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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1997.
Registration No. 333-
---------------
========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
----------------------
PHOTRONICS, INC.
(Exact name of registrant as specified in its charter)
Connecticut 06-0854886
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
--------------------------
1061 EAST INDIANTOWN ROAD
JUPITER, FLORIDA 33477
(561) 745-1222
(Address, and telephone number,
of Registrant's principal executive offices)
-----------------------
JEFFREY P. MOONAN, ESQ.,
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
1061 EAST INDIANTOWN ROAD
JUPITER, FLORIDA 33477
(561) 745-1222
FAX: (561) 747-1432
(Name, address, including zip code, and telephone number of agent
for service)
-----------------------
Copies to:
STEVEN L. WASSERMAN, ESQ. KEITH F. HIGGINS, ESQ.
REID & PRIEST LLP ROPES & GRAY
40 WEST 57TH STREET ONE INTERNATIONAL PLACE
NEW YORK, NEW YORK 10019 BOSTON, MASSACHUSETTS 02110
(212) 603-2000 (617) 951-7000
FAX: (212) 603-2001 FAX: (617) 951-7050
----------------------
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, check the following box. [ ]
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
=========================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO OFFERING AGGREGATE REGISTRATION
OF SECURITIES TO BE BE PRICE OFFERING FEE
REGISTERED REGISTERED PER UNIT(1) PRICE (1) (1)
-------------------------------------------------------------------------
Convertible Notes $86,250,000
due 2004 (2) 100% $86,250,000 $26,136.36
-------------------------------------------------------------------------
Common Stock, $.01
par value (3) -- -- --
=========================================================================
(1) The filing fee has been calculated pursuant to Paragraphs (a) and
(i) of Rule 457 promulgated under the Securities Act of 1933.
(2) Includes $11,250,000 aggregate principal of Notes subject to
the Underwriters' over-allotment.
(3) Such presently indeterminable number of shares of Common Stock as
may be or become deliverable upon conversion of the Notes being
registered thereby.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
===========================================================================
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED APRIL 28, 1997
$75,000,000
[LOGO] PHOTRONICS, INC.
. % Convertible Subordinated Notes due May 15, 2004
-----------------
The Notes are convertible at any time prior to maturity, unless
previously redeemed or repurchased, into shares of Common Stock, par
value $.01 per share ("Common Stock"), of Photronics, Inc. (the
"Company") at a conversion rate of . shares per each $1,000 principal
amount of Notes (equivalent to a conversion price of approximately $ .
per share), subject to adjustment in certain circumstances. On April
25, 1997, the last reported bid price of the Common Stock, which is
traded under the symbol "PLAB" on The Nasdaq National Market, was
$31.75 per share.
Interest on the Notes is payable on May 15 and November 15 of each
year, commencing November 15, 1997. The Notes are redeemable in whole
or in part at the Company's option at any time on or after May 16,
2000 at the redemption prices set forth herein, plus accrued interest
to the date of redemption. See "Description of Notes -- Optional
Redemption." The Notes are not entitled to any sinking fund. The
Notes will mature on May 15, 2004.
In the event of a Change of Control (as defined herein), each
holder of Notes may require the Company to repurchase its Notes, in
whole or in part, for cash or, at the Company's option, Common Stock
(valued at 95% of the average closing prices for the five trading days
immediately preceding and including the third trading day prior to the
repurchase date) at a repurchase price of 100% of the principal amount
of Notes to be repurchased, plus accrued interest to the repurchase
date. See "Description of Notes -- Repurchase at Option of Holders
Upon a Change of Control."
The Notes are unsecured obligations subordinated in right of
payment to all existing and future Senior Indebtedness (as defined
herein) of the Company and effectively subordinated in right of
payment to all indebtedness and other liabilities of the Company's
subsidiaries. As of April 28, 1997, the Company had $17.0 million of
Senior Indebtedness outstanding. After giving effect to the offering
of the Notes and the application of net proceeds therefrom, the
Company will have $2.0 million of Senior Indebtedness outstanding. As
of February 2, 1997, the Company's subsidiaries had other indebtedness
and liabilities of approximately $46 million (excluding intercompany
obligations). The Indenture will not restrict the Company or its
subsidiaries from incurring additional Senior Indebtedness or other
indebtedness.
The Notes will be represented by a Global Note registered in the
name of the nominee of The Depository Trust Company ("DTC"), which
will act as depositary. Beneficial interests in the Global Note will
be shown on, and transfers thereof will be effected only through,
records maintained by DTC and its direct and indirect participants.
Except as described herein, Notes in definitive form will not be
issued. The Notes will be issued in registered form in denominations
of $1,000 and integral multiples thereof. See "Description of the
Notes -- Book-Entry."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
INVESTORS IN EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED
HEREBY, SEE "RISK FACTORS" BEGINNING ON PAGE 6.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
PROCEEDS
INITIAL PUBLIC UNDERWRITING TO
OFFERING DISCOUNT COMPANY
PRICE (1) (2) (1)(3)
--------- ------------ --------
Per Note . . . . . 100.0% . % . %
Total(4) . . . . . $75,000,000 $ . $ .
------------------------------------
(1) Plus accrued interest, if any, from May . , 1997.
(2) The Company has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act").
(3) Before deducting estimated expenses of $375,000 payable by the
Company.
(4) The Company has granted the Underwriters an option for 30 days to
purchase up to an additional $11,250,000 aggregate principal
amount of Notes at the initial public offering price shown above,
less the underwriting discount, solely to cover overallotments,
if any. If such option is exercised in full, the total initial
public offering price, underwriting discount and proceeds to the
Company will be $86,250,000, $ . and $ . , respectively. See
"Underwriting."
----------------------
The Notes offered hereby are offered by the Underwriters, as
specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is
expected that the Notes will be ready for delivery in book-entry form
only through the facilities of DTC in New York, New York, on or about
May . , 1997 against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO.
ROBERTSON, STEPHENS & COMPANY
SMITH BARNEY INC.
---------------------
The date of this Prospectus is May . , 1997
Photronics is a
leading global
manufacturer of
Picture of photomasks, which Picture of
Photomask are high precision Person at
quartz plates Equipment
containing Console
microscopic images
of electronic
circuits.
Semiconductor/Photomask
interface graphic
Photomasks are a key element in the manufacture of
semiconductors and are used as masters to transfer
circuit patterns onto semiconductor wafers.
Picture of Picture of
Process Photomask
Equipment
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE
PRICE OF THE NOTES AND THE COMMON STOCK, INCLUDING OVER-
ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF PENALTY BIDS, IN CONNECTION
WITH THE OFFERING. IN ADDITION, IN CONNECTION WITH THIS
OFFERING, CERTAIN UNDERWRITERS ALSO MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL
MARKET, IN ACCORDANCE WITH RULE 103 UNDER THE SECURITIES EXCHANGE
ACT OF 1934. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and consolidated financial statements and
notes thereto appearing elsewhere in, or incorporated by
reference into, this Prospectus. Unless otherwise indicated, the
information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option.
THE COMPANY
Photronics, Inc. ("Photronics" or the "Company") is a leading
manufacturer of photomasks, which are used primarily by the
semiconductor industry in the manufacture of integrated circuits.
A photomask is a high precision photographic quartz plate that is
used as a master to transfer microscopic circuit patterns onto
semiconductor wafers during the fabrication of integrated
circuits. The Company's manufacturing network includes five
facilities in the United States (with a sixth under construction)
as well as facilities in Singapore, Switzerland and the United
Kingdom. Based upon available market information, the Company
believes that it has a larger share of the United States market
for photomasks than any other photomask manufacturer and is one
of the largest photomask manufacturers in the world.
Photomasks are a key element in the manufacture of
semiconductors and are used to transfer integrated circuit
patterns onto semiconductor wafers during the fabrication of
integrated circuits and, to a lesser extent, other types of
electronic components. Each integrated circuit consists of a
series of separate patterns, each of which is imaged onto a
different photomask. The resulting series of photomasks is then
used to successively layer the circuit patterns onto the
semiconductor wafer. Demand for photomasks is driven both by
semiconductor design activity and increases in the complexity of
integrated circuits. As the complexity of integrated circuits
has increased, the number and complexity of photomasks used in
the manufacture of a single circuit also has increased. VLSI
Research Inc. estimates that worldwide photomask sales exceeded
$1.7 billion in 1996 and projects a compound annual growth rate
of approximately 17% through 2001.
Photomasks are manufactured by independent manufacturers,
like the Company, and captives, which are semiconductor
manufacturers that produce photomasks almost exclusively for
their own use. Since the mid-1980s, there has been a trend in
the United States and Europe toward the divestiture or closing of
captive photomask operations by semiconductor manufacturers and
an increase in the share of the market served by independent
manufacturers. At the same time, the number of significant
independent manufacturers in the United States and Europe has
decreased from approximately 14 in the mid-1980s to four in 1996.
The Company has completed a number of strategic acquisitions of
both independent and captive photomask manufacturers.
The Company's objective is to expand its position as a
worldwide leader in the manufacture of photomasks. The Company's
strategy includes maintaining technological leadership through
investment in state-of-the-art manufacturing capabilities,
ensuring strong customer relationships through high levels of
customer satisfaction and leveraging the Company's network of
manufacturing facilities to provide timely product delivery and
rapid response to customer demands. During 1996, the Company
significantly expanded its operations in international markets by
acquiring existing photomask operations located in the United
Kingdom and Switzerland, establishing manufacturing operations in
Singapore and acquiring an equity interest in a photomask
manufacturing operation in Korea. The Company also continued its
aggressive investment program in its manufacturing operations in
the United States by completing a new state-of-the-art facility
in Allen, Texas, starting construction of a facility in Austin,
Texas and adding leading-edge manufacturing equipment to its
existing operations.
The Company sells its products primarily through a direct
sales force. The Company conducts its sales activities from ten
sales locations in the United States, two in the United Kingdom,
and one in each of Switzerland, Singapore and Taiwan. The
Company's customers include Analog Devices, Inc., Atmel Corp.,
Cirrus Logic, Inc., Cypress Semiconductor Corporation, LSI Logic
Corp., Motorola Inc., Plessey Semiconductors Ltd., Symbios Logic
Inc., Texas Instruments Incorporated, and VLSI Technology Inc.
The Company is a Connecticut corporation, organized in 1969.
Its principal executive offices are located at 1061 East
Indiantown Road, Jupiter, Florida 33473, telephone (561) 745-
1222.
3
THE OFFERING
SECURITIES OFFERED . . . $75,000,000 aggregate principal
amount of . % Convertible
Subordinated Notes due May 15, 2004
(the "Notes"). The Company has
granted the Underwriters an option
for 30 days to purchase up to
$11,250,000 additional aggregate
principal amount of Notes, solely to
cover over-allotments.
INTEREST PAYMENT Interest on the Notes is payable at
DATES . . . . . . . . . the rate set forth on the cover page
hereof, semi-annually on each May
15 and November 15, commencing November
15, 1997.
CONVERSION RIGHT . . . The Notes are convertible at any time
prior to maturity, unless previously
redeemed or repurchased, into shares
of Common Stock at a conversion rate
of . shares per $1,000 principal
amount of Notes (equivalent to a
conversion price of approximately $ .
per share), subject to adjustment in
certain circumstances as described
herein. See "Description of Notes --
Conversion Rights."
SUBORDINATION . . . . . The Notes are subordinated in right
of payment to all existing and future
Senior Indebtedness (as defined
herein) of the Company and will be
effectively subordinated to all
indebtedness and other liabilities of
the Company's subsidiaries. As of
April 28, 1997, the Company had $17.0
million aggregate principal amount of
Senior Indebtedness outstanding,
approximately $15 million of which
will be repaid with the net proceeds
from this offering. As of February
2, 1997, the Company's subsidiaries
had other indebtedness and liabilities
of approximately $46 million (excluding
intercompany obligations). The
Indenture will not restrict the Company
or its subsidiaries from incurring
additional Senior Indebtedness or other
indebtedness. See "Capitalization,"
"Management's Discussion and Analysis
of Results of Operations and Financial
Condition" and "Description of Notes
-- Subordination."
OPTIONAL REDEMPTION . . The Notes will be redeemable at the
Company's option, in whole or in
part, at any time on or after May
16, 2000 at the redemption prices set
forth herein plus accrued interest to
the date of redemption. See
"Description of Notes -- Optional
Redemption."
REPURCHASE AT OPTION
OF HOLDERS UPON A
CHANGE OF CONTROL . . In the event of a Change of Control,
each holder of Notes may require the
Company to repurchase the Notes, in
whole or in part, for cash or, at the
Company's option, Common Stock
(valued at 95% of the average closing
prices for the five trading days
immediately preceding and including
the third trading day prior to the
repurchase date) at a repurchase
price of 100% of the principal amount
of Notes to be repurchased, plus
accrued interest to the repurchase
date. See "Description of Notes --
Repurchase at Option of Holders Upon
a Change of Control."
USE OF PROCEEDS . . . . The Company intends to use
approximately $15 million to repay
outstanding borrowings under a
revolving credit facility. The
remainder of the net proceeds will be
used for general corporate purposes,
including capital expenditures and
possible acquisitions. See "Use of
Proceeds."
4
LISTING . . . . . . . . The Notes will not be listed on any
securities exchange or quoted on The
Nasdaq Stock Market. Although each
of the Underwriters has advised the
Company that it intends to make a
market in the Notes, they are not
obligated to do so, and any market
making may be discontinued at any
time at the sole discretion of each
of the Underwriters without notice.
See "Underwriting."
COMMON STOCK . . . . . The Common Stock is quoted on The
Nasdaq National Market under the
symbol "PLAB."
SUMMARY CONSOLIDATED FINANCIAL DATA
YEAR ENDED OCTOBER 31,
-----------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE
DATA)
CONSOLIDATED
STATEMENT OF
EARNINGS DATA:
Net sales . . . . $41,305 $48,363 $80,696 $125,299 $160,071
Operating income. 5,868 6,991 14,237 23,590 32,265
Income before
income taxes . . 6,719 7,436 15,301 29,842 33,903
Net income(2) . . $ 4,367 $ 4,908 $10,336 $ 18,632 $ 21,003
Net income per
share(2)(3) . . . $ 0.55 $ 0.59 $ 1.03 $ 1.66 $ 1.74
OTHER DATA:
Ratio of earnings
to fixed
charges(4) . . . 67x 75x 205x 213x 213x
THREE MONTHS ENDED
----------------------------
JANUARY 31, FEBRUARY 2,
1996 1997(1)
---------- ----------
(IN THOUSANDS, EXCEPT RATIOS AND
PER SHARE DATA)
CONSOLIDATED
STATEMENT OF
EARNINGS DATA:
Net sales . . . . . $34,668 $40,029
Operating income . 7,006 7,345
Income before income
taxes . . . . . . . 7,551 8,625
Net income(2) . . . $ 4,651 $ 5,325
Net income per
share(2)(3) . . . . $ 0.39 $ 0.44
OTHER DATA:
Ratio of earnings to
fixed charges(4) . 211x 241x
FEBRUARY 2, 1997(1)
-----------------------
AS
ACTUAL ADJUSTED(5)
------ -----------
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Working capital . . . . . . . . . . $ 16,494 $ 88,869
Property, plant and equipment . . . 135,243 135,243
Total assets . . . . . . . . . . . 209,075 284,075
Long-term debt, less current portion
(6) . . . . . . . . . . . . . . . . 2,005 77,005
Total shareholders' equity . . . . $160,673 $160,673
-----------------------
(1) Beginning with the current fiscal year, the Company has
adopted a fiscal year ending on the Sunday closest to
October 31.
(2) Includes (i) a benefit of $237,000, or $0.02 per share, for
fiscal 1994 representing the cumulative effect of the
Company adopting Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," effective November
1, 1993, (ii) approximately $2 million, or $0.16 per share,
for fiscal 1995 attributable to an after tax gain from the
sale of equity investments less a non-recurring research and
development charge related to an acquisition and
(iii) $0.7 million, or $0.05 per share, for the first
quarter of 1997 attributable to an after tax gain from the
sale of equity investments.
(3) Per share data reflect a 3-for-2 stock split effected in
March 1995.
(4) For purposes of calculating the ratio of earnings to fixed
charges, (i) earnings consist of income before income taxes
plus fixed charges and (ii) fixed charges consist of
interest expense incurred.
(5) As adjusted to give effect to the issuance and sale of the
Notes and the application of net proceeds therefrom.
(6) Does not include approximately $15 million that the Company
borrowed under its unsecured line of credit subsequent to
February 2, 1997, which will be paid with the net proceeds
from this offering. See "Use of Proceeds."
5
RISK FACTORS
Prospective purchasers of the Notes should consider carefully
the following risk factors relating to the offering and the
business of the Company, together with the information and
financial data set forth elsewhere or incorporated by reference
in this Prospectus, prior to making an investment decision.
Certain statements under this caption constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of
1995 (the "Reform Act"). See "--Forward-Looking Statements".
DEPENDENCE ON SEMICONDUCTOR INDUSTRY
The Company sells substantially all of its photomasks to
semiconductor designers and manufacturers. The Company believes
that the demand for photomasks primarily depends on integrated
circuit design activity rather than the volume of semiconductor
sales. Consequently, an increase in semiconductor sales does not
necessarily result in a corresponding increase in photomask
sales. In addition, the reduced use of customized integrated
circuits or other changes in the technology or methods of
manufacturing semiconductors could reduce demand for photomasks
even if demand for semiconductors increases. Further, advances
in semiconductor and photomask design and semiconductor
production methods could reduce the demand for photomasks.
During the early 1990s, certain of these factors contributed to
flat demand for photomasks despite increased semiconductor design
activity. Although demand for photomasks has increased since
late 1993, there can be no assurance that any of the foregoing
factors will not have a material adverse effect on the Company's
business and results of operations. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition"
and "Business -- Industry Overview."
FLUCTUATIONS IN QUARTERLY PERFORMANCE
The Company has experienced fluctuations in its quarterly
operating results and it anticipates that such fluctuations will
continue and could intensify in the future. Fluctuations in
operating results may result in volatility in the price of the
Common Stock and the Notes. Operating results may fluctuate as a
result of many factors, including size and timing of orders and
shipments, loss of significant customers, product mix,
technological change, competition, sales of used equipment by the
Company (which have widely varying gross margins) and general
economic conditions. The Company's customers generally order the
Company's products on an as-needed basis, and substantially all
of the Company's net sales in any quarter are dependent on orders
received during that quarter. Since the Company operates with a
limited backlog and the rate of new orders may vary significantly
from month to month, the Company's capital expenditures and
expense levels are based primarily on sales forecasts.
Consequently, if anticipated sales in any quarter do not occur
when expected, capital expenditures and expense levels could be
disproportionately high, and the Company's operating results
would be adversely affected. Due to the foregoing factors, the
Company believes that period-to-period comparisons of its
operating results are not necessarily meaningful and that such
comparisons cannot be relied upon as indicators of future
performance. In addition, in some future quarter the Company's
operating results could be below the expectations of public
market analysts and investors, which, in turn, could materially
adversely affect the market price of the Common Stock and of the
Notes. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and Note 12 of Notes to
Consolidated Financial Statements.
RAPID TECHNOLOGICAL CHANGE
The photomask industry has been and is expected to continue to
be characterized by technological change and evolving industry
standards. In order to remain competitive, the Company will be
required to continually anticipate, respond to and utilize
changing technologies. In particular, the Company believes that
as semiconductor geometries continue to become smaller, the
Company will be required to manufacture optical proximity
correction and phase-shift photomasks. These technologies
currently are in developmental stages and the Company has not yet
manufactured these types of photomasks in significant volume. In
addition, demand for photomasks has been and could in the future
6
be adversely affected by changes in methods of semiconductor
manufacturing (which could affect the type or quantity of
photomasks utilized) or increased market acceptance of
alternative methods of transferring circuit designs onto
semiconductor wafers which could reduce or eliminate the need for
photomasks. If the Company were unable, due to resource,
technological or other constraints, to anticipate, respond to or
utilize these or other changing technologies, the Company's
business and results of operations could be materially adversely
affected. See "Business -- Research and Development."
CAPITAL INTENSIVE OPERATIONS
The manufacture of photomasks requires a significant
investment in fixed assets. The Company expects that it will be
required to continue to make significant capital expenditures in
connection with its operations. There can be no assurance that
the Company will be able to obtain any additional capital
required in connection with such expansion on reasonable terms,
or at all, or that any such expansion will not have a material
adverse effect on the Company's business and results of
operations, particularly during the start-up phase of new
operations. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition."
DEPENDENCE ON MAJOR CUSTOMERS
Approximately 26% of the Company's net sales in fiscal 1996
was derived from sales to Texas Instruments Incorporated ("Texas
Instruments"). In addition, approximately 19% of net sales in
fiscal 1996 was derived from sales to the Company's next four
largest customers, but no customer other than Texas Instruments
accounted for more than 10% of the Company's net sales in fiscal
1996. Although the Company has purchasing arrangements which
assure the Company a specified amount of certain customers'
requirements so long as the Company's performance is
satisfactory, none of the Company's customers has contracts
requiring it to purchase any minimum quantity of photomasks from
the Company. Any loss of, or significant reduction in, orders
from any of these customers, particularly Texas Instruments,
could have a material adverse effect on the Company's business
and results of operations. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and
"Business -- Customers."
DEPENDENCE ON SUPPLIERS
The Company relies on a limited number of photomask equipment
manufacturers to develop and supply the equipment used in the
photomask manufacturing process. Significant manufacturing
systems used by the Company usually are built to order and
typically have order lead times that can exceed one year.
Further, the Company relies on equipment suppliers to develop
future generations of manufacturing systems to support the
Company's requirements. The inability to obtain equipment when
required could have a material adverse affect on the Company's
business and results of operations.
The Company uses high precision quartz photomask blanks,
pellicles (which are protective transparent cellulose membranes)
and electronic grade chemicals in its manufacturing processes.
Any delays or quality problems in connection with significant raw
materials, particularly photomask blanks, could cause delays in
shipments of photomasks which could adversely affect the
Company's business and results of operations. The fluctuation of
exchange rates with respect to prices of significant raw
materials used in manufacturing also could have a material
adverse effect on the Company's business and results of
operations, although they have not been material to date. See
"Business -- Materials and Supplies."
MANAGEMENT OF EXPANDING OPERATIONS
The Company recently has experienced rapid expansion of its
operations, primarily due to its acquisitions of existing
photomask manufacturing operations. The Company may make
additional acquisitions in the future. This expansion has
placed, and is expected to continue to place, significant demands
on the Company's administrative, operational and financial
7
personnel and systems. Managing acquired operations entails
numerous operational and financial risks, including difficulties
in the assimilation of acquired operations, diversion of
management's attention to other business concerns, amortization
of acquired intangible assets and potential loss of key employees
of acquired operations. Sales of acquired operations also may
decline following an acquisition, particularly if there is an
overlap of customers served by the Company and the acquired
operation, and such customers transition to another vendor in
order to ensure a second source of supply. Furthermore, in
connection with any future acquisitions, the Company would be
required to utilize its cash reserves and/or issue new
securities, which could have a dilutive effect on the Company's
earnings per share, particularly during the initial integration
of the acquired operations into the Company's operations. In
addition, the Company has experienced in the past, and could
experience in the future, difficulties and delays in ramping up
new production facilities. Any failure of the Company to
successfully manage its expanding operations could have a
material adverse effect on the Company's business and results of
operations. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition."
COMPETITION
The photomask industry is highly competitive, and most of the
Company's customers utilize more than one photomask supplier.
The Company competes primarily with DuPont Photomasks, Inc.
("DuPont") and, to a lesser extent, with other independent
photomask suppliers. The Company also competes with
semiconductor manufacturers' captive photomask manufacturing
operations. The Company expects to face continued competition
from these and other suppliers in the future. Certain
competitors have substantially greater financial, technical,
sales, marketing and other resources than the Company.
The Company believes that consistency of product quality and
timeliness of delivery are the principal factors considered by
customers in selecting their photomask suppliers. The inability
of the Company to meet these requirements could adversely affect
the Company's sales. In the past, competition led to pressure to
reduce prices which, the Company believes, contributed to the
decrease in the number of independent manufacturers. There can
be no assurance that there will not be pressure to reduce prices
in the future. See "Business -- Competition."
EXPANSION INTO INTERNATIONAL MARKETS
In fiscal 1996, international sales accounted for
approximately 18% of the Company's net sales. The Company
believes that achieving significant additional international
sales requires it to develop, among other things, a local
presence in the markets on which it is focused. Such a strategy
requires a significant investment of financial, management,
operational and other resources. During fiscal 1996, the Company
significantly expanded its operations in international markets by
acquiring existing operations in the United Kingdom and
Switzerland, establishing manufacturing operations in Singapore
and acquiring an equity interest in a photomask manufacturing
operation in Korea. In international markets, existing
independent photomask suppliers, including, in certain markets,
DuPont, have significant local presences and market share.
Accordingly, the Company has encountered significant competition
which could adversely affect the Company's ability to establish a
significant presence in international markets that it targets.
Operations outside the United States are subject to inherent
risks, including fluctuations in exchange rates, political and
economic conditions in various countries, unexpected changes in
regulatory requirements, tariffs and other trade barriers,
difficulties in staffing and managing foreign operations, longer
accounts receivable payment cycles and potentially adverse tax
consequences. There can be no assurance that such factors will
not have a material adverse effect on the Company's ability to
generate sales outside the United States and, consequently, on
the Company's business and results of operations. See
"Management's Discussion and Analysis of Results of Operations
and Financial Condition" and "Business -- Strategy."
8
DEPENDENCE ON MANAGEMENT AND TECHNICAL PERSONNEL
The Company's success, in part, depends upon key managerial,
engineering and technical personnel, as well as its ability to
continue to attract and retain additional personnel. The loss of
certain key personnel could have a material adverse effect upon
the Company's business and results of operations. There can be
no assurance that the Company can retain its key managerial,
engineering and technical employees or that it can attract
similar additional employees in the future. While the Company
believes that it provides competitive compensation and incentive
packages, it does not have written employment agreements with
employees. See "Business -- Employees" and "Management."
SUBORDINATION
The Notes will be unsecured and subordinated in right of
payment in full to all existing and future Senior Indebtedness of
the Company. As a result of such subordination, in the event of
the Company's liquidation or insolvency, a payment default with
respect to Senior Indebtedness, a covenant default with respect
to Senior Indebtedness or upon acceleration of the Notes due to
an event of default, the assets of the Company will be available
to pay obligations on the Notes only after all Senior
Indebtedness has been paid in full, and there may not be
sufficient assets remaining to pay amounts due on any or all of
the Notes then outstanding. The Company may from time to time
incur indebtedness constituting Senior Indebtedness. The Company
conducts its operations through its subsidiaries. Accordingly,
the Company's ability to meet its cash obligations depends, in
part, upon the ability of its subsidiaries to make distributions
to the Company, which is and will continue to be restricted by,
among other limitations, applicable provisions of law. The
Indenture will not restrict the ability of the Company's
subsidiaries to incur contractual restrictions on their ability
to make distributions to the Company. The right of the Company
to participate in the assets of any subsidiary (and thus the
ability of holders of the Notes to benefit indirectly from such
assets) are generally subject to the prior claims of creditors,
including trade creditors, of that subsidiary. The Notes,
therefore, will be structurally subordinated to the claims of
creditors, including trade creditors, of subsidiaries of the
Company. As of April 28, 1997, the Company had $17.0 million of
Senior Indebtedness outstanding. After giving effect to the
offering of the Notes and the application of net proceeds
therefrom, the Company will have approximately $2 million of
Senior Indebtedness outstanding. As of February 2, 1997,
the Company's subsidiaries had outstanding indebtedness and other
liabilities of approximately $46 million (excluding intercompany
obligations). See "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and "Description
of Notes -- Subordination."
LIMITATIONS ON REPURCHASE OF NOTES
Upon a Change in Control, each holder of Notes will have the
right, at the holder's option, to require the Company to
repurchase all or a portion of such holder's Notes. If a Change
of Control were to occur, there can be no assurance that the
Company would have sufficient funds to pay the repurchase price
for all Notes tendered by the holders thereof. The Company's
repurchase of Notes as a result of the occurrence of a Change of
Control may be prohibited or limited by, or create an event of
default under, the terms of agreements related to borrowings
which the Company may enter into from time to time, including
agreements relating to Senior Indebtedness. The Company also may
elect to make any payment to holders of Notes upon a Change of
Control using shares of Common Stock. See "Description of
Notes -- Repurchase at Option of Holders Upon a Change of Control."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Notes will be a new issue of securities with no
established trading market. Although the Underwriters have
advised the Company that they intend to make a market in the
Notes, they are not obligated to do so, and any such market
making may be discontinued at any time at the sole discretion of
any such Underwriter without notice. There can be no assurance
that an active market for the Notes will develop and continue
upon completion of the offering or that the market price of the
Notes will not decline. Various factors could cause the market
9
price of the Notes to fluctuate significantly, including changes
in prevailing interest rates or changes in perceptions of the
Company's creditworthiness. The trading price of the Notes also
could be significantly affected by the market price of the Common
Stock, which could be subject to wide fluctuations in response to
a variety of factors, including quarterly variations in operating
results, announcements of technological innovations or new
products by the Company in the industry and general economic and
market conditions. The Notes will not be listed on any
securities exchange or quoted on the Nasdaq Stock Market and will
only be traded on the over-the-counter market. See
"-- Fluctuations in Stock Price" and "Underwriting."
FLUCTUATIONS IN STOCK PRICE
The trading prices of the Company's Common Stock have
fluctuated significantly. The prices at which the Common Stock
trades are determined in the marketplace and may be influenced by
many factors, including the performance of, and investor
expectations for, the Company, including shortfalls in net sales
or earnings from levels expected by securities analysts, the
trading volume in the Common Stock and general economic and
market conditions. In addition, in recent years the stock market
in general, and the shares of technology companies in particular,
have experienced extreme price and volume fluctuations. This
volatility has substantially affected the market prices of
securities issued by many companies for reasons unrelated to
their operating performance. These broad market fluctuations may
adversely affect the market price of the Company's Common Stock
and the Notes. There can be no assurance as to the price at
which the Common Stock will trade in the future. See "Price
Range of Common Stock."
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including,
without limitation, statements containing the words "believes,"
"anticipates," "intends," "expects" and words of similar import,
constitute "forward-looking statements" within the meaning of the
Reform Act. Such forward-looking statements involve known or
unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic
and business conditions, both nationally and internationally,
including in those localities in which the Company operates
manufacturing facilities; uncertain demand for photomasks and the
cyclical nature of the semiconductor industry; rapid
technological changes; competition; the need for capital to fund
the expansion of the Company's business; the ability to manage
expanding operations; dependence on customers and suppliers; and
other factors referenced in this Prospectus, including without
limitation, those referenced under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis
of Results of Operations and Financial Condition" and "Business."
Given these uncertainties, prospective investors are cautioned
not to place undue reliance on such forward-looking statements.
The Company disclaims any obligation to update any such factors
or to publicly announce the results of any revisions to any of
the forward-looking statements contained herein to reflect future
events or developments.
10
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes
offered by the Company hereby, after deducting estimated
underwriting discounts, commissions and offering expenses payable
by the Company, are estimated to be approximately $72.4 million
($83.3 million if the Underwriters' over-allotment option is
exercised in full).
The Company intends to use approximately $15 million of the net
proceeds from the offering to repay outstanding borrowings under
the Company's unsecured revolving line of credit. Such
borrowings bear interest at a fluctuating rate which, at April 28,
1997, was 6.6875% per annum, and mature on October 31, 1998. The
Company incurred such indebtedness to finance working capital
needs during the second quarter of fiscal 1997. After repayment
of such borrowings, the unsecured revolving credit facility will
remain available to the Company for future borrowings thereunder.
The Company intends to use the remainder of the net proceeds for
general corporate purposes, including capital expenditures. The
Company may use a portion of the net proceeds in connection with
the possible exercise of options to purchase additional equity in
a Korean photomask manufacturer in which the Company has invested
and shares of the minority shareholder of the Company's Swiss
subsidiary. If the Company were to exercise both options in
full, it would utilize aggregate net proceeds of approximately
$20 million. In addition, from time to time the Company
evaluates and enters into negotiations with respect to potential
acquisitions of the equipment and other assets of both captive
and independent photomask manufacturers and may, as opportunities
become available, make such acquisitions in the future. The
foregoing represents the Company's best estimate of the
allocation of the net proceeds from this offering based upon
current economic and industry conditions and the current state of
its business operations and plans. The application of proceeds
for any particular purpose will depend on a number of factors,
including the timing of expenditures and the availability of
funds from operations or other sources. Pending such uses,
proceeds will be invested in short-term instruments. See
"Management's Discussion and Analysis of Results of Operations
and Financial Condition."
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has been quoted on The Nasdaq
National Market under the symbol "PLAB" since the Company's
initial public offering in March 1987. The following table sets
forth high and low sales prices for the Common Stock as reported
on The Nasdaq National Market for the periods indicated. The
Company effected a three-for-two stock split on March 20, 1995,
and per share prices prior to such date have been adjusted to
reflect such stock split.
HIGH LOW
---- ---
Fiscal year ended October 31, 1995
First quarter . . . . . . . . $20.50 $16.00
Second quarter . . . . . . . . 24.50 19.17
Third quarter . . . . . . . . 36.00 21.75
Fourth quarter . . . . . . . . 40.48 25.50
Fiscal year ended October 31, 1996
First quarter . . . . . . . . 32.75 19.25
Second quarter . . . . . . . . 27.50 18.75
Third quarter . . . . . . . . 30.00 19.75
Fourth quarter . . . . . . . . 35.00 24.75
Fiscal year ending November 2, 1997
First quarter . . . . . . . . 40.25 23.50
Second quarter (through April
25, 1997) . . . . . . . . . 38.50 26.25
On April 25, 1997, the last sale price for the Common Stock as
reported on The Nasdaq National Market was $31.75 per share.
Based on information available to the Company, the Company
believes that it has approximately 7,500 beneficial shareholders.
11
DIVIDEND POLICY
The Company has not paid any cash dividends to date and, for
the foreseeable future, anticipates that earnings will continue
to be retained for use in its business. The terms of the
Company's financing agreements contain certain financial
covenants, including covenants that require the maintenance of
minimum net worth and working capital and compliance with ratios
of total unsubordinated liabilities to tangible net worth and of
accounts receivable and cash to current liabilities, which could
have the effect of limiting the payment of dividends.
CAPITALIZATION
The following table sets forth the capitalization of the
Company as of February 2, 1997 and as adjusted to give effect to
the issuance and sale of $75,000,000 aggregate principal amount
of the Notes being offered hereby.
FEBRUARY 2, 1997
-------------------
AS
ACTUAL ADJUSTED
------ ----------
(IN THOUSANDS)
Long-term debt:(1)
Convertible Subordinated Notes . . . . . . . $ -- $ 75,000
Other indebtedness, less current portion(2) . 2,005 2,005
-------- --------
2,005 77,005
-------- --------
Shareholders' equity:
Preferred Stock $0.01 par value, 2,000,000
shares authorized; none issued
and outstanding . . . . . . . . . . . . . -- --
Common Stock, $0.01 par value, 20,000,000
shares authorized; 11,983,744 shares
issued; and 11,847,244 shares
outstanding . . . . . . . . . . . . . . . 120 120
Additional paid-in capital . . . . . . . . . 78,084 78,084
Retained earnings . . . . . . . . . . . . . 79,298 79,298
Unrealized gains on investments(3) . . . . . 3,230 3,230
Treasury stock, 136,500 shares at cost . . . (245) (245)
Cumulative foreign exchange translation
adjustment . . . . . . . . . . . . . . . . 186 186
-------- --------
Total shareholders' equity . . . . . 160,673 160,673
-------- --------
Total capitalization . . . . . $162,678 $237,678
======== ========
-------------
(1) See Note 4 of Notes to Consolidated Financial Statements for a
description of the Company's long-term debt.
(2) Does not include approximately $15 million that the Company
borrowed under its revolving credit facility subsequent to
February 2, 1997, which will be repaid with the net proceeds from
this offering.
(3) Reflects unrealized gains on the Company's shares in two
publicly-held technology companies. See Note 2 of Notes to
Consolidated Financial Statements.
12
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of the Company
as of October 31, 1992, 1993, 1994, 1995 and 1996 and for the years
then ended have been derived from the audited consolidated financial
statements of the Company. The financial statements as of October 31,
1995 and 1996 and for each of the years in the three year period ended
October 31, 1996, and the report of Deloitte & Touche LLP, independent
auditors, with respect to such periods, are included elsewhere in this
Prospectus. The selected financial data as of February 2, 1997 and
for the three months ended January 31, 1996 and February 2, 1997 have
been derived from the unaudited financial statements which contain
adjustments, consisting only of normal recurring adjustments, which
management considers necessary for a fair presentation of the
financial information for such periods. The results of operations for
the three months ended February 2, 1997 are not necessarily indicative
of the operating results that may be expected for any other period or
the full year. The data are qualified by reference to, and should be
read in conjunction with, "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and the Consolidated
Financial Statements and related notes and other financial information
appearing elsewhere in this Prospectus or incorporated by reference
herein. Beginning with the current fiscal year, the Company has
adopted a fiscal year ending on the Sunday closest to October 31.
YEAR ENDED OCTOBER 31,
-------------------------------
1992 1993 1994
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
CONSOLIDATED STATEMENT OF
EARNINGS DATA:
Net sales . . . . . . . . . . . $41,305 $48,363 $80,696
Costs and expenses:
Cost of sales . . . . . . . 27,142 32,048 51,204
Selling, general and
administrative . . . . . . 5,746 6,580 10,517
Research and development(1) 2,549 2,744 4,738
------- ------- -------
Operating income . . . . . . . 5,868 6,991 14,237
Interest and other, net(2) . . 851 445 1,064
------- ------- -------
Income before income taxes . . 6,719 7,436 15,301
Provision for income taxes(3) . 2,352 2,528 4,965
------- ------- -------
Net income(3) . . . . . . . . . $ 4,367 $ 4,908 $10,336
======= ======= =======
Net income per common $ 0.55 $ 0.59 $ 1.03
share(3)(4) . . . . . . . . . ======= ======= =======
Weighted average number of 7,998 8,372 10,062
common shares outstanding(4) . ======= ======= =======
YEAR ENDED OCTOBER
31, THREE MONTHS ENDED
------------------ ------------------
JANUARY 31, FEBRUARY 2,
1995 1996 1996 1997
---- ---- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENT OF
EARNINGS DATA:
Net sales . . . . . . . $125,299 $160,071 $34,668 $40,029
Costs and expenses:
Cost of sales . . . 76,683 98,267 21,252 25,347
Selling, general and
administrative . . 17,127 21,079 4,585 5,035
Research and 7,899 8,460 1,825 2,302
development(1) . . -------- -------- -------- --------
Operating income . . . 23,590 32,265 7,006 7,345
Interest and other, net(2) 6,252 1,638 545 1,280
-------- -------- -------- --------
Income before income taxes 29,842 33,903 7,551 8,625
Provision for income 11,210 12,900 2,900 3,300
taxes(3) . . . . . . . -------- -------- -------- --------
Net income(3) . . . . . $18,632 $21,003 $ 4,651 $ 5,325
======== ======== ======== ========
Net income per common $ 1.66 $ 1.74 $ 0.39 $ 0.44
share(3)(4) . . . . . ======== ======== ======== ========
Weighted average number of
common shares 11,207 12,101 12,058 12,227
outstanding(4) . . . . ======== ======== ======== ========
OCTOBER 31,
-----------------------------
1992 1993 1994
---- ---- ----
(IN THOUSANDS)
CONSOLIDATED BALANCE
SHEET DATA:
Working capital . . . . $20,771 $17,577 $32,329
Property, plant and
equipment. . . . . . . 25,148 41,585 39,205
Total assets(5) . . . . 52,026 74,441 98,346
Long-term debt, less
current portion . . . 1,698 1,051 495
Total shareholders'
equity(5). . . . . . . $44,011 $62,626 $80,402
OCTOBER 31,
----------------- FEBRUARY 2,
1995 1996 1997
---- ---- -----------
(IN THOUSANDS)
CONSOLIDATED BALANCE
SHEET DATA:
Working capital . . . $ 49,653 $ 21,613 $ 16,494
Property, plant and
equipment. . . . . . 72,063 123,666 135,243
Total assets(5) . . . 174,218 211,903 209,075
Long-term debt, less
current portion . . 1,809 1,987 2,005
Total shareholders'
equity(5). . . . . . $134,045 $156,417 $160,673
----------------
(1) Includes a non-recurring charge of $1.5 million in fiscal 1995
representing amounts assigned to certain research and development
projects of Microphase Laboratories, Inc. ("Microphase"), which
amounts were expensed at the time of the acquisition.
(2) Includes net gains of $5.1 million and $1.1 million in fiscal
1995 and the three months ended February 2, 1997, respectively,
from the sale of investments.
(3) Includes (i) a benefit of $237,000, or $0.02 per share, for
fiscal 1994 representing the cumulative effect of the Company
adopting Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," effective November 1, 1993, (ii)
approximately $2 million, or $0.16 per share, for fiscal 1995
attributable to an after-tax gain from the sale of equity
investments less a non-recurring research and development charge
related to the Microphase acquisition and (iii) $0.7 million, or
$0.05 per share, for the first quarter of 1997 attributable to an
after-tax gain from the sale of equity investments.
(4) Share and per share data reflect a 3-for-2 split effected in
March 1995.
(5) Under Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities," which the Company adopted effective October 1994,
equity investments are included in assets at fair market value
and unrealized gains on investments are reported as a separate
component of total shareholders' equity. See Notes 1 and 2 of
Notes to Consolidated Financial Statements.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
Photronics established itself as a multinational company during the
fiscal year ended October 31, 1996, by acquiring two European
operations, opening a new, state-of-the-art manufacturing facility in
Singapore and acquiring a minority interest in an independent
photomask manufacturer in Korea. These facilities, together with the
Company's five United States manufacturing facilities, comprise a
global manufacturing network of nine manufacturing facilities
supporting semiconductor manufacturers in the Asian, European and
North American markets. Net sales to foreign markets increased in
each of the last three fiscal years. As a result of the international
expansion, the Company expects that net sales to foreign markets will
continue to increase.
European expansion included the acquisition of the photomask
manufacturing operations and assets of Plessey Semiconductors Limited
("Plessey") located in Manchester, United Kingdom, on January 24,
1996, and a controlling interest in the Litomask Division ("Litomask")
of Centre Suisse d'Electronique et de Microtechnique S.A. ("CSEM")
located in Neuchatel, Switzerland, on April 1, 1996 (see Note 6 of
Notes to the Consolidated Financial Statements). Individually,
neither of these acquisitions had a material effect on the results of
operations in fiscal 1996.
Net sales also have been affected by the increased demand for
higher technology photomasks, which have higher average selling
prices. To meet this demand and position the Company for future
growth, the Company continues to make substantial investments in high-
end manufacturing technology and capacity both at existing and new
facilities. In addition to the Singapore facility, the Company
completed construction of its new state-of-the-art facility in Allen,
Texas, to which it relocated its Dallas, Texas operation in the fourth
quarter of fiscal 1996. The Company currently is constructing a new
manufacturing facility in Manchester, United Kingdom, to which the
existing Manchester operations will be relocated during fiscal 1997. A
new manufacturing facility near Austin, Texas, which the Company
expects will be operational in late fiscal 1997, will be the Company's
tenth manufacturing facility.
The Company acquired the photomask manufacturing operations and
assets of Hoya Micro Mask, Inc. ("Micro Mask") in Sunnyvale,
California, on December 1, 1994, and Microphase in Colorado Springs,
Colorado, on June 20, 1995. The acquisition of Micro Mask contributed
significantly to the Company's growth in fiscal 1995 and, to a lesser
extent, in fiscal 1996. Except for a non-recurring charge in fiscal
1995 to research and development expenses (see Note 6 of Notes to the
Consolidated Financial Statements), the financial results of the new
Colorado facility did not have a material effect on the Company's
results of operations or financial position.
The Company has an option to purchase additional equity of PK
Limited, an independent Korean photomask manufacturer. If the Company
were to acquire a controlling interest, PK Limited's results of
operations and financial condition would be included in the Company's
financial statements. At December 31, 1996, to the Company's
knowledge, PK Limited had total liabilities of $27.4 million, to which
the Notes would be effectively subordinated.
14
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentage of net sales represented by certain items in the Company's
Consolidated Statement of Earnings for each period:
YEAR ENDED OCTOBER 31, THREE MONTHS ENDED
---------------------- ------------------
JANUARY FEBRUARY
31, 2,
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
Net sales . . . . . 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales . . . 63.4 61.2 61.4 61.3 63.3
Selling, general and
administrative . 13.0 13.7 13.2 13.2 12.6
Research and 5.9 6.3 5.3 5.3 5.8
development(1) . ----- ----- ----- ----- -----
Operating income . . 17.7 18.8 20.1 20.2 18.3
Interest and other 1.3 5.0 1.0 1.6 3.2
income, net(2) . . . ----- ----- ----- ----- -----
Income before income
taxes . . . . . . . 19.0 23.8 21.1 21.8 21.5
Provision for income 6.2 8.9 8.0 8.4 8.2
taxes(3) . . . . . . ----- ----- ----- ----- -----
Net income(3) . . . . 12.8% 14.9% 13.1% 13.4% 13.3%
===== ===== ===== ===== =====
---------------
(1) Includes a non-recurring charge of $1.5 million, or 1.2% of net
sales, in fiscal 1995, representing amounts assigned to certain
Microphase research and development projects acquired by the
Company, which amounts were expensed by the Company at the time
of the acquisition. See Note 6 of Notes to Consolidated
Financial Statements.
(2) Includes net gains of $0.8 million, $5.1 million and $1.1 million
in fiscal 1994, fiscal 1995 and the first quarter of fiscal 1997,
respectively, or 1.0%, 4.1% and 2.6% of net sales, respectively,
from the sale by the Company of equity investments.
(3) Includes a benefit from the adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," of
$237,000 for fiscal 1994, or 0.3% of net sales.
THREE MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1996
NET SALES
Net sales for the three months ended February 2, 1997 increased
15.5% to $40.0 million compared with $34.7 million for the three
months ended January 31, 1996. Sales from Photronics' new
international manufacturing operations accounted for slightly more
than one-half of this increase. The remaining portion of the growth
resulted from increased shipments to customers from existing
facilities due to the availability of greater manufacturing
capability, reflecting the implementation of the Company's capacity
expansion program, as well as stronger overall demand.
COST OF SALES
Gross profit for the three months ended February 2, 1997 increased
9.4% to $14.7 million compared with $13.4 million for the same period
in the prior fiscal year. Gross margin decreased to 36.7% for the
three months ended February 2, 1997, as compared with 38.7% in the
corresponding period in the prior fiscal year. The increase in gross
profit resulted principally from increases in sales volume, both from
existing operations in the United States and from new international
operations. To allow for increased manufacturing capability, the
Company has continued to increase its staffing levels and added to its
manufacturing systems, resulting in higher labor and equipment-related
costs, including depreciation expense. The lower margins were due
primarily to the Company's newly expanded manufacturing base, which
was not fully utilized, as well as the inclusion of international
operations which generated margins below those generally experienced
15
in the Company's domestic operations. Partially offsetting these
increased costs were better margins resulting from a favorable product
mix of complex photomasks during the current fiscal year. The Company
anticipates that its fixed operating costs will increase in connection
with its continuing capacity expansion which it expects to offset with
increases in net sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 9.8% to $5.0
million for the three months ended February 2, 1997, compared with
$4.6 million for the same period in the prior fiscal year. However,
as a percentage of net sales, selling, general and administrative
expenses decreased to 12.6% for the three months ended February 2,
1997, compared with 13.2% for the same period in the prior fiscal
year. The increases in costs resulting from the addition of the
international operations were offset by the absence of a proportionate
increase in costs in the U.S. business which have not been
significantly different than in the prior year.
