redemption given as provided in this Section, the Company will deposit with the
Trustee or with one or more paying agents (or, if the Company is acting as its
own paying agent, set aside, segregate and hold in trust as provided in Section
5.4) an amount of money sufficient to redeem on the date fixed for redemption
all the Notes (or portions thereof) so called for redemption (other than those
theretofore surrendered for conversion into Common Stock) at the appropriate
redemption price, together with accrued interest to, but excluding, the date
fixed for redemption, PROVIDED that if such payment is made on the date fixed
for redemption it must be received by the Trustee or paying agent, as the case
may be, by 10:00 a.m. New York City time, on such date. If any Note called for
redemption is converted pursuant hereto, any money deposited with the Trustee or
any paying agent or so segregated and held in trust for the redemption of such
Note shall be paid to the Company upon its request, or, if then held by the
Company shall be discharged from such trust.
If fewer than all the Notes are to be redeemed, the Trustee shall select
the Notes or portions thereof to be redeemed (in principal amounts of $1,000 or
integral multiples thereof), by lot or, in its sole discretion, on a pro rata
basis. If any Note selected for partial redemption is converted in part after
such selection, the converted portion of such Note shall be deemed (so far as
may be) to be the portion to be selected for redemption. The Notes (or portions
thereof) so selected shall be deemed duly selected for redemption for all
purposes hereof, notwithstanding
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that any such Note is converted as a whole or in part before the mailing of the
notice of redemption. Notes may be redeemed in part only in denominations of
$1,000 or any integral multiple thereof.
Upon any redemption of less than all Notes, the Company and the Trustee
shall treat as outstanding any Notes surrendered for conversion during the
period of fifteen (15) days next preceding the mailing of a notice of redemption
and shall treat as not outstanding any Note authenticated and delivered during
such period in exchange for the unconverted portion of any Note converted in
part during such period.
Section 3.3 PAYMENT OF NOTES CALLED FOR REDEMPTION. If notice of
redemption has been given as above provided, the Notes or portion of Notes with
respect to which such notice has been given shall, unless converted into Common
Stock pursuant to the terms hereof, become due and payable on the date and at
the place or places stated in such notice at the applicable redemption price,
together with interest accrued to, but excluding, the date fixed for redemption.
On and after said date (unless the Company shall default in the payment of such
Notes at the redemption price, together with interest accrued to said date)
interest on the Notes or portion of Notes so called for redemption shall cease
to accrue and such Notes shall cease, except as provided in Sections 8.5 and
13.4, to be entitled to any benefit or security under this Indenture, and the
holders thereof shall have no right in respect of such Notes except the right to
receive the redemption price thereof and unpaid interest to, but excluding, the
date fixed for redemption. On and after the close of business on the Trading
Day next preceding the date fixed for redemption (unless the Company shall
default in the payment of such Notes at the redemption price, together with
accrued interest to the date fixed for redemption) the Notes or portion of the
Notes called for redemption shall also cease to be convertible into Common
Stock. On presentation and surrender of such Notes at a place of payment in
said notice specified, the said Notes or the specified portions thereof to be
redeemed shall be paid and redeemed by the Company at the applicable redemption
price, together with interest accrued thereon to, but excluding, the date fixed
for redemption; PROVIDED that, if the applicable date fixed for redemption is an
Interest Payment Date, the semi-annual payment of interest becoming due on such
date shall be payable to the holders of such Notes on the relevant record date
subject to the terms and provisions of Section 2.13 hereof.
Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to the holder thereof, at
the expense of the Company, a new Note or Notes, of authorized denominations, in
principal amount equal to the unredeemed portion of the Notes so presented.
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Notwithstanding the foregoing, the Trustee shall not redeem any Notes or
mail or publish any notice of optional redemption during the continuance of a
default in payment of interest or premium on the Notes or of any Event of
Default of which, in the case of any Event of Default other than under Section
7.1(a), (b) or (c), a Responsible Officer of the Trustee has knowledge. If any
Note called for redemption shall not be so paid upon surrender thereof for
redemption, the principal and premium, if any, shall, until paid or duly
provided for, bear interest from the date fixed for redemption at the rate borne
by the Note and such Note shall remain convertible into Common Stock until the
principal and premium, if any, shall have been paid or duly provided for.
Section 3.4 CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION. In
connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes by an agreement with one or more investment
bankers or other purchasers to purchase such Notes by paying to the Trustee in
trust for the Noteholders, on or before the date fixed for redemption, an amount
not less than the applicable redemption price, together with interest accrued
to, but excluding, the date fixed for redemption, of such Notes.
Notwithstanding anything to the contrary contained in this Article III, the
obligation of the Company to pay the redemption price of such Notes, together
with interest accrued to, but excluding, the date fixed for redemption, shall be
deemed to be satisfied and discharged to the extent such amount is so paid by
such purchasers. If such an agreement is entered into, a copy of which will be
filed with the Trustee prior to the date fixed for redemption, any Notes not
duly surrendered for conversion by the holders thereof may, at the option of the
Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such holders and (notwithstanding anything to the contrary
contained in Article XV) surrendered by such purchasers for conversion, all as
of immediately prior to the close of business on the date fixed for redemption
(and the right to convert any such Notes shall be deemed to have been extended
through such time), subject to payment of the above amount as aforesaid. At the
direction of the Company, the Trustee shall hold and dispose of any such amount
paid to it in the same manner as it would monies deposited with it by the
Company for the redemption of Notes. Without the Trustee's prior written
consent, no arrangement between the Company and such purchasers for the purchase
and conversion of any Notes shall increase or otherwise affect any of the
powers, duties, responsibilities or obligations of the Trustee as set forth in
this Indenture, and the Company agrees to indemnify the Trustee from, and hold
it harmless against, any loss, liability or expense arising out of or in
connection with any such arrangement for the purchase and conversion of any
Notes between the Company and such purchasers to which the Trustee has not
consented in writing, including the costs and expenses incurred by the Trustee
in the defense or investigation of any claim or liability arising out of or in
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connection with the exercise or performance of any of its powers, duties,
responsibilities or obligations under this Indenture.
ARTICLE IV
SUBORDINATION OF NOTES
Section 4.1 AGREEMENT OF SUBORDINATION. The Company covenants and
agrees, and each holder of Notes issued hereunder by its acceptance thereof
likewise covenants and agrees, that all Notes shall be issued subject to the
provisions of this Article IV; and each person holding any Note, whether upon
original issue or upon transfer, assignment or exchange thereof, accepts and
agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest on all Notes
(including, but not limited to, the redemption price or repurchase price with
respect to the Notes to be redeemed or repurchased, as provided in this
Indenture) issued hereunder and all other payments to Noteholders required
hereunder (the "Subordinated Indebtedness") shall, to the extent and in the
manner hereinafter set forth, be subordinated and subject in right of payment to
the prior payment in full of all Senior Indebtedness, whether outstanding at the
date of this Indenture or thereafter incurred.
No provision of this Article IV shall prevent the occurrence of any default
or Event of Default hereunder.
Section 4.2 PAYMENTS TO NOTEHOLDERS. No payment shall be made with
respect to Subordinated Indebtedness, except payments made pursuant to Article
XIII from monies deposited with the Trustee pursuant thereto prior to the
happening of the events specified in either of the following clauses (i) or
(ii), if:
(i) a default in the payment of principal of or, premium, if any,
interest or other payment due on any Senior Indebtedness occurs and is
continuing (or, in the case of Senior Indebtedness for which there is a
period of grace, in the event of such a default that continues beyond the
period of grace, if any, specified in the instrument evidencing such Senior
Indebtedness), unless and until such default shall have been cured or
waived or shall have ceased to exist; or
(ii) a default, other than a payment default, on any Designated Senior
Indebtedness occurs and is continuing that then permits holders of such
Designated Senior Indebtedness to accelerate its maturity and the Trustee
and the Company receive a notice of the default (a "Payment Blockage
Notice") under the Line of Credit or from a holder (or a trustee on
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behalf of such holder) of at least $5,000,000 in outstanding principal
amount of such Designated Senior Indebtedness.
If the Trustee and the Company receive any Payment Blockage Notice
pursuant to clause (ii) above, no subsequent Payment Blockage Notice shall be
effective for purposes of this Section unless (A) at least 365 days shall have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice, and (B) either (x) all scheduled payments of the principal of and
premium, if any, and interest on the Notes that have come due have been paid in
full in cash or (y) the Trustee or the Noteholders shall not have instituted
proceedings to enforce the Noteholders' right to receive such payments. No
nonpayment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee and the Company shall be, or be made, the
basis for a subsequent Payment Blockage Notice. If the Trustee and the Company
receive a Payment Blockage Notice pursuant to clause (ii) above that is
ineffective pursuant to this paragraph, the Trustee shall continue to make
payments pursuant to this Indenture.
The Company may and shall resume payments on and distributions in
respect of the Notes upon the earlier of:
(1) the date upon which the default referred to in clause (i) or (ii)
above, as applicable, is cured or waived, or
(2) in the case of a default referred to in clause (ii) above, 179
days pass after the Payment Blockage Notice is received unless the maturity of
such Designated Senior Indebtedness has been accelerated,
unless this Article IV otherwise prohibits the payment or distribution at the
time of such payment or distribution.
Upon any payment by the Company, or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding-up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due upon all Senior Indebtedness shall first be paid in full, or payment
thereof provided for in money in accordance with its terms, before any payment
is made on account of Subordinated Indebtedness (except payments made pursuant
to Article XIII from monies deposited with the Trustee pursuant thereto prior to
the happening of such dissolution, winding-up, liquidation or reorganization or
bankruptcy, insolvency, receivership or other such proceedings); and upon any
such dissolution or winding-up or liquidation or reorganization or bankruptcy,
insolvency, receivership or other such proceedings, any payment by the Company,
or distribution of assets of the Company of any kind or character, whether in
cash,
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property or securities, to which the holders of the Notes or the Trustee under
this Indenture would be entitled, except for the provision of this Article IV,
shall (except as aforesaid) be paid by the Company or by any receiver, trustee
in bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, or by the holders of the Notes or by the Trustee under this
Indenture if received by them or it, directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders, or as otherwise required by law or a
court order) or their respective representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all Senior Indebtedness in
full after giving effect to any concurrent payment or distribution to or for the
holders of Senior Indebtedness, before any payment or distribution is made to
the holders of the Notes or to the Trustee under this Indenture. The holders of
Designated Senior Indebtedness shall have the right to file proofs of claim on
behalf of the holders of the Notes.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (including, without limitation, by way of setoff or
otherwise), prohibited by the foregoing, shall be received by the Trustee under
this Indenture or by any holders of the Notes before all Senior Indebtedness is
paid in full, or provision is made for such payment in accordance with its
terms, such payment or distribution shall be held by the recipient or recipients
in trust for the benefit of, and shall be paid over or delivered to, the holders
of Senior Indebtedness or their respective representative or representatives, or
to the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by the Company, for application to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in accordance with its terms, after giving
effect to any concurrent payment or distribution (or provision therefor) to or
for the holders of such Senior Indebtedness.
For purposes of this Article IV, the words "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment, the payment of which is
subordinated (at least to the extent provided in this Article IV with respect to
the Notes) to the payment of all Senior Indebtedness which may at the time be
outstanding and no principal amount of which is payable prior to the maturity of
the Line of Credit; PROVIDED that (i) the Senior
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Indebtedness is assumed by the new corporation, if any, resulting from such
reorganization or adjustment, and (ii) the rights of the holders of Senior
Indebtedness (other than leases which are not assumed by the Company or by the
new corporation, as the case may be) are not, without the consent of such
holders, altered by such reorganization or readjustment. The consolidation of
the Company with, or the merger of the Company into, another corporation or the
liquidation or dissolution of the Company following the conveyance or transfer
of its property as an entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided for in Article XII shall not
be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section 4.2 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions stated
in Article XII. Nothing in this Section 4.2 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 8.6. This Section 4.2
shall be subject to the further provisions of Section 4.5.
Section 4.3 SUBROGATION OF NOTES. Subject to the payment in full of all
Senior Indebtedness, the rights of the holders of the Notes shall be subrogated
to the extent of the payments or distributions made to the holders of such
Senior Indebtedness pursuant to the provisions of this Article IV (equally and
ratably with the holders of all indebtedness of the Company which by its express
terms is subordinated to other indebtedness of the Company to substantially the
same extent as the Notes are subordinated and is entitled to like rights of
subrogation) to the rights of the holders of Senior Indebtedness to receive
payments or distributions of cash, property or securities of the Company
applicable to the Senior Indebtedness until the principal of (and premium, if
any) and interest on the Notes shall be paid in full; and, for the purposes of
such subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the holders of the
Notes or the Trustee would be entitled except for the provisions of this Article
IV, and no payment over pursuant to the provisions of this Article IV, to or for
the benefit of the holders of Senior Indebtedness by holders of the Notes or the
Trustee, shall, as between the Company, its creditors other than holders of
Senior Indebtedness, and the holders of the Notes, be deemed to be a payment by
the Company to or on account of the Senior Indebtedness; and no payments or
distributions of cash, property or securities to or for the benefit of the
holders of the Notes pursuant to the subrogation provisions of this Article IV,
which would otherwise have been paid to the holders of Senior Indebtedness shall
be deemed to be a payment by the Company to or for the account of the Notes. It
is understood that the provisions of this Article IV are and are intended solely
for the purposes of defining the relative rights of the holders of the Notes, on
the one hand, and the holders of the Senior Indebtedness, on the other hand.
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Nothing contained in this Article IV or elsewhere in this Indenture or in
the Notes is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
holders of the Notes the principal of (and premium, if any) and interest on the
Notes as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the holders of
the Notes and creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Trustee or the
holder of any Note from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article IV of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
Upon any payment or distribution of assets of the Company referred to in
this Article IV, the Trustee, subject to the provisions of Section 8.1, and the
holders of the Notes shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such bankruptcy, dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distribution, delivered to the Trustee or
to the holders of the Notes, for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article IV.
Section 4.4 AUTHORIZATION BY NOTEHOLDERS. Each holder of a Note by his
acceptance thereof authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article IV and appoints the Trustee his attorney-in-fact for
any and all such purposes.
Section 4.5 NOTICE TO TRUSTEE. The Company shall give prompt written
notice in the form of an Officers' Certificate to a Responsible Officer of the
Trustee and to any paying agent of any fact known to the Company which would
prohibit the making of any payment of monies to or by the Trustee or any paying
agent in respect of the Notes pursuant to the provisions of this Article IV.
Notwithstanding the provisions of this Article IV or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any Senior Indebtedness (including
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Designated Senior Indebtedness) or of any default or event of default with
respect to any Senior Indebtedness (including Designated Senior Indebtedness) or
of any other facts which would prohibit the making of any payment of monies to
or by the Trustee in respect of the Notes pursuant to the provisions of this
Article IV, unless and until a Responsible Officer of the Trustee shall have
received written notice thereof at the Corporate Trust Office of the Trustee
from the Company (in the form of an Officers' Certificate) or from a holder or
holders of Senior Indebtedness or Designated Senior Indebtedness or from any
trustee thereof who shall have been certified by the Company or otherwise
established to the reasonable satisfaction of the Trustee to be such holder or
trustee; and before the receipt of any such written notice, the Trustee, subject
to the provisions of Section 8.1, shall be entitled in all respects to assume
that no such facts exist; PROVIDED that if on a date at least two (2) Business
Days prior to the date upon which by the terms hereof any such monies may become
payable for any purpose (including, without limitation, the payment of the
principal of, or premium, if any, or interest on any Note), the Trustee shall
not have received with respect to such monies the notice provided for in this
Section 4.5, then, anything herein contained to the contrary notwithstanding,
the Trustee shall have full power and authority to receive such monies and to
apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such prior date.
Notwithstanding anything to the contrary hereinbefore set forth, nothing
shall prevent any payment by the Trustee to the Noteholders of monies deposited
with it pursuant to Section 13.1.
The Trustee, subject to the provisions of Section 8.1, shall be entitled to
rely on the delivery to it of a written notice by a person representing himself
to be a holder of Senior Indebtedness or Designated Senior Indebtedness (or a
trustee on behalf of such holder) to establish that such notice has been given
by a holder of Senior Indebtedness or Designated Senior Indebtedness or a
trustee on behalf of any such holder or holders. In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any person as a holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this Article IV, the Trustee may request
such person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness held by such person, the extent to which
such person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such person under this Article IV, and if
such evidence is not furnished the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any person as a holder of
Designated Senior Indebtedness to deliver a Payment Blockage Notice pursuant to
this Article IV, the Trustee
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may request such person to furnish evidence to the reasonable satisfaction of
the Trustee as to the amount of Designated Senior Indebtedness held by such
person and any other facts pertinent to determining the right of such person to
deliver a Payment Blockage Notice, and if such evidence is not furnished the
Trustee may defer taking action with respect to a Payment Blockage Notice
pending judicial determination as to the right of such person to give such
notice.
Section 4.6 TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS. The Trustee and
any agent of the Company or the Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article IV in respect of any Senior
Indebtedness at any time held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in Section 8.13 or elsewhere in this Indenture
shall deprive the Trustee or any such agent of any of its rights as such holder.
Nothing in this Article IV shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 8.6.
With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article IV, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section 4.2 and Section 8.1, the Trustee shall not be liable to
any holder of Senior Indebtedness if it shall pay over or deliver to holders of
Notes, the Company or any other person money or assets to which any holder of
Senior Indebtedness shall be entitled by virtue of this Article IV or otherwise.
Section 4.7 NO IMPAIRMENT OF SUBORDINATION. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Section 4.8 CERTAIN CONVERSIONS DEEMED PAYMENT. For the purposes of
this Article only, (1) the issuance and delivery of junior securities upon
conversion of Notes in accordance with Article XV shall not be deemed to
constitute a payment or distribution on account of the principal of (or premium,
if any) or interest on Notes or on account of the purchase or other acquisition
of Notes, and (2) the payment, issuance or delivery of
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cash, property or securities (other than junior securities) upon conversion of a
Note shall be deemed to constitute payment on account of the principal of such
Note. For the purposes of this Section, the term "junior securities" means (a)
shares of any stock of any class of the Company and (b) securities of the
Company which are subordinated in right of payment to all Senior Indebtedness
which may be outstanding at the time of issuance or delivery of such securities
to substantially the same extent as, or to a greater extent than, the Notes are
so subordinated as provided in this Article and the weighted average maturity of
which is no earlier than the maturity of the Notes. Nothing contained in this
Article or elsewhere in this Indenture or in the Notes is intended to or shall
impair, as among the Company, its creditors other than holders of Senior
Indebtedness and the holders of the Notes, the right, which is absolute and
unconditional, of the holder of any Note to convert such Note in accordance with
Article XV.
ARTICLE V
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any, Additional Amounts, if any, and interest
on each of the Notes at the places, at the respective times and in the manner
provided herein and in the Notes. Each installment of interest on the Notes due
on any semi-annual Interest Payment Date may be paid by mailing checks for the
interest payable to or upon the written order of the holders of Notes entitled
thereto as they shall appear on the registry books of the Company; PROVIDED
that, with respect to any holder of Notes with an aggregate principal amount
equal to or in excess of $5,000,000, at the request of such holder in writing to
the Company, interest on such holder's Notes shall be paid by wire transfer in
immediately available funds in accordance with the wire transfer instructions
supplied by such holder to the Trustee and paying agent (if different from
Trustee). The Company will cause the bank through which any payment on the
Notes is made to deliver to the Paying Agent by 10:00 a.m. New York time, two
business days prior to the due date for such payment irrevocable confirmation
(by tested telex or authenticated Swift MT 100 Message) of its intention to make
such payment.
Section 5.2 MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain
in The City of New York, an office or agency where the Notes may be surrendered
for registration of transfer or exchange or for presentation for payment or for
conversion, redemption or repurchase and where notices and demands to or upon
the Company in respect of the Notes and this Indenture may be served. The
Company will give prompt written notice to the Trustee
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of the location, and any change in the location, of such office or agency not
designated or appointed by the Trustee. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee or
the office of the Trustee in The City of New York.
For as long as any Bearer Notes remain outstanding or until monies for the
payment of all principal of, premium, if any, and interest on (and Additional
Amounts with respect to) all outstanding Bearer Notes shall have been made
available at the office of the Paying Agent and shall have been returned to the
Company as provided in Section 13.4 hereof, the Company will maintain in at
least one city in Western Europe, which shall be Luxembourg so long as the Notes
are listed on the Luxembourg Stock Exchange, an office or agency where Bearer
Notes may be surrendered for payment or conversion pursuant to Section 2.6
hereof and where notices and demands to or upon the Company in respect of the
Bearer Notes or of this Indenture may be served.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; PROVIDED that no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York, for such
purposes. 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.
So long as there shall be Notes outstanding or until monies for the payment
of all principal of, premium, if any, and interest on (and Additional Amounts
with respect to) all outstanding Notes shall have been made available at the
office of the Paying Agent and shall have been returned to the Company as
provided in Section 13.4 hereof, the Company shall maintain a Note Registrar and
additional transfer agencies (each, a "Transfer Agent" and, collectively, the
"Transfer Agents") (i) where Registered Notes may be surrendered for
registration of transfer or for exchange for Registered Notes in The City of New
York and (ii) in at least one city in Western Europe, which shall be Luxembourg
so long as the Notes are listed on the Luxembourg Stock Exchange, where
Registered Notes may be surrendered for purposes of such transfer or exchange,
and where Bearer Notes may be delivered in exchange for Bearer Notes or for
Registered Notes. Consistent with applicable laws and regulations, including
the provisions of the federal income tax laws of the United States, such
agencies may be the same agencies as or different agencies from those maintained
by the Company pursuant to Section 4.2(a). The Company hereby appoints the
London Office of The Chase Manhattan Bank, N.A. and Chase Manhattan Bank
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Luxembourg S.A., 5 Rue Plaetis, L-2338 Luxembourg, as Transfer Agents for such
transfers and exchanges. The registration of transfer or exchange of Registered
Notes shall only be made by the Trustee in The City of New York.
The Company will give to the Trustee written notice of the locations of
such offices or agencies and of any change in the locations thereof. If at any
time the Company shall fail to maintain any such offices or agencies or shall
fail to give such notice of the location or of any change in the locations
thereof, presentations, surrenders, notices and demands in respect of Registered
Notes may be made or served at the principal corporate trust office of the
Trustee in The City of New York and in respect of Bearer Notes may be made or
served at the principal office of the Trustee in London, England at which at any
particular time its corporate trust business shall be administered.
So long as the Trustee is the Note Registrar, the Trustee agrees to mail,
or cause to be mailed, the notice set forth in Section 8.10(a).
Section 5.3 APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.4 PROVISIONS AS TO PAYING AGENT.
(a) If the Company shall appoint a paying agent other than the
Trustee or if the Trustee shall appoint such a paying agent, it will cause
such paying agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of
this Section 5.4:
(1) that it will hold all sums held by it as such agent for the
payment of the principal of and premium, if any, Additional Amounts,
if any, or interest on the Notes (whether such sums have been paid to
it by the Company or by any other obligor on the Notes) in trust for
the benefit of the holders of the Notes;
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Notes) to make any payment of
the principal of and premium, if any, Additional Amounts, if any, or
interest on the Notes when the same shall be due and payable; and
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(3) that at any time during the continuance of an Event of
Default, upon request of the Trustee, it will forthwith pay to the
Trustee all sums so held in trust.
The Company shall, on or before each due date of the principal of,
premium, if any, or interest on the Notes, deposit with the paying agent a
sum sufficient to pay such principal, premium, if any, Additional Amounts,
if any, or interest, and (unless such paying agent is the Trustee) the
Company will promptly notify the Trustee of any failure to take such
action, PROVIDED that if such deposit is made on the due date, such deposit
must be received by the paying agent by 10:00 a.m., New York City time, on
such date.
(b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of, premium, if any, Additional
Amounts, if any, or interest on the Notes, set aside, segregate and hold in
trust for the benefit of the holders of the Notes a sum sufficient to pay
such principal, premium, if any, Additional Amounts, if any, or interest so
becoming due and will notify the Trustee of any failure to take such action
and of any failure by the Company (or any other obligor under the Notes) to
make any payment of the principal of, premium, if any, Additional Amounts,
if any, or interest on the Notes when the same shall become due and
payable.
(c) Anything in this Section 5.4 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be
paid to the Trustee all sums held in trust by the Company or any paying
agent hereunder as required by this Section 5.4, such sums to be held by
the Trustee upon the trusts herein contained and upon such payment by the
Company or any paying agent to the Trustee, the Company or such paying
agent shall be released from all further liability with respect to such
sums.
(d) Anything in this Section 5.4 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 5.4 is subject
to Sections 13.3 and 13.4.
Section 5.5 EXISTENCE. Subject to Article XII, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence, rights (charter and statutory) and franchises; PROVIDED,
HOWEVER, that the Company shall not be required to preserve any such right or
franchise if it shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that
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the loss thereof is not disadvantageous in any material respect to the
Noteholders.
Section 5.6 STAY, EXTENSION AND USURY LAWS. The Company covenants (to
the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Company from paying all or any portion of the principal of or
interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Indenture; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, 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 has been enacted.
Section 5.7 COMPLIANCE CERTIFICATE. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on December 31, 1996) an Officers'
Certificate stating whether or not the signers know of any Event of Default that
occurred during such period. If they do, such Officers' Certificate shall
describe the Event of Default and its status.
Section 5.8 FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee,
the Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
Section 5.9 RULE 144A INFORMATION. The Company shall furnish to the
holders or the beneficial holders of the Notes or the underlying Common Stock
and prospective purchasers of Notes or the underlying Common Stock designated by
the holders of Notes or the underlying Common Stock, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act until such time as the Notes are no longer "restricted
securities" within the meaning of Rule 144 under the Securities Act.
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 6.1 NOTEHOLDERS' LISTS. The Company covenants and agrees that
it will furnish or cause to be furnished to the Trustee, semi-annually, not more
than fifteen (15) days after each January 15 and July 15 in each year beginning
with July 15, 1996,
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and at such other times as the Trustee may request in writing, within thirty
(30) days after receipt by the Company of any such request (or such lesser time
as the Trustee may reasonably request in order to enable it to timely provide
any notice to be provided by it hereunder), a list in such form as the Trustee
may reasonably require of the names and addresses of the holders of Registered
Notes as of a date not more than fifteen (15) days (or such other date as the
Trustee may reasonably request in order to so provide any such notices) prior to
the time such information is furnished, except that no such list need be
furnished so long as the Trustee is acting as Note registrar.
Section 6.2 PRESERVATION AND DISCLOSURE OF LISTS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of
Registered Notes contained in the most recent list furnished to it as provided
in Section 6.1 or maintained by the Trustee in its capacity as Note registrar,
if so acting. The Trustee may destroy any list furnished to it as provided in
Section 6.1 upon receipt of a new list so furnished.
(b) The rights of Noteholders to communicate with other holders of
Notes with respect to their rights under this Indenture or under the Notes and
the corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Noteholder, by receiving and holding the same, agrees with
the Company and the Trustee that neither the Company nor the Trustee nor any
agent of either of them shall be held accountable by reason of any disclosure of
information as to names and addresses of holders of Notes made pursuant to the
Trust Indenture Act.
Section 6.3 REPORTS BY TRUSTEE.
(a) Within sixty (60) days after May 15 of each year commencing with
the year 1996, the Trustee shall transmit to holders of Notes such reports dated
as of May 15 of the year in which such reports are made concerning the Trustee
and its actions under this Indenture as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of such report shall, at the time of such transmission to
holders of Notes, be filed by the Trustee with each stock exchange and automated
quotation system upon which the Notes are listed and with the Company. The
Company will notify the Trustee when the Notes are listed on any stock exchange
or automated quotation system and when any such listing is discontinued.
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Section 6.4 REPORTS BY COMPANY. The Company shall file with the Trustee
and the Commission, and transmit to holders of Notes, such information,
documents and other reports and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant to such Act; PROVIDED that any such information, documents or reports
required to be filed with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act shall be filed with the Trustee within fifteen (15) days after the
same is so required to be filed with the Commission.
The Company will deliver to the Trustee (a) as soon as available and in any
event within ninety (90) days after the end of each fiscal year of the Company
(i) a consolidated balance sheet of the Company and its subsidiaries as of the
end of such fiscal year and the related consolidated statements of operations,
stockholders' equity and cash flows for such fiscal year, all reported on by an
independent public accountant of nationally recognized standing and (ii) a
report containing a management's discussion and analysis of the financial
condition and results of operations for such fiscal year and a description of
the business and properties of the Company and (b) as soon as available and in
any event within forty-five (45) days after the end of each of the first three
quarters of each fiscal year of the Company (i) an unaudited consolidated
balance sheet of the Company and its subsidiaries as of the end of such fiscal
quarter and the related unaudited consolidated statements of operations,
stockholders' equity and cash flows for such fiscal quarter and (ii) a report
containing a management's discussion and analysis of the financial condition and
results of operations of the Company for such quarter; PROVIDED that the
foregoing statements and reports shall not be required for any fiscal year or
quarter, as the case may be, with respect to which the Company files with the
Trustee an annual report or quarterly report, as the case may be, pursuant to
the preceding paragraph of this Section 6.4.
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.1 EVENTS OF DEFAULT. In case one or more of the following
Events of Default (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) shall have occurred and be
continuing:
(a) default in the payment of any installment of interest upon any of
the Notes or any Additional Amounts as
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and when the same shall become due and payable, and continuance of such
default for a period of thirty (30) days, whether or not such payment is
prohibited by the provisions of Article IV; or
(b) default in the payment of the principal of and premium, if any,
on any of the Notes as and when the same shall become due and payable
either at maturity or in connection with any redemption, by declaration or
otherwise, whether or not such payment is prohibited by the provisions of
Article IV; or
(c) a default in the payment of the Repurchase Price in respect of
any Note on the repurchase date therefor in accordance with the provisions
of Article XVI, whether or not such payment is prohibited by the provisions
of Article IV; or
(d) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the
Notes or in this Indenture (other than a covenant or agreement a default in
whose performance or whose breach is elsewhere in this Section specifically
dealt with) (a "Covenant Default") continued for a period of forty-five
(45) days after the date on which written notice of such failure, requiring
the Company to remedy the same, shall have been given to the Company by the
Trustee, or to the Company and a Responsible Officer of the Trustee by the
holders of at least 25% in aggregate principal amount of the Notes at the
time outstanding determined in accordance with Section 9.4, PROVIDED that
such forty-five (45) day period may be extended for an additional
forty-five (45) days if the Company is disputing the existence of such
Covenant Default in good faith and has provided to the Trustee prior to the
expiration of the initial forty-five (45) day period an Officers'
Certificate to such effect setting forth in reasonable detail the basis on
which the Company is disputing the existence of such Covenant Default; or
(e) default under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Company under any mortgage,
indenture or instrument under which there may be issued or by which there
may be secured or evidenced any indebtedness for money borrowed by the
Company, whether such indebtedness now exists or shall hereafter be
created, which default (i) constitutes a failure to pay at a final maturity
an aggregate principal amount of such indebtedness exceeding $5,000,000 or
(ii) shall have resulted in an aggregate principal amount of such
indebtedness exceeding $5,000,000 becoming or being declared due and
payable prior to the date on which it would otherwise have become due and
payable, without such indebtedness having been discharged, or
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such acceleration having been rescinded or annulled, within a period of
thirty (30) days after there shall have been given, by registered or
certified mail, to the Company by the Trustee, or to the Company and the
Trustee by the holders of at least 25% in aggregate principal amount of the
Notes at the time outstanding determined in accordance with Section 9.4, a
written notice specifying such default and requiring the Company to cause
such indebtedness to be discharged, or such acceleration to be rescinded or
annulled and stating that such notice is a "Notice of Default" hereunder;
PROVIDED, HOWEVER, that if, prior to the entry of judgment in favor of the
Trustee, such acceleration, if any shall be rescinded or annulled, or such
default under such indenture or instrument shall be remedied or cured by
the Company or waived by the holders of such indebtedness, or if any
amounts due and payable as a result of maturity or such acceleration are
paid in full, then the Event of Default hereunder by reason thereof shall
be deemed likewise to have been thereupon remedied, cured or waived without
further action upon the part of either the Trustee or any of the
Noteholders; PROVIDED FURTHER that, subject to the provisions of Sections
8.1 and 8.2, the Trustee shall not be deemed to have knowledge of such
default unless either (A) a Responsible Officer of the Trustee shall have
actual knowledge of such default or (B) the Trustee shall have received
written notice thereof from the Company, from any Noteholder, from the
holder of any such indebtedness or from the trustee under any such
mortgage, indenture or other instrument; or
(f) the Company or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due; or
(g) an involuntary case or other proceeding shall be commenced
against the Company or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall
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remain undismissed and unstayed for a period of ninety (90) consecutive
days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(f) or (g) with respect to the Company), unless the principal of
all of the Notes shall have already become due and payable, either the Trustee
or the holders of not less than 25% in aggregate principal amount of the Notes
then outstanding hereunder determined in accordance with Section 9.4, by notice
in writing to the Company (and to the Trustee if given by Noteholders), may
declare the principal of and premium, if any, on all the Notes and the interest
accrued thereon to be due and payable immediately, and upon any such declaration
the same shall become and shall be immediately due and payable, anything in this
Indenture or in the Notes contained to the contrary notwithstanding. If an
Event of Default specified in Section 7.1(f) or (g) with respect to the Company
occurs and is continuing, the principal of, and premium, if any, on all the
Notes and the interest accrued thereon shall be immediately due and payable.