RESEARCH AND DEVELOPMENT
Research and development expenses for the three months ended
February 2, 1997, increased 26.1% to $2.3 million, compared with $1.8
million for the same period in the prior fiscal year. This increase
reflects expansion of the Company's research and development
organization and an increase in its development efforts which have
focused on new high-end, more complex photomasks, including phase
shift, optical proximity correction and deep ultra-violet technologies
as well as large area photomasks. As a percentage of net sales,
research and development expenses increased to 5.8% for the three
months ended February 2, 1997, compared with 5.3% in the corresponding
prior fiscal period.
OTHER INCOME
Interest and other income, net, for the three months ended February
2, 1997, increased to $1.3 million compared with $0.5 million for the
same period in the prior fiscal year due principally to a $1.1 million
gain from the sale of investment securities, offset in part by a
decrease in interest income resulting from lower levels of funds
available for investment.
NET INCOME
Net income for the three months ended February 2, 1997, increased
14.5% to $5.3 million, or $0.44 per share, compared with $4.7 million
or $0.39 per share, for the same period in the prior fiscal year. Net
income in the first quarter of 1997 included $0.7 million, or $0.05
per share, from the gain on the sale of investment securities. The
weighted average number of common shares outstanding increased to 12.2
million for the three months ended February 2, 1997, from 12.1 million
for the same period in the prior fiscal year principally as a result
of the issuance of shares in connection with employee stock option
exercises since the first quarter of 1996.
FISCAL YEARS ENDED OCTOBER 31, 1996, 1995 AND 1994
NET SALES
Net sales in fiscal 1996 increased 27.8% to $160.1 million compared
with net sales of $125.3 million in the prior fiscal year. The
majority of the growth was from increased shipments to customers from
existing facilities due to greater manufacturing capacity resulting
from the Company's capital expansion program, and from increased
average selling prices due to a larger proportion of higher technology
photomask shipments in fiscal 1996. Approximately 20% of the increase
is attributable to the European acquisitions, including sales to
Plessey under a long-term supply agreement which was executed in
connection with the acquisition. The increase in sales was also
favorably affected by the inclusion of a full year's sales for the
Company's Colorado and Sunnyvale facilities which were acquired during
fiscal 1995 and increased sales from the Company's wholly owned
subsidiary, Beta Squared, Inc. ("Beta Squared"). Net sales for fiscal
1995 represented an increase of 55.3% over fiscal 1994 sales of $80.7
million. Approximately one-half of the fiscal 1995 increase was
attributable to the inclusion of the Company's new Sunnyvale facility,
commencing December 1, 1994. Furthermore, shipments to customers from
16
existing facilities increased due to stronger demand generally and
greater manufacturing capacity as the Company implemented its capacity
expansion program.
COST OF SALES
Cost of sales for fiscal 1996 increased 28.1% to $98.3 million
compared to $76.7 million for the prior fiscal year. These increases
resulted principally from increases in sales volume, including those
resulting from the Company's recent acquisitions. To meet the
increased production demands, the Company has increased its staffing
levels and manufacturing capacity, resulting in, among other things,
increased labor costs, depreciation expense and equipment maintenance
costs. As a percentage of net sales, cost of sales increased slightly
to 61.4% in fiscal 1996, compared with 61.2% in fiscal 1995.
Improvements from higher capacity utilization of the Company's
installed equipment base and a more favorable mix of advanced
photomasks were offset by the absorption of increased costs resulting
from manufacturing capacity expansion and lower margins generally at
recently acquired operations, at Beta Squared, and on sales contracted
to foreign manufacturing partners. The Company anticipates that its
fixed operating costs will increase in connection with its continuing
capacity expansion. While cost of sales may increase initially, the
Company expects to match these higher costs with continued increases
in revenues as the new facilities and equipment progress to a higher
level of utilization.
Cost of sales for fiscal 1995 increased 49.8% over fiscal 1994 cost
of sales of $51.2 million. This increase resulted principally from
increases in sales volume, including those resulting from the Micro
Mask acquisition. Staffing levels were increased to meet production
demands and higher employee incentive compensation expenses were
incurred as a result of the Company's performance. The addition of
manufacturing capacity resulted in increased equipment-related costs,
including maintenance and depreciation. However, as a percentage of
net sales, cost of sales in fiscal 1995 decreased to 61.2% from 63.4%
in fiscal 1994. This improvement was due primarily to the continued
higher capacity utilization and greater operating efficiencies
afforded by sales volume increases, most notably at the Company's
Dallas, Texas, operation which was acquired from Toppan Printronics
(USA), Inc. ("Toppan") on October 1, 1993, and a more favorable mix of
more complex photomasks.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 23.1% to
$21.1 million in fiscal 1996 compared to $17.1 million in fiscal 1995.
Nearly half of the increase was due to the addition of the Company's
foreign operations. The remaining increase primarily is attributable
to the inclusion of a full year's expenses for the Company's Colorado
and Sunnyvale facilities which were acquired during fiscal 1995 and
increased staffing levels to accommodate the Company s significant
growth, partially offset by lower incentive compensation expense. As
a percentage of net sales, selling, general and administrative
expenses decreased to 13.2% for fiscal 1996 compared to 13.7% in the
prior fiscal year, largely due to the lower level of employee
incentive compensation expense in fiscal 1996. Selling, general and
administrative expenses in fiscal 1995 increased 62.9% over fiscal
1994 expenses of $10.5 million. This increase was principally due to
the inclusion of the Company s Sunnyvale facility and higher employee
incentive compensation expenses resulting from the Company s
performance. Moreover, increased staffing levels and other associated
costs were incurred in the latter part of 1994 and in 1995 to
accommodate the Company s business expansion. As a percentage of net
sales, selling, general and administrative expenses in fiscal 1995
increased to 13.7% from 13.0% in fiscal 1994.
RESEARCH AND DEVELOPMENT
Research and development expenses for fiscal 1996 increased 7.1% to
$8.5 million from $7.9 million for the prior fiscal year. In
connection with the Microphase acquisition in fiscal 1995, the Company
recorded a one-time charge of $1.5 million, representing amounts
assigned to certain Microphase research and development projects,
principally for the manufacture of large area masks, which were
expensed upon acquisition. Excluding this non-recurring charge,
research and development expenses for fiscal 1996 increased
approximately 32% compared to fiscal 1995. This increase reflects the
expansion of the Company s research and development organization and
the resulting increase in its development efforts that have focused on
new high-end, more complex photomasks utilizing phase shift, optical
proximity correction and deep ultra-violet technologies, and on large
17
area photomasks. As a percentage of net sales, excluding the
Microphase charge, research and development expenses increased
slightly to 5.3% in fiscal 1996 from 5.1% in fiscal 1995. Research
and development expenses in fiscal 1995, excluding the Microphase
charge, increased approximately 35% over fiscal 1994 expenses of $4.7
million. As a percentage of net sales, research and development
expenses, excluding the Microphase charge, declined to 5.1% in fiscal
1995 from 5.9% of net sales in fiscal 1994 because of the substantial
increase in net sales.
OTHER INCOME AND EXPENSE
Interest income for fiscal 1996 remained fairly constant at $1.6
million. Other income, net, decreased to $197,000 for fiscal 1996
compared to $4.8 million for the prior fiscal year principally due to
the $5.1 million net gain from the sales of equity investments during
fiscal 1995. Gains on disposition of investments in fiscal 1994
totaled $831,000. Minority interest expense and foreign currency
transaction gains or losses were not significant in fiscal 1996.
INCOME TAXES
For fiscal 1996, the Company provided Federal, state and foreign
income taxes at an estimated combined effective annual tax rate of
38.0% as compared to 37.6% in fiscal 1995 and 34.0% in fiscal 1994.
The increase in the Company s estimated tax rate primarily is the
result of a decrease in tax-exempt investment income for fiscal 1996.
The change in the estimated tax rate from fiscal 1994 to fiscal 1995
was the result of a larger portion of income being subject to the 35%
incremental Federal income tax rate and a greater portion of the
Company s income being generated in California following the Micro
Mask acquisition. In 1994, the Company recognized the cumulative
effect of the adoption of SFAS 109, "Accounting for Income Taxes,"
resulting in a benefit of $237,000, or $0.02 per share.
NET INCOME
Net income for fiscal 1996 amounted to $21.0 million, or $1.74 per
share, compared with $18.6 million, or $1.66 per share, in fiscal 1995
and $10.3 million, or $1.03 per share, in fiscal 1994. Excluding the
non-recurring research and development charge and the net gain from
the sale of equity investments in the third quarter of fiscal 1995
which increased prior year net income by approximately $2 million, or
$0.16 per share, net income for fiscal 1996 increased approximately
26%. Earnings per share were based on 12.1 million weighted average
shares outstanding in fiscal 1996, compared with 11.2 million shares
in 1995 and 10.1 million shares in 1994. The increases in weighted
average shares outstanding in fiscal 1996 and 1995 principally are the
result of a public offering of 1.5 million shares in April and May
1995 and the issuance of approximately 100,000 shares in connection
with the Microphase acquisition in June 1995. All share and earnings
per share amounts reflect a three-for-two stock split effected in
March 1995.
18
QUARTERLY RESULTS
The following tables present unaudited quarterly consolidated
financial data for each of the eight quarters in the period ended
October 31, 1996 and for the fiscal quarter ended February 2, 1997 and
such data as a percentage of net sales. This data has been prepared
on a basis consistent with the audited consolidated financial
statements appearing elsewhere in this Prospectus, and in the opinion
of management, includes all necessary adjustments (consisting only of
normal recurring adjustments) to present fairly the unaudited
quarterly results when read in conjunction with the audited
consolidated financial statements of the Company and notes thereto
appearing elsewhere in this Prospectus. The results of operations for
any quarter are not necessarily indicative of results to be expected
for any future period.
FISCAL 1995
THREE MONTHS ENDED
--------------------------------------------------
JANUARY 31, APRIL 30, JULY 31, OCTOBER 31,
1995 1995 1995 1995
----------- --------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales . . . . . . $26,176 $30,037 $32,854 $36,232
Costs and expenses:
Cost of sales . . 16,417 18,422 20,015 21,829
Selling, general
and administrative 3,543 4,104 4,489 4,991
Research and 1,348 1,595 3,177 1,779
development(1) . . ------ ------ ------ ------
Operating income . . 4,868 5,916 5,173 7,633
Interest and other
income, net(2) . . . 334 179 5,187 552
------ ------ ------ ------
Income before income
taxes . . . . . . . 5,202 6,095 10,360 8,185
Provision for income 1,935 2,275 3,900 3,100
taxes . . . . . . . ------ ------ ------ ------
Net income(3) . . . . $ 3,267 $ 3,820 $ 6,460 $ 5,085
====== ====== ====== ======
Net income per common $ 0.32 $ 0.36 $ 0.54 $ 0.42
share(3) . . . . . . ====== ====== ====== ======
Weighted average
number of common
shares outstanding . 10,256 10,513 11,945 12,113
====== ====== ====== ======
Net sales . . . . . . 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales . . 62.7 61.3 60.9 60.2
Selling, general
and administrative 13.5 13.7 13.7 13.8
Research and 5.2 5.3 9.7 4.9
development(1). . ------ ------ ------ ------
Operating income . . 18.6 19.7 15.7 21.1
Interest and other 1.3 0.6 15.8 1.5
income, net(2) . . . ------ ------ ------ ------
Income before income
taxes . . . . . . . 19.9 20.3 31.5 22.6
Provision for income 7.4 7.6 11.8 8.6
taxes . . . . . . . ------ ------ ------ ------
Net income . . . . . 12.5% 12.7% 19.7% 14.0%
====== ====== ====== ======
FISCAL
1997
THREE
FISCAL 1996 MONTHS
THREE MONTHS ENDED ENDED
---------------------------------------- --------
JANUARY APRIL JULY OCTOBER FEBRUARY
31, 30, 31, 31, 2,
1996 1996 1996 1996 1997
------- ----- ---- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales . . . . . . $34,668 $40,514 $42,677 $42,212 $40,029
Costs and expenses:
Cost of sales . . 21,252 24,811 26,249 25,955 25,347
Selling, general
and administrative 4,585 5,447 5,587 5,460 5,035
Research and 1,825 2,123 2,218 2,294 2,302
development(1 . . ------ ------ ------ ------ ------
Operating income . . 7,006 8,133 8,623 8,503 7,345
Interest and other
income, net(2) . . . 545 334 290 469 1,280
------ ------ ------ ------ ------
Income before income
taxes . . . . . . . 7,551 8,467 8,913 8,972 8,625
Provision for income 2,900 3,200 3,400 3,400 3,300
taxes . . . . . . . ------ ------ ------ ------ ------
Net income(3) . . . . $ 4,651 $ 5,267 $ 5,513 $ 5,572 $ 5,325
====== ====== ====== ====== ======
Net income per common $ 0.39 $ 0.44 $ 0.46 $ 0.46 $ 0.44
share(3) . . . . . . ====== ====== ====== ====== ======
Weighted average
number of common
shares outstanding . 12,058 12,048 12,111 12,196 12,227
====== ====== ====== ====== ======
Net sales . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales . . 61.3 61.2 61.5 61.5 63.3
Selling, general
and administrative 13.2 13.4 13.1 12.9 12.6
Research and 5.3 5.3 5.2 5.5 5.8
development(1). . ------ ------ ------ ------ ------
Operating income . . 20.2 20.1 20.2 20.1 18.3
Interest and other 1.6 0.8 0.7 1.1 3.2
income, net(2) . . . ------ ------ ------ ------ ------
Income before income
taxes . . . . . . . 21.8 20.9 20.9 21.2 21.5
Provision for income 8.4 7.9 8.0 8.0 8.2
taxes . . . . . . . ------ ------ ------ ------ ------
Net income . . . . . 13.4% 13.0% 12.9% 13.2% 13.3%
====== ====== ====== ====== ======
------------------
(1) Includes a non-recurring charge of $1.5 million, or 4.6% of net sales,
in the three months ended July 31, 1995, representing amounts
attributed to certain Microphase research and development projects,
which were expensed at the time of the Microphase acquisition.
(2) Includes net gains of $0.4 million, $4.7 million and $1.1 million in
the three months ended January 31, 1995, July 31, 1995 and February 2,
1997, respectively, or 1.5%, 14.3% and 2.6%, respectively, of net
sales for such periods from the sale of equity investments.
(3) Includes (i) approximately $2 million, or $0.16 per share, in the
third quarter of fiscal 1995 attributable to the sale of equity
investments less the non-recurring research and development charge and
(ii) $0.7 million, or $0.05 per share, attributable to the sale of
equity investments in the first quarter of fiscal 1997.
19
In the past, the Company has experienced fluctuations in its
quarterly operating results and it anticipates that such fluctuations
will continue and could intensify in the future. Operating results
may fluctuate as a result of many factors, including size and timing
of orders and shipments, product mix, sales of equipment (which have
widely varying gross margins), technological change, competition, loss
of significant customers and general economic conditions. The
Company's customers generally order the Company's products on an as-
needed basis, and substantially all of the Company's net sales in any
quarter are dependent on orders received during the quarter. Since
the Company operates with a limited backlog and the rate of new orders
may vary significantly from month to month, the Company's capital
expenditures and overhead expense levels are based primarily on sales
forecasts. Consequently, if anticipated sales and shipments in any
quarter do not occur when expected, capital expenditures and overhead
expense levels could be disproportionately high and the Company's
operating results would be adversely affected. In addition,
substantially all of the Company's net sales are derived from
customers in the semiconductor industry. This industry is highly
cyclical and has been characterized by periodic downturns, which in
some cases have had severe effects on suppliers to the industry. There
can be no assurance that any of the foregoing factors will not have a
material adverse effect on the Company's business and results of
operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and short-term investments
decreased $25.2 million during fiscal 1996, largely as a result of
$55.8 million of capital expenditures for building construction and
equipment purchases in connection with the Company's expansion of
manufacturing capacity and $12.4 million for the acquisitions of the
photomask manufacturing operations and assets of Plessey and Litomask
and the investment in PK Limited. Offsetting these decreases during
fiscal 1996 were cash provided by operating activities totaling $38.6
million, $2.8 million from sales of stock under employee stock option
and purchase plans and the receipt of approximately $1.0 million of
local government financial incentives to be utilized for the Company's
new Manchester operation. Cash, cash equivalents and short-term
investments decreased $13.7 million during the three months ended
February 2, 1997, largely as a result of funding $15.7 million of
capital expenditures for equipment and construction in progress in
connection with the Company's expansion of manufacturing capacity.
Accounts receivable increased to $24.8 million at October 31, 1996
from $17.9 million at October 31, 1995, primarily as a result of
higher year-end sales levels, including sales by the new foreign
operations, and slower collections generally. Accounts receivable
increased only slightly during the first quarter of fiscal 1997.
Inventories increased to $8.0 million at October 31, 1996 from $6.4
million at October 31, 1995, primarily due to general increases to
accommodate the escalating sales volume and the addition of the
foreign facilities. Inventories increased $1.1 million, or 14%, from
October 31, 1996 to $9.1 million at February 2, 1997, as a result of
the purchase of several machines for refurbishment and resale during
the quarter by Beta Squared. Other current assets increased to $6.2
million at October 31, 1996, from $3.4 million at October 31, 1995,
primarily due to an increase in prepaid income taxes and prepaid
expenses at the newly acquired foreign operations.
Property, plant and equipment increased to $135.2 million at
February 2, 1997 and to $123.7 million at October 31, 1996, from $72.1
million at October 31, 1995. Deposits on and purchases of equipment,
building construction at the new Allen, Texas and Singapore
facilities, and construction in progress on the new Manchester and
Austin, Texas facilities totaled $55.8 million and $15.7 million in
fiscal 1996 and during the three months ended February 2, 1997,
respectively, and fixed assets totaling $8.1 million were acquired in
connection with the Plessey and Litomask acquisitions in fiscal 1996.
These increases were offset by depreciation expense totaling $12.1
million and $4.2 million in fiscal 1996 and the first quarter of
fiscal 1997, respectively. Decreases in intangible assets from $10.3
million at October 31, 1995 to $9.3 million at October 31, 1996 and to
$9.0 million at February 2, 1997 was due primarily to amortization
expense during the applicable periods.
Investments increased to $13.2 million at October 31, 1996, from
$12.3 million at October 31, 1995, due to the Company s investment in
PK Limited, offset by a decrease in the fair values of the Company s
available-for-sale investments during fiscal 1996. Investments
decreased to $10.4 million at February 2, 1997, due to the sale of
certain investment securities as well as the net decrease in the fair
value of investment securities during the period.
20
Accounts payable increased to $34.2 million at October 31, 1996,
from $17.9 million at October 31, 1995, primarily due to increased
payables related to the completion of new facilities during the fourth
quarter, recent major equipment purchases, the addition of the foreign
operations and a higher level of purchases generally due to the
Company s growth. Accounts payable decreased $4.2 million from
October 31, 1996 to $29.9 million at February 2, 1997, due to payments
made of unusually high payables at October 31, 1996 which had resulted
from the acceptance of significant equipment purchases at the end of
fiscal 1996. Accrued salaries and wages and other accrued liabilities
decreased to $9.8 million at October 31, 1996, from $11.9 million at
October 31, 1995. This decrease is largely attributable to the
settlement of fees in connection with the conclusion of several of the
Company s expansion projects, together with lower sales, use and
property tax liabilities because of the resolution of related
assessments. Accrued salaries and wages and other accrued liabilities
decreased to $7.8 million at February 2, 1997, largely as a result of
payments for fiscal 1996 incentive compensation and timing of other
expenses.
The Company has amended its revolving credit facility to permit
borrowings of up to $30.0 million at any time through October 31,
1998. All amounts outstanding at October 31, 1998 will be due and
payable on such date.
The Company did not incur any long-term debt during 1996. Changes
in long-term debt are due to the imputation of interest on the
obligation incurred in connection with the Micro Mask acquisition.
Deferred income taxes decreased from $8.3 million at October 31, 1995
to $7.5 million at October 31, 1996 and to $6.6 million at February 2,
1997, largely due to a reduction in unrealized gains on investments.
Other liabilities increased to $2.1 million at October 31, 1996, from
$265,000 at October 31, 1995, principally due to financial incentives
received in connection with the Company s new Manchester operations
and minority interest associated with the Company's Swiss subsidiary.
The Company's commitments represent on-going investments in
additional manufacturing capacity as well as advanced equipment for
research and development of the next generation of higher technology,
more complex photomasks. At February 2, 1997, the Company had
commitments outstanding for capital expenditures of approximately $62
million. Additional commitments are expected to be incurred during
fiscal 1997. Subsequent to the end of the first quarter of fiscal
1997, the Company utilized its revolving credit facility and, at April
28, 1997, approximately $15 million was outstanding. The Company
believes that its currently available resources, together with its
capacity for substantial growth and its accessibility to other debt
and equity financing sources, are sufficient to satisfy its cash
requirements for the foreseeable future.
EFFECT OF NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128 ("SFAS
128"), "Earnings per Share," which establishes new standards for
the computation and disclosure of earnings per share ("EPS"). The
new statement requires dual presentation of "basic" EPS and
"diluted" EPS. Basic EPS is based on the weighted average number
of common shares outstanding for the period, excluding any dilutive
common share equivalents. Diluted EPS relfects the potential
dilution that could occur if securities or other contracts to
issue common stock were exercised or converted. The Company cannot
adopt SFAS 128 until the first quarter of fiscal year 1998. The
effect of SFAS 128, had it been adopted beginning in fiscal year
1994, would have been to present basic EPS that would have been
greater than EPS actually reported by $0.03 in fiscal year 1994;
$0.07 in 1995; $0.05 in 1996; and $0.01 for the first quarter
of 1996 and for the first quarter of 1997. The presentation of
diluted EPS would have been the same as EPS actually reported
for the respective periods.
21
BUSINESS
Photronics is a leading manufacturer of photomasks, which are
used primarily by the semiconductor industry in the manufacture
of integrated circuits. A photomask is a high precision
photographic quartz plate that is used as a master to transfer
microscopic circuit patterns onto semiconductor wafers during the
fabrication of integrated circuits. Based upon available market
information, the Company believes that it has a larger share of
the United States market for photomasks than any other photomask
manufacturer and is one of the largest photomask manufacturers in
the world.
During 1996, the Company focused on developing a global
network and enhancing its technological and manufacturing
capabilities by expanding its existing facilities and acquiring
or establishing new manufacturing operations. The Company
transferred its Dallas, Texas operations to a new, advanced
manufacturing facility in Allen, Texas and began construction of
another facility in Austin, Texas that the Company expects will
begin operations by late 1997. The Company established
manufacturing operations outside the United States by acquiring
facilities in the United Kingdom and Switzerland, constructing a
state-of-the-art manufacturing facility in Singapore and
acquiring an equity interest in PK Limited, a Korean photomask
manufacturer. As a result of these efforts and its continuing
investment in sophisticated manufacturing equipment, the Company
believes that its manufacturing capacity is among the largest and
most advanced in the industry.
INDUSTRY OVERVIEW
Photomasks are used to transfer circuit patterns onto
semiconductor wafers during the fabrication of integrated
circuits and, to a lesser extent, other types of electronic
components. Each integrated circuit design consists of a series
of separate patterns, each of which is imaged onto a different
photomask. The resulting series of photomasks then is used to
successively layer the circuit patterns onto the semiconductor
wafer. The manufacture of modern photomasks requires the use of
advanced cleanrooms and sophisticated lithography, inspection,
repair and process systems as well as complex data handling
capabilities.
VLSI Research Inc. estimates that worldwide photomask sales
exceeded $1.7 billion in 1996 and projects a compound annual
growth rate of approximately 17% through 2001. These amounts
include sales by both independent manufacturers and captives,
which are semiconductor manufacturers that produce photomasks
almost exclusively for their own use. Since the mid-1980s, there
has been a trend in the United States and Europe towards the
divestiture or closing of captive photomask operations by
semiconductor manufacturers and an increase in the share of the
market served by independent manufacturers. The Company believes
that this trend is attributable to an increase in the complexity
of integrated circuit devices and resultant increases in the
complexity of photomasks necessary to produce such circuits.
These developments have increased substantially the capital
requirements and costs related to photomask operations, making it
no longer cost effective in many cases for semiconductor
manufacturers to maintain captive photomask operations. At the
same time, due in part to these increasing capital requirements
and competitive pressures, the number of significant independent
manufacturers in the United States and Europe decreased from
approximately 14 in the mid-1980s to four in 1996.
The Company believes that increased photomask demand reflects
increased semiconductor design activity and is only indirectly
affected by changes in semiconductor sales volumes. Increased
design activity has been stimulated by both the rapid development
of new generation semiconductor designs and the proliferation of
application-specific integrated circuits. In addition, the
Company believes the following factors have affected and will
continue to affect the photomask industry:
. Proliferation of Semiconductor Applications. Semiconductor
devices of all types continue to be incorporated into new
products, including cellular telephones, pagers,
automobiles, medical products, household appliances and
other electronic consumer products. These applications are
22
function specific and typically require new integrated
circuit designs and corresponding sets of photomasks. In
addition, the demand for semiconductor devices from
traditional markets such as computer systems is growing
significantly as semiconductor content in electronic systems
increases and as the market for personal computers and other
electronic systems expands.
. Increasing Device Complexity. Semiconductor manufacturers
and designers continue to increase the complexity of
integrated circuits which has led to a corresponding
increase in the complexity and number of photomasks required
in the manufacture of an integrated circuit. For example, a
typical 64 Mbit DRAM uses 23 photomasks compared to 14
photomasks for an older generation 1 Mbit DRAM.
. Limited High-End Photomask Manufacturing Capacity. High-end
photomasks typically require more advanced manufacturing
systems and processes. These systems generally are
significantly more expensive than prior generation systems,
and photomasks requiring these advanced systems are usually
more expensive to produce. The Company believes that only a
limited number of photomask manufacturers throughout the
world currently have the capacity to produce high-end
photomasks in significant volume.
. New Advanced Semiconductor Manufacturing Facilities. In
response to the increasing demand for integrated circuits,
semiconductor manufacturers have added, or announced the
addition of, a significant number of new state-of-the-art
manufacturing facilities. These facilities are likely to
require the most advanced photomasks.
. Limited Technological Capabilities. As semiconductor
manufacturers continue to increase the complexity of
integrated circuits, they have encountered technological
limitations in their installed equipment base. One solution
to these limitations has been to incorporate advanced
lithographic techniques into the design of photomasks.
These advanced photomasks, generally known as phase-shift
and optical proximity correction (OPC) photomasks, are among
the most difficult and expensive photomasks to manufacture,
and only a small number of photomask manufacturers have the
expertise and the sophisticated equipment to manufacture
such photomasks.
STRATEGY
The Company's strategy to expand its position as a leader in
the manufacture of photomasks consists of the following elements:
. Maintain Technological Leadership. Maintaining
technological leadership in photomask manufacture is
important to the Company's long-term success. The Company
invests in state-of-the-art manufacturing systems and
facilities to support advanced technological and high volume
demands. The Company will continue to devote significant
resources to the development of technologies for the
manufacture of advanced photomasks, including optical
proximity correction and phase-shift photomasks, which are
designed to improve circuit image resolution on a
semiconductor wafer.
. Ensure Strong Customer Relationships. Critical to the
Company's position as an industry leader is developing and
maintaining high levels of customer satisfaction. Because
each photomask is specific to a particular circuit design
and customers expect rapid delivery, the Company believes
that consistency of product quality and timeliness of
delivery are critical to its success. The Company has
invested in the facilities and personnel necessary to
expeditiously handle incoming customer designs and works
closely with each customer to ensure that the customer's
specifications are properly reflected in the final product.
In addition, the Company has entered into arrangements with
certain key customers under which the Company is designated
a preferred supplier and the customer is assured a level of
priority access to the Company's manufacturing capabilities.
23
. Leverage Strategically Located Manufacturing Facilities.
The Company believes that in certain markets proximity to
customers is an important competitive factor. In order to
accelerate delivery times and respond to customer demands,
the Company has established multiple manufacturing
facilities in key locations. The Company's manufacturing
network now includes five facilities in the United States
(with a sixth under construction) as well as facilities in
Singapore, Switzerland and the United Kingdom. The Company
also has an option to increase its equity ownership of a
manufacturing operation in Korea. The Company continually
evaluates new markets and acquisition opportunities to
support its customers.
. Provide Global Solution. As the semiconductor industry
becomes increasingly global, the ability to satisfy a
customer's requirements in multiple markets throughout the
world can improve a manufacturer's market position. The
Company has established manufacturing operations in Europe
and Asia in order to achieve this objective and can support
an individual customer's requirements across many markets.
MANUFACTURING TECHNOLOGY
The Company's photomasks are manufactured in accordance with
circuit designs provided on a confidential basis by its
customers. The typical manufacturing process for one of the
Company's photomasks involves receipt and conversion of circuit
design data to manufacturing pattern data. This manufacturing
data is then used to control the lithography system that exposes
the circuit pattern onto the photomask blank. The exposed areas
are dissolved and etched to produce that pattern on the
photomask. The photomask is inspected for defects and conformity
to the customer design data, any defects are repaired, any
required pellicles (or protective membranes) are applied and,
after final cleaning, the photomask is shipped to the customer.
The Company currently supports customers across the full
spectrum of integrated circuit production technologies by
manufacturing photomasks using electron beam or laser-based
technologies and, to a significantly lesser degree, optical-based
technologies. Laser-based or electron beam systems are the
predominant technologies used for photomask manufacturing. Such
technologies are capable of producing the finer line resolution,
tighter overlay and larger die size for the larger and more
complex circuits currently being designed. Laser and electron
beam generated photomasks can be used with the most advanced
processing techniques to produce VLSI (very large scale
integrated circuit) devices. The Company currently owns a number
of laser writing systems and electron beam systems and has
committed to purchase additional advanced systems in order to
maintain technological leadership. Compared to laser or electron
beam generated photomasks, the production of photomasks by the
optical method is less expensive, but also less precise. The
optical method traditionally is used on less complex and lower
priced photomasks.
The first several levels of photomasks frequently are required
to be delivered by the Company within 24 hours from the time it
receives a customer's design. The ability to manufacture high
quality photomasks within short time periods is dependent upon
efficient manufacturing methods, high yields and high equipment
reliability. The Company believes that it meets these
requirements and has made significant investments in
manufacturing and data processing systems and statistical process
control methods to optimize the manufacturing process and reduce
cycle times.
Quality control is an integral part of the photomask
manufacturing process. Photomasks are manufactured in
temperature, humidity and particulate controlled cleanrooms
because of the high level of precision, quality and yields
required. Each photomask is inspected several times during the
manufacturing process to ensure compliance with customer
specifications. The Company has made a substantial investment in
equipment to inspect and repair photomasks and to ensure that
customer specifications are met. After inspection and any
necessary repair, the Company utilizes technological processes to
clean the photomasks prior to shipment.
24
SALES AND MARKETING
The market for photomasks primarily consists of semiconductor
manufacturers and designers, both domestic and international,
including manufacturers that have the capability to manufacture
photomasks. Generally, the Company and each of its customers
engage in a qualification and correlation process before the
Company becomes an approved supplier. Thereafter, the Company
typically negotiates pricing parameters for a customer's orders
based on the customer's specifications in order to expedite the
placement of individual purchase orders. Some of these prices
may remain in effect for an extended period. The Company also
negotiates prices, and occasionally enters into purchase
arrangements, based on the understanding that, so long as the
Company's performance is competitive, the Company will receive a
specified percentage of that customer's photomask requirements.
The Company conducts its sales and marketing activities
through a staff of full-time sales personnel and customer service
representatives who work closely with the Company's general
management and technical personnel. In addition to the sales
personnel at the Company's manufacturing facilities in
Brookfield, Connecticut; Milpitas and Sunnyvale, California;
Colorado Springs, Colorado; Allen, Texas; Manchester, United
Kingdom; Neuchatel, Switzerland and Singapore, the Company has
sales offices in Carlsbad, California; Austin, Texas; Raleigh,
North Carolina; Hillsboro, Oregon; Lancaster, United Kingdom; and
Taiwan.
The Company supports international customers through both its
domestic and foreign facilities. The Company also has sub-
contract manufacturing arrangements in Taiwan. The Company
considers its presence in international markets important to
attracting new customers, providing global solutions to its
existing customers and serving customers that utilize
manufacturing foundries outside of the United States, principally
in Asia. Current customers include companies in Australia,
Canada, Germany, Italy, Japan, Singapore, Switzerland, Taiwan and
the United Kingdom. For a statement of the amount of net sales,
operating income or loss, and assets attributable to each of the
Company's geographic areas of operations, see Note 13 of Notes to
the Consolidated Financial Statements.
EQUIPMENT SALES AND SERVICES
In addition to the manufacture of photomasks, the Company,
through its wholly-owned subsidiary, Beta Squared, manufactures,
sells and services a wafer plasma etching system used in the
processing of semiconductor wafers. The original system was
developed by Texas Instruments which licensed to Beta Squared the
right to manufacture and sell the system. Beta Squared also
sells refurbished semiconductor manufacturing equipment,
engineering services and replacement parts and field service for
such equipment on a third-party basis. Such activities
represented approximately 5% of the Company's net sales during
fiscal 1996.
CUSTOMERS
The Company primarily sells its products to leading
semiconductor manufacturers. The Company's largest customers
during fiscal 1996 included the following:
Advanced Micro Devices, Inc. Micron Technology, Inc.
Analog Devices, Inc. Motorola, Inc.
Atmel Corporation National Semiconductor
Chartered Semiconductor Corporation
Manufacturing, Ltd. Orbit Semiconductor
Cirrus Logic, Inc. Inc.
Cypress Semiconductor Corporation Philips N.V.
Digital Equipment Corporation Plessey Semiconductors
Integrated Device Technology, Inc. Limited
LSI Logic Corp. Symbios Logic Inc.
Texas Instruments
Incorporated
Unitrode Corp.
VLSI Technology Inc.
Zilog, Inc.
25
The Company has continually expanded its customer base and,
during fiscal 1996, sold its products and services to
approximately 400 customers. The Company assumed an agreement
with Texas Instruments as part of the acquisition of the Dallas,
Texas operation in fiscal 1993 and, as a result, Texas
Instruments became a more significant customer of the Company.
In fiscal 1996, sales to Texas Instruments represented
approximately 26% of net sales, and the loss of Texas Instruments
or a significant decrease in the amount of the purchases by Texas
Instruments from the Company would have a material adverse effect
on the Company. The agreement with Texas Instruments continues
until March 31, 2000 and provides that the Company will be Texas
Instruments' principal photomask supplier in the United States
and Europe so long as the Company's price, quality, service and
delivery are competitive. The agreement also requires the
Company to ensure that prices charged to Texas Instruments are
not less favorable than those otherwise extended by the Company
to other customers with similar specifications, volume, delivery
and other requirements. During fiscal 1996, no single customer
other than Texas Instruments accounted for more than 10% of the
Company's net sales. The Company's five largest customers, in
the aggregate, accounted for approximately 45% of net sales in
fiscal 1996.
RESEARCH AND DEVELOPMENT
The Company conducts ongoing research and development programs
intended to maintain the Company's leadership in technology and
manufacturing efficiency. Since fiscal 1994, the Company has
increased its investment in research and development activities
and current efforts include deep ultraviolet, phase-shift and
optical proximity correction photomasks for advanced
semiconductor manufacturing. Phase-shift and optical proximity
correction photomasks use advanced lithography techniques for
enhanced resolutions of images on a semiconductor wafer. The
Company incurred expenses of $4.7 million, $7.9 million
(including a non-recurring charge of $1.5 million) and $8.5
million for research and development in fiscal 1994, 1995 and
1996, respectively. While the Company believes that it possesses
valuable proprietary information and has received licenses under
certain patents, the Company does not believe that patents are a
material factor in the photomask manufacturing business and it
holds only one patent.
MATERIALS AND SUPPLIES
Raw materials utilized by the Company generally include high
precision quartz plates, which are used as photomask blanks,
primarily obtained from Japanese suppliers (including Toppan
Printing Co., the parent of Toppan ("Toppan Printing"), and Hoya
Corporation ("Hoya")), pellicles (which are protective
transparent cellulose membranes) and electronic grade chemicals
used in the manufacturing process. Such materials are generally
available from a number of suppliers and the Company is not
dependent on any one supplier for its raw materials. The Company
believes that its utilization of a broad range of suppliers
enables it to access the most advanced material technology
available. The Company has established purchasing arrangements
with each of Toppan and Hoya and it is expected that the Company
will purchase substantially all of its photomask blanks from
Toppan and Hoya so long as their price, quality, delivery and
service are competitive.
The Company relies on a limited number of equipment suppliers
to develop and supply the equipment used in the photomask
manufacturing process. Although the Company has been able to
obtain equipment on a timely basis, the inability to obtain
equipment when required could adversely affect the Company's
business and results of operations. The Company also relies on
these suppliers to develop future generations of manufacturing
systems to support the Company's requirements.
BACKLOG
The first several levels of photomasks for a circuit
frequently are required to be shipped within 24 hours of
receiving a customer's design. Because of the short period
between order and shipment dates (typically from one day to two
weeks) for the principal portion of the Company's sales, the
dollar amount of current backlog is not considered to be a
reliable indication of future sales volume.
26
COMPETITION
The photomask industry is highly competitive and most of the
Company's customers utilize more than one photomask supplier.
The Company's ability to compete primarily depends upon the
consistency of product quality and timeliness of delivery, as
well as pricing, technical capability and service. The Company
also believes that proximity to customers is an important factor
in certain markets. Certain competitors have considerably
greater financial and other resources than the Company. The
Company believes that it is able to compete effectively because
of its dedication to customer service, its investment in state-
of-the-art photomask equipment and its experienced technical
employees.
There has been a decrease since the mid-1980s in the number of
independent manufacturers as a result of independents being
acquired or discontinuing operations. The Company believes that
entry into the market by a new independent manufacturer would
require a major investment of capital, a significant period of
time to establish a commercially viable operation and additional
time to attain meaningful market share and achieve profitability.
In the past, competition and relatively flat demand led to
pressure to reduce prices which the Company believes contributed
to the decrease in the number of independent manufacturers.
Although independent photomask manufacturers have experienced
increased demand since late 1993, there can be no assurance that
past trends in pricing and demand will not re-emerge.
Based upon available market information, the Company believes
that it has a larger share of the United States market than any
other photomask manufacturer and is one of the largest photomask
manufacturers in the world. Competitors in the United States
include DuPont and Align-Rite; and in international markets, Dai
Nippon Printing, Toppan, Hoya, DuPont, Taiwan Mask Corp., Innova,
Align-Rite and Compugraphics. In addition, some of the Company's
customers possess their own captive facilities for manufacturing
photomasks and certain semiconductor manufacturers market their
photomask manufacturing services to outside customers as well as
to their internal organization.
EMPLOYEES
As of April 1, 1997, the Company employed approximately 900
persons on a full-time basis. The Company believes that it
offers competitive compensation and other benefits and that its
employee relations are good. Except for employees in the United
Kingdom, none of the Company's employees is represented by a
union.
27
PROPERTY
The Company's properties include buildings in which the
Company currently conducts manufacturing operations or is
constructing facilities for future manufacturing operations. The
following table presents certain information about the Company's
manufacturing facilities.
FACILITY
SIZE TYPE OF
LOCATION (SQ. FT.) INTEREST
-------- ------- --------
Brookfield, 19,600 Owned
Connecticut
(Building #1)
Brookfield, 20,000 Leased
Connecticut
(Building #2)
Milpitas, 49,000 Leased
California
(2 buildings)
Sunnyvale, 40,000 Owned
California
(3 buildings)
Colorado Springs, 27,000 Leased
Colorado
Allen, Texas 60,000 Owned
Austin, Texas 50,000 Owned
(under
construction)
Manchester, 13,000 Leased
United Kingdom
(current
facility)
Manchester, 42,000 Owned
United Kingdom
(new facility
under construction
to replace current
facility)
Neuchatel, 7,000 Leased
Switzerland
Singapore 20,000 Leased
Lease terms range from less than one year, for facilities from
which the Company is planning to relocate operations, to up to
five years, with options to renew for certain facilities. In
addition, the Company leases office space in Jupiter, Florida;
Austin, Texas; Carlsbad, California; Hillsboro, Oregon and
certain property adjacent to its facilities in Brookfield,
Connecticut. During fiscal 1996, the Company leased real
property at an aggregate annual rental of $2.3 million and leased
equipment at an aggregate annual rental of $3.3 million.
The leased properties in Brookfield, Connecticut are leased
from entities controlled by Constantine S. Macricostas under
fixed lease rates which were determined by reference to fair
market value rates at the beginning of the respective lease term.
Mr. Macricostas is the Chairman of the Board, Chief Executive
Officer and a director of the Company.
Other than new manufacturing facilities or systems which had
not yet been placed into service, the Company believes that it
substantially utilized its facilities during fiscal 1996.
LEGAL PROCEEDINGS
The Company is not a party to any material pending legal
proceedings, nor is the property of the Company subject to any
such proceedings.
28
MANAGEMENT
The names of the officers and directors of the Company are set
forth below, together with the positions held by each person in
the Company and their ages as of April 24, 1997. All officers
are elected annually by the Board of Directors and serve until
their successors are duly elected and qualified.
NAME AGE POSITION
---- --- --------
Constantine S. 61 Chairman of the
Macricostas Board, Chief
Executive Officer
and Director
Michael J. Yomazzo 54 President, Chief
Operating Officer
and Director
Jeffrey P. Moonan 41 Senior Vice
President, General
Counsel and
Secretary
Robert J. Bollo 52 Vice President Finance--
and Chief Financial
Officer
David C. Heilman 58 Senior Vice President--
Sales and Marketing
James Northup 36 Senior Vice President--
Operations
Jack P. Moneta 54 Senior Vice President--
Business Development
Walter M. 50 Director
Fiederowicz
Joseph A. Fiorita, Jr. 52 Director
Yukio Tagawa 59 Director
The terms of the Company's revolving credit facility specify
that if Mr. Macricostas ceases to maintain day-to-day control of
the Company, Mr. Yomazzo, or another replacement acceptable to
the bank, must assume such duties, otherwise the Company may be
declared in default.
For the past five years each of the officers and directors of
the Company has held the office shown, except as follows:
Constantine S. Macricostas, a founder of the Company, served
as Treasurer and Chief Financial Officer of the Company from 1974
until September 1987 and as President from 1974 until November
1990. Mr. Macricostas also serves as a Director of Nutmeg
Federal Savings and Loan Association and The DII Group, Inc. (a
provider of integrated electronic manufacturing products and
services).
Michael J. Yomazzo has served as President and Chief Operating
Officer since January 1994. From November 1990 until January
1994, he served as Executive Vice President; from July 1989 until
November 1990, he served as Senior Vice President Finance and
Planning and since 1977, he has served as a Vice President of the
Company with responsibilities which have included finance, sales
and marketing.
Jeffrey P. Moonan has served as Senior Vice President since
January 1994 and General Counsel and Secretary since July 1988.
From July 1989 until January 1994, he served as Vice
President/Administration.
29
Robert J. Bollo has served as Vice President--Finance and Chief
Financial Officer since November 1994. From August 1994 to
November 1994, he served as Director of Finance. From April 1992
to July 1994, he was a Principal of CFO Associates, Inc., a
financial management firm. Prior to April 1992, he was with
Kollmorgen Corporation, serving as a Vice President since January
1990 and Controller and Chief Accounting Officer from February
1985 until January 1990.
David C. Heilman has served as Senior Vice President--Sales and
Marketing since November 1996. From September 1993 until
November 1996, he served as Vice President Sales and Marketing.
Prior to joining the Company, he served in various capacities for
more than five years with DuPont Photomasks, Inc., including as
Executive Vice President and Chief Operating Officer, Vice
President, Sales and Marketing and most recently as General
Manager of DuPont's Kokomo, Indiana facility.
James Northup has served as Senior Vice President--Operations
since November 1996. From May 1995 until November 1996, Mr.
Northup served as Vice President--California, Connecticut and
Colorado Operations; from January 1994 until May 1995, he served
as Director of Connecticut Operations and from April 1990 until
January 1994 he served as Operations Manager for the Company's
Connecticut operations.
Jack P. Moneta has served as Senior Vice President--Business
Development since November 1996. From January 1994 until
November 1996, he served as Vice President--Texas Operations.
From August 1992 to January 1994, he served as Director of Texas
Operations. He served in various capacities with International
Business Machines Corporation for 25 years, including most
recently as the General Manager of IBM's United States photomask
operations with overall responsibility for coordinating IBM's
worldwide photomask operations.
Walter M. Fiederowicz has served since April 1997 as the
President and Chief Executive Officer of World Corp, Inc., a
holding company that owns approximately 61.3% of the common stock
of World Airways, Inc. (a leading provider of long-range passenger
and cargo air transportation services to major airlines) and
approximately 28.9% of the common stock of InteliData Technologies
Corporation (a provider of caller identification based tele-
communications devices, smart telephone and on-line electronics
information services). From March 1996 until April 1997, Mr.
Fiederowicz was a private investor and consultant. Mr. Fiederowicz
served as chairman of Colonial Data Technologies Corp., (a
distributor of telecommunications equipment) from August
1994 to March 1996. From January 1991 until July 1994, he held
various positions, including executive vice president and
chairman and served as director of Conning and Company (the
parent company of an investment firm). Mr. Fiederowicz was
chairman and director of Covenant Mutual Insurance Company, a
property and casualty insurance company ("Covenant"), from 1989
until March 1993, and was president and chief executive officer
of Covenant from 1989 until December 1992. Covenant was placed
in rehabilitation by the Insurance Commissioner of the State of
Connecticut in 1993 and subsequently liquidated as a result of
losses in connection with insurance claims relating to Hurricane
Andrew. Mr. Fiederowicz also serves as a director of InteliData
Technologies Corporation, Blau Marketing Technologies, Inc.
(a marketing firm) and First Albany Companies, Inc. (the
parent of a broker-dealer).
Joseph A. Fiorita, Jr. is a partner in Fiorita, Kornhaas and
Van Houten, P.C., independent certified public accountants.
Yukio Tagawa has served as a Director of the Company since
January 1997. Mr. Tagawa has served as Vice Divisional Manager
for the Electronics Division of Toppan since June 1996 and as a
Director of Toppan from June 1995. Prior to assuming such
duties, Mr. Tagawa served in other managerial capacities with
Toppan since March 1991. Toppan is a diversified manufacturing
company with operations in printing and electronics industries
(including photomask manufacture) and had revenues in excess of
$11 billion during its last fiscal year.
30
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to
the Company regarding the beneficial ownership of the Common
Stock of Photronics as of April 1, 1997. Information is
presented with respect to (i) persons beneficially owning five
percent or more of the outstanding Common Stock; (ii) each
director and certain executive officers of the Company and (iii)
all directors and executive officers of the Company as a group.
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1)
-------------------- ------------------------
NUMBER PERCENT
------ -------
Constantine S.
Macricostas (2)(3) . . . . . 1,595,459 13.3%
1061 East Indiantown Road
Jupiter, Florida 33477
Toppan Printing Co., Ltd. . . 1,590,000 13.4
1, Kanda Izumi-cho
Chiyoda-Ku
Tokyo, Japan 101
Yukio Tagawa (4) . . . . . . 1,590,000 13.4
Toppan Printing Co., Ltd.
1, Kanda Izumi-cho
Chiyoda-Ku
Tokyo, Japan 101
Macricostas Partners, L.P. . 1,140,000 9.6
1122 Bel Air
Allen, Texas 75013
Michael J. Yomazzo (2)(5) . . 195,609 1.6
Jeffrey P. Moonan (2) . . . . 76,250 *
Walter M. Fiederowicz (2)(6). 26,125 *
Joseph A. Fiorita, Jr. (2). . 13,925 *
Robert J. Bollo (2) . . . . . 7,500 *
Directors and Executive (7) . 3,504,868 28.9
Officers as a group
(seven persons)
-------------------
* Represents less than 1%.
(1) Except as otherwise indicated, the named person has the
sole voting and investment power with respect to the
shares of the Company's Common Stock set forth opposite
such person's name.
(2) Includes shares of Common Stock subject to stock
options exercisable as of May 30, 1997 as follows:
Mr. Bollo (7,500); Mr. Fiederowicz (13,725); Mr.
Fiorita (13,725); Mr. Macricostas (145,628); Mr.
Yomazzo (56,400); and Mr. Moonan (65,000).
(3) Includes 17,000 shares held by the wife of Mr.
Macricostas, as to which shares he disclaims beneficial
ownership. Also includes 1,140,000 shares owned by
Macricostas Partners, L.P., of which Mr. Macricostas is
a limited partner and 25,309 shares owned by the
corporate general partner of such partnership of which
31
Mr. Macricostas is the President, a director and a
significant shareholder. Mr. Macricostas disclaims
beneficial ownership of those shares not represented by
his ownership interests.
(4) Includes 1,590,000 shares owned by Toppan Printing Co.,
Ltd. of which Mr. Tagawa is an executive officer and a
director, as to which shares Mr. Tagawa disclaims
beneficial ownership.
(5) Also includes 31,000 shares held by the wife of Mr.
Yomazzo, as to which shares he disclaims beneficial
ownership.
(6) Includes 6,000 shares owned by the wife of Mr.
Fiederowicz and 1,375 shares owned by his children, as
to which shares he disclaims beneficial ownership.
(7) Includes the shares listed in notes (2), (3), (4), (5)
and (6) above.
TOPPAN STOCK PURCHASE AGREEMENT
In October 1993, the Company sold 1,590,000 shares of Common
Stock to Toppan Printing in connection with the Company's
acquisition of the photomask manufacturing business of Toppan, a
subsidiary of Toppan Printing. Under the terms of the stock
purchase agreement, Toppan Printing may not acquire additional
shares of the Company's Common Stock, if, after such acquisition,
Toppan Printing beneficially will own more than 19% of the
Company's outstanding Common Stock. The Company has granted
Toppan Printing certain demand and piggyback registration rights
commencing in 1996 with respect to shares of Common Stock owned
by it. The stock purchase agreement restricts sales of Common
Stock by Toppan Printing until October 1998 and grants to the
Company rights of first refusal with respect to proposed sales to
unaffiliated third parties, with certain exceptions. Such
restrictions and rights of first refusal terminate in October
1998, or earlier if at any time Toppan Printing owns less than 5%
of the Company's Common Stock or if certain other events occur.
Under the stock purchase agreement, the Company is required to
use its best efforts to nominate a director designated by Toppan
Printing for as long as it owns at least 1,500,000 shares of
Common Stock and such holdings represent at least 15% of the
outstanding shares of the Company's Common Stock on a fully
diluted basis. The stock purchase agreement also requires Toppan
Printing to vote all voting securities of the Company that it
beneficially owns in favor of each nominee for election to the
Board who has been recommended by the Board. In addition, for a
ten-year period, the Company agreed to pay Toppan Printing annual
commissions of from 1% to 2.5% of sales over $3 million to Texas
Instruments. Such commissions amounted to approximately $560,000
in fiscal 1996.
32
DESCRIPTION OF NOTES
The Notes are to be issued under an Indenture, to be dated as
of May . , 1997 (the "Indenture"), between the Company and The
Chase Manhattan Bank, as trustee (the "Trustee"), a copy of which
is filed as an exhibit to the Registration Statement. Wherever
particular defined terms of the Indenture (including the Notes)
are referred to, such defined terms are incorporated herein by
reference (the Notes and various terms relating to the Notes
being referred to in the Indenture as "Securities"). References
in this section to the "Company" are solely to Photronics, Inc.
and not to its subsidiaries. The following summaries of certain
provisions of the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to,
the detailed provisions of the Notes and the Indenture, including
the definitions therein of certain terms. Section references
below are references to sections of the Indenture.
GENERAL
The Notes will be unsecured subordinated obligations of the
Company, will be limited to $86,250,000 aggregate principal
amount, and will mature on May 15, 2004. The Notes will bear
interest at the rate per annum shown on the front cover of this
Prospectus from the date of issuance, payable semiannually on
May 15 and November 15 of each year, commencing on November 15,
1997. (Section 301)
The Notes will be convertible into Common Stock initially at
the conversion rate stated on the cover page hereof, subject to
adjustment upon the occurrence of certain events described under
"-- Conversion Rights," at any time prior to the close of business
on the maturity date, unless previously redeemed or repurchased.
(Section 1301)
The Notes are redeemable under the circumstances and at the
redemption prices set forth below under "-- Optional Redemption,"
plus accrued interest to the Redemption Date. (Section 1101)
The Notes will be issued only in fully registered form,
without coupons, in denominations of $1,000 and any integral
multiple thereof. (Section 302) No service charge will be made
for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.
(Section 305)
CONVERSION RIGHTS
The Holder of any Note will have the right, at the Holder's
option, to convert any portion of the principal amount of a Note
that is an integral multiple of $1,000 into shares of Common
Stock at any time prior to the close of business on the maturity
date, unless previously redeemed or repurchased, at a conversion
rate of . shares of Common Stock per $1,000 principal amount of
Notes (the "Conversion Rate") (equivalent to a conversion price
of approximately $ . per share of Common Stock) (subject to
adjustment as described below). The right to convert a Note
called for redemption or tendered for repurchase will terminate
at the close of business on the Redemption Date or the Repurchase
Date for such Note, as the case may be. (Section 1301)
The right of conversion attaching to any Note may be exercised
by the Holder by delivering the Note at the specified office of
the Conversion Agent, accompanied by a duly signed and completed
notice of conversion, a copy of which may be obtained from the
Trustee. The conversion date will be the date on which the Note
and the duly signed and completed notice of conversion are so
delivered. As promptly as practicable on or after the conversion
date, the Company will issue and deliver to the Trustee a
certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in
lieu of any fraction of a share; such certificate will be sent by
the Trustee to the Conversion Agent (if other than the Trustee)
for delivery to the Holder. Such shares of Common Stock issuable
upon conversion of the Notes, in accordance with the provisions
of the Indenture, will be fully paid and nonassessable and will
rank pari passu with the other shares of Common Stock of the
33
Company outstanding from time to time. Any Note surrendered for
conversion during the period from the close of business on any
Regular Record Date next preceding any Interest Payment Date to
the opening of business on such Interest Payment Date (except
Notes (or portions thereof) called for redemption on a Redemption
Date or which are repurchasable on a Repurchase Date occurring,
in either case, within such period) must be accompanied by
payment of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of Notes being
surrendered for conversion. The interest so payable on such
Interest Payment Date with respect to any Note (or portion
thereof, if applicable) which has been called for redemption on a
Redemption Date, or which may be repurchased on a Repurchase
Date, occurring, in either case, during the period from the close
of business on any Regular Record Date next preceding any
Interest Payment Date to the opening of business on such Interest
Payment Date, which Note (or portions thereof, if applicable) is
surrendered for conversion during such period, shall be paid to
the Holder of such Note being converted in an amount equal to the
interest that would have been payable on such Note if such Note
had been converted as of the close of business on such Interest
Payment Date. The interest so payable on such Interest Payment
Date in respect of any Note (or portion thereof, as the case may
be) which has not been called for redemption on a Redemption
Date, or is not eligible for repurchase on a Repurchase Date,
occurring, in either case, during the period from the close of
business on any Record Date next preceding any Interest Payment
Date to the opening of business on such Interest Payment Date,
which Note (or portion thereof, as the case may be) is
surrendered for conversion during such period, shall be paid to
the Holder of such Note as of such Regular Record Date. Interest
payable in respect of any Note surrendered for conversion or
repurchase on or after an Interest Payment Date shall be paid to
the Holder of such Note as of the next preceding Regular Record
Date, notwithstanding the exercise of the right of conversion or
repurchase. As a result of the foregoing provisions, except as
provided above, Holders that surrender Notes for conversion on a
date that is not an Interest Payment Date will not receive any
interest from the Interest Payment Date next preceding the date
of conversion to the date of conversion or for any later period,
even if the Notes are surrendered after a notice of redemption
(except for the payment of interest on Notes called for
redemption on a Redemption Date or to be repurchased on a
Repurchase Date between a Regular Record Date and the Interest
Payment Date to which it relates, as provided above). No other
payment or adjustment for interest, or for any dividends in
respect of Common Stock, will be made upon conversion. Holders
of Common Stock issued upon conversion will not be entitled to
receive any dividends payable to holders of Common Stock as of
any record time or date before the close of business on the
conversion date. No fractional shares will be issued upon
conversion but, in lieu thereof, the Company will pay an
appropriate amount in cash based on the market price of Common
Stock at the close of business on the day of conversion. (Sections
101, 203, 307, 1302 and 1303)
A Holder delivering a Note for conversion will not be required
to pay any taxes or duties in respect of the issue or delivery of
Common Stock on conversion but will be required to pay any tax or
duty which may be payable in respect of any transfer involved in
the issue or delivery of the Common Stock in a name other than
that of the Holder of the Note. Certificates representing shares
of Common Stock will not be issued or delivered unless all taxes
and duties, if any, payable by the Holder have been paid.
(Section 1308)
The Conversion Rate is subject to adjustment in certain
events, including, without duplication: (a) dividends (and other
distributions) payable in Common Stock, (b) the issuance to all
holders of Common Stock of rights, options or warrants entitling
them to subscribe for or purchase Common Stock at less than the
then Current Market Price of such Common Stock (determined as
provided in the Indenture) as of the record date for shareholders
entitled to receive such rights, options or warrants, (c)
subdivisions, combinations and reclassifications of Common Stock,
(d) distributions to all holders of Common Stock of evidences of
indebtedness of the Company, shares of capital stock, or other
property (including securities, but excluding those dividends,
rights, options, warrants and distributions referred to above,
dividends and distributions paid exclusively in cash and in
mergers and consolidations to which the next succeeding paragraph
applies), (e) distributions consisting exclusively of cash
(excluding any cash portion of distributions referred to in (d)
above, or cash distributed upon a merger or consolidation to
which the next succeeding paragraph applies) to all holders of
Common Stock in an aggregate amount that, combined together with
(i) other such all-cash distributions made within the preceding
12 months in respect of which no adjustment has been made and
(ii) any cash and the fair market value of other consideration
34
payable in respect of any tender offer by the Company or any of
its subsidiaries for Common Stock concluded within the preceding
12 months in respect of which no adjustment has been made,
exceeds 10% of the Company's market capitalization (being the
product of the then Current Market Price per share of the Common
Stock and the number of shares of Common Stock then outstanding)
on the record date for such distribution, and (f) the successful
completion of a tender offer made by the Company or any of its
subsidiaries for Common Stock which involves an aggregate
consideration that, together with (i) any cash and other
consideration payable in a tender offer by the Company or any of
its subsidiaries for Common Stock expiring within the 12 months
preceding the expiration of such tender offer in respect of which
no adjustment has been made and (ii) the aggregate amount of any
such all-cash distributions referred to in (e) above to all
holders of Common Stock within the 12 months preceding the
expiration of such tender offer in respect of which no
adjustments have been made, exceeds 10% of the Company's market
capitalization on the expiration of such tender offer.
Notwithstanding the foregoing, (i) if the options, rights or
warrants described in clause (b) above are exercisable only upon
the occurrence of certain triggering events, then the Conversion
Rate will not be adjusted until such triggering events occur and
(ii) if such options, rights or warrants expire unexercised, the
Conversion Rate will be readjusted to take into account only the
actual number of such options, rights or warrants which were
exercised. The Company reserves the right to make such increases
in the Conversion Rate in addition to those required in the
foregoing provisions as it considers to be advisable in order
that any event treated for federal income tax purposes as a
dividend or distribution of stock or issuance of rights or
warrants to purchase or subscribe for stock will not be taxable
to the recipients. No adjustment of the Conversion Rate will be
required to be made until the cumulative adjustments amount to 1%
or more of the Conversion Rate. (Section 1304) The Company shall
compute any adjustments to the Conversion Rate pursuant to this
paragraph and will give notice to the Holders of the Notes of any
adjustments. (Section 1305)
In case of any consolidation or merger of the Company with or
into another Person or any merger of another Person into the
Company (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of the
Common Stock), or in case of any sale or transfer of all or
substantially all of the assets of the Company, each Note then
outstanding will, without the consent of the Holder of any Note,
become convertible only into the kind and amount of securities,
cash and other property receivable upon such consolidation,
merger, sale or transfer by a holder of the number of shares of
Common Stock into which such Note was convertible immediately
prior thereto (assuming such holder of Common Stock failed to
exercise any rights of election and that such Note was then
convertible). (Section 1311)
To the extent permitted by applicable law, the Company from
time to time may increase the Conversion Rate by any amount for
any period of time if the period is at least twenty (20) days,
the increase is irrevocable during such period, and the Board of
Directors shall have made a determination that such increase
would be in the best interests of the Company, which
determination shall be conclusive; provided, however, that no
such increase shall be taken into account for purposes of
determining whether the Closing Price Per Share of the Common
Stock equals or exceeds 105% of the Conversion Price in
connection with an event which would otherwise be a Change of
Control. Whenever the Conversion Rate is increased pursuant to
the preceding sentence, the Company shall give notice of the
increase to the Holders at least fifteen (15) days prior to the
date the increased Conversion Rate takes effect, and such notice
shall state the increased Conversion Rate and the period during
which it will be in effect. (Section 1304)
If at any time the Company makes a distribution of property to
its stockholders which would be taxable to such stockholders as a
dividend for United States federal income tax purposes (e.g.,
distributions of evidences of indebtedness or assets of the
Company, but generally not stock dividends on Common Stock or
rights to subscribe for Common Stock) and, pursuant to the
anti-dilution provisions of the Indenture, the number of shares
into which Notes are convertible is increased, such increase may
be deemed for federal income tax purposes to be the payment of a
taxable dividend to Holders of Notes. See "Certain Federal
Income Tax Considerations."
SUBORDINATION
35
The payment of the principal of, premium, if any, and interest
on the Notes will be subordinated in right of payment, to the
extent set forth in the Indenture, to the prior payment in full
of the principal of, premium, if any, interest and other amounts
in respect of all Senior Indebtedness of the Company. As of
April 28, 1997, the Company had $17.0 million of Senior
Indebtedness outstanding. At such date, after giving effect to
this offering and the application of proceeds therefrom, the
Company would have had $2.0 million of Senior Indebtedness
outstanding. Senior Indebtedness is defined in the Indenture to
mean the principal of (and premium, if any) and interest
(including all interest accruing subsequent to the commencement
of any bankruptcy or similar proceeding, whether or not a claim
for post-petition interest is allowable as a claim in any such
proceeding) on, and all fees and other amounts payable in
connection with, the following, whether absolute or contingent,
secured or unsecured, due or to become due, outstanding on the
date of the Indenture or thereafter created, incurred or assumed:
(a) indebtedness of the Company to banks, insurance companies and
other financial institutions evidenced by credit or loan
agreements, notes or other written obligations, (b) all other
indebtedness of the Company (including indebtedness of others
guaranteed by the Company) other than the Notes, whether
outstanding on the date of the Indenture or thereafter created,
incurred or assumed, which is (i) for money borrowed or (ii)
evidenced by a note, security, debenture, bond or similar
instrument, (c) obligations of the Company as lessee under leases
required to be capitalized on the balance sheet of the lessee
under generally accepted accounting principles, (d) obligations of
the Company under interest rate and currency swaps, caps, floors,
collars or similar agreements or arrangements, (e) obligations of
the Company issued or assumed as the deferred purchase price of
property, (f) obligations of the Company for the reimbursement of
letters of credit to the extent such obligations are Senior
Indebtedness under clauses (a) through (c) of this paragraph, and
(g) renewals, extensions, modifications, restatements and
refundings of, and any amendments, modifications or supplements
to, or any indebtedness or obligation issued in exchange for, any
such indebtedness or obligation described in clauses (a) through
(d) of this paragraph; provided, however, that Senior
Indebtedness shall not include any such indebtedness or
obligation if the terms of such indebtedness or obligation (or
the terms of the instrument under which, or pursuant to which, it
is issued) expressly provide that such indebtedness or obligation
shall not be senior in right of payment to the Notes, or
expressly provide that such indebtedness or obligation is pari
passu with or junior to the Notes. (Sections 101, 1201, 1202 and
1216)
No payment on account of principal, premium, if any, or
interest on, the Notes may be made by the Company if there shall
have occurred (i) a default in the payment of principal, premium,
if any, or interest (including a default under any repurchase or
redemption obligation) with respect to any Senior Indebtedness or
(ii) any other event of default with respect to any Senior
Indebtedness, permitting the holders thereof to accelerate the
maturity thereof, and such event of default shall not have been
cured or waived or shall not have ceased to exist after written
notice of such event of default shall have been given to the
Company and the Trustee by any holder of Senior Indebtedness.
Upon any acceleration of the principal due on the Notes or
payment or distribution of assets of the Company to creditors
upon any dissolution, winding up, liquidation or reorganization,
whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other similar proceedings of the Company, all
principal, premium, if any, and interest or other amounts due on
all Senior Indebtedness must be paid in full before the Holders
of the Notes are entitled to receive any payment. By reason of
such subordination, in the event of insolvency, creditors of the
Company who are holders of Senior Indebtedness are likely to
recover more, ratably, than the Holders of the Notes, and such
subordination may result in a reduction or elimination of
payments to the Holders of the Notes. (Sections 1202, 1203 and
1204)
The Company is a holding company with no business operations
of its own. Accordingly, the Notes will be structurally
subordinated to all indebtedness and other liabilities (including
trade payables and lease obligations) of the Company's
subsidiaries, as any right of the Company to receive any assets
of its subsidiaries upon their liquidation or reorganization (and
the consequent right of the Holders of the Notes to participate
in those assets) will be effectively subordinated to the claims
of that subsidiary's creditors (including trade creditors),
except to the extent that the Company itself is recognized as a
creditor of such subsidiary, in which case the claims of the
Company would still be subordinate to any security interest in
the assets of such subsidiary and any indebtedness of such
subsidiary senior to that held by the Company. As of February 2,
1997, the Company's subsidiaries had an aggregate outstanding
36
amount of total indebtedness and other liabilities of
approximately $46 million, which amount will remain outstanding
after giving effect to the offering of the Notes and the
application of net proceeds therefrom.
The Indenture does not limit the Company's ability to incur
Senior Indebtedness or any other indebtedness.
OPTIONAL REDEMPTION
The Notes may not be redeemed prior to May 16, 2000.
Thereafter, the Notes may be redeemed, in whole or in part, at
the option of the Company, upon not less than 20 nor more than 60
days' prior notice as provided under "-- Notices" below, at the
redemption prices set forth below.
The redemption prices (expressed as a percentage of principal
amount) are as follows for the 12-month period beginning on May
16 of the following years:
Redemption
Year Price
---- ----------
2000 . %
2001 .
2002 .
2003 .
and thereafter at a redemption price equal to 100% of the
principal amount, in each case together with accrued interest to
the date of redemption. (Section 203, Article Eleven)
No sinking fund is provided for the Notes.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE OF CONTROL
If a Change of Control (as defined) occurs, each Holder of
Notes shall have the right, at the Holder's option, to require
the Company to repurchase all of such Holder's Notes, or any
portion of the principal amount thereof that is equal to $1,000
or an integral multiple of $1,000 in excess thereof, on the date
(the "Repurchase Date") that is 45 days after the date of the
Company Notice (as defined), at a price equal to 100% of the
principal amount of the Notes to be repurchased, together with
interest accrued to the Repurchase Date (the "Repurchase Price").
(Section 1401)
The Company may, at its option, in lieu of paying the
Repurchase Price in cash, pay the Repurchase Price in Common
Stock valued at 95% of the average of the closing prices of the
Common Stock for the five consecutive Trading Days ending on and
including the third Trading Day preceding the Repurchase Date;
provided that payment may not be made in Common Stock unless the
Company satisfies certain conditions with respect to such payment
as provided in the Indenture. (Sections 1401 and 1402)
Within 30 days after the occurrence of a Change of Control,
the Company is obligated to give to all Holders of the Notes
notice, as provided in the Indenture (the "Company Notice"), of
the occurrence of such Change of Control and of the repurchase
right arising as a result thereof, or, at the request of the
Company on or before the 15th day after such occurrence, the
Trustee shall give the Company Notice. The Company must also
deliver a copy of the Company Notice to the Trustee and to the
office of each Paying Agent. To exercise the repurchase right, a
Holder of Notes must deliver on or before the 30th day after the
date of the Company Notice irrevocable written notice to the
Trustee or Paying Agent of the Holder's exercise of such right,
together with the Notes with respect to which the right is being
exercised. (Section 1403)
37
A Change of Control shall be deemed to have occurred at such
time after the original issuance of the Notes as there shall
occur:
(i) the acquisition by any Person (including any
syndicate or group deemed to be a "person" under Section 13(d)
(3) of the Exchange Act) of beneficial ownership, directly or
indirectly, through a purchase, merger or other acquisition
transaction or series of transactions, of shares of capital
stock of the Company entitling such Person to exercise 50% or
more of the total voting power of all shares of capital stock
of the Company entitled to vote generally in elections of
directors, other than any such acquisition by the Company, any
Subsidiary of the Company or any employee benefit plan of the
Company; or
(ii) any consolidation or merger of the Company with or
into any other Person, any merger of another Person into the
Company, or any conveyance, sale, transfer, or lease of all or
substantially all of the assets of the Company (other than (a)
any consolidation or merger (x) which does not result in any
reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock, and (y) pursuant to which
the holders of 50% or more of the total voting power of all
shares of capital stock of the Company entitled to vote
generally in elections of directors immediately prior to such
transaction have the entitlement to exercise, directly or
indirectly, 50% or more of the total voting power of all
shares of capital stock of the continuing or surviving
corporation entitled to vote generally in elections of
directors of the contining or surviving corporation immediately
after such transaction and (b) a merger which is effected
solely to change the juisdiction of incorporation of the
Company and results in a reclassification, conversion or
exchange of outstanding shares of Common Stock into solely
shares of common stock);
provided, however, that a Change of Control shall not be deemed
to have occurred if (i) the Closing Price Per Share of the Common
Stock for any five Trading Days within the period of 10
consecutive Trading Days ending immediately after the later of
the Change of Control or the public announcement of the Change of
Control (in the case of a Change of Control under clause (i)
above) or ending immediately prior to the date of the Change of
Control (in the case of a Change of Control under clause (ii)
above) shall equal or exceed 105% of the Conversion Price of the
Notes in effect on each such Trading Day or (ii) all of the
consideration (excluding cash payments for fractional shares or
cash payments for appraisal rights) in the transaction or
transactions constituting the Change of Control consists of
shares of common stock or securities convertible into common
stock that are, or upon issuance will be traded on a national
securities exchange or through The Nasdaq National Market and as
a result of such transaction or transactions the Notes become
convertible solely into such common stock or securities. The
"Conversion Price" is equal to $1,000 divided by the Conversion
Rate. "Beneficial owner" shall be determined in accordance with
Rule 13d-3 promulgated by the Commission under the Exchange Act,
as in effect on the date of original execution of the Indenture.
(Section 1404)
The Company's ability to repurchase Notes upon the occurrence
of a Change of Control is subject to limitations. There can be
no assurance that the Company would have the financial resources,
or would be able to arrange financing, to pay the Repurchase
Price for all the Notes that might be delivered by Holders of
Notes seeking to exercise the purchase right. In addition, the
Company's ability to purchase Notes may be limited or prohibited
by the terms of its Senior Indebtedness. The Company's ability
to purchase Notes with cash may also be limited by the terms of
its subsidiaries' then-existing borrowing arrangements due to
dividend restrictions. Any failure by the Company to repurchase
the Notes when required following a Change of Control could
result in an Event of Default under the Indenture whether or not
such repurchase is permitted by the subordination provisions of
the Indenture. Any such default may, in turn, cause a default
under Senior Indebtedness of the Company. Moreover, the
occurrence of a Change of Control may cause an event of default
under Senior Indebtedness of the Company. As a result, in any
such case, any repurchase of the Notes would, absent a waiver, be
prohibited under the subordination provisions of the Indenture
until the Senior Indebtedness is paid in full. See
"-- Subordination" and "Risk Factors -- Subordination."
38
Rule 13e-4 under the Exchange Act requires the dissemination
of certain information to security holders in the event of an
issuer tender offer and may apply in the event that the
repurchase option becomes available to Holders of the Notes. The
Company will comply with this rule to the extent applicable at
that time.
The foregoing provisions would not necessarily afford Holders
of the Notes protection in the event of highly leveraged or other
transactions involving the Company that may adversely affect
Holders.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other
Person or convey, transfer, or lease its properties and assets
substantially as an entirety to any Person, and the Company may
not permit any Person to merge into the Company or convey,
transfer or lease its properties and assets substantially as an
entirety to the Company, unless (a) the Person formed by such
consolidation or into which the Company is merged or the Person
to which the properties and assets of the Company are so
transferred or leased is a corporation, limited liability
company, partnership or trust organized and existing under the
laws of the United States, any state thereof or the District of
Columbia and has expressly assumed the due and punctual payment
of the principal of, premium, if any, and interest on the Notes
and the performance of the other covenants of the Company under
the Indenture and has provided for conversion rights in
accordance with the Indenture, (b) immediately after giving
effect to such transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an
Event of Default, shall have occurred and be continuing, and (c)
the Company has provided to the Trustee an Officer's Certificate
and Opinion of Counsel if required by the Indenture. (Section
801)
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture:
(a) failure to pay principal or Redemption Price of any Note when
due, whether or not such payment is prohibited by the
subordination provisions of the Indenture; (b) failure to pay any
interest on any Note when due, continuing for 30 days, whether or
not such payment is prohibited by the subordination provisions of
the Indenture; (c) default in the Company's obligation to provide
a Company Notice of a Change in Control; (d) failure to perform
any other covenant of the Company in the Indenture, continuing
for 60 days after written notice as provided in the Indenture;
(e) any indebtedness for money borrowed by the Company in an
aggregate principal amount in excess of $15 million is not paid
at final maturity or upon acceleration thereof and such default
in payment or acceleration is not cured or rescinded within 30
days after written notice as provided in the Indenture; and (f)
certain events of bankruptcy, insolvency or reorganization.
(Section 501) Subject to the provisions of the Indenture
relating to the duties of the Trustee in case an Event of Default
shall occur and be continuing, the Trustee will be under no
obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders,
unless such Holders shall have offered to the Trustee reasonable
indemnity. (Section 603) Subject to such provisions for the
indemnification of the Trustee, the Holders of a majority in
aggregate principal amount of the Outstanding Notes will 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. (Section 512)
If an Event of Default (other than an Event of Default
specified in clause (f) above) occurs and is continuing,
either the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Outstanding Notes, by notice in
writing to the Company, may declare the principal of all the
Notes to be due and payable immediately, and upon any such
declaration such principal and any accrued interest thereon will
become immediately due and payable. If an Event of Default
specified in clause (f) occurs and is continuing, the
principal and any accrued interest on all of the then Outstanding
Notes shall ipso facto become due and payable immediately without
any declaration or other Act on the part of the Trustee or any
Holder. (Section 502)
At any time after a declaration of acceleration has been made
but before a judgment or decree based on acceleration, the
Holders of a majority in aggregate principal amount of
Outstanding Notes may, under certain circumstances, rescind and
39
annul such acceleration if all Events of Default, other than the
nonpayment of accelerated principal and interest have been cured
or waived as provided in the Indenture. (Section 502)
No Holder of any Note will have any right to institute any
proceeding with respect to the Indenture or for any remedy
thereunder, unless such Holder shall have previously given to the
Trustee written notice of a continuing Event of Default and
unless also the Holders of at least 25% in aggregate principal
amount of the Outstanding Notes shall have made written request,
and offered reasonable indemnity, to the Trustee to institute
such proceeding as trustee, and the Trustee shall not have
received from the Holders of a majority in aggregate principal
amount of the Outstanding Notes a direction inconsistent with
such request and shall have failed to institute such proceeding
within 60 days. (Section 507) However, such limitations do not
apply to a suit instituted by a Holder of a Note for the
enforcement of payment of the principal of, premium, if any, or
interest on such Note on or after the respective due dates
expressed in such Note or of the right to convert such Note in
accordance with the Indenture. (Section 508)
The Company will be required to furnish to the Trustee
annually a statement as to the performance by the Company of
certain of its obligations under the Indenture and as to any
default in such performance. (Section 1004)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made, and
certain past defaults by the Company may be waived, with the
written consent of the Holders of not less than a majority in
aggregate principal amount of the Notes at the time Outstanding.
However, no such modification or amendment may, without the
consent of the Holder of each outstanding Note affected thereby,
(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, (b) reduce the principal
amount of, or the premium, if any, or rate of interest on, any
Note, (c) reduce the amount payable upon redemption or mandatory
repurchase, (d) modify the provisions with respect to the
repurchase right of the Holders in a manner adverse to the
Holders, (e) change the place or currency of payment of principal
of, premium, if any, or interest on, any Note, (f) impair the
right to institute suit for the enforcement of any payment on or
with respect to any Note (including any payment of the Repurchase
Price in respect of such Note), (g) modify the obligation of the
Company to maintain an office or agency in New York City, (h)
except as otherwise permitted by the Indenture or contemplated by
provisions concerning consolidation, merger, conveyance,
transfer, sale or lease of all or substantially all of the
property and assets of the Company, adversely affect the right of
Holders to convert any of the Notes or to require the Company to
repurchase any Note other than as provided in the Indenture, (i)
modify the subordination provisions in a manner adverse to the
Holders of the Notes, (j) reduce the above-stated percentage of
Outstanding Notes necessary to modify or amend the Indenture, or
(k) reduce the percentage of aggregate principal amount of
Outstanding Notes necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults.
(Sections 902 and 513)
The Holders of a majority in aggregate principal amount of the
Outstanding Notes may waive compliance by the Company with
certain restrictive provisions of the Indenture. (Section 1009)
The Holders of a majority in aggregate principal amount of the
Outstanding Notes also may waive any past default under the
Indenture, except a default in the payment of principal, premium,
if any, or interest. (Section 513)
TRANSFER AND EXCHANGE
The Company has initially appointed the Trustee as Security
Registrar and transfer agent for the Notes, acting through its
Corporate Trust Office in the City of New York. The Company
reserves the right to vary or terminate the appointment of the
Security Registrar or of any transfer agent or to appoint
additional or other transfer agents or to approve any change in
the office through which any security registrar or any transfer
agent acts. (Sections 305 and 1002)
40
PURCHASE AND CANCELLATION
The Company or any Subsidiary may at any time and from time to
time purchase Notes at any price in the open market or otherwise.
All Notes surrendered for payment, redemption, repurchase,
registration of transfer or exchange or conversion shall, if
surrendered to any Person other than the Trustee, be delivered to
the Trustee. All Notes so delivered to the Trustee shall be
canceled promptly by the Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as
provided in the Indenture. All canceled Notes held by the
Trustee shall be disposed of in accordance with the Trustee's
normal procedures. (Section 309)
TITLE
The Company and the Trustee may treat the registered owner (as
reflected in the Security Register) of any Note as the absolute
owner thereof (whether or not such Note shall be overdue) for the
purpose of making payment and for all other purposes. (Section
308)
NOTICES
Notice to Holders of the Notes will be given by mail to the
addresses of such Holders as they appear in the Security
Register. Such notices will be deemed to have been given on the
date of such mailing. (Section 106)
Notice of a redemption of Notes will be given at least once
not less than 20 nor more than 60 days prior to the Redemption
Date (which notice shall be irrevocable) and will specify, among
other things, the Redemption Date. (Section 1105)
SATISFACTION AND DISCHARGE
The Company may discharge its payment obligations under the
Indenture while Notes remain outstanding if (a) all outstanding
Notes have become due and payable or will become due and payable
at their scheduled maturity within one year, (b) all outstanding
Notes are scheduled for redemption within one year or (c) all
outstanding Notes are delivered to the Trustee for conversion in
accordance with the Indenture and in the case of (a) or (b)
above, the Company has deposited with the Trustee an amount
sufficient to pay and discharge the entire indebtedness on all
outstanding Notes on the date of their scheduled maturity or the
scheduled date of redemption. (Section 401)
REPLACEMENT OF NOTES
Notes that become mutilated, destroyed, stolen or lost will be
replaced by the Company at the expense of the Holder upon
delivery to the Trustee of the mutilated Notes or evidence of the
loss, theft or destruction thereof satisfactory to the Company
and the Trustee. In the case of a lost, stolen or destroyed
Note, indemnity satisfactory to the Trustee and the Company may
be required at the expense of the Holder of such Note before a
replacement Note will be issued. (Section 306)
GOVERNING LAW
The Indenture and the Notes will be governed by and construed
in accordance with the laws of the State of New York. (Section
112)
THE TRUSTEE
41
In case an Event of Default shall occur (and shall not be
cured), the Trustee will be required to use the degree of care of
a prudent person in the conduct of his own affairs in the
exercise of its powers. Subject to such provisions, the Trustee
will be under no obligation to exercise any of its rights or
powers under the Indenture at the request of any of the Holders
of Notes, unless they shall have offered to the Trustee security
or indemnity satisfactory to it. (Sections 601 and 603)
BOOK-ENTRY
The Notes will be issued in the form of a global note (the
"Global Note") deposited with, or on behalf of, DTC and
registered in the name of Cede & Co. as DTC's nominee. Owners of
beneficial interests in the Notes represented by the Global Note
will hold such interests pursuant to the procedures and practices
of DTC and must exercise any rights in respect of their interests
(including any right to convert or require repurchase of their
interests) in accordance with those procedures and practices.
Such beneficial owners will not be Holders, and will not be
entitled to any rights under the Global Note or the Indenture,
with respect to the Global Note, and the Company and the Trustee,
and any of their respective agents, may treat DTC as the sole
Holder and owner of the Global Note.
DTC has advised the Company as follows: DTC is a
limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC holds
securities that its participants deposit with DTC. DTC also
facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct participants include
securities brokers and dealers (including the Underwriters),
banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its direct
participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks
and trust companies that clear through or maintain a custodial
relationship with a direct participant, either directly or
indirectly. The rules applicable to DTC and its participants are
on file with the Securities and Exchange Commission.
Unless and until they are exchanged in whole or in part for
certificated Notes in definitive form as set forth below, the
Global Note may not be transferred except as a whole by DTC to a
nominee of DTC, or by a nominee of DTC to DTC or another nominee
of DTC.
The Notes represented by the Global Note will not be
exchangeable for certificated Notes, provided that if DTC is at
any time unwilling, unable or ineligible to continue as
depositary, or an Event of Default has occurred and is continuing
with respect to the Global Note, the Company may issue individual
Notes in definitive form in exchange for the Global Note. In the
event of such an exchange, an owner of a beneficial interest in a
Global Note will be entitled to physical delivery of Notes in
definitive form equal in principal amount to such beneficial
interest and to have such Notes registered in its name.
Individual Notes so issued in definitive form will be issued in
denominations of $1,000 and any larger amount that is an integral
multiple of $1,000 and will be issued in registered form only,
without coupons.
Payments of principal of and interest on the Notes will be
made by the Company through the Trustee to DTC or its nominee, as
the case may be, as the registered owner of the Global Note.
Neither the Company nor the Trustee will have any responsibility
or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the
Global Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests. The
Company expects that DTC, upon receipt of any payment of
principal or interest in respect of the Global Note, will credit
the accounts of the related participants with payment in amounts
42
proportionate to their respective holdings in principal amount of
beneficial interest in the Global Note as shown on the records of
DTC. The Company also expects that payments by participants to
owners of beneficial interests in the Global Note will be
governed by standing customer instructions and customary
practices, as is now the case with securities held for the
accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such participants.
So long as the Notes are represented by a Global Note, DTC or
its nominee will be the only entity that can exercise a right to
repayment pursuant to the Holder's option to elect repayment of
its Notes or the right of conversion of the Notes. Notice by
participants or by owners of beneficial interests in a Global
Note held through such participants of the exercise of the option
to elect repayment, or the right of conversion, of beneficial
interests in Notes represented by the Global Note must be
transmitted to DTC in accordance with its procedures on a form
required by DTC and provided to participants. In order to ensure
that DTC's nominee will timely exercise a right to repayment, or
the right of conversion, with respect to a particular Note, the
beneficial owner of such Notes must instruct the broker or other
participant through which it holds an interest in such Notes to
notify DTC of its desire to exercise a right to repayment, or the
right of conversion. Different firms have different cut-off
times for accepting instructions from their customers and,
accordingly, each beneficial owner should consult the broker or
other participant through which it holds an interest in a Note in
order to ascertain the cut-off time by which such an instruction
must be given in order for timely notice to be delivered to DTC.
The Company will not be liable for any delay in delivery of such
notice to DTC.
43
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 2 million
shares of preferred stock, $.01 par value, of which no shares are
issued and outstanding, and 20 million shares of Common Stock,
$.01 par value per share, of which 11,874,790 shares are issued
and outstanding as of April 1, 1997.
COMMON STOCK
The holders of validly issued and outstanding shares of Common
Stock are entitled to one vote per share on all matters to be
voted upon by stockholders. At a meeting of stockholders at
which a quorum is present, a majority of the votes cast decides
all questions, unless the matter is one upon which, by express
provision of the Certificate of Incorporation, the By-Laws or
statute, a different vote is required. There is no cumulative
voting with respect to the election of directors, which means
that the holders of a majority of the shares can elect all the
directors if they choose to do so, and in such event, the holders
of the remaining shares would not be able to elect any directors.
The holders of Common Stock have no preemptive rights, nor are
there any redemption rights provisions with respect to Common
Stock. The shares offered hereby, when issued and paid for, will
be fully paid and nonassessable and not subject to further call
or assessment by the Company.
The holders of Common Stock are entitled to such dividends, if
any, as may be declared by the Board of Directors in its
discretion out of funds legally available for the purpose and to
participate pro rata in any distribution of the Company's assets
upon liquidation.
The Company has reserved 1,424,720 shares of Common Stock for
issuance under its stock option plans and has reserved 207,199
shares of Common stock for issuance under an employee stock
purchase plan. See Note 8 of Notes to Consolidated Financial
Statements.
PREFERRED STOCK
The Board of Directors has the authority by resolution to
issue up to 2,000,000 shares of Preferred Stock in one or more
series and to fix the number of shares constituting any such
series, the voting powers, designations, preferences and
relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, including
the dividend rights, dividend rate, terms of redemption
(including sinking fund provisions), redemption price or prices,
conversion rights and liquidation preferences of the shares
constituting any series, without any further vote or action by
the stockholders. For example, the Board of Directors is
authorized to issue a series of Preferred Stock that would have
the right to vote separately or with any other series of
Preferred Stock on any proposed amendment to the Company's
Certificate of Incorporation or any other proposed corporate
action including business combinations and other transactions.
However, the Board of Directors currently does not contemplate
the issuance of any Preferred Stock.
CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK
At April 1, 1997, there were 6,357,091 shares of Common
Stock which were not outstanding or reserved for issuance and
2,000,000 shares of unissued and undesignated Preferred Stock.
These additional shares may be utilized for a variety of proper
corporate purposes, including future public offerings to raise
additional capital or facilitate corporate acquisitions. The
Company does not currently have any plan to issue additional
shares of Common Stock or Preferred Stock (other than shares of
Common Stock to be issued upon the exercise of
44
outstanding options and warrants and other than shares of
Common Stock reserved for issuance under the Company's stock
option plans).
One of the effects of the existence of unissued and unreserved
Common Stock and undesignated Preferred Stock may be to enable
the Board of Directors to issue shares to persons friendly to
current management, which could render more difficult or
discourage an attempt to obtain control of the Company by means
of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of the Company's management. The
Board of Directors can issue the Preferred Stock without
stockholder approval, with voting and conversion rights which
could adversely affect the voting rights of the common
stockholders.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is
Registrar & Transfer Company, Cranford, New Jersey.
LISTING
The Common Stock is quoted on The Nasdaq National Market under
the symbol "PLAB."
45
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal
income tax considerations relating to the purchase, ownership and
disposition of the Notes and of Common Stock into which Notes may
be converted, but does not purport to be a complete analysis of
all the potential tax considerations relating thereto. This
summary is based on laws, regulations, rulings and decisions now
in effect, all of which are subject to change. This summary deals
only with holders that are United States persons and that will
hold Notes and Common Stock into which Notes may be converted
as "capital assets" (within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended (the "Code" )) and does
not address tax considerations applicable to investors that may
be subject to special tax rules, such as banks, tax-exempt
organizations, insurance companies, dealers in securities or
currencies, or persons that will hold Notes as a position
in a hedging transaction, "straddle" or "conversion transaction"
for tax purposes. As used herein, the term "United States person"
means (1) a citizen or resident of the United States, (2) an
entity created or organized in or under the laws of the United
States or any political subdivision thereof that is classified as
a corporation or as a partnership, (3) an estate the income of
which is subject to United States federal income taxation
regardless of its source, or (4) a trust if (i) a U.S. court is
able to exercise primary supervision over the trust's
administration and (ii) one or more U.S. fiduciaries have the
authority to control all the trust's substantial decisions. The
term "United States" means the United States of America (including
the States and the District of Columbia). This summary discusses
the tax considerations applicable to the initial purchasers of
the Notes who purchase the Notes at their "issue price" as
defined in Section 1273 of the Code and does not discuss the tax
considerations applicable to subsequent purchasers of the Notes.
The summary below does not address the tax consequences resulting
upon a repurchase of the Notes by the Company in exchange for
Common Stock upon a Change of Control. The Company has not sought
any ruling from the Internal Revenue Service (the "IRS") with
respect to the statements made and the conclusions reached in
the following summary, and there can be no assurance that the
IRS will agree with such statements and conclusions.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE
UNITED STATES FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING
UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION
OR UNDER ANY APPLICABLE TAX TREATY.
PAYMENT OF INTEREST
Interest on a Note generally will be includable in the income
of a Holder as ordinary income at the time such interest is
received or accrued, in accordance with such Holder's method of
accounting for United States federal income tax purposes.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange or redemption of a Note (excluding
conversion), a Holder generally will recognize capital gain or
loss equal to the difference between (i) the amount of cash
proceeds and the fair market value of any property received on
the sale, exchange or redemption (except to the extent such amount
is attributable to accrued interest income not previously included
in income which is taxable as ordinary income) and (ii) such
Holder's adjusted tax basis in the Note. A Holder's adjusted
tax basis in a Note generally will equal the cost of the Note to
such Holder. Such capital gain or loss will be long-term capital
gain or loss if the Holder's holding period in the Note is more
than one year at the time of sale, exchange or redemption.
CONVERSION OF THE NOTES
46
A Holder generally will not recognize any income, gain or loss
upon conversion of a Note into Common Stock except with respect
to cash received in lieu of a fractional share of Common Stock. A
Holder's tax basis in the Common Stock received on conversion of
a Note will be the same as such Holder's adjusted tax basis in
the Note at the time of conversion (reduced by any basis
allocable to a fractional share interest), and the holding period
for the Common Stock received on conversion will generally
include the holding period of the Note converted.
Cash received in lieu of a fractional share of Common Stock
upon conversion will be treated as a payment in exchange for the
fractional share of Common Stock. Accordingly, the receipt of
cash in lieu of a fractional share of Common Stock generally will
result in capital gain or loss (measured by the difference
between the cash received for the fractional share and the
Holder's adjusted tax basis in the fractional share).
CONSTRUCTIVE DISTRIBUTIONS
If at any time (i) the Company makes a distribution of cash or
property to its stockholders or purchases Common Stock and such
distribution or purchase would be taxable to such stockholders as
a dividend for United States federal income tax purposes (e.g.,
distributions of evidences of indebtedness or assets of the
Company, but generally not stock dividends or rights to subscribe
for Common Stock) and, pursuant to the antidilution provisions of
the Indenture, the conversion rate of the Notes is increased, or
(ii), the conversion rate of the Notes is increased at the
discretion of the Company, such increase in conversion rate may
be deemed to be the Holders of Notes (pursuant to Section 305 of
the Code). Holders of Notes could therefore be required to report
taxable income as a result of an event pursuant to which they
received no cash or property.
DIVIDENDS
Dividends paid on the Common Stock generally will be
includable in the income of a Holder as ordinary income to the
extent of the Company's current or accumulated earnings and
profits. Subject to certain limitiations, a corporate taxpayer
holding Common Stock that receives dividends thereon generally
will be eligible for a dividends-received deduction equal to 70
percent of the dividends received. Under legislation proposed as
part of the Clinton administration's fiscal year 1998 budget
proposal, the 70 percent dividends-received deduction would be
reduced to 50 percent for dividends paid or accrued more than
30 days after the date of enactment of the legislation.
SALE OF COMMON STOCK
Upon the sale or exchange of Common Stock, a Holder generally
will recognize capital gain or loss equal to the difference
between (i) the amount of cash and the fair market value of any
property received upon the sale or exchange and (ii) such
Holder's adjusted tax basis in the Common Stock. Such capital
gain or loss will be long-term if the Holder's holding period in
Common Stock is more than one year at the time of the sale or
exchange. A Holder's basis and holding period in Common Stock
received upon conversion of a Note are determined as discussed
above under " --Conversion of the Notes."
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to
payments of principal, premium, if any, and interest on a Note,
payments of dividends on Common Stock, payments of the proceeds
of the sale of a Note or Common Stock to certain noncorporate
Holders, and a 31% backup withholding tax may apply to such
payments if the Holder (i) fails to furnish or certify his
correct taxpayer identification number to the payor in the manner
required, (ii) is notified by the IRS that he has failed to
report payments of interest and dividends properly, or (iii) does
not otherwise establish his entitlement to an exemption. Any
amounts withheld under the backup withholding rules from a
payment to a Holder will be allowed as a credit against such
Holder's United States federal income tax and may entitle the
Holder to a refund, provided that the required information is
furnished to the IRS.
47
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon
for the Company by Reid & Priest LLP, New York, New York.