This provision, however, is subject to the conditions that if, at any time after
the principal of the Notes shall have been so declared due and payable, and
before any judgment or decree for the payment of the monies due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured installments of
interest upon all Notes and any Additional Amounts and the principal of and
premium, if any, on any and all Notes which shall have become due otherwise than
by acceleration (with interest on overdue installments of interest and
Additional Amounts (to the extent that payment of such interest is enforceable
under applicable law) and on such principal and premium, if any, at the rate
borne by the Notes, to the date of such payment or deposit) and amounts due to
the Trustee pursuant to Section 8.6, and if any and all defaults under this
Indenture, other than the nonpayment of principal of and premium, if any,
Additional Amounts, if any, and accrued interest on Notes which shall have
become due by acceleration, shall have been cured or waived pursuant to Section
7.7, then and in every such case the holders of a majority in aggregate
principal amount of the Notes then outstanding, by written notice to the Company
and to the Trustee, may waive all defaults or Events of Default and rescind and
annul such declaration and its consequences; but no such waiver or rescission
and annulment shall extend to or shall affect any subsequent default or Event of
Default, or shall impair any right consequent thereon. The Company shall notify
in writing a Responsible Officer of the Trustee, promptly upon becoming aware
thereof, of any Event of Default and the Trustee will not be deemed to have
knowledge of such Event of Default prior to receipt of notice.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been
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discontinued or abandoned because of such waiver or rescission and annulment or
for any other reason or shall have been determined adversely to the Trustee,
then and in every such case the Company, the holders of Notes, and the Trustee
shall be restored respectively to their several positions and rights hereunder,
and all rights, remedies and powers of the Company, the holders of Notes, and
the Trustee shall continue as though no such proceeding had been instituted.
Section 7.2 PAYMENTS OF NOTES ON DEFAULT; SUIT THEREFOR. The Company
covenants that (a) in case default shall be made in the payment by the Company
of any installment of interest upon any of the Notes as and when the same shall
become due and payable, and such default shall have continued for a period of
thirty (30) days, or (b) in case default shall be made in the payment of the
principal of or premium, if any, or Additional Amounts, if any, on any of the
Notes as and when the same shall have become due and payable, whether at
maturity of the Notes or in connection with any redemption or repurchase, by
declaration under this Indenture or otherwise, then, upon demand of the Trustee,
the Company will pay to the Trustee, for the benefit of the holders of the
Notes, the whole amount that then shall have become due and payable on all such
Notes for principal and premium, if any, or Additional Amounts, if any, or
interest, or both, as the case may be, with interest upon the overdue principal
and premium, if any, and (to the extent that payment of such interest is
enforceable under applicable law) upon the 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
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
any expenses or liabilities incurred by the Trustee hereunder other than through
its negligence or bad faith. Until such demand by the Trustee, the Company may
pay the principal of and premium, if any, Additional Amounts, if any, and
interest on the Notes to the holders, whether or not the Notes are overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
In the case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Notes under Title
11 of the United States Code, or
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any other applicable law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official shall
have been appointed for or taken possession of the Company or such other
obligor, the property of the Company or such other obliger, or in the case of
any other judicial proceedings relative to the Company or such other obligor
upon the Notes, or to the creditors or property of the Company or such other
obligor, 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 any demand pursuant to the
provisions of this Section 7.2, shall be entitled and empowered, by intervention
in such proceedings or otherwise, to file and prove a claim or claims for the
whole amount of principal, premium, if any, and interest owing and unpaid in
respect of the Notes, and, in case of any judicial proceedings, to file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and of the Noteholders allowed in
such judicial proceedings relative to the Company or any other obligor on the
Notes, its or their creditors, or its or their property, and to collect and
receive any monies or other property payable or deliverable on any such claims,
and to distribute the same after the deduction of any amounts due the Trustee
under Section 8.6; and any receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, custodian or similar official is hereby authorized
by each of the Noteholders 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 Noteholders, to pay to the Trustee any amount due it for reasonable
compensation, expenses, advances and disbursements, including counsel fees
incurred by it up to the date of such distribution. To the extent that such
payment of reasonable compensation, expenses, advances and disbursements out of
the estate in any such proceedings shall be denied for any reason, payment of
the same shall be secured by a lien on, and shall be paid out of, any and all
distributions, dividends, monies, securities and other property which the
holders of the Notes may be entitled to receive in such proceedings, whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
All rights of action and of asserting claims under this Indenture, or under
any of the Notes, may be enforced by the Trustee without the possession of any
of the Notes, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or 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.
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In any proceedings brought by the Trustee (and in any proceedings involving
the interpretation of any provision of this Indenture to which the Trustee shall
be a party) the Trustee shall be held to represent all the holders of the Notes,
and it shall not be necessary to make any holders of the Notes parties to any
such proceedings.
Section 7.3 APPLICATION OF MONIES COLLECTED BY TRUSTEE. Any monies
collected by the Trustee pursuant to this Article VII shall be applied in the
order following, at the date or dates fixed by the Trustee for the distribution
of such monies, upon presentation of the several Notes, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
First: To the payment of all amounts due the Trustee and its agents
under Section 8.6;
Second: Subject to the provisions of Article IV, in case the
principal of the outstanding Notes shall not have become due and be unpaid,
to the payment of interest on the Notes in default in the order of the
maturity of the installments of such interest, with interest (to the extent
that such interest has been collected by the Trustee) upon the overdue
installments of interest at the rate borne by the Notes, such payments to
be made ratably to the persons entitled thereto;
Third: Subject to the provisions of Article IV, in case the principal
of the outstanding Notes shall have become due, by declaration or
otherwise, and be unpaid, to the payment of the whole amount then owing and
unpaid upon the Notes for principal and premium, if any, Additional
Amounts, if any, and interest, with interest on the overdue principal and
premium, if any, and (to the extent that such interest has been collected
by the Trustee) upon overdue installments of interest at the rate borne by
the Notes; and in case such monies shall be insufficient to pay in full the
whole amounts so due and unpaid upon the Notes, then to the payment of such
principal and premium, if any, Additional Amounts, if any, and interest
without preference or priority of principal and premium, if any, over
interest or Additional Amounts, or of interest or Additional Amounts over
principal and premium, if any, or of any installment of interest over any
other installment of interest, or of any Note over any other Note, ratably
to the aggregate of such principal and premium, if any, and accrued and
unpaid interest; and
Fourth: Subject to the provisions of Article IV, to the payment of
the remainder, if any, to the Company or any other person lawfully entitled
thereto.
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Section 7.4 PROCEEDINGS BY NOTEHOLDER. No holder of any Note shall have
any right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture, or for the appointment of a receiver, trustee,
liquidator, custodian or other similar official, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding shall have made written request
upon the Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for sixty (60) days after its
receipt of such notice, request and offer of indemnity, shall have neglected or
refused to institute any such action, suit or proceeding and no direction
inconsistent with such written request shall have been given to the Trustee
pursuant to Section 7.7; it being understood and intended, and being expressly
covenanted by the taker and holder of every Note with every other taker and
holder and the Trustee, that no one or more holders of Notes 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 holder of
Notes, or to obtain or seek to obtain priority over or preference to any other
such holder, or to enforce any right under this Indenture, except in the manner
herein provided and for the equal, ratable and common benefit of all holders of
Notes (except as otherwise provided herein). For the protection and enforcement
of this Section 7.4, each and every Noteholder and the Trustee shall be entitled
to such relief as can be given either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision of
any Note, the right of any holder of any Note to receive payment of the
principal of and premium, if any, Additional Amounts, if any, and interest on
such Note, on or after the respective due dates expressed in such Note, or to
institute suit for the enforcement of any such payment on or after such
respective dates against the Company shall not be impaired or affected without
the consent of such holder.
Anything in this Indenture or the Notes to the contrary notwithstanding,
the holder of any Note, without the consent of either the Trustee or the holder
of any other Note, on his own behalf and for his own benefit, may enforce, and
may institute and maintain any proceeding suitable to enforce, his rights of
conversion as provided herein.
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Section 7.5 PROCEEDINGS BY TRUSTEE. In case of an Event of Default the
Trustee may in its discretion proceed to protect and enforce the rights vested
in it by this Indenture by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any of such rights, either by
suit in equity or by action at law or by proceeding in bankruptcy or otherwise,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or in aid of the exercise of any power granted in this Indenture,
or to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.
Section 7.6 REMEDIES CUMULATIVE AND CONTINUING. Except as provided in
Section 2.6, all powers and remedies given by this Article VII to the Trustee or
to the Noteholders shall, to the extent permitted by law, be deemed cumulative
and not exclusive of any thereof or of any other powers and remedies available
to the Trustee or the holders of the Notes, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture, and no delay or omission of the Trustee
or of any holder of any of the Notes to exercise any right or power accruing
upon any default or Event of Default occurring and continuing as aforesaid shall
impair any such right or power, or shall be construed to be a waiver of any such
default or any acquiescence therein; and, subject to the provisions of Section
7.4, every power and remedy given by this Article VII or by law to the Trustee
or to the Noteholders may be exercised from time to time, and as often as shall
be deemed expedient, by the Trustee or by the Noteholders.
Section 7.7 DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY MAJORITY
OF NOTEHOLDERS. The holders of a majority in aggregate principal amount of the
Notes at the time outstanding determined in accordance with Section 9.4 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; PROVIDED, HOWEVER, that (a) such direction shall
not be in conflict with any rule of law or with this Indenture nor result in any
liability for the Trustee, and (b) the Trustee may, but shall have no obligation
to, take any other action deemed proper by the Trustee which is not inconsistent
with such direction. The holders of a majority in aggregate principal amount of
the Notes at the time outstanding determined in accordance with Section 9.4 may
on behalf of the holders of all of the Notes waive any past default or Event of
Default hereunder and its consequences except (i) a default in the payment of
interest or premium, if any, on, or the principal of, the Notes, (ii) a failure
by the Company to convert any Notes into Common Stock or (iii) a default in
respect of a covenant or provisions hereof which under Article XI cannot be
modified or amended without the consent of the holders of all Notes then
outstanding. Upon any such waiver the Company, the
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Trustee and the holders of the Notes shall be restored to their former positions
and rights hereunder; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon. Whenever
any default or Event of Default hereunder shall have been waived as permitted by
this Section 7.7, said default or Event of Default shall for all purposes of the
Notes and this Indenture be deemed to have been cured and to be not continuing;
but no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.
Section 7.8 NOTICE OF DEFAULTS. The Trustee shall, within ninety (90)
days after the occurrence of a default, give to Noteholders the notice provided
in Section 17.3 of all defaults known to a Responsible Officer, unless such
defaults shall have been cured or waived before the giving of such notice; and
PROVIDED that, except in the case of default in the payment of the principal of,
or premium, if any, or interest on any of the Notes, the Trustee shall be
protected in withholding such notice if and so long as 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 best interest of the Noteholders.
Section 7.9 UNDERTAKING TO PAY 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; PROVIDED that the provisions of this Section 7.9 shall not apply to
any suit instituted by the Trustee, to any suit instituted by any Noteholder, or
group of Noteholders, holding in the aggregate more than 10% in principal amount
of the Notes at the time outstanding determined in accordance with Section 9.4,
or to any suit instituted by any Noteholder for the enforcement of the payment
of the principal of or premium, if any, Additional Amounts, if any, or interest
on any Note on or after the due date expressed in such Note or to any suit for
the enforcement of the right to convert any Note in accordance with the
provisions of Article XV.
Section 7.10 DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any holder of any Note 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 any acquiescence therein. Every right
and remedy given by this Article or by law to the Trustee or to the holders of
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Notes may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the holders of Notes, as the case may be.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.1 DUTIES AND RESPONSIBILITIES OF TRUSTEE. The Trustee, prior
to the occurrence of an Event of Default and after the curing of all Events of
Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. In case an Event of
Default has occurred (which has not been cured or waived) the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
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
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture and the
Trust Indenture Act, and the Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Indenture and no implied covenants or obligations shall
be read into this Indenture and the Trust Indenture Act against the
Trustee; and
(2) in the absence of bad faith and willful misconduct on the
part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
therein, upon any 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 provisions 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) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or
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Officers of the Trustee, unless it shall be provided that the Trustee was
negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable to any Noteholder 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 not less than a majority in principal
amount of the Notes at the time outstanding determined as provided in
Section 9.4 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; and
(d) whether or not therein 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.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Section 8.2 RELIANCE ON DOCUMENTS, OPINIONS, ETC. Except as otherwise
provided in Section 8.1:
(a) the Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, note, coupon or other paper or document
believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless
other evidence in respect thereof be herein specifically prescribed); and
any resolution of the Board of Directors may be evidenced to the Trustee by
a copy thereof certified by the Secretary or an Assistant Secretary of the
Company;
(c) the Trustee may consult with counsel and any advice or Opinion of
Counsel shall be full and complete authorization and protection in respect
of any action taken or omitted by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;
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(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Noteholders pursuant to the provisions of this
Indenture, unless such Noteholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture 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; PROVIDED, HOWEVER, that if the payment within a reasonable time
to the Trustee of the costs, expenses or liabilities likely to be incurred
by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to
it by the terms of this Indenture, the Trustee may require reasonable
indemnity from the Noteholders against such expenses or liability as a
condition to so proceeding; the reasonable expenses of every such
examination shall be paid by the Company or, if paid by the Trustee or any
predecessor Trustee, shall be repaid by the Company upon demand; and
(f) 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 by it with due
care hereunder.
Section 8.3 NO RESPONSIBILITY FOR RECITALS, ETC. The recitals contained
herein and in the Notes (except in the Trustee's certificate of authentication)
shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. 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 any Notes or the proceeds of any Notes authenticated and delivered by
the Trustee in conformity with the provisions of this Indenture.
Section 8.4 TRUSTEE, PAYING AGENTS, CONVERSION AGENTS OR REGISTRAR MAY
OWN NOTES. The Trustee, any paying agent, any conversion agent or Note
registrar, in its individual or any other capacity, may become the owner or
pledgee of Notes with the same
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rights it would have if it were not Trustee, paying agent, conversion agent or
Note registrar.
Section 8.5 MONIES TO BE HELD IN TRUST. Subject to the provisions of
Section 13.4, all monies received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received.
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 may be
agreed from time to time by the Company and the Trustee.
Section 8.6 COMPENSATION AND EXPENSES OF TRUSTEE; INDEMNIFICATION. The
Company covenants and agrees to pay to the Trustee from time to time, and the
Trustee shall be entitled to, reasonable compensation for all services rendered
by it hereunder in any capacity (which shall not be limited by any provision of
law in regard to the compensation of a trustee of an express trust), and the
Company will pay or reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances reasonably incurred or made by the Trustee
in accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or willful misconduct.
The Company agrees to indemnify the Trustee and each of its officers,
directors, attorneys-in-fact and agents for, and hold it harmless against, any
claim, demand, expense (including but not limited to reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel), loss or
liability incurred by it without negligence or willful misconduct on its part,
arising out of or in connection with the administration of this trust and its
right or duties hereunder including the reasonable costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The Trustee shall
notify the Company promptly of any claim asserted against the Trustee for which
it may seek indemnity. The Company shall defend the claim and the Trustee shall
provide reasonable cooperation at the Company's expense in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel; provided, that the Company will not be required to
pay such fees and expenses if it assumes the Trustee's defense and in the
Trustee's sole reasonable determination there is no conflict of interest between
the Company and the Trustee in connection with such defense. The Company need
not pay for any settlement made without its written consent, which consent shall
not be unreasonably withheld. The Company need not reimburse any expense
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or indemnify against any loss or liability to the extent incurred by the Trustee
through its negligence, or willful misconduct. To secure the Company's payment
obligations in this Section 8.6, the Trustee shall have a lien prior to the
Notes on all assets held or collected by the Trustee, in its capacity as
Trustee, except assets held in trust prior to any Event of Default to pay
principal and premium, if any, of or interest on, or Additional Amounts with
respect to, particular Notes. Without limiting any of the rights available to
the Trustee under applicable law, when the Trustee incurs expenses or renders
services after an Event of Default specified in Section 7.1(f) or (g) hereof
occurs, the expenses and the compensation for the services are intended to
constitute expenses of administration under any bankruptcy law.
The Company's obligations under this Section 8.6 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the discharge
of the Company's obligations pursuant to Article XIII of this Indenture and any
rejection or termination of this Indenture under any bankruptcy law.
Section 8.7 OFFICERS' CERTIFICATE AS EVIDENCE. Except as otherwise
provided in Section 8.1, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence and willful misconduct on the part
of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such Officers' Certificate,
in the absence of negligence and willful misconduct on the part of the Trustee,
shall be full warrant to the Trustee for any action taken or omitted by it under
the provisions of this Indenture upon the faith thereof.
Section 8.8 CONFLICTING INTERESTS OF TRUSTEE. If the Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Indenture.
Section 8.9 ELIGIBILITY OF TRUSTEE. There shall at all times be a
Trustee hereunder which shall be a person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of at least
$50,000,000. If such person publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease
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to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
Section 8.10 RESIGNATION OR REMOVAL OF TRUSTEE.
(a) The Trustee may at any time resign by giving written notice of
such resignation to the Company and by giving notice thereof to the holders
of Notes as provided in Section 17.3. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor trustee by
written instrument, in duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If no successor trustee
shall have been so appointed and have accepted appointment sixty (60) days
after the mailing of such notice of resignation to the Noteholders, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee, or any Noteholder who has been a bona
fide holder of a Note or Notes for at least six months may, subject to the
provisions of Section 7.9, on behalf of himself and all others similarly
situated, petition any such court for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may
deem proper and prescribe, appoint a successor trustee.
(b) The Company may remove the Trustee and appoint a successor
trustee in accordance with and by complying with the procedures and
requirements set forth in this Section 8.10(b). In order to exercise its
right to remove the Trustee in accordance with this Section 8.10(b), the
Company shall deliver to the Trustee and shall give notice as provided in
Section 17.3 of the proposed removal and appointment of a successor trustee
(the "Removal Notice"). The Removal Notice shall (i) state that the
Company proposes to remove the existing Trustee in accordance with Section
8.10(b) of the Indenture, (ii) set forth the name of the proposed successor
trustee, (iii) include a certification by the Company that no default or
Event of Default has occurred and is continuing under the Indenture, (iv)
state that the proposed successor trustee shall succeed to the Trustee as
trustee under the Indenture on the thirty-fifth (35th) day (or, if such day
is not a Business Day, the next succeeding Business Day) unless holders of
not less that 20% in aggregate principal amount of the Notes then
outstanding object in writing to the removal of the existing Trustee to the
Company or the Trustee within thirty (30) days after the date on which
written notice of such proposed removal and appointment is given to the
holders of all of the Notes, and (v) include a certification by the Company
that, based on information provided by the proposed successor trustee, such
proposed successor trustee is eligible
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to act as Trustee under the Indenture. The appointment of the proposed
successor trustee shall become effective on the thirty-fifth (35th) day
(or, if such day is not a Business Day, the next succeeding Business Day)
after the giving of the notice to holders of Notes as required by the
preceding sentence, by written instrument, in duplicate, executed by order
of the Board of Directors, one copy of which instrument shall be delivered
to the Trustee so removed and one copy to the successor trustee, PROVIDED
that neither such appointment nor such removal shall be effective in the
event that (A) a default or Event of Default under the Indenture has
occurred and is continuing as of such date, (B) written objections shall
have been received by the Company or the Trustee by not less than 20% in
aggregate principal amount of the Notes as contemplated by clause (iv) of
the preceding sentence, or (C) the proposed successor trustee is not then
eligible to act as Trustee under the Indenture.
(c) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8 after
written request therefor by the Company or by any Noteholder who has
been a bona fide holder of a Note or Notes for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.9 and shall fail to resign after written
request therefor by the Company or by any such Noteholder, 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, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of
the Board of Directors, one copy of which instrument shall be delivered to
the Trustee so removed and one copy to the successor trustee, or, subject
to the provisions of Section 7.9, any Noteholder who has been a bona fide
holder of a Note or Notes for at least six 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. Such court may thereupon, after such notice, if any, as
it may
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deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(d) The holders of a majority in aggregate principal amount of the
Notes at the time outstanding may at any time remove the Trustee and
nominate a successor trustee which shall be deemed appointed as successor
trustee unless within ten (10) days after notice to the Company of such
nomination the Company objects thereto, in which case the Trustee so
removed or any Noteholder, upon the terms and conditions and otherwise as
in Section 8.10(a) provided, may petition any court of competent
jurisdiction for an appointment of a successor trustee.
(e) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.10
shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 8.11.
Section 8.11 ACCEPTANCE BY SUCCESSOR TRUSTEE. Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amounts then due it pursuant to the provisions of Section
8.6, execute and deliver an instrument transferring to such successor trustee
all the rights and powers of the trustee so ceasing to act. Upon request of any
such successor trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such successor
trustee all such rights and powers. Any trustee ceasing to act shall,
nevertheless, retain a lien upon all property and funds held or collected by
such trustee as such, except for funds held in trust for the benefit of holders
of particular Notes, to secure any amounts then due it pursuant to the
provisions of Section 8.6.
No successor trustee shall accept appointment as provided in this Section
8.11 unless at the time of such acceptance such successor trustee shall be
qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as provided in this
Section 8.11, the Company shall give notice as provided in Section 17.3 of the
succession of the former trustee
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hereunder to the holders of Notes. If the Company fails to give such notice
within ten (10) days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be given at the expense of the
Company.
Section 8.12 SUCCESSION BY MERGER, ETC. Any corporation or other entity
into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation or other entity 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 to the Trustee hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, PROVIDED that in the case of any corporation or other entity
succeeding to all or substantially all of the trust business of the Trustee such
corporation or other entity shall be qualified under the provisions of Section
8.8 and eligible under the provisions of Section 8.9.
Section 8.13 LIMITATION ON RIGHTS OF TRUSTEE AS CREDITOR. If and when
the Trustee shall be or become a creditor of the Company (or any other obligor
upon the Notes), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Company (or any
such other obligor).
ARTICLE IX
CONCERNING THE NOTEHOLDERS
Section 9.1 ACTION BY NOTEHOLDERS. Whenever in this Indenture it is
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article X, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than fifteen
(15) days prior to the date of commencement of solicitation of such action.
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Section 9.2 PROOF OF EXECUTION BY NOTEHOLDERS. Subject to the
provisions of Sections 8.1, 8.2 and 10.5, proof of the execution of any
instrument by a Noteholder or his agent or proxy shall be sufficient if made in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
holding of Registered Notes shall be proved by the Note register or by a
certificate of the Note registrar. The holding of Bearer Notes shall be proved
by the production of the Bearer Notes or by a certificate executed, as
depositary by, and the appointment of any proxy shall be proved by having the
signature of the person executing the proxy witnessed or guaranteed by, in each
case, any trust company, bank, or banker satisfactory to the Trustee.
The record of any Noteholders' meeting shall be proved in the manner
provided in Section 10.6.
Section 9.3 WHO ARE DEEMED ABSOLUTE OWNERS. The Company, the Trustee,
any paying agent, any conversion agent and any Registered Note registrar may
deem the person in whose name such Note shall be registered upon the Note
register to be, and may treat him as, the absolute owner of such Note (whether
or not such Note shall be overdue and notwithstanding any notation of ownership
or other writing thereon) for the purpose of receiving payment of or on account
of the principal of, premium, if any, and interest on such Note, for conversion
of such Note and for all other purposes; and neither the Company nor the Trustee
nor any paying agent nor any conversion agent nor any Note registrar shall be
affected by any notice to the contrary. All such payments so made to any holder
for the time being, or upon his order, shall be valid, and, to the extent of the
sum or sums so paid, effectual to satisfy and discharge the liability for monies
payable upon any such Note.
Section 9.4 COMPANY-OWNED NOTES DISREGARDED. In determining whether the
holders of the requisite aggregate principal amount of Notes have concurred in
any direction, consent, waiver or other action under this Indenture, Notes which
are owned by the Company or any other obligor on the Notes or by any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any other obligor on the Notes shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; PROVIDED that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, consent, waiver or other
action only Notes which a Responsible Officer knows are so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of this Section 9.4 if the pledgee
shall establish to the satisfaction of the Trustee the pledgee's right to vote
such Notes and that the pledgee is not the Company, any other obligor on the
Notes or a person directly or indirectly controlling or controlled by or under
direct or indirect
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common control with the Company or any such other obligor. In the case of a
dispute as to such right, any decision by the Trustee taken upon the advice of
counsel shall be full protection to the Trustee. Upon request of the Trustee,
the Company shall furnish to the Trustee promptly an Officers' Certificate
listing and identifying all Notes, if any, known by the Company to be owned or
held by or for the account of any of the above described persons; and, subject
to Section 8.1, the Trustee shall be entitled to accept such Officers'
Certificate as conclusive evidence of the facts therein set forth and of the
fact that all Notes not listed therein are outstanding for the purpose of any
such determination.
Section 9.5 REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND. At any time
prior to (but not after) the evidencing to the Trustee, as provided in Section
9.1, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Notes specified in this Indenture in connection with
such action, any holder of a Note which is shown by the evidence to be included
in the Notes the holders of which have consented to such action may, by filing
written notice with the Trustee at its Corporate Trust Office and upon proof of
holding as provided in Section 9.2, revoke such action so far as concerns such
Note. Except as aforesaid, any such action taken by the holder of any Note
shall be conclusive and binding upon such holder and upon all future holders and
owners of such Note and of any Notes issued in exchange or substitution
therefor, irrespective of whether any notation in regard thereto is made upon
such Note or any Note issued in exchange or substitution therefor.
ARTICLE X
NOTEHOLDERS' MEETINGS
Section 10.1 PURPOSE OF MEETINGS. A meeting of Noteholders may be called
at any time and from time to time pursuant to the provisions of this Article X
for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or to give
any directions to the Trustee permitted under this Indenture, or to consent
to the waiving of any default or Event of Default hereunder and its
consequences, or to take any other action authorized to be taken by
Noteholders pursuant to any of the provisions of Article VII;
(2) to remove the Trustee and nominate a successor trustee pursuant
to the provisions of Article VIII;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2;
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(4) to take any other action authorized to be taken by or on behalf
of the holders of any specified aggregate principal amount of the Notes
under any other provision of this Indenture or under applicable law; or
(5) to take any other action authorized by this Indenture or under
applicable law.
Section 10.2 CALL OF MEETINGS BY TRUSTEE. The Trustee may at any time
call a meeting of Noteholders to take any action specified in Section 10.1, to
be held at such time and at such place in The City of New York or in London, or
any other reasonably convenient city, as the Trustee shall determine. Notice of
every meeting of the Noteholders, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such meeting and
the establishment of any record date pursuant to Section 9.1, shall be made as
specified in Section 17.3 hereof, except that such notice shall set forth the
time and place of the meetings, in general terms the action proposed to be taken
at such meeting, and a general description of the regulations applicable to such
meeting and shall be published at least three times in publications specified in
Section 17.3, the first publication to be not less than 21 nor more than 180
days prior to the date fixed for the meeting. Such notice shall also be mailed
to the Company.
Any meeting of Noteholders shall be valid without notice if the holders of
all Notes then outstanding are present in person or by proxy or if notice is
waived before or after the meeting by the holders of all Notes outstanding, and
if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
Section 10.3 CALL OF MEETINGS BY COMPANY OR NOTEHOLDERS. In case at any
time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least 10% in aggregate principal amount of the Notes then
outstanding, shall have requested the Trustee to call a meeting of Noteholders,
by written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have given the notice of such
meeting as provided in Section 17.3 within twenty (20) days after receipt of
such request, then the Company or such Noteholders may determine the time and
the place for such meeting and may call such meeting to take any action
authorized in Section 10.1, by giving notice thereof as provided in Section
10.2.
Section 10.4 QUALIFICATIONS FOR VOTING. To be entitled to vote at any
meeting of Noteholders a person shall (a) be a holder of one or more Notes on
the record date pertaining to such meeting or (b) be a person appointed by an
instrument in writing as proxy by a holder of one or more Notes. The only
persons who shall be
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entitled to be present or to speak at any meeting of Noteholders shall be the
persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
Section 10.5 REGULATIONS. Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Noteholders as provided in Section 10.3, in which case the Company
or the Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 9.4, at any meeting each Noteholder or
proxyholder shall be entitled to one vote for each $1,000 principal amount of
Notes held or represented by him; PROVIDED, HOWEVER, that no vote shall be cast
or counted at any meeting in respect of any Note challenged as not outstanding
and ruled by the chairman of the meeting to be not outstanding. The chairman of
the meeting shall have no right to vote other than by virtue of Notes held by
him or instruments in writing as aforesaid duly designating him as the proxy to
vote on behalf of other Noteholders. Any meeting of Noteholders duly called
pursuant to the provisions of Section 10.2 or 10.3 may be adjourned from time to
time by the holders of a majority of the aggregate principal amount of Notes
represented at the meeting, whether or not constituting a quorum, and the
meeting may be held as so adjourned without further notice.
Section 10.6 VOTING. The vote upon any resolution submitted to any
meeting of Noteholders shall be by written ballot on which shall be subscribed
the signatures of the holders of Notes or of their representatives by proxy and
the principal amount of the Notes held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting
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of Noteholders shall be prepared by the secretary of the meeting and there shall
be attached to said record the original reports of the inspectors of votes on
any vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was mailed as provided in Section 10.2. The record
shall show the principal amount of the Notes voting in favor of or against any
resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Company and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7 NO DELAY OF RIGHTS BY MEETING. Nothing in this Article X
contained shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Noteholders or any rights expressly or impliedly conferred
hereunder to make such call, any hindrance or delay in the exercise of any right
or rights conferred upon or reserved to the Trustee or to the Noteholders under
any of the provisions of this Indenture or of the Notes.
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS. The
Company, when authorized by the resolutions of the Board of Directors, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to make provisions with respect to the conversion rights of the
holders of Notes pursuant to the requirements of Section 15.6;
(b) subject to Article IV, to convey, transfer, assign, mortgage or
pledge to the Trustee as security for the Notes, any property or assets;
(c) to evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor corporation
of the covenants, agreements and obligations of the Company pursuant to
Article XII;
(d) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit
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of the holders of Notes, and to make the occurrence, or the occurrence and
continuance, of a default in any such additional covenants, restrictions or
conditions a default or an Event of Default permitting the enforcement of
all or any of the several remedies provided in this Indenture as herein set
forth; PROVIDED, HOWEVER, that in respect of any such additional covenant,
restriction or condition such supplemental indenture may provide for a
particular period of grace after default (which period may be shorter or
longer than that allowed in the case of other defaults) or may provide for
an immediate enforcement upon such default or may limit the remedies
available to the Trustee upon such default;
(e) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any
supplemental indenture, or to make such other provisions in regard to
matters or questions arising under this Indenture which shall not
materially adversely affect the interests of the holders of the Notes;
(f) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(g) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualifications of this
Indenture under the Trust Indenture Act, or under any similar federal
statute hereafter enacted.
The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
11.1 may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 11.2.
Section 11.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. With
the consent (evidenced as provided in Article IX) of the holders of not less
than a majority in aggregate principal amount of the Notes at the time
outstanding (determined in accordance with Section 9.4), the Company, when
authorized by the resolutions of the Board of Directors, and the Trustee may
from
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time to time and at any time 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 any supplemental
indenture or of modifying in any manner the rights of the holders of the Notes;
PROVIDED, HOWEVER, that no such supplemental indenture shall (i) extend the
fixed maturity of any Note, or reduce the rate or extend the time of payment of
interest thereon, or reduce the principal amount thereof or premium, if any,
thereon, or reduce any amount payable on redemption or repurchase thereof,
change or impair the obligation of the Company to repurchase any Note at the
option of the holder upon the happening of a Designated Event, or impair or
affect the right of any Noteholder to institute suit for the payment thereof, or
make the principal thereof or interest or premium, if any, thereon payable in
any coin or currency other than that provided in the Notes, or change or impair
the right to convert the Notes into Common Stock subject to the terms set forth
herein, including Section 15.6, or modify the provisions of this Indenture with
respect to the subordination of the Notes in a manner adverse to the
Noteholders, without the consent of the holder of each Note so affected, or (ii)
reduce the aforesaid percentage of Notes, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of all Notes then outstanding.
Upon the request of the Company, accompanied by a copy of the resolutions
of the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Noteholders as aforesaid,
the Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
It shall not be necessary for the consent of the Noteholders under this
Section 11.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Section 11.3 EFFECT OF SUPPLEMENTAL INDENTURES. Any supplemental
indenture executed pursuant to the provisions of this Article XI shall comply
with the Trust Indenture Act, as then in effect. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article XI, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitation of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Notes shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications
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and amendments and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
Section 11.4 NOTATION ON NOTES. Notes authenticated and delivered after
the execution of any supplemental indenture pursuant to the provisions of this
Article XI may (but need not) bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company or
the Trustee shall so determine, new Notes so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any modification of this
Indenture contained in any such supplemental indenture may (but need not), at
the Company's expense, be prepared and executed by the Company, authenticated by
the Trustee (or an authenticating agent duly appointed by the Trustee pursuant
to Section 17.11) and delivered in exchange for the Notes then outstanding, upon
surrender of such Notes then outstanding.
Section 11.5 EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE
FURNISHED TRUSTEE. The Trustee, subject to the provisions of Sections 8.1 and
8.2, shall be entitled to receive an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that any supplemental indenture executed pursuant
hereto complies with the requirements of this Article XI.
ARTICLE XII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1 COMPANY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. Subject to
the provisions of Section 12.2, nothing contained in this Indenture or in any of
the Notes shall prevent, without the consent of the holders of the Notes, any
consolidation or merger of the Company 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 its successor or successors
shall be a party or parties, or shall prevent any sale, conveyance or lease (or
successive sales, conveyances or leases) of all or substantially all of the
property of the Company, to any other corporation (whether or not affiliated
with the Company), authorized to acquire and operate the same and which shall be
organized under the laws of the United States of America, any state thereof or
the District of Columbia; PROVIDED, HOWEVER, and the Company hereby covenants
and agrees, that upon any such consolidation, merger, sale, conveyance or lease,
the due and punctual payment of the principal of and premium, if any, and
interest on all of the Notes, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed by the Company, shall be expressly assumed, by
supplemental indenture satisfactory in
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form to the Trustee, executed and delivered to the Trustee by the corporation
(if other than the Company) formed by such consolidation, or into which the
Company shall have been merged, or by the corporation which shall have acquired
or leased such property, and such supplemental indenture shall provide for the
applicable conversion rights set forth in Section 15.6 and the repurchase rights
set forth in Article XVI.
Section 12.2 SUCCESSOR CORPORATION TO BE SUBSTITUTED. In case of any
such consolidation, merger, sale, conveyance or lease and upon the assumption by
the successor corporation, by supplemental indenture, executed and delivered to
the Trustee and satisfactory in form to the Trustee, of the due and punctual
payment of the principal of and premium, if any, and interest on all of the
Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
corporation shall succeed to and be substituted for the Company, with the same
effect as if it had been named herein as the party of the first part. Such
successor corporation thereupon may cause to be signed, and may issue either in
its own name or in the name of U.S. Office Products Company any or all of the
Notes issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee; and, upon the order of such successor
corporation instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver, or cause to be authenticated and delivered, any Notes which
previously shall have been signed and delivered by the officers of the Company
to the Trustee for authentication, and any Notes which such successor
corporation thereafter shall cause to be signed and delivered to the Trustee for
that purpose. All the Notes so issued shall in all respects have the same legal
rank and benefit under this Indenture as the Notes theretofore or thereafter
issued in accordance with the terms of this Indenture as though all of such
Notes had been issued at the date of the execution hereof. In the event of any
such consolidation, merger, sale, conveyance or lease, the person named as the
"Company" in the first paragraph of this Indenture, or any successor which shall
thereafter have become such in the manner prescribed in this Article XII and
which shall have transferred its rights and obligations hereunder to another
successor in the manner prescribed in this Article XII, may be dissolved, wound
up and liquidated at any time thereafter and such person shall be released from
its liabilities as obligor and maker of the Notes and from its obligations under
this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form (but not in substance) may be made in the Notes
thereafter to be issued as may be appropriate.
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Section 12.3 OPINION OF COUNSEL TO BE GIVEN TRUSTEE. The Trustee,
subject to Sections 8.1 and 8.2, shall receive an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance or lease and any such assumption complies with the provisions
of this Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1 DISCHARGE OF INDENTURE. When (a) the Company shall deliver
to the Trustee for cancellation all Notes theretofore authenticated (other than
any Notes which have been destroyed, lost or stolen and in lieu of or in
substitution for which other Notes shall have been authenticated and delivered)
and not theretofore canceled, or (b) all the Notes not theretofore canceled or
delivered to the Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or are to be called
for redemption within one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption, and the Company shall deposit with the
Trustee, in trust, funds sufficient to pay at maturity or upon redemption of all
of the Notes (other than any Notes which shall have been mutilated, destroyed,
lost or stolen and in lieu of or in substitution for which other Notes shall
have been authenticated and delivered) not theretofore canceled or delivered to
the Trustee for cancellation, including principal and premium, if any,
Additional Amounts, if any, and interest due or to become due to such date of
maturity or date fixed for redemption, as the case may be, and if in either case
the Company shall also pay or cause to be paid all other sums payable hereunder
by the Company, then this Indenture shall cease to be of further effect (except
as to (i) remaining rights of registration of transfer, substitution and
exchange and conversion of Notes, (ii) rights hereunder of Noteholders to
receive payments of principal of and premium, if any, Additional Amounts, if
any, and interest on the Notes and the other rights, duties and obligations of
Noteholders, as beneficiaries hereof with respect to the amounts, if any, so
deposited with the Trustee and (iii) the rights, obligations and immunities of
the Trustee hereunder), and the Trustee, on demand of the Company accompanied by
an Officers' Certificate and an Opinion of Counsel as required by Section 17.5
and at the cost and expense of the Company, shall execute proper instruments
acknowledging satisfaction of and discharging this Indenture; the Company,
however, hereby agrees to reimburse the Trustee for any costs or expenses
thereafter reasonably and properly incurred by the Trustee and to compensate the
Trustee for any services thereafter reasonably and properly rendered by the
Trustee in connection with this Indenture or the Notes.
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Section 13.2 DEPOSITED MONIES TO BE HELD IN TRUST BY TRUSTEE. Subject to
Section 13.4, all monies deposited with the Trustee pursuant to Section 13.1
shall be held in trust and applied by it to the payment, notwithstanding the
provisions of Article IV, either directly or through any paying agent (including
the Company if acting as its own paying agent), to the holders of the particular
Notes for the payment or redemption of which such monies have been deposited
with the Trustee, of all sums due and to become due thereon for principal and
interest and premium, if any.
Section 13.3 PAYING AGENT TO REPAY MONIES HELD. Upon the satisfaction
and discharge of this Indenture, all monies then held by any paying agent of the
Notes (other than the Trustee) shall, upon demand of the Company, be repaid to
it or paid to the Trustee, and thereupon such paying agent shall be released
from all further liability with respect to such monies.
Section 13.4 RETURN OF UNCLAIMED MONIES. Subject to the requirements of
applicable law, any monies deposited with or paid to the Trustee for payment of
the principal of, premium, if any, Additional Amounts, if any, or interest on
Notes and not applied but remaining unclaimed by the holders of Notes for two
years after the date upon which the principal of, premium, if any, Additional
Amounts, if any, or interest on such Notes, as the case may be, shall have
become due and payable, shall be repaid to the Company by the Trustee on demand
and all liability of the Trustee shall thereupon cease with respect to such
monies; and the holder of any of the Notes shall thereafter look only to the
Company for any payment which such holder may be entitled to collect unless an
applicable abandoned property law designates another person.
Section 13.5 REINSTATEMENT. If (i) the Trustee or the paying agent is
unable to apply any money in accordance with Section 13.2 by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application and (ii) the holders of at least a
majority in principal amount of the then outstanding Notes so request by written
notice to the Trustee, the Company's obligations under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 13.1 until such time as the Trustee or the paying agent is permitted
to apply all such money in accordance with Section 13.2; PROVIDED, HOWEVER, that
if the Company makes any payment of interest or premium, if any, Additional
Amounts, if any, on or principal of any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the holders of
such Notes to receive such payment from the money held by the Trustee or paying
agent.
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ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 14.1 INDENTURE AND NOTES SOLELY CORPORATE OBLIGATIONS. No
recourse for the payment of the principal of or premium, if any, Additional
Amounts, if any, or interest on any Note, or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company in this Indenture or in any supplemental
indenture or in any Note, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder,
employee, agent, officer or director or Subsidiary, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of this Indenture and the issue of the Notes.
ARTICLE XV
CONVERSION OF NOTES
Section 15.1 RIGHT TO CONVERT. Subject to and upon compliance with the
provisions of this Indenture, the holder of any Note shall have the right, at
his option, at any time after the Exchange Date and prior to the close of
business on the last Trading Day prior to May 15, 2003 (except that, with
respect to any Note or portion of a Note which shall be called for redemption,
such right shall terminate, except as provided in the fourth paragraph of
Section 15.2, at the close of business on the last Trading Day prior to the date
fixed for redemption of such Note or portion of a Note unless the Company shall
default in payment due upon redemption thereof and such right shall terminate
with respect to any Note or portion thereof subject to a duly completed election
for repurchase unless the Company shall default in payment due upon repurchase
thereof) to convert the principal amount of any such Note, or any portion of
such principal amount which is $1,000 or an integral multiple thereof, into that
number of fully paid and non-assessable shares of Common Stock (as such shares
shall then be constituted) obtained by dividing the principal amount of the Note
or portion thereof surrendered for conversion by the Conversion Price in effect
at such time, by surrender of the Note so to be converted in whole or in part in
the manner provided in Section 15.2. A holder of Notes is not entitled to any
rights of a holder of Common Stock until such holder has converted his Notes to
Common
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Stock, and only to the extent such Notes are deemed to have been converted to
Common Stock under this Article XV.
Section 15.2 EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF COMMON STOCK
ON CONVERSION; NO ADJUSTMENT FOR INTEREST OR DIVIDENDS. In order to exercise
the conversion privilege with respect to any Note, the holder of any such Note
to be converted in whole or in part shall surrender such Note, (together with
all unmatured Coupons and all matured Coupons in default appertaining thereto in
the case of Bearer Notes) duly endorsed, at an office or agency maintained by
the Company pursuant to Section 5.2, accompanied by the funds, if any, required
by the last paragraph of this Section 15.2, and shall give written notice of
conversion in the form provided on the Notes (or such other notice which is
acceptable to the Company) to such office or agency that the holder elects to
convert such Note or such portion thereof specified in said notice. Such notice
shall also state the name or names (with address) in which the certificate or
certificates for shares of Common Stock which shall be issuable on such
conversion shall be issued, and shall be accompanied by transfer taxes, if
required pursuant to Section 15.7. Each such Note surrendered for conversion
shall, unless the shares issuable on conversion are to be issued in the same
name as the registration of such Note, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the holder or his duly authorized attorney.
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, the Company shall issue and shall deliver to such
holder at the office or agency maintained by the Company for such purpose
pursuant to Section 5.2, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such Note or portion
thereof in accordance with the provisions of this Article and a check or cash in
respect of any fractional interest in respect of a share of Common Stock arising
upon such conversion, as provided in Section 15.3 (which payment, if any, shall
be paid no later than five Business Days after satisfaction of the requirements
for conversion set forth above). In case any Note of a denomination greater
than $1,000 shall be surrendered for partial conversion, and subject to Section
2.3, the Company shall execute and the Trustee shall authenticate and deliver to
the holder of the Note so surrendered, without charge to him, a new Note or
Notes in authorized denominations in an aggregate principal amount equal to the
unconverted portion of the surrendered Note.
Each conversion shall be deemed to have been effected as to any such Note
(or portion thereof) on the date on which the requirements set forth above in
this Section 15.2 have been satisfied as to such Note (or portion thereof), and
the person in whose name any certificate or certificates for shares of Common
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Stock shall be issuable upon such conversion shall be deemed to have become on
said date the holder of record of the shares represented thereby; PROVIDED,
HOWEVER, that any such surrender on any date when the stock transfer books of
the Company shall be closed shall constitute the person in whose name the
certificates are to be issued as the record holder thereof for all purposes on
the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date upon which
such Note shall be surrendered.
Any Registered Note or portion thereof surrendered for conversion during
the period from the close of business on the record date for any Interest
Payment Date through the close of business on the day next preceding such
Interest Payment Date shall (unless such Note or portion thereof being converted
shall have been called for redemption on a date in such period) be accompanied
by payment, in funds acceptable to the Company, of an amount equal to the
interest otherwise payable on such Interest Payment Date on the principal amount
being converted; PROVIDED, HOWEVER, that no such payment need be made if there
shall exist at the time of conversion a default in the payment of interest on
the Notes. An amount equal to such payment shall be paid by the Company on such
Interest Payment Date to the holder of such Note at the close of business on
such record date; PROVIDED, HOWEVER, that if the Company shall default in the
payment of interest on such Interest Payment Date, such amount shall be paid to
the person who made such required payment. Except as provided above in this
Section 15.2, no adjustment shall be made for interest accrued on any Note
converted or for dividends on any shares issued upon the conversion of such Note
as provided in this Article.
Section 15.3 CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of Notes. If more than one Note shall be surrendered for
conversion at one time by the same holder, the number of full shares which shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Notes (or specified portions thereof to the extent
permitted hereby) so surrendered for conversion. If any fractional share of
stock otherwise would be issuable upon the conversion of any Note or Notes, the
Company shall make an adjustment therefor in cash at the Current Market Price on
the last Trading Day prior to the date of conversion.
Section 15.4 CONVERSION PRICE. The conversion price shall be as
specified in the form of Note (herein called the "Conversion Price") attached as
Exhibit A hereto, subject to adjustment as provided in this Article XV.
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Section 15.5 ADJUSTMENT OF CONVERSION PRICE. The Conversion Price shall
be adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of
Common Stock, the Conversion Price in effect at the opening of business on
the date following the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution shall be reduced by
multiplying such Conversion Price by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close of
business on the Record Date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number
of shares constituting such dividend or other distribution, such reduction
to become effective immediately after the opening of business on the day
following the Record Date. If any dividend or distribution of the type
described in this Section 15.5(a) is declared but not so paid or made, the
Conversion Price shall again be adjusted to the Conversion Price which
would then be in effect if such dividend or distribution had not been
declared.
(b) In case the Company shall issue rights or warrants to all holders
of its outstanding shares of Common Stock entitling them (for a period
expiring within forty-five (45) days after the date fixed for the
determination of stockholders entitled to receive such rights or warrants)
to subscribe for or purchase shares of Common Stock at a price per share
less than the Current Market Price (as defined in Section 15.5(h)) on the
Record Date fixed for the determination of stockholders entitled to receive
such rights or warrants, the Conversion Price shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion Price
in effect at the opening of business on the date after such Record Date by
a fraction of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the Record Date plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at such Current Market Price, and of which
the denominator shall be the number of shares of Common Stock outstanding
on the close of business on the Record Date plus the total number of
additional shares of Common Stock so offered for subscription or purchase.
Such adjustment shall become effective immediately after the opening of
business on the day following the Record Date fixed for determination of
stockholders entitled to receive such rights or warrants. To the extent
that shares of Common Stock are not delivered pursuant to such rights or
warrants, upon the expiration or termination of such
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rights or warrants the Conversion Price shall be readjusted to the
Conversion Price which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made on the basis of
delivery of only the number of shares of Common Stock actually delivered.
In the event that such rights or warrants are not so issued, the Conversion
Price shall again be adjusted to be the Conversion Price which would then
be in effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed. In
determining whether any rights or warrants entitle the holders to subscribe
for or purchase shares of Common Stock at less than such Current Market
Price, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received
for such rights or warrants, the value of such consideration, if other than
cash, to be determined by the Board of Directors.
(c) In case the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following the day
upon which such subdivision becomes effective shall be proportionately
reduced, and conversely, in case outstanding shares of Common Stock shall
be combined into a smaller number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following the day
upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become
effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock shares of any class of capital stock of
the Company (other than any dividends or distributions to which Section
15.5(a) applies) or evidences of its indebtedness, cash or other assets
(including securities, but excluding any rights or warrants referred to in
Section 15.5(b) and dividends and distributions paid exclusively in cash
and excluding any capital stock, evidences of indebtedness, cash or assets
distributed upon a merger or consolidation to which Section 15.6 applies)
(the foregoing hereinafter in this Section 15.5(d) called the
"Securities"), then, in each such case, the Conversion Price shall be
reduced so that the same shall be equal to the price determined by
multiplying the Conversion Price in effect immediately prior to the close
of business on the Record Date (as defined in Section 15.5(h)) with respect
to such distribution by a fraction of which the numerator shall be the
Current Market Price (as defined in Section 15.5(h)) on such
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date less the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a Board
Resolution) on such date of the portion of the Securities so distributed
applicable to one share of Common Stock and the denominator shall be such
Current Market Price, such reduction to become effective immediately prior
to the opening of business on the day following the Record Date; PROVIDED,
HOWEVER, that in the event the then fair market value (as so determined) of
the portion of the Securities so distributed applicable to one share of
Common Stock is equal to or greater than the Current Market Price on the
Record Date, in lieu of the foregoing adjustment, adequate provision shall
be made so that each Noteholder shall have the right to receive upon
conversion of a Note (or any portion thereof) the amount of Securities such
holder would have received had such holder converted such Note (or portion
thereof) immediately prior to such Record Date. In the event that such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect
if such dividend or distribution had not been declared. If the Board of
Directors determines the fair market value of any distribution for purposes
of this Section 15.5(d) by reference to the actual or when issued trading
market for any securities comprising all or part of such distribution, it
must in doing so consider the prices in such market over the same period
used in computing the Current Market Price pursuant to Section 15.5(h) to
the extent possible.
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of
the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a
specified event or events ("Trigger Event"): (i) are deemed to be
transferred with such shares of Common Stock; (ii) are not exercisable; and
(iii) are also issued in respect of future issuances of Common Stock, shall
be deemed not to have been distributed for purposes of this Section 15.5(d)
(and no adjustment to the Conversion Price under this Section 15.5(d) will
be required) until the occurrence of the earliest Trigger Event. If such
right or warrant is subject to subsequent events, upon the occurrence of
which such right or warrant shall become exercisable to purchase different
securities, evidences of indebtedness or other assets or entitle the holder
to purchase a different number or amount of the foregoing or to purchase
any of the foregoing at a different purchase price, then the occurrence of
each such event shall be deemed to be the date of issuance and Record Date
with respect to a new right or warrant (and a termination or expiration of
the existing right or warrant without exercise by the holder thereof to the
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extent not exercised). In addition, in the event of any distribution (or
deemed distribution) of rights or warrants, or any Trigger Event or other
event (of the type described in the preceding sentence) with respect
thereto, that resulted in an adjustment to the Conversion Price under this
Section 15.5(d), (1) in the case of any such rights or warrants which shall
all have been redeemed or repurchased without exercise by any holders
thereof, the Conversion Price shall be readjusted upon such final
redemption or repurchase to give effect to such distribution or Trigger
Event, as the case may be, as though it were a cash distribution (but not a
distribution paid exclusively in cash), equal to the per share redemption
or repurchase price received by a holder of Common Stock with respect to
such rights or warrants (assuming such holder had retained such rights or
warrants), made to all holders of Common Stock as of the date of such
redemption or repurchase, and (2) in the case of such rights or warrants
all of which shall have expired or been terminated without exercise, the
Conversion Price shall be readjusted as if such rights and warrants had
never been issued.
For purposes of this Section 15.5(d) and Sections 15.5(a) and (b), any
dividend or distribution to which this Section 15.5(d) is applicable that
also includes shares of Common Stock or also includes rights or warrants to
subscribe for or purchase shares of Common Stock to which Section 15.5(b)
applies (or also includes both), shall be deemed to be (1) a dividend or
distribution of the evidences of indebtedness, assets, shares of capital
stock, rights or warrants other than such shares of Common Stock or rights
or warrants to which Section 15.5(b) applies (and any Conversion Price
reduction required by this Section 15.5(d) with respect to such dividend or
distribution shall then be made) immediately followed by (2) a dividend or
distribution of such shares of Common Stock or such rights or warrants (and
any further Conversion Price reduction required by Sections 15.5(a) and (b)
with respect to such dividend or distribution shall then be made, except
(A) the Record Date of such dividend or distribution shall be substituted
as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution", "Record Date fixed for such
determination" and "Record Date" within the meaning of Section 15.5(a) and
as "the date fixed for the determination of stockholders entitled to
receive such rights or warrants", "the Record Date fixed for the
determination of the stockholders entitled to receive such rights or
warrants" and "such Record Date" within the meaning of Section 15.5(b) and
(B) any shares of Common Stock included in such dividend or distribution
shall not be deemed "outstanding at the close of business on the Record
Date fixed for such determination" within the meaning of Section 15.5(a)).
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(e) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock cash (excluding any cash that is
distributed upon a merger or consolidation to which Section 15.6 applies or
as part of a distribution referred to in Section 15.5(d)), in an aggregate
amount that, combined together with (1) the aggregate amount of any other
such distributions to all holders of its Common Stock made exclusively in
cash within the twelve (12) months preceding the date of payment of such
distribution, and in respect of which no adjustment pursuant to this
Section 15.5(e) has been made, and (2) the aggregate of any cash plus the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) of
consideration payable in respect of any tender offer by the Company or any
Subsidiary for all or any portion of the Common Stock concluded within the
twelve (12) months preceding the date of payment of such distribution, and
in respect of which no adjustment pursuant to Section 15.5(f) has been
made, exceeds 10% of the product of the Current Market Price (as defined in
Section 15.5(h)) on the Record Date with respect to such distribution times
the number of shares of Common Stock outstanding on such date, then, and in
each such case, immediately after the close of business on such date, the
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the close of business on such Record Date by a fraction (i) the
numerator of which shall be equal to the Current Market Price on the Record
Date less an amount equal to the quotient of (x) the excess of such
combined amount over such 10% and (y) the number of shares of Common Stock
outstanding on the Record Date and (ii) the denominator of which shall be
equal to the Current Market Price on such date; PROVIDED, HOWEVER, that in
the event the portion of the cash so distributed applicable to one share of
Common Stock is equal to or greater than the Current Market Price of the
Common Stock on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Noteholder shall have the
right to receive upon conversion of a Note (or any portion thereof) the
amount of cash such holder would have received had such holder converted
such Note (or portion thereof) immediately prior to such Record Date. In
the event that such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such dividend or distribution had not been
declared. Any cash distribution to all holders of Common Stock as to which
the Company makes the election permitted by Section 15.5(n) and as to which
the Company has complied with the requirements of such Section shall be
treated as not having been made for all purposes of this Section 15.5(e).
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(f) In case a tender offer made by the Company or any Subsidiary for
all or any portion of the Common Stock shall expire and such tender offer
(as amended upon the expiration thereof) shall require the payment to
stockholders (based on the acceptance (up to any maximum specified in the
terms of the tender offer) of Purchased Shares (as defined below)) of an
aggregate consideration having a fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described
in a Board Resolution) that combined together with (1) the aggregate of the
cash plus the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a Board
Resolution), as of the expiration of such tender offer, of consideration
payable in respect of any other tender offers, by the Company or any
Subsidiary for all or any portion of the Common Stock expiring within the
twelve (12) months preceding the expiration of such tender offer and in
respect of which no adjustment pursuant to this Section 15.5(f) has been
made and (2) the aggregate amount of any distributions to all holders of
the Company's Common Stock made exclusively in cash within twelve (12)
months preceding the expiration of such tender offer and in respect of
which no adjustment pursuant to Section 15.5(e) has been made, exceeds 10%
of the product of the Current Market Price (as defined in Section 15.5(h))
as of the last time (the "Expiration Time") tenders could have been made
pursuant to such tender offer (as it may be amended) times the number of
shares of Common Stock outstanding (including any tendered shares) on the
Expiration Time, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration Time, the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the close of business on the date of the Expiration Time by a fraction
of which the numerator shall be the number of shares of Common Stock
outstanding (including any tendered shares) at the Expiration Time
multiplied by the Current Market Price of the Common Stock on the Trading
Day next succeeding the Expiration Time and the denominator shall be the
sum of (x) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the tender offer) of all shares validly
tendered and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) on the Expiration Time and the
Current Market Price of the Common Stock on the Trading Day next succeeding
the Expiration Time, such reduction (if any) to become effective
immediately prior to the opening of business on the day following the
Expiration
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Time. In the event that the Company or any Subsidiary is obligated to
purchase shares pursuant to any such tender offer, but the Company or such
Subsidiary is permanently prevented by applicable law from effecting any
such purchases or all such purchases are rescinded, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in
effect if such tender offer had not been made. If the application of this
Section 15.5(f) to any tender offer would result in an increase in the
Conversion Price, no adjustment shall be made for such tender offer under
this Section 15.5(f). Any cash distribution to all holders of Common Stock
as to which the Company has made the election permitted by Section 15.5(n)
and as to which the Company has complied with the requirements of such
Section shall be treated as not having been made for all purposes of this
Section 15.5(f).
(g) In case of a tender or exchange offer made by a person other than
the Company or any Subsidiary for an amount which increases the offeror's
ownership of Common Stock to more than 25% of the Common Stock outstanding
and shall involve the payment by such person of consideration per share of
Common Stock having a fair market value (as determined by the Board of
Directors whose determination shall be conclusive and described in a Board
Resolution at the last time (the "Offer Expiration Time") tenders or
exchanges may be made pursuant to such tender or exchange offer (as it
shall have been amended)) that exceeds the Current Market Price of the
Common Stock on the Trading Day next succeeding the Offer Expiration Time,
and in which, as of the Offer Expiration Time the Board of Directors is not
recommending rejection of the offer, the Conversion Price shall be reduced
so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the Offer Expiration Time
by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding (including any tendered or exchanged shares) at
the Offer Expiration Time multiplied by the Current Market Price of the
Common Stock on the Trading Day next succeeding the Offer Expiration Time
and the denominator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the
terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Offer Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the
"Purchased Common Shares") and (y) the product of the number of shares of
Common Stock outstanding (less any Purchased Common Shares) on the Offer
Expiration Time and the Current Market Price of the Common Stock on the
Trading Day next succeeding the Offer Expiration Time, such reduction to
become
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effective immediately prior to the opening of business on the day following
the Offer Expiration Time. In the event that such person is obligated to
purchase shares pursuant to any such tender or exchange offer, but such
person is permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect
if such tender or exchange offer had not been made. If the application of
this Section 15.5(g) to any tender or exchange offer would result in an
increase in the Conversion Price, no adjustment shall be made for such
tender or exchange offer under this Section 15.5(g). Notwithstanding the
foregoing, the adjustment described in this Section 15.5(g) shall not be
made if, as of the Expiration Time, the offering documents with respect to
such offer disclose a plan or intention to cause the Company to engage in
any transaction described in Article XII.
(h) For purposes of this Section 15.5, the following terms shall have
the meaning indicated:
(1) "Closing Price" with respect to any securities on any day
shall mean the closing sale price regular way on such day or, in case
no such sale takes place on such day, the average of the reported
closing bid and asked prices, regular way, in each case on the Nasdaq
National Market or New York Stock Exchange, as applicable, or, if such
security is not listed or admitted to trading on such National Market
or Exchange, on the principal national security exchange or quotation
system on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the average of the
closing bid and asked prices of such security on the over-the-counter
market on the day in question as reported by the National Quotation
Bureau Incorporated, or a similar generally accepted reporting
service, or, if not so available, in such manner as furnished by any
New York Stock Exchange member firm selected from time to time by the
Board of Directors for that purpose, or a price determined in good
faith by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution.
(2) "Current Market Price" shall mean, except as provided in the
following sentence, the average of the daily Closing Prices per share
of Common Stock for the ten (10) consecutive Trading Days immediately
prior to the date in question; PROVIDED, HOWEVER, that (1) if the "ex"
date (as hereinafter defined) for any event (other than the issuance
or distribution requiring such
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computation) that requires an adjustment to the Conversion Price
pursuant to Section 15.5(a), (b), (c), (d), (e), (f) or (g) occurs
during such ten (10) consecutive Trading Days, the Closing Price for
each Trading Day prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the same fraction by
which the Conversion Price is so required to be adjusted as a result
of such other event, (2) if the "ex" date for any event (other than
the issuance or distribution requiring such computation) that requires
an adjustment to the Conversion Price pursuant to Section 15.5(a),
(b), (c), (d), (e), (f) or (g) occurs on or after the "ex" date for
the issuance or distribution requiring such computation and prior to
the day in question, the Closing Price for each Trading Day on and
after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by
which the Conversion Price is so required to be adjusted as a result
of such other event, and (3) if the "ex" date for the issuance or
distribution requiring such computation is prior to the day in
question, after taking into account any adjustment required pursuant
to clause (1) or (2) of this proviso, the Closing Price for each
Trading Day on or after such "ex" date shall be adjusted by adding
thereto the amount of any cash and the fair market value (as
determined by the Board of Directors in a manner consistent with any
determination of such value for purposes of Section 15.5(d), (f) or
(g), whose determination shall be conclusive and described in a Board
Resolution) of the evidences of indebtedness, shares of capital stock
or assets being distributed applicable to one share of Common Stock as
of the close of business on the day before such "ex" date. For
purposes of any computation under Sections 15.5(f) or (g), the Current
Market Price of the Common Stock on any date shall mean the average of
the daily Closing Prices per share of Common Stock for such day and
the next two succeeding Trading Days; PROVIDED, HOWEVER, that if the
"ex" date for any event (other than the tender or exchange offer
requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 15.5(a), (b), (c), (d), (e), (f)
and (g) occurs on or after the Expiration Time or Offer Expiration
Time, as applicable, for the tender or exchange offer requiring such
computation and prior to the day in question, the Closing Price for
each Trading Day on and after the "ex" date for such other event shall
be adjusted by multiplying such Closing Price by the reciprocal of the
fraction by which the Conversion Price is so required to be adjusted
as a result of such other event. For purposes of this paragraph, the
term
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"ex" date, (1) when used with respect to any issuance or distribution,
means the first date on which the Common Stock trades regular way on
the relevant exchange or in the relevant market from which the Closing
Price was obtained without the right to receive such issuance or
distribution, (2) when used with respect to any subdivision or
combination of shares of Common Stock, means the first date on which
the Common Stock trades regular way on such exchange or in such market
after the time at which such subdivision or combination becomes
effective, and (3) when used with respect to any tender or exchange
offer means the first date on which the Common Stock trades regular
way on such exchange or in such market after the Expiration Time or
Offer Expiration Time, as applicable, of such offer. Notwithstanding
the foregoing, whenever successive adjustments to the Conversion Price
are called for pursuant to this Section 15.5, such adjustments shall
be made to the Current Market Price as may be necessary or appropriate
to effectuate the intent of this Section 15.5 and to avoid unjust or
inequitable results as determined in good faith by the Board of
Directors.