Certain legal matters will be passed upon for the Underwriters by
Ropes & Gray, Boston, Massachusetts. Ropes & Gray will rely on
the opinion of Reid & Priest LLP as to matters of New York law.
EXPERTS
The consolidated financial statements as of October 31, 1995
and 1996 and for each of the three years in the period ended
October 31, 1996 included and incorporated by reference in this
Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are
included and incorporated by reference herein (which reports
express an unqualified opinion and include an explanatory
paragraph referring to the 1994 change in accounting for
investments and income taxes), and have been so included and
incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration
Statement on Form S-3 (the "Registration Statement") under the
Securities Act, with respect to the Notes offered hereby. This
Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules
thereto. For further information with respect to the Company and
such Notes, reference is hereby made to such Registration
Statement and to the exhibits and schedules thereto. The Company
is subject to the informational requirements of the 1934 Act,
and, in accordance therewith, files reports, proxy statements,
and other information with the Commission. Such Registration
Statement, reports, proxy statements and other information filed
by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: New York Regional
Office, Seven World Trade Center, 13th Floor, New York, New York
10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can also be
obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. In addition, the Commission maintains a site on the World
Wide Web at http://www.sec.gov that contains reports, proxy and
other information statements of the Company and other information
regarding registrants that file electronically with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed by the Company
with the Securities and Exchange Commission (the "Commission")
(File Number 0-15451) pursuant to the Securities Exchange Act of
1934, as amended (the "1934 Act"), are incorporated herein by
reference: the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1996; all reports filed pursuant to
Section 13(a) or 15(d) of the Exchange Act since the end of the
fiscal year covered by the Company's Annual Report on Form 10-K
and the description of the Company's Common Stock contained in
the Company's Registration Statement on Form 8-A, dated March 3,
1987, pursuant to Section 12 of the 1934 Act.
All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the 1934 Act, after the date of this
Prospectus and prior to the termination of this offering shall be
deemed to be incorporated by reference and to be a part hereof
from the respective dates of filing. Any statement contained in
a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes
of this prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or
48
superseded shall not be deemed, except as so modified or
supersedes, to constitute a part of this Prospectus.
The Company will furnish, without charge, to each person,
including any beneficial owner, to whom a copy of this Prospectus
is delivered, upon the written or oral request of such person, a
copy of any or all of the foregoing documents incorporated herein
by reference (other than certain exhibits). Requests for such
documents should be directed to Michael McCarthy, Manager of
Investor Relations, Photronics, Inc., P.O. Box 5226, 15 Secor
Road, Brookfield, Connecticut, 06804, telephone (203) 775-9000.
49
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PHOTRONICS, INC.
PAGE
----
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheet at October 31, 1995 and 1996 and unaudited
at February 2, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statement of Earnings for the years ended October 31,
1994, 1995 and 1996 and the unaudited three months ended
January 31, 1996 and February 2, 1997 . . . . . . . . . . . . . . . F-5
Consolidated Statement of Shareholders' Equity for the years ended
October 31, 1994, 1995 and 1996 and the unaudited three months
ended February 2, 1997 . . . . . . . . . . . . . . . . . . . . . . . F-6
Consolidated Statement of Cash Flows for the years ended
October 31, 1994, 1995 and 1996 and the unaudited three
months ended January 31, 1996 and February 2, 1997 . . . . . . . . . F-8
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . F-9
F-1
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Photronics, Inc.
Jupiter, Florida
We have audited the accompanying consolidated balance sheets of Photronics,
Inc. and subsidiaries at October 31, 1995 and 1996, and the related
consolidated statements of earnings, shareholders' equity and cash flows
for each of the three years in the period ended October 31, 1996. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Photronics,
Inc. and its subsidiaries as of October 31, 1995 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended October 31, 1996 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1994
the Company changed its method of accounting for investments and income
taxes.
/S/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Hartford, Connecticut
December 9, 1996
F-2
PHOTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
OCTOBER 31,
-------------------- FEBRUARY 2,
1995 1996 1997
--------- -------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents. . $ 35,644 $ 18,766 $ 7,836
Short-term investments . . . 16,221 7,918 5,104
Accounts receivable (less
allowance for doubtful
accounts of $195 in
1995 and $235 in 1996
and 1997, unaudited) . . . 17,857 24,750 25,467
Inventories . . . . . . . . 6,357 7,992 9,102
3,380 6,154 6,771
Other current assets . . . . -------- -------- --------
Total current assets . . . 79,459 65,580 54,280
Property, plant and equipment. 72,063 123,666 135,243
Intangible assets (less
accumulated amortization of
$2,156 in 1995, $3,256 in
1996 and $3,535 in 1997,
unaudited) . . . . . . . . . 10,289 9,305 9,026
Investments. . . . . . . . . . 12,329 13,239 10,412
78 113 114
Other assets . . . . . . . . . -------- -------- --------
$174,218 $211,903 $209,075
======== ======== ========
See accompanying notes to consolidated financial statements.
F-3
PHOTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OCTOBER 31,
-------------------- FEBRUARY 2,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of
long-term debt . . . . $ 36 $ 38 $ 39
Accounts payable . . . 17,850 34,168 29,949
Accrued salaries and
wages . . . . . . . . . 5,810 5,561 4,169
Other accrued 6,110 4,200 3,629
liabilities . . . . . . -------- -------- --------
Total current
liabilities . . . 29,806 43,967 37,786
Long-term debt . . . . . 1,809 1,987 2,005
Deferred income taxes . . 8,293 7,481 6,596
265 2,051 2,015
Other liabilities . . . . -------- -------- --------
40,173 55,486 48,402
Total liabilities . -------- -------- --------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.01
par value, 2,000,000
shares authorized,
none issued and
outstanding . . . . . -- -- --
Common stock, $0.01 par
value, 20,000,000
shares authorized,
11,758,292 shares
issued in 1995,
11,973,290 shares
issued in 1996 and
11,983,744 shares
issued in 1997
(unaudited) . . . . . 118 120 120
Additional paid-in
capital . . . . . . . 75,083 77,833 78,084
Retained earnings . . . 52,970 73,973 79,298
Unrealized gains on
investments . . . . . 6,471 4,678 3,230
Treasury stock, 136,500
shares at cost . . . . (245) (245) (245)
Cumulative foreign
currency translation
adjustment . . . . . . -- 58 186
Deferred compensation (352) -- --
on restricted stock . -------- -------- --------
Total
shareholders' 134,045 156,417 160,673
equity . . . . -------- -------- --------
$174,218 $211,903 $209,075
======== ======== ========
See accompanying notes to consolidated financial statements.
F-4
PHOTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED OCTOBER 31,
---------------------------------
1994 1995 1996
------- -------- --------
Net sales . . . . . . . . . . . . . . $80,696 $125,299 $160,071
Costs and expenses:
Cost of sales . . . . . . . . . 51,204 76,683 98,267
Selling, general and
administrative . . . . . . . . . 10,517 17,127 21,079
4,738 7,899 8,460
Research and development . . . . ------- -------- -------
Operating income . . . . . . . . . . 14,237 23,590 32,265
Interest income . . . . . . . . . . . 568 1,627 1,601
Interest expense . . . . . . . . . . (75) (141) (160)
Other income, net . . . . . . . . . . 571 4,766 197
------- -------- -------
Income before income taxes and
cumulative effect of change in
accounting for income taxes . . 15,301 29,842 33,903
5,202 11,210 12,900
Provision for income taxes . . . . . ------- -------- --------
Income before cumulative effect of
change in accounting for income
taxes . . . . . . . . . . . . . 10,099 18,632 21,003
Cumulative effect of change in 237 -- --
accounting for income taxes . . ------- -------- --------
$10,336 $ 18,632 $ 21,003
Net income . . . . . . . . . . . . . ======= ======== ========
Net income per common share:
Income before cumulative effect of
change in accounting for income
taxes . . . . . . . . . . . . . $ 1.01 $ 1.66 $ 1.74
Cumulative effect of change in 0.02 -- --
accounting for income taxes . . ------- -------- -------
$ 1.03 $ 1.66 $ 1.74
Net income . . . . . . . . . . . . ======= ======== =======
Weighted average number of common 10,062 11,207 12,101
shares outstanding . . . . . . . ======= ======== =======
THREE MONTHS ENDED
-----------------------------
JANUARY 31, FEBRUARY 2,
1996 1997
-----------------------------
(UNAUDITED)
Net sales . . . . . . . . . . . . . . . . $34,668 $40,029
Costs and expenses:
Cost of sales . . . . . . . . . . . 21,252 25,347
Selling, general and administrative 4,585 5,035
1,825 2,302
Research and development . . . . . . ------- -------
Operating income . . . . . . . . . . . . 7,006 7,345
Interest income . . . . . . . . . . . . . 575 238
Interest expense . . . . . . . . . . . . (36) (36)
Other income, net . . . . . . . . . . . . 6 1,078
------- -------
Income before income taxes and
cumulative effect of change in
accounting for income taxes . . . . 7,551 8,625
2,900 3,300
Provision for income taxes . . . . . . . ------- -------
Income before cumulative effect of
change in accounting for income taxes 4,651 5,325
Cumulative effect of change in -- --
accounting for income taxes . . . . ------- -------
$ 4,651 $ 5,325
Net income . . . . . . . . . . . . . . . ======= =======
Net income per common share:
Income before cumulative effect of
change in accounting for income taxes $ 0.39 $ 0.44
Cumulative effect of change in -- --
accounting for income taxes . . . . ------- -------
$ 0.39 $ 0.44
Net income . . . . . . . . . . . . . . ======= =======
Weighted average number of common 12,058 12,227
shares outstanding . . . . . . . . . ======= =======
See accompanying notes to consolidated financial statements.
F-5
PHOTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED FEBRUARY 2, 1997 IS
UNAUDITED)
ADDI-
COMMON STOCK TIONAL
--------------------- PAID-IN
SHARES AMOUNT CAPITAL
-------- ---------- ---------------
Balance at
November 1, 1993 . . . 6,484 $ 65 $38,804
Net income . . . . . . -- -- --
Sale of common stock
through employee
stock option and
purchase plans . . . . 124 1 1,478
Restricted stock awards 52 1 1,056
Amortization of
restricted stock to
compensation expense . -- -- --
Cumulative effect of
change in accounting
for investments . . . -- -- --
------- ------- ------
Balance at
October 31, 1994 . . . 6,660 67 41,338
Net income . . . . . . -- -- --
Sale of common stock
in connection with
public offering . . . 1,500 15 29,336
Issuance of common
stock related to
acquisition . . . . . 98 1 2,399
Sale of common stock
through warrants and
employee stock option
and purchase plans . . 170 2 2,043
Amortization of
restricted stock to
compensation expense . -- -- --
Change in unrealized
gains on investments . -- -- --
Three-for-two stock
split . . . . . . . . 3,330 33 (33)
------- ------- ------
Balance at
October 31, 1995 . . . 11,758 118 75,083
Net income . . . . . . -- -- --
Sale of common stock
through employee
stock option and
purchase plans . . . . 215 2 2,750
Foreign currency
translation
adjustment . . . . . . -- -- --
Amortization of
restricted stock to
compensation expense . -- -- --
Change in unrealized
gains on investments . -- -- --
------- ------- ------
Balance at
October 31, 1996 . . . 11,973 120 77,833
UNREAL-
IZED
GAINS
ON
RETAINED INVEST- TREASURY
EARNINGS MENTS STOCK
-------- ------- --------
Balance at
November 1, 1993 . . . $24,002 $ -- $(245)
Net income . . . . . . 10,336 -- --
Sale of common stock
through employee
stock option and
purchase plans . . . . -- -- --
Restricted stock awards -- -- --
Amortization of
restricted stock to
compensation expense . -- -- --
Cumulative effect of
change in accounting
for investments . . . -- 5,608 --
------- -------- -------
Balance at
October 31, 1994 . . . 34,338 5,608 (245)
Net income . . . . . . . 18,632 -- --
Sale of common stock
in connection with
public offering . . . -- -- --
Issuance of common
stock related to
acquisition . . . . . -- -- --
Sale of common stock
through warrants and
employee stock option
and purchase plans . . -- -- --
Amortization of
restricted stock to
compensation expense . -- -- --
Change in unrealized
gains on investments . -- 863 --
Three-for-two stock
split . . . . . . . . -- -- --
------- -------- -------
Balance at
October 31, 1995 . . . 52,970 6,471 (245)
Net income . . . . . . . 21,003 -- --
Sale of common stock
through employee
stock option and
purchase plans . . . . -- -- --
Foreign currency
translation
adjustment . . . . . . -- -- --
Amortization of
restricted stock to
compensation expense . -- -- --
Change in unrealized
gains on investments . -- (1,793) --
------- -------- -------
Balance at
October 31, 1996 . . . 73,973 4,678 (245)
CUMULA-
TIVE
FOREIGN
CURRENCY DEFERRED
TRANS- COMPENSA-
LATION TION ON TOTAL
ADJUST- RESTRICTED SHAREHOLDERS'
MENT STOCK EQUITY
-------- ---------- -------------
Balance at
November 1, 1993 . . . . $ -- $ -- $ 62,626
Net income . . . . . . . -- -- 10,336
Sale of common stock
through employee
stock option and
purchase plans . . . . . -- -- 1,479
Restricted stock awards -- (1,057) --
Amortization of
restricted stock to
compensation expense . -- 353 353
Cumulative effect of
change in accounting
for investments . . . -- -- 5,608
------- ------- --------
Balance at
October 31, 1994 . . . -- (704) 80,402
Net income . . . . . . . -- -- 18,632
Sale of common stock
in connection with
public offering . . . -- -- 29,351
Issuance of common
stock related to
acquisition . . . . . -- -- 2,400
Sale of common stock
through warrants and
employee stock option
and purchase plans . . -- -- 2,045
Amortization of
restricted stock to
compensation expense . -- 352 352
Change in unrealized
gains on investments . -- -- 863
Three-for-two stock
split . . . . . . . . -- -- --
-------- ------- --------
Balance at
October 31, 1995 . . . -- (352) 134,045
Net income . . . . . . . -- -- 21,003
Sale of common stock
through employee
stock option and
purchase plans . . . . -- -- 2,752
Foreign currency
translation
adjustment . . . . . . 58 -- 58
Amortization of
restricted stock to
compensation expense . -- 352 352
Change in unrealized
gains on investments . -- -- (1,793)
-------- ------- --------
Balance at
October 31, 1996 . . . 58 -- 156,417
See accompanying notes to consolidated financial statements.
F-6
PHOTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS)
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED FEBRUARY 2, 1997 IS
UNAUDITED)
ADDI-
COMMON STOCK TIONAL
------------------ PAID-IN
SHARES AMOUNT CAPITAL
-------- -------- ---------
Net income . . . . . -- -- --
Sale of common stock
through employee
stock option and
purchase plans . . . 11 -- 251
Foreign currency
translation
adjustment . . . . . -- -- --
Change in unrealized
gains on investments -- -- --
------ ----- -------
Balance at
February 2, 1997 11,984 $120 $78,084
(unaudited) . . . . . ====== ===== =======
UNREAL-
IZED
GAINS
ON
RETAINED INVEST- TREASURY
EARNINGS MENTS STOCK
-------- --------- --------
Net income . . . . . 5,325 -- --
Sale of common stock
through employee
stock option and
purchase plans . . . -- -- --
Foreign currency
translation
adjustment . . . . . -- -- --
Change in unrealized
gains on investments -- (1,448) --
------- ------ -----
Balance at
February 2, 1997
(unaudited) . . . . . $79,298 $3,230 $(245)
======= ====== =====
CUMULA-
TIVE
FOREIGN
CURRENCY DEFERRED
TRANS- COMPENSA-
LATION TION ON TOTAL
ADJUST- RESTRICTED SHAREHOLDERS'
MENT STOCK EQUITY
--------- ---------- ------------
Net income . . . . . -- -- 5,325
Sale of common stock
through employee
stock option and
purchase plans . . . -- -- 251
Foreign currency
translation
adjustment . . . . . 128 -- 128
Change in unrealized
gains on investments -- -- (1,448)
---- ------- --------
Balance at
February 2, 1997
(unaudited) . . . . . $186 $ -- $160,673
==== ======= ========
See accompanying notes to consolidated financial statements.
F-7
PHOTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEAR ENDED
OCTOBER 31,
------------------------------
1994 1995 1996
---- ---- ----
Cash flows from operating activities:
Net income.............................. $10,336 $18,632 $21,003
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization of
property, plant and equipment... 7,953 8,747 12,120
Amortization of intangible assets.. 694 1,039 1,100
Gain on disposition of investments. (831) (5,110) --
Deferred income taxes.............. 847 (842) 1,000
Cumulative effect of change in
accounting for income taxes..... (237) -- --
Research and development expense
from acquisition................ -- 1,484 --
Other.............................. 403 377 626
Changes in assets and liabilities,
net of effects of acquisitions:
Accounts receivable............. (372) (7,639) (6,893)
Inventories..................... 437 (2,922) (1,228)
Other current assets............ (533) 199 (3,260)
Accounts payable and 2,305 19,587 14,159
accrued liabilities.......... ------- ------- -------
Net cash provided by operating 21,002 33,552 38,627
activities......................... ------- ------- -------
Cash flows from investing activities:
Acquisitions of and investment in
photomask operations............ -- (10,536) (12,397)
Deposits on and purchases of
property, plant and equipment... (6,187) (35,547) (55,762)
Net change in short-term
investments..................... 961 (13,686) 8,303
Proceeds from sale of investments.. 615 5,750 --
(269) 90 1,635
Other.............................. ------- ------- -------
(4,880) (53,929) (58,221)
Net cash used in investing activities... ------- ------- -------
Cash flows from financing activities:
Repayment of long-term debt........ (735) (467) (36)
Proceeds from issuance of common 1,479 31,396 2,752
stock........................... ------- ------- -------
Net cash provided by financing 744 30,929 2,716
activities......................... ------- ------- -------
Net increase (decrease) in cash and
cash equivalents................... 16,866 10,552 (16,878)
Cash and cash equivalents at beginning 8,226 25,092 35,644
of period.......................... ------- ------- -------
Cash and cash equivalents at end of $25,092 $35,644 $18,766
period............................. ======= ======= =======
THREE MONTHS ENDED
---------------------------
JANUARY 31, FEBRUARY 2,
1996 1997
---------- -----------
(UNAUDITED)
Cash flows from operating activities:
Net income................................. $4,651 $5,325
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
property, plant and equipment...... 2,569 4,243
Amortization of intangible assets..... 266 247
Gain on disposition of investments.... -- (1,060)
Deferred income taxes................. 94 185
Cumulative effect of change in
accounting for income taxes........ -- --
Research and development expense from
acquisition........................ -- --
Other................................. 39 27
Changes in assets and liabilities, net
of effects of acquisitions:
Accounts receivable................ 291 (717)
Inventories........................ 34 (1,110)
Other current assets............... (318) (617)
Accounts payable and accrued (1,702) (6,218)
liabilities..................... ------- -------
5,924 305
Net cash provided by operating activities.. ------- -------
Cash flows from investing activities:
Acquisitions of and investment in
photomask operations............... (4,900) --
Deposits on and purchases of property,
plant and equipment................ (9,629) (15,730)
Net change in short-term investments.. 11,026 2,814
Proceeds from sale of investments..... -- 1,369
4 70
Other................................. ------- -------
(3,499) (11,477)
Net cash used in investing activities...... ------- -------
Cash flows from financing activities:
Repayment of long-term debt........... (9) (9)
786 251
Proceeds from issuance of common stock ------- -------
777 242
Net cash provided by financing activities.. ------- -------
Net increase (decrease) in cash and
cash equivalents...................... 3,202 (10,930)
Cash and cash equivalents at 35,644 18,766
beginning of period................... ------- -------
$38,846 $7,836
Cash and cash equivalents at end of period. ======= ======
See accompanying notes to consolidated financial statements.
F-8
PHOTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE THREE MONTHS ENDED
JANUARY 31, 1996 AND FEBRUARY 2, 1997 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Photronics, Inc. and its subsidiaries. All significant intercompany
balances and transactions have been eliminated. Certain amounts in the
consolidated financial statements for periods prior to October 31, 1996
have been reclassified to conform to the current presentation. The Company
has adopted a fiscal year ending on the Sunday closest to October 31,
beginning with the current fiscal year.
FOREIGN CURRENCY TRANSLATION
The Company s subsidiaries in Europe and Singapore maintain their accounts
in their respective local currencies. Assets and liabilities of such
subsidiaries are translated to U.S. dollars at period-end exchange rates.
Income and expenses are translated at average rates of exchange prevailing
during the period. Foreign currency translation adjustments are
accumulated in a separate component of shareholders equity. The effects
of changes in exchange rates on foreign currency transactions are included
in income.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and highly liquid investments
purchased with an original maturity of three months or less. The carrying
values approximate fair value based on the short maturity of the
instruments.
INVESTMENTS
The Company's debt and equity investments available for sale are carried at
fair value. Prior to 1994, such investments were carried at cost. Short-
term investments include a diversified portfolio of high quality marketable
securities which will be liquidated as needed to meet the Company's current
cash requirements. All other investments are classified as non-current
assets. Unrealized gains and losses, net of tax, are reported as a
separate component of shareholders' equity. Gains and losses are included
in income when realized, determined based on the disposition of
specifically identified investments.
INVENTORIES
Inventories, principally raw materials, are stated at the lower of cost,
determined under the first-in, first-out method, or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost less accumulated
depreciation. Repairs and maintenance as well as renewals and replacements
of a routine nature are charged to operations as incurred, while those
which improve or extend the lives of existing assets are capitalized. Upon
sale or other disposition, the cost of the asset and accumulated
depreciation are eliminated from the accounts, and any resulting gain or
loss is reflected in income.
For financial reporting purposes, depreciation and amortization are
computed on the straight-line method over the estimated useful lives of the
related assets. Buildings and improvements are depreciated over 15 to 40
years, machinery and equipment over 3 to 10 years and furniture, fixtures
and office equipment over 3 to 5 years. Leasehold improvements are
amortized over the life of the lease or the estimated useful life of the
improvement, whichever is less. For income tax purposes, depreciation is
F-9
PHOTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
computed using various accelerated methods and, in some cases, different
useful lives than those used for financial reporting.
INTANGIBLE ASSETS
Intangible assets include goodwill which represents the excess of cost over
fair value of assets acquired and is being amortized on a straight-line
basis over fifteen to twenty years. Costs allocated to sales, non-compete
and technology agreements arising from business acquisitions and other
intangible assets are being amortized on a straight-line basis over the
respective agreement periods ranging from three to ten years. The future
economic benefit of the carrying value of intangible assets is reviewed
periodically and any diminution in useful life or impairment in value based
on future anticipated cash flows would be recorded in the period so
determined.
INCOME TAXES
The provision for income taxes is computed on the basis of consolidated
financial statement income. Deferred income taxes reflect the tax effects
of differences between the carrying amounts of assets and liabilities for
financial reporting and the amounts used for income tax purposes. The
Company adopted Statement of Financial Accounting Standards No. 109 ("SFAS
109"), "Accounting for Income Taxes," effective November 1, 1993. The
cumulative effect of adopting SFAS 109 was an increase in income of $237,
or $0.02 per share, for fiscal 1994.
NET INCOME PER COMMON SHARE
Net income per common and common equivalent share is calculated using the
weighted average number of common and common equivalent shares outstanding
during each year. When dilutive, stock options and stock purchase warrants
are included as common equivalent shares using the treasury stock method.
STOCK OPTIONS
The Company records stock option awards in accordance with the provisions
of Accounting Principles Board Opinion 25, Accounting for Stock Issued to
Employees. In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123 ( SFAS 123 ),
Accounting for Stock-Based Compensation, which the Company will be
required to adopt in fiscal 1997. Under SFAS 123, companies can elect, but
are not required, to recognize compensation expense for all stock-based
awards, using a fair value methodology. The Company does not believe that
adoption of SFAS 123 will have a material effect on its financial
statements.
NOTE 2 - INVESTMENTS
Short-term investments consist principally of municipal bonds, commercial
paper, and money market and bond funds. The estimated fair value of short-
term investments, based upon current yields of like securities,
approximates cost, resulting in no significant unrealized gains or losses.
Short-term investments at October 31, 1996, mature by their terms, as
follows:
Due within one year . . . . . . . . . . . . . . . $4,113
Due after one year, but within three years. . . . 3,276
Due after three years . . . . . . . . . . . . . . 529
------
$7,918
======
Other investments consist of available-for-sale equity securities of
publicly traded technology companies and a minority interest in a photomask
manufacturer in Korea. The fair values of available-for-sale investments
F-10
PHOTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
are based upon quoted market prices. The Company is a supplier to one of
the investee companies. The estimated fair value of the non-available-for-
sale investment is based upon the financial condition and the operating
results and projections of the investee and is considered to approximate
cost. Unrealized gains on investments were determined as follows:
OCTOBER 31, FEBRUARY 2,
------------------- 1997
1995 1996 ----------
------- ------- (UNAUDITED)
Fair value . . . . $12,329 $13,239 $10,412
Cost . . . . . . . 1,075 5,104 4,794
------- ------- -------
11,254 8,135 5,618
Less deferred
income taxes . . 4,783 3,457 2,388
------- ------- -------
Net unrealized
gains . . . . . . . $ 6,471 $ 4,678 $ 3,230
======= ======= =======
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
OCTOBER 31,
------------------ FEBRUARY 2,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
Land . . . . . . . . . . . . . $ 2,200 $ 2,735 2,735
Buildings and improvements . . 13,305 20,665 20,665
Machinery and equipment . . . . 89,269 141,430 156,124
Leasehold improvements . . . . 7,213 9,703 10,450
Furniture, fixtures and office 993 1,873 1,906
equipment . . . . . . . . . . . ------- ------- -------
112,980 176,406 191,880
Less accumulated depreciation 40,917 52,740 56,637
and amortization . . . . . . . ------- ------- -------
Property, plant and equipment . $ 72,063 $123,666 $135,243
======== ======== ========
F-11
PHOTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 4 - LONG-TERM DEBT
Long-term debt consists of the following:
OCTOBER 31,
---------------- FEBRUARY 2,
1995 1996 1997
------ ------ -----------
Acquisition indebtedness payable (UNAUDITED)
December 1, 1998, net of
interest of $450 at October 31,
1995, $234 at October 31, 1996,
and $206 at February 2, 1997
(unaudited) imputed at 7.45% per
annum . . . . . . . . . . . . . . $1,350 $1,566 $1,594
Industrial development mortgage
note, secured by building, with
interest at 6.58% per annum,
payable through November 2005 . . 495 459 450
----- ------ ------
1,845 2,025 2,044
Less current portion . . . . . . . . 36 38 39
------ ------ ------
Long-term debt . . . . . . . . . . . $1,809 $1,987 $2,005
====== ====== ======
Long-term debt as of October 31, 1996 matures as follows: 1998-$41; 1999-
$1,610; 2000-$46; 2001-$50; years after 2001-$240. The fair value of long-
term debt not yet substantively extinguished is estimated based on the
current rates offered to the Company and is not significantly different
from carrying value.
In March 1995, the Company entered into an unsecured revolving credit
facility that provides for borrowings of up to $10 million per year in each
of the following three years, subject to a carryover in the second and
third year of up to the lesser of $3 million and the amount of borrowing
capacity not used in the prior years. The Company is charged a commitment
fee on the average unused amount of the available credit and is subject to
compliance with and maintenance of certain financial covenants and ratios.
At February 2, 1997, the Company had not borrowed any amounts under this
agreement; however, the Company borrowed $15.0 million subsequent to
February 2, 1997.
Cash paid for interest was $75, $38 and $48 in 1994, 1995 and 1996,
respectively, and $8 and $7 for the three months ended January 31, 1996 and
February 2, 1997, respectively.
NOTE 5 - SHAREHOLDERS' EQUITY
In January 1995, the Company's Board of Directors authorized a three-for-
two stock split effected in the form of a stock dividend payable to
shareholders of record as of March 20, 1995. The stock split resulted in
the issuance of 3.3 million additional shares of common stock. All
applicable share and per share amounts included in the financial statements
reflect the stock split. On March 16, 1995, the shareholders approved an
amendment to the Company's Certificate of Incorporation increasing the
number of common shares, $0.01 par value, which the Company is authorized
to issue from 10 million to 20 million shares.
F-12
PHOTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
In connection with a public offering, in April and May 1995, the Company
issued 1,500,000 new shares of common stock at a price of $21.00 per share
($19.85 per share after underwriting discounts), 40,000 shares of common
stock due to the exercise of stock options at prices ranging from $1.83 to
$3.17 per share and 7,500 additional shares of common stock resulting from
the exercise of a warrant at $5.24 per share. The proceeds, net of costs
of the issue, amounted to $29.6 million.
In June 1995, the Company issued 98,559 shares of common stock in
connection with the acquisition of Microphase Laboratories, Inc. (see Note
6).
NOTE 6 - ACQUISITIONS
EUROPEAN PHOTOMASK OPERATIONS
In January 1996, the Company acquired the photomask manufacturing
operations and assets of Plessey Semiconductors Limited ("Plessey") located
in Oldham, United Kingdom, for $4.9 million in cash. In connection with
the transaction, the Company leased the facilities from Plessey previously
utilized by them for the manufacture of photomasks. The acquisition was
accounted for as a purchase and, accordingly, the acquisition price was
allocated to property and equipment based on relative fair value.
In April 1996, the Company, through its majority-owned subsidiary, acquired
the photomask manufacturing operations and assets of the Litomask Division
("Litomask") of Centre Suisse d'Electronique et de Microtechnique S.A.
("CSEM") located in Neuchatel, Switzerland for $3.4 million in cash. CSEM
holds the remaining interest in this subsidiary and the Company has an
option to acquire CSEM s interest within a two-year period. In connection
with the transaction, the Company leased the facilities and retained
certain services from CSEM previously utilized by Litomask. The
acquisition was accounted for as a purchase and, accordingly, the
acquisition price was allocated to property and equipment based on relative
fair value.
The consolidated statement of earnings includes the results of European
photomask operations beginning on the effective date of the respective
acquisition. Such results were not material to the Company.
HOYA MICRO MASK, INC.
In December 1994, the Company acquired certain assets held by Hoya Micro
Mask, Inc. ("Micro Mask"), an independent photomask manufacturer with
manufacturing operations located in Sunnyvale, California. The transaction
included the purchase of the land, buildings, inventory and certain assets
other than cash and receivables. In addition, significant manufacturing
systems owned by Micro Mask were leased by the Company from Micro Mask.
The acquisition was financed through the payment of approximately $10.2
million in cash and the obligation to pay $1.8 million, without interest,
four years after the closing. The operating lease of the significant
manufacturing systems has a term ranging from 44 to 62 months and includes
the right to purchase the systems at fair market value at the end of the
lease. The acquisition was accounted for as a purchase and, accordingly,
the acquisition price was allocated to property, plant and equipment as
well as certain intangible assets based on relative fair value. The excess
of purchase price over the fair value of assets acquired is being amortized
over 20 years. The consolidated statement of earnings includes the results
of Micro Mask's operations from December 1, 1994, the effective date of the
acquisition. The consolidated results of the Company's operations on a
proforma basis (unaudited) for the year ended October 31, 1994, as though
the purchase had been made as of the beginning of the year, would have
reflected sales of approximately $106 million and net income of
approximately $11 million, or $1.10 per common share. The proforma results
of operations are not necessarily indicative of the actual operating
results that would have occurred had the transactions been consummated at
the beginning of the year, or of the future combined operating results.
F-13
PHOTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
MICROPHASE LABORATORIES, INC.
In June 1995, the Company acquired the manufacturing operations and assets,
exclusive of cash and accounts receivable, of Microphase Laboratories, Inc.
("Microphase"), an independent photomask manufacturer located in Colorado
Springs, Colorado, in exchange for 98,559 shares of common stock of the
Company valued at $2.4 million. The acquisition was accounted for as a
purchase. Of the total purchase price, $1.5 million was allocated to
Microphase's research and development projects and, accordingly, was
charged to research and development expenses. The consolidated statement
of earnings includes the results of the Microphase operations beginning
June 20, 1995, the effective date of the acquisition. Such results were
not material to the Company.
NOTE 7 - INCOME TAXES
The provision for income taxes consists of the following:
YEAR ENDED OCTOBER 31,
---------------------------
1994 1995 1996
------ ------- ------
Current:
Federal . . . . . . . . . . . . $3,722 $10,234 $9,905
State . . . . . . . . . . . . . 633 1,818 1,908
Foreign . . . . . . . . . . . . -- -- 87
------ ------- -------
4,355 12,052 11,900
------ ------- -------
Deferred:
Federal . . . . . . . . . . . . 832 (617) 918
State . . . . . . . . . . . . . 15 (225) 82
------ ------- -------
847 (842) 1,000
------ ------- -------
$5,202 $11,210 $12,900
====== ======= =======
The provision for income taxes differs from the amount computed by applying
the statutory U.S. Federal income tax rate to income before taxes as a
result of the following:
YEAR ENDED OCTOBER 31,
----------------------------
1994 1995 1996
------ ------- -------
U.S. Federal income tax at statutory
rate . . . . . . . . . . . . . . . . $5,255 $10,445 $11,866
State income taxes, net of Federal
benefit . . . . . . . . . . . . . . . 428 1,035 1,294
Tax benefits of tax exempt income . . . (168) (389) (302)
Foreign tax rate differential . . . . . -- -- (291)
Other, net . . . . . . . . . . . . . . . (313) 119 333
------ ------- -------
$5,202 $11,210 $12,900
====== ======= =======
The Company's net deferred tax liability consists of the following:
F-14
PHOTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OCTOBER 31,
-------------------
1995 1996
---- ----
Deferred income tax liabilities:
Property, plant and equipment . . . $3,761 $3,876
Investments . . . . . . . . . . . . 4,783 3,457
Other . . . . . . . . . . . . . . . 31 454
------ ------
Total deferred tax liability . . 8,575 7,787
------ ------
Deferred income tax assets:
Reserves not currently deductible . 1,528 1,226
Other . . . . . . . . . . . . . . . 643 483
------ ------
Total deferred tax asset . . . . 2,171 1,709
------ ------
Net deferred tax liability . . . . . $6,404 $6,078
====== ======
Cash paid for income taxes was $3.7 million, $11.6 million and $13.0
million in 1994, 1995 and 1996, respectively, and $0.7 million and
$0.2 million for the three months ended January 31, 1996 and February 2,
1997, respectively.
NOTE 8 - EMPLOYEE STOCK OPTION AND PURCHASE PLANS
In March 1996, the shareholders approved the adoption of the 1996 Stock
Option Plan which includes provisions allowing for the award of qualified
and non-qualified stock options and the granting of restricted stock
awards. A total of 600,000 shares of common stock may be issued pursuant
to options or restricted stock awards granted under the Plan. Restricted
stock awards do not require the payment of any cash consideration by the
recipient, but shares subject to an award may be forfeited unless
conditions specified in the grant are satisfied.
The Company has adopted a series of other stock option plans under which
incentive and non-qualified stock options and restricted stock awards for a
total of 1,800,000 shares of the Company's common stock may be granted to
employees and directors. All plans provide that the exercise price may not
be less than the fair market value of the common stock at the date the
options are granted and limit the maximum term of options granted to a
range of from five to ten years.
The following table summarizes stock option activity under the plans:
STOCK OPTIONS EXERCISE PRICES
------------- ---------------
Balance at November 1, 1993 . . . 964,242 $1.83-$8.67
Granted . . . . . . . . . . 249,150 10.17-14.83
Exercised . . . . . . . . . (166,017) 1.83- 8.67
Canceled . . . . . . . . . . (124,613) 6.17-13.42
--------
Balance at October 31, 1994 . . . 922,762 1.83-14.83
Granted . . . . . . . . . . 241,640 18.67-27.38
Exercised . . . . . . . . . (145,273) 1.83-13.42
Canceled . . . . . . . . . . (39,189) 6.17-24.00
--------
Balance at October 31, 1995 . . . 979,940 1.83-27.38
F-15
PHOTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Granted . . . . . . . . . . 482,050 21.50-25.00
Exercised . . . . . . . . . (184,431) 1.83-27.38
Canceled . . . . . . . . . . (85,796) 6.17-27.38
--------
Balance at October 31, 1996 . . . 1,191,763 $ 3.17-27.38
At October 31, 1996, 270,657 shares were available for grant and 471,296
shares were exercisable.
In 1994, restricted stock awards representing a total of 78,750 shares were
awarded to certain key employees. The market value of the grant amounted
to $1.1 million at the date of grant and was charged to "Deferred
Compensation on Restricted Stock", a component of shareholders' equity.
Such amount was amortized as compensation expense over the three-year
period during which the shares under these awards were subject to
forfeiture.
In 1992, the shareholders approved the Company's adoption of an Employee
Stock Purchase Plan (the "Purchase Plan"), under which 300,000 shares of
common stock are reserved for issuance. The Purchase Plan enables eligible
employees to subscribe, through payroll deductions, to purchase shares of
the Company's common stock at a purchase price equal to 85% of the lower of
the fair market value on the commencement date of the offering and the last
day of the payroll payment period. At October 31, 1996, 92,801 shares had
been issued and 32,968 shares were subject to outstanding subscriptions
under the Purchase Plan.
NOTE 9 - EMPLOYEE BENEFIT PLANS
The Company maintains a 401(k) Savings and Profit-Sharing Plan (the "Plan")
which covers all domestic employees who have completed six months of
service and are eighteen years of age or older. Under the terms of the
Plan, an employee may contribute up to 15% of their compensation which will
be matched by the Company at 50% of the employee's contributions which are
not in excess of 4% of the employee's compensation. Employee and employer
contributions vest fully upon contribution. Employer contributions
amounted to $0.3 million in 1994 and $0.5 million in 1995 and 1996.
The Company maintains a cafeteria plan to provide eligible domestic
employees with the option to receive non-taxable medical, dental,
disability and life insurance benefits. The cafeteria plan is offered to
all active full-time employees and their qualifying dependents. The
Company's contribution amounted to $1.2 million in 1994, $1.4 million in
1995 and $1.8 million in 1996.
The Company's foreign subsidiaries maintain benefit plans for their
employees which vary by country. The obligations and cost of these plans
are not significant to the Company.
NOTE 10 - LEASES
The Company leases various real estate and equipment under non-cancelable
operating leases. Rental expense under such leases amounted to
$2.0 million in 1994, $4.9 million in 1995 and $5.6 million in 1996.
Included in such amounts were $0.1 million in each year to affiliated
entities, which are owned, in part, by a significant shareholder of the
Company.
Future minimum lease payments under non-cancelable operating leases with
initial or remaining terms in excess of one year amounted to $11.4 million
at October 31, 1996, as follows:
F-16
PHOTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1997 . . . . . . . $3,979 2000 . . . . . . . $980
1998 . . . . . . . 3,611 2001 . . . . . . . 350
1999 . . . . . . . 2,167 Thereafter . . . . 312
Included in such future lease payments are amounts to affiliated entities
of $0.1 million in each year from 1997 to 2000, and $0.3 million in years
thereafter.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
The Company and a significant shareholder have jointly guaranteed a loan
totaling approximately $0.5 million as of October 31, 1996, on certain real
estate which is being leased by the Company. The Company is subject to
certain financial covenants in connection with the guarantee.
As of October 31, 1996 and February 2, 1997, the Company had capital
expenditure purchase commitments outstanding of approximately $54 million
and $62 million, respectively.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions, including collectibility of accounts receivable,
and depreciable lives and recoverability of property, plant, equipment and
intangible assets. Actual results may differ from such estimates.
Financial instruments that potentially subject the Company to credit risk
consist principally of trade receivables and temporary cash investments.
The Company sells its products primarily to manufacturers in the
semiconductor and computer industries in North America, Europe and Asia.
The Company believes that the concentration of credit risk in its trade
receivables is substantially mitigated by the Company's ongoing credit
evaluation process and relatively short collection terms. The Company does
not generally require collateral from customers. The Company establishes
an allowance for doubtful accounts based upon factors surrounding the
credit risk of specific customers, historical trends and other information.
Historically, the Company has not incurred any significant credit related
losses.
F-17
PHOTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 12 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following table sets forth certain unaudited quarterly financial data:
FIRST SECOND THIRD
------- ------- ----------
1995:
Net sales . . . . . . . $26,176 $30,037 $32,854
Gross profit . . . . . 9,759 11,615 12,839
Net income . . . . . . $ 3,267 $ 3,820 $ 6,460(b)
Net income
per share(a) . . . . $ 0.32 $ 0.36 $ 0.54(b)
1996:
Net sales . . . . . . . $34,668 $40,514 $42,677
Gross profit . . . . . 13,416 15,703 16,428
Net income . . . . . . $ 4,651 $ 5,267 $ 5,513
Net income
per share (a) . . . $ 0.39 $ 0.44 $ 0.46
FOURTH YEAR
------- --------
1995:
Net sales . . . . . . . . . . $36,232 $125,299
Gross profit . . . . . . . . 14,403 48,616
Net income . . . . . . . . . $ 5,085 $ 18,632
Net income
per share(a) . . . . . . . $ 0.42 $ 1.66
1996:
Net sales . . . . . . . . . . $42,212 $160,071
Gross profit . . . . . . . . 16,257 61,804
Net income . . . . . . . . . $ 5,572 $ 21,003
Net income
per share (a) . . . . . . $ 0.46 $ 1.74
--------------------
(a) Quarterly per share data may not equal the annual amounts due to
changes in weighted average shares and share equivalents outstanding.
(b) Includes a net gain from the sale of equity investments of $2.9
million, or $0.24 per share, after tax, and a non-recurring
charge related to the acquisition of Microphase Laboratories, Inc. of
$0.9 million, or $0.08 per share, after tax.
F-18
PHOTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 13 - SEGMENT INFORMATION
The Company operates in a single industry segment as a manufacturer of
photomasks, which are high precision quartz plates containing microscopic
images of electronic circuits for use in the fabrication of semiconductors.
In addition to its manufacturing facilities in the United States, the
Company has operations in the United Kingdom, Switzerland and Singapore.
Prior to 1996, the Company had no operations outside of the United States.
The Company's net sales and operating profit for the year ended October 31,
1996 and identifiable assets at October 31, 1996, by geographic area were
as follows:
OPERATING
INCOME IDENTIFIABLE
NET SALES (LOSS) ASSETS
--------- --------- ------------
United States . . . . . . $153,227 $32,660 $181,255
Europe and Asia . . . . . 6,844 (395) 30,648
-------- ------- --------
$160,071 $32,265 $211,903
======== ======= ========
Approximately 14% of net domestic sales in 1996 were for delivery outside
of the United States (11% in 1995 and 13% in 1994).
The Company's largest single customer represented approximately 36% of
total net sales in 1994, 32% in 1995, 26% in 1996 and 23% in the three
months ended February 2, 1997.
F-19
UNDERWRITING
Subject to the terms and conditions set forth in the
Underwriting Agreement, the Company has agreed to sell to each of
the Underwriters named below, and each of such Underwriters has
severally agreed to purchase, the entire principal amounts of the
Notes set forth opposite its name below:
Principal
Amount
Underwriter of Notes
----------- --------
Goldman, Sachs & Co. . . . . . . . . . . . . $ .
Robertson, Stephens & Company LLC . . . . . . $ .
Smith Barney Inc. . . . . . . . . . . . . . . $ .
---------
Total . . . . . . . . . . . . . . . . . $75,000,000
==========
Under the terms and conditions of the Underwriting Agreement,
the Underwriters are committed to take and pay for all of the
Notes, if any are taken.
The Underwriters propose to offer the Notes in part directly
to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain
securities dealers at such price less a concession of . % of the
principal amount of the Notes. The Underwriters may allow, and
such dealers may reallow, a concession not to exceed . % of the
principal amount of the Notes to certain brokers and dealers.
After the Notes are released for sale to the public, the offering
price and other selling terms may from time to time be varied by
the representatives.
The Company has granted the Underwriters an option exercisable
for 30 days after the date of this Prospectus to purchase up to
an aggregate of $11,250,000 additional principal amount of Notes
solely to cover over-allotments, if any. If the Underwriters
exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the principal
amount of the Notes to be purchased by each of them, as shown in
the foregoing table, bears to the aggregate principal amount of
the Notes offered hereby.
The Notes are a new issue of securities with no established
trading market. The Company has been advised by the Underwriters
that they intend to make a market in the Notes but are not
obligated to do so and may discontinue market making at any time
without notice. No assurance can be given as to the liquidity of
the trading market for the Notes.
The Company has also agreed that it will not offer to sell,
contract to sell or otherwise dispose of any Common Stock (other
than upon conversion of the Notes), any securities substantially
similar to the Notes or the Common Stock or any security
exchangeable or exercisable for or convertible into Common Stock
or substantially similar securities (any such security, a
"Covered Security"), without the prior consent of Goldman, Sachs
& Co., for a period of 90 days after the date of this Prospectus,
except pursuant to the Company's stock option or purchase plans
existing as of the date of this Prospectus or other options
granted by the Company to employees. Certain directors and
executive officers of the Company have also agreed, subject to
certain exceptions, that they will not offer to sell, sell or
otherwise dispose of shares of Common Stock beneficially owned by
them without the prior written consent of Goldman, Sachs & Co.
until the earlier of the 90th day after the date of this
Prospectus.
The Underwriters may engage in transactions that stabilize,
maintain, or otherwise affect the price of the Notes, including
(i) syndicate covering transactions, which consist of the placing
of any bid or the effecting of any purchase on behalf of the
Underwriters to reduce a short position created in connection
with the Offering; (ii) penalty bids, which permit the
U-1
Representative to reclaim a selling concession otherwise accruing
from an Underwriter in connection with the Offering when
securities originally sold by an Underwriter are purchased in
syndicate covering transactions; and (iii) short sales, by which
the Underwriters sell securities which they do not own at the
time that the sale transaction becomes a binding obligation and
(iv) "passive" market making (see below). These activities may
stabilize, maintain or otherwise affect the market price of the
Notes and Common Stock which may be higher than the price that
might otherwise prevail in the open market.
As permitted by Rule 103 under the Securities Exchange Act of
1934, as amended, Underwriters or prospective Underwriters that
are market makers ("passive market makers") in the Common Stock
may make bids for or purchases of shares of Common Stock in The
Nasdaq National Market until such time, if any, when a
stabilizing bid for such securities has been made. Rule 103
generally provides that (1) a passive market maker's net daily
purchases of the Common Stock may not exceed 30% of its average
daily trading volume in such securities for the two full
consecutive calendar months (or any 60 consecutive days ending
within the 10 days) immediately preceding the filing date of the
registration statement of which this Prospectus forms a part, (2)
a passive market maker may not effect transactions or display
bids for the Common Stock at a price that exceeds the highest
independent bid for shares of Common Stock by persons who are not
passive market makers and (3) bids made by passive market makers
must be identified as such.
The Company has agreed to indemnify the several Underwriters
against certain liabilities under the Securities Act.
U-2
Map of Locations Across Globe
Demand for photomasks is driven both by semiconductor
design activity and the increase in complexity of
integrated circuits. As the complexity of integrated
circuits has increased, the number and complexity of
photomasks used in the manufacture of a single circuit
also has increased.
Chart of Number of Photomasks
for Device Generation
===========================================
No person has been authorized to give any
information or to make any representations
other than those contained in this Prospectus
and, if given or made, such information or
representations must not be relied upon as
having been authorized. This Prospectus does
not constitute an offer to sell or the
solicitation of an offer to buy any securities
other than the securities to which it relates
or an offer to sell or the solicitation of an
offer to buy such securities in any
circumstances in which such offer or solicitation
is unlawful. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any
circumstances, create any implication that there
has been no change in the affairs of the Company since
the date hereof or that the information contained
herein is correct as of any time subsequent to its date.
---------------------
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . 6
USE OF PROCEEDS . . . . . . . . . . . . . . . . 11
PRICE RANGE OF COMMON STOCK . . . . . . . . . . 11
DIVIDEND POLICY . . . . . . . . . . . . . . . . 12
CAPITALIZATION . . . . . . . . . . . . . . . . 12
SELECTED CONSOLIDATED FINANCIAL
DATA . . . . . . . . . . . . . . . . . . . . . 13
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION . . . . . . . . . . . 14
BUSINESS . . . . . . . . . . . . . . . . . . . 22
MANAGEMENT . . . . . . . . . . . . . . . . . . 29
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . 31
DESCRIPTION OF NOTES . . . . . . . . . . . . . 33
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . 44
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS . . . . . . . . . . . . . . . . 46
LEGAL MATTERS . . . . . . . . . . . . . . . . . 48
EXPERTS . . . . . . . . . . . . . . . . . . . . 48
AVAILABLE INFORMATION . . . . . . . . . . . . . 48
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE . . . . . . . . . . . . . . . . 48
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS . . . F-1
UNDERWRITING . . . . . . . . . . . . . . . . . . U-1
==================================================
=================================================
$75,000,000
[LOGO]
PHOTRONICS, INC.
. % CONVERTIBLE
SUBORDINATED NOTES
DUE MAY 15, 2004
------------
PROSPECTUS
------------
GOLDMAN, SACHS & CO.
ROBERTSON, STEPHENS &
COMPANY
SMITH BARNEY INC.
==============================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and
distribution of the securities being registered, other than
underwriting discounts and commissions, are estimated to be:
Securities and Exchange Commission
registration fee . . . . . . . . . . . . $26,136
NASD filing fee . . . . . . . . . . . . . . 9,125
NASD listing fee . . . . . . . . . . . . . 17,500
Rating agency fees . . . . . . . . . . . . 88,750
Legal fees and expenses . . . . . . . . . . 85,000
Accounting fees and expenses . . . . . . . 75,000
Blue Sky fees and expenses (including
fees of counsel) . . . . . . . . . . . . 5,000
Trustee's fees . . . . . . . . . . . . . . 15,000
Printing and engraving fees . . . . . . . . 40,000
Miscellaneous . . . . . . . . . . . . . . . 13,489
--------
Total . . . . . . . . . . . . . . $375,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Connecticut Stock Corporation Act (the "Act") provides
for indemnification of directors, officers, shareholders,
employees and agents of a corporation. Under the Act, a
corporation is required to indemnify a director against judgments
and other expenses of litigation when he is sued by reason of his
being a director in any proceeding brought, other than on behalf
of the corporation, if a director is successful on the merits in
defense, or acted in good faith and in a manner reasonably
believed to be in the best interests of the corporation, or in a
criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. In a proceeding brought on behalf of a
corporation (a derivative action), a director is entitled to be
indemnified by the corporation for reasonable expenses of
litigation, if the director is finally adjudged not to have
breached his duty to the corporation. In addition, a director is
entitled to indemnification for both derivative and
non-derivative actions, if a court determines, upon application,
that the director is fairly and reasonably entitled to be
indemnified.
Article Ninth of the Company's Certificate of Incorporation
limits directors' monetary liability for actions or omissions
made in good faith, which are later determined to be a breach of
their duty as directors of the Company. Article Ninth does not
eliminate or limit a director's liability for breaches of
fiduciary duty for actions or omissions which (i) involved a
knowing and culpable violation of law; (ii) enabled a director or
an associate (as defined in the Act) to receive an improper
personal economic gain; (iii) showed a lack of good faith and
conscious disregard for his duty as a director under
circumstances where the director was aware that his actions
created an unjustifiable risk of serious injury to the Company;
(iv) constituted a sustained and unexcused pattern of inattention
that amounted to an abdication of his duty; or (v) involved the
improper distribution of Company assets to its shareholders or an
improper loan to an officer, director or 5% shareholder. Article
Ninth also does not preclude suits for equitable relief, such as
an injunction, nor would it shield directors from liability for
violations of the federal securities laws. Moreover, Article
Ninth does not limit the liability of directors for any act or
omission that occurred prior to the date the Article became
effective and does not limit the potential liability of
officer-directors in their capacity as officers.
II-1
The Company has purchased directors' and officers' liability
insurance covering certain liabilities incurred by its directors
in connection with the performance of their duties.
The Underwriting Agreement filed herewith as Exhibit 1.1
contains provisions by which the Underwriters agree to indemnify
the Company, each person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the
1934 Act, each director of the Company, and each officer of the
Company who signs this Registration Statement with respect to
information furnished in writing by the Underwriters for use in
the Registration Statement.
ITEM 16. EXHIBITS.
1.1 - Proposed form of Underwriting Agreement.
4.1 - Form of Indenture.
4.2 - Form of Convertible Subordinated Note (included in
Exhibit 4.1).
4.3 - Form of Stock Certificate.(1)
5.1 - Opinion of Reid & Priest LLP.(2)
12.1 - Statement re Computation of Ratio of Earnings to
Fixed Charges.
23.1 - Consent of Deloitte & Touche LLP.
23.2 - Consent of Reid & Priest LLP (To be included in
Exhibit 5.1).
24.1 - Power of Attorney. (Included at page II-4).
25.1 - T-1 Statement of Eligibility and Qualification under
the Trust Indenture Act of 1939 of The Chase
Manhattan Bank.
------------------
(1) Filed as an exhibit to the Company's Registration Statement
on Form S-1, File Number 33-11694, which was declared
effective by the Commission on March 10, 1987, and
incorporated herein by reference.
(2) To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(b) The undersigned Registrant hereby undertakes:
(1) That for purposes of determining any liability
under the Securities Act of 1933, the information omitted
from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared
effective.
II-2
(2) That for the purpose of determining any liability
under the Securities Act of 1933, each post-effective
amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the Town of Brookfield, State of Connecticut, on the 25th day of
April 1997.
PHOTRONICS, INC.
By /s/ Constantine S. Macricostas
--------------------------------
Constantine S. Macricostas,
Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose
signature appears below constitutes and appoints Michael J.
Yomazzo and Jeffrey P. Moonan, and each of them, his true and
lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, to act, without the other, for
him and in his name, place and stead, in any and all capacities,
to sign any or all amendments (including post-effective
amendments) to this Registration Statement, including any
subsequent registration statement for the same offering that may
be filed under Rule 462(b), and to file the same, with all
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of
them, their substitute or substitutes may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Constantine S. Macriostas Chairman of the April 25, 1997
----------------------------- Board of
Constantine S. Macriostas Directors,
Chief Executive
Officer and
Director
(Principal
Executive
Officer)
/s/ Michael J. Yomazzo President and April 25, 1997
----------------------------- Director
Michael J. Yomazzo
II-4
/s/ Robert J. Bollo Vice April 25, 1997
------------------------------- President/Finance
Robert J. Bollo Chief Financial
Officer
(Principal
Financial and
Accounting
Officer)
/s/ Walter M. Fiederowicz Director April 25, 1997
---------------------------
Walter M. Fiederowicz
/s/ Joseph A. Fiorita, Jr. Director April 25, 1997
----------------------------
Joseph A. Fiorita, Jr.
/s/ Yukio Tagawa Director April 25, 1997
-------------------------
Yukio Tagawa
II-5
INDEX TO EXHIBITS
Exhibit
Number Exhibit
------- -------
1.1 - Proposed form of Underwriting Agreement
4.1 - Form of Indenture
4.2 - Form of Convertible Subordinated Note
(included in Exhibit 4.1)
4.3 - Form of Stock Certificate.(1)
5.1 - Opinion of Reid & Priest LLP.(2)
12.1 - Statement Regarding Computation of
Ratio of Earnings to Fixed Charges
23.1 - Consent of Deloitte & Touche LLP
23.2 - Consent of Reid & Priest LLP
(To be included in Exhibit 5.1)
24.1 - Power of Attorney (Included at page II-4)
25.1 - T-1 Statement of Eligibility
and Qualification under the Trust
Indenture Act of 1939 of
The Chase Manhattan Bank
---------------------------
(1) Filed as an exhibit to the Company's Registration Statement
on Form S-1, File Number 33-11694, which was declared
effective by the Commission on March 10, 1987, and
incorporated herein by reference.
(2) To be filed by amendment.
Exhibit 1.1
PHOTRONICS, INC
$75,000,000
__% Convertible Subordinated Notes due 2004
Underwriting Agreement
----------------------
May __, 1997
Goldman, Sachs & Co.,
Robertson, Stephens & Company LLC,
Smith Barney Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Photronics, Inc., a Connecticut corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to
issue and sell to the Underwriters named in Schedule I hereto
(the "Underwriters") an aggregate of $75,000,000 principal amount
of the Convertible Subordinated Notes, convertible into Common
Stock, par value $.01 per share ("Stock") of the Company,
specified above (the "Firm Securities") and, at the election of
the Underwriters, up to an aggregate of $11,250,000 additional
aggregate principal amount (the "Optional Securities") (the Firm
Securities and the Optional Securities which the Underwriters
elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Securities").
1. The Company represents and warrants to, and agrees
with, each of the Underwriters that:
(a) A registration statement on Form S-3 (File No.
333-....) (the "Initial Registration Statement") in respect
of the Securities and shares of the Stock issuable upon
conversion thereof has been filed with the Securities and
Exchange Commission (the "Commission"); the Initial
Registration Statement (including any pre-effective
amendment) and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding
exhibits thereto but including all documents incorporated by
reference in the prospectus contained therein, to you for
each of the other Underwriters, have been declared effective
by the Commission in such form; other than a registration
statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended
(the "Act"), which became effective upon filing, no other
document with respect to the Initial Registration Statement,
or document incorporated by reference therein has heretofore
been filed with the Commission; and no stop order suspending
the effectiveness of the Initial Registration Statement, any
post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no
proceeding for that purpose has been initiated or threatened
by the Commission (any preliminary prospectus included in
the Initial Registration Statement or filed with the
Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Act, is hereinafter
called a "Preliminary Prospectus"; the various parts of the
Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits
thereto but excluding Form_T-1 and including (i) the
information contained in the form of final prospectus filed
with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 5(a) hereof and deemed by virtue of
Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective
and (ii) the documents incorporated by reference in the
prospectus contained in the registration statement at the
time such part of the registration statement became
effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective,
each as amended at the time such part of the registration
statement became effective, are hereinafter collectively
called the "Registration Statement"; such final prospectus,
in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Prospectus"; any reference
herein to any Preliminary Prospectus or the Prospectus shall
be deemed to refer to and include the documents incorporated
by reference therein pursuant to Item 12 of Form S-3 under
the Act, as of the date of such Preliminary Prospectus or
Prospectus, as the case may be; any reference to any
amendment or supplement to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include any
documents filed after the date of such Preliminary
Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be; and any
reference to any amendment to the Registration Statement
shall be deemed to refer to and include any annual report of
the Company filed pursuant to Section 13(a) or 15(d) of the
Exchange Act after the effective date of the Initial
Registration Statement that is incorporated by reference in
the Registration Statement;
(b) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission,
and each Preliminary Prospectus, at the time of filing
thereof, conformed in all material respects to the
requirements of the Act and the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act"), and the rules and
regulations of the Commission thereunder, and did not
contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein, in the light of
the circumstances under which they were made, not
misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(c) The documents incorporated by reference in the
Prospectus, when they became effective or were filed with
the Commission, as the case may be, conformed in all
material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations
of the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and
any further documents so filed and incorporated by reference
in the Prospectus or any further amendment or supplement
thereto, when such documents become effective or are filed
with the Commission, as the case may be, will conform in all
material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations
of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in
conformity with information furnished in writing to the
Company by an Underwriter through Goldman, Sachs & Co.
expressly for use therein;
(d) The Registration Statement conforms, and the
Prospectus and any further amendments or supplements to the
Registration Statement or the Prospectus will conform, in
all material respects to the requirements of the Act and the
Trust Indenture Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the
applicable effective date as to the Registration Statement
and any amendment thereto and as of the applicable filing
date as to the Prospectus and any amendment or supplement
thereto, 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 not misleading;
provided, however, that this representation and warranty
shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished
in writing to the Company by an Underwriter through Goldman,
Sachs & Co. expressly for use therein;
(e) Neither the Company nor any of its subsidiaries
has sustained since the date of the latest audited financial
statements included or incorporated by reference in the
Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the
Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital
stock other items or long-term debt of the Company or any of
its subsidiaries or any material adverse change, or any
development that is reasonably likely to result in a
material adverse change, in or affecting the general
affairs, management, financial position, shareholders'
equity or results of operations of the Company and its
subsidiaries taken as a whole, otherwise than as set forth
or contemplated in the Prospectus;
(f) The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good
and marketable title to all personal property owned by them,
in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or
such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries;
and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the
Company and its subsidiaries;
(g) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the state of Connecticut, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification,
or is subject to no material liability or disability by
reason of the failure to be so qualified in any such
jurisdiction; and each subsidiary of the Company has been
duly incorporated and is validly existing as a corporation
in good standing under the laws of its jurisdiction of
incorporation;
(h) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued shares of
capital stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable;
the shares of Stock initially issuable upon conversion of
the Securities have been duly and validly authorized and
reserved for issuance and, when issued and delivered in
accordance with the provisions of the Securities and the
Indenture referred to below, will be duly and validly
issued, fully paid and non-assessable and will conform in
all material respects to the description of the Stock
contained in the Prospectus; and all of the issued shares of
capital stock of each subsidiary of the Company have been
duly and validly authorized and issued, are fully paid and
non-assessable and (except for directors' qualifying shares
and except as described or incorporated by reference in the
Prospectus) are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or
claims;
(i) The Securities have been duly authorized and, when
issued and delivered pursuant to this Agreement, will have
been duly executed, authenticated, issued and delivered and
will constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the indenture
to be dated as of March __, 1997 (the "Indenture") between
the Company and The Chase Manhattan Bank, as Trustee (the
"Trustee"), under which they are to be issued, which will be
substantially in the form filed as an exhibit to the
Registration Statement; the Indenture has been duly
authorized and duly qualified under the Trust Indenture Act
and, when executed and delivered by the Company and the
Trustee, will constitute a valid and legally binding
instrument, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general
equity principles; and the Securities and the Indenture will
conform in all material respects to the descriptions thereof
in the Prospectus;
(j) The issue and sale of the Securities and the
compliance by the Company with all of the provisions of the
Securities, the Indenture and this Agreement and the
consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound or
to which any of the property or assets of the Company or any
of its subsidiaries is subject, nor will such action result
in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or
any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or
qualification of or with any such court or governmental
agency or body is required for the issue and sale of the
Securities or the consummation by the Company of the
transactions contemplated by this Agreement or the
Indenture, except the registration under the Act of the
Securities and the shares of Stock issuable upon conversion
thereof, the qualification of the Indenture under the Trust
Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the
purchase and distribution of the Securities and the Stock by
the Underwriters;
(k) Neither the Company nor any of its subsidiaries is
in violation of its Certificate of Incorporation or By-laws
or in default in the performance or observance of any
material obligation, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by
which it or any of its properties may be bound;
(l) The statements set forth in the Prospectus under
the caption "Description of Notes" and "Description of
Capital Stock", insofar as they purport to constitute a
summary of the terms of the Securities and the Stock, under
the caption "Certain Federal Income Tax Considerations", and
under the caption "Underwriting", insofar as they purport to
describe the provisions of the laws and documents referred
to therein, are accurate, complete and fair in all material
respects;
(m) Other than as set forth in the Prospectus, there
are no legal or governmental proceedings pending to which
the Company or any of its subsidiaries is a party or of
which any property of the Company or any of its subsidiaries
is the subject which, if determined adversely to the Company
or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the current or
future financial position, shareholders' equity or results
of operations of the Company and its subsidiaries taken as a
whole; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(n) The Company is not and, after giving effect to the
offering and sale of the Securities, will not be an
"investment company" or an entity "controlled" by an
"investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the Investment
Company Act");
(o) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or
affiliate located in Cuba within the meaning of Section
517.075, Florida Statutes;
(p) To the Company's knowledge, Deloitte & Touche LLP,
who have certified certain financial statements of the
Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and
regulations of the Commission thereunder; and
(q) The Company and its subsidiaries (i) are in
compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the
protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all
permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except
where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such
permits, licenses or approvals would not, individually or in
the aggregate, have a material adverse effect on the current
or future consolidated financial position, shareholders'
equity or results of operations of the Company and its
subsidiaries taken as a whole.
2. Subject to the terms and conditions herein set forth,
(a) the Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at a purchase price of
.....% of the principal amount thereof, plus accrued interest, if
any, from May __, 1997 to the Time of Delivery hereunder, the
principal amount of Securities set forth opposite the name of
such Underwriter in Schedule I hereto, and (b) in the event and
to the extent that the Underwriters shall exercise the election
to purchase Optional Securities as provided below, the Company
agrees to issue and sell to each of the Underwriters, and each of
the Underwriters agrees, severally and not jointly, to purchase
from the Company, at the same purchase price set forth in clause
(a) of this Section 2, that portion of the aggregate principal
amount of the Optional Securities as to which such election shall
have been exercised (to be adjusted by you so as to eliminate
fractions of $1,000,) determined by multiplying such aggregate
principal amount of Optional Securities by a fraction, the
numerator of which is the maximum aggregate principal amount of
Optional Securities which such Underwriter is entitled to
purchase as set forth opposite the name of such Underwriter in
Schedule I hereto and the denominator of which is the maximum
aggregate principal amount of Optional Securities which all of
the Underwriters are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right
to purchase at their election up to ........ aggregate principal
amount of Optional Securities, at the purchase price set forth in
clause (a) of the first paragraph of this Section 2, for the sole
purpose of covering overallotments in the sale of Firm
Securities. Any such election to purchase Optional Securities
may be exercised by written notice from you to the Company, given
within a period of 30 calendar days after the date of this
Agreement, setting forth the aggregate principal amount of
Optional Securities to be purchased and the date on which such
Optional Securities are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined
in Section (4) hereof) or, unless you and the Company otherwise
agree in writing, earlier than two or later than ten business
days after the date of such notice.
3. Upon the authorization by you of the release of the
Firm Securities, the several Underwriters propose to offer the
Firm Securities for sale upon the terms and conditions set forth
in the Prospectus.
4. (a) The Securities to be purchased by each Underwriter
hereunder will be represented by one or more definitive global
Securities in book-entry form which will be deposited by or on
behalf of the Company with The Depository Trust Company ("DTC")
or its designated custodian. The Company will deliver the
Securities to Goldman, Sachs & Co., for the account of each
Underwriter, against payment by or on behalf of such Underwriter
of the purchase price therefor by wire transfer to the order of
the Company in Federal (same day) funds, by causing DTC to credit
the Securities to the account of Goldman, Sachs & Co. at DTC.
The Company will cause the certificates representing the
Securities to be made available to Goldman, Sachs & Co. for
checking at least twenty-four hours prior to the Time of Delivery
(as defined below) at the office of DTC or its designated
custodian (the "Designated Office"). The time and date of such
delivery and payment shall be, with respect to the Firm
Securities, 9:30 a.m., New York City time, on May __, 1997 or
such other time and date as Goldman, Sachs & Co. and the Company
may agree upon in writing, and, with respect to the Optional
Securities, 9:30 a.m., New York City time, on the date specified
by Goldman, Sachs & Co. in the written notice given by Goldman,
Sachs & Co. of the Underwriters' election to purchase such
Optional Securities, or such other time and date as Goldman,
Sachs & Co. and the Company may agree upon in writing. Such time
and date for delivery of the Firm Securities is herein called the
"First Time of Delivery", such time and date for delivery of the
Optional Securities, if not the First Time of Delivery, is herein
called the "Second Time of Delivery", and each such time and date
for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at the Time of
Delivery by or on behalf of the parties hereto pursuant to
Section 7 hereof, including the cross-receipt for the Securities
and any additional documents requested by the Underwriters
pursuant to Section 7(k) hereof, will be delivered at the offices
of Ropes & Gray, 885 Third Avenue, New York, New York 10022-4834
(the "Closing Location"), and the Securities will be delivered at
the Designated Office, all at the Time of Delivery. A meeting
will be held at the Closing Location at ......... p.m., New York
City time, on the New York Business Day next preceding the Time
of Delivery, at which meeting the final drafts of the documents
to be delivered pursuant to the preceding sentence will be
available for review by the parties hereto. For the purposes of
this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on
which banking institutions in New York City are generally
authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by
you and to file such Prospectus pursuant to Rule 424(b) under the
Act not later than the Commission's close of business on the
second business day following the execution and delivery of this
Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or
Prospectus prior to such Time of Delivery which shall be
disapproved by you promptly after reasonable notice thereof; to
advise you, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been
filed or becomes effective or any supplement to the Prospectus or
any amended Prospectus has been filed and to furnish you with
copies thereof; to file promptly all reports and any definitive
proxy or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of the
Prospectus and for so long as the delivery of a prospectus is
required in connection with the offering or sale of the
Securities; to advise you, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or
of any order preventing or suspending the use of any Preliminary
Prospectus or prospectus, of the suspension of the qualification
of the Securities or the shares of Stock issuable upon conversion
of the Securities for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any
stop order or of any order preventing or suspending the use of
any Preliminary Prospectus or prospectus or suspending any such
qualification, to promptly use its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as
you may reasonably request to qualify the Securities and the
shares of Stock issuable upon conversion of the Securities for
offering and sale under the securities laws of such jurisdictions
as you may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Securities, provided that in connection
therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of
process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the
New York Business Day next succeeding the date of this Agreement
and from time to time, furnish the Underwriters with copies of
the Prospectus in New York City in such quantities as you may
reasonably request, and, if the delivery of a prospectus is
required at any time prior to the expiration of nine months after
the time of issue of the Prospectus in connection with the
offering or sale of the Securities and the shares of Stock
issuable upon conversion of the Securities and if at such time
any event shall have occurred as a result of which the Prospectus
as then amended or supplemented would include an untrue statement
of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the
circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall
be necessary during such same period to amend or supplement the
Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply
with the Act, the Exchange Act or the Trust Indenture Act, to
notify you and upon your request to file such document and to
prepare and furnish without charge to each Underwriter and to any
dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to
the Prospectus which will correct such statement or omission or
effect such compliance; and in case any Underwriter is required
to deliver a prospectus in connection with sales of any of the
Securities and the shares of Stock issuable upon conversion of
the Securities at any time nine months or more after the time of
issue of the Prospectus, upon your request but at the expense of
such Underwriter, to prepare and deliver to such Underwriter as
many copies as you may request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders
as soon as practicable, but in any event not later than eighteen
months after the effective date of the Registration Statement (as
defined in Rule 158(c)), an earnings statement of the Company and
its subsidiaries (which need not be audited) complying with
Section 11(a) of the Act and the rules and regulations of the
Commission thereunder (including, at the option of the Company,
Rule 158);
(e) During the period beginning from the date hereof
and continuing to and including the date 90 days after the date
of the Prospectus, not to offer, sell, contract to sell or
otherwise dispose of, except as provided hereunder any securities
of the Company that are substantially similar to the Securities
or the Stock, including but not limited to any securities that
are convertible into or exchangeable for, or that represent the
right to receive, Stock or any such substantially similar
securities (other than (i) pursuant to employee stock option
plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the
date of this Agreement and (ii) as consideration for acquisitions
of businesses, property or assets, provided that the recipient of
any shares of Stock so issued shall agree in writing for the
benefit of the Underwriters that such shares shall remain subject
to the restrictions of this Section 5(e), which agreement the
Company agrees not to waive), without your prior written
consent;
(f) To furnish to the holders of the Securities, at
the time the Company distributes such reports to its
shareholders, an annual report (including a balance sheet and
statements of income, shareholders' equity and cash flows of the
Company and its consolidated subsidiaries certified by
independent public accountants) and (beginning with the fiscal
quarter ending after the effective date of the Registration
Statement) consolidated summary financial information in
reasonable detail of the Company and its subsidiaries for each of
the first three quarters of each period year;
(g) During a period of five years from the effective
date of the Registration Statement, upon your written request, to
furnish to you copies of all reports or other communications
(financial or other) furnished to shareholders, and to deliver to
you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or
any national securities exchange on which the Securities or any
class of securities of the Company is listed; and (ii) such
additional information concerning the business and financial
condition of the Company as you may from time to time reasonably
request (such financial statements to be on a consolidated basis
to the extent the accounts of the Company and its subsidiaries
are consolidated in reports furnished to its shareholders
generally or to the Commission);
(h) To use the net proceeds received by it from the
sale of the Securities pursuant to this Agreement in the manner
specified in the Prospectus under the caption "Use of Proceeds";
(i) To reserve and keep available at all times, free
of preemptive rights, shares of Stock for the purpose of enabling
the Company to satisfy any obligations to issue shares of its
Stock upon conversion of the Securities;
(j) To use its best efforts to list, subject to notice
of issuance, the shares of Stock issuable upon conversion of the
Securities on the Nasdaq National Market ("NASDAQ"); and
(k) If the Company elects to rely upon Rule 462(b),
the Company shall file a Rule 462(b) Registration Statement with
the Commission in compliance with Rule 462(b) by 10:00 p.m.,
Washington, D.C. time, on the date of this Agreement, and the
Company shall at the time of filing either pay to the Commission
the filing fee for the Rule 462(b) Registration Statement or give
irrevocable instructions for the payment of such fee pursuant to
Rule 111(b) under the Act.
6. The Company covenants and agrees with the several
Underwriters that the Company will pay or cause to be paid the
following: (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the
registration of the Securities and the shares of Stock issuable
upon conversion of the Securities under the Act and all other
expenses in connection with the preparation, printing and filing
of the Registration Statement, any Preliminary Prospectus and the
Prospectus and amendments and supplements thereto and the mailing
and delivering of copies thereof to the Underwriters and dealers;
(ii) the cost of printing or producing any Agreement among
Underwriters, this Agreement, the Indenture, the Blue Sky and
Legal Investment Memoranda, closing documents (including any
compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Securities;
(iii) all expenses in connection with the qualification of the
Securities and the shares of Stock issuable upon conversion of
the Securities for offering and sale under state securities laws
as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Underwriters in connection with
such qualification and in connection with the Blue Sky and legal
investment surveys not to exceed $5,000; (iv) any fees charged by
securities rating services for rating the Securities; (v) the
filing fees incident to any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale
of the Securities; (vi) the cost of preparing the Securities;
(vii) the fees and expenses of the Trustee and any agent of the
Trustee and the fees and disbursements of counsel for the Trustee
in connection with the Indenture and the Securities; and (viii)
all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 8 and 11 hereof,
the Underwriters will pay all of their own costs and expenses,
including the fees of their counsel, transfer taxes on resale of
any of the Securities by them, and any advertising expenses
connected with any offers they may make.
7. The obligations of the Underwriters hereunder shall be
subject, in their discretion, to the condition that all
representations and warranties and other statements of the
Company herein are, at and as of such Time of Delivery, true and
correct, the condition that the Company shall have performed all
of its obligations hereunder theretofore to be performed, and the
following additional conditions:
(a) The Prospectus shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time
period prescribed for such filing by the rules and regulations
under the Act and in accordance with Section 5(a) hereof; if the
Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have become effective by 10:00 p.m.,
Washington D.C. time, on the date of this Agreement; no stop
order suspending the effectiveness of the Registration Statement
or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your
reasonable satisfaction;
(b) Ropes & Gray, counsel for the Underwriters, shall
have furnished to you such opinion or opinions (a draft of each
such opinion is attached as Annex II(a) hereto), dated such Time
of Delivery, with respect to the matters covered in paragraphs
(i), (ii) (with respect to the shares of Stock initially issuable
upon conversion of the Securities), (vi), (vii), (viii), (xi) and
(xvi) of subsection (c) below as well as such other related
matters as you may reasonably request, and such counsel shall
have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) Reid & Priest LLP, counsel for the Company, shall
have furnished to you their written opinion (a draft of such
opinion is attached as Annex II(b) hereto) dated such Time of
Delivery, in form and substance satisfactory to you, to the
effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the state of Connecticut, with corporate power and
authority to own its properties and conduct its business as
described in the Prospectus;
(ii) The Company has an authorized capitalization
as set forth in the Prospectus, and all of the issued shares
of capital stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable;
and the shares of Stock initially issuable upon conversion
of the Securities have been duly and validly authorized and
reserved for issuance and, when issued and delivered in
accordance with the provisions of the Securities and the
Indenture, will be duly and validly issued and fully paid
and non-assessable, and will conform in all material
respects to the description of the Stock contained in the
Prospectus;
(iii) The Company has been duly qualified as a
foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction
in which, to such counsel's knowledge, it owns or leases
properties or conducts any business so as to require such
qualification except where the failure to so qualify would
not have a material adverse effect on the Company and its
subsidiaries taken as a whole (such counsel being entitled
to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact
upon certificates of officers of the Company, provided that
such counsel shall state that they believe that both you and
they are justified in relying upon such opinions and
certificates);
(iv) Each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of
incorporation; and all of the issued shares of capital stock
of each such subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable,
and (except for directors' qualifying shares) are owned
directly or indirectly by the Company, to such counsel's
knowledge, free and clear of all liens, encumbrances,
equities or claims (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of local
counsel and in respect of matters of fact upon certificates
of officers of the Company or its subsidiaries, provided
that such counsel shall state that they believe that both
you and they are justified in relying upon such opinions and
certificates);
(v) To such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of
the Company or any of its subsidiaries is the subject which,
if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a
material adverse effect on the current or future
consolidated financial position, shareholders' equity or
results of operations of the Company and its subsidiaries
taken as a whole; and, to such counsel's knowledge, no such
proceedings are threatened by governmental authorities or by
others;
(vi) This Agreement has been duly authorized,
executed and delivered by the Company;
(vii) The Securities have been duly
authorized, executed, issued and delivered and, when duly
authenticated in accordance with the terms of the Indenture,
constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the Indenture;
and the Securities and the Indenture conform in all material
respects to the descriptions thereof in the Prospectus;
(viii) The Indenture has been duly authorized,
executed and delivered by the Company and constitutes a
valid and legally binding instrument of the Company,
enforceable in accordance with its terms (provided that such
counsel need not express any opinion regarding the enforce-
ability or effect of Section 515 of the Indenture), subject,
as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles
including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible
unavailability of specific performance or injunctive relief,
regardless of whether such validity and binding effect are
considered in a proceeding in equity or at law; and the
Indenture has been duly qualified under the Trust Indenture
Act;
(ix) The issue and sale of the Securities being
issued at such Time of Delivery and the compliance by the
Company with all of the provisions of the Securities, the
Indenture and this Agreement and the consummation of the
transactions herein and therein contemplated will not
conflict with or result in a material breach or violation of
any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such
counsel to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is
bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject nor will such
actions result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or
any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their
properties;
(x) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and
sale of the Securities being issued at such Time of Delivery
or the consummation by the Company of the transactions
contemplated by this Agreement or the Indenture, except such
as have been obtained under the Act and the Trust Indenture
Act, such as may be required under the Act in connection
with the shares of Stock issuable upon conversion of the
Securities and such consents, approvals, authorizations,
registrations or qualifications as may be required under
state securities or Blue Sky laws (as to which such counsel
need not express any opinion) in connection with the
purchase and distribution of the Securities by the
Underwriters;
(xi) The statements set forth in the Prospectus
under the caption "Description of Notes" and "Description of
Capital Stock", insofar as they purport to constitute a
summary of the terms of the Securities and the Stock, under
the caption "Certain Federal Income Tax Considerations", and
under the caption "Underwriting", insofar as they purport to
describe the provisions of the laws and documents referred
to therein, are accurate, complete and fair in all material
respects;
(xii) The Company is not an "investment
company" or an entity "controlled" by an "investment
company", as such terms are defined in the Investment
Company Act;
(xiii) The documents incorporated by reference
in the Prospectus or any further amendment or supplement
thereto made by the Company prior to the Time of Delivery
(other than the financial statements and related schedules
therein, as to which such counsel need express no opinion),
when they became effective or were filed with the
Commission, as the case may be, complied as to form in all
material respects with the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations
of the Commission thereunder; and no fact came to such
counsel's attention which causes them to believe that any of
such documents, when such documents became effective or were
so filed, as the case may be, contained, in the case of a
registration statement which became effective under the Act,
an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading, or, in the case
of other documents which were filed with the Commission
under the Act or the Exchange Act , an untrue statement of a
material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made when such documents
were so filed, not misleading; and
(xiv) The Registration Statement and the
Prospectus and any further amendments and supplements
thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules
therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the
requirements of the Act and the Trust Indenture Act and the
rules and regulations thereunder; although they do not
assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration
Statement or the Prospectus, except for those referred to in
the opinion in subsection (xi) of this Section 7(c), no fact
came to such counsel's attention which causes them to
believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the
Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading or that, as of
its date, the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of such
Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto
made by the Company prior to such Time of Delivery (other
than the financial statements and related schedules therein,
as to which such counsel need express no opinion) contains
an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in
the light of the circumstances under which they were made,
not misleading; and they do not know of any amendment to the
Registration Statement required to be filed or of any
contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or
required to be incorporated by reference into the Prospectus
or required to be described in the Registration Statement or
the Prospectus which are not filed or incorporated by
reference or described as required;
(d) On the date of the Prospectus at a time prior to
the execution of this Agreement, at 9:30 a.m., New York City
time, on the effective date of any post-effective amendment to
the Registration Statement filed subsequent to the date of this
Agreement and also at each Time of Delivery, Deloitte & Touche
LLP shall have furnished to you a letter or letters, dated the
respective dates of delivery thereof, in form and substance
satisfactory to you, to the effect set forth in Annex I hereto
(the executed copy of the letter delivered prior to the execution
of this Agreement is attached as Annex I(a) hereto and a draft of
the form of letter to be delivered on the effective date of any
post-effective amendment to the Registration Statement and as of
each Time of Delivery is attached as Annex I(b) hereto);
(e) (i) Neither the Company nor any of its
subsidiaries shall have sustained since the date of the latest
audited financial statements included or incorporated by
reference in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether
or not covered by insurance, or from any labor dispute or court
or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus, and (ii) since the
respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries
or any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such
case described in Clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering
or the delivery of the Securities being issued at such Time of
Delivery on the terms and in the manner contemplated in the
Prospectus;
(f) On or after the date hereof (i) no downgrading
shall have occurred in the rating accorded the Company's debt
securities by any "nationally recognized statistical rating
organization", as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its
rating of any of the Company's debt securities;
(g) On or after the date hereof there shall not have
occurred any of the following: (i) a suspension or material
limitation in trading in securities generally on the New York
Stock Exchange or on NASDAQ; (ii) a suspension or material
limitation in trading in the Company's securities on NASDAQ;
(iii) a general moratorium on commercial banking activities
declared by either Federal or New York State authorities; or (iv)
the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national
emergency or war, if the effect of any such event specified in
this Clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering
or the delivery of the Securities being issued at such Time of
Delivery on the terms and in the manner contemplated in the
Prospectus;
(h) The shares of Stock issuable upon conversion of
the Securities shall have been duly listed, subject to notice of
issuance, on NASDAQ;
(i) The Company shall have obtained and delivered to
you an agreement in writing prior to the date hereof from each
executive officer, director and each beneficial owner of shares
of Common Stock as you shall have requested that such person will
not during the period beginning from the date hereof and
continuing to and including the date 90 days after the date of
the Prospectus offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder, any securities of the Company
that are substantially similar to the Securities or the Stock,
including but not limited to any securities that are convertible
into or exchangeable for, or that represent the right to receive,
Stock or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the
conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement), without your
prior written consent;
(j) The Company shall have complied with the
provisions of Section 5(c) hereof with respect to the furnishing
of prospectuses on the New York Business Day next succeeding the
date of this Agreement; and
(k) The Company shall have furnished or caused to be
furnished to you at such Time of Delivery certificates of
officers of the Company satisfactory to you as to the accuracy of
the representations and warranties of the Company herein at and
as of such Time of Delivery, as to the performance by the Company
of all of its obligations hereunder to be performed at or prior
to such Time of Delivery, as to the matters set forth in
subsections (a) and (e) of this Section and as to such other
matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending
any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by any
Underwriter through Goldman, Sachs & Co. expressly for use
therein.
(b) Each Underwriter will indemnify and hold harmless
the Company against any losses, claims, damages or liabilities to
which the Company may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use
therein; and will reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party
under subsection (a) or (b) above of notice of the commencement
of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party
under such subsection, notify the indemnifying party in writing
of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to
such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection
with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect
of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise
or judgment (i) includes an unconditional release of the
indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on
behalf of any indemnified party.
(d) If the indemnification provided for in this
Section 8 is unavailable to or insufficient to hold harmless an
indemnified party under subsection (a) or (b) above in respect of
any losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other from
the offering of the Securities. If, however, the allocation
provided by the immediately preceding sentence is not permitted
by applicable law or if the indemnified party failed to give the
notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses)
received by the Company bear to the total underwriting discounts
and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on
the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company
and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed
to include 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 subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by
which the total price at which the Securities underwritten by it
and distributed to the public were offered to the public exceeds
the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute
are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section
8 shall be in addition to any liability which the Company may
otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any
liability which the respective Underwriters may otherwise have
and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any,
who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation
to purchase the Securities which it has agreed to purchase
hereunder, you may in your discretion arrange for you or another
party or other parties to purchase such Securities on the terms
contained herein at a Time of Delivery. If within thirty-six
hours after such default by any Underwriter you do not arrange
for the purchase of such Securities, then the Company shall be
entitled to a further period of thirty-six hours within which to
procure another party or other parties reasonably satisfactory to
you to purchase such Securities on such terms. In the event
that, within the respective prescribed periods, you notify the
Company that you have so arranged for the purchase of such
Securities, or the Company notifies you that it has so arranged
for the purchase of such Securities, you or the Company shall
have the right to postpone such Time of Delivery for a period of
not more than seven days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and
the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in
this Agreement shall include any person substituted under this
Section with like effect as if such person had originally been a
party to this Agreement with respect to such Securities.
(b) If, after giving effect to any arrangements for
the purchase of the Securities of a defaulting Underwriter or
Underwriters by you and the Company as provided in subsection (a)
above, the aggregate principal amount of such Securities which
remains unpurchased does not exceed one-eleventh of the aggregate
principal amount of all the Securities to be purchased at such
Time of Delivery, then the Company shall have the right to
require each non-defaulting Underwriter to purchase the principal
amount of Securities which such Underwriter agreed to purchase
hereunder at such Time of Delivery and, in addition, to require
each non-defaulting Underwriter to purchase its pro rata share
(based on the principal amount of Securities which such
Underwriter agreed to purchase hereunder) of the Securities of
such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve
a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for
the purchase of the Securities of a defaulting Underwriter or
Underwriters by you and the Company as provided in subsection (a)
above, the aggregate principal amount of Securities which remains
unpurchased exceeds one-eleventh of the aggregate principal
amount of all the Securities to be purchased at such Time of
Delivery, or if the Company shall not exercise the right
described in subsection (b) above to require non-defaulting
Underwriters to purchase Securities of a defaulting Underwriter
or Underwriters, then this Agreement (or, with respect to the
Second Time of Delivery, the obligation of the Underwriters to
purchase and of the Company to sell the Optional Securities)
shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the
expenses to be borne by the Company and the Underwriters as
provided in Section 6 hereof and the indemnity and contribution
agreements in Section 8 hereof; but nothing herein shall relieve
a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements,
representations, warranties and other statements of the Company
and the several Underwriters, as set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person
of any Underwriter, or the Company, or any officer or director or
controlling person of the Company, and shall survive delivery of
and payment for the Securities.
11. If this Agreement shall be terminated pursuant to
Section 9 hereof, the Company shall not then be under any
liability to any Underwriter except as provided in Sections 6 and
8 hereof; but, if for any other reason, any Securities are not
delivered by or on behalf of the Company as provided herein, the
Company will reimburse the Underwriters through you for all
out-of-pocket expenses approved in writing by you, including fees
and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and
delivery of the Securities, but the Company shall then be under
no further liability to any Underwriter except as provided in
Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of
each of the Underwriters, and the parties hereto shall be
entitled to act and rely upon any statement, request, notice or
agreement on behalf of any Underwriter made or given by you
jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements
hereunder shall be in writing, and if to the Underwriters shall
be delivered or sent by mail, telex or facsimile transmission to
you as the representatives in care of Goldman, Sachs & Co., 85
Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by
mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter
pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its
address set forth in its Underwriters' Questionnaire, or telex
constituting such Questionnaire, which address will be supplied
to the Company by you upon request. Any such statements,
requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely
to the benefit of, the Underwriters, the Company and, to the
extent provided in Sections 8 and 10 hereof, the officers and
directors of the Company and each person who controls the Company
or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement.
No purchaser of any of the Securities from any Underwriter shall
be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement. As
used herein, the term "business day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
16. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which
shall be deemed to be an original, but all such respective
counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding,
please sign and return to us counterparts hereof, and upon the
acceptance hereof by you, on behalf of each of the Underwriters,
this letter and such acceptance hereof shall constitute a binding
agreement between each of the Underwriters and the Company. It
is understood that your acceptance of this letter on behalf of
each of the Underwriters is pursuant to the authority set forth
in a form of Agreement among Underwriters, the form of which
shall be submitted to the Company for examination upon request,
but without warranty on your part as to the authority of the
signers thereof.
Very truly yours,
Photronics, Inc.
By:_____________________________
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Robertson, Stephens & Company LLC
Smith Barney Inc.
By:_________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
SCHEDULE 1
Principal
Amount of
Optional
Principal Securities
Amount of to be Purchased
Firm Securities if Maximum
to be Option
Underwriter Purchased Exercised
------------ --------- -----------
Goldman, Sachs & Co . . $ $
Robertson, Stephens &
Company LLC . . . . . .
Smith Barney Inc. . . .
----------- -----------
Total . . . . $75,000,000 $11,250,000
=========== ===========
ANNEX I
Pursuant to Section 7(d) of the Underwriting Agreement, the
accountants shall furnish letters to the Underwriters to the
effect that:
(i) They are independent certified public accountants
with respect to the Company and its subsidiaries within the
meaning of the Act and the applicable published rules and
regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if
applicable, prospective financial statements and/or pro
forma financial information) examined by them and included
or incorporated by reference in the Registration Statement
or the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or
the Exchange Act, as applicable, and the related published
rules and regulations thereunder; and, if applicable, they
have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of
the consolidated interim financial statements, selected
financial data, pro forma financial information, prospective
financial statements and/or condensed financial statements
derived from audited financial statements of the Company for
the periods specified in such letter, as indicated in their
reports thereon, copies of which have been furnished to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with
standards established by the American Institute of Certified
Public Accountants of the unaudited condensed consolidated
statement of income, consolidated balance sheets and
consolidated statements of cash flows included in the
Prospectus and/or included in the Company's quarterly report
on Form 10-Q incorporated by reference into the Prospectus
as indicated in their reports thereon copies of which have
been separately furnished to the Representatives; and on the
basis of specified procedures including inquiries of
officials of the Company who have responsibility for
financial and accounting matters regarding whether the
unaudited condensed consolidated financial statements
referred to in paragraph (vi)(A)(i) below comply as to form
in the related in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and
the related published rules and regulations, nothing came to
their attention that caused them to believe that the
unaudited condensed consolidated financial statements do not
comply as to form in all material respects with the
applicable accounting requirements of the Act and the
Exchange Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with
respect to the consolidated results of operations and
financial position of the Company for the five most recent
fiscal years included in the Prospectus and included or
incorporated by reference in Item 6 of the Company's Annual
Report on Form 10-K for the most recent fiscal year agrees
with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements
for such five fiscal years which were included or
incorporated by reference in the Company's Annual Reports on
Form 10-K for such fiscal years;
(v) They have compared the information in the
Prospectus under selected captions with the disclosure
requirements of Regulation S-K and on the basis of limited
procedures specified in such letter nothing came to their
attention as a result of the foregoing procedures that
caused them to believe that this information does not
conform in all material respects with the disclosure
requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not
constituting an examination in accordance with generally
accepted auditing standards, consisting of a reading of the
unaudited financial statements and other information
referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial
statements included or incorporated by reference in the
Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting
matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention
that caused them to believe that:
(A) (i) the unaudited condensed consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the
Prospectus and/or included or incorporated by reference
in the Company's Quarterly Reports on Form 10-Q
incorporated by reference in the Prospectus do not
comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act
and the related published rules and regulations, or
(ii) any material modifications should be made to the
unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements
of cash flows included or incorporated by reference in
the Company's Quarterly Reports on Form 10-Q
incorporated by reference in the Prospectus, for them
to be in conformity with generally accepted accounting
principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not
agree with the corresponding items in the unaudited
consolidated financial statements from which such data
and items were derived, and any such unaudited data and
items were not determined on a basis substantially
consistent with the basis for the corresponding amounts
in the audited consolidated financial statements
included or incorporated by reference in the Company's
Annual Report on Form 10-K for the most recent fiscal
year;
(C) the unaudited financial statements which were
not included in the Prospectus but from which were
derived the unaudited condensed financial statements
referred to in Clause (A) and any unaudited income
statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not
determined on a basis substantially consistent with the
basis for the audited financial statements included or
incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated
condensed financial statements included or incorporated
by reference in the Prospectus do not comply as to form
in all material respects with the applicable accounting
requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments
have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five
days prior to the date of such letter, there have been
any changes in the consolidated capital stock (other
than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs
of performance shares and upon conversions of
convertible securities, in each case which were
outstanding on the date of the latest balance sheet
included or incorporated by reference in the
Prospectus) or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or
any decreases in consolidated net current assets or
stockholders' equity or other items specified by the
Representatives, or any increases in any items
specified by the Representatives, in each case as
compared with amounts shown in the latest balance sheet
included or incorporated by reference in the
Prospectus, except in each case for changes, increases
or decreases which the Prospectus discloses have
occurred or may occur or which are described in such
letter; and
(F) for the period from the date of the latest
financial statements included or incorporated by
reference in the Prospectus to the specified date
referred to in Clause (E) there were any decreases in
consolidated net revenues or operating profit or the
total or per share amounts of consolidated net income
or other items specified by the Representatives, or any
increases in any items specified by the
Representatives, in each case as compared with the
comparable period of the preceding year and with any
other period of corresponding length specified by the
Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred
or may occur or which are described in such letter; and
(vii) In addition to the examination referred to in
their report(s) included or incorporated by reference in the
Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in
paragraphs (iii) and (vi) above, they have carried out
certain specified procedures, not constituting an
examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and
financial information specified by the Representatives which
are derived from the general accounting records of the
Company and its subsidiaries, which appear in the Prospectus
(excluding documents incorporated by reference) or in Part
II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives or in documents
incorporated by reference in the Prospectus specified by the
Representatives, and have compared certain of such amounts,
percentages and financial information with the accounting
records of the Company and its subsidiaries and have found
them to be in agreement.