(3) "fair market value" shall mean the amount which a willing
buyer would pay a willing seller in an arm's length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of
Common Stock have the right to receive any cash, securities or other
property or in which the Common Stock (or other applicable security)
is exchanged for or converted into any combination of cash, securities
or other property, the date fixed for determination of stockholders
entitled to receive such cash, securities or other property (whether
such date is fixed by the Board of Directors or by statute, contract
or otherwise).
(5) "Trading Day" shall mean (x) if the applicable security is
listed or admitted for trading on the New York Stock Exchange or
another national security exchange, a day on which the New York Stock
Exchange or such other national security exchange is open for business
or (y) if the applicable security is quoted on the Nasdaq National
Market, a day on which trades may be made thereon or (z) if the
applicable security is not so listed, admitted for trading or quoted,
any day other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by
law or executive order to close.
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(i) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 15.5(a), (b), (c), (d), (e), (f) and
(g), as the Board of Directors considers to be advisable to avoid or
diminish any income tax to holders of Common Stock or rights to purchase
Common Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes.
To the extent permitted by applicable law, the Company from time to
time may reduce the Conversion Price by any amount for any period of time
if the period is at least twenty (20) days, the reduction is irrevocable
during the period and the Board of Directors shall have made a
determination that such reduction would be in the best interests of the
Company, which determination shall be conclusive and described in a Board
Resolution. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Company shall give to the holder of each Note the
notice provided in Section 17.3 of the reduction at least fifteen (15) days
prior to the date the reduced Conversion Price takes effect, and such
notice shall state the reduced Conversion Price and the period during which
it will be in effect.
(j) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in
such price; PROVIDED, HOWEVER, that any adjustments which by reason of this
Section 15.5(j) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Article XV shall be made by the Company and shall be made to the
nearest cent or to the nearest one hundredth of a share, as the case may
be. No adjustment need be made for a change in the par value or no par
value of the Common Stock.
(k) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Trustee and any conversion agent other
than the Trustee an Officers' Certificate setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment. Promptly after delivery of such
certificate, the Company shall prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the date
on which each adjustment becomes effective and shall give the holders of
the Notes notice of the adjusted Conversion Price as provided in Section
17.3, within twenty (20) days of the effective date of such adjustment.
Failure to deliver such notice shall not effect the legality or validity of
any such adjustment.
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(l) In any case in which this Section 15.5 provides that an
adjustment shall become effective immediately after a Record Date for an
event, the Company may defer until the occurrence of such event (i) issuing
to the holder of any Note converted after such Record Date and before the
occurrence of such event the additional shares of Common Stock issuable
upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment and (ii) paying to such holder any amount in cash
in lieu of any fractional shares pursuant to Section 15.3.
(m) For purposes of this Section 15.5, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury
of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The
Company will not pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Company.
(n) In lieu of making any adjustment to the Conversion Price pursuant
to Section 15.5(e), the Company may elect to reserve an amount of cash for
distribution to the holders of the Notes upon the conversion of the Notes
so that any such holder converting Notes will receive upon such conversion,
in addition to the shares of Common Stock and other items to which such
holder is entitled, the full amount of cash which such holder would have
received if such holder had, immediately prior to the Record Date for such
distribution of cash, converted its Notes into Common Stock, together with
any interest accrued with respect to such amount, in accordance with this
Section 15.5(n). The Company may make such election by providing an
Officers' Certificate to the Trustee to such effect on or prior to the
payment date for any such distribution and depositing with the Trustee on
or prior to such date an amount of cash equal to the aggregate amount the
holders of the Notes would have received if such holders had, immediately
prior to the Record Date for such distribution, converted all of the Notes
into Common Stock. Any such funds so deposited by the Company with the
Trustee shall be invested by the Trustee in a money market fund limited to
United States government obligations, or repurchase agreements backed by
such obligations, and the Trustee shall not be liable for any losses
incurred from any such investment. Upon conversion of Notes by a holder,
the holder will be entitled to receive, in addition to the Common Stock
issuable upon conversion, an amount of cash from such funds equal to the
amount such holder would have received if such holder had, immediately
prior to the Record Date for such distribution converted its Note into
Common Stock, along with such holder's pro-rata share of any
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accrued interest earned as a consequence of the investment such funds.
Promptly after making an election pursuant to this Section 15.5(n), the
Company shall give or shall cause to be given notice as provided in Section
17.3 to all Noteholders of such election, which notice shall state the
amount of cash per $1,000 principal amount of Notes such holders shall be
entitled to receive (excluding interest) upon conversion of the Notes as a
consequence of the Company having made such election.
Section 15.6 EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
If any of the following events occur, namely (i) any reclassification or change
of the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of execution
of such supplemental indenture if such supplemental indenture is then required
to so comply) providing that such Note shall be convertible into the kind and
amount of shares of stock and other securities or property or assets (including
cash) receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance by a holder of a number of shares of Common
Stock issuable upon conversion of such Notes (assuming, for such purposes, a
sufficient number of authorized shares of Common Stock available to convert all
such Notes) immediately prior to such reclassification, change, consolidation,
merger, combination, sale or conveyance assuming such holder of Common Stock did
not exercise his rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance (provided that, if the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
statutory exchange, sale or conveyance is not the same for each share of Common
Stock in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purposes of this Section 15.6 the kind and
amount of securities, cash or other property receivable upon such consolidation,
merger, statutory exchange, sale or conveyance for each non-electing share shall
be deemed to be the kind and amount so receivable per share
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by a plurality of the non-electing shares). Such supplemental indenture shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article. If, in the case of
any such reclassification, change, consolidation, merger, combination, sale or
conveyance, the stock or other securities and assets receivable thereupon by a
holder of shares of Common Stock includes shares of stock or other securities
and assets of a corporation other than the successor or purchasing corporation,
as the case may be, in such reclassification, change, consolidation, merger,
combination, sale or conveyance, then such supplemental indenture shall also be
executed by such other corporation and shall contain such additional provisions
to protect the interests of the holders of the Notes as the Board of Directors
shall reasonably consider necessary by reason of the foregoing, including to the
extent practicable the provisions providing for the repurchase rights set forth
in Article XVI herein.
The Company shall cause notice of the execution of such supplemental
indenture to be given to each holder of Notes as provided in Section 17.3 within
twenty (20) days after execution thereof. Failure to deliver such notice shall
not affect the legality or validity of such supplemental indenture.
The Trustee, subject to the provisions of Sections 8.1 and 8.2, shall be
entitled to receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Section 15.6.
The above provisions of this Section shall similarly apply to successive
reclassifications, changes, consolidations, mergers, combinations, sales and
conveyances.
If this Section 15.6 applies to any event or occurrence, Section 15.5 shall
not apply.
Section 15.7 TAXES ON SHARES ISSUED. The issue of stock certificates on
conversions of Notes shall be made without charge to the converting Noteholder
for any tax in respect of the issue thereof. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of stock in any name other than that of the holder of
any Note converted, and the Company shall not be required to issue or deliver
any such stock certificate unless and until the person or persons requesting the
issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
Section 15.8 RESERVATION OF SHARES; SHARES TO BE FULLY PAID; LISTING OF
COMMON STOCK. The Company shall provide, free from
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preemptive rights, out of its authorized but unissued shares or shares held in
treasury, sufficient shares to provide for the conversion of the Notes from time
to time as such Notes are presented for conversion.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of the Notes, the Company will take all corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that all shares of Common Stock issued upon
conversion of Notes will be fully paid and non-assessable by the Company and
free from all taxes, liens and charges with respect to the issue thereof.
The Company covenants that if any shares of Common Stock to be provided for
the purpose of conversion of Notes hereunder require registration with or
approval of any governmental authority under any federal or state law before
such shares may be validly issued upon conversion, the Company will in good
faith and as expeditiously as possible endeavor to secure such registration or
approval, as the case may be.
The Company further covenants that if at any time the Common Stock shall be
listed on the New York Stock Exchange or any other national securities exchange
the Company will, if permitted by the rules of such exchange, list and keep
listed, so long as the Common Stock shall be so listed on such exchange, all
Common Stock issuable upon conversion of the Notes.
Section 15.9 RESPONSIBILITY OF TRUSTEE. The Company is solely
responsible for performing the duties and responsibilities contained in this
Article XV, except for the specific obligations assigned to the Trustee in
Sections 15.2, 15.5(n) and 15.6, respectively, and except for duties assigned to
any conversion agent. The Trustee and any other conversion agent shall not at
any time be under any duty or responsibility to any holder of Notes to determine
whether any facts exist which may require any adjustment of the Conversion
Price, or with respect to the nature or extent or calculation of any such
adjustment when made, or with respect to the method employed, or herein or in
any supplemental indenture provided to be employed, in making the same. The
Trustee and any other conversion agent shall not be accountable with respect to
the validity or value (or the kind or amount) of any shares of Common Stock, or
of any securities or property, which may at any time be issued or delivered upon
the conversion of any Note; and the Trustee and any other conversion agent make
no representations with respect thereto. Subject to the provisions of Section
8.1, neither
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the Trustee nor any conversion agent shall be responsible for any failure of the
Company to issue, transfer or deliver any shares of Common Stock or stock
certificates or other securities or property or cash upon the surrender of any
note for the purpose of conversion or to comply with any of the duties,
responsibilities or covenants of the Company contained in this Article. Without
limiting the generality of the foregoing, neither the Trustee nor any conversion
agent shall be under any responsibility to determine the correctness of any
provisions contained in any supplemental indenture entered into pursuant to
Section 15.6 relating either to the kind or amount of shares of stock or
securities or property (including cash) receivable by Noteholders upon the
conversion of their Notes after any event referred to in such Section 15.6 or to
any adjustment to be made with respect thereto, but, subject to the provisions
of Section 8.1, may accept as conclusive evidence of the correctness of any such
provisions, and shall be protected in relying upon, the Officers' Certificate
(which the Company shall be obligated to file with the Trustee prior to the
execution of any such supplemental indenture) with respect thereto.
Section 15.10 NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS. In case:
(a) the Company shall declare a dividend (or any other distribution)
on its Common Stock (other than in cash out of retained earnings); or
(b) the Company shall authorize the granting to all of the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
share of any class or any other rights or warrants; or
(c) of any reclassification of the Common Stock of the Company (other
than a subdivision or combination of its outstanding Common Stock, or a
change in par value, or from par value to no par value, or from no par
value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any shareholders of the Company is
required, or of the sale or transfer of all or substantially all of the
assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
the Company shall cause to be filed with the Trustee and to be given to each
holder of Notes as promptly as possible but in any event at least fifteen (15)
days prior to the applicable date hereinafter specified, a notice as provided in
Section 17.3 stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, authorization of rights or warrants, or,
if a record is not to be taken, the date as of which the
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holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective or occur, and the date
as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of such dividend,
distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up.
ARTICLE XVI
REPURCHASE UPON A DESIGNATED EVENT
Section 16.1 REPURCHASE RIGHT. If, at any time prior to May 15, 2003
there shall occur a Designated Event, then each Noteholder shall have the right,
at such holder's option, to require the Company to repurchase all of such
holder's Notes, or any portion thereof (in principal amounts of $1,000 or
integral multiples thereof), on the repurchase date (the "repurchase date") that
is forty (40) days after the date of the Company Notice (as defined in Section
16.2 below) of such Designated Event (or, if such 40th day is not a Business
Day, the next succeeding Business Day). Such repayment shall be made in cash at
a price equal to 100% of the principal amount of Notes such holder elects to
require the Company to repurchase together with accrued interest thereon to,
but excluding, the repurchase date (the "Repurchase Price"); PROVIDED that, if
such repurchase date is an Interest Payment Date, the semi-annual payment of
interest becoming due on such date shall be payable to the holders of such Notes
registered as such on the relevant record date subject to the terms and
provisions of Section 2.3 hereof. No Notes may be repurchased at the option of
holders upon a Designated Event if there has occurred and is continuing an Event
of Default, other than a default in the payment of the Repurchase Price with
respect to such Notes on the repurchase date.
Section 16.2 NOTICES; METHOD OF EXERCISING REPURCHASE RIGHT, ETC.
(a) Unless the Company shall have theretofore called for redemption all of
the outstanding Notes, on or before the fifteenth (15th) calendar day after the
occurrence of a Designated Event, the Company or, at the request of the Company,
the Trustee, shall give to all holders a notice (the "Company Notice") as
provided in Section 17.3 of the occurrence of the Designated Event and of the
repurchase right set forth herein arising as a result thereof. The Company
shall also deliver a copy of such Company Notice of a
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repurchase right to the Trustee. The Company Notice shall contain the following
information:
(1) the repurchase date,
(2) the date by which the repurchase right must be exercised,
(3) the Repurchase Price,
(4) a description of the procedure which a holder must follow to
exercise a repurchase right, and
(5) the Conversion Price then in effect, a statement that the right
to convert the principal amount of the Notes to be repurchased will
terminate upon surrender for repurchase (unless the Company defaults in its
obligation to repurchase the Notes) and the place or places where Notes may
be surrendered for conversion.
No failure of the Company to give the foregoing notices or defect therein
shall limit any holder's right to exercise a repurchase right or affect the
validity of the proceedings for the repurchase of Notes.
If any of the foregoing provisions are inconsistent with applicable law,
such law shall govern.
(b) To exercise a repurchase right, a holder shall deliver to the Trustee
on or before the thirtieth (30th) day after the date the Company Notice is first
given to Noteholders (i) irrevocable written notice to the Company (or agent
designated by the Company for such purpose) of the holder's exercise of such
right, which notice shall set forth the name of the holder, the principal amount
of the Notes to be repurchased and a statement that an election to exercise the
repurchase right is being made thereby, and (ii) the Notes with respect to which
the repurchase right is being exercised, duly endorsed for transfer to the
Company. Such written notice shall be irrevocable, and, subject to Section
16.2(c), upon the exercise of the repurchase right in accordance with this
Section 16.2(b), the holder's right to convert the Notes (or portion thereof) as
to which the repurchase right has been exercised shall terminate.
(c) If the Company fails to repurchase on the repurchase date any Notes
(or portions thereof) as to which the repurchase right has been properly
exercised, then the principal of such Notes shall, until paid, bear interest to
the extent permitted by applicable law from the repurchase date at the rate
borne by the Notes and each such Note shall be convertible into Common Stock in
accordance with this Indenture (without giving effect to Section
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16.2(b)) until the principal of such Note shall have been paid or duly provided
for.
(d) Any Note which is to be repurchased only in part shall be surrendered
to the Trustee (with 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, containing identical terms and
conditions, of any authorized denomination as requested by such holder in
aggregate principal amount equal to and in exchange for the unrepurchased
portion of the principal of the Note so surrendered.
(e) On or prior to the repurchase 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 5.4) an amount of
money sufficient to pay the Repurchase Price of the Notes that are to be repaid
on the repurchase date, provided that if such payment is made on the repurchase
date it must be received by the Trustee or paying agent, as the case may be, by
10:00 a.m., New York City time, on such date.
Section 16.3 CERTAIN DEFINITIONS. For purposes of this Article XVI:
(a) the term "beneficial owner" shall be determined in accordance
with Rule 13d-3 and 13d-5, as in effect on the date of the original
execution of this Indenture, promulgated by the Commission pursuant to the
Exchange Act;
(b) the term "person" or "group" shall include any syndicate or group
which would be deemed to be a "person" under Section 13(d) (3) and 14(d) of
the Securities Exchange Act of 1934, as amended, as in effect on the date
of the original execution of this Indenture; and
DC the term "Continuing Director" means at any date a member of the
Company's Board of Directors (i) who was a member of such board on May 22,
1996 or (ii) who was nominated or elected by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election or whose election to the Company's Board of Directors was
recommended or endorsed by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election. (Under
this definition, if the current Board of Directors of the Company were to
approve a new director or directors and then resign, no Change in
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Control would occur even though the current Board of Directors would
thereafter cease to be in office).
(d) the term "Designated Event" means a Change in Control or a
Termination of Trading.
(e) the term "Change in Control" means an event or series of events
as a result of which (i) any person or group is or becomes the beneficial
owner of shares representing more than 50% of the combined voting power of
the then outstanding securities entitled to vote generally in elections of
directors of the Company (the "Voting Stock"), (ii) the stockholders of the
Company approve any plan or proposal for the liquidation or dissolution of
the Company, (iii) the Company consolidates with or merges into any other
corporation, or conveys, transfers or leases all or substantially all of
its assets to any person, or any other corporation merges into the Company,
and, in the case of any such transaction, the outstanding common stock of
the Company is changed or exchanged as a result, unless the stockholders of
the Company immediately before such transaction own, directly or indirectly
immediately following such transaction, at least 51% of the combined voting
power of the outstanding voting securities of the corporation resulting
from such transaction in substantially the same proportion as their
ownership of the Voting Stock immediately before such transaction, or (iv)
the Continuing Directors do not constitute a majority of the Board of
Directors of the Company (or, if applicable, a successor corporation to the
Company); PROVIDED that a Change in Control shall not be deemed to have
occurred if either (x) the Closing Price of the Common Stock for any five
(5) Trading Days during the ten (10) Trading Days immediately preceding the
Change in Control is at least equal to 105% of the Conversion Price in
effect on the date on which the Change in Control occurs or (y) at least
90% of the consideration (excluding cash payments for fractional shares) in
the transaction or transactions constituting the Change in Control consists
of common stock or securities convertible into common stock that are, or
upon issuance will be, traded on a United States national securities
exchange or approved for trading on an established automated
over-the-counter trading market in the United States. A Change of Control
also shall not be deemed to have occurred if Jonathan J. Ledecky, or a
group that includes Jonathan J. Ledecky, (collectively, a "Permitted
Investor") becomes the beneficial owner of more than 50% of the Voting
Stock, PROVIDED that, if as a consequence of any transaction involving a
Permitted Investor, or in which a Permitted Investor has an interest, less
than 30% of the shares of Common Stock outstanding upon the issuance of the
Notes are neither listed for trading upon a national securities exchange
nor approved for trading on an
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established over-the-counter trading market in the United States, then a
Change of Control shall be deemed to have occurred upon the consummation of
such transaction.
(f) a "Termination of Trading" shall have occurred if the Common
Stock of the Company (or other common stock into which the Notes are then
convertible) is neither listed for trading on a United States national
securities exchange nor approved for trading on an established automated
over-the-counter trading market in the United States.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
Section 17.1 PROVISIONS BINDING ON COMPANY'S SUCCESSORS. All the
covenants, stipulations, promises and agreements of the Company in this
Indenture contained shall bind its successors and assigns whether so expressed
or not.
Section 17.2 OFFICIAL ACTS BY SUCCESSOR CORPORATION. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
Section 17.3 NOTICES. All notices hereunder shall be deemed to have been
given when deposited in the mail as first class mail, registered or certified,
return receipt requested, postage prepaid, addressed to any party hereto as
follows:
The Company U.S. Office Products Company
1440 New York Avenue, N.W.
Suite 310
Washington, D.C. 20005
Attn: Chief Financial Officer
(with a copy to the attention of the General Counsel at
the same address)
The Trustee The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
3rd Floor, Institutional Trust
Brooklyn, New York 11245
Attn: Institutional Trust Administration
Telecopy: (718) 242-3529
Telex: 62910 CMBUW
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The Paying The Chase Manhattan Bank, N.A.
Agents Woolgate House
Coleman Street
London EC2P 2HD
ENGLAND
Attn: Corporate Trust Administration
Telecopy: 44 1 202-347945
Telex: 8954681
Answer Back: CMB G
Chase Manhattan Bank Luxembourg S.A.
5 Rue Plaetis
L-2338 Luxembourg
Attn: Manager - Corporate Trust Operations
Telecopy: 352 46 26 85380
Telex: 1223
Answer Back: CHASE LU
or at any other address of which any of the foregoing shall have notified the
others in writing. Notices to holders of the Notes will be given by publication
in an Authorized newspaper in The City of New York and in London and, for so
long as the Notes are listed on the Luxembourg Stock Exchange, in Luxembourg,
or, if publication in either London or Luxembourg is not practical, in an
Authorized Newspaper in Europe. In addition, notices to holders of Registered
Notes will be given by first-class mail to the addresses of such holders as they
appear in the register maintained by the Trustee on the fifteenth day prior to
such mailing. Such notices will be deemed to have been given on the date of
such publication or mailing or, if published in such newspapers on different
dates, on the date of the first such publication. The Trustee shall promptly
furnish to the Company, the Paying Agent and to each other paying agency of the
Company a copy of each notice so published or mailed.
Section 17.4 GOVERNING LAW. This Indenture and each Note shall be deemed
to be a contract made under the laws of New York, and for all purposes shall be
construed in accordance with the laws of New York.
Section 17.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT;
CERTIFICATES TO TRUSTEE. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions 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 have been
complied with.
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Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Indenture shall include (1) a statement that the person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statement or opinion contained in such certificate or opinion is
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Section 17.6 LEGAL HOLIDAYS. In any case where the date of maturity of
interest on or principal of the Notes or the date fixed for redemption or
repurchase of any Note will not be a Business Day, then payment of such interest
on or principal of the Notes need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the date fixed for redemption or repurchase, and no
interest shall accrue for the period from and after such date.
Section 17.7 NO SECURITY INTEREST CREATED. Nothing in this Indenture or
in the Notes, expressed or implied, shall be construed to constitute a security
interest under the Uniform Commercial Code or similar legislation, as now or
hereafter enacted and in effect, in any jurisdiction.
Section 17.8 TRUST INDENTURE ACT. If and to the extent that any
provision of this Indenture limits, qualifies or conflicts with another
provision included in this Indenture which is required to be included in this
Indenture by any of Section 310 to 317, inclusive, of the Trust Indenture Act,
such required provision shall control. If any provision of this Indenture
modifies or excludes any provision of the Trust Indenture Act that may be so
modified or excluded, the latter provision shall be deemed to apply to this
Indenture as so modified or excluded, as the case may be.
Section 17.9 BENEFITS OF INDENTURE. Nothing in this Indenture or in the
Notes, expressed or implied, shall give to any person, other than the parties
hereto, any paying agent, any authenticating agent, any Note registrar, any
conversion agent and their successors hereunder, the holders of Notes and the
holders of Senior Indebtedness, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
Section 17.10 TABLE OF CONTENTS, HEADINGS, ETC. The table of contents and
the titles and headings of the articles and sections
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of this Indenture have been inserted for convenience of reference only, are not
to be considered a part hereof, and shall in no way modify or restrict any of
the terms or provisions hereof.
Section 17.11 AUTHENTICATING AGENT. The Trustee may appoint an
authenticating agent which shall be authorized to act on its behalf and subject
to its direction in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Article II and Section 3.3, as fully to all intents and purposes
as though the authenticating agent had been expressly authorized by this
Indenture and those Sections to authenticate and deliver Notes. For all
purposes of this Indenture, the authentication and delivery of Notes by the
authenticating agent shall be deemed to be authentication and delivery of such
Notes "by the Trustee" and a certificate of authentication executed on behalf of
the Trustee by an authenticating agent shall be deemed to satisfy any
requirement hereunder or in the Notes for the Trustee's certificate of
authentication. Such authenticating agent shall at all times be a person
eligible to serve as trustee hereunder pursuant to Section 8.9.
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, consolidation or conversion to which any authenticating agent
shall be a party, or any corporation succeeding to the corporate trust business
of any authenticating agent, shall be the successor of the authenticating agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any paper or any further act on the
part of the parties hereto or the authenticating agent or such successor
corporation.
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 a termination, or in case at any time
any authenticating agent shall cease to be eligible under this Section, the
Trustee shall promptly appoint a successor authenticating agent (which may be
the Trustee), shall give written notice of such appointment to the Company and
shall give notice of such appointment to all holders of Notes.
The Trustee agrees to pay to the authenticating agent from time to time
reasonable compensation for its services (to the extent pre-approved by the
Company in writing), and the Trustee shall be entitled to be reimbursed for such
pre-approved payments, subject to Section 8.6.
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The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section 17.11 shall
be applicable to any authenticating agent.
Section 17.12 EXECUTION IN COUNTERPARTS. This Indenture may be executed
in any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
The Chase Manhattan Bank, N.A. hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly signed all as of the date first written above.
U.S. OFFICE PRODUCTS COMPANY
By: /s/ Mark D. Director
----------------------------------------------
Title: Executive Vice President & General Counsel
-------------------------------------------
THE CHASE MANHATTAN BANK, N.A.,
as Trustee
By: /s/ Douglas J. [ILLEGIBLE]
----------------------------------------------
Title: Second Vice President
-------------------------------------------
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EXHIBIT A
(FORM OF FACE OF REGISTERED NOTE)
[Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation (55 Water
Street, New York, New York ("DTC"), to the issuer or its agent for registration
of transfer, exchange or payment, and any certificate issued is registered in
the name of Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]
[THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. EACH
PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF,
REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE COMPANY THAT:
(I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT;
(II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS
SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS (OR SUCH
SHORTER PERIOD AS SHALL BE PERMITTED AS A RESULT OF AN
AMENDMENT TO THE RULES UNDER THE SECURITIES ACT IN RESPECT
THEREOF) AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) (THE
"RESALE RESTRICTION TERMINATION DATE") EXCEPT
(A) TO THE COMPANY,
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(B) PURSUANT TO A CURRENT REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT,
(C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT,
(E) IN A TRANSACTION ARRANGED BY A BROKER OR DEALER REGISTERED
UNDER THE UNITED STATES SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED, TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
(WITHIN THE MEANING OF SUBPARAGRAPHS (A)(1), (2), (3) OR
(7) OF RULE 501 UNDER THE SECURITIES ACT) THAT IS
ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR,"
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR
(F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN
EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY APPLICABLE
JURISDICTION; AND
(III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE
RESTRICTIONS SET FORTH IN (II) ABOVE. IF ANY RESALE OR
OTHER TRANSFER OF THIS SECURITY IS PROPOSED TO BE MADE
PURSUANT TO CLAUSE (II)(E) ABOVE PRIOR TO THE DATE WHICH
IS THREE YEARS (OR SUCH SHORTER PERIOD AS SHALL BE
PERMITTED AS A RESULT OF AN AMENDMENT TO THE RULES UNDER
THE SECURITIES ACT IN RESPECT THEREOF) AFTER THE DATE OF
ORIGINAL ISSUANCE HEREOF, THE TRANSFEROR SHALL DELIVER A
LETTER FROM THE TRANSFEREE CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY. ANY OFFER,
SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING
CLAUSES (II)(D), (E) AND (F) IS SUBJECT TO THE RIGHT OF
THE ISSUER OF THIS SECURITY AND THE TRUSTEE TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER
INFORMATION
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ACCEPTABLE TO THEM IN FORM AND SUBSTANCE. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED MAY 22, 1996
BETWEEN THE COMPANY AND ROBERTSON, STEPHENS & COMPANY LLC AND NATWEST SECURITIES
LIMITED, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE.]
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U.S. OFFICE PRODUCTS COMPANY
(Incorporated in the State of Delaware)
5-1/2% CONVERTIBLE SUBORDINATED NOTE DUE 2003
CUSIP No.
U.S. $_________
U.S. Office Products Company, a corporation duly incorporated and
existing under the laws of the State of Delaware (the "Company"), for value
received, hereby promises to pay to ________________________________, or
registered assigns, the principal sum of ___________ United States dollars on
May 15, 2003 upon presentation and surrender hereof and to pay interest thereon,
from the most recent Interest Payment Date (as defined below) to which interest
has been paid or duly provided for (or from May 22, 1996 if no interest has been
paid or duly provided for in respect of this Security), semiannually in arrears
on May 15 and November 15 in each year (each an "Interest Payment Date"),
commencing November 15, 1996, at the rate of 5-1/2% per annum until the
principal hereof is paid or made available for payment. Interest hereon shall
be calculated on the basis of a 360-day year composed of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture (as defined on the
reverse hereof), be paid to the person in whose name this Note is registered at
the close of business on the Interest Record Date for such interest payment,
which shall be April 30 or October 31 (whether or not a Business Day) next
preceding such Interest Payment Date. To the extent lawful, the Company shall
pay interest on overdue principal and overdue installments of interest at the
rate borne by this Note, compounded semi-annually. Except as otherwise provided
in the Indenture, any such interest not so punctually paid or duly provided for
will forthwith cease to be payable to the holder on such Interest Payment Date
and, together with Defaulted Interest relating thereto, may be paid at any time
in any lawful manner, all as more fully provided in the Indenture. Payment of
interest of this Note shall be made by United States dollar check and mailed to
the person entitled thereto at his address as it shall appear in the Note
Register, or with respect to a holder of Notes with an aggregate principal
amount equal to or in excess of $5,000,000, at the request of such holder in
writing to the Company, interest on such holder's Notes shall be paid by wire
transfer in immediately available funds in accordance with wire transfer
instructions supplied by such holder to the Trustee and pay agent (if different
from the Trustee); provided, however, that if such mailing is not possible and
no such application shall have been made, payment of interest shall be made at
the Principal Corporate Trust Office of the Trustee (as defined in the Indenture
referred to above), or such other office or agency of the Company as may be
designated for such purpose in The City of New York, in United States currency.
Reference is hereby made to the provisions of this Note set forth
under Terms and Conditions of the Notes on the reverse
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hereof, which further provisions shall for all purposes have the same effect as
if set forth at this place.
This Note shall not become valid or enforceable for any purpose unless
and until the certificate of authentication hereon shall have been manually
signed by a duly authorized officer of the Trustee.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed in its corporate name and under its corporate seal by the manual or
facsimile signature of a duly authorized signatory.
U.S. OFFICE PRODUCTS COMPANY
Dated: By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
[Corporate Seal]
Attest:_____________
CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within mentioned Indenture.
THE CHASE MANHATTAN BANK, N.A.,
as Trustee
By:____________________________
Authorized Officer
Dated:
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(FORM OF FACE OF BEARER NOTE)
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE
CODE OF 1986, AS AMENDED.
U.S. OFFICE PRODUCTS COMPANY
(Incorporated in the State of Delaware)
5-1/2% CONVERTIBLE SUBORDINATED NOTE DUE 2003
No. B___ U.S. $_______
U.S. Office Products Company, a corporation duly incorporated and
existing under the laws of the State of Delaware (the "Company"), for value
received, hereby promises to pay to bearer upon presentation and surrender of
this Note the principal sum of ________________ United States dollars on May 15,
2003 upon presentation and surrender hereof and to pay interest thereon, from
May 22, 1996, semiannually in arrears on May 15 and November 15 in each year
(each an "Interest Payment Date"), commencing November 15, 1996, at the rate of
5-1/2% per annum until the principal hereof is paid or made available for
payment. Interest hereon shall be calculated on the basis of a 360-day year
comprised of twelve 30-day months. To the extent lawful, the Company shall pay
interest on overdue principal and overdue installments of interest of the rate
borne by this Note, compounded semi-annually. Payments in respect of this Note
shall be made by United States dollar check, subject to any laws or regulations
applicable thereto and to the right of the Company (limited as provided in the
Indenture (as defined on the reverse hereof) to terminate the appointment of any
paying agency, at the London office of The Chase Manhattan Bank, N.A. located at
Woolgate House, Coleman Street, London EC2P 2HD, England, or Chase Manhattan
Bank Luxembourg S.A., 5 Rue Plaetis, L-2338 Luxembourg, or at such other
offices or agencies outside the United States of America, its territories or its
possessions as the Company may designate, by United States dollar check or, with
respect to a holder of Notes with an aggregate principal amount equal to or in
excess of $5,000,000, at the request of such holder in writing to the Company,
interest on such holder's Notes shall be paid by wire transfer in immediately
available funds to a United States dollar account maintained by the holder at a
bank outside the United States, its territories and its possessions in
accordance with wire transfer instructions supplied by the holder to the Trustee
and paying agent (if different from the Trustee). Interest on this Note shall
be paid only at an office or agency located outside the United States, its
territories or its possessions and, in the case of interest due on or before
maturity, only upon presentation and surrender at such an office or agency of
the interest coupons hereto attached as they severally mature. No payment on
this Note or any coupon will be made at the Principal Corporate Trust Office of
the Trustee (as defined in the Indenture referred to above) or any other paying
agency maintained by the Company in the United States, nor will any payment be
made by
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transfer to an account in, or by mail to an address in, the United States,
except as may be permitted by United States tax laws and regulations in effect
at the time of such payment without detriment to the Company. Notwithstanding
the foregoing, payment of this Note and coupons may be made at the office of the
Trustee in The City of New York if full payment at all paying agencies outside
the United States is illegal or effectively precluded by exchange controls or
other similar restrictions.