Exhibit 4.1
PHOTRONICS, INC.
TO
THE CHASE MANHATTAN BANK
TRUSTEE
INDENTURE
Dated as of May o, 1997
$75,000,000
o% CONVERTIBLE SUBORDINATED NOTES
DUE MAY 15, 2004
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO
SECTIONS 310 THROUGH 318 OF THE
TRUST INDENTURE ACT OF 1939:
Trust Indenture
Act Section Indenture Section
---------------- ----------------
Section 310(a)(1) . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . 608
610
Section 311(a) . . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . . . . . 613
Section 312(a) . . . . . . . . . . . . . . . . 701
702(a)
(b) . . . . . . . . . . . . . . . . . . . 702(b)
(c) 702(c)
Section 313(a) . . . . . . . . . . . . . . . . 703(a)
. . . . . . . . . . . . . . . . . . . . . (b)703(a)
(c) . . . . . . . . . . . . . . . . . . . 703(a)
(d) . . . . . . . . . . . . . . . . . . . 703(b)
Section 314(a) . . . . . . . . . . . . . . . . 704
(b) . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . . 601
603(a)
(b) . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . . . . . 514
Section 316(a)(1)(A) . . . . . . . . . . . . . 512
(a)(1)(B) . . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . 104
Section 317(a)(1) . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . . . . . . 107
_______________________
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
TABLE OF CONTENTS
------------------
Page
----
ARTICLE ONE-Definitions and Other Provisions of General
Application . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 101. Definitions. . . . . . . . . . . . . . . . 1
SECTION 102. Compliance Certificates and Opinions. . . 9
SECTION 103. Form of Documents Delivered to Trustee. . 10
SECTION 104. Acts of Holders; Record Dates. . . . . . . 10
SECTION 105. Notices, Etc., to Trustee and Company. . . 12
SECTION 106. Notice to Holders; Waiver. . . . . . . . . 13
SECTION 107. Conflict with Trust Indenture Act. . . . . 13
SECTION 108. Effect of Headings and Table of
Contents. . . . . . . . . . . . . . . . 13
SECTION 109. Successors and Assigns. . . . . . . . . . 13
SECTION 110. Separability Clause. . . . . . . . . . . . 13
SECTION 111. Benefits of Indenture. . . . . . . . . . . 14
SECTION 112. Governing Law. . . . . . . . . . . . . . . 14
SECTION 113. Legal Holidays. . . . . . . . . . . . . . 14
SECTION 114. Incorporators, Stockholders, Officers and
Directors of the Company Exempt from
Individual Liability. . . . . . . . . . 14
ARTICLE TWO-Security Forms . . . . . . . . . . . . . . . . . 15
SECTION 201. Forms Generally. . . . . . . . . . . . . . 15
SECTION 202. Form of Face of Security. . . . . . . . . 15
SECTION 203. Form of Reverse of Security. . . . . . . . 18
SECTION 204. Form of Trustee's Certificate of
Authentication. . . . . . . . . . . . . 24
SECTION 205. Form of Conversion Notice. . . . . . . . . 24
ARTICLE THREE-The Securities . . . . . . . . . . . . . . . . 25
SECTION 301. Title and Terms. . . . . . . . . . . . . . 25
SECTION 302. Denominations. . . . . . . . . . . . . . . 26
SECTION 303. Execution, Authentication, Delivery and
Dating. . . . . . . . . . . . . . . . . 26
SECTION 304. Temporary Securities. . . . . . . . . . . 26
SECTION 305. Registration, Registration of Transfer
and Exchange. . . . . . . . . . . . . . 27
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities. . . . . . . . . . . . . . . 29
SECTION 307. Payment of Interest; Interest Rights
Preserved. . . . . . . . . . . . . . . . 30
SECTION 308. Persons Deemed Owners. . . . . . . . . . . 31
SECTION 309. Cancellation. . . . . . . . . . . . . . . 31
SECTION 310. Computation of Interest. . . . . . . . . . 31
ARTICLE FOUR-Satisfaction and Discharge . . . . . . . . . . . 31
SECTION 401. Satisfaction and Discharge of
Indenture. . . . . . . . . . . . . . . . 32
SECTION 402. Application of Trust Money. . . . . . . . 33
ARTICLE FIVE-Remedies . . . . . . . . . . . . . . . . . . . . 33
SECTION 501. Events of Default. . . . . . . . . . . . . 33
SECTION 502. Acceleration of Maturity; Rescission and
Annulment. . . . . . . . . . . . . . . . 35
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee. . . . . . . . . 35
SECTION 504. Trustee May File Proofs of Claim. . . . . 36
SECTION 505. Trustee May Enforce Claims Without
Possession of Securities. . . . . . . . 37
SECTION 506. Application of Money Collected. . . . . . 37
SECTION 507. Limitation on Suits. . . . . . . . . . . . 38
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest and to
Convert. . . . . . . . . . . . . . . . . 38
SECTION 509. Restoration of Rights and Remedies. . . . 39
SECTION 510. Rights and Remedies Cumulative. . . . . . 39
SECTION 511. Delay or Omission Not Waiver. . . . . . . 39
SECTION 512. Control by Holders. . . . . . . . . . . . 39
SECTION 513. Waiver of Past Defaults. . . . . . . . . . 40
SECTION 514. Undertaking for Costs. . . . . . . . . . . 40
SECTION 515. Waiver of Stay or Extension Laws. . . . . 40
ARTICLE SIX-The Trustee . . . . . . . . . . . . . . . . . . . 41
SECTION 601. Certain Duties and Responsibilities. . . . 41
SECTION 602. Notice of Defaults. . . . . . . . . . . . 42
SECTION 603. Certain Rights of Trustee. . . . . . . . . 42
SECTION 604. Not Responsible for Recitals or Issuance
of Securities. . . . . . . . . . . . . . 43
SECTION 605. May Hold Securities. . . . . . . . . . . . 43
SECTION 606. Money Held in Trust. . . . . . . . . . . . 43
SECTION 607. Compensation and Reimbursement. . . . . . 44
SECTION 608. Disqualification; Conflicting Interests. . 44
SECTION 609. Corporate Trustee Required; Eligibility. . 45
SECTION 610. Resignation and Removal; Appointment of
Successor. . . . . . . . . . . . . . . . 45
SECTION 611. Acceptance of Appointment by Successor. . 46
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business. . . . . . . . . 47
SECTION 613. Preferential Collection of Claims Against
Company. . . . . . . . . . . . . . . . . 47
SECTION 614. Appointment of Authenticating Agent. . . . 47
ARTICLE SEVEN-Holders' Lists and Reports by Trustee and
Company . . . . . . . . . . . . . . . . . . . 49
SECTION 701. Company to Furnish Trustee Names and
Addresses of Holders. . . . . . . . . . 49
SECTION 702. Preservation of Information;
Communications to Holders. . . . . . . . 49
SECTION 703. Reports by Trustee. . . . . . . . . . . . 49
SECTION 704. Reports by Company. . . . . . . . . . . . 50
ARTICLE EIGHT-Consolidation, Merger, Conveyance,
Transfer or Lease . . . . . . . . . . . . . . 50
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms. . . . . . . . . . . . . . 50
SECTION 802. Successor Substituted. . . . . . . . . . . 51
ARTICLE NINE-Supplemental Indentures . . . . . . . . . . . . 51
SECTION 901. Supplemental Indentures Without Consent
of Holders. . . . . . . . . . . . . . . 51
SECTION 902. Supplemental Indentures with Consent of
Holders. . . . . . . . . . . . . . . . . 52
SECTION 903. Execution of Supplemental Indentures. . . 53
SECTION 904. Effect of Supplemental Indentures. . . . . 53
SECTION 905. Conformity with Trust Indenture Act. . . . 53
SECTION 906. Reference in Securities to Supplemental
Indentures. . . . . . . . . . . . . . . 53
SECTION 907. Notice of Supplemental Indentures. . . . . 54
ARTICLE TEN-Covenants . . . . . . . . . . . . . . . . . . . . 54
SECTION 1001. Payment of Principal, Premium and
Interest. . . . . . . . . . . . . . . . 54
SECTION 1002. Maintenance of Office or Agency. . . . . . 54
SECTION 1003. Money for Security Payments to Be
Held in Trust. . . . . . . . . . . . . . 55
SECTION 1004. Statement by Officers as to Default. . . . 56
SECTION 1005. Existence. . . . . . . . . . . . . . . . . 56
SECTION 1006. Maintenance of Properties. . . . . . . . . 57
SECTION 1007. Payment of Taxes and Other Claims. . . . . 57
SECTION 1008. Book-Entry System. . . . . . . . . . . . . 57
SECTION 1009. Waiver of Certain Covenants. . . . . . . . 57
ARTICLE ELEVEN-Redemption of Securities . . . . . . . . . . . 58
SECTION 1101. Right of Redemption. . . . . . . . . . . . 58
SECTION 1102. Applicability of Article. . . . . . . . . 58
SECTION 1103. Election to Redeem; Notice to Trustee. . . 58
SECTION 1104. Selection by Trustee of Securities to Be
Redeemed. . . . . . . . . . . . . . . . 58
SECTION 1105. Notice of Redemption. . . . . . . . . . . 59
SECTION 1106. Deposit of Redemption Price. . . . . . . . 59
SECTION 1107. Securities Payable on Redemption Date. . . 60
SECTION 1108. Securities Redeemed in Part. . . . . . . . 60
ARTICLE TWELVE-Subordination of Securities . . . . . . . . . 61
SECTION 1201. Securities Subordinate to Senior
Indebtedness. . . . . . . . . . . . . . 61
SECTION 1202. Payment Over of Proceeds Upon
Dissolution, Etc. . . . . . . . . . . . 61
SECTION 1203. Prior Payment to Senior Indebtedness Upon
Acceleration of Securities. . . . . . . 62
SECTION 1204. No Payment When Senior Indebtedness in
Default. . . . . . . . . . . . . . . . . 63
SECTION 1205. Payment Permitted If No Default. . . . . . 63
SECTION 1206. Subrogation to Rights of Holders of
Senior Indebtedness. . . . . . . . . . . 63
SECTION 1207. Provisions Solely to Define Relative
Rights. . . . . . . . . . . . . . . . . 64
SECTION 1208. Trustee to Effectuate Subordination. . . . 64
SECTION 1209. No Waiver of Subordination Provisions. . . 64
SECTION 1210. Notice to Trustee. . . . . . . . . . . . . 65
SECTION 1211. Reliance on Judicial Order or Certificate
of Liquidating Agent. . . . . . . . . . 66
SECTION 1212. Trustee Not Fiduciary for Holders of
Senior Indebtedness. . . . . . . . . . . 66
SECTION 1213. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of
Trustee's Rights. . . . . . . . . . . . . 66
SECTION 1214. Article Applicable to Paying Agents. . . . 66
SECTION 1215. Certain Conversions Deemed Payment. . . . 67
ARTICLE THIRTEEN-Conversion of Securities . . . . . . . . . . 67
SECTION 1301. Conversion Privilege and Conversion
Rate. . . . . . . . . . . . . . . . . . 67
SECTION 1302. Exercise of Conversion Privilege. . . . . 68
SECTION 1303. Fractions of Shares. . . . . . . . . . . . 69
SECTION 1304. Adjustment of Conversion Rate. . . . . . . 69
SECTION 1305. Notice of Adjustments of Conversion
Rate. . . . . . . . . . . . . . . . . . 74
SECTION 1306. Notice of Certain Corporate Action. . . . 74
SECTION 1307. Company to Reserve Common Stock. . . . . . 75
SECTION 1308. Taxes on Conversions. . . . . . . . . . . 75
SECTION 1309. Covenant as to Common Stock. . . . . . . . 76
SECTION 1310. Cancellation of Converted Securities. . . 76
SECTION 1311. Provision in Case of Consolidation,
Merger or Sale of Assets. . . . . . . . 76
SECTION 1312. Responsibility of Trustee for Conversion
Provisions. . . . . . . . . . . . . . . 77
ARTICLE FOURTEEN-Repurchase of Securities at the Option of the
Holder Upon a Change of Control . . . . . 78
SECTION 1401. Right to Require Repurchase. . . . . . . . 78
SECTION 1402. Conditions to the Company's Election to
Pay the Repurchase Price in Common
Stock. . . . . . . . . . . . . . . . . . 78
SECTION 1403. Notices; Method of Exercising Repurchase
Right, Etc. . . . . . . . . . . . . . . 79
SECTION 1404. Certain Definitions. . . . . . . . . . . . 82
SECTION 1405. Consolidation, Merger, Etc. . . . . . . . 83
--------------------
Note: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
INDENTURE, dated as of May o, 1997, between Photronics,
Inc., a corporation duly organized and existing under the laws of
the State of Connecticut (herein called the "Company"), having
its principal office at 1061 East Indiantown Road, Jupiter,
Florida 33477, and The Chase Manhattan Bank, a New York banking
corporation, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
its o% Convertible Subordinated Notes Due May 15, 2004 (herein
called the "Securities") of substantially the tenor and amount
hereinafter set forth, and to provide therefor the Company has
duly authorized the execution and delivery of this Indenture.
All things necessary to make the Securities, when executed
by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company, and
to make this Indenture a valid agreement of the Company, in
accordance with their and its terms, have been done. Further,
all things necessary to duly authorize the issuance of the Common
Stock of the Company issuable upon the conversion of the
Securities, and to duly reserve for issuance the number of shares
of Common Stock issuable upon such conversion, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually agreed, for
the equal and proportionate benefit of all Holders of the
Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article One have the meanings
assigned to them in this Article and include the plural as well
as the singular;
(2) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein,
have the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally
accepted accounting principles, and, except as otherwise herein
expressly provided, the term "generally accepted accounting
principles" with respect to any computation required or permitted
hereunder shall mean such accounting principles as are generally
accepted at the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person.
For the purposes of this definition, "control", when used with
respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agent Member" means any member of, or participant in, the
Depositary.
"Applicable Procedures" means, with respect to any transfer
or transaction involving a Global Security or beneficial interest
therein, the rules and procedures of the Depositary for such
Global Security to the extent applicable to such transaction and
as in effect from time to time.
"Authenticating Agent" means any Person authorized by the
Trustee pursuant to Section 614 to act on behalf of the Trustee
to authenticate Securities.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a resolution duly adopted by the
Board of Directors, a copy of which, certified by the Secretary
or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors and to be in full force and
effect on the date of such certification, shall have been
delivered to the Trustee.
"Business Day" means, with respect to any Place of Payment,
Place of Conversion or any other place, as the case may be, each
Monday, Tuesday, Wednesday, Thursday and Friday, other than any
such day on which banking institutions in The City of New York,
New York or in such particular place are authorized or obligated
by law or executive order to close.
"Change of Control" has the meaning specified in Section
1404(b).
"Closing Price Per Share" means, with respect to the Common
Stock of the Company, for any day, the reported last sales price
regular way per share or, in case no such reported sale takes
place on such day, the average of the reported closing bid and
asked prices regular way, in either case (i) on the New York
Stock Exchange or, if the Common Stock is not listed or admitted
to trading on the New York Stock Exchange, on the principal
national securities exchange on which the Common Stock is listed
or admitted to trading, or (ii) if not listed on or admitted to
trading on any national securities exchange then on the Nasdaq
National Market or (iii) if the Common Stock is not listed or
admitted to trading on any national securities exchange or on
such National Market, the average of the closing bid and asked
prices in the over-the-counter market as furnished by any New
York Stock Exchange member firm selected from time to time by the
Company for that purpose.
"Code" has the meaning specified in Section 201.
"Commission" means the Securities and Exchange Commission,
as from time to time constituted, created under the Exchange Act,
or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body performing
such duties at such time.
"Common Stock" means the Common Stock, par value $0.01 per
share, of the Company authorized at the date of this instrument
as originally executed. Subject to the provisions of Section
1311, shares issuable on conversion or repurchase of Securities
shall include only shares of Common Stock or shares of any class
or classes of common stock resulting from any reclassification or
reclassifications thereof; provided, however, that if at any time
there shall be more than one such resulting class, the shares so
issuable on conversion of Securities shall include shares of all
such classes, and 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.
"Common stock" includes any stock of any class of capital
stock 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 issuer thereof and
which is not subject to redemption by the issuer thereof.
"Company" means the Person named as the "Company" in the
first paragraph of this instrument until a successor Person shall
have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Company" shall mean such successor
Person.
"Company Notice" has the meaning specified in Section 1403.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman of the
Board, its Vice Chairman of the Board, its President or a Vice
President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the
Trustee.
"Constituent Person" has the meaning specified in Section
1311.
"Conversion Agent" means any Person authorized by the
Company to convert Securities in accordance with Article
Thirteen. The Company has initially appointed the Trustee as its
Conversion Agent.
"Conversion Price" has the meaning specified in Section
1404.
"Conversion Rate" has the meaning specified in Section 1301.
"Corporate Trust Office" means the principal office of the
Trustee at which at any particular time its corporate trust
business shall be administered, which office on the date hereof
is located at Global Trust Services, 450 West 33rd Street, 15th
Floor, New York, NY 10001-2697.
"Corporation" means a corporation, association, company,
joint-stock company or business trust.
"Custodian" means The Chase Manhattan Bank, as custodian
with respect to any Global Security, or any successor entity
thereto.
"Defaulted Interest" has the meaning specified in Section
307.
"Depositary" means, with respect to any Global Securities, a
clearing agency that is registered as such under the Exchange Act
and is designated by the Company to act as Depositary for such
Global Securities (or any successor securities clearing agency so
registered).
"DTC" means The Depository Trust Company, a New York
corporation.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the United States Securities Exchange
Act of 1934 (or any successor statute), as amended from time to
time.
"Expiration Date" has the meaning specified in Section 104.
"Expiration Time" has the meaning specified in Section 1304.
"Global Security" means a Security that is registered in the
Security Register in the name of a Depositary or a nominee
thereof.
"Holder" means a Person in whose name a Security is
registered in the Security Register.
"Indenture" means this instrument as originally executed or
as it may from time to time be supplemented or amended by one or
more indentures supplemental hereto entered into pursuant to the
applicable provisions hereof, including, for all purposes of this
instrument and any such supplemental indenture, the provisions of
the Trust Indenture Act that are deemed to be a part of and
govern this instrument and any such supplemental indenture,
respectively.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Maturity", when used with respect to any Security, means
the date on which the principal of such Security becomes due and
payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption,
submission for repurchase or otherwise.
"Non-electing Share" has the meaning specified in Section
1311.
"Notice of Default" means a written notice of the kind
specified in Section 501(4) or 501(5).
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, a Vice Chairman of the Board, the
President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary, of the
Company, and delivered to the Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 1004
shall be the principal executive, financial or accounting officer
of the Company.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, and who shall be reasonably
acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means,
as of the date of determination, all Securities theretofore
authenticated and delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities for payment or redemption of which money in the
necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in
trust or set aside and segregated in trust by the Company
(if the Company shall act as its own Paying Agent) for the
Holders of such Securities; provided that, if such
Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(iii) Securities which have been paid pursuant to Section 306
or in exchange for or in lieu of which other Securities have
been authenticated and delivered pursuant to this Indenture,
other than any such Securities in respect of which there
shall have been presented to the Trustee proof satisfactory
to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the
Company; and
(iv) Securities converted into Common Stock pursuant to Article
Thirteen.
provided, however, that in determining whether the Holders of the
requisite principal amount of Outstanding Securities have given
any request, demand, authorization, direction, notice, consent or
waiver hereunder, Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or of
such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only
Securities which a Responsible Officer of the Trustee actually
knows to be so owned shall be so disregarded. Securities so owned
which have been pledged in good faith may be regarded as Outstanding
if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to
pay the principal of (and premium, if any) or interest on any
Securities on behalf of the Company.
"Person" means any individual, corporation, limited
liability company, partnership, joint venture, joint stock
company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Place of Conversion" has the meaning specified in Section
1302.
"Place of Payment" means any city in which a Paying Agent is
located.
"Predecessor Security" of any particular Security means
every previous Security evidencing all or a portion of the same
debt as that evidenced by such particular Security; and, for the
purposes of this definition, any Security authenticated and
delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
"Record Date" means any Regular Record Date or Special
Record Date.
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Security
to be redeemed, means the price at which it is to be redeemed
pursuant to this Indenture.
"Reference Date" has the meaning specified in Section 1304.
"Regular Record Date" for the interest payable on any
Interest Payment Date means the May 1 or November 1 (whether or
not a Business Day), as the case may be, next preceding such
Interest Payment Date.
"Repurchase Date" has the meaning specified in Section 1401.
"Repurchase Price" has the meaning specified in Section
1401.
"Responsible Officer", when used with respect to the
Trustee, means any vice president, assistant vice president,
assistant treasurer, assistant secretary or any other officer
of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and having
direct responsibility for the administration of this Indenture,
and also, with respect to a particular matter, any other other
officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"Securities" has the meaning ascribed to it in the first
paragraph under the caption "Recitals of the Company".
"Securities Act" means the United States Securities Act of
1933 (or any successor statute), as amended from time to time.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Senior Indebtedness" means the principal of (and premium,
if any) and interest (including all interest accruing subsequent
to the commencement of any bankruptcy or similar proceeding,
whether or not a claim for post-petition interest is allowable as
a claim in any such proceeding) on, and all fees and other
amounts payable in connection with, the following, whether
absolute or contingent, secured or unsecured, due or to become
due, outstanding on the date of the Indenture or thereafter
created, incurred or assumed: (a) indebtedness of the Company to
banks, insurance companies and other financial institutions
evidenced by credit or loan agreements, notes or other written
obligations, (b) all other indebtedness of the Company (including
indebtedness of others guaranteed by the Company) other than the
Securities, whether outstanding on the date of this Indenture or
thereafter created, incurred or assumed, which is (i) for money
borrowed or (ii) evidenced by a note, security, debenture, bond
or similar instrument, (c) obligations of the Company as lessee
under leases required to be capitalized on the balance sheet of
the lessee under generally accepted accounting principles, (d)
obligations of the Company under interest rate and currency
swaps, caps, floors, collars or similar agreements or
arrangements intended to protect the Company against fluctuations
in interest or currency exchange rates, (e) all obligations of
the Company issued or assumed as the deferred purchase price of
property, (f) all obligations of the Company for the
reimbursement of letters of credit to the extent such obligations
are Senior Indebtedness under clauses (a) through (c) above, and
(g) renewals, extensions, modifications, restatements and
refundings of, or any indebtedness or obligation issued in
exchange for, any such indebtedness or obligation described in
clauses (a) through (f) of this paragraph; provided, however,
that Senior Indebtedness shall not include any such indebtedness
or obligation if the terms of such indebtedness or obligation (or
the terms of the instrument under which, or pursuant to which, it
is issued) expressly provide that such indebtedness or obligation
is not superior in right of payment to the Securities, or
expressly provide that such indebtedness or obligation is pari
passu with or junior to the Securities.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section
307.
"Stated Maturity", when used with respect to any Security or
any installment of interest thereon, means the date specified in
such Security as the fixed date on which the principal of such
Security or such installment of interest is due and payable.
"Subsidiary" means a Corporation more than 50% of the
outstanding voting stock of which is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries,
or by the Company and one or more other Subsidiaries. For the
purposes of this definition, "voting stock" means stock which
ordinarily has voting power for the election of directors,
managers or other voting members of the governing body of such
Corporation, whether at all times or only so long as no senior
class of stock has such voting power by reason of any
contingency.
"Trading Days" means (i) if the Common Stock is listed or
admitted for trading on any national securities exchange, days on
which such national securities exchange is open for business or
(ii) if the Common Stock is not listed or admitted for trading on
any national securities exchange, days on which trades may be
made on the Nasdaq National Market or any similar system of
automated dissemination of quotations of securities prices on
which the Common Stock is quoted or (iii) if the Common Stock is
not listed or admitted for trading on any national securities
exchange or the Nasdaq National Market or quoted on any other
system of automated dissemination of quotation of securities
prices, days on which the Common Stock is traded regular way in
the over-the-counter market and for which a closing bid and a
closing asked price for the Common Stock are available.
"Trustee" means the Person named as the "Trustee" in the
first paragraph of this instrument until a successor Trustee
shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter "Trustee" shall mean such
successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939
as in force at the date as of which this instrument was executed;
provided, however, that in the event the Trust Indenture Act of
1939 is amended after such date, "Trust Indenture Act" means, to
the extent required by any such amendment, the Trust Indenture
Act of 1939 as so amended.
"Underwriting Agreement" has the meaning specified in
Section 301.
"Vice President", when used with respect to the Company or
the Trustee, means any vice president, whether or not designated
by a number or a word or words added before or after the title
"vice president".
SECTION 102. Compliance Certificates and Opinions
------------------------------------
Upon any application or request by the Company to the
Trustee to take any action under any provision of this Indenture,
the Company shall furnish to the Trustee an Officers' Certificate
stating that all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied
with and an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or
request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating
to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate (including certificates provided pursuant
to Section 1004) or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall
include, without limitation:
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition and
the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with;
and
(4) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been complied
with.
SECTION 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be
so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such
Person may certify or give an opinion as to such matters in one
or several documents.
Any certificate or opinion of an officer of the Company may
be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless
such officer knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with
respect to the matters upon which such certificate or opinion is
based are erroneous.
Any such certificate or opinion of counsel may be based,
insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the
Company stating that the information with respect to such factual
matters is in the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that
the certificate or opinion or representations with respect to
such matters are
erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but
need not, be consolidated and form one instrument.
SECTION 104. Acts of Holders; Record Dates.
-----------------------------
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be
given or taken by Holders may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such
Holders in person or by an agent duly appointed in writing; and,
except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are
delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such
instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to
Section 601) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a
witness of such execution or by a certificate of a notary public
or other officer authorized by law to take acknowledgments of
deeds, certifying that the individual signing such instrument or
writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also
constitute sufficient proof of his authority. The fact and date
of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in
any other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the
Security Register.
(d) The Company may set any day as a record date for the
purpose of determining the Holders entitled to give, make or take
any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Indenture to
be given, made or taken by Holders, provided that the Company may
not set a record date for, and the provisions of this Section
104(d) shall not apply with respect to, the giving or making of
any notice, declaration, request or direction referred to in
Section 104(e). If any record date is set pursuant to this
Section 104(d), the Holders on such record date, and only such
Holders, shall be entitled to take the relevant action, whether
or not such Holders remain Holders after such record date;
provided that no such action shall be effective hereunder unless
taken on or prior to the applicable Expiration Date by Holders of
the requisite principal amount of Securities on such record date.
Nothing in this Section 104(d) shall be construed to prevent the
Company from setting a new record date for any action for which a
record date has previously been set pursuant to this Section
104(d) (whereupon the record date previously set shall
automatically and with no action by any Person be canceled and of
no effect). Nothing in this Section 104(d) shall be construed to
render ineffective any action taken by Holders of the
requisite principal amount of Securities on the date such action
is taken without the setting of a record date. Promptly after
any record date is set pursuant to this Section 104(d), the
Company, at its own expense, shall cause notice of such record
date, the proposed action by Holders and the applicable
Expiration Date to be given to the Trustee in writing and to each
Holder in the manner set forth in Section 106.
(e) The Trustee may set any day as a record date for the
purpose of determining the Holders entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 502, (iii) any request to
institute proceedings referred to in Section 507(2), or (iv) any
direction referred to in Section 512. If any record
date is set pursuant to this Section 104(e), the Holders on such
record date, and only such Holders, shall be entitled to join in
such notice, declaration, request or direction, whether or not
such Holders remain Holders after such record date; provided that
no such action shall be effective hereunder unless taken on or
prior to the applicable Expiration Date by Holders of the
requisite principal amount of Securities on such record date.
Nothing in this Section 104(e) shall be construed to prevent the
Trustee from setting a new record date for any action for which a
record date has previously been set pursuant to this Section
104(e) (whereupon the record date previously set shall
automatically and with no action by any Person be canceled and of
no effect). Nothing in this Section 104(e) shall be construed to
render ineffective any action taken by Holders of the requisite
principal amount of Securities on the date such action is taken
without the setting of a record date. Promptly after any record
date is set pursuant to this Section 104(e), the Trustee, at the
Company's expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to
be given to the Company in writing and to each Holder of
Securities in the manner set forth in Section 106.
(f) With respect to any record date set pursuant to
Sections 104(d) or 104(e), the party hereto which sets such
record date may designate any day as the "Expiration Date" and
from time to time may change the Expiration Date to any earlier
or later day; provided that no such change shall be effective
unless notice of the proposed new Expiration Date is given to the
other party hereto in writing, and to each Holder in the manner
set forth in Section 106, on or prior to the existing Expiration
Date. If an Expiration Date is not designated with respect to
any record date set pursuant to Sections 104(d) or 104(e), the
party hereto which set such record date shall be deemed to have
initially designated the 180th day after such record date as the
Expiration Date with respect thereto, subject to its right to
change the Expiration Date as provided in this Section 104(f).
Notwithstanding the foregoing, no Expiration Date shall be later
than the 180th day after the applicable record date.
(g) Without limiting the foregoing, a Holder entitled
hereunder to take any action hereunder with regard to any
particular Security may do so with regard to all or any part of
the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such principal
amount.
(h) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall
bind every future Holder of the same Security and the Holder of
every Security issued upon the registration of transfer thereof
or in exchange therefor or in lieu thereof in respect of anything
done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such
action is made upon such Security.
SECTION 105. Notices, Etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or
permitted by this Indenture to be made upon, given or furnished
to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished
or filed in writing to or with the Trustee at its Corporate Trust
Office, Attention: Global Trust Services, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company to the attention of the Secretary at the
address of the Company's principal office specified in the first
paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise
herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than
the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event,
and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service
or by reason of any other cause it shall be impracticable to give
such notice by mail, then such notification as shall be made with
the approval of the Trustee shall constitute a sufficient
notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with
a provision of the Trust Indenture Act that is required under
such Act to be a part of and govern this Indenture, the latter
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 to be
excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the
construction hereof.
SECTION 109. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the
Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 110. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto
and their successors hereunder, the holders of Senior
Indebtedness and the Holders of Securities, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
-------------
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 113. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption
Date, Repurchase Date or Stated Maturity of any Security or the
last date on which a Holder has the right to convert his
Securities shall not be a Business Day at a Place of Payment or
Place of Conversion, as the case may be, then (notwithstanding
any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) or
delivery for conversion of such Security need not be made on such
date, but may be made on the next succeeding Business Day at such
Place of Payment or Place of Conversion, as the case may be, with
the same force and effect as if made on the Interest Payment
Date, Redemption Date, Repurchase Date or at the Stated Maturity,
or on such last day for conversion, provided that no interest
shall accrue for the period from and after such Interest Payment
Date, Redemption Date, Repurchase Date, Stated Maturity or the
last day for conversion, as the case may be, so long as payment
is made on such succeeding Business Day.
SECTION 114. Incorporators, Stockholders, Officers and Directors
---------------------------------------------------
of the Company Exempt from Individual Liability.
-----------------------------------------------
No recourse under or upon any obligation, covenant or
agreement in this Indenture or any indenture supplemental hereto
or in any of the Securities, or for any claim based thereon or
otherwise in respect thereof, shall be had against any
incorporator, stockholder, officer or director, as such, past,
present or future, of the Company or of any successor Person,
either directly or through the Company or any successor Person,
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 this Indenture and
the obligations issued hereunder are solely corporate
obligations, and that no such personal liability whatever shall
attach to, or is or shall be incurred by, the incorporators,
stockholders, officers or directors, as such, of the Company or
of any successor Person, or any of them, because of the creation
of the indebtedness hereby authorized, or under or by reason of
the obligations, covenants or agreements contained in this
Indenture or in any of the Securities or implied therefrom; and
that any and all such personal liability of every name and
nature, either at common law or in equity or by constitution or
statute, of, and any and all such rights and claims against,
every such incorporator, stockholder, officer or director, as
such, because of the creation of the indebtedness hereby authorized,
or under or by reason of the obligations, covenants or agreements
contained in this Indenture or in any of the Securities or implied
therefrom are hereby expressly waived and released as a condition
of, and as a consideration for, the execution of this Indenture and
the issue of such Securities.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
---------------
The Securities and the Trustee's certificates of
authentication shall be in substantially the forms set forth in
this Article, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted
by this Indenture, and may have such letters, numbers or other
marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any
securities exchange, the Internal Revenue Code of 1986, as
amended, and the regulations thereunder (the "Code"), or as may,
consistently herewith, be determined by the officers executing
such Securities, as evidenced by their execution of the
Securities.
Any definitive Securities 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
automated quotation system or securities exchange on which the
Securities may be quoted or listed, as the case may be, all as
determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
SECTION 202. Form of Face of Security.
------------------------
[The following legend shall appear on the face of each Global
Security:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF THE DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE
TREATED BY THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS
OWNER AND HOLDER OF THIS SECURITY FOR ALL PURPOSES.]
[The following legend shall appear on the face of each Global
Security for which The Depository Trust Company is to be the
Depositary:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS 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.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
REGISTERED SECURITIES IN DEFINITIVE REGISTERED FORM IN THE
LIMITED CIRCUMSTANCES REFERRED TO IN THE INDENTURE, THIS GLOBAL
SECURITY 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.]
PHOTRONICS, INC.
o% CONVERTIBLE SUBORDINATED NOTE
DUE MAY 15, 2004
No. __________ $________
Photronics, Inc., a corporation duly organized and existing
under the laws of Connecticut (herein called the "Company", which
term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to
pay to __________________, or registered assigns, the principal
sum of _____________________ Dollars ($_______) on May 15,
2004, and to pay interest thereon from _________ __, 1997 or from
the most recent Interest Payment Date to which interest has been
paid or duly provided for, semi-annually in arrears on May 15
and November 15 in each year (each, an "Interest Payment Date"),
commencing November 15, 1997 at the rate of o% per annum, until
the principal hereof is due, and at the rate of o% per annum on
any overdue principal and premium, if any, and, to the extent
permitted by law, on any overdue interest. The interest so
payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid
to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest, which shall be the
May 1 or November 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date. 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 Regular Record Date and may either
be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
a Special Record Date for the payment of such Defaulted Interest
to be fixed by the Company, notice whereof shall be given to
Holders of Securities not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner
not inconsistent with the requirements of any automated quotation
system or securities exchange on which the Securities may be
listed, and upon such notice as may be required by such quotation
system or exchange, as the case may be, all as more fully
provided in the Indenture. Payments of principal shall be made
upon the surrender of this Security at the option of the Holder
at the 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 Borough of Manhattan, The City of New York,
in such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of
public and private debts; provided, however, that at the option
of the Company payment of interest may be made by check, mailed
to the address of the Person entitled thereto as such address
shall appear in the Security Register, or, upon written
application by the Holder to the Security Registrar.
Except as specifically provided 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
governmental or any political subdivision or taxing authority
thereof or therein.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by
manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed under its corporate seal.
Dated:
PHOTRONICS, INC.
[Corporate Seal]
By________________________________
Title:
Name:
Attest:
______________________________
Title:
SECTION 203. Form of Reverse of Security.
---------------------------
This Security is one of a duly authorized issue of
Securities of the Company designated as its o% Convertible
Subordinated Notes due May 15, 2004 (herein called the
"Securities"), limited in aggregate principal amount to
$75,000,000, as such amount may be increased, but not by an
amount in excess of $11,250,000, solely as a result of the
exercise of the underwriters' over-allotment option granted by
the Company under the underwriting agreement, dated May o,
1997, among the Company, Goldman, Sachs & Co., Robertson,
Stephens & Company and Smith Barney Inc., issued and to be issued
under an Indenture, dated as of May o, 1997 (herein called the
"Indenture"), between the Company and The Chase Manhattan Bank,
as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for
a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee, the
holders of Senior Indebtedness and the Holders of the Securities
and of the terms upon which the Securities are, and are to be,
authenticated and delivered. The Securities are issuable in
registered form only without coupons in denominations of $1,000
and any integral multiple thereof.
Subject to and upon compliance with the provisions of the
Indenture, the Holder of this Security is entitled, at his
option, at any time before the close of business on May 15,
2004, or in case this Security or a portion hereof is called for
redemption or the Holder hereof has exercised his right to
require the Company to repurchase this Security or a portion
hereof, then in respect of this Security until and including, but
(unless the Company defaults in making the payment due upon
redemption or repurchase, as the case may be) not after, the
close of business on the Redemption Date or Repurchase Date, as
the case may be, to convert this Security (or any portion of the
principal amount hereof that is an integral multiple of $1,000,
provided that the unconverted portion of such principal amount is
$1,000 or any integral multiple of $1,000 in excess thereof) into
fully paid and nonassessable shares of Common Stock of the
Company at an initial Conversion Rate of o shares of Common Stock
for each $1,000 principal amount of Securities (or at the then
current adjusted Conversion Rate if an adjustment has been made
as provided in the Indenture) by surrender of this Security, duly
endorsed or assigned to the Company or in blank and, in case such
surrender shall be made during the period from the close of
business on any Regular Record Date next preceding any Interest
Payment Date to the opening of business on such Interest Payment
Date (except if this Security has been called for redemption on a
Redemption Date or is repurchasable on a Repurchase Date
occurring, in either case, during such period and is surrendered
for such conversion during such period (including any Securities
or portions thereof called for redemption on a Redemption Date
that is a Regular Record Date or an Interest Payment Date, as the
case may be)), also accompanied by payment in New York Clearing
House or other funds acceptable to the Company of an amount equal
to the interest payable on such Interest Payment Date on the
principal amount of this Security then being converted, and also
the conversion notice hereon duly executed, to the Company at the
Corporate Trust Office of the Trustee, or at such other office or
agency of the Company, subject to any laws or regulations
applicable thereto and subject to the right of the Company to
terminate the appointment of any Conversion Agent (as defined
below) as may be designated by it for such purpose in the Borough
of Manhattan, The City of New York, or at such other offices or
agencies as the Company may designate (each a "Conversion
Agent"), provided further, that if this Security or portion
hereof has been called for redemption on a Redemption Date or is
repurchasable on a Repurchase Date occurring, in either case,
during the period from the close of business on any Regular
Record Date next preceding any Interest Payment Date to the
opening of business on such succeeding Interest Payment Date and
is surrendered for conversion during such period, then the Holder
of this Security who converts this Security or a portion hereof
during such period will be entitled to receive the interest
accruing hereon from the Interest Payment Date next preceding the
date of such conversion to such succeeding Interest Payment Date
and shall not be required to pay such interest upon surrender of
this Security for conversion. Subject to the provisions of the
preceding sentence and, in the case of a conversion after the
close of business on the Regular Record Date next preceding any
Interest Payment Date and on or before the close of business on
such Interest Payment Date, to the right of the Holder of this
Security (or any Predecessor Security of record as of such
Regular Record Date) to receive the related installment of
interest to the extent and under the circumstances provided in
the Indenture, no cash payment or adjustment is to be made on
conversion for interest accrued hereon from the Interest Payment
Date next preceding the day of conversion, or for dividends on
the Common Stock issued on conversion hereof. The Company shall
thereafter deliver to the Holder the fixed number of shares of
Common Stock (together with any cash adjustment, as provided in
the Indenture) into which this Security is convertible and such
delivery will be deemed to satisfy the Company's obligation to
pay the principal amount of this Security. No fractions of
shares or scrip representing fractions of shares will be issued
on conversion, but instead of any fractional interest (calculated
to the nearest 1/100th of a share) the Company shall pay a cash
adjustment as provided in the Indenture. The Conversion Rate is
subject to adjustment as provided in the Indenture. In addition,
the Indenture provides that in the case of certain consolidations
or mergers to which the Company is a party or the conveyance,
transfer, sale or lease of all or substantially all of the
property and assets of the Company, the Indenture shall be
amended, without the consent of any Holders of Securities, so
that this Security, if then Outstanding, will be convertible
thereafter, during the period this Security shall be convertible
as specified above, only into the kind and amount of securities,
cash and other property receivable upon such consolidation,
merger, conveyance, transfer, sale or lease by a holder of the
number of shares of Common Stock of the Company into which this
Security could have been converted immediately prior to such
consolidation, merger, conveyance, transfer, sale or lease
(assuming such holder of Common Stock is not a Constituent
Person, failed to exercise any rights of election and received
per share the kind and amount received per share by a plurality
of Non-electing Shares). No adjustment in the Conversion Rate
will be made until such adjustment would require an increase or
decrease of at least one percent of such Conversion Rate,
provided that any adjustment that would otherwise be made will be
carried forward and taken into account in the computation of any
subsequent adjustment.
The Securities are subject to redemption upon not less than
20 nor more than 60 days' notice by mail, at any time on or after
May 16, 2000, as a whole or in part, at the election of the
Company, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed during the
12-month period beginning May 16 of the years indicated,
Redemption
Year Price
2000 o%
2001 o%
2002 o%
2003 o%
and thereafter at a Redemption Price equal to 100% of the
principal amount, in each case together with accrued interest to
the Redemption Date; provided, however, that interest
installments whose Stated Maturity is on or prior to such
Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at
the close of business on the relevant Record Dates referred to on
the face hereof, all as provided in the Indenture.
In the event of redemption, repurchase or conversion of this
Security in part only, a new Security or Securities for the
unredeemed, unrepurchased or unconverted portion hereof will be
issued in the name of the Holder hereof upon the cancellation
hereof.
In any case where the due date for the payment of the
principal of, premium, if any, or interest on any Security or the
last day on which a Holder of a Security has a right to convert
his Security shall be, at any Place of Payment or Place of
Conversion, as the case may be, a day on which banking
institutions at such Place of Payment or Place of Conversion are
authorized or obligated by law or executive order to close, then
payment of principal, premium, if any, or interest, or delivery
for conversion of such Security need not be made on or by such
date at such place but may be made on or by the next succeeding
day at such place which is not a day on which banking
institutions are authorized or obligated by law or executive
order to close, with the same force and effect as if made on the
date for such payment or the date fixed for redemption or
repurchase, or by such last day for conversion, and no interest
shall accrue on the amount so payable for the period after such
date so long as payment is made on the next succeeding day at
such place which is not a day on which banking institutions are
authorized or obligated by law or executive order to close.
If a Change of Control occurs, the Holder of this Security,
at the Holder's option, shall have the right, in accordance with
the provisions of the Indenture, to require the Company to
repurchase this Security (or any portion of the principal amount
hereof that is equal to $1,000 or any integral multiple of $1,000
in excess thereof) for cash at a Repurchase Price equal to 100%
of the principal amount thereof plus interest accrued to the
Repurchase Date. At the option of the Company, the Repurchase
Price may be paid in cash or, subject to the conditions provided
in the Indenture, by delivery of shares of Common Stock having a
fair market value equal to the Repurchase Price. For purposes of
this paragraph, the fair market value of shares of Common Stock
shall be determined by the Company and shall be equal to 95% of
the average of the Closing Prices Per Share for the five
consecutive Trading Days ending on and including the third
Trading Day immediately preceding the Repurchase Date. Whenever
in this Security there is a reference, in any context, to the
principal of any Security as of any time, such reference shall be
deemed to include reference to the Repurchase Price payable in
respect of such Security to the extent that such Repurchase Price
is, was or would be so payable at such time, and express mention
of the Repurchase Price in any provision of this Security shall
not be construed as excluding the Repurchase Price so payable in
those provisions of this Security when such express mention is
not made; provided, however, that, for the purposes of the next
paragraph, such reference shall be deemed to include reference to
the Repurchase Price only to the extent the Repurchase Price is
payable in cash.
The indebtedness evidenced by this Security is, to the
extent provided in the Indenture, subordinate and subject in
right of payment to the prior payment in full of all Senior
Indebtedness, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of
this Security, by accepting the same, (a) agrees to and shall be
bound by such provisions, (b) authorizes and directs the Trustee
on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and (c)
appoints the Trustee his attorney-in-fact for any and all such
purposes.
If an Event of Default shall occur and be continuing, the
principal of all the Securities may be declared due and payable
in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Holders of the Securities under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount of the
Securities at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in
aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to
waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security
issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of
this Security or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of (and premium, if any) and interest on
this Security on the respective Stated Maturities expressed
herein (or in the case of redemption or repurchase, on the
Redemption Date or Repurchase Date, as the case may be) or to
convert this Security as provided in the Indenture.
As provided in and subject to the provisions of the
Indenture, the Holder of this Security shall not have the right
to institute any proceeding with respect to the Indenture or for
the appointment of a receiver or trustee or for any other remedy
thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default, the
Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee indemnity satisfactory
to it and the Trustee shall not have received from the Holders of
a majority in principal amount of the Securities Outstanding a
direction inconsistent with such request, and shall have failed
to institute any such proceeding, for 60 days after receipt of
such notice, request and offer of indemnity. The foregoing shall
not apply to any suit instituted by the Holder of this Security
for the enforcement of any payment of principal hereof, premium,
if any, or interest hereon on or after the respective due dates
expressed herein or for the enforcement of the right to convert
this Security as provided in the Indenture.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is
registrable in the Security Register, upon surrender of this
Security for registration of transfer at the office or agency of
the Company maintained for that purpose pursuant to Section 1002,
duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new
Securities, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated
transferee or transferees.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Prior to due presentment of this Security for registration
of transfer, the Company, the Trustee, and any agent of the
Company or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes,
whether or not this Security be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the
Indenture.
ABBREVIATIONS
The following abbreviations, when used in the inscription of
the face of this Security, shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT--_______
TEN ENT - as tenants by the entireties (Cust)
JT TEN - as joint tenants with right Custodian _____
under Uniform
of survivorship and not as (Minor)
tenants in common Gifts to Minors Act _____________
(State)
Additional abbreviations may also be used though not in the above
list.
ELECTION OF HOLDER TO REQUIRE REPURCHASE
1. Pursuant to Section 1401 of the Indenture, the
undersigned hereby elects to have this Security repurchased by
the Company.
2. The undersigned hereby directs the Trustee or the
Company to pay it or __________________ an amount in cash or, at
the Company's election, Common Stock valued as set forth in the
Indenture, equal to 100% of the principal amount to be
repurchased (as set forth below), plus interest accrued to the
Repurchase Date, as provided in the Indenture.
Dated:
______________________________
______________________________
Signature(s)
Signature(s) must be guaranteed by an Eligible Guarantor
Institution with membership in an approved signature
guarantee program pursuant to Rule 17Ad-15 under the
Securities Exchange Act of 1934.
______________________________
Signature Guaranteed
Principal amount to be repurchased
(an integral multiple of $1,000): __________________________
Remaining principal amount following such repurchase:
____________________
NOTICE: The signature to the foregoing Election must correspond
to the Name as written upon the face of this Security in every
particular, without alteration or any change whatsoever.
SECTION 204. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
This is one of the Securities referred to in the
within-mentioned Indenture.
[NAME OF TRUSTEE],
as Trustee
By ____________________
Authorized Signatory
SECTION 205. Form of Conversion Notice.