Reference is hereby made to the further provisions of this Note set
forth under Terms and Conditions of the Notes on the reverse hereof, which
further provisions shall for all purposes have the same effect as if set forth
at this place.
Neither this Note nor any of the coupons attached hereto shall become
valid or enforceable for any purpose unless and until the certificate of
authentication hereon shall have been manually signed by a duly authorized
officer of the Trustee.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed in its corporate name and under its corporate seal by the manual or
facsimile signature of a duly authorized officer and coupons bearing the
facsimile signature of a duly authorized signatory to be annexed hereto.
U.S. OFFICE PRODUCTS COMPANY
Dated: By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
[Corporate Seal]
Attest:_____________
CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-mentioned Indenture.
THE CHASE MANHATTAN BANK, N.A.,
as Trustee
By:____________________________
Authorized Officer
Dated:
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(FORM OF FACE OF COUPON ON BEARER NOTES)
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE
CODE OF 1986, AS AMENDED.
U.S. OFFICE PRODUCTS COMPANY
(Incorporated in the State of Delaware)
5-1/2% CONVERTIBLE SUBORDINATED NOTE DUE 2003
No. _______ U.S. $_______ Due _______
Unless the Bearer Note to which this coupon appertains shall have been
called for redemption prior to the due date hereof and payment thereof duly
provided for or shall have been converted, U.S. Office Products Company (herein
called the "Company") shall, subject to and in accordance with the terms and
conditions of the Bearer Note and the Indenture dated as of May 22, 1996 between
the Company and The Chase Manhattan Bank, N.A., as Trustee, pay to the bearer,
on the date set forth herein upon surrender hereof, the amount shown hereon
(together with any Additional Amounts in respect hereof which the Company may be
required to pay according to the terms of said Bearer Note) at the paying
agencies set out on the reverse hereof or at such other places outside the
United States of America, its territories and its possessions as the Company may
determine from time to time, by United States dollar check or, with respect to a
holder of Notes with an aggregate principal amount equal to or in excess of
$5,000,000, at the request of such holder in writing to the Company, interest on
such holder's Notes shall be paid by wire transfer in immediately available
funds to a United States dollar account maintained by the bearer at a bank
outside the United States of America, its territories and its possessions, being
one-half year's interest then payable on said Bearer Note.
U.S. OFFICE PRODUCTS COMPANY
By:_____________________________________
Name:___________________________________
Title:__________________________________
Attest:
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[Reverse of Coupon]
The Chase Manhattan Bank, N.A. Chase Manhattan Bank
Woolgate House Luxembourg S.A.
Coleman Street 5 Rue Plaetis
London EC2P 2HD L-2338 Luxembourg
ENGLAND
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(FORM OF REVERSE OF REGISTERED AND BEARER NOTES)
Terms and Conditions of the Notes
1. GENERAL.
(a) This Note is one of a duly authorized issue of securities of the
Company designated as its 5-1/2% Convertible Subordinated Notes due 2003 (herein
called the "Notes"), limited in aggregate principal amount to U.S. $230,000,000.
The Company issued the Notes under an Indenture, dated as of May 22, 1996 (the
"Indenture"), between the Company and The Chase Manhattan Bank, N.A., as trustee
(the "Trustee"). Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Notes include those stated in
the Indenture and those made part of the Indenture by reference to the United
States Trust Indenture Act of 1939, as amended, as in effect on the date of the
Indenture. The Notes are subject to all such terms, and holders of Notes are
referred to the Indenture and said Act for a statement of them. The Notes are
unsecured obligations of the Company.
(b) The Notes are issuable as bearer securities (the "Bearer Notes"), with
interest Coupons attached, in the denominations of U.S. $1,000 and U.S. $10,000
and integral multiples thereof, and as registered securities (the "Registered
Notes"), without coupons, in denominations of U.S. $1,000 and integral multiples
thereof. The Registered Notes, and transfers thereof, shall be registered as
provided in the Indenture. The holder of any Bearer Note or any Coupon and the
registered holder of a Registered Note shall (to the fullest extent permitted by
applicable law) be treated at all times, by all persons and for all purposes,
except as provided in the Indenture, as the absolute owner of such Note or
Coupon, as the case may be, regardless of any notice of ownership, theft or loss
or any writing thereon.
2. ADDITIONAL AMOUNTS.
The Company will pay, as additional interest ("Additional Amounts"), to the
holder of this Note or of any Coupon appertaining hereto who is a United States
Alien (as defined below) such amounts as may be necessary in order that every
net payment of the principal of and premium, if any, and interest on this Note
and any cash payments made in lieu of issuing shares of Common Stock upon
conversion of this Note, after withholding for or on account of any present or
future tax, assessment or other governmental charge imposed upon or as a result
of such payment by the United States or any political subdivision or taxing
authority thereof or therein, will not be less than the interest provided herein
or any Coupon appertaining hereto to be then due and payable; provided, however,
that the foregoing obligation to pay Additional Amounts shall not apply to any
one or more of the following:
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(a) any tax, assessment or other governmental charge which would not
have been so imposed but for (i) the existence of any present or former
connection between such holder (or between a fiduciary, settlor,
beneficiary, member or stockholder of, or a person holding a power over,
such holder, if such holder is an estate, trust, partnership or
corporation) and the United States, including, without limitation, such
holder (or such fiduciary, settlor, beneficiary, member, stockholder or
person holding a power) being or having been a citizen or resident or
treated as a resident thereof or being or having been engaged in a trade or
business or being or having been present therein or having or having had a
permanent establishment therein, (ii) such holder's present or former
status as a personal holding company, foreign personal holding company,
passive foreign investment company, foreign private foundation or other
foreign tax exempt entity or controlled foreign corporation for United
States federal income tax purposes or a corporation which accumulates
earnings to avoid United States federal income tax, or (iii) such holder's
status as a bank extending credit pursuant to a loan agreement entered into
in the ordinary course of business;
(b) any tax, assessment or other governmental charge which would not
have been so imposed but for the presentation by the holder of this Note or
any Coupon appertaining hereto for payment on a date more than 10 days
after the date on which such payment became due and payable or on the date
on which payment thereof is duly provided, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer or personal or
intangible property tax or any similar tax, assessment or other
governmental charge;
(d) any tax, assessment or other governmental charge which would not
have been imposed but for the failure to comply with certification,
information, documentation or other reporting requirements concerning the
nationality, residence, identity or present or former connection with the
United States of the holder or beneficial owner of this Note or any related
Coupon if such compliance is required by statute, regulation or ruling of
the United States or any political subdivision or taxing authority thereof
or therein as a precondition to relief or exemption from such tax,
assessment or other governmental charge;
(e) any tax, assessment or other governmental charge which is payable
otherwise than by deduction or withholding from payments of principal of
and premium, if any, or interest on this Note;
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(f) any tax, assessment or other governmental charge imposed on
interest received by a person holding, actually or constructively, 10% or
more of the total combined voting power of all classes of stock of the
Company entitled to vote; or
(g) any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal of and premium,
if any, or interest on any Note or interest on any Coupon appertaining
thereto if such payment can be made without such withholding by any other
paying agent; nor shall Additional Amounts be paid with respect to any
payment of the principal of or premium, if any, or interest on this Note
(or cash in lieu of issuance of shares of Common Stock upon conversion) to
a person other than the sole beneficial owner of such payment or that is a
partnership or fiduciary to the extent such beneficial owner, member of
such partnership or beneficiary or settlor with respect to such fiduciary
would not have been entitled to the payment of Additional Amounts had such
beneficial owner, member, beneficiary or settlor been the holder of this
Note or any Coupon appertaining hereto. The term "United States Alien"
means any person who, for United States federal income tax purposes, is (i)
a foreign corporation, (ii) a foreign partnership one or more of the
members of which are, for United States federal income tax purposes,
foreign corporations, non-resident alien individuals or non-resident alien
fiduciaries of a foreign estate or trust, (iii) a non-resident alien
individual or (iv) a non-resident alien fiduciary of a foreign estate or
trust, and the term "United States" means the United States of America
(including the several States and the District of Columbia), its
territories, its possessions and other areas subject to its jurisdiction.
Except as specifically provided herein and in the Indenture, the Company
shall not be required to make any payment with respect to any tax,
assessment or other governmental charge imposed by any government or any
political subdivision or taxing authority thereof or therein. Whenever any
Additional Amounts are to be paid on the Notes, the Company will give
notice to the Trustee, the Paying Agent and any paying agency of the
Company, all as provided in the Indenture.
3. REDEMPTION.
(a) The Company, at its option, may redeem the Notes, in whole or in part
(but if in part, in aggregate principal amounts of no less than $1,000), at any
time or times on and after May 22, 1998, upon notice as hereinafter prescribed,
at a redemption price equal to 103.929% of their principal amount if redeemed
during the period commencing May 15, 1998 and ending May 14, 1999, 103.143% of
their principal amount if redeemed during the 12-month period commencing May 15,
1999, 102.357% of their principal amount if redeemed during the 12-month period
commencing May 15, 2000,
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period commencing May 15, 2001, 100.786% of their principal amount if redeemed
during the 12-month period commencing May 15, 2002, and 100% of their principal
amount if redeemed on or after May 15, 2003, in each cash together with accrued
and unpaid interest to the date fixed for redemption; provided, however, that
the Company may not redeem the Notes prior to May 15, 1999, unless the closing
price of the Common Stock on the principal stock exchange or market on which the
Common Stock is then quoted or admitted to trading equals or exceeds 150% of the
conversion price for at least 20 Trading Days, as defined in the Indenture,
within a period of 30 consecutive Trading Days ending on the fifth Trading Day
prior to the date on which notice of redemption is first given to holders. If
fewer than all of the then outstanding Notes are to be redeemed, the Notes to be
redeemed will be selected by the Trustee not more than 75 days prior to the date
fixed for redemption, by such method as the Trustee shall deem fair and
appropriate. Provisions of this Note that apply to Notes called for redemption
also apply to portions of Notes called for redemption. The Trustee shall notify
the Company promptly of the Notes or portions of Notes to be called for
redemption.
(b) The Company shall, except as set forth in the next succeeding
paragraph, redeem the Bearer Notes as a whole but not in part, upon notice as
hereinafter prescribed, at 100% of their principal amount, together with
interest accrued and unpaid to the date fixed for redemption, less applicable
withholding taxes, if any, plus any applicable Additional Amounts payable, after
the Company determines, based on a written Opinion of Counsel, that any
certification, identification or information reporting requirement of any
present or future United States law or regulation with regard to the
nationality, residence or identity of a beneficial owner of a Bearer Note or a
Coupon appertaining thereto who is a United States Alien would be applicable to
a payment of principal of or interest on a Bearer Note or a Coupon appertaining
thereto made outside the United States by the Company or a paying agent (other
than a requirement (i) which would not be applicable to a payment made by the
Company or any one of its paying agents (A) directly to the beneficial owner or
(B) to a custodian, nominee or other agent of the beneficial owner, or (ii)
which could be satisfied by the holder, custodian, nominee or other agent
certifying that the beneficial owner is a United States Alien, provided,
however, in each case referred to in clauses (i)(B) and (ii) payment by such
custodian, nominee or agent of the beneficial owner is not otherwise subject to
any requirement referred to in this sentence). The Company shall make such
determination and will notify the Trustee thereof in writing as soon as
practicable, stating in the notice the effective date of such certification,
identification, or information reporting requirement and the dates within which
the redemption shall occur, and the Trustee shall give prompt notice thereof in
accordance with the Indenture. The Company shall determine the date fixed for
redemption by notice to the Trustee at least 75 days before the date fixed for
redemption unless a shorter period is acceptable to the Trustee. Such
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redemption of the Notes must take place on such date, not later than one year
after the publication of the initial notice of the Company's determination of
the existence of such certification, identification or information reporting
requirement. The Company shall not so redeem the Bearer Notes, however, if the
Company shall, based on a subsequent event, determine, based on a written
Opinion of Counsel (who shall not be an employee of the Company), not less than
30 days prior to the date fixed for redemption, that no such payment would be
subject to any requirement described above, in which case the Company shall
notify the Trustee, which shall give prompt notice of that determination in
accordance with the Indenture and any earlier redemption notice shall thereupon
be revoked and of no further effect.
Notwithstanding the preceding paragraph, if and so long as the
certification, identification or information reporting requirement referred to
in the preceding paragraph would be fully satisfied by payment of United States
withholding, backup withholding or similar taxes, the Company may elect, prior
to the giving of the notice of redemption, to have the provisions of this
paragraph apply in lieu of the provisions of the preceding paragraph. In that
event, the Company will pay such Additional Amounts (without regard to Section 2
hereof) as are necessary in order that, following the effective date of such
requirements, every net payment made outside the United States by the Company or
a paying agent of the principal of and interest on a Bearer Note or a Coupon
appertaining thereto to a holder who is a United States Alien (without regard to
a certification, identification or information reporting requirement as to the
nationality, residence or identity of such holder), after deduction for United
States withholding, backup withholding or similar taxes (other than withholding,
backup withholding or similar taxes (i) which would not be applicable in the
circumstances referred to in the parenthetical clauses of the first sentence of
the next preceding paragraph or (ii) which are imposed as a result of
presentation of such Bearer Note or Coupon for payment more than 10 days after
the date on which such payment becomes due and payable or on which payment
thereof is duly provided for, whichever is later), will not be less than the
amount provided in the Bearer Note or the Coupon to be then due and payable. If
the Company elects to pay such Additional Amounts and as long as it is obligated
to pay such Additional Amounts, the Company may subsequently redeem the Bearer
Notes, at any time, in whole but not in part, upon not more than 60 days nor
less than 30 days notice, given as hereinafter prescribed, at 100% of their
principal amount, plus accrued interest to the date fixed for redemption and
Additional Amounts, if any.
(c) If (i) notice of redemption has been given in the manner set forth in
Section 3.2 of the Indenture with respect to Notes to be redeemed at the option
of the Company, the Notes so to be redeemed shall become due and payable on the
applicable date fixed for redemption specified in such notice and upon
presentation and surrender of the Notes at the place or places specified in the
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notice given by the Company with respect to such redemption, together in the
case of Bearer Notes with all appurtenant Coupons, if any, maturing subsequent
to the dated fixed for redemption, the Notes shall be paid and redeemed by the
Company, at the places and in the manner and currency herein specified and at
the redemption price together with accrued interest, if any, to the dated fixed
for redemption; provided, however, that interest due in respect of Coupons
maturing on or prior to the dated fixed for redemption shall be payable only
upon the presentation and surrender of such Coupons (at an office or agency
located outside of the United States of America). If any Bearer Note
surrendered for redemption shall not be accompanied by all appurtenant Coupons
maturing after the dated fixed for redemption, such Note may be paid after
deducting from the amount otherwise payable an amount equal to the face amount
of all such missing Coupons, or the surrender of such missing Coupon or Coupons
may be waived by the Company and the Trustee if they are furnished with such
security or indemnity as they may require to save each of them and each other
paying agency of the Company harmless. From and after the dated fixed for
redemption, if monies for the redemption of Notes shall have been available at
the principal corporate trust office of the Trustee for redemption on the dated
fixed for redemption, the Notes shall cease to bear interest, the Coupons for
interest appertaining to Bearer Notes maturing subsequent to the dated fixed for
redemption shall be void, and the only right of the holders of such Notes shall
be to receive payment of the Notes together with accrued interest to the dated
fixed for redemption. If monies for the redemption of the Notes are not made
available by the Company for payment until after the dated fixed for redemption,
the Notes shall not cease to bear interest until such monies have been so made
available.
4. CONVERSION.
(a) Subject to and upon compliance with the provisions of the Indenture, a
holder of Notes is entitled, at its option, at any time on and after the
Exchange Date and prior to the close of business on May 15, 2003 to convert such
Note (or any portion of the principal amount thereof which is U.S. $1,000 or an
integral multiple thereof), at the principal amount thereof, or of such portion,
into fully paid and nonassessable shares of common stock, par value $0.001 per
share ("Common Stock"), of the Company (calculated as to each conversion to the
nearest 1/1000 of a share) at a Conversion Price equal to U.S. $47.40 aggregate
principal amount of Notes for each such share (the "Conversion Price") (or at
the current adjusted Conversion Price if an adjustment has been made as provided
in the Indenture) by surrender of the Note, together with (i) if a Bearer Note,
all unmatured Coupons and any matured Coupons in default appertaining thereto,
or (ii) if a Registered Note (if so required by the Company and Trustee),
instruments of transfer in form satisfactory to the Company and the Trustee,
duly executed by the registered holder or by his duly authorized attorney, and,
in either case, (iii) the conversion
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notice hereon duly executed (x) at the Principal Corporate Trust Office of the
Trustee, or at such other office or agency of the Company as may be designated
by it for such purpose in The City of New York, or (y) subject to any laws or
regulations applicable thereto and subject to the right of the Company to
terminate the appointment of any such conversion agency, at the London office of
The Chase Manhattan Bank, N.A. located at 4 Chase Metro Tech Center, 3rd Floor,
Institutional Trust Administration, Brooklyn, New York 11245, and Chase
Manhattan Bank Luxembourg S.A., 5 Rue Plaetis, L-2338 Luxembourg, or at such
other offices or agencies as the Company may designate.
(b) In the case of any Registered Note which is converted after any
Interest Record Date and on or prior to the next succeeding Interest Payment
Date, interest that is payable on such Interest Payment Date shall be payable on
such Interest Payment Date notwithstanding such conversion, and such interest
shall be paid to the person in whose name that Registered Note is registered at
the close of business on such Interest Record Date. Except as otherwise
provided in the immediately preceding sentence, no payment or adjustment shall
be made upon any conversion on account of any interest accrued on the Notes
surrendered for conversion or on account of any dividends or distributions on
the shares issued upon conversion. Registered Notes surrendered for conversion
during the period after the close of business on any Interest Record Date next
preceding any Interest Payment Date to the close of business on such Interest
Payment Date shall be accompanied by payment of an amount equal to the interest
payable on such Interest Payment Date on the principal amount being surrendered
for conversion. No fractions of shares or script representing fractions of
shares will be issued or delivered on conversion, but instead of any fractional
interest the Company shall pay a cash adjustment as provided in the Indenture.
(c) Whenever the Conversion Price is adjusted, the Company shall give
notice as provided in the Indenture.
5. TRANSFER AND EXCHANGE OF NOTES.
(a) Title to Bearer Notes and Coupons shall pass by delivery. As provided
in the Indenture and subject to certain limitations therein set forth, the
transfer of Registered Notes is registrable on the Note Register upon surrender
of a Registered Note for registration of transfer at the office or agency of the
Trustee in The City of New York, or, subject to applicable laws and regulations,
at the office of the paying agency in Luxembourg, duly endorsed by, or
accompanied by a written instrument of transfer in the form satisfactory to the
Company and the Registrar duly executed by, the holder thereof or his attorney
duly authorized in writing, and thereupon one or more new Registered Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
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(b) As provided in the Indenture and subject to certain limitations therein
set forth, Bearer Notes (with all unmatured Coupons appertaining thereto) are
exchangeable at, subject to applicable laws and regulations, the offices of the
paying agencies in London and Luxembourg or as designated by the Company for
such purpose pursuant to the Indenture, for an equal aggregate principal amount
of Registered Notes and/or Bearer Notes of authorized denominations, and
Registered Notes are exchangeable at the principal corporate trust office of the
Trustee in The City of New York or , subject to applicable laws and regulations,
the offices of the paying agencies in London and Luxembourg or as designated by
the Company for such purpose pursuant to the Indenture, for an equal aggregate
principal amount of Registered Notes of authorized denominations as requested by
the holder surrendering the same. Registered Notes will not be exchangeable for
Bearer Notes. The Company shall not be required (i) to exchange Bearer Notes
for Registered Notes during the period between the close of business on any
Interest Record Date and the opening of business on the next succeeding Interest
Payment Date, (ii) to exchange any Bearer Note (or portion thereof) for a
Registered Note if the Company shall determine and inform the Trustee in writing
that, as a result thereof, the Company may incur adverse consequences under the
federal income tax laws and regulations (including proposed regulations) of the
United States in effect or proposed at the time of such exchange, or (iii) in
the event of a redemption in part, (A) to register the transfer of Registered
Notes or to exchange Bearer Notes for Registered Notes during a period of 15
days immediately preceding the date notice is given identifying the serial
numbers of the Notes called for such redemption; (B) to register the transfer of
or exchange any such Registered Notes, or portion thereof, called for
redemption; or (C) to exchange any such Bearer Note called for redemption;
provided, however, that a Bearer Note called for redemption may be exchanged for
a Registered Note which is simultaneously surrendered, with written instruction
for payment of the date fixed for redemption, unless the date fixed for
redemption is during the period between the close of business on any Interest
Record Date and the close of business on the next succeeding Interest Payment
Date, in which case such exchange may only be made prior to the close of
business on the Interest Record Date immediately preceding the date fixed for
redemption. The Company also shall not be required to exchange Notes if, as a
result thereof, the Company would incur adverse consequences under United States
federal income tax laws in effect at the time of such exchange. In the event of
redemption or conversion of a Registered Note in part only, a new Registered
Note or Notes for the unredeemed or unconverted portion hereof will be issued in
the name of the holder thereof.
(c) The costs and expenses of effecting any exchange or registration of
transfer pursuant to the foregoing provisions, except for the expenses of
delivery (if any) by other than regular mail and except, if the Company shall so
require, the payment of a sum sufficient to cover any tax or other governmental
charge or
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insurance charges that may be imposed in relation thereto, will be borne by the
Company.
(d) The Company has initially appointed the Trustee as registrar, transfer
agent, paying agent and conversion agent acting through the Trustee's principal
corporate trust office in The City of New York and its agents in London. The
Company has also initially appointed Chase Manhattan Bank Luxembourg S.A. as a
transfer agent, paying agent and conversion agent. The Company may at any time
terminate the appointment of the registrar and such agents and appoint
additional or other registrars and agents or approve any changes in an office
through which the registrar or any agent acts; provided that, until all of the
Notes have been delivered to the Trustee for cancellation, or monies sufficient
to pay the Notes have been made available for payment and either paid or
returned to the Company as provided in the Notes and the Indenture, the Company
will maintain a paying agent and a conversion agent (i) in The City of New York
in the United States for the payment of the principal and interest on Registered
Notes and for the surrender of Notes for conversion or redemption and (ii) in a
European city that, so long as the Notes are listed on the Luxembourg Stock
Exchange and such exchange shall so require, shall be Luxembourg, for the
payment of the principal and interest on Notes and for the surrender of Notes
for conversion or redemption.
6. MEETINGS OF HOLDERS.
A meeting of holders of Notes may be called at any time and from time to
time in the manner and for the purposes set forth in the Indenture. The Trustee
may at any time call a meeting of holders of the Notes to be held at such time
and at such place in any of such designated locations as the Trustee shall
determine. Notice of every meeting of holders shall be made as specified in the
Indenture.
7. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented, and any existing default or Event of Default or compliance with
any provision may be waived, with the written consent of the holders of a
majority in aggregate principal amount of the Notes then outstanding. Without
notice to or consent of any holder, the parties thereto may amend or supplement
the Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, or make any other change that does not adversely affect the
rights of any holder of a Note.
8. SUBORDINATION.
Payment of principal, premium, if any, interest on and Additional Amounts
with respect to the Notes is subordinated, in
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the manner and to the extent set forth in the Indenture, to the prior payment in
full of all Senior Indebtedness.
9. SUCCESSORS.
Except as otherwise provided in the Indenture, when a successor assumes all
the obligations of its predecessor under the Notes and the Indenture, the
predecessor will be released from those obligations.
10. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer or employee, as such, past, present or
future, of the Company or any successor corporation shall have any personal
liability in respect of the obligations of the Company under the Notes or the
Indenture by reason of his, her or its status as such stockholder, director,
officer or employee. Each holder of a Note by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
11. NON-BUSINESS DAYS.
In any case where the date of maturity of the principal of or interest on
(or Additional Amounts, if any, with respect thereto) the Notes or the date
fixed for redemption of any Note shall be at any place of payment a day other
than a Business Day, then payment of principal or interest (or Additional
Amounts, if any) need not be made on such date at such place 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 of maturity or the date fixed for redemption,
and no interest shall accrue for the period after such date.
12. NOTICES.
All notices to the holder of Notes will be published on a Business Day in
Authorized Newspapers in The City of New York and in London, and, as long as
the Notes are listed on the Luxembourg Stock Exchange, in an Authorized
Newspaper in Luxembourg, or, if either publication in London or Luxembourg is
not practical, in an Authorized Newspaper in Western Europe. Notices shall be
deemed to have been given on the date of publication as aforesaid or, if
published on different dates, on the date of the first such publication. A copy
of each notice will be mailed by the Trustee, on behalf of and to the expense of
the Company, by first-class mail to each holder of a Registered Note at the
registered address of such holder as the same shall appear in the Note Register
on the day fifteen days prior to such mailing. The Trustee shall promptly
furnish to the Company, the Paying Agent and to each other paying agency of the
Company a copy of each notice so published or mailed.
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13. GOVERNING LAW.
(a) The Indenture, this Note and any coupons appertaining hereto shall be
governed by and construed in accordance with the laws of the State of New York,
United States of America, without regard to principles of conflicts of laws.
(b) The Company has appointed the Trustee as its agent upon whom process
may be served in any legal action or proceeding relating to or arising out of
this Note, the Indenture or any Coupon appertaining hereto.
14. AUTHENTICATION.
This Note and any Coupon appertaining thereto shall not become valid or
obligatory for any purpose until the certificate of authentication hereon shall
have been duly signed by the Trustee or an authenticating agent acting under the
Indenture.
15. STATUS AS UNITED STATES REAL PROPERTY HOLDING CORPORATION.
To the best of its knowledge, as of the date of the issuance of this Note,
the Company is not a "United States real property holding corporation" as
defined in Section 897(c)(2) of the United States Internal Revenue Code of 1986,
as amended (the "Code"). A non-United States person disposing of this Note may
request from the Company a statement as to whether this Note constitutes a
"United States real property interest" (as defined in Code Section 897(c)(1) as
of the date of disposition. It may be necessary to obtain a statement that this
Note does not constitute a "United States real property interest" prior to the
time that a tax return would otherwise be required to be filed with the United
States Internal Revenue Service with respect to such disposition in order to
avoid a withholding tax on such disposition. If, at any time while this Note is
outstanding, the Company determines that it is at such time a "United States
real property holding corporation", it shall provide notice of such
determination in accordance with the provisions of Section 12 hereof.
16. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a holder of Note or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A ( = Uniform Gifts of Minors
Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED NOTES.
In addition to the rights provided to holder of Notes under the Indenture,
holders of Restricted Notes shall have all the rights set forth in the
Registration Rights Agreement.
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18. ACCOUNTING TERMS.
All accounting terms not otherwise defined herein shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
applied in the United States.
19. DESCRIPTIVE HEADINGS.
The descriptive headings appearing herein are for convenience of reference
only and shall not alter, limit or define the provisions hereof. The Company
will furnish to any holder upon written request and without charge a copy of the
Indenture and/or the Registration Rights Agreement.
Request may be made to:
U.S. Office Products Company
1440 New York Avenue, N.W.
Suite 310
Washington, D.C. 20005
Attention: Secretary
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TRANSFER NOTICE
FOR VALUE RECEIVED, the undersigned holder hereby sell(s), assign(s)
and transfer(s) unto ________________________ whose taxpayer identification
number is _______________ and whose address including postal/ZIP code is
____________________________________________________ the within Note and all
rights thereunder, hereby irrevocably constituting and appointing
______________________________________ attorney-in-fact to transfer said Note on
the books of the Company with full power of substitution in the premises. Only
if a Restricted Note: In connection with the transfer of this Note, the
undersigned certifies that (check one):
/ / (a) This Note is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act") in compliance with the
exemption from registration under the Securities Act of 1933 provided
by Rule 144A thereunder.
/ / (b) This Note is being transferred in an Offshore Transaction (as defined
in Regulation S under the Securities Act) in compliance with the
exemption from registration under the Securities Act provided by
Regulation S thereunder.
/ / (c) This Note is being transferred in a transaction arranged by a broker
or dealer registered under the United States Securities Exchange Act
of 1934, as amended (the "Exchange Act"), to an institutional
"accredited investor" (within the meaning of Rule 501(a)(1), (2), (3)
or (7) under the Securities Act) in a transaction not involving any
general solicitation or general advertising and in connection with
which transfer the Company has received, if it has so requested, an
opinion of counsel (satisfactory to it in form and substance) to the
effect that the transfer is being made pursuant to an exemption from
the registration requirements of the Securities Act.
/ / (d) This Note is being transferred to U.S. Office Products Company.
/ / (e) This Note is being transferred in connection with a transfer, other
than those above, as to which the Company has received an opinion of
counsel (satisfactory to it in form and substance) to the effect that
the transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act.
A-22
<PAGE>
/ / (f) This Note is being exchanged for a beneficial interest in the Rule
144A Global Note and the undersigned is a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act).
Date: Name:_____________________________________________
By:_______________________________________________
Name:
Title:
NOTICE: The signature of the holder to this assignment must correspond with the
name as written upon the face of the within instrument in every particular,
without enlargement or any change whatsoever.
SIGNATURE GUARANTEED
A-23
<PAGE>
TO BE COMPLETED BY A BROKER OR DEALER IF (c) ABOVE IS CHECKED: The
undersigned represents and warrants that (i) it is a broker or dealer registered
under Section 15 of the Exchange Act, (ii) each person which will become a
beneficial owner of this Note upon transfer is an institutional investor which
is an "accredited investor" (within the meaning of Rule 501(a)(1), (2), (3) or
(7) under the Securities Act; (iii) no general solicitation or general
advertising was made or used by it in connection with the offer and sale of this
Note to such person(s); and (iv) each such person has been notified that this
Note has not been registered under the Securities Act and is subject to the
restrictions on transfer of the Note set forth herein and in the Indenture.
Dated: By:_______________________________________________
Name:
Title:
IF NONE OF THE FOREGOING BOXES IS CHECKED, THE TRUSTEE SHALL NOT BE
OBLIGATED TO REGISTER THE TRANSFER OF THIS NOTE UNLESS AND UNTIL THE CONDITIONS
TO ANY SUCH TRANSFER OF REGISTRATION SET FORTH HEREIN, ON THE FACE HEREOF AND IN
THE INDENTURE SHALL HAVE BEEN SATISFIED.
A-24
<PAGE>
CONVERSION NOTICE
If (i) Registered Note of denomination U.S. $1,000 or (ii) Bearer Note
of denomination U.S. $1,000:
The undersigned holder of this Note hereby irrevocably exercises the
option to convert this Note into shares of Common Stock of U.S. Office Products
Company in accordance with the terms of this Note and directs that such shares
be registered in the name of and delivered, together with a check in payment for
any fractional share, to be undersigned unless a different name has been
indicated below. If shares are to be registered in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto.
Dated: ____________________________________________
Signature
MUST BE MEDALLION GUARANTEED IF THE STOCK IS
TO BE ISSUED IN A NAME OTHER THAN THE
REGISTERED HOLDER OF THE NOTE
If shares are to be registered in the name of and delivered to a
person other than the holder, please print such person's name and address and,
if this is a Restricted Note complete Transfer Notice:
_____________________________________________
HOLDER
Please print name and address
of holder:
A-25
<PAGE>
CONVERSION NOTICE
If (i) Registered Note of denomination greater than U.S. $1,000 or
(ii) Bearer Note of denomination U.S. $10,000:
The undersigned holder of this Note hereby irrevocably exercises the
option to convert this Note, or portion hereof (which is U.S. $1,000 or an
integral multiple thereof below designated, into shares of Common Stock of U.S.
Office Products Company in accordance with the terms of this Note, and directs
that such shares, together with a check in payment for any fractional share and
any Notes representing any unconverted principal amount hereof, be delivered to
and be registered (if a Registered Note) in the name of the undersigned unless a
different name has been indicated below. If shares or Notes are to be
registered in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto.
Dated: _____________________________________________
Signature
MUST BE MEDALLION GUARANTEED IF THE STOCK IS
TO BE ISSUED IN A NAME OTHER THAN THE
REGISTERED HOLDER OF THE NOTE
If shares or Notes are to be If only a portion of the Notes in
registered in the name of a the name of the holder is to be
Person other than the holder, converted, please indicate:
please print such person's
name and address and, if this 1. Principal Amount to be Note,
is a Restricted Note, complete complete Transfer Notice:
Transfer Notice converted: U.S. $
2. Kind, amount and denomination
of Notes representing
unconverted principal amount
to be issued:
Bearer-U.S. $________________
Denominations: U.S. $________
(U.S. $1,000 or $10,000)
Registered - U.S. $
Denominations: U.S. $_________
(U.S. $1,000 or an integral
multiple thereof)
Registered Notes are not
exchangeable for Bearer Notes
A-26
<PAGE>
[SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES
The following exchanges of a part of this Rule 144A Global Note for
Registered Accredited Investor Notes have been made:
<TABLE>
<CAPTION>
Amount of Principal Amount of Signature of
Decrease in Amount of Increase in This Global Note Authorized Officer of
Principal Amount Principal Amount of This Following Such Trustee or Note
Date of Exchange of this Global Note Global Note Decrease or Increase Registrar]
- ---------------- ------------------- ----------- -------------------- ----------
<S> <C> <C> <C> <C>
</TABLE>
A-27
<PAGE>
EXHIBIT B
(FORM OF REGULATION S GLOBAL NOTE)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OF
AMERICA (INCLUDING THE STATES AND THE DISTRICT OF COLUMBIA), ITS TERRITORIES,
ITS POSSESSIONS AND OTHER AREAS SUBJECT TO THIS JURISDICTION (THE "UNITED
STATES") OR TO ANY CITIZEN, NATIONAL OR RESIDENT OF THE UNITED STATES OR TO ANY
CORPORATION, PARTNERSHIP OR OTHER ENTITY CREATED OR ORGANIZED IN OR UNDER THE
LAWS OF THE UNITED STATES OR ANY POLITICAL SUBDIVISION THEREOF, OR TO ANY ESTATE
OR TRUST THE INCOME OF WHICH IS SUBJECT TO UNITED STATES FEDERAL INCOME TAXATION
REGARDLESS OF ITS SOURCE OR TO ANY OTHER PERSON DEEMED A U.S. PERSON UNDER
REGULATION S UNDER THE SECURITIES ACT ("UNITED STATES PERSONS"), EXCEPT TO
CERTAIN INSTITUTIONAL INVESTORS IN THE UNITED STATES IN TRANSACTI0NS NOT
REQUIRED TO BE REGISTERED UNDER THE SECURITIES ACT. ANY UNITED STATES PERSON
WHO HOLDS THE OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES
FEDERAL INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165j AND
1287(a) OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED. THIS
SECURITY IS A TEMPORARY GLOBAL SECURITY, WITHOUT COUPONS, EXCHANGEABLE FOR
DEFINITIVE BEARER NOTES WITH INTEREST COUPONS OR REGISTERED NOTES WITHOUT
INTEREST COUPONS. THE RIGHTS ATTACHING TO THIS GLOBAL NOTE, AND THE CONDITIONS
AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE AS SPECIFIED IN
THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS
OF THIS GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON
EXCEPT PURSUANT TO THE PROVISIONS HEREOF.
B-1
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
(Incorporated in the State of Delaware)
5-1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2003
TEMPORARY GLOBAL NOTES
U.S. OFFICE PRODUCTS COMPANY, a corporation duly incorporated and
existing under the laws of the State of Delaware (the "Company"), for value
received,, hereby promises to pay to bearer upon presentation and surrender of
this Global Note the principal sum of $_______ United States Dollars on May 15,
2003 and to pay interest thereon, from May 22, 1996 semiannually in arrears on
May 15 and November 15 in each year, commencing November 15, 1996, at the rate
of 5-1/2% per annum, until the principal hereof is paid or made available for
payment; provided, however, that interest on this Global Note shall be payable
only after the issuance of the definitive Notes for which this Global Note is
exchangeable and, in the case of definitive Notes in bearer form, only upon
presentation and surrender (at an office or agency outside the United States,
its territories and its possessions, except as otherwise provided in the
Indenture referred to below) of the interest coupons thereto attached as they
severally mature. This Global Note is one of a duly authorized issue of Notes
of the Company designated as specified in the title hereof, issued and to be
issued under the Indenture dated as of May 22, 1996 (the "Indenture") between
the Company and The Chase Manhattan Bank, N.A., as Trustee (the "Trustee," which
term includes any successor trustee under the Indenture). This Global Note is a
temporary Note and is exchangeable in whole or from time to time in part without
charge upon request of the holder hereof for definitive Notes in bearer form,
with interest coupons attached, or in registered form, without coupons, of
authorized denominations, (a) not earlier than 60 days after the date hereof and
(b) as promptly as practicable following presentation of each certification
called for in the Indenture for such purpose, that the beneficial owner or
owners of this Global Note (or, if such exchange is only for a part of this
Global Note, of such part) are not United States persons or other Persons who
have purchased such Note for resale to United States persons. Definitive Notes
in bearer form to be delivered in exchange for any part of this Global Note
shall be delivered only outside of the United States, its territories and its
possessions. Upon any exchange of a part of this Global Note for definitive
Notes, the portion of the principal amount hereof so exchanged shall be endorsed
by the Trustee or its agent on the Schedule of Exchanges hereto, and the
principal amount hereof so exchanged shall be reduced for all purposes by the
amount so exchanged. Until exchanged in full for definitive Notes, this Global
Note shall in all respects be entitled to the same benefits under, and subject
to the same terms and conditions of, the Indenture as definitive Notes
authenticated and delivered thereunder, except that neither the holder hereof
not the beneficial owners of this Global Note shall be entitled to receive
payment of interest hereon or to convert this Global Note into shares of Common
Stock of the Company or any other security, cash or other property.
B-2
<PAGE>
THIS GLOBAL NOTE SHALL BE GOVERNED BY AND CONSTRUCTED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
All terms used in this Global Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture. Unless the
certificate of authentication hereon has been manually executed by an authorized
signatory of the Trustee, this Global Note shall not be entitled to any benefit
under the Indenture or valid or obligatory for any purpose.
IN WITNESS, WHEREOF, the Company has caused this Global Note to be
duly executed in its corporate name by its duly authorized signatory under its
corporate seal.
Dated: May 22, 1996 U.S. OFFICE PRODUCTS COMPANY
By:__________________________________________
Name:
Title:
[Corporate Seal]
Attest:
CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-mentioned Indenture.
THE CHASE MANHATTAN BANK, N.A.
as Trustee
By:___________________________
Name:
Title:
B-3
<PAGE>
5 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2003
REGISTRATION RIGHTS AGREEMENT
Dated as of May 22, 1996
by and among
U.S. OFFICE PRODUCTS COMPANY,
as the Company,
and
ROBERTSON, STEPHENS & COMPANY LLC
and
NATWEST SECURITIES LIMITED,
as Managers
<PAGE>
This Registration Rights Agreement is made and entered into as of May 22,
1996, by and among U. S. Office Products Company, a Delaware corporation (the
"Company"), and Robertson, Stephens & Company LLC and Natwest Securities Limited
(the "Managers") who have purchased or have the right to purchase up to
$230,000,000 in aggregate principal amount of 5 1/2% Convertible Subordinated
Notes due 2003 (the "Notes") of the Company pursuant to the Subscription
Agreement (as such term is defined below).
This Agreement is made pursuant to the Subscription Agreement, dated May
14, 1996, among the Company and the Managers (the "Subscription Agreement").
In order to induce the Managers to enter into the Subscription Agreement, the
Company has agreed to provide the registration rights provided for in this
Agreement to the Managers and their respective direct and indirect
transferees (i) for the benefit of the Managers, (ii) for the benefit of the
holders from time to time of the Notes (including the Managers) and the
holders from time to time of the Common Stock issuable or issued upon
conversion of the Notes and (iii) for the benefit of the securities
constituting the Transfer Restricted Securities. The execution of this
Agreement is a condition to the closing of the transactions contemplated by
the Subscription Agreement.
The parties hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
ACCREDITED INVESTOR NOTES: Notes initially resold by the Managers
pursuant to the Subscription Agreement to institutional "accredited investors"
(within the meaning of Rule 501(a)(1), (2), (3) or (7) promulgated by the SEC
under the Securities Act) (it being understood and agreed that such Notes shall
not include any Notes initially resold outside the United States to certain
persons in offshore transactions in reliance on Regulation S under the
Securities Act) and all Notes issued upon registration of transfer of or in
exchange for such Notes.
ACT: As defined in this Section 1.
ADVICE: As defined in Section 2(d) hereof.
AFFILIATE: An affiliate of any specified person shall mean 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 person, means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise and
the terms "affiliated," "controlling" and "controlled" have meanings correlative
to the foregoing.
<PAGE>
AGREEMENT: This Registration Rights Agreement, as the same may be
amended, supplemented or modified from time to time in accordance with the terms
hereof.
BUSINESS DAY: Each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
CLOSING DATE: May 22, 1996.
COMMON STOCK: Common Stock, $.001 par value per share, of the Company
and any other shares of common stock as may constitute "Common Stock" for
purposes of the Indenture, in each case, as issuable or issued upon conversion
of the Notes.
COMPANY: U.S. Office Products Company, a Delaware corporation, and any
successor corporation thereto.
CONTROLLING PERSON: As defined in Section 6(a) hereof.
DAMAGES PAYMENT DATE: Each of the semi-annual interest payment dates
provided in the Indenture.
EFFECTIVENESS PERIOD: As defined in Section 2(a) hereof.
EFFECTIVENESS TARGET DATE: The 180th day following the Closing Date;
provided that, as to the Company's obligations to file a Shelf Registration
Statement registering the resale of shares of Common Stock issuable upon
conversion of Notes, which shares constitute Transfer Restricted Securities, in
the event that notwithstanding the Company's best efforts to cause such
Registration Statement to become effective by the 180th day after the Closing
Date, the Company is unable to cause such Registration Statement to become
effective. The Effective Target Date for Registration Statement (but only such
Registration Statement) shall be extended to up to the 240th day after the
Closing Date provided that the Company has filed a Shelf Registration Statement
on Form S-1 covering resales of such shares and is using its best efforts to
cause such Registration Statement to become effective as soon as reasonably
practicable. The foregoing proviso shall not alter in any respect the Effective
Target Date as it relates to the Company's obligation to cause a Shelf
Registration Statement registering the resale of the Notes constituting Transfer
Restricted Securities to become effective.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
FILING DATE: The 90th day after the Closing Date.
- 2 -
<PAGE>
HOLDER: Each owner of any Transfer Restricted Securities.
INDEMNIFIED PERSON: As defined in Section 6(a) hereof.
INDENTURE: The Indenture, dated as of the date hereof, between the
Company and the Trustee, pursuant to which the Notes are being issued, as the
same may be amended, modified or supplemented from time to time in accordance
with the terms thereof.
LIQUIDATED DAMAGES: As defined in Section 3(a) hereof.
MANAGERS: As defined in the first paragraph hereof.
NOTES: The $200,000,000 aggregate principal amount of 5 1/2%
Convertible Subordinated Notes due 2003 of the Company being issued pursuant to
the Indenture (together with up to $30,000,000 aggregate principal amount of
such Notes, if, and to the extent, the Managers' over-allotment option is
exercised).
PROCEEDING: An action, claim, suit or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed in reliance upon Rule 430A), as
amended or supplemented by any prospectus supplement, with respect to the resale
of any of the Transfer Restricted Securities covered by such Registration
Statement, and all other amendments and supplements to any such prospectus,
including post-effective amendments, and all materials incorporated by reference
or deemed to be incorporated by reference, if any, in such prospectus.
RECORD HOLDER: (i) with respect to any Damages Payment Date relating
to any Note as to which any such Liquidated Damages have accrued, the registered
Holder of such Note on the record date with respect to the interest payment date
under the Indenture on which such Damages Payment Date shall occur and (ii) with
respect to any Damages Payment Date relating to any shares of Common Stock as to
which any such Liquidated Damages have accrued, the registered Holder of such
shares 15 days prior to the next succeeding Damages Payment Date.
REGISTRATION DEFAULT: As defined in Section 3(a) hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
filed with the SEC pursuant to the Securities Act that covers the resale of any
of the Transfer Restricted Securities pursuant to the provisions of this
Agreement, including the
- 3 -
<PAGE>
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be
incorporated by reference, if any, in such registration statement.
REQUISITE INFORMATION: As defined in Section 2(c) hereof.
RULE 144: Rule 144 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any successor rule or
regulation.
RULE 144A: Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any successor
rule or regulation.
RULE 144A NOTES: Notes initially resold by the Managers pursuant to
the Subscription Agreement to "qualified institutional buyers" (as such time is
defined in Rule 144A) (it being understood and agreed that such Notes shall not
include any Notes initially resold outside the United States to certain persons
in offshore transactions in reliance on Regulation S under the Securities Act)
and all Notes issued upon registration of transfer of or in exchange for such
Notes.
RULE 158: Rule 158 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any successor rule or
regulation.
RULE 415: Rule 415 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any successor rule or
regulation.
RULE 424: Rule 424 promulgated by the SEC pursuant to the Securities
Act, as such Rule may be amended from time to time, or any successor rule or
regulation.
RULE 430A: Rule 430A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any successor
rule or regulation.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.
SHELF REGISTRATION STATEMENT: As defined in Section 2 hereof.
SPECIAL COUNSEL: The special counsel to the Holders.
- 4 -
<PAGE>
SUBSCRIPTION AGREEMENT: As defined in the second paragraph hereof.
TIA: The Trust Indenture Act of 1939, as amended, and the rules and
regulations promulgated by the SEC thereunder.
TRANSFER RESTRICTED SECURITIES: The Accredited Investor Notes and the
Rule 144A Notes and the shares of Common Stock into which such Notes are
converted or convertible (including any shares of Common Stock issued or
issuable thereon upon any stock split, stock combination, stock dividend or the
like), and associated related rights, if any, until, in the case of any such
Note or share (and associated rights) (i) the date on which the resale thereof
has been registered effectively pursuant to the Securities Act and completed in
accordance with the Registration Statement relating thereto, (ii) the date on
which such security has been sold to the public pursuant to Rule 144 or is
saleable pursuant to paragraph (k) of Rule 144 or (iii) the date on which it
ceases to be outstanding, whichever date is earliest; provided that for purposes
of the provisions hereof requiring the Company to register the resale of
Transfer Restricted Securities and related obligations, shares of Common Stock
issuable upon conversion of outstanding Notes constituting Transfer Restricted
Securities shall be treated as outstanding (other than for purposes of
Liquidated Damages and approval, amendment and waiver provisions).
TRUSTEE: The trustee under the Indenture.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
connection with which securities of the Company are sold to an underwriter for
reoffering to the public pursuant to an effective Registration Statement.
References herein to the term "Holders of a majority in aggregate
principal amount of Transfer Restricted Securities" or words to a similar effect
shall mean, with respect to any request, notice, demand, objection or other
action by the Holders hereunder or pursuant hereto (each, an "Act"), registered
Holders of a number of shares of then-outstanding Common Stock constituting
Transfer Restricted Securities and an aggregate principal amount of then
outstanding Notes constituting Transfer Restricted Securities, such that the sum
of such shares of Common Stock and the shares of Common Stock issuable upon
conversion of such Notes constitutes in excess of 50% of the sum of all of the
then-outstanding shares of Common Stock constituting Transfer Restricted
Securities and the number of shares of Common Stock issuable upon conversion of
then-outstanding Notes constituting Transfer Restricted Securities. For
purposes of the immediately preceding sentence, (i) any Holder may elect to take
any Act with respect to all or any portion of Transfer Restricted Securities
held by it and only the portion as to which such Act is taken shall be included
in the numerator of the fraction described in the preceding sentence and (ii)
Transfer
- 5 -
<PAGE>
Restricted Securities owned, directly or indirectly, by the Company or its
Affiliates shall be deemed not to be outstanding.
2. SHELF REGISTRATION STATEMENT
(a) The Company agrees to file with the SEC as soon as reasonably
practicable after the Closing Date, but in no event later than the Filing Date,
a Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Transfer Restricted Securities or
separate Registration Statements for an offering to be made on a continuous
basis pursuant to Rule 415 covering (i) all of the Notes constituting Transfer
Restricted Securities and (ii) all of the shares of Common Stock constituting
Transfer Restricted Securities, respectively (such Registration Statement or
Statements, collectively, the "Shelf Registration Statement"). Each Shelf
Registration Statement shall be on Form S-3 under the Securities Act or another
appropriate form selected by the Company permitting registration of such
Transfer Restricted Securities for resale by the Holders in the manner or
manners reasonably designated by them (including, without limitation, up to
three underwritten offerings). The Company will use its best efforts to effect
the intent of this Agreement and facilitate the disposition of the Transfer
Restricted Securities, notwithstanding certain stockholders' rights to
participate in offerings. The Company shall use its best efforts to cause each
Shelf Registration Statement to be declared effective pursuant to the Securities
Act as soon as reasonably practicable following the filing thereof and to keep
each Shelf Registration Statement continuously effective under the Securities
Act for 36 months after the Closing Date (subject to extension pursuant to
Sections 2(d) hereof) (the "Effectiveness Period"), or such shorter period
ending when there cease to be any Transfer Restricted Securities.
(b) SUPPLEMENTS AND AMENDMENTS. The Company shall use its best
efforts to keep each Shelf Registration Statement continuously effective by
supplementing and amending the Shelf Registration Statement if required by the
rules, regulations or instructions applicable to the registration form used for
such Shelf Registration Statement, if required by the Securities Act or if
reasonably requested by the Holders of a majority in aggregate principal amount
of the Transfer Restricted Securities or by any managing underwriter of such
Transfer Restricted Securities; provided, however, that the Effectiveness Period
shall be extended as provided in Section 2(d) hereof.
(c) SELLING SECURITYHOLDER INFORMATION. Each Holder shall furnish to
the Company such information regarding the distribution of its Transfer
Restricted Securities as is required by law to be disclosed in the applicable
Registration Statement (the "Requisite Information") prior to effecting any sale
pursuant to such Registration Statement.
- 6 -
<PAGE>
The Company shall file, within five Business Days after the receipt of
notice from any Holder which includes the Requisite Information with respect to
such Holder, a Prospectus supplement pursuant to Rule 424 or otherwise amend or
supplement such Registration Statement to include in the Prospectus the
Requisite Information as to such Holder (and the Transfer Restricted Securities
held by such Holder), and the Company shall provide such Holder and the Special
Counsel within seven Business Days after receipt of such notice with a copy of
such Prospectus as so amended or supplemented containing the Requisite
Information in order to permit such Holder to comply with the Prospectus
delivery requirements of the Securities Act in a timely manner with respect to
any proposed disposition of such Holder's Transfer Restricted Securities.
If any such Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require, in the event that such reference to such Holder by
name or otherwise is not required by the Securities Act or any similar Federal
statute then in force, the deletion of the reference to such Holder in such
Registration Statement at any time subsequent to the time that such reference
ceases to be required.
(d) CERTAIN NOTICES; SUSPENSION OF SALES. Each Holder agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 4(c)(ii), 4(c)(iii), 4(c)(v) or 4(c)(vi) hereof, such Holder will
forthwith discontinue disposition of such Transfer Restricted Securities covered
by such Registration Statement and Prospectus (other than in transactions exempt
from the registration requirements under the Securities Act) until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 4(g) hereof, or until it is advised in writing (the "Advice") by the
Company that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus. If
the Company shall give any such notice, the Effectiveness Period shall be
extended by the number of days during such period from and including the date of
the giving of such notice to and including the date when each Holder shall have
received (x) the copies of the supplemented or amended Prospectus contemplated
by Section 4(g) hereof or (y) the Advice, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus.
3. LIQUIDATED DAMAGES
(a) The Company and the Managers agree that the Holders will suffer
damages if the Company fails to fulfill its obligations
- 7 -
<PAGE>
pursuant to Section 2 hereof and that it would not be possible to ascertain
the extent of such damages. Accordingly, the Company hereby agrees to pay
liquidated damages ("Liquidated Damages") to each Holder under the
circumstances and to the extent set forth below:
(i) if the Shelf Registration Statement has not been filed with
the SEC on or prior to the Filing Date; or
(ii) if each Shelf Registration Statement is not declared
effective by the SEC on or prior to the applicable Effectiveness
Target Date; or
(iii) if any Shelf Registration Statement ceases to be effective
or usable at any time during the Effectiveness Period (without being
succeeded on the next Business Day immediately by a post-effective
amendment or supplement to such Registration Statement that cures such
failure and that is itself, in the case of a post-effective amendment,
immediately declared effective) for a period of time which shall
exceed 45 days in the aggregate in any three-month period or 90 days
in the aggregate per 12-month period;
(any of the foregoing, a "Registration Default"). In the event of any such
Registration Default, the Company shall accrue Liquidated Damages to each
Holder during the first 90-day period immediately following the occurrence of
such Registration Default in an amount equal to (x) $.05 per week per $1,000
principal amount of Notes and (y), if applicable, $.01 per week per share of
Common Stock (subject to adjustment in the event of any stock split, stock
combination, stock dividends and the like) in each case constituting Transfer
Restricted Securities held by such Holder for each week or portion thereof
that the Registration Default continues. The weekly rate at which such
Liquidated Damages accrue shall increase by an additional $.05 per $1,000
principal amount of Notes and $.01 per share (subject to adjustment as set
forth above) of Common Stock constituting Transfer Restricted Securities for
each subsequent continuing 90-day period following the occurrence of such
Registration Default until all Registration Defaults have been cured;
PROVIDED, HOWEVER, that Liquidated Damages shall not at any time exceed $.25
per week per $1,000 principal amount of Notes and $.05 per week per share
(subject to adjustment as set forth above) of Common Stock constituting
Transfer Restricted Securities. Following the cure of all Registration
Defaults, the accrual of Liquidated Damages shall cease (without in any way
limiting the effect of any subsequent Registration Default). A Registration
Default under clause (i) above shall be cured on the date that the applicable
Shelf Registration Statement is filed with the SEC; a Registration Default
under clause (ii) above shall be cured on the date that the applicable Shelf
Registration Statement is declared
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effective by the SEC; and a Registration Default under clause (iii) above
shall be cured on the date the applicable Shelf Registration Statement is
declared effective or otherwise usable.
(b) The Company shall notify the Trustee within one Business Day
after each and every date on which a Registration Default occurs. Liquidated
Damages shall be paid by the Company to the Record Holders on each Damages
Payment Date by wire transfer of immediately available funds to the accounts
specified by them or by mailing checks to their registered addresses as they
appear in the Note register (as defined in the Indenture), in the case of the
Notes, and in the register of the Company for the Common Stock, in the case of
shares of Common Stock, if no such accounts have been specified on or before the
Damage Payment Date; PROVIDED, HOWEVER, that any Liquidated Damages accrued with
respect to any Note or portion thereof called for redemption on a redemption
date, repurchased in connection with a Repurchase Event (as defined in the
Indenture) on a repurchase date, or converted into shares of Common Stock on a
conversion date prior to the Damages Payment Date, shall, in any such event, be
paid instead to the Holder who submitted such Note or portion thereof for
redemption, repurchase or conversion on the applicable redemption date,
repurchase date or conversion date, as the case may be, on such date (promptly
following the conversion date, in the case of conversion of a Note).
(c) All of the Company's obligations set forth in this Section 3
which are unsatisfied to any extent with respect to any Transfer Restricted
Securities at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security have been satisfied in full (notwithstanding the earlier termination of
this Agreement).
(d) Any payments due and payable pursuant to this Section 3 with
respect to any Notes shall be subject to the provisions of Article IV of the
Indenture as if such payments were additional interest on the Notes.
4. REGISTRATION PROCEDURES. In connection with the Company's
registration obligations hereunder, the Company shall effect such registrations
on the appropriate form selected by the Company to permit the resale of Transfer
Restricted Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall as expeditiously as
reasonably possible:
(a) No fewer than five Business Days prior to the initial filing of a
Registration Statement or Prospectus and no fewer than two Business Days prior
to the filing of any amendment or supplement thereto (excluding, unless
specifically requested, any document that would be incorporated or deemed to be
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incorporated therein by reference), furnish to the Special Counsel and the
managing underwriters, if any, copies of all such documents proposed to be filed
(excluding, unless specifically requested, those incorporated or deemed to be
incorporated by reference) and cause the officers and directors of the Company,
counsel to the Company and independent certified public accountants to the
Company to respond to such inquiries as shall be necessary in connection with
such Registration Statement, in the opinion of the Special Counsel and counsel
to such underwriters, to conduct a reasonable investigation within the meaning
of the Securities Act. The Company shall not file any such Registration
Statement or related Prospectus or any amendments or supplements thereto to
which the Special Counsel, or the managing underwriters, if any, shall
reasonably object on a timely basis;
(b) Prepare and file with the SEC such amendments, including post-
effective amendments, to each Registration Statement as may be necessary to keep
such Registration Statement continuously effective for the applicable time
period set forth in Section 2(a) hereof; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 with respect to the disposition of all securities
covered by such Registration Statement during such period in accordance with the
intended method or methods of disposition by the Holder set forth in such
Registration Statement as so amended or in such Prospectus as so supplemented
(including, without limitation, the filing of any Prospectus supplement pursuant
to Rule 424 in order to add or change any selling security holder information
(including any such supplements or amendments pursuant to Section 2(c) hereof,
PROVIDED such Holder to which such change applies complies with the Requisite
Information requirements of Section 2(c) hereof));
(c) Notify the registered (as of the most recent reasonably
practicable date which shall not be more than two Business Days prior to the
date such notice is personally delivered, delivered to a next-day courier,
deposited in the mail or telecopied, as the case may be) Holders, the Special
Counsel and the managing underwriters, if any, promptly (and in the case of an
event specified by clause (i)(A) of this paragraph in no event fewer than two
Business Days prior to such filing), and (if requested by any such person),
confirm such notice in writing, (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment is proposed to be filed, and, (B) with
respect to any Registration Statement or any post-effective amendment, when the
same has become effective, excluding with respect to (A) or (B) any Prospectus
supplement or post-effective amendment accomplished solely through incorporation
by reference, (ii) of any request of the SEC or any other Federal or state
governmental authority for amendments or supplements to such Registration
Statement or related Prospectus or for additional information related thereto,
(iii) of the issuance by the SEC, any state securities commission, any other
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governmental agency or any court of any stop order, order or injunction
suspending or enjoining the use or the effectiveness of any Registration
Statement or the initiation of any proceedings for that purpose, (iv) if at any
time any of the representations and warranties of the Company contained in any
agreement (including any underwriting agreement) contemplated by Section 4(m)
hereof are not true and correct in all material respects, (v) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Transfer Restricted
Securities for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, and (vi) of the existence of any fact and the
happening of any event that makes any statement made in such Registration
Statement or related Prospectus untrue in any material respect, or that requires
the making of any changes in such Registration Statement or Prospectus so that
in the case of any Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
that, in the case of the Prospectus, such Prospectus will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of any stop order or order enjoining or suspending the use
or effectiveness of a Registration Statement or the lifting of any suspension of
the qualification (or exemption from qualification) of any of the Transfer
Restricted Securities for sale in any jurisdiction, at the earliest practicable
moment;
(e) If requested by the Special Counsel or the managing underwriters,
if any, (i) promptly include in a Prospectus supplement or post-effective
amendment such information as the Special Counsel, the managing underwriters, if
any, and such Holders agree should be included therein, and (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as reasonably practicable after the Company has received notification of
the matters to be included in such Prospectus supplement or post-effective
amendment; PROVIDED, HOWEVER, that the Company shall not be required to take any
action pursuant to this Section 4(e) that would, in the opinion of counsel for
the Company, violate applicable law;
(f) Furnish to each Holder who so requests, Special Counsel and each
managing underwriter, if any, without charge, at least one conformed copy of
each Registration Statement and each amendment thereto, including financial
statements (but excluding schedules, all documents incorporated or deemed to be
incorporated therein by reference and all exhibits, unless specifically
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<PAGE>
requested in writing by such Holder, Special Counsel or managing underwriter);
(g) Deliver to each Holder, the Special Counsel, and the
underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of Prospectus) and each amendment or
supplement thereto to as such persons may reasonably request; and, unless the
Company shall have given notice to such Holder pursuant to Section 4(c)(vi), the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Transfer Restricted
Securities and the underwriters, if any, in connection with the offering and
sale of the Transfer Restricted Securities covered by such Prospectus and any
amendment or supplement thereto, PROVIDED, HOWEVER, that no Holder shall be
entitled to use the Prospectus unless and until such Holder shall have furnished
to the Company any and all Requisite Information pursuant to Section 2(c)
hereof;
(h) Use its best efforts to register or qualify, or cooperate with
the Holders of Transfer Restricted Securities to be sold or tendered for, the
managing underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of, such Transfer Restricted Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions within the United States
as any Holder or underwriter reasonably requests in writing, keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things necessary legally to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the applicable
Registration Statement; PROVIDED, HOWEVER, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified, take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or subject the
Company to any tax in any such jurisdiction where it is not then so subject;
(i) In connection with any sale or transfer of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders and the managing underwriters,
if any, to (A) facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold, which certificates shall
not bear any restrictive legends, shall bear a CUSIP number different from the
CUSIP number for the Transfer Restricted Securities and shall be in a form
eligible for deposit with The Depository Trust Company and (B) enable such
Transfer Restricted Securities to be in such denominations and registered in
such names as the managing underwriters, if any, or Holders may reasonably
request at least
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two Business Days prior to any sale of Transfer Restricted Securities;
(j) Use its best efforts to cause the offering of the Transfer
Restricted Securities covered by the Registration Statement to be registered
with or approved by such other governmental agencies or authorities within the
United States, except as may be required as a consequence of the nature of a
Holder's business, in which case the Company will cooperate in all reasonable
respects with the filing of such Registration Statement and the granting of such
approvals as may be reasonably necessary to enable the seller or sellers thereof
or the underwriters, if any, to consummate the disposition of such Transfer
Restricted Securities; PROVIDED, HOWEVER, that the Company shall not be required
to register the Transfer Restricted Securities in any jurisdiction that would
require the Company to qualify to do business in any jurisdiction where it is
not then so qualified, subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any tax
in any such jurisdiction where it is not then so subject;
(k) Upon the occurrence of any event contemplated by Section 4(c)(vi)
hereof, as promptly as reasonably practicable, prepare a supplement or
amendment, including, if appropriate, a post-effective amendment, to each
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, such Prospectus will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(l) Prior to the effective date of the first Registration Statement
relating to the Transfer Restricted Securities, to provide a CUSIP number for
the Transfer Restricted Securities to be sold pursuant to the Registration
Statement;
(m) Enter into such agreements (including underwriting agreements in
form, scope and substance as are customary in underwritten offerings) reasonably
satisfactory to the Company and take all such other reasonable actions in
connection therewith (including those reasonably requested by the managing
underwriters, if any, or the Holders of a majority in aggregate principal amount
of the Transfer Restricted Securities being sold) in order to expedite or
facilitate the sale of such Transfer Restricted Securities; PROVIDED, HOWEVER,
that the Company is required to facilitate no more than three underwritten
offerings. In such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration, (i) make such representations and warranties to the Holders of
such Transfer Restricted Securities and the
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<PAGE>
underwriters, if any, with respect to the business of the Company and its
subsidiaries (including with respect to businesses or assets acquired or to
be acquired by any of them), and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as are customarily made
by issuers to underwriters in underwritten offerings and reasonably
acceptable to the Company, and confirm the same if and when requested; (ii)
seek to obtain opinions of counsel to the Company and updates thereof (which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and Special Counsel to the
Holders of the Transfer Restricted Securities being sold, addressed to each
selling Holder of Transfer Restricted Securities and each of the
underwriters, if any, covering the matters customarily covered in opinions
requested in underwritten offerings (including any such matters as may be
reasonably requested by such Special Counsel and underwriters); (iii) use all
reasonable efforts to obtain customary "cold comfort" letters and updates
thereof from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data is, or is required to be,
included in the Registration Statement), addressed (where reasonably
possible) to each selling Holder of Transfer Restricted Securities and each
of the underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings; (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and
procedures no less favorable to the selling Holders of Transfer Restricted
Securities and the underwriters, if any, than those set forth in Section 6
hereof (or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities
covered by such Registration Statement and the managing underwriters); and
(v) deliver such documents and certificates as may be reasonably requested by
the Holders of majority in aggregate principal amount of the Transfer
Restricted Securities being sold, their Special Counsel or the managing
underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (i) of this Section
4(m) and to evidence compliance with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Company;
(n) Make available for inspection by a representative of the Holders
of Transfer Restricted Securities being sold, any underwriter participating in
any such disposition of Transfer Restricted Securities, if any, and any
attorney, consultant or accountant retained by such selling Holders or
underwriter, at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
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<PAGE>
properties of the Company and its subsidiaries as they may reasonably request,
and cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case reasonably requested by any
such representative, underwriter, attorney, consultant or accountant in
connection with such Registration Statement, PROVIDED, HOWEVER, that such
persons shall first agree in writing with the Company that any information that
is reasonably and in good faith designated by the Company in writing as
confidential at the time of delivery or inspection (as the case may be) of such
information shall be kept confidential by such persons, unless (i) disclosure of
such information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities, (ii) disclosure of such
information is required by law (including any disclosure requirements pursuant
to Federal securities laws in connection with the filing of any Registration
Statement or the use of any Prospectus), (iii) such information becomes
generally available to the public other than as a result of a disclosure or
failure to safeguard by any such person or (iv) such information becomes
available to any such person from a source other than the Company and such
source is not bound by a confidentiality agreement.