-------------------------
The undersigned Holder of this Security hereby irrevocably
exercises the option to convert this Security, or any portion of
the principal amount hereof (which is an integral multiple of
$1,000, provided that the unconverted portion of such principal
amount is $1,000 or any integral multiple of $1,000 in excess
thereof) below designated, into shares of Common Stock in
accordance with the terms of the Indenture referred to in this
Security, and directs that such shares, together with a check in
payment for any fractional share and any Securities representing
any unconverted principal amount hereof, be delivered to and be
registered in the name of the undersigned unless a different name
has been indicated below. If shares of Common Stock or
Securities are to be registered in the name of a Person other
than the undersigned, (a) the undersigned will pay all transfer
taxes payable with respect thereto and (b) signature(s) must be
guaranteed by an Eligible Guarantor Institution with membership
in an approved signature guarantee program pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934. Any amount
required to be paid by the undersigned on account of interest
accompanies this Security.
Dated:________________________
_______________________________
Fill in for registration of shares
_______________________________
of Common Stock if to be issued, Signature(s)
and Securities if to be delivered,
other than to and in the name of
the registered holder:
______________________________
(Name)
ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to
$75,000,000, as such amount may be increased, but not by an
amount in excess of $11,250,000, solely as a result of the
purchase of additional Securities (referred to in the
Underwriting Agreement as "Additional Securities") pursuant to the
exercise of the underwriters' over-allotment option granted by
the Company under the underwriting agreement, dated May o, 1997
(the "Underwriting Agreement"), among the Company, Goldman,
Sachs & Co., Robertson, Stephens & Company and Smith Barney Inc.
(collectively, the "Underwriters"), except for Securities
authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Securities pursuant to
Section 304, 305, 306, 906, 1108, 1302 or 1403(e).
The Securities shall be known and designated as the "o%
Convertible Subordinated Notes due May 15, 2004" of the
Company. Their Stated Maturity shall be May 15, 2004, and they
shall bear interest at the rate of o% per annum, from ___________
__, 1997 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, as the case may be,
payable semi-annually in arrears on May 15 and November 15 in
each year, commencing November 15, 1997, until the principal
thereof is paid or made available for payment, and, to the
fullest extent permitted by law, at the rate of o% per annum on
any overdue principal and on any overdue installment of interest.
Upon receipt by the Trustee of an Officers' Certificate
stating that the Underwriters have elected to purchase from the
Company a specified aggregate principal amount of Additional
Securities not to exceed a total of $11,250,000 for all such
elections in accordance with this paragraph pursuant to the
Underwriting Agreement, the Trustee shall authenticate and make
available for delivery such specified aggregate principal amount
of such Additional Securities to or upon a Company Request, and
such specified aggregate principal amount of such Additional
Securities shall be considered part of the original aggregate
principal amount of the Securities.
The principal of (and premium, if any) and interest on the
Securities shall be payable at the office or agency of the
Company maintained for such purpose pursuant to Section 1002;
provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security
Register.
The Securities shall be redeemable as provided in Article
Eleven.
The Securities are not entitled to the benefit of any
sinking fund.
The Securities shall be subordinated in right of payment to
Senior Indebtedness as provided in Article Twelve.
The Securities shall be convertible as provided in Article
Thirteen.
The Securities shall be subject to repurchase at the option
of the Holders upon a Change of Control as provided in Article
Fourteen.
SECTION 302. Denominations.
-------------
The Securities shall be issuable only in registered form
without coupons and only in denominations of $1,000 and any
integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Securities shall be executed on behalf of the Company by
its Chairman of the Board, its Vice Chairman of the Board, its
President, or one of its Vice Presidents, under its corporate
seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on
the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior
to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities
executed by the Company to the Trustee for authentication,
together with a Company Order for the authentication and delivery
of such Securities; and the Trustee in accordance with such
Company Order shall authenticate and deliver such Securities as
in this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there
appears on such Security a certificate of authentication
substantially in the form provided for herein executed by the
Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence,
that such Security has been duly authenticated and delivered
hereunder.
SECTION 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the
Company may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in
any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may determine,
as evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay.
After the preparation of definitive Securities, the temporary
Securities shall be exchangeable for definitive Securities upon
surrender of the temporary Securities at any office or agency of
the Company designated pursuant to Section 1002, without charge
to the Holder. Upon surrender for cancellation of any one or
more temporary Securities, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Securities of authorized
denominations. Until so exchanged the temporary Securities shall
in all respects be entitled to the same benefits under this
Indenture as definitive Securities.
For purposes of this Section 304, each Global Security shall
be considered a definitive Security.
SECTION 305. Registration, Registration of Transfer and
------------------------------------------
Exchange.
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The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such
office and in any other office or agency designated pursuant to
Section 1002 being herein sometimes collectively referred to as
the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for
the registration of Securities and of transfers of Securities.
The Trustee is hereby appointed "Security Registrar" for the
purpose of registering Securities and transfers of Securities as
herein provided.
Upon surrender for registration of transfer of any Security
at an office or agency of the Company designated pursuant to
Section 1002 for such purpose, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities
of any authorized denominations and of a like aggregate principal
amount.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations and of a like
aggregate principal amount, upon surrender of the Securities to
be exchanged at such office or agency. Whenever any Securities
are so surrendered for exchange, the Company shall execute, and
the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered upon
such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or
the Trustee) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and
the Security Registrar duly executed, by the Holder thereof or
his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906, 1108, 1302 or 1403(e) not
involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at
the opening of business 15 days before the day of the mailing of
a notice of redemption of Securities selected for redemption
under Section 1104 and ending at the close of business on the day
of such mailing, or (ii) to register the transfer of or exchange
any Security so selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in
part.
The provisions of Clauses (1), (2), (3), (4) and (5) below
shall apply only to Global Securities:
(1) Each Global Security authenticated under this Indenture
shall be registered in the name of the Depositary designated for
such Global Security or a nominee thereof and delivered to such
Depositary or a nominee thereof or Custodian therefor, and each
such Global Security shall constitute a single Security for all
purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture,
no Global Security may be exchanged in whole or in part for
Securities registered, and no transfer of a Global Security in
whole or in part may be registered, in the name of any Person
other than the Depositary for such Global Security or a nominee
thereof unless (A) such Depositary (i) has notified the Company
that it is unwilling or unable to continue as Depositary for such
Global Security or (ii) has ceased to be a clearing agency
registered under the Exchange Act, or (B) there shall have
occurred and be continuing an Event of Default with respect to
such Global Security.
(3) Subject to Clause (2) above, any exchange of a Global
Security for other Securities may be made in whole or in part,
and all Securities issued in exchange for a Global Security or
any portion thereof shall be registered in such names as the
Depositary for such Global Security shall direct.
(4) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a
Global Security or any portion thereof, whether pursuant to this
Article Three or otherwise, shall be authenticated and delivered
in the form of, and shall be, a Global Security, unless such
Security is registered in the name of a Person other than the
Depositary for such Global Security or a nominee thereof.
(5) The Depositary or its nominee, as registered owner of a
Global Security, shall be the Holder of such Global Security for
all purposes under the Indenture and the Securities, and owners
of beneficial interests in a Global Security shall hold such
interests pursuant to the Applicable Procedures. Accordingly,
any such owner's beneficial interest in a Global Security will be
shown only on, and the transfer of such interest shall be
effected only through, records maintained by the Depositary or
its nominee or its Agent Members and such owners of beneficial
interests in a Global Security will not be considered the owners
or holders thereof.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Security of like tenor and
principal amount and bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Company and the Trustee
(i) evidence to their satisfaction of the destruction, loss or
theft of any Security and (ii) such security or indemnity as may
be satisfactory to them to save each of them and any agent of
either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and the Trustee
shall authenticate and deliver, in lieu of any such destroyed,
lost or stolen Security, a new Security of like tenor and
principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen
Security has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Security,
pay such Security.
Upon the issuance of any new Security under this Section,
the Company may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and
expenses of the Trustee and its agents and counsel) connected
therewith.
Every new Security issued pursuant to this Section in lieu
of any destroyed, lost or stolen Security shall constitute an
original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security shall be at
any time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be
paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment
Date (herein called "Defaulted Interest") shall forthwith cease
to be payable to the Holder on the relevant Regular Record Date
by virtue of having been such Holder, 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 elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner.
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the
date of the proposed payment, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which shall be not
more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt
by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first-class
postage prepaid, to each Holder at his address as it appears in
the Security Register, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having
been so mailed, such Defaulted Interest shall be paid to the
Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business
on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
(2) The 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 Securities may be listed,
and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this Clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Security
shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
In the case of any Security which is converted in accordance
with Section 1302 after any Regular Record Date and on or prior
to the next succeeding Interest Payment Date (other than a
Security whose Maturity is prior to such Interest Payment Date),
interest whose Stated Maturity is on such Interest Payment Date
shall be payable on such Interest Payment Date notwithstanding
such conversion, and such interest (whether or not punctually
paid or duly provided for) shall be paid to the Person in whose
name such Security (or one or more Predecessor Securities) is
registered at the close of business on such Regular Record Date.
Except as otherwise expressly provided in the immediately
preceding sentence or in Section 1302, in the case of any
Security which is converted, interest whose Stated Maturity is
after the date of conversion of such Security shall not be
payable.
SECTION 308. Persons Deemed Owners.
---------------------
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name such Security
is registered as the owner of such Security for the purpose of
receiving payment of principal of (and premium, if any) and
(subject to Section 307) interest on such Security and for all
other purposes whatsoever, whether or not such Security be
overdue, and neither the Company, the Trustee nor any agent of
the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 309. Cancellation.
------------
All Securities surrendered for payment, redemption,
repurchase, registration of transfer or exchange or conversion
shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly canceled by it.
The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities
canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Securities held by the
Trustee shall be disposed of in accordance with the Trustee's
normal procedures.
SECTION 310. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of
a 360-day year of twelve 30-day months.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect (except
as to any surviving rights of conversion, or registration of
transfer or exchange of Securities herein expressly provided
for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than
(i)Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and
(ii) Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company
and thereafter repaid to the Company or discharged from such
trust, as provided in Section 1003) have been delivered to the
Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above,
has deposited or caused to be deposited with the Trustee as
trust funds in trust for the purpose an amount sufficient to
pay and discharge the entire indebtedness on such Securities
not theretofore delivered to the Trustee for cancellation,
for principal (and premium, if any) and interest to the date
of such deposit (in the case of Securities which have become
due and payable) or to the Stated Maturity or Redemption
Date, as the case may be;
(2) the Company has paid or caused to be paid all other
sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied
with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under
Section 607, the obligations of the Trustee to any Authenticating
Agent under Section 614 and, if money shall have been deposited
with the Trustee pursuant to subclause (B) of Clause (1) of this
Section, the obligations of the Trustee under Section 402 and the
last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section
401 shall be held in trust and applied by it, in accordance with
the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including
the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for whose payment such money has
been deposited with the Trustee. All moneys deposited with the
Trustee pursuant to Section 401 (and held by it or any Paying
Agent) for the payment of Securities subsequently converted shall
be returned to the Company upon Company Request.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of
the following events (whatever the reason for such Event of
Default and whether it shall be occasioned by the provisions of
Article Twelve or be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative
or governmental body):
(1) default in the payment of the principal or Redemption
Price of any Security at its Maturity whether or not such payment
is prohibited pursuant to Article Twelve; or
(2) default in the payment of any interest upon any
Security when it becomes due and payable whether or not such
payment is prohibited pursuant to Article Twelve, and continuance
of such default for a period of 30 days; or
(3) failure by the Company to give the Company Notice in
accordance with Section 1403; or
(4) default in the performance, or breach, of any covenant
or warranty of the Company in this Indenture (other than a
covenant or warranty a default in whose performance or whose
breach is elsewhere in this Section specifically dealt with), and
continuance of such default or breach for a period of 60 days
after there has been given, by registered or certified mail, to
the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities a written notice specifying such default
or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(5) a default under any indebtedness of the Company for
money borrowed or 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
in an aggregate outstanding principal amount then outstanding in
excess of $15,000,000, whether such indebtedness now exists or
shall hereafter be created, such indebtedness is not paid at
final maturity (either upon its stated maturity or acceleration
thereof) and such default in payment or acceleration has not been
cured or rescinded, within a period of 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 Outstanding
Securities, a written notice specifying such default and
requiring the Company to cause such indebtedness to be discharged
or cause such default to be cured or waived or such acceleration
to be rescinded or annulled and stating that such notice is a
"Notice of Default" hereunder; or
(6) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or (B) a decree or order adjudging the Company a
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of
or in respect of the Company under any applicable federal or
state law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the
Company or of any substantial part of its property, or ordering
the winding up or liquidation of its affairs, and the continuance
of any such decree or order for relief or any such other decree
or order unstayed and in effect for a period of 60 consecutive
days; or
(7) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by it to the entry of a decree or order for relief in
respect of the Company in an involuntary case or proceeding under
any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable federal or state
law, or the consent by the Company to the filing of such petition
or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to
pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such
action.
SECTION 502. Acceleration of Maturity; Rescission and
----------------------------------------
Annulment.
---------
If an Event of Default (other than an Event of Default
specified in Section 501(6) or 501(7)) occurs and is continuing,
then and in every such case the Trustee or the Holders of not
less than 25% in principal amount of the Outstanding Securities
may declare the principal of all the Securities to be due and
payable immediately, by a notice in writing to the Company (and
to the Trustee if given by Holders), and upon any such
declaration such principal and all accrued interest thereon shall
become immediately due and payable. If an Event of Default
specified in Section 501(6) or 501(7) occurs and is continuing,
the principal of and any accrued interest thereon, all
Outstanding Securities shall ipso facto become due and payable
immediately without any declaration or other Act on the part of
the Trustee or any Holder.
At any time after such a declaration of acceleration has
been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this
Article Five provided, the Holders of a majority in principal
amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may rescind and annul such declaration
and its consequences if
(1) the Company has paid or deposited with the Trustee a
sum sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any
Securities which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate
borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at a rate of o% per annum, and
(D) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel; and
(2) all Events of Default, other than the nonpayment of the
principal of Securities which have become due solely by such
declaration of acceleration, have been cured or waived as
provided in Section 513.
No such rescission or annulment referred to above shall affect
any subsequent default or Event of Default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for
----------------------------------------
Enforcement by Trustee.
----------------------
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such
default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the
benefit of the Holders of such Securities, the whole amount then
due and payable on such Securities for principal (and premium, if
any) and interest, and, to the extent that payment of such
interest shall be legally enforceable, interest on any overdue
principal (and premium, if any) and on any overdue interest, at a
rate of o% per annum, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express
trust, may institute a judicial proceeding for the collection of
the sums so due and unpaid, may prosecute such proceeding to
judgment or final decree and may enforce the same against the
Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights
and the rights of the Holders by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect
and enforce any such rights, whether for the specific enforcement
of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other
proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to the Company
or any other obligor upon the Securities or the property of the
Company or of such other obligor or the creditors of either, the
Trustee (irrespective of whether the principal of, and any
interest on, the Securities shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective
of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal or interest) shall be
entitled and empowered, by intervention in such proceeding or
otherwise,
(1) to file and prove a claim for the whole amount of
principal, premium, if any, and interest owing and unpaid in
respect of the Securities and take such other actions, including
participating as a member, voting or otherwise, of any official
committee of creditors appointed in such matter, and to file such
other papers or documents, in each of the foregoing cases, as may
be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel) and of the Holders of Securities allowed in such
judicial proceeding, and
(2) to collect and receive any moneys or other property
payable or deliverable on any such claim and to distribute the
same;
and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel and any other amounts due the
Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf
of any Holder of a Security any plan of reorganization,
arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee
to vote in respect of the claim of any Holder of a Security in
any such proceeding; provided, however, that the Trustee may, on
-------- -------
behalf of such Holders, vote for the election of a trustee in
bankruptcy or similar official.
SECTION 505. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Securities.
----------
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without
the possession of any of the Securities or the production thereof
in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
------------------------------
Subject to Article Twelve, any money collected by the
Trustee pursuant to this Article Five shall be applied in the
following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal
(or premium, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607;
SECOND: To the payment of the amounts then due and unpaid
for principal of (and premium, if any) and interest on the
Securities in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority
of any kind, according to the amounts due and payable on such
Securities for principal (and premium, if any) and interest,
respectively; and
THIRD: Any remaining amounts shall be repaid to the
Company.
SECTION 507. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to institute
any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
indemnity satisfactory to it against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute
any such proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the
Holders of a majority in principal amount of the Outstanding
Securities;
it being understood and intended that no one or more Holders
shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture to affect, disturb
or prejudice the rights of any other Holders, or to obtain or to
seek to obtain priority or preference over any other Holders or
to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all the
Holders.
SECTION 508. Unconditional Right of Holders to Receive
------------------------------------------
Principal, Premium and Interest and to Convert.
----------------------------------------------
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute
and unconditional, to receive payment of the principal of (and
premium, if any) and (subject to Section 307) interest on such
Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption or repurchase, on the
Redemption Date or Repurchase Date, as the case may be) and to
convert such Security in accordance with Article Thirteen and to
institute suit for the enforcement of any such payment and right
to convert, and such rights shall not be impaired without the
consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding
to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or
has been determined adversely to the Trustee or to such Holder,
then and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be
restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee
and the Holders shall continue as though no such proceeding had
been instituted.
SECTION 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in
the last paragraph of Section 306, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Five or by law to
the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
SECTION 512. Control by Holders.
------------------
The Holders of a majority in principal amount of the
Outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power
conferred on the Trustee, provided
that
(1) such direction shall not be in conflict with any rule
of law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal
amount of the Outstanding Securities may on behalf of the Holders
of all the Securities waive any past default hereunder and its
consequences, except a default
(1) in the payment of the principal of (or premium, if any)
or interest on any Security, or
(2) in respect of a covenant or provision hereof which
under Article Nine cannot be modified or amended without the
consent of the Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have
been cured, for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other default or impair
any right consequent thereon.
SECTION 514. Undertaking for Costs.
---------------------
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, suffered or omitted by it as Trustee, a court may require
any party litigant in such suit to file an undertaking to pay the
costs of such suit, and may assess costs against any such party
litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided that the provisions of this Section 514
(to the extent permitted by law) shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder,
or group of Holders, holding in the aggregate more than ten (10)
percent in principal amount of Outstanding Securities, or to any
suit instituted by any Holder of any Security for the enforcement
of the payment of the principal of, premium, if any, or interest
on any Security or to any suit for the enforcement of the right
to convert any Security in accordance with the provisions of
Article Thirteen or to require the Company to repurchase any
Security in accordance with the provisions of Article Fourteen.
SECTION 515. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any
stay, usury or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law and covenants that it will not
hinder, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
-----------------------------------
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise 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.
(b) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Trustee and conforming to the
requirements of the Indenture; but in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or
not they substantially conform to the requirements of this
Indenture.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action,
its own negligent failure to act, or its own wilful misconduct,
except that
(1) this paragraph (c) shall not be construed to limit the
effect of paragraph (b) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it
shall be proved that the Trustee was negligent in ascertaining
the pertinent facts;
(3) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a majority in
principal amount of the Outstanding Securities relating to the
time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture; and
(4) no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if
it shall have reasonable grounds for believing that repayment of
such funds or indemnity satisfactory to it against such risk or
liability is not assured to it.
(d) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
------------------
Within 90 days after the occurrence of any default hereunder
as to which the Trustee has received written notice, the Trustee
shall give to all Holders of Securities, in the manner provided
in Section 106, notice of such default, unless such default shall
have been cured or waived; provided, however, that in the case of
any default of the character specified in Section 501(4), no such
notice to Holders of Securities shall be given until at least 30
days after the occurrence of such default. For the purpose of
this Section, the term "default" means any event which is, or
after notice or lapse of time or both would become, an Event of
Default.
SECTION 603. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, Officers'
Certificate, other certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or
Company Order and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on
their part, conclusively rely upon an Officers' Certificate or
an opinion of counsel;
(d) the Trustee may consult with counsel and the advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders pursuant to this
Indenture, unless such Holders shall have offered to the Trustee
security or indemnity satisfactory to it against the costs,
expenses and liabilities which might be incurred by it in
compliance with such request or direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness 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
during reasonable business hours and after reasonable notice;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by
or through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder; and
(h) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and reasonably believed
by it to be authorized or within the discretion or rights or
powers conferred upon it by this Indenture.
SECTION 604. Not Responsible for Recitals or Issuance of
-------------------------------------------
Securities.
----------
The recitals contained herein and in the Securities, except
the Trustee's certificates of authentication, shall be taken as
the statements of the Company, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be
accountable for the use or application by the Company of
Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
-------------------
The Trustee, any Authenticating Agent, any Paying Agent, any
Security Registrar or any other agent of the Company, in its
individual or any other capacity, may become the owner or pledgee
of Securities and, subject to Sections 608 and 613, may otherwise
deal with the Company with the same rights it would have if it
were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
SECTION 606. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law.
The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the
Company in writing.
SECTION 607. Compensation and Reimbursement.
------------------------------
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee for all reasonable expenses, disbursements
and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents
and counsel), except any such expense, disbursement or advance
as may be attributable to its gross negligence or bad faith; and
(3) to indemnify the Trustee and its directors, officers,
employees and agents for, and to hold them harmless against, any
loss, liability or expense incurred without negligence or bad
faith on their part, arising out of or in connection with the
acceptance or administration of this trust, including the costs
and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its
powers or duties hereunder.
To secure the Company's payment obligations under this
Section, the Trustee shall have a lien prior to the Securities on
all money or property held or collected by the Trustee including,
without limitation, all money or property held or collected by
the Trustee in trust to pay the principal of, or interest on, or
any other amounts on any Securities, and such lien shall survive
the satisfaction and discharge of the Indenture and any other
termination of the Indenture including any termination under any
bankruptcy law. When the Trustee incurs expenses or renders
services in connection with an Event of Default specified in
Sections 501(6) or (7), the Holders by their acceptance of the
Securities hereby agree that such expenses (including the fees
and expenses of its counsel) and the compensation for such services
are intended to constitute expenses of administration under Title
11 of the United States Code or any other applicable Federal or
state bankruptcy, insolvency or similar law. "Trustee" for
purposes of this Section 607 shall include any predecessor Trustee,
but the negligence or bad faith of any Trustee shall not affect
the indemnification of any other Trustee.
The provisions of this Section shall survive the termination
of this Indenture or the resignation or removal of the Trustee.
SECTION 608. Disqualification; Conflicting Interests.
---------------------------------------
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 609. Corporate Trustee Required; Eligibility.
---------------------------------------
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, having a combined capital and surplus of at least
$50,000,000 subject to supervision or examination by federal or
state authority, in good standing and having an established place
of business in the Borough of Manhattan, The City of New York.
If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, 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 to be eligible in accordance with the provisions of
this Section 609, it shall resign promptly in the manner and
with the effect hereinafter specified in this Article and a
successor shall be appointed pursuant to Section 610.
SECTION 610. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by
a successor Trustee shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation,
the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has
been a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section
609 and shall fail to resign after written request therefor by
the Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee
or of its property shall be appointed or any public officer shall
take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Company by a Board Resolution may
remove the Trustee, or (ii) subject to Section 514, any Holder
who has been a bona fide Holder of a Security 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.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee. If, within one year after
such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment, become the successor Trustee and
supersede the successor Trustee appointed by the Company. If no
successor Trustee shall have been so appointed by the Company or
the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor
Trustee to all Holders in the manner provided in Section 106.
Each notice shall include the name of the successor Trustee and
the address of its Corporate Trust Office.
(g) No retiring Trustee shall be liable for the acts or
omissions of any successor Trustee hereunder.
(h) All fees, charges and expenses of the retiring Trustee
shall become immediately due and payable upon the appointment of
a successor Trustee hereunder.
SECTION 611. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring
Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on
request of the Company or the successor Trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver
an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder. Upon
request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers
and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be
qualified and eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business.
--------
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate
trust business of the Trustee (including the trust created by
this Indenture), shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and
eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties
hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor
Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
-------------------------------------------------
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee
shall be subject to the provisions of the Trust Indenture Act
regarding the collection of claims against the Company (or any
such other obligor).
SECTION 614. Appointment of Authenticating Agent.
-----------------------------------
The Trustee may appoint an Authenticating Agent or Agents
reasonably acceptable to the Company which shall be authorized to
act on behalf of the Trustee to authenticate Securities issued
upon original issue and upon exchange, registration of transfer,
partial conversion or partial redemption or pursuant to Section
306, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the
Trustee by an Authenticating Agent and a certificate of
authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States
of America, any State thereof or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having
a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by federal or state
authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of
such Authenticating Agent 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 an Authenticating Agent
shall cease to be eligible in accordance with the provisions of
this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which such Authenticating Agent shall be a
party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation
shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part
of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Company. The
Trustee may at any time terminate the agency of an Authenticating
Agent by giving written notice thereof 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
such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may
appoint a successor Authenticating Agent which shall be reasonably
acceptable to the Company and shall mail, at the Company's expense,
written notice of such appointment by first-class mail, postage
prepaid, to all Holders as their names and addresses appear in
the Security Register. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with
all the rights, powers and duties of its predecessor hereunder,
with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible
under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services under this
Section, and the Trustee shall be entitled to be reimbursed for
such payments, subject to the provisions of Section 607.
An Authenticating Agent hereunder shall be entitled to all
of the rights, protections and immunities of the Trustee
hereunder.
If an appointment is made pursuant to this Section, the
Securities may have endorsed thereon, in addition to the
Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities described in the
within-mentioned Indenture.
[NAME OF TRUSTEE],
As Trustee
By: ________________________
as Authenticating Agent
By: ________________________
Authorized Signatory
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of
-------------------------------------------------
Holders.
-------
The Company will furnish or cause to be furnished to the
Trustee
(a) semi-annually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of such
Regular Record Date, and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Company of any
such request, a list of similar form and content as of a date not
more than 15 days prior to the time such list is furnished;
provided that such list need not be furnished by the Company so
long as the Trustee is acting as Security Registrar.
SECTION 702. Preservation of Information; Communications to
----------------------------------------------
Holders.
-------
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders
contained in the most recent list furnished to the Trustee as
provided in Section 701 and the names and addresses of Holders
received by the Trustee in its capacity as Security Registrar.
The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the
Securities, and the corresponding rights and duties of the
Trustee, shall be as provided by the Trust Indenture Act.
(c) Every Holder, by receiving and holding the Securities,
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 made pursuant to the Trust
Indenture Act.
SECTION 703. Reports by Trustee.
------------------
(a) The Trustee shall transmit to Holders, at the Company's
expense, such reports 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 each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock
exchange upon which the Securities are listed, with the
Commission and with the Company. The Company will notify the
Trustee, in writing, if and when the Securities are listed on
any stock exchange.
SECTION 704. Reports by Company.
------------------
The Company shall file with the Trustee and the Commission,
and transmit to Holders, 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 Securities
Exchange Act of 1934 shall be filed with the Trustee within 15
days after the same is so required to be filed with the
Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on Certain
----------------------------------------------
Terms.
-----
The Company (a) shall not consolidate with or merge into any
other Person or, directly or indirectly, convey, transfer, sell,
lease or otherwise dispose of its properties and assets
substantially as an entirety to any Person, and (b) shall not
permit any Person to consolidate or merge with or into the
Company or convey, transfer, sell, lease or otherwise dispose of
such Person's properties and assets substantially as an entirety
to the Company, unless:
(1) in case the Company shall consolidate with or merge
into another Person or convey, transfer, sell, lease or otherwise
dispose of its properties and assets substantially as an entirety
to any Person, the Person formed by such consolidation or into or
with which the Company is merged or the Person which acquires by
conveyance, transfer or sale, or which leases or otherwise
acquires, the properties and assets of the Company substantially
as an entirety shall be a corporation, limited liability company,
partnership or trust, shall be organized and validly existing
under the laws of the United States of America, any State thereof
or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the
Trustee, the due and punctual payment of the principal of (and
premium, if any) and interest on all the Securities and the
performance or observance of every covenant of this Indenture on
the part of the Company to be performed or observed and shall
have provided for conversion rights in accordance with Article
Thirteen;
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes due an obligation of the
Company at the time of such transaction, no Event of Default, and
no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be
continuing; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such
transaction, such supplemental indenture comply with this Article
and that all conditions precedent herein provided for relating to
such transaction have been complied with.
SECTION 802. Successor Substituted.
---------------------
Upon any consolidation or merger of the Company with or into
any other Person, or any conveyance, transfer, sale or lease of
the properties and assets of the Company substantially as an
entirety in accordance with Section 801, the successor Person
formed by such consolidation or merger or into or with which the
Company is merged or to which such conveyance, transfer, sale or
lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this
Indenture with the same effect as if such successor Person had
been named as the Company herein, and thereafter, except in the
case of a lease, the predecessor Person shall be relieved of all
obligations and covenants under this Indenture and the
Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of
------------------------------------------
Holders.
-------
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time
and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any
of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants
and obligations of the Company herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit
of the Holders, or to surrender any right or power herein
conferred upon the Company; or
(3) to secure the Securities; or
(4) to make provision with respect to the conversion rights
of Holders pursuant to the requirements of Section 1311 or the
repurchase obligations of the Company pursuant to the
requirements of Section 1405; or
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture which shall not
be inconsistent with the provisions of this Indenture, provided
--------
that such action pursuant to this Clause (5) shall not adversely
affect the interests of the Holders in any material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
-----------------------------------------------
With the written consent of the Holders of not less than a
majority in principal amount of the Outstanding Securities, by
the Act of said Holders delivered to the Company and the Trustee,
the Company, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture
or of modifying in any manner the rights of the Holders under
this Indenture; provided, however, that no such supplemental
-------- -------
indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or the amounts
payable upon the redemption or repurchase thereof, or change the
place of payment where, or the place or currency in which, any
Security or any premium or interest thereon or any other amount
in respect thereof is payable, or impair the right to institute
suit for the enforcement of any payment in respect of any
Security on or after the Stated Maturity thereof (or, in the case
of redemption or any repurchase, on or after the Redemption Date
or Repurchase Date, as the case may be), or, except as provided
by Section 1311, adversely affect the right to convert any
Security as provided in Article Thirteen, or modify the
provisions of this Indenture with respect to the subordination of
the Securities in a manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the
Outstanding Securities the consent of whose Holders is required
for any such supplemental indenture or the consent of whose
Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and
their consequences) provided for in this Indenture, or
(3) modify the obligation of the Company to maintain an
office or agency in the Borough of Manhattan, The City of New
York pursuant to Section 1002, or
(4) modify any of the provisions of this Section, Section
513 or Section 1009, except to increase any percentage contained
herein or therein or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent
of the Holder of each Outstanding Security affected thereby; or
(5) modify the provisions of Article Twelve, Article
Thirteen or Article Fourteen in a manner adverse to the Holders.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article Nine or the
modifications thereby of the trusts created by this Indenture,
the Trustee shall be entitled to receive, and (subject to Section
601) shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture and an Officers'
Certificate stating that all conditions precedent to the
execution of such supplemental indenture have been fulfilled.
The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this
Article Nine, this Indenture shall be modified in accordance
therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this
Article Nine shall conform to the requirements of the Trust
Indenture Act, as then in effect.
SECTION 906. Reference in Securities to Supplemental
---------------------------------------
Indentures.
----------
Securities authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article Nine may,
and shall if required by the Company, bear a notation in form
approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new
Securities so modified as to conform, in the opinion of the
Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities.
SECTION 907. Notice of Supplemental Indentures.
---------------------------------
Promptly after the execution by the Company and the Trustee
of any supplemental indenture pursuant to the provisions of
Section 902, the Company shall give notice to all Holders of
Securities of such fact, setting forth in general terms the
substance of such supplemental indenture, in the manner provided
in Section 106. Any failure of the Company to give such notice,
or any defect therein, shall not in any way impair or affect the
validity of any such supplemental indenture.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest.
------------------------------------------
The Company will duly and punctually pay the principal of
(and premium, if any) and interest on the Securities in
accordance with the terms of the Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
-------------------------------
The Company hereby appoints The Chase Manhattan Bank as its
agent in The City of New York where Securities may be presented
or surrendered for payment, where Securities may be surrendered
for registration of transfer or exchange, where conversion notices,
certificates and other items required to be delivered to effect
conversion may be delivered and where notices and demands to or
upon the Company in respect of the Securities and this Indenture
may be served.
The Company hereby also appoints the Corporate Trust Office
of the Trustee as Paying Agent for the payment of principal of
and interest on the Securities and as Conversion Agent for the
Conversion of any of the Securities in accordance with Article
Thirteen, and appoints the Corporate Trust Office of the Trustee
as transfer agent where Securities may be surrendered for
registration of transfer or exchange.
The Company may at any time and from time to time vary or
terminate the appointment of any such agent or appoint any
additional agents with or without cause for any or all of such
purposes; provided, however, that until all of the Securities
have been delivered to the Trustee for cancellation, or moneys
sufficient to pay the principal of and interest on the Securities
have been made available for payment and either paid or returned
to the Company pursuant to the provisions of Section 1003, the
Company will maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be presented
or surrendered for payment, where Securities may be surrendered
for registration of transfer or exchange, where Securities may be
surrendered for conversion and where notices and demands to or
upon the Company, in respect of the Securities and this Indenture
may be served. The Company will give prompt written notice to
the Trustee, and the Company will, or will cause the Trustee to,
give notice to Holders of Securities in the manner specified in
Section 106, of the appointment or termination of any such agents
and of the location and any change in the location of any such
office or agency.
If at any time the Company shall fail to maintain any such
required office or agency, or shall fail to furnish the Trustee
with the address thereof, presentations and surrenders may be
made and notices and demands may be served on and Securities may
be surrendered for conversion to the Corporate Trust Office of
the Trustee, and the Company hereby appoints the same as its
agent to receive such respective presentations, surrenders,
notices and demands.
SECTION 1003. Money for Security Payments to Be Held in Trust.
-----------------------------------------------
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,
or interest on any of the Securities, segregate and hold in trust
for the benefit of the Persons entitled thereto a sum sufficient
to pay the principal, premium, if any, or interest so becoming
due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and the Company will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents,
it will, on or prior to 10:00 a.m. on each due date of the
principal of, premium, if any, or interest on any Securities
(including any Repurchase Date), deposit with such Paying
Agent(s) a sum in immediately available funds on the payment date
sufficient to pay the principal, premium, if any, or interest so
becoming due, such sum to be held as provided by the Trust
Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of any failure so to
act.
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section, that such Paying Agent will:
(1) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent;
(2) give the Trustee written notice of any default by the
Company (or any other obligor upon the Securities) in the making
of any payment of principal, premium, if any, or interest; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held by such Paying Agent.
The Company may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other
purpose, pay, or by Company Order direct any Paying Agent to pay,
to the Trustee all sums held in trust by the Company or such
Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the
principal of, premium, if any, or interest on any Security and
remaining unclaimed for two years after such principal, premium,
if any, or interest has become due and payable shall be paid to
the Company on Company Request, or (if then held by the Company)
shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look
only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in
a newspaper in the English language, customarily published on
each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains
unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to
the Company.
SECTION 1004. Statement by Officers as to Default.
-----------------------------------
The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year of the Company, an Officers'
Certificate stating whether or not to the best knowledge of the
signers thereof the Company is in compliance on such date with
all conditions and covenants under the Indenture (without regard
to any period of grace or requirement of notice provided
hereunder).
The Company will deliver to the Trustee, forthwith upon
becoming aware of any default or Event of Default under this
Indenture, an Officers' Certificate specifying with particularity
such default or Event of Default and further stating what action
the Company has taken, is taking or proposes to take with respect
thereto. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or
both would become, an Event of Default.
Any notice required to be given under this Section 1004
shall be delivered to the Trustee at its Corporate Trust Office.
SECTION 1005. Existence.
---------
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and
effect its existence, rights (charter and statutory) and
franchises; provided, however, that the Company shall not be
required to preserve any such right or franchise if the Company
shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that
the loss thereof is not disadvantageous in any material respect
to the Holders.
SECTION 1006. Maintenance of Properties.
-------------------------
The Company will cause all properties used or useful in the
conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments
and improvements thereof, all as in the judgment of the Company
may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all
times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the operation or
maintenance of any of such properties if such discontinuance is,
in the judgment of the Company, desirable in the conduct of its
business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 1007. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all
taxes, assessments and governmental charges levied or imposed
upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary, (2) all lawful claims
for labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Company or any Subsidiary;
provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate
proceedings.
SECTION 1008. Book-Entry System.
-----------------
If the Securities cease to trade in DTC's book-entry
settlement system, the Company covenants and agrees that it shall
use reasonable efforts to make such other book-entry arrangements
that it determines are reasonable for the Securities.
SECTION 1009. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply
with any covenant or condition set forth in Sections 1006 and
1007, inclusive, if before the time for such compliance the
Holders of not less than a majority in principal amount of the
Outstanding Securities shall, by Act of such Holders, either
waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver
shall extend to or affect such covenant or condition except to
the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties
of the Trustee in respect of any such covenant or condition shall
remain in full force and effect.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption.
-------------------
The Securities may be redeemed at the election of the
Company, as a whole or from time to time in part, at any time on
or after May 16, 2000, at the Redemption Prices specified in
the form of Security hereinbefore set forth, together with
accrued interest to the Redemption Date.
SECTION 1102. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company, as
permitted or required by any provision of this Indenture, shall
be made in accordance with such provision and this Article
Eleven.
SECTION 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities
pursuant to Section 1101 shall be evidenced by a Board
Resolution. In case of any redemption at the election of the
Company, the Company shall, at least 30 days prior to the
Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee, in
writing, of such Redemption Date and of the principal amount
of Securities to be redeemed.
SECTION 1104. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more
than 30 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities not previously called for redemption,
by such method as the Trustee shall deem fair and appropriate and
which may provide for the selection for redemption of portions
(equal to $1,000 or any integral multiple thereof) of the
principal amount of Securities of a denomination larger than
$1,000.
If any Security selected for partial redemption is converted
in part before termination of the conversion right with respect
to the portion of the Security so selected, the converted portion
of such Security shall be deemed (so far as may be) to be the
portion selected for redemption. Securities which have been
converted during a selection of Securities to be redeemed shall
be treated by the Trustee as Outstanding for the purpose of such
selection.
The Trustee shall promptly notify the Company and each
Security Registrar in writing of the Securities selected for
redemption and, in the case of any Securities selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Securities redeemed
or to be redeemed only in part, to the portion of the principal
amount of such Securities which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 20 nor more than 60 days
prior to the Redemption Date, to each Holder of Securities to be
redeemed, at such Holder's address appearing in the Security
Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities are to be
redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Securities
to be redeemed,
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be
redeemed and that interest thereon will cease to accrue on and
after said date,
(5) the conversion price, the date on which the right to
convert the principal of the Securities to be redeemed will
terminate and the place or places where such Securities may be
surrendered for conversion, and
(6) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election
of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the
Company, and such notice, when given to the Holders, shall be
irrevocable.
SECTION 1106. Deposit of Redemption Price.
---------------------------
Not less than one Business Day prior to any Redemption Date,
the Company shall deposit with the Trustee or with a Paying Agent
(or, if the Company is acting as its own Paying Agent, segregate
and hold in trust as provided in Section 1003) an amount of money
(which shall be in immediately available funds on such Redemption
Date) sufficient to pay the Redemption Price of, and (except if
the Redemption Date shall be an Interest Payment Date) accrued
interest on, all the Securities which are to be redeemed on that
date other than any Securities called for redemption on that date
which have been converted prior to the date of such deposit.
If any Security called for redemption is converted, any
money deposited with the Trustee or with any Paying Agent or so
segregated and held in trust for the redemption of such Security
shall (subject to any right of the Holder of such Security or any
Predecessor Security to receive interest as provided in the last
paragraph of Section 307) be paid to the Company upon Company
Request or, if then held by the Company, shall be discharged from
such trust.
SECTION 1107. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified,
and from and after such date (unless the Company shall default in
the payment of the Redemption Price, including accrued interest)
such Securities shall cease to bear interest. Upon surrender of
any such Security for redemption in accordance with said notice,
such Security shall be paid by the Company at the Redemption
Price, together with accrued interest to the Redemption Date;
provided, however, that installments of interest whose
-------- -------
Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of
business on the relevant Record Dates according to their terms
and the provisions of Section 307.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and
premium, if any) shall, until paid, bear interest from the
Redemption Date at a rate of _% per annum.
SECTION 1108. Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be
surrendered at an office or agency of the Company designated for
that purpose pursuant to Section 1002 (with, if the Company or
the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities, of
any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so
surrendered.
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Securities Subordinate to Senior Indebtedness.
---------------------------------------------
The Company covenants and agrees, and each Holder of a
Security, by his acceptance thereof, likewise covenants and
agrees, that, to the extent and in the manner hereinafter set
forth in this Article Twelve (subject to the provisions of
Article Four), the indebtedness represented by the Securities and
the payment of the principal of (and premium, if any) and
interest on each and all of the Securities are hereby expressly
made subordinate and subject in right of payment to the prior
payment in full of all Senior Indebtedness. Whenever in this
Article Twelve there is a reference, in any context, to the
principal of any Security as of any time, such reference shall be
deemed to include reference to the Repurchase Price payable in
cash or Redemption Price in respect of such Security to the
extent that such Repurchase Price payable in cash or Redemption
Price is, was or would be so payable at such time, and express
mention of the Repurchase Price and the Redemption Price in any
provision of this Article Twelve shall not be construed as
excluding the Repurchase Price payable in cash or Redemption
Price in those provisions of this Article Twelve when such
express mention is not made.
SECTION 1202. Payment Over of Proceeds Upon Dissolution, Etc.
----------------------------------------------
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or
other similar case or proceeding in connection therewith,
relative to the Company or to its creditors, as such, or to its
assets, or (b) any liquidation, dissolution or other winding up
of the Company, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy, or (c) any assignment for
the benefit of creditors or any other marshalling of assets and
liabilities of the Company, then and in any such event the
holders of Senior Indebtedness shall be entitled to receive
payment in full of all amounts due or to become due on or in
respect of all Senior Indebtedness in cash or other immediately
available funds, or provision shall be made for such payment in
cash or other immediately available funds or otherwise in a
manner satisfactory to each holder of Senior Indebtedness with
respect to its indebtedness, before the Holders of the Securities
are entitled to receive any payment on account of principal of
(or premium, if any) or interest on the Securities, and to that
end the holders of Senior Indebtedness shall be entitled to
receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property
or securities, which may be payable or deliverable in respect of
the Securities in any such case, proceeding, dissolution,
liquidation or other winding up or event.
In the event that, notwithstanding the foregoing provisions
of this Section, the Trustee or the Holder of any Security shall
have received any payment or distribution of assets of the
Company of any kind or character, whether in cash, securities or
other property, before all Senior Indebtedness is paid in full or
payment thereof provided for, and if such fact shall, at or prior
to the time of such payment or distribution, have been made
actually known to a Responsible Officer of the Trustee or, as
the case may be, such Holder, then and in such event such payment
or distribution shall be paid over or delivered forthwith to the
trustee in bankruptcy, receiver, liquidating trustee, custodian,
assignee, agent or other Person making payment or distribution of
assets of the Company for application to the payment of all Senior
Indebtedness remaining unpaid, 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.
For purposes of this Article only, the words "cash,
securities or other property" 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 which shares of stock
are subordinated in right of payment to all then outstanding
Senior Indebtedness to substantially the same extent as, or to a
greater extent than, the Securities are so subordinated as
provided in this Article Twelve. The consolidation of the
Company with, or the merger of the Company into, another Person
or the liquidation or dissolution of the Company following the
conveyance or transfer of its properties and assets substantially
as an entirety to another Person upon the terms and conditions
set forth in Article Eight shall not be deemed a dissolution,
winding up, liquidation, reorganization, assignment for the
benefit of creditors or marshalling of assets and liabilities of
the Company for the purposes of this Section if the Person formed
by such consolidation or into which the Company is merged or
which acquires by conveyance or transfer such properties and
assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article Eight.
SECTION 1203. Prior Payment to Senior Indebtedness Upon
-----------------------------------------
Acceleration of Securities.
--------------------------
In the event that any Securities are declared due and
payable before their Stated Maturity, then and in such event the
holders of the Senior Indebtedness outstanding at the time such
Securities so become due and payable shall be entitled to receive
payment in full of all amounts due or to become due on or in
respect of such Senior Indebtedness, or provision shall be made
for such payment in money or money's worth, before the Holders of
the Securities are entitled to receive any payment by the Company
on account of the principal of (or premium, if any) or interest
on the Securities or on account of the purchase or other
acquisition of Securities.
In the event that, notwithstanding the foregoing, the
Company shall make any payment to the Trustee or the Holder of
any Security prohibited by the foregoing provisions of this
Section, and if such fact shall, at or prior to the time of such
payment, have been made actually known to a Responsible Officer
of the Trustee or, as the case may be, such Holder, then and in
such event such payment shall be paid over and delivered forthwith
to the Company.
The provisions of this Section shall not apply to any
payment with respect to which Section 1202 would be applicable.
SECTION 1204. No Payment When Senior Indebtedness in Default.
----------------------------------------------
(a) In the event and during the continuation of any default
in the payment of principal of (or premium, if any) or interest
on (including a default under any redemption or repurchase
obligation with respect to) any Senior Indebtedness beyond any
applicable grace period with respect thereto or in the event that
any other event of default with respect to any Senior
Indebtedness shall have occurred and be continuing which would
then permit the holders of such Senior Indebtedness to declare
such Senior Indebtedness due and payable prior to the date on
which it would otherwise have become due and payable, unless and
until such event of default shall have been cured or waived or
shall have ceased to exist after written notice to the Company
and the Trustee by any holder of such Senior Indebtedness, or (b)
in the event any judicial proceeding shall be pending with
respect to any such default in payment or event of default, then
no payment shall be made by the Company on account of principal
of (or premium, if any) or interest on the Securities or on
account of the purchase, redemption or other acquisition of
Securities.
In the event that, notwithstanding the foregoing, the
Company shall make any payment to the Trustee or the Holder of
any Security prohibited by the foregoing provisions of this
Section, and if such fact shall, at or prior to the time of such
payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be
paid over and delivered forthwith to the Company, in the case of
the Trustee, or the Trustee, in the case of such Holder.
The provisions of this Section shall not apply to any
payment with respect to which Section 1202 would be applicable.
SECTION 1205. Payment Permitted If No Default.
-------------------------------
Nothing contained in this Article or elsewhere in this
Indenture or in any of the Securities shall prevent (a) the
Company, at any time except during the pendency of any case,
proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshalling of
assets and liabilities of the Company referred to in Section
1202, or under the conditions described in Sections 1203 and
1204, from making payments at any time of principal of (and
premium, if any) or interest on the Securities, or (b) the
application by the Trustee of any money deposited with it
hereunder to the payment of or on account of the principal of
(and premium, if any) or interest on the Securities or the
retention of such payment by the Holders, if, at the time of such
application by the Trustee, a Responsible Officer of the Trustee
did not have knowledge that such payment would have been prohibited
by the provisions of this Article.
SECTION 1206. Subrogation to Rights of Holders of Senior
------------------------------------------
Indebtedness.
------------
Subject to the payment in full of all Senior Indebtedness,
the Holders of the Securities 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 to
the rights of the holders of such Senior Indebtedness to receive
payments and distributions of cash, property and securities
applicable to the Senior Indebtedness until the principal of (and
premium, if any) and interest on the Securities shall be paid in
full. For 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
Securities or the Trustee would be entitled except for the
provisions of this Article, and no payments over pursuant to the
provisions of this Article to the holders of Senior Indebtedness
by Holders of the Securities or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Indebtedness
and the Holders of the Securities, be deemed to be a payment or
distribution by the Company to or on account of the Senior
Indebtedness.