(o) Cause the Indenture to be qualified under the TIA not later than
the effective date of the first Registration Statement relating to the Transfer
Restricted Securities; and in connection therewith, cooperate with the Trustee
and the Holders of Notes constituting Transfer Restricted Securities to effect
such changes to the Indenture, if any, as may be required for such Indenture to
be so qualified in accordance with the terms of the TIA; and execute, and use
its best efforts to cause the Trustee to execute, all customary documents as may
be required to effect such changes, and all other forms and documents (including
Form T-1) required to be filed with the SEC to enable the Indenture to be so
qualified under the TIA in a timely manner;
(p) Comply with applicable rules and regulations of the SEC and make
generally available to its security holders earning statements satisfying the
provisions of Section 11(a) of the Securities Act or Rule 158 (or any similar
rule promulgated under the Securities Act), no later than 45 days after the end
of any 12-month period (or 90 days after the end of any 12-month period if such
period is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Transfer Restricted Securities are sold to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter after the effective date of a Registration Statement, which
statement shall cover said period, consistent with the requirements of Rule 158;
and
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<PAGE>
(q) (i) list all shares of Common Stock covered by such Registration
Statement on any securities exchange on which the Common Stock is then listed or
(ii) authorize for quotation on the National Association of Securities Dealers
Automated Quotation System ("Nasdaq") or the National Market of Nasdaq all
Common Stock covered by such Registration Statement if the Common Stock is then
so authorized for quotation.
5. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by it whether or
not any Registration Statement is filed or becomes effective and whether or not
any securities are offered or sold pursuant to any Registration Statement. The
fees and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filings fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. and (B) in compliance
with securities or Blue Sky laws (including, without limitation and in addition
to that provided for in (b) below, fees and disbursements of counsel for the
underwriters or the Special Counsel in connection with Blue Sky qualifications
of the Transfer Restricted Securities and determination of the eligibility of
the Transfer Restricted Securities for investment under the laws of such
jurisdictions as the managing underwriters, if any, or Holders of a majority in
aggregate principal amount of Transfer Restricted Securities, may designate)),
(ii) printing expenses (including, without limitation, expenses of printing
certificates for Transfer Restricted Securities in a form eligible for deposit
with The Depository Trust Company and of printing Prospectuses if the printing
of Prospectuses is required by the managing underwriters, if any, or by the
Holders of a majority in aggregate principal amount of the Transfer Restricted
Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and the Special Counsel (plus any local
counsel deemed appropriate by the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities) in accordance with the provisions
of Section 5(b) hereof, (v) fees and disbursements of all independent certified
public accountants referred to in Section 4(m)(iii) (including, without
limitation, the expenses of any special audit and "comfort" letters required by
or incident to such performance), (vi) Securities Act liability insurance, if
the Company so desires such insurance, and (vii) fees and expenses of all other
persons retained by the Company. In addition, the Company shall pay its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of an annual audit and the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange or the
Nasdaq or the Nasdaq National Market.
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<PAGE>
Notwithstanding anything in this Agreement to the contrary, each Holder shall
pay all underwriting discounts and brokerage commissions with respect to any
Transfer Restricted Securities sold by it.
(b) In connection with any registration hereunder, the Company shall
reimburse the Holders of the Transfer Restricted Securities being registered or
tendered for in such registration for the fees and disbursements of not more
than one firm of attorneys representing the selling Holders (in addition to any
local counsel), which firm shall be chosen by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities. Winston &
Strawn shall be Special Counsel for all purposes hereof unless and until another
Special Counsel shall have been selected by a majority in aggregate principal
amount of the Transfer Restricted Securities and notice hereof shall have been
given to the Company.
6. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each of the
Managers, (ii) each Holder, (iii) each person, if any, who controls (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
any of the foregoing (any of the persons referred to in this clause (iii) being
hereinafter referred to as a "controlling person"), and (iv) the respective
officers, directors, partners, employees, representatives and agents of the
Managers, the Holders (including predecessor Holders), or any controlling person
(any person referred to in clause (i), (ii), (iii) or (iv) may hereinafter be
referred to as an "Indemnified Person"), from and against any and all losses,
claims, damages, liabilities, expenses and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus or in any amendment or supplement thereto
or in any preliminary Prospectus, or caused by any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or supplement
thereto, in light of the circumstances under which they were made) not
misleading, except insofar as such losses, claims, damages, liabilities,
expenses or judgments are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Indemnified Person furnished to the Company by or on behalf of such Indemnified
Person expressly for use therein; PROVIDED, HOWEVER, that the foregoing
indemnity with respect to any preliminary Prospectus shall not inure to the
benefit of any Indemnified Person from whom the person asserting such losses,
claims, damages, liabilities, expenses and judgments purchased securities if
such untrue statement or omission or alleged untrue statement or omission made
in such preliminary Prospectus is eliminated or remedied in the Prospectus and a
copy of the
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Prospectus shall not have been furnished to such person in a timely manner
due to the wrongful action or wrongful inaction of such Indemnified Person,
whether as a result of negligence or otherwise.
(b) In case any action shall be brought against any Indemnified
Person, based upon any Registration Statement or any such Prospectus or any
amendment or supplement thereto and with respect to which indemnity may be
sought against the Company, such Indemnified Person shall promptly notify the
Company in writing and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Person and
payment of all fees and expenses. Any Indemnified Person shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person, unless (i) the employment of such counsel shall have
been specifically authorized in writing by the Company, (ii) the Company shall
have failed to assume the defense and employ counsel or (iii) such Indemnified
Person or Persons shall have been advised by counsel that there may be a
conflict between the positions of the indemnifying party or parties and of the
indemnified party or parties in conducting the defense of such action or
proceeding or that there may be legal defenses available to such Indemnified
Person or Persons different from or in addition to those available to the
indemnifying party or parties (in which case the Company shall not have the
right to assume the defense of such action on behalf of such Indemnified Person,
it being understood, however, that the Company shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all such Indemnified Persons, which firm
shall be designated in writing by such Indemnified Persons, and that all such
fees and expenses shall be reimbursed as they are incurred). The Company shall
not be liable for any settlement of any such action effected without its written
consent but if settled with the written consent of the Company, the Company
agrees to indemnify and hold harmless any Indemnified Person from and against
any loss or liability by reason of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(c) Each Holder (or predecessor Holder) agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors, its officers
and any person controlling the
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Company within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, to the same extent as the foregoing indemnity from the
Company to each Indemnified Person but only with reference to information
relating to such Indemnified Person furnished by or on behalf of such
Indemnified Person expressly for use in such Registration Statement. In case
any action shall be brought against the Company, any of its directors, any
such officer or any person controlling the Company based on such Registration
Statement and in respect of which indemnity may be sought against any
Indemnified Person, the Indemnified Person shall have the rights and duties
given to the Company (except that if the Company shall have assumed the
defense thereof, such Indemnified Person shall not be required to do so, but
may employ separate counsel therein and participate in defense thereof but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Person), and the Company, its directors, any such officers and
any person controlling the Company shall have the rights and duties given to
the Indemnified Person by Section 6(b) hereof.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities, expenses or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities, expenses and judgments (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and each Indemnified Person on the other hand from the offering for
resale of the Transfer Restricted Securities or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and each such Indemnified
Person in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities, expenses or judgments, as well as any
other relevant equitable considerations. The relative fault of the Company and
each such Indemnified Person shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the Company
or such Indemnified Person and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company, the Holders and the Managers agree that it would not be
just and equitable if contribution pursuant to this Section 6(d) were determined
by PRO RATA allocation (even if the Indemnified Person were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
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preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities, expenses or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 6, no Indemnified Person shall be required to contribute any amount in
excess of the amount by which the total net profit received by it in connection
with the sale of the Transfer Restricted Securities pursuant to this Agreement
exceeds the amount of any damages which such Indemnified Person has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Indemnified Persons' obligations to contribute pursuant
to this Section 6(d) are several in proportion to the respective amount of
Transfer Restricted Securities included in and sold pursuant to any such
Registration Statement by each Indemnified Person and not joint.
7. RULES 144 AND 144A
The Company shall use its best efforts to file the reports required to
be filed by it under the Securities Act and the Exchange Act in a timely manner
and, if at any time it is not required to file such reports but in the past had
been required to or did file such reports, it will, upon the request of any
Holder, make available other information as required by, and so long as
necessary to permit sales of, its Transfer Restricted Securities pursuant to
Rule 144 and Rule 144A . Notwithstanding the foregoing, nothing in this
Section 7 shall be deemed to require the Company to register any of its
securities pursuant to the Exchange Act.
8. UNDERWRITTEN REGISTRATIONS
If any of the Transfer Restricted Securities covered by any Shelf
Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be investment bankers of recognized national
standing selected by the Holders of a majority in aggregate principal amount of
such Transfer Restricted Securities included in such offering, subject to the
consent of the Company (which will not be unreasonably withheld or delayed).
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably
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<PAGE>
provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities underwriting agreements,
lock-up agreements and other documents reasonably required under the terms of
such underwriting arrangements.
9. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company or by a Holder
of any of their respective obligations under this Agreement, each Holder or the
Company, in addition to being entitled to exercise all rights granted by law,
including, without limitation, recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each Holder
agree that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of any of the provisions of this Agreement
and hereby further agree that, in the event of any action for specific
performance in respect of such breach, they shall waive the defense that a
remedy at law would be adequate. This Section 9(a) shall not apply to any
breach for which Liquidated Damages have been specifically provided hereunder.
(b) OTHER AGREEMENTS.
(i) After the date hereof, the Company shall not enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Without the written consent of the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities, the Company
shall not grant to any person the right to request it to register any of its
securities under the Securities Act unless the rights so granted are subject in
all respect to the prior rights of the Holders set forth herein, and are not
otherwise in conflict or inconsistent with the provisions of this Agreement.
(ii) The Company has entered into agreements with certain of its
stockholders that may give such stockholders rights to participate in
underwritten offerings undertaken for the benefit of the Holders. The Company
will use its best efforts to effect the intent of this Agreement and facilitate
the disposition of the Transfer Restricted Securities.
(c) NO ADVERSE ACTION AFFECTING THE TRANSFER RESTRICTED SECURITIES.
The Company will not take any action with respect to the Transfer Restricted
Securities which would adversely affect the ability of any of the Holders to
include such Transfer Restricted Securities in a registration undertaken
pursuant to this Agreement.
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<PAGE>
(d) NO PIGGYBACK ON REGISTRATIONS. After the date hereof, the
Company shall not grant to any of its security holders (other than the Holders
in such capacity) the right to include any of its securities in any Shelf
Registration Statement.
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof,
may not be given, without the written consent of the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders whose Transfer Restricted Securities are being sold pursuant to an
underwritten offering and that does not directly or indirectly affect the rights
of other Holders may be given by Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities being sold by such Holders pursuant
to such an underwritten offering; PROVIDED, HOWEVER, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(f) NOTICES. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next day air courier,
certified first-class mail, return receipt requested or telecopy:
(i) if to a Holder, to the address of such Holder as it appears
in the Note or Common Stock register of the Company, as
applicable;
(ii) if to the Company, to:
U. S. Office Products Company
1440 New York Avenue, N.W.
Suite 310
Washington, DC 20005
Telecopy No.: (202) 628-9509
with a copy to:
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036-5869
Attention: Linda L. Griggs, Esquire
Telecopy No: (202) 467-7176
(iii)if to the Special Counsel, to:
Winston & Strawn
35 West Wacker Drive
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<PAGE>
Chicago, IL 60601-9703
Attention: Leland E. Hutchinson, Esquire
Telecopy No.: (312) 558-5700
or such other Special Counsel at such other address and
telecopy number as a majority in aggregate principal amount
of the Transfer Restricted Securities shall have given
notice to the Company as contemplated by Section 5(b)
hereof.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given, when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier, five Business Days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is acknowledged by the recipient's
telecopier machine, if telecopied.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each existing and future Holder.
The Company may not assign its rights or obligations hereunder without the prior
written consent of the Holders of a majority in aggregate principal amount of
the Transfer Restricted Securities, other than by operation of law pursuant to a
merger or consolidation to which the Company is a party. In the event the Notes
constituting Transfer Restricted Securities become convertible into common stock
of another person pursuant to Section 1506 of the Indenture, the Company shall
cause such person to assume the Company's obligations hereunder.
(h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts by the parties hereto, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(j) SEVERABILITY. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term,
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<PAGE>
provision, covenant or restriction. It is hereby stipulated and declared to
be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
that may be hereafter declared invalid, illegal, void or unenforceable.
(k) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
(l) ATTORNEYS' FEES. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing party, as determined by the court, shall
be entitled to recover its reasonable attorneys' fees in addition to any other
available remedy.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
U.S. OFFICE PRODUCTS COMPANY
By: /s/ Mark Director
-----------------------------
Name: Mark Director
---------------------------
Title: Executive Vice President
--------------------------
The foregoing Registration Rights
Agreement is hereby confirmed and
agreed to as of the date first
written above:
ROBERTSON, STEPHENS & COMPANY LLC
NATWEST SECURITIES LIMITED
ROBERTSON, STEPHENS & COMPANY LLC
By: ROBERTSON, STEPHENS & COMPANY, GROUP INC.
By: /s/ [illegible]
-----------------------------------
Authorized Signatory
Acting on behalf of itself and the other
Manager
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between U.S. Office Products
Company, a Delaware corporation (the "Company") and Mark D. Director
("Employee") is hereby entered into as of the 6th day of December, 1995. This
Agreement hereby supersedes any other employment agreements or understandings,
written or oral, between the Company and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Company is engaged primarily in the office
products supply business.
As of the date hereof, Employee and the Company have agreed upon all of the
material terms of Employee's employment by the Company, and have agreed that
such employment shall commence as soon as Employee is able to conclude his
business with his current employer. For purposes of this Agreement, the term
"Effective Date" shall mean the date on which Employee commences his employment
with the Company, as specified in a written notice from Employee to the Company.
As of the Effective Date, Employee will be employed hereunder by the Company in
a confidential relationship wherein Employee, in the course of his employment
with the Company, has and will continue to become familiar with and aware of
information as to the Company's and its subsidiaries' customers, specific manner
of doing business, including the processes, techniques and trade secrets
utilized by the Company and its subsidiaries, and future plans with respect
thereto, all of which has been and will be established and maintained at great
expense to the Company and its subsidiaries; this information is a trade secret
and constitutes the valuable good will of the Company and its subsidiaries.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Executive Vice President,
General Counsel and Assistant Secretary. As such, Employee shall have
responsibilities, duties and authority reasonably accorded to and expected of an
executive vice president,
<PAGE>
a general counsel and an assistant secretary. Employee will report directly
to the Board of Directors of the Company (the "Board"). Employee hereby
accepts this employment upon the terms and conditions herein contained and
agrees to devote his time, attention and efforts to promote and further the
business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Company.
(c) Employee shall not, during the Term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. However, the foregoing limitations shall not be
construed as prohibiting Employee from making personal investments in such form
or manner as will neither require his services in the operation or affairs of
the companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
2. COMPENSATION. For all services rendered by Employee, the Company
shall compensate Employee as follows:
(a) BASE SALARY. Effective on the date hereof, the base salary payable to
Employee shall be $150,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures but not less than monthly. On at
least an annual basis, the Board will review Employee's performance and may make
increases to such base salary if, in its discretion, any such increase is
warranted.
(b) INCENTIVE BONUS PLAN. The Company will develop a written Incentive
Bonus Plan setting forth the criteria under which Employee and other officers
and key employees will be eligible to receive year-end bonus awards. The
Incentive Bonus Plan will provide for Employee to earn up to 100% of his base
salary in bonus compensation, payable out of a bonus pool determined by the
Board of Directors of the Company or a compensation committee thereof. Bonuses
under the Incentive Bonus Plan will be determined by measuring Employee's
performance, the Company's performance based on the following criteria, weighted
as indicated, and measured against target performance levels established by the
Board of Directors of the Company or such compensation committee: (i) the profit
of the Company -- 50% and (ii) revenue growth of the Company due to acquisitions
- -- 50%.
(c) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(1) Payment of all premiums (or such portion thereof as
2
<PAGE>
is provided by the Company's plans) for coverage for Employee
and his dependent family members under health,
hospitalization, disability, dental, life and other insurance
plans that the Company may have in effect from time to time,
benefits provided to Employee under this clause (1) to include
a minimum of $150,000 life insurance coverage on Employee.
(2) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of
his services pursuant to this Agreement. All reimbursable
expenses shall be appropriately documented in reasonable detail
by Employee upon submission of any request for reimbursement, and
in a format and manner consistent with the Company's expense
reporting policy.
(3) The Company shall pay for or reimburse Employee for expenses
incurred by Employee in connection with his use of one automobile
in connection with his employment hereunder, said expenses not to
exceed $650 per month, payable monthly.
(4) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for
Employee by the Board and participation in all other Company-wide
employee benefits as available from time to time.
(5) Options to purchase 100,000 shares of common stock of the
Company, granted under the terms of the Company's 1994 Long-Term
Incentive Compensation Plan, such options to vest in accordance
with standard Company policy and to be evidenced by a Grant
Certificate or Option Agreement, in the Company's discretion;
provided, that such options shall be contingent upon Employee's
commencement of his employment with the Company.
(d) STARTING BONUS. Within 10 days of the Effective Date the Company
shall pay Employee a starting bonus of $50,000.
3. NON-COMPETITION AGREEMENT.
(a) Employee will not, during the period of his employment by or with the
Company, and for a period equal to the longer of (i) two (2) years or (ii) the
period during which Employee is entitled to receive and is receiving any payment
pursuant to paragraph 5(d) hereof, immediately following the termination of his
employment under this Agreement, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any
3
<PAGE>
other person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in direct
competition with the Company, within 100 miles of where the Company or
where any of the Company's subsidiaries conducts business, including any
territory serviced by the Company or any of such subsidiaries (the
"Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of the Company (including the respective subsidiaries thereof)
in a managerial capacity for the purpose or with the intent of enticing
such employee away from or out of the employ of the Company (including the
respective subsidiaries thereof);
(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to that time, a customer of the Company
(including the respective subsidiaries thereof) within the Territory for
the purpose of soliciting or selling products or services in direct
competition with the Company (including the respective subsidiaries
thereof) within the Territory;
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was either
called upon by the Company (including the respective subsidiaries thereof),
or for which the Company (including the respective subsidiaries thereof)
made an acquisition analysis, for the purpose of acquiring such entity,
either prior to or during the period that Employee is employed by the
Company.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than one percent (1%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter. Clauses (iii) and (iv) above
shall not be deemed to have been breached if Employee had no knowledge that the
person or entity being contacted fell within the scope of such clauses,
provided, that Employee immediately ceases all contact or involvement with such
person or entity promptly after learning (or being advised by the Company) of
the applicability of this Section 3.
(b) Because of the difficulty of measuring economic losses to the Company
as a result of a breach of the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to the Company for which they would
have no other adequate
4
<PAGE>
remedy, Employee agrees that the foregoing covenant may be enforced by the
Company in the event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company (including the Company's subsidiaries) on the date
of the execution of this Agreement and the current plans of the Company
(including the Company's subsidiaries); but it is also the intent of the Company
and Employee that such covenants be construed and enforced in accordance with
the changing activities, business and locations of the Company (including the
Company's subsidiaries) throughout the term of this covenant.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company (including the
Company's subsidiaries), or similar activities or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of Employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company (including the Company's subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants, PROVIDED, however,
that upon the failure of the Company to make any payments required under this
Agreement, the Employee may, upon thirty days prior written notice to the
Company, waive his right to receive any additional compensation pursuant to this
Agreement and engage in any activity prohibited by the covenants of this
paragraph 3. It is specifically agreed that the period of two (2) years stated
at the beginning of this paragraph 3, during which the agreements and covenants
of Employee made in this paragraph 3 shall be effective,
5
<PAGE>
shall be computed by excluding from such computation any time during which
Employee is in violation of any provision of this paragraph 3.
(f) Notwithstanding any of the foregoing, if any applicable law shall
reduce the time period during which Employee shall be prohibited from engaging
in any competitive activity described in paragraph 3(a) hereof, the period of
time for which Employee shall be prohibited pursuant to paragraph 3(a) hereof
shall be the maximum time permitted by law. However, in the event that the time
period specified by paragraph 3(a) shall be so reduced, then, notwithstanding
the provisions of paragraph 5(d) hereof, Employee shall be entitled to receive
from the Company his base salary at the rate then in effect solely for the
longer of (i) the time period during which the provisions of paragraph 3(a)
shall be enforceable under the provisions of such applicable law, or (ii) the
time period during which Employee is not engaging in any competitive activity,
but in no event longer than the term provided in paragraph 5(d).
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board to relocate
from his present residence to another geographic location in order to more
efficiently carry out his duties and responsibilities under this Agreement or as
part of a promotion or other increase in duties and responsibilities. In such
event, if Employee agrees to relocate, the Company will pay all relocation costs
to move Employee, his immediate family and their personal property and effects.
Such costs may include, by way of example, but are not limited to, pre-move
visits to search for a new residence, investigate schools or for other purposes;
temporary lodging and living costs prior to moving into a new permanent
residence; duplicate home carrying costs; all closing costs on the sale of
Employee's present residence and on the purchase of a comparable residence in
the new location; and added income taxes that Employee may incur if any
relocation costs are not deductible for tax purposes. The general intent of the
foregoing is that Employee shall not personally bear any out-of-pocket cost as a
result of the relocation, with an understanding that Employee will use his best
efforts to incur only those costs which are reasonable and necessary to effect a
smooth, efficient and orderly relocation with minimal disruption to the business
affairs of the Company and the personal life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c) and, in the
event that Employee is terminated for such refusal, Employee shall be entitled
to receive all payments under this Agreement as if he were terminated by the
Company without cause.
6
<PAGE>
5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement
shall begin on the Effective Date and continue for four years (the "Initial
Term"), and, unless terminated as herein provided, shall be extended at the end
of each year beginning at the end of the second year of the Initial Term hereof
for a period of one year on the same terms and conditions contained herein, such
that the term (the "Term") of this Agreement shall extend for a period of three
years from the date of each such extension and shall, unless terminated or not
renewed, at all times be at least two years. This Agreement and Employee's
employment may be terminated in any one of the followings ways:
(a) DEATH. The death of Employee shall immediately terminate the
Agreement with no severance compensation due to Employee's estate.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after written
notice to the Employee (which notice may occur before or after the end of such
four (4) month period, but which shall not be effective earlier than the last
day of such four (4) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume his full-time duties
at the conclusion of such notice period. Also, Employee may terminate his
employment hereunder if his health should become impaired to an extent that
makes the continued performance of his duties hereunder hazardous to his
physical or mental health or his life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. Subject to paragraph 3(f) hereof and the last
paragraph of this paragraph 5, in the event this Agreement is terminated as a
result of Employee's disability, Employee shall receive from the Company the
base salary at the rate then in effect for whatever time period is remaining
under the Term of this Agreement, payable over such time period.
(c) GOOD CAUSE. The Company may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
willful, material and irreparable breach of this Agreement which continues after
receipt of ten (10) days prior written notice from the Company to Employee; (2)
Employee's gross negligence in the performance or intentional nonperformance
(continuing for ten (10) days after receipt of written notice of need to cure)
of any of Employee's material duties and responsibilities hereunder; (3)
Employee's willful dishonesty, fraud or misconduct with respect to the business
or affairs of the
7
<PAGE>
Company which materially and adversely affects the operations or reputation of
the Company; (4) Employee's conviction of a felony or other crime involving
moral turpitude; or (5) alcohol abuse or illegal drug abuse by Employee. In the
event of a termination for good cause, as enumerated above, Employee shall have
no right to any severance compensation.
(d) WITHOUT CAUSE. At any time after the commencement of employment, the
Company may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Employee.
Should Employee be terminated by the Company without cause, subject to paragraph
3(f) hereof and the last paragraph of this paragraph 5, Employee shall receive
from the Company the base salary at the rate then in effect for whatever time
period is remaining under the Term of this Agreement, payable over such time
period. If Employee resigns or otherwise terminates his employment for any
reason other than Good Reason as defined in paragraph 5(f), Employee shall
receive no severance compensation.
(e) CHANGE IN CONTROL OF THE COMPANY. Refer to paragraph 17 below.
(f) TERMINATION BY EMPLOYEE FOR GOOD REASON. The Employee may terminate
his employment hereunder for "Good Reason." As used herein, "Good Reason" shall
mean the continuance of any of the following after 10 days' prior written notice
by Employee to the Company, specifying the basis for such Employee's having Good
Reason to terminate this Agreement:
(i) a material adverse change in Employee's status, title, position
or responsibilities;
(ii) the assignment to Employee of any duties materially and
adversely inconsistent with the Employee's position as specified in
paragraph 1 hereof (or such other position to which he may be promoted),
including status, offices, responsibilities or persons to whom the Employee
reports as contemplated under paragraph 1 of this Agreement, or any other
action by the Company which results in a material and adverse change in
such position, status, offices, titles or responsibilities;
(iii) Employee's removal from, or failure to be reappointed or
reelected to, Employee's position under this Agreement, except as
contemplated by paragraphs 5(a), (b), (c) and (e); or
(iv) any other material breach of this Agreement by the Company,
including the failure to pay Employee on a timely basis the amounts to
which he is entitled under this Agreement.
In the event of any termination by the Employee for Good Reason, as
8
<PAGE>
determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 15 below, the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest
thereon and all reasonable legal fees and expenses and other costs incurred
by Employee to enforce his rights hereunder.
(g) PAYMENT THROUGH TERMINATION. Upon termination of this Agreement for
any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments for
accrued vacation and sick leave) due through the effective date of termination.
Additional compensation subsequent to termination, if any, will be due and
payable to Employee only to the extent and in the manner expressly provided
above. All other rights and obligations of the Company and Employee under this
Agreement shall cease as of the effective date of termination, except that the
Company's obligations under paragraph 9 herein and Employee's obligations under
paragraphs 3, 6, 7, 8 and 10 herein shall survive such termination in accordance
with their terms.
In the event of any termination of Employee's employment under this Agreement,
the Employee shall have no obligation to seek other employment; PROVIDED,
however, that in the event that Employee secures employment during the period
that any payment is continuing pursuant to the provisions of this paragraph 5,
the amounts to be paid hereunder shall be reduced by the amount of Employee's
earnings from such other employment.
6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company (including
the Company's subsidiaries) or their representatives, vendors or customers which
pertain to the business of the Company (including the Company's subsidiaries)
shall be and remain the property of the Company and be subject at all times to
its discretion and control. Likewise, all correspondence, reports, records,
charts, advertising materials and other similar data pertaining to the business,
activities or future plans of the Company which are collected by Employee shall
be delivered promptly to the Company without request by it upon termination of
Employee's employment.
7. INVENTIONS. Employee shall disclose promptly to the Company any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company and which Employee conceives as a result of his
employment by the Company. Employee hereby assigns and agrees to assign all his
interests therein to the
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<PAGE>
Company or its nominee. Whenever requested to do so by the Company, Employee
shall execute any and all applications, assignments or other instruments that
the Company shall deem necessary to apply for and obtain Letters Patent of
the United States or any foreign country or to otherwise protect the
Company's interest therein.
8. TRADE SECRETS. Employee agrees that he will not, during or after the
term of this Agreement with the Company, disclose the specific terms of the
Company's (including the Company's subsidiaries') relationships or agreements
with their respective significant vendors or customers or any other significant
and material trade secret of the Company (including the Company's subsidiaries),
whether in existence or proposed, to any person, firm, partnership, corporation
or business for any reason or purpose whatsoever.
9. INDEMNIFICATION. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the
Company against Employee), by reason of the fact that he is or was performing
services under this Agreement or as an officer of the Company (and whether or
not the basis of such action is the Employee's action in such official
capacity), then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement,
as actually and reasonably incurred by Employee in connection therewith and
such indemnification shall continue as to the Employee even if he has ceased
to be an employee officer of the Company and shall inure to the benefit of
his heirs and estate. The Company shall promptly advance to Employee all
reasonable costs and expenses directly related to the defense of such action,
suit or proceeding within twenty days after written request therefore by the
Employee to the Company, PROVIDED that such request shall include an
undertaking by the Employee to repay such advances if it shall ultimately be
determined that Employee is or was not entitled to be indemnified by the
Company against such costs and expenses. In the event that both Employee and
the Company are made a party to the same third-party action, complaint, suit
or proceeding, the Company agrees to engage competent legal representation,
and Employee agrees to use the same representation, provided that if counsel
selected by the Company shall have a conflict of interest that prevents such
counsel from representing Employee, Employee may engage separate counsel and
the Company shall pay all attorneys' fees of such separate counsel. Further,
while Employee is expected at all times to use his best efforts to faithfully
discharge his duties under this Agreement, Employee cannot be held liable to
the Company for errors or omissions made in good faith where Employee has not
exhibited gross, willful or wanton negligence or misconduct or performed
criminal or fraudulent acts which materially damage the business of the
Company. The provisions of this Section 9 are in addition to, and not in
derogation of, the indemnification
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provisions of the Company's By-laws.
10. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences, this Agreement shall be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their respective
heirs, legal representatives, successors and assigns.
12. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Employee and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements. This written Agreement may not be later modified
except by a further writing signed by a duly authorized officer of the Company
and Employee, and no term of this Agreement may be waived except by writing
signed by the party waiving the benefit of such term.
13. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: U.S. Office Products Company
1440 New York Avenue, N.W.
Suite 310
Washington, D.C. 20005
Attn: Martin S. Pinson
To Employee: Mark D. Director
10101 Grayhorse Court
Potomac, Maryland 20845
11
<PAGE>
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party
may change the address for notice by notifying the other party of such change in
accordance with this paragraph 13.
14. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
15. ARBITRATION. Any unresolved dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. The arbitrators shall have the authority to order back-pay,
severance compensation, vesting of options (or cash compensation in lieu of
vesting of options), reimbursement of costs, including those incurred to enforce
this Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Company. The arbitration proceeding shall be
held in the city where the Company is located.
16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Delaware.
17. CHANGE IN CONTROL.
(a) Unless he elects to terminate this Agreement pursuant to the next
paragraph Employee understands and acknowledges that the Company may be merged
or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder.
In the event of a Change in Control, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Company not later than five (5) business days
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<PAGE>
after the closing of the transaction giving rise to the Change in Control.
In such case, the applicable provisions of paragraph 5(d) will apply as
though the Company had terminated the Agreement without cause; however, under
such circumstances, Employee shall be entitled to continue to receive his
base salary at the rate then in effect for whatever time period is remaining
under the Term of this Agreement or for two (2) years, whichever amount is
greater, payable over the term of such payment and the non-competition
provisions of paragraph 3 shall all apply for a period equal to the duration
of such payment.
(b) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than the Company or an employee benefit plan of
the Company, acquires directly or indirectly the Beneficial Ownership (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company and immediately after such
acquisition such person is, directly or indirectly, the Beneficial Owner of
voting securities representing 50% or more of the total voting power of all
of the then-outstanding voting securities of the Company;
(ii) the individuals (A) who, as of the closing date of the Company's
initial public offering, constitute the Board of Directors of the Company
(the "Original Directors") or (B) who thereafter are elected to the Board
of Directors of the Company and whose election, or nomination for election,
to the Board of Directors of the Company was approved by a vote of at least
two-thirds (2/3) of the Original Directors then still in office (such
directors becoming "Additional Original Directors" immediately following
their election) or (C) who are elected to the Board of Directors of the
Company and whose election, or nomination for election, to the Board of
Directors of the Company was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election) (such individuals being
the "Continuing Directors"), cease for any reason to constitute a majority
of the members of the Board of Directors of the Company;
(iii) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a
reverse stock split of outstanding voting securities, or consummation of
any such transaction if stockholder approval is not sought or obtained,
other than any such transaction which would result in at least 75% of the
total voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being Beneficially
Owned by at least 75% of the holders of
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<PAGE>
outstanding voting securities of the Company immediately prior to the
transaction, with the voting power of each such continuing holder relative
to other such continuing holders not substantially altered in the
transaction; or
(iv) the stockholders of the Company shall approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or a substantial portion of the Company's assets (i.e.,
50% or more of the total assets of the Company).
(c) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.
(d) Employee shall be reimbursed by the Company or its successor for any
excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
IN WITNESS WHEREOF, the Company and Employee have duly executed this
Agreement as of the date first above written.
U.S. OFFICE PRODUCTS COMPANY
By:
-------------------------------------
Title:
EMPLOYEE:
MARK D. DIRECTOR
----------------------------------------
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EXHIBIT 99.1
CONFORMED COPY
AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT, dated as of June 20, 1996 (the
"Amendment"), is by and between U.S. OFFICE PRODUCTS COMPANY, a Delaware
corporation ("USOP") and a stockholder of Blue Star Group Limited, a New Zealand
corporation (the "COMPANY"), and ERIC JOHN WATSON (the "STOCKHOLDER"), also a
stockholder of the COMPANY. There are three other stockholders of the COMPANY,
Grant Keith Baker, Maurice George Kidd and Paul Anthony Smithies (all such other
stockholders, the "Management Stockholders").
This Amendment amends the Stock Purchase Agreement, dated as of January 31,
1996 (as amended by an Acknowledgement and Agreement (the "Acknowledgement")
dated as of February 28, 1996, the "Purchase Agreement"), between USOP and the
STOCKHOLDER. Terms used herein that are not defined herein shall have the
meanings ascribed thereto in the Purchase Agreement.
WHEREAS, at a Closing held on February 28, 1996 USOP and the
STOCKHOLDER consummated the transactions then contemplated by the
Purchase Agreement, including USOP's acquisition from the STOCKHOLDER
of 51% of the issued and outstanding shares of COMPANY Stock, with the
STOCKHOLDER and the Management Stockholders owing the remaining 49% of
the issued and outstanding shares of COMPANY Stock;
WHEREAS, USOP desires to purchase from the STOCKHOLDER, and the
STOCKHOLDER desires to sell to USOP, all of the issued and outstanding
shares of COMPANY Stock not owned by USOP, and to facilitate this
transaction the STOCKHOLDER intends to acquire all of the shares of
COMPANY Stock owned by the Management Stockholders prior to the
closing of the transactions contemplated by this Amendment; and
WHEREAS, USOP and the STOCKHOLDER have determined that it is in
their respective best interests for the Purchase Agreement to be
amended in certain respects to provide for the foregoing purchase and
sale and certain related matters;
NOW, THEREFORE, in consideration of the premises the parties hereto agree
as follows:
1. The following shall be inserted after Section 1.2 of the Purchase
Agreement:
"1.3 SECOND STOCK SALE. Subject to the terms and conditions of
this Agreement and on the basis of and in reliance upon the
representations, warranties, covenants and agreements set forth
herein, at a closing (the "Second Closing") to be held as soon as
practicable after the conditions set forth in Sections 6.4, 6.5, 7.5
and 7.6 hereof have been satisfied or waived (the date of such Second
Closing, the "Second Closing Date"), the STOCKHOLDER shall sell to
USOP and USOP shall purchase from the STOCKHOLDER all of the shares of
COMPANY Stock not then owned by USOP (being 7,677,888 shares and
constituting 49% of all of the issued and outstanding shares of
COMPANY Stock) in exchange for 1,052,632 shares of USOP Stock."
<PAGE>
2. Section 2.4 of the Purchase Agreement shall be deleted and the following
shall be inserted in lieu thereof:
"2.4 SECOND CLOSING. At the Second Closing:
(a) The STOCKHOLDER shall deliver to USOP in accordance with
applicable law and free and clear of all pledges, liens, transfer and
stamp tax obligations, encumbrances, claims and other charges thereon
of every kind, all of the issued and outstanding shares of COMPANY
Stock not then owned by USOP, in exchange for the delivery by USOP to
the STOCKHOLDER of a certificate or certificates representing the
number of registered shares of USOP Stock to be delivered to the
STOCKHOLDER pursuant to Section 1.3 hereof.
(b) USOP shall cause the COMPANY to, and the STOCKHOLDER shall,
execute and deliver an Amendment to the Employment Agreement between
the COMPANY and the STOCKHOLDER dated as of February 28, 1996
substantially in the form set forth in Exhibit A hereto.
(c) USOP and the STOCKHOLDER shall cause the charter documents
and boards of directors of the COMPANY and its Subsidiaries to be
amended and restructured to the satisfaction of USOP.
(d) The STOCKHOLDER shall also deliver to USOP, and USOP shall
deliver to the STOCKHOLDER, the certificates and other instruments and
documents referred to in Sections 7.1 and 7.4 hereof and Sections 6.1
and 6.3 and clauses (iii) and (iv) of Section 6.7 hereof,
respectively."
3. The following shall be inserted after Section 2.6 of the Purchase
Agreement:
"2.7 ELECTIVE ADJUSTMENT TO CONSIDERATION.
(a) At the STOCKHOLDER's election, written notice of which must
be delivered to USOP no later than 120 days after the end of USOP's
1999 fiscal year to be effective, the 2,264,753 shares of USOP Stock
issued by USOP pursuant to this Agreement shall be adjusted if the
Value of BSG (as hereinafter defined) is greater than the Value of
USOP Stock (as hereinafter defined).
(b) The "Value of BSG" shall mean seven times the consolidated
pre-tax earnings of Blue Star Group Limited and only its New Zealand
based subsidiaries for its 1999 fiscal year (determined in accordance
with NZGAAP).
(c) The "Value of USOP Stock" shall mean the product of (i)
2,264,753 (being the number of shares of USOP Stock issued by USOP
pursuant to this Agreement) multiplied by (ii) the average of the
closing prices (per share) of USOP Stock averaged over a period of the
ten consecutive trading days following the date of publication of
USOP's audited financial statements for its 1999 fiscal year (the
"Adjustment Price").
(d) If the Value of BSG is greater than the Value of USOP Stock,
then USOP shall issue and deliver to the STOCKHOLDER that number of
shares of USOP Stock
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<PAGE>
equal to the amount of such excess divided by the Adjustment Price,
provided that the number of shares of USOP Stock so issued and delivered
shall not in any event exceed 2,000,000 shares (the "Maximum Number of
Shares").
(e) The Value of USOP Stock and the Maximum Number of Shares
shall be automatically adjusted in the event of any stock split, stock
dividend, subdivision, combination, reclassification, consolidation,
merger or amalgamation, capitalization of profits or reserves by way
of rights or other reorganization affecting USOP's stock (or any
shares, stock or securities derived from it) or other conveyance of
substantially all assets, or other similar corporate event of USOP. A
dispute between the parties with respect to the implementation of this
section shall be referred to an Expert for resolution if it is not
resolved within five business days of it arising, in which event the
following provision shall apply:
(i) The Expert shall be instructed to:
(A) decide the dispute within the shortest practicable
time; and
(B) deliver a report stating his or her opinion with
respect to the matters in dispute, setting out the reasons
for the decision.
(ii) The Expert shall decide the procedures to be followed
in order to resolve the dispute. The parties shall provide the
Expert with all information and assistance which he or she
reasonably requests for the purpose of resolving the dispute.
(iii) The Expert shall act as an independent expert, not an
arbitrator. The Expert's decision shall be conclusive and final
and binding on the parties (except in the case of manifest
error).
(iv) Each party shall bear its own costs relating to the
resolution of a dispute under this clause. Each party shall bear
one half of the costs of the Expert.
For the purposes of this subclause (e), the expression "Expert" shall
mean a "big-six" independent public accountant chosen by agreement of
the parties or, failing prompt agreement, nominated at the request of
either party by USOP's independent public accountants.
(f) Until the end of USOP's 1999 fiscal year, all acquisitions
by USOP, if any, of companies or businesses based in New Zealand shall
be made through the COMPANY."
4. The following shall be inserted at the end of Section 3.3 of the
Purchase Agreement:
"Upon completion of the transactions to be consummated at the Second
Closing, all issued and outstanding shares of the capital stock of the
COMPANY will be owned of record and beneficially by USOP."
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<PAGE>
5. The definitions of Interim Financials and COMPANY Financial Statements
in Section 3.7 of the Purchase Agreement shall be amended to include the
COMPANY's consolidated balance sheet as of February 28, 1996 and consolidated
statements of income, cash flows and retained earnings for the eleven-month
period then ended.
6. Section 4.2 of the Purchase Agreement shall be amended to read as
follows
"4.2 USOP STOCK. The USOP Stock to be delivered to the
STOCKHOLDER at the Closing Date and at the Second Closing Date will be
duly authorized, validly issued shares of Common Stock of USOP,
credited as fully paid and nonassessable."
7. Sections 5.1, 5.2, 5.3 and 5.6 shall not apply to the transaction
contemplated by this Amendment.
8. Between the date of this Amendment and the Second Closing, the
STOCKHOLDER shall use his best efforts to acquire all shares of COMPANY Stock
owned by the Management Stockholders. USOP acknowledges that in connection with
such acquisitions the STOCKHOLDER will agree to deliver to the Management
Stockholders a portion of the shares of USOP Stock to be delivered by USOP at
the Closing pursuant to new Section 2.4 of the Purchase Agreement, resulting in
the following allocation:
COMPANY Stockholder Shares of USOP Stock
------------------- --------------------
Eric John Watson 1,030,895
Grant Keith Baker 4,166
Maurice George Kidd 11,980
Paul Anthony Smithies 5,591
Total 1,052,632 Shares
The reference to "Section 5.9" in Section 8.1(a)(iii) of the Purchase Agreement
shall also be deemed to include the matters referred to in this section 8.
9. The reference to "Section 6" in Section 6.1 of the Purchase Agreement
shall be amended to read "Section 4".
10. The obligation of the STOCKHOLDER to consummate the transactions
contemplated by new Section 2.4 of the Purchase Agreement is subject to
satisfaction of the following conditions (and for such purpose the reference to
"Section 2.2" in the introductory paragraph to Section 6 of the Purchase
Agreement shall be deemed to be a reference to new Section 2.4 of the Purchase
Agreement):
(a) The conditions set forth in Sections 6.1 through 6.5, and in
clauses (iii) and (iv) of Section 6.7, of the Purchase Agreement;
provided that for this purpose only the reference to Closing Date in
Section 6.1 of the Purchase Agreement shall be deemed to refer to the
Second Closing Date and the references to the Purchase Agreement in
clauses (iii) and (iv) of Section 6.7 of the Purchase Agreement shall
be
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<PAGE>
deemed to refer to this Amendment; and, provided further, that for this
purpose only Section 6.1 of the Purchase Agreement shall be revised to read
as follows:
"6.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS. All the representations and warranties of USOP
contained in Section 4 shall be true and correct as of the Second
Closing Date as though such representations and warranties had
been made on and as of that time; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by
USOP on or before the Second Closing Date shall have been duly
complied with and performed; and a certificate to the foregoing
effect dated the Closing Date and signed by the President or any
Vice President of USOP shall have been delivered to the
STOCKHOLDER."
(b) USOP shall have issued to STOCKHOLDER options under USOP's
1994 Long-Term Incentive Compensation Plan to acquire 250,000 shares
of USOP Stock at US$36.0625 per share and subject to USOP's standard
vesting provisions.
(c) USOP shall have released to STOCKHOLDER all of his shares of
USOP Stock held by USOP in connection with the COMPANY's UBIX
transaction and shall have terminated all pledge arrangements in
connection therewith.
11. For purposes of section 10(a) of this Amendment only the phrase
"6,250,000 ordinary shares of stock, NZ$.10 par value per share" in Section
1.2(i) of the Purchase Agreement shall be revised to read "15,669,158 ordinary
shares of stock, NZ$1.00 par value per share".
12. The obligation of USOP to consummate the transactions contemplated by
new Section 2.4 of the Purchase Agreement is subject to satisfaction of the
conditions set forth in Sections 7.1, 7.2, 7.4, 7.5 and 7.6 of the Purchase
Agreement (and for such purpose the reference to "Section 2.2" in the
introductory paragraph to Section 7 of the Purchase Agreement shall be deemed to
be a reference to new Section 2.4 of the Purchase Agreement); provided that for
this purpose only Section 7.1 of the Purchase Agreement shall be revised to read
as follows:
"7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
All the representations and warranties of the STOCKHOLDER contained in
Sections 3.6, 3.8(b), 3.9, 3.10, 3.12 through 3.21, 3.23 and 3.26
hereof shall be true, correct and complete on and as of February 28,
1996, with the same effect as though such representations and
warranties had been made on and as of such date. All the other
representations and warranties of the STOCKHOLDER contained in this
Agreement shall be true, correct and complete on and as of the Second
Closing Date (with the qualification that the reference to
stockholders of the COMPANY in Section 3.27 hereof shall not include
USOP), with the same effect as though such representations and
warranties had been made on and as of such date. Each and all of the
agreements of the STOCKHOLDER to be performed on or before the Second
Closing Date pursuant to the terms hereof shall have been performed.
The STOCKHOLDER shall have delivered to USOP a certificate dated the
Second Closing Date and signed by him to both such effects."
13. For purposes of section 12 of this Amendment only the phrase "on
January 31, 1996 19,732,050 shares were issued and outstanding" in Section
1.2(ii) of the Purchase Agreement shall be revised to read "on May 1, 1996
30,905,966 shares were issued and outstanding"."
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<PAGE>
14. The phrase "51% of all Claims" in clause (y) of Section 8.1(a) of the
Purchase Agreement shall be deleted and the phrase "100% of all Claims" shall be
inserted in lieu thereof.
15. The references to "Closing Date" in Sections 8.1(a)(iv) and 8.1(a)(v)
of the Purchase Agreement shall be amended to refer to the Second Closing Date;
and the reference to a balance sheet at the end of each such Section shall be
amended to refer to the February 28, 1996 balance sheet referred to in section 5
of this Amendment.
16. The references to "US$600,000" and "US$30,000,000" in the proviso at
the end of Section 8.1 of the Purchase Agreement shall be amended to read
"US$1,200,000" and "US$60,000,000", respectively.
17. Clauses (ii) and (z) of Section 11.2(b) of the Purchase Agreement shall
be deleted. Section 11.2(c) of the Purchase Agreement shall be deleted.
18. For purposes of the transactions contemplated by this Amendment only,
Section 11.2(e) of the Purchase Agreement shall be deleted and the following
shall be inserted in lieu thereof:
"(e) The STOCKHOLDER acknowledges that USOP will not provide the
STOCKHOLDER with a prospectus for the STOCKHOLDER's use in selling the
USOP Stock delivered to him at the Second Closing and agrees to sell
such shares only in accordance with the requirements of Regulation S
promulgated under the Securities Act of 1933, as amended. The
STOCKHOLDER further acknowledges that there will be placed on the
certificates representing such shares of USOP Stock, or any
substitutions therefor, a legend stating in substance as follows:
The shares of the Corporation represented by this
certificate have been issued pursuant to Regulation S
promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), and have not been registered under
the Securities Act. These shares may not be transferred,
offered or sold prior to the end of the 40-day period (the
"Restricted Period") commencing on the issuance of the
shares by the Corporation, unless such transfer, offer or
sale is made in an "offshore transaction" and not to or for
the account or benefit of a "U.S. person" (as such terms are
defined in Regulation S) and is otherwise in accordance with
the requirements of Regulation S. Following expiration of
the Restricted Period, the shares may not be transferred,
offered or sold except pursuant to an effective and current
registration statement under the Securities Act or pursuant
to an available exemption from such registration."
19. This Amendment may be terminated in accordance with the provisions set
forth in Section 12.2 of the Purchase Agreement, provided (a) that for this
purpose references in such Section to "Closing", "Closing Date" and "March 31,
1996" shall be deemed to be references to "Second Closing", "Second Closing
Date" and "July 31, 1996", and (b) that the effect of any such termination shall
be limited to this Amendment and the transactions contemplated hereby.
20. The references to "Section 5.7" in Section 12.2(iv) of the Purchase
Agreement shall be amended to read "Section 5.6".
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<PAGE>
21. Section 12.14(a) of the Purchase Agreement shall be deleted and the
following shall be inserted in lieu thereof:
"(a) So long as the STOCKHOLDER is the Chief Executive officer
of the COMPANY, in connection with each acquisition by the COMPANY of
a business in Australia or New Zealand, USOP shall make available to
the COMPANY options to purchase a number of shares of USOP Stock equal
to 6.25% (and up to 15%, in USOP's sole discretion) of the number of
shares of USOP Stock issued in such transaction. Grants of such
options shall be determined by the STOCKHOLDER (within any limitations
that may be imposed by the applicable stock option plan and law), and
shall be subject to standard USOP policies."
22. Sections 12.14(c) through 12.14(k) of the Purchase Agreement shall be
deleted and the following shall be inserted in lieu thereof:
"(c) If USOP determines to sell or transfer substantially all of
the business of the COMPANY and its subsidiaries (the "Blue Star
Business") to an unrelated third party, whether by sale of assets or
shares, it shall first offer to sell the Blue Star Business to the
STOCKHOLDER on such terms as it may select. If the STOCKHOLDER fails
to accept such offer within 60 days after it is made, or if he accepts
such an offer but fails to consummate the transaction with 30 days
after acceptance, USOP may during the subsequent six-month period
offer and sell or transfer the Blue Star Business to any person on
terms no less favorable to USOP than those offered to the STOCKHOLDER
(or if the initial offer was accepted by the STOCKHOLDER, no less
favorable to USOP than the terms accepted by the STOCKHOLDER). If
USOP does not sell or transfer the Blue Star Business on such terms
during such six-month period, USOP thereafter will again be required
to comply with the procedures of this Section 12.14(c) for any
transaction covered hereby. Notwithstanding anything to the contrary,
the limitations on USOP set forth in this Section 12.14(c) shall apply
only to a sale of the Blue Star Business on a stand-alone basis to an
unrelated third party, and shall not apply to any other transaction in
which ownership of the COMPANY or any of its subsidiaries is
transferred directly or indirectly, including without limitation by
subdivision, combination, reclassification, consolidation, merger,
reorganization, spin-off, split-off or sale of USOP, or any spin-off
or split-off to stockholders of the COMPANY, or any transaction
involving USOP or any of its subsidiaries other than the COMPANY and
its subsidiaries, or any transaction involving any Related Party. For
purposes of this Section 12.14(c), 'Related Party' shall mean each of
USOP and its subsidiaries (and each other business entity in which it
or they have a substantial and active investment interest) and its and
their officers, directors, stockholders and principals, partners and
other investors (in business entities in which it or they have a
substantial and active investment interest), and each person that,
directly or indirectly, controls, is controlled by or is under common
control with the any such person."
23. Paragraphs 5 and 6 of the Acknowledgement shall be deleted.
24. This Amendment includes the Exhibit hereto. This Amendment may be
executed simultaneously in two or more counterparts, each of which shall be
deemed an original and all of which together shall constitute but one and the
same instrument. This Amendment shall be effective
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<PAGE>
upon the exchange by telefax of executed signature pages. Except as otherwise
expressly provided herein, all terms of the Purchase Agreement remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
U.S. OFFICE PRODUCTS COMPANY
By /S/ MARK D. DIRECTOR
------------------------------------
Name: Mark D. Director
Title: Executive Vice President
Witness:
/S/ MAURICE GEORGE KIDD /S/ ERIC JOHN WATSON
- ------------------------ ------------------------------------
ERIC JOHN WATSON
-8-
<PAGE>
EXHIBIT A
FORM OF AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT, dated as of ________, 1996 (the
"Amendment"), is by and between BLUE STAR GROUP LIMITED, a New Zealand
corporation (the "Company"), and ERIC JOHN WATSON ("Employee").
This Amendment amends the Employment Agreement, dated as of February 28,
1996 (the "Employment Agreement"), between the Company and Employee. Terms used
herein that are not defined herein shall have the meanings ascribed thereto in
the Employment Agreement.
WHEREAS, the Employment Agreement was entered into in connection
with the sale by Employee to USOP of 51% of the issued and outstanding
shares of the Company pursuant to a Stock Purchase Agreement dated as
of January 31, 1996 between USOP and Employee (the "Purchase
Agreement");
WHEREAS, as of June 20, 1996 USOP and Employee entered into an
amendment to the Purchase Agreement providing for Employee's sale to
USOP of the remaining 49% of the issued and outstanding shares of the
Company, and this Amendment is being entered into at the closing for
that transaction pursuant to section 2.4(c) of the amended Purchase
Agreement; and
WHEREAS, the Company and Employee have determined that it is in
their respective best interests for the Employment Agreement to be
amended in certain respects to provide for the foregoing purchase and
sale and certain related matters;
NOW, THEREFORE, in consideration of the premises the parties hereto agree
as follows:
1. The following shall be inserted after Section 1(b) of the Employment
Agreement:
"(c) Three of the six current members of the board of directors of
the Company were selected by USOP and three were selected by Employee.
If USOP determines not to support the continued holding of office of
an equal number of directors selected by Employee, Employee shall have
the right during the 60-day period after such determination to
terminate this Agreement. If he so exercises such right he shall be
entitled to the same benefits hereunder that he would be entitled to
receive in the event of a termination without cause by the Company
under Section 5(d) hereof."
2. The second and third paragraphs of Appendix A to the Employment
Agreement shall be deleted.
3. The second sentence of paragraph 2(a) in the Employment Agreement shall
be deleted.
4. Except as otherwise expressly provided herein, all terms of the
Employment Agreement remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
BLUE STAR GROUP LIMITED
By
------------------------------------
Name:
---------------------------------
Title:
---------------------------------
Witness:
- --------------------------------- ---------------------------------------
ERIC JOHN WATSON
A-2
<PAGE>
EXHIBIT 11.1
U.S. OFFICE PRODUCTS COMPANY
STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Primary net income per share:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
APRIL 30,
1996
-------------
<S> <C>
Net income......................................................................................... $ 8,740
-------------
-------------
Weighted average common shares outstanding......................................................... 22,907
Common stock equivalents from stock options........................................................ 478
-------------
Total weighted average common shares outstanding................................................... 23,385
-------------
-------------
Net income per share............................................................................... $ 0.37
-------------
-------------
</TABLE>
51
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF U.S. OFFICE PRODUCTS COMPANY
<TABLE>
<CAPTION>
STATE (COUNTRY)
NAME OF INCORPORATION
------------------------------------------------------------------------------------- ----------------------
<S> <C> <C>
1. Andrews Office Supply & Equipment Company (DBA ANDREWS OFFICE PRODUCTS) District of Columbia
2. Baird Acquisition Corp. (DBA BAIRD & SON) Delaware
3. Blue Star Group Limited New Zealand
a. Blue Star Finance (1995) Limited New Zealand
b. Blue Star Finance (No. 1) Limited New Zealand
c. Blue Star Finance Limited New Zealand
d. Blue Star Graphics Limited New Zealand
e. Blue Star Group Limited New Zealand
f. Blue Star Office Automation (Hamilton) Limited New Zealand
g. Blue Star Office Automation Limited New Zealand
h. Blue Star Office Furniture Limited New Zealand
i. Blue Star Office Products (Christchurch) Limited New Zealand
j. Blue Star Office Products (Hawkes Bay) Limited New Zealand
k. Blue Star Office Products (Tauranga) Limited New Zealand
l. Blue Star Office Products (Wellington) Limited New Zealand
m. Blue Star Office Products Limited New Zealand
n. Blue Star Print & Copy Limited New Zealand
o. Blue Star Properties (Crawford Street) Limited New Zealand
o. Blue Star Properties (Grey Street) Limited New Zealand
q. Blue Star Properties (Karamu Road) Limited New Zealand
r. Blue Star Properties (Spey Street) Limited New Zealand
s. Blue Star Telecommunications Limited New Zealand
t. Bowring Imperial Crookbain Limited New Zealand
u. Dixon (NZ) Limited New Zealand
v. Malibu Investments Limited New Zealand
w. Napier Business Centre Limited New Zealand
x. Sealex Holdings Limited New Zealand
y. Securacopy Services Limited New Zealand
z. Shaws Office Machines and Stationery Limited New Zealand
aa. Stanton Bros. (Napier) Limited New Zealand
bb. U-BIX Business Machines Limited New Zealand
4. Burgess, Anderson & Tate, Inc. Illinois
a. Erbin Enterprises, Inc. (DBA DRAKE'S OFFICE PRODUCTS) Illinois
b. Evers, Inc. (DBA EVERS OFFICE SUPPLY) Illinois
c. Lincoln Office Products Illinois
5. Carithers-Wallace-Courtenay, Inc. (DBA CWC) Georgia
6. C&G Acquisition Corp. (DBA C&G OFFICE PRODUCTS) Delaware
7. Coffee Butler Acquisition Corp. (DBA COFFEE BUTLER SERVICES) Delaware
8. Copenhaver Holdings, Inc. Florida
a. The Smith-Wilson Co. Florida
i. North Howard Corporation (DBA PITTMAN OFFICE PRODUCTS) Florida
ii. Brasaw, Inc. (DBA HALSEY'S OFFICE & ART SUPPLY) Florida
9. C.W. Mills Acquisition Corp. (DBA C.W. MILLS PAPER COMPANY) Delaware
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
STATE (COUNTRY)
NAME OF INCORPORATION
------------------------------------------------------------------------------------- ----------------------
<S> <C> <C>
10. Dameron-Pierson Company, Limited Louisiana
a. St. Tammany Office Products Louisiana
b. Ferris Office Furnishings, Inc. Louisiana
c. United Office Supply, Inc. Louisiana
11. DeKalb Acquisition Corp. (DBA DEKALB OFFICE SUPPLY) Delaware
12. EN Acquisition Corp. (DBA EMMONS-NAPP OFFICE PRODUCTS, INC.) Delaware
13. The H.H. West Company (DBA RECO/LYNCH, H.H. WEST, HAMCO) Delaware
a. Warmke Office Equipment, Inc. Wisconsin
14. Kentwood Office Furniture, Inc. Michigan
a. Kentwood Marketing, Inc. Michigan
15. Magic City Acquisition Corp. (DBA MAGIC CITY) Delaware
16. Mills Morris Arrow, Inc. (DBA MILLS MORRIS ARROW, MILLS MORRIS BUSINESS INTERIORS, Tennessee
ARROW OFFICE PRODUCTS, TODAY'S OFFICE, INC.)
a. Middleton Co., Inc. (DBA MIDDLETON OFFICE SUPPLY) Missouri
17. National Office Supply, Inc. (DBA TUSCARAWAS OFFICE SUPPLY, STARK OFFICE SUPPLY, Ohio
COSTIGAN'S)
18. Oak Brook Office Supply and Equipment Corporation Delaware
19. Office Connection, Inc. Florida
20. The Office Works, Inc. (DBA RELIABLE OFFICE PRODUCTS, SWIFT & BARNES, HARKINS) Pennsylvania
21. OSCO Acquisition Corp. (DBA OAC, THE COMMERCIAL DIVISION OF MISSCO, THE OFFICE SUPPLY Delaware
COMPANY, THE INTERSTATE COMPANIES, ZACSMITH/CRAWFORD, CRAWFORD, INTERSTATE 2,
INTERSTATE OFFICE SYSTEMS)
a. Business Equipment & Supply Company (DBA BESCO) Mississippi
22. Pence-Dickens & Heeter, Inc. Indiana
23. Price Modern, Inc. Maryland
24. Radar Holdings Corporation (DBA RADAR OFFICE SUPPLY, WALLER BROTHERS) Delaware
25. Sharp Pencil Holdings, Inc. (DBA GENERAL OFFICE PRODUCTS COMPANY) Delaware
a. General Office Products Company Minnesota
b. Emerald Office Supply (DBA GENERAL OFFICE PRODUCTS CO.) Minnesota
c. OPC Office Products Inc. (DBA THE OFFICE PRODUCTS COMPANY, OMAHA PRINTING Delaware
COMPANY)
26. Steve's Office Supply California
27. Sturgis Acquisition Corp. (DBA STURGIS COMPANY) Delaware
28. The J. Thayer Company Oregon
</TABLE>
53
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (333-01574) and on Form S-4 (333-1928) of our report
dated May 31, 1996, except as to Note 15 which is as of July 10, 1996, appearing
on page 19, of U.S. Office Products Company's Annual Report on Form 10-K for the
year ended April, 30, 1996. We also consent to the references to us under the
headings "Experts" and "Selected Financial Data" in such Registration
Statements. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Financial Data."
PRICE WATERHOUSE LLP
July 12, 1996
54
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000934852
<NAME> U.S. OFFICE PRODUCTS COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<CASH> 165,659
<SECURITIES> 0
<RECEIVABLES> 128,943
<ALLOWANCES> (2,784)
<INVENTORY> 71,306
<CURRENT-ASSETS> 406,394
<PP&E> 70,942
<DEPRECIATION> (20,413)
<TOTAL-ASSETS> 651,527
<CURRENT-LIABILITIES> 176,535
<BONDS> 157,303
0
0
<COMMON> 31
<OTHER-SE> 305,378
<TOTAL-LIABILITY-AND-EQUITY> 651,527
<SALES> 701,949
<TOTAL-REVENUES> 701,949
<CGS> 523,409
<TOTAL-COSTS> 523,409
<OTHER-EXPENSES> 157,427<F1>
<LOSS-PROVISION> 1,083
<INTEREST-EXPENSE> 6,476
<INCOME-PRETAX> 13,554
<INCOME-TAX> 4,814
<INCOME-CONTINUING> 8,740
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,740
<EPS-PRIMARY> .37
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES $8,057 OF NONRECURRING ACQUISITION COSTS INCURRED IN CONNECTION WITH
THE BUSINESS COMBINATIONS COMPLETED DURING FISCAL 1996, WHICH WERE ACCOUNTED
FOR UNDER THE POOLING-OF-INTERESTS METHOD, AND $682 OF COSTS ASSOCIATED WITH
THE DISCONTINUATION OF THE PRINTING DIVISION AT A SUBSIDIARY.
</FN>
</TABLE>