SECTION 1207. Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article are and are intended solely
for the purpose of defining the relative rights of the Holders of
the Securities on the one hand and the holders of Senior
Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Securities is
intended to or shall (a) impair, as among the Company, its
creditors other than holders of Senior Indebtedness and the
Holders of the Securities, the obligation of the Company, which
is absolute and unconditional, to pay to the Holders of the
Securities the principal of (and premium, if any) and interest on
the Securities as and when the same shall become due and payable
in accordance with their terms; or (b) affect the relative rights
against the Company of the Holders of the Securities and
creditors of the Company other than the holders of Senior
Indebtedness; or (c) prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior
Indebtedness to receive cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder.
SECTION 1208. Trustee to Effectuate Subordination.
-----------------------------------
Each holder of a Security 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 and appoints the Trustee
his attorney-in-fact for any and all such purposes.
SECTION 1209. No Waiver of Subordination Provisions.
-------------------------------------
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 of any Senior
Indebtedness, or by any non-compliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of
any knowledge thereof any such holder may have or be otherwise
charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time
and from time to time, without the consent of or notice to the
Trustee or the Holders of the Securities, without incurring
responsibility to the Holders of the Securities and without
impairing or releasing the subordination provided in this Article
or the obligations hereunder of the Holders of the Securities to
the holders of Senior Indebtedness, do any one or more of the
following: (i) change the manner, place or terms of payment or
extend the time of payment of, or renew, increase or alter,
Senior Indebtedness, or otherwise amend or supplement in any
manner Senior Indebtedness or any instrument evidencing the same
or any agreement under which Senior Indebtedness is outstanding;
(ii)_sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness;
(iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 1210. Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee
of any fact known to the Company which would prohibit the making
of any payment to or by the Trustee in respect of the Securities.
Notwithstanding the provisions of this Article or any other
provision of this Indenture, the Trustee shall not be charged
with knowledge of the existence of any facts which would prohibit
the making of any payment to or by the Trustee in respect of the
Securities, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior
Indebtedness or from any trustee therefor; and, prior to the
receipt of any such written notice, the Trustee, subject to the
provisions of Section 601, shall be entitled in all respects to
assume that no such facts exist; provided, however, that if the
-------- -------
Trustee shall not have received the notice provided for in this
Section at least two Business Days prior to the date upon which
by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of
(and premium, if any) or interest on any Security), then,
anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to receive such money
and to apply the same to the purpose for which such money was
received and shall not be affected by any notice to the contrary
which may be received by it within two Business Days prior to
such date.
Notwithstanding anything in this Article Twelve to the
contrary, nothing shall prevent any payment by the Trustee to the
Holders of monies deposited with it pursuant to Section 401, and
any such payment shall not be subject to the provisions of
Sections 1202, 1203 or 1204.
Subject to the provisions of Article Six, the Trustee shall
be entitled to conclusively rely on the delivery to it of a
written notice by a Person representing himself to be a holder of
Senior Indebtedness (or a trustee therefor) to establish that
such notice has been given by a holder of Senior Indebtedness (or
a trustee therefor). 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, 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, 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.
SECTION 1211. Reliance on Judicial Order or Certificate of
--------------------------------------------
Liquidating Agent.
-----------------
Upon any payment or distribution of assets of the Company
referred to in this Article, the Trustee, subject to the
provisions of Section 601, and the Holders of the Securities
shall be entitled to conclusively rely upon any order or decree
entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or
proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee
for the benefit of creditors, agent or other Person making such
payment or distribution, delivered to the Trustee or to the
Holders of Securities, for the purpose of ascertaining the
Persons entitled to participate in such payment or 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.
SECTION 1212. Trustee Not Fiduciary for Holders of Senior
-------------------------------------------
Indebtedness.
------------
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness and shall not be liable to any
such holders if it shall in good faith mistakenly pay over or
distribute to Holders of Securities or to the Company or to any
other Person cash, property or securities to which any holders of
Senior Indebtedness shall be entitled by virtue of this Article
or otherwise.
SECTION 1213. Rights of Trustee as Holder of Senior
-------------------------------------
Indebtedness; Preservation of Trustee's Rights.
----------------------------------------------
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article with respect to any
Senior Indebtedness which may at any time be held by it, to the
same extent as any other holder of Senior Indebtedness, and
nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder.
Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 607.
SECTION 1214. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting
hereunder, the term "Trustee" as used in this Article shall in
such case (unless the context otherwise requires) be construed as
extending to and including such Paying Agent within its meaning
as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the
Trustee; provided, however, that Section 1213 shall not apply to
the Company or any Affiliate of the Company if it or such
Affiliate acts as Paying Agent.
SECTION 1215. Certain Conversions Deemed Payment.
----------------------------------
For the purposes of this Article only, (1) the issuance and
delivery of junior securities upon conversion of Securities in
accordance with Article Thirteen or upon the repurchase of
Securities in accordance with Article Fourteen shall not be
deemed to constitute a payment or distribution on account of the
principal of or premium or interest on Securities or on account
of the purchase or other acquisition of Securities, and (2) the
payment, issuance or delivery of cash, property or securities
(other than junior securities) upon conversion of a Security
shall be deemed to constitute payment on account of the principal
of such Security. For the purposes of this Section, the term
"junior securities" means (a) shares of any stock of any class of
the Company and any cash, securities or other property into which
the Securities are convertible pursuant to Article Thirteen 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 Securities are so subordinated as provided in this Article.
Nothing contained in this Article or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as among the
Company, its creditors other than holders of Senior Indebtedness
and the Holders of the Securities, the right, which is absolute
and unconditional, of the Holder of any Security to convert such
Security in accordance with Article Thirteen or to exchange such
Security for Common Stock in accordance with Article Fourteen if
the Company elects to satisfy its obligation under Article
Fourteen by the delivery of Common Stock.
ARTICLE THIRTEEN
Conversion of Securities
SECTION 1301. Conversion Privilege and Conversion Rate.
----------------------------------------
Subject to and upon compliance with the provisions of this
Article Thirteen, at the option of the Holder thereof, any
Security may be converted at any time into fully paid and
nonassessable shares (calculated as to each conversion to the
nearest 1/100th of a share) of Common Stock of the Company at the
Conversion Rate, determined as hereinafter provided, in effect at
the time of conversion. Such conversion right shall expire at
the close of business on May 15, 2004, subject, in the case of
conversion of any Global Security, to any Applicable Procedures.
In case a Security or portion thereof is called for redemption at
the election of the Company or the Holder thereof exercises his
right to require the Company to repurchase a Security or portion
thereof, such conversion right in respect of such Security, shall
expire (a) at the close of business on the Redemption Date, in
the case of a Security called for redemption, and (b) at the
close of business on the Repurchase Date, in the case of a
Security tendered for repurchase, in each case unless the Company
defaults in making the payment due upon redemption or repurchase,
as the case may be, and in each case subject as aforesaid to any
Applicable Procedures with respect to any Global Security.
The rate at which shares of Common Stock shall be delivered
upon conversion (herein called the "Conversion Rate") shall be
initially o shares of Common Stock for each $1,000 principal
amount of Securities. The Conversion Rate shall be adjusted in
certain instances as provided in this Article Thirteen.
SECTION 1302. Exercise of Conversion Privilege.
--------------------------------
In order to exercise the conversion privilege, the Holder of
any Security to be converted shall surrender such Security, duly
endorsed or assigned to the Company or in blank, at any office or
agency of the Company maintained for that purpose pursuant to
Section 1002 (any city in which any Conversion Agent is located
being called herein a "Place of Conversion"), accompanied by a
duly signed conversion notice substantially in the form set forth
in Section 205 stating that the Holder elects to convert such
Security or, if less than the entire principal amount thereof is
to be converted, the portion thereof to be converted. Each
Security surrendered for conversion (in whole or in part) during
the period from the close of business on any Regular Record Date
next preceding any Interest Payment Date to the opening of
business on such Interest Payment Date shall (except in the case
of any Security or portion thereof which has been called for
redemption on a Redemption Date, or which is repurchasable on a
Repurchase Date, occurring, in either case, within such period)
be accompanied by payment in New York Clearing House funds or
other funds acceptable to the Company of an amount equal to the
interest payable on such Interest Payment Date on the principal
amount of such Security (or part thereof, as the case may be)
being surrendered for conversion. The interest so payable on
such Interest Payment Date with respect to any Security (or
portion thereof, if applicable) which has been called for
redemption on a Redemption Date, or is repurchasable on a
Repurchase Date, occurring, in either case, during the period
from the close of business on any Regular Record Date next
preceding any Interest Payment Date to the opening of business on
such Interest Payment Date, which Security (or portion thereof,
if applicable) is surrendered for conversion during such period,
shall be paid to the Holder of such Security on the preceding
Regular Record Date, notwithstanding the exercise of the right of
conversion. Except as provided in this paragraph and subject to
the last paragraph of Section 307, no cash payment or adjustment
shall be made upon any conversion on account of any interest
accrued from the Interest Payment Date next preceding the
conversion date, in respect of any Security (or part thereof, as
the case may be) surrendered for conversion, or on account of any
dividends on the Common Stock issued upon conversion. The
Company's delivery to the Holder of the number of shares of
Common Stock (and cash in lieu of fractions thereof, as provided
in this Indenture) into which a Security is convertible will be
deemed to satisfy the Company's obligation to pay the principal
amount of the Security.
Securities shall be deemed to have been converted
immediately prior to the close of business on the day of
surrender of such Securities for conversion in accordance with
the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person
or Persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder
or holders of such Common Stock at such time. As promptly as
practicable on or after the conversion date, the Company shall
issue and deliver to the Trustee, for delivery to the Holder, a
certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in
lieu of any fraction of a share, as provided in Section 1303.
In the case of any Security which is converted in part only,
upon such conversion the Company shall execute and the Trustee
shall authenticate and deliver to the Holder thereof, at the
expense of the Company, a new Security or Securities of
authorized denominations in an aggregate principal amount equal
to the unconverted portion of the principal amount of such
Security. A Security may be converted in part, but only if the
principal amount of such Security to be converted is any integral
multiple of $1,000 and the principal amount of such security to
remain Outstanding after such conversion is equal to $1,000 or
any integral multiple of $1,000 in excess thereof.
SECTION 1303. Fractions of Shares.
-------------------
No fractional shares of Common Stock shall be issued upon
conversion of any Security or Securities. If more than one
Security shall be surrendered for conversion at one time by the
same Holder, the number of full shares which shall be issuable
upon conversion thereof shall be computed on the basis of the
aggregate principal amount of the Securities (or specified
portions thereof) so surrendered. Instead of any fractional
share of Common Stock which would otherwise be issuable upon
conversion of any Security or Securities (or specified portions
thereof), the Company shall calculate and pay a cash adjustment
in respect of such fraction (calculated to the nearest 1/100th of
a share) in an amount equal to the same fraction of the Closing
Price Per Share at the close of business on the day of
conversion.
SECTION 1304. Adjustment of Conversion Rate.
-----------------------------
The Conversion Rate shall be subject to adjustments from
time to time as follows:
(1) In case the Company shall pay or make a dividend or
other distribution on any class of capital stock of the Company
payable in shares of Common Stock, the Conversion Rate in effect
at the opening of business on the day following the date fixed
for the determination of shareholders entitled to receive such
dividend or other distribution shall be increased by dividing
such Conversion Rate by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the
total number of shares constituting such dividend or other
distribution, such increase to become effective immediately after
the opening of business on the day following the date fixed for
such determination. For the purposes of this paragraph (1), the
number of shares of Common Stock at any time outstanding shall
not include shares held in the treasury of the Company but shall
include shares issuable in respect of scrip certificates issued
in lieu of fractions of shares of Common Stock. The Company will
not pay any dividend or make any distribution on shares of Common
Stock held in the treasury of the Company.
(2) In case the Company shall issue rights, options or
warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per
share less than the current market price per share (determined as
provided in paragraph (8) of this Section 1304) of the Common
Stock on the date fixed for the determination of stockholders
entitled to receive such rights, options or warrants, the
Conversion Rate in effect at the opening of business on the day
following the date fixed for such determination shall be
increased by dividing such Conversion Rate by a fraction of which
the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would
purchase at such current market price and the denominator shall
be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination plus the
number of shares of Common Stock so offered for subscription or
purchase, such increase to become effective immediately after the
opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (2), the
number of shares of Common Stock at any time outstanding shall
not include shares held in the treasury of the Company but shall
include shares issuable in respect of scrip certificates issued
in lieu of fractions of shares of Common Stock. The Company will
not issue any rights, options or warrants in respect of shares of
Common Stock held in the treasury of the Company.
Notwithstanding the foregoing, (i) if the options, rights or
warrants described in this Section 1304(2) are exercisable only
upon the occurrence of certain triggering events, then the
Conversion Rate will not be adjusted until such triggering events
occur and (ii) if such options, rights or warrants expire
unexercised, the Conversion Rate will be readjusted to take into
account only the actual number of such options, rights or
warrants which were exercised.
(3) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Rate in effect at the opening of business on the day
following the day upon which such subdivision becomes effective
shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a
smaller number of shares of Common Stock, the Conversion Rate in
effect at the opening of business on the day following the day
upon which such combination becomes effective shall be
proportionately reduced, such increase or reduction, as the case
may be, to become effective immediately after the opening of
business on the day following the day upon which such subdivision
or combination becomes effective.
(4) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its
indebtedness, shares of any class of capital stock, or other
property (including securities, but excluding (i) any rights,
options or warrants referred to in paragraph (2) of this Section,
(ii) any dividend or distribution paid exclusively in cash, (iii)
any dividend or distribution referred to in paragraph (1) of this
Section and (iv) any merger or consolidation to which Section
1311 applies), the Conversion Rate shall be adjusted so that the
same shall equal the rate determined by dividing the Conversion
Rate in effect immediately prior to the close of business on the
date fixed for the determination of stockholders entitled to
receive such distribution by a fraction of which the numerator
shall be the current market price per share (determined as
provided in paragraph (8) of this Section) of the Common Stock on
the date fixed for such determination (the "Reference Date") less
the then fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described
in a Board Resolution filed with the Trustee) on the Reference
Date of the portion of the assets, shares or evidences of
indebtedness so distributed applicable to one share of Common
Stock and the denominator shall be the current market price per
share of the Common Stock on the Reference Date, such adjustment
to become effective immediately prior to the opening of business
on the day following the Reference Date.
(5) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any
cash that is distributed as part of a distribution referred to in
paragraph (4) of this Section) in an aggregate amount that,
combined together with (I) the aggregate amount of any other cash
distributions to all holders of its Common Stock made exclusively
in cash within the 12 months preceding the date of payment of
such distribution and in respect of which no adjustment pursuant
to this paragraph (5) has been made and (II) the aggregate of any
cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described
in a Board Resolution) of consideration paid or payable in
respect of any tender offer by the Company or any of its
Subsidiaries for all or any portion of the Common Stock concluded
within the 12 months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to
paragraph (6) of this Section 1304 has been made (the "combined
cash and tender amount"), exceeds 10% of the product of the
current market price per share (determined as provided in
paragraph (8) of this Section 1304) of the Common Stock on the
date for the determination of holders of shares of Common Stock
entitled to receive such distribution times the number of shares
of Common Stock outstanding on such date (the "aggregate current
market price"), then, and in each such case, immediately after
the close of business on such date for determination, the
Conversion Rate shall be adjusted so that the same shall equal
the rate determined by dividing the Conversion Rate in effect
immediately prior to the close of business on the date fixed for
determination of the stockholders entitled to receive such
distribution by a fraction (i) the numerator of which shall be
equal to the current market price per share (determined as
provided in paragraph (8) of this Section) of the Common Stock on
the date fixed for such determination less an amount equal to the
quotient of (x) the excess of such combined cash and tender
amount over 10% of such aggregate current market price divided by
(y) the number of shares of Common Stock outstanding on such date
for determination and (ii) the denominator of which shall be
equal to the current market price per share (determined as
provided in paragraph (8) of this Section 1304) of the Common
Stock on such date for determination.
(6) 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 or exchange (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 (I) the aggregate of the cash plus the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board
Resolution), as of the expiration of such tender or exchange
offer, of consideration payable in respect of any other tender or
exchange offer by the Company or any Subsidiary for all or any
portion of the Common Stock expiring within the 12 months
preceding the expiration of such tender or exchange offer and in
respect of which no adjustment pursuant to this paragraph (6) has
been made and (II) the aggregate amount of any cash dividends or
distributions to all holders of the Company's Common Stock within
12 months preceding the expiration of such tender or exchange
offer and in respect of which no adjustment pursuant to paragraph
(5) of this Section has been made (the "combined tender and cash
amount") exceeds 10% of the product of the current market price
per share of the Common Stock (determined as provided in
paragraph (8) of this Section 1304) as of the last time (the
"Expiration Time") tenders or exchanges could have been made
pursuant to such tender or exchange offer (as it may be amended)
times the number of shares of Common Stock outstanding (including
any tendered or exchanged shares) as of 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 Rate shall be adjusted so that the same shall equal
the rate determined by dividing the Conversion Rate immediately
prior to close of business on the date of the Expiration Time by
a fraction (i) the numerator of which shall be equal to (A) the
product of (I) the current market price per share of the Common
Stock (determined as provided in paragraph (8) of this Section
1304) on the date of the Expiration Time multiplied by (II) the
number of shares of Common Stock outstanding (including any
tendered or exchanged shares) on the date of the Expiration Time
less (B) the combined tender and cash amount, and (ii) the
denominator of which shall be equal to the product of (A) the
current market price per share of the Common Stock (determined as
provided in paragraph (8) of this Section 1304) as of the
Expiration Time multiplied by (B) the number of shares of Common
Stock outstanding (including any tendered or exchanged shares) as
of the Expiration Time less the number of all shares validly
tendered or exchanged and not withdrawn as of the Expiration Time
(the shares deemed so accepted up to any such maximum, being
referred to as the "Purchased Shares").
(7) The reclassification of Common Stock into securities
other than Common Stock (other than any reclassification upon a
consolidation or merger to which Section 1311 applies) shall be
deemed to involve (a) a distribution of such securities other
than Common Stock to all holders of Common Stock (and the
effective date of such reclassification shall be deemed to be
"the date fixed for the determination of stockholders entitled to
receive such distribution" and "the date fixed for such
determination" within the meaning of paragraph (4) of this
Section), and (b) a subdivision or combination, as the case may
be, of the number of shares of Common Stock outstanding
immediately prior to such reclassification into the number of
shares of Common Stock outstanding immediately thereafter (and
the effective date of such reclassification shall be deemed to be
"the day upon which such subdivision becomes effective" or "the
day upon which such combination becomes effective", as the case
may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (3) of this
Section 1304).
(8) For the purpose of any computation under paragraphs
(2), (4), (5) or (6) of this Section 1304, the current market
price per share of Common Stock on any date shall be calculated
by the Company and be deemed to be the average of the daily
Closing Prices Per Share for the five consecutive Trading Days
selected by the Company commencing not more than 10 Trading Days
before, and ending not later than, the earlier of the day in
question and the day before the "ex" date with respect to the
issuance or distribution requiring such computation. For
purposes of this paragraph, the term "'ex' date", when used with
respect to any issuance or distribution, means the first date on
which the Common Stock trades regular way in the applicable
securities market or on the applicable securities exchange
without the right to receive such issuance or distribution.
(9) No adjustment in the Conversion Rate shall be required
unless such adjustment (plus any adjustments not previously made
by reason of this paragraph (9)) would require an increase or
decrease of at least one percent in such rate; provided, however,
-------- --------
that any adjustments which by reason of this paragraph (9) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Article shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
(10) The Company may make such increases in the Conversion
Rate, for the remaining term of the Securities or any shorter
term, in addition to those required by paragraphs (1), (2), (3),
(4), (5) and (6) of this Section 1304, as it considers to be
advisable in order to avoid or diminish any income tax to any
holders of shares of Common Stock resulting from any dividend or
distribution of stock or issuance of rights or warrants to
purchase or subscribe for stock or from any event treated as such
for income tax purposes. The Company shall have the power to
resolve any ambiguity or correct any error in this paragraph (10)
and its actions in so doing shall, absent manifest error, be
final and conclusive.
(11) To the extent permitted by applicable law, the
Company from time to time may increase the Conversion Rate by any
amount for any period of time if the period is at least twenty
(20) days, the increase is irrevocable during such period, and
the Board of Directors shall have made a determination that such
increase would be in the best interests of the Company, which
determination shall be conclusive; provided, however, that no such
-------- --------
increase shall be taken into account for purposes of determining
whether the Closing Price Per Share of the Common Stock equals or
exceeds 105% of the Conversion Price in connection with an event
which would otherwise be a Change of Control pursuant to Section
1404. Whenever the Conversion Rate is increased pursuant to the
preceding sentence, the Company shall give notice of the increase
to the Holders in the manner provided in Section 106 at least
fifteen (15) days prior to the date the increased Conversion Rate
takes effect, and such notice shall state the increased
Conversion Rate and the period during which it will be in effect.
SECTION 1305. Notice of Adjustments of Conversion Rate.
----------------------------------------
Whenever the Conversion Rate is adjusted as herein provided:
(1) the Company shall compute the adjusted Conversion Rate
in accordance with Section 1304 and shall prepare a certificate
signed by the principal accounting or financial officer of the
Company setting forth the adjusted Conversion Rate and showing in
reasonable detail the facts upon which such adjustment is based,
and such certificate shall promptly be filed with the Trustee and
with each Conversion Agent; and
(2) a notice stating that the Conversion Rate has been
adjusted and setting forth the adjusted Conversion Rate shall
forthwith be prepared, and as soon as practicable after it is
prepared, such notice shall be provided by the Company, or the
Company shall cause such notice to be provided by the Trustee to,
all Holders in accordance with Section 106.
Neither the Trustee nor any Conversion Agent shall be under any
duty or responsibility with respect to any such certificate or
the information and calculations contained therein, except to
exhibit the same to any Holder of Securities desiring inspection
thereof at its office during normal business hours.
SECTION 1306. Notice of Certain Corporate Action.
----------------------------------
In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable (i) otherwise than
exclusively in cash or (ii) exclusively in cash in an amount that
would require any adjustment pursuant to Section 1304; or
(b) the Company shall authorize the granting to the holders
of its Common Stock generally of rights, options or warrants to
subscribe for or purchase any shares of capital stock of any
class or of any other rights; or
(c) of any reclassification of the Common Stock of the
Company, or of any consolidation, merger or share exchange to
which the Company is a party and for which approval of any
stockholders of the Company is required, or of the conveyance,
sale, transfer or lease 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; or
(e) the Company or any Subsidiary shall commence a tender
offer for all or a portion of the Company's outstanding shares of
Common Stock (or shall amend any such tender offer);
then the Company shall cause to be filed, or the Company shall
cause the Trustee to cause to be filed, at each office or agency
maintained for the purpose of conversion of Securities pursuant
to Section 1002, and the Company shall cause to be provided, or
the Company shall cause the Trustee to cause to be provided, to
all Holders in accordance with Section 106, at least 20 days (or
10 days in any case specified in clause (a) or (b) above) prior
to the applicable record, expiration or effective date
hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend,
distribution, rights, options or warrants, or, if a record is not
to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights,
options or warrants are to be determined, (y) the date on which
the right to make tenders under such tender offer expires or (z)
the date on which such reclassification, consolidation, merger,
conveyance, transfer, sale, lease, dissolution, liquidation or
winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, conveyance, transfer,
sale, lease, dissolution, liquidation or winding up. Neither the
failure to give such notice or the notice referred to in the
following paragraph nor any defect therein shall affect the
legality or validity of the proceedings described in clauses (a)
through (e) of this Section 1306. If at the time the Trustee
shall not be a Conversion Agent, a copy of such notice shall also
forthwith be filed by the Company with the Trustee.
The preceding paragraph to the contrary notwithstanding, the
Company shall cause to be filed, or the Company shall cause the
Trustee to cause to be filed, at each office or agency maintained
for the purpose of conversion of Securities pursuant to Section
1002, and the Company shall cause to be provided, or the Company
shall cause the Trustee to cause to be provided, to all Holders
in accordance with Section 106, notice of any tender offer by the
Company or any Subsidiary for all or any portion of the Common
Stock on or after the time that such notice of tender offer is
provided to the public generally.
SECTION 1307. Company to Reserve Common Stock.
-------------------------------
The Company shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued
Common Stock, for the purpose of effecting the conversion of
Securities, the full number of shares of Common Stock then
issuable upon the conversion of all Outstanding Securities.
SECTION 1308. Taxes on Conversions.
--------------------
Except as provided in the next sentence, the Company will
pay any and all taxes and duties that may be payable in respect
of the issue or delivery of shares of Common Stock on conversion
of Securities pursuant hereto. The Company shall not, however,
be required to pay any tax or duty which may be payable in
respect of (i) income of the holder or (ii) any transfer involved
in the issue and delivery of shares of Common Stock in a name
other than that of the Holder of the Security or Securities to be
converted, and no such issue or delivery shall be made unless and
until the Person requesting such issue has paid to the Company
the amount of any such tax or duty, or has established to the
satisfaction of the Company that such tax or duty has been paid.
SECTION 1309. Covenant as to Common Stock.
---------------------------
The Company agrees that all shares of Common Stock which may
be delivered upon conversion of Securities will, upon such
delivery, have been duly authorized and validly issued and will
be fully paid and nonassessable and, except as provided in
Section 1308, the Company will pay all taxes, liens and charges
with respect to the issue thereof.
SECTION 1310. Cancellation of Converted Securities.
------------------------------------
All Securities delivered for conversion shall be delivered
to the Trustee to be canceled by or at the direction of the
Trustee, which shall dispose of the same as provided in Section
309.
SECTION 1311. Provision in Case of Consolidation, Merger or Sale
--------------------------------------------------
of Assets.
---------
In case of any consolidation or merger of the Company with
or into any other Person, any merger of another Person with or
into the Company (other than a merger which does not result in
any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company) or any
conveyance, sale, transfer or lease of all or substantially all
of the assets of the Company, the Person formed by such
consolidation or resulting from such merger or which acquires
such assets, as the case may be, shall execute and deliver to the
Trustee a supplemental indenture providing that the Holder of
each Security then Outstanding shall have the right thereafter,
during the period such Security shall be convertible as specified
in Section 1301, to convert such Security only into the kind and
amount of securities, cash and other property receivable upon
such consolidation, merger, conveyance, sale, transfer or lease
by a holder of the number of shares of Common Stock of the
Company into which such Security might have been converted
immediately prior to such consolidation, merger, conveyance,
sale, transfer or lease, assuming such holder of Common Stock of
the Company (i) is not a Person with which the Company
consolidated or merged with or into or which merged into or with
the Company or to which such conveyance, sale, transfer or lease
was made, as the case may be ("Constituent Person"), or an
Affiliate of a Constituent Person and (ii) failed to exercise his
rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such
consolidation, merger, conveyance, sale, transfer or lease
(provided that if the kind or amount of securities, cash and
other property receivable upon such consolidation, merger,
conveyance, sale, transfer, or lease is not the same for each
share of Common Stock of the Company held immediately prior to
such consolidation, merger, conveyance, sale, transfer or lease
by others than a Constituent Person or an Affiliate thereof and
in respect of which such rights of election shall not have been
exercised ("Non-electing Share"), then for the purpose of this
Section 1311 the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance,
sale, transfer or lease by the holders of each Non-electing Share
shall be deemed to be the kind and amount so receivable per share
by a plurality of the Non-electing Shares). Such supplemental
indenture shall provide for adjustments which, for events
subsequent to the effective date of such supplemental indenture,
shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article. The above provisions
of this Section 1311 shall similarly apply to successive
consolidations, mergers, conveyances, sales, transfers or leases.
Notice of the execution of such a supplemental indenture shall be
given by the Company, or the Company shall cause the Trustee to
give such notice, to the Holder of each Security as provided in
Section 106 promptly upon such execution.
Neither the Trustee, any Paying Agent nor any Conversion
Agent shall be under any responsibility to determine the
correctness of any provisions contained in any such supplemental
indenture relating either to the kind or amount of shares of
stock or other securities or property or cash receivable by
Holders of Securities upon the conversion of their Securities
after any such consolidation, merger, conveyance, transfer, sale
or lease or to any such adjustment, but may accept as conclusive
evidence of the correctness of any such provisions, and shall be
fully protected in relying upon, an Opinion of Counsel and an
Officers' Certificate with respect thereto, which the Company
shall cause to be furnished to the Trustee upon request.
SECTION 1312. Responsibility of Trustee for Conversion
----------------------------------------
Provisions.
----------
The Trustee, subject to the provisions of Article Six, and
any Conversion Agent shall not at any time be under any duty or
responsibility to any Holder of Securities to determine whether
any facts exist which may require any adjustment of the
Conversion Rate, or with respect to the nature or extent 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, or whether a supplemental
indenture need be entered into. Neither the Trustee, subject to
the provisions of Article Six, nor any Conversion Agent shall be
accountable with respect to the validity or value (or the kind or
amount) of any Common Stock, or of any other securities or
property or cash, which may at any time be issued or delivered
upon the conversion of any Security; and it or they do not make
any representation with respect thereto. Neither the Trustee,
subject to the provisions of Article Six, nor any Conversion
Agent shall be responsible for any failure of the Company to make
or calculate any cash payment or to issue, transfer or deliver
any shares of Common Stock or share certificates or other
securities or property or cash upon the surrender of any Security
for the purpose of conversion; and the Trustee, subject to the
provisions of Article Six, and any Conversion Agent shall not be
responsible for any failure of the Company to comply with any of
the covenants of the Company contained in this Article.
ARTICLE FOURTEEN
Repurchase of Securities at the Option of the
Holder Upon a Change of Control
SECTION 1401. Right to Require Repurchase.
---------------------------
In the event that a Change of Control (as hereinafter
defined) shall occur, then each Holder shall have the right, at
the Holder's option, but subject to the provisions of Section
1402, to require the Company to repurchase, and upon the exercise
of such right the Company shall repurchase, all of such Holder's
Securities, or any portion of the principal amount thereof that
is equal to $1,000 or any integral multiple of $1,000 in excess
thereof, on the date (the "Repurchase Date") that is 45 days
after the date of the Company Notice (as defined in Section 1403)
at a purchase price equal to 100% of the principal amount of the
Securities to be repurchased plus interest accrued to the
Repurchase Date (the "Repurchase Price"); provided, however, that
installments of interest on Securities whose Stated Maturity is
on or prior to the Repurchase Date shall be payable to the
Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the
relevant Record Date according to their terms and the provisions
of Section 307. Such right to require the repurchase of the
Securities shall not continue after a discharge of the Company
from its obligations with respect to the Securities in accordance
with Article Four, unless a Change of Control shall have occurred
prior to such discharge. At the option of the Company, the
Repurchase Price may be paid (i) in cash, or (ii) subject to the
fulfillment by the Company of the conditions set forth in Section
1402, by delivery of shares of Common Stock having a fair market
value equal to the Repurchase Price; provided, however, that
failure of the Company to pay the Repurchase Price on the
Repurchase Date either in cash or by delivery of shares of Common
Stock shall constitute an Event of Default for purposes of
Section 501(1) hereof notwithstanding the Company's inability to
comply with the provisions of or satisfy any conditions set forth
in Section 1402. Whenever in this Indenture (including Sections
202, 301, 501(1) and 508) there is a reference, in any context,
to the principal of any Security as of any time, such reference
shall be deemed to include reference to the Repurchase Price
payable in respect of such Security to the extent that such
Repurchase Price is, was or would be so payable at such time, and
express mention of the Repurchase Price in any provision of this
Indenture shall not be construed as excluding the Repurchase
Price in those provisions of this Indenture when such express
mention is not made; provided, however, that for the purposes of
-------- -------
Article Twelve such reference shall be deemed to include reference
to the Repurchase Price only to the extent the Repurchase Price is
payable in cash.
SECTION 1402. Conditions to the Company's Election to Pay the
-----------------------------------------------
Repurchase Price in Common Stock.
---------------------------------
The Company may elect to pay the Repurchase Price by
delivery of shares of Common Stock pursuant to Section 1401 if
and only if the following conditions shall have been satisfied:
(i) The shares of Common Stock deliverable in payment
of the Repurchase Price shall have an aggregate fair market
value as of the Repurchase Date of not less than the
Repurchase Price. For purposes of this Section 1402, the
fair market value of shares of Common Stock shall be
determined by the Company and shall be calculated using a
price per share of Common Stock equal to 95% of the average
of the Closing Prices Per Share for the five consecutive
Trading Days ending on and including the third Trading Day
immediately preceding the Repurchase Date;
(ii) The shares of Common Stock deliverable in payment
of the Repurchase Price are, or shall have been, approved
for listing on the Nasdaq National Market or are, or shall
have been, listed on a national securities exchange, in
either case, prior to the Repurchase Date; and
(iii) All shares of Common Stock deliverable in
payment of the Repurchase Price shall be issued out of the
Company's authorized but unissued Common Stock and, will
upon issue, be duly and validly issued and fully paid and
nonassessable and free of any preemptive rights.
If all of the conditions set forth in this Section 1402 are
not satisfied in accordance with the terms thereof, the
Repurchase Price shall be paid by the Company only in cash.
SECTION 1403. Notices; Method of Exercising Repurchase Right,
-----------------------------------------------
Etc.
---
(a) Unless the Company shall have theretofore called for
redemption all of the Outstanding Securities or unless all of the
Outstanding Securities shall have theretofore been converted in
accordance with Article Thirteen, on or before the 30th day after
the occurrence of a Change of Control, the Company or, at the
expense and the request of the Company given to the Trustee on or
before the 15th day after such occurrence, the Trustee, shall
give to all Holders, in the manner provided in Section 106,
notice (the "Company Notice") of the occurrence of the Change of
Control and of the repurchase right set forth herein arising as a
result thereof. The Company shall also deliver a copy of such
notice of a repurchase right to the Trustee.
Each notice of a repurchase right shall state:
(1) the Repurchase Date,
(2) the date by which the repurchase right must be
exercised,
(3) the Repurchase Price, and whether the Repurchase
Price shall be paid by the Company in cash or by delivery of
shares of Common Stock,
(4) a description of the procedure which a Holder must
follow to exercise a repurchase right, and the place or
places where such Securities are to be surrendered for
payment of the Repurchase Price and accrued interest, if
any,
(5) that on the Repurchase Date the Repurchase Price,
including accrued interest, if any, will become due and
payable upon each such Security designated by the Holder to
be repurchased, and that interest thereon shall cease to
accrue on and after said date,
(6) the Conversion Rate then in effect, the date on
which the right to convert the principal amount of the
Securities to be repurchased will terminate and the place or
places where such Securities may be surrendered for
conversion, and
(7) the place or places that the form of certificate
required by Section 203 shall be delivered, and the form of
such certificate.
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 Securities.
If any of the foregoing provisions or other provisions of
this Article Fourteen are inconsistent with applicable law, such
law shall govern.
(b) To exercise a repurchase right, a Holder shall deliver
to the Trustee or any Paying Agent on or before the 30th day
after the date of the Company Notice (i) written notice of the
Holder's exercise of such right, which notice shall set forth the
name of the Holder, the principal amount of the Securities to be
repurchased (and, if any Security is to be repurchased in part,
the portion of the principal amount thereof to be repurchased and
the name of the Person in which the portion thereof to remain
Outstanding after such repurchase is to be registered) and a
statement that an election to exercise the repurchase right is
being made thereby, and, in the event that the Repurchase Price
shall be paid in shares of Common Stock, the name or names (with
addresses) in which the certificate or certificates for shares of
Common Stock shall be issued, and (ii) the Securities with
respect to which the repurchase right is being exercised. Such
written notice shall be irrevocable, except that the right of the
Holder to convert the Securities with respect to which the
repurchase right is being exercised shall continue until the
close of business on the Repurchase Date.
(c) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause
to be paid to the Trustee or the Paying Agent the Repurchase
Price in cash or shares of Common Stock, as provided above, for
payment to the Holder on the Repurchase Date or, if shares of
Common Stock are to be paid, as promptly after the Repurchase
Date as practicable, together with accrued and unpaid interest to
the Repurchase Date payable with respect to the Securities as to
which the purchase right has been exercised; provided, however,
-------- --------
that installments of interest that mature on or prior to the
Repurchase Date shall be payable in cash to the Holders of such
Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Regular Record Date
according to the terms and provisions of Section 307.
(d) If any Security (or portion thereof) surrendered for
repurchase shall not be so paid on the Repurchase Date, the
principal amount of such Security (or portion thereof, as the
case may be) shall, until paid, bear interest to the extent
permitted by applicable law from the Repurchase Date at the rate
of o% per annum, and each Security shall remain convertible into
Common Stock until the principal of such Security (or portion
thereof, as the case may be) shall have been paid or duly
provided for.
(e) Any Security which is to be repurchased only in part
shall be surrendered to the Trustee (with, if the Company or the
Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee
duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and make available for delivery to the
Holder of such Security without service charge, a new Security or
Securities, containing identical terms and conditions, each in an
authorized denomination in aggregate principal amount equal to
and in exchange for the unrepurchased portion of the principal of
the Security so surrendered.
(f) Any issuance of shares of Common Stock in respect of
the Repurchase Price shall be deemed to have been effected
immediately prior to the close of business on the Repurchase Date
and the Person or Persons in whose name or names any certificate
or certificates for shares of Common Stock shall be issuable upon
such repurchase shall be deemed to have become on the Repurchase
Date the holder or holders of record of the shares represented
thereby; provided, however, that any surrender for repurchase on
a date when the stock transfer books of the Company shall be
closed shall constitute the Person or Persons in whose name or
names the certificate or certificates for such shares are to be
issued as the record holder or holders thereof for all purposes
at the opening of business on the next succeeding day on which
such stock transfer books are open. No payment or adjustment
shall be made for dividends or distributions on any Common Stock
issued upon repurchase of any Security declared prior to the
Repurchase Date.
(g) No fractions of shares shall be issued upon repurchase
of Securities. If more than one Security shall be repurchased
from the same Holder and the Repurchase Price shall be payable in
shares of Common Stock, the number of full shares which shall be
issuable upon such repurchase shall be computed on the basis of
the aggregate principal amount of the Securities so repurchased.
Instead of any fractional share of Common Stock which would
otherwise be issuable on the repurchase of any Security or
Securities, the Company will deliver to the applicable Holder its
check for the current market value of such fractional share. The
current market value of a fraction of a share is determined by
multiplying the current market price of a full share by the
fraction, and rounding the result to the nearest cent. For
purposes of this Section, the current market price of a share of
Common Stock is the Closing Price Per Share of the Common Stock
on the Trading Day immediately preceding the Repurchase Date.
(h) Any issuance and delivery of certificates for shares of
Common Stock on repurchase of Securities shall be made without
charge to the Holder of Securities being repurchased for such
certificates or for any tax or duty in respect of the issuance or
delivery of such certificates or the securities represented
thereby; provided, however, that the Company shall not be required
-------- -------
to pay any tax or duty which may be payable in respect of
(i) income of the Holder or (ii) any transfer involved in the
issuance or delivery of certificates for shares of Common Stock
in a name other than that of the Holder of the Securities being
repurchased, and no such issuance or delivery shall be made unless
and until the Person requesting such issuance or delivery has paid
to the Company the amount of any such tax or duty or has established,
to the satisfaction of the Company, that such tax or duty has been
paid.
(i) All Securities delivered for repurchase shall be
delivered to the Trustee, the Paying Agent or any other agents
(as shall be set forth in the Company Notice) to be canceled by
or at the direction of the Trustee, which shall dispose of the
same as provided in Section 309.
SECTION 1404. Certain Definitions.
-------------------
For purposes of this Article Fourteen,
(a) the term "beneficial owner" shall be determined in
accordance with Rule 13d-3, as in effect on the date of the
original execution of this Indenture, promulgated by the
Commission pursuant to the Exchange Act;
(b) a "Change of Control" shall be deemed to have occurred
at the time, after the original issuance of the Securities, of:
(i) the acquisition by any Person of beneficial
ownership, directly or indirectly, through a purchase,
merger or other acquisition transaction or series of
transactions, of shares of capital stock of the Company
entitling such person to exercise 50% or more of the total
voting power of all shares of capital stock of the Company
entitled to vote generally in the elections of directors
(any shares of voting stock of which such person or group is
the beneficial owner that are not then outstanding being
deemed outstanding for purposes of calculating such
percentage), other than any such acquisition by the Company,
any Subsidiary of the Company or any employee benefit plan
of the Company existing on the date of this Indenture; or
(ii) any consolidation or merger of the Company with or
into any other Person, any merger of another Person into the
Company, or any conveyance, sale, transfer, or lease of all
or substantially all of the assets of the Company (other
than (a) any consolidation or merger (x) which does not
result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock, and (y)
pursuant to which the holders of 50% or more of the total
voting power of all shares of capital stock of the Company
entitled to vote generally in elections of directors
immediately prior to such transaction have the entitlement
to exercise, directly or indirectly, 50% or more of the
total voting power of all shares of capital stock of the
continuing or surviving corporation entitled to vote
generally in elections of directors of the continuing or
surviving corporation immediately after such transaction and
(b) a merger which is effected solely to change the
jurisdiction of incorporation of the Company and results in
a reclassification, conversion or exchange of outstanding
shares of Common Stock into solely shares of common stock);
provided, however, that a Change of Control shall not be deemed
to have occurred if (i) the Closing Price Per Share on any five
Trading Days within the period of 10 consecutive Trading Days
ending immediately after the later of the date of the Change of
Control or the date of the public announcement of the Change of
Control (in the case of a Change of Control under Clause (i)
above) or the period of 10 consecutive Trading Days ending
immediately prior to the date of the Change of Control (in the
case of a Change of Control under Clause (ii) above) shall equal
or exceed 105% of the Conversion Price in effect on each such
Trading Day or (ii) all of the consideration (excluding cash
payments for fractional shares or cash payments for appraisal
rights) in the transaction or transactions constituting the
Change of Control consists of shares of common stock or
securities convertible into common stock that are, or upon
issuance will be, traded on a national securities exchange or
through The Nasdaq National Market and as a result of such
transaction or transactions the Notes become convertible solely
into such common stock or securities.
(c) the term "Conversion Price" shall equal $1,000 divided
by the Conversion Rate; and
(d) for the purposes of Section 1404(b)(i), the term
"Person" shall include any syndicate or group which would be
deemed to be a "person" under Section 13(d)(3) of the Exchange
Act, as in effect on the date of the original execution of this
Indenture.
SECTION 1405. Consolidation, Merger, Etc.
--------------------------
In the case of any conveyance, sale, transfer, lease, or
merger, to which Section 1311 applies, in which the Common Stock
of the Company is changed or exchanged as a result into the right
to receive shares of stock and other securities or property or
assets (including cash) which includes shares of Common Stock of
the Company or common stock of another person that are, or upon
issuance will be, traded on a United States national securities
exchange or approved for trading on an established automated
over-the-counter trading market in the United States and such
shares constitute at the time such change or exchange becomes
effective in excess of 50% of the aggregate fair market value of
such shares of stock and other securities, property and assets
(including cash) (as determined by the Company, which
determination shall be conclusive and binding), then the person
formed by such consolidation or resulting from such merger or
combination or which acquires the properties or assets (including
cash) of the Company, as the case may be, shall execute and
deliver to 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) modifying the
provisions of this Indenture relating to the right of Holders to
cause the Company to repurchase the Securities following a Change
of Control, including without limitation the applicable
provisions of this Article Fourteen and the definitions of the
Common Stock and Change of Control, as appropriate, and such
other related definitions set forth herein as determined in good
faith by the Company (which determination shall be conclusive and
binding), to make such provisions apply to the common stock and
the issuer thereof if different from the Company and Common Stock
of the Company (in lieu of the Company and the Common Stock of
the Company).
____________________
This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, all as of the day and
year first above written.
PHOTRONICS, INC.
By: ______________________
[SEAL] Name:
Title:
Attest:
__________________________
Name: THE CHASE MANHATTAN BANK,
Title: Trustee:
[SEAL] By: _______________________
Name:
Title:
Attest:
___________________________
Name:
Title:
STATE OF ) ss.:
COUNTY OF )
On the o day of May, 1997, before me personally came o, to
me known, who, being by me duly sworn, did depose and say that
he/she is o of PHOTRONICS, INC., one of the corporations
described in and which executed the foregoing instrument; that
he/she knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed
by authority of the Board of Directors of said corporation, and
that he/she signed his/her name thereto by like authority.
______________________________
Notary Public
STATE OF ) ss.:
COUNTY OF )
On the o day of May, 1997, before me personally came o to
me known, who, being by me duly sworn, did depose and say that
he/she is o of THE CHASE MANHATTAN BANK, one of the corporations
described in and which executed the foregoing instrument; that
he/she knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed
by authority of the Board of Directors of said corporation, and
that he/she signed his/her name thereto by like authority.
______________________________
Notary Public
Exhibit 12.1
PHOTRONICS, INC.
Computation of Ratio of Earnings to Fixed Charges
For the Five Years Ended October 31, 1996 and for the
Three Months Ended January 31, 1996 and February 2, 1997
(dollars in thousands)
Three Months
Ended
Year Ended October 31, ----------------
----------------------
January February
31, 2,
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
Income before $6,719 $7,436 $15,301 $29,842 $33,903 $7,551 $8,625
income taxes. . ------ ------ ------- ------- ------- ------ ------
Interest 102 101 75 141 160 36 36
expense . . . . ------ ------ ------- ------- ------- ------ ------
Numerator . . . 6,821 7,537 15,376 29,983 34,063 7,587 8,661
Denominator . . $ 102 $ 101 $ 75 $ 141 $ 160 $ 36 $ 36
------ ------ ------- ------- ------- ------ ------
Ratio: 1 . . . 67 75 205 213 213 211 241
====== ====== ======= ======= ======= ====== ======
Exhibit 23.1
Independent Auditors' Consent
We consent to the use in this Registration Statement of Photronics,
Inc. on Form S-3 of our report dated December 9, 1996 (which report
expresses an unqualified opinion and includes an explanatory paragraph
relating to the 1994 change in accounting for investments and income taxes)
included in the Annual Report on Form 10-K of Photronics, Inc. for the year
ended October 31, 1996, and to the use of our report dated December 9,
1996, appearing in the Prospectus, which is part of this Registration
Statement. We also consent to the reference to us under the headings
"Selected Financial Data" and "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
-------------------------
Deloitte & Touche LLP
Hartford, Connecticut
April 28, 1997
Exhibit 25.1
- -----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
---------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
--------
---------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
-------------------------------------------
PHOTRONICS, INC.
(Exact name of obligor as specified in its charter)
CONNECTICUT 06-0854886
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) identification No.)
1061 EAST INDIANTOWN ROAD
JUPITER, FLORIDA 33477
(Address of principal executive offices) (Zip Code)
------------------------------------
DEBT SECURITIES
(Title of the indenture securities)
------------------------------------
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
New York State Banking Department, State House, Albany,
New York 12110.
Board of Governors of the Federal Reserve System,
Washington, D.C., 20551
Federal Reserve Bank of New York, District No. 2,
33 Liberty Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C.,
20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe
each such affiliation.
None.
-2-
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now
in effect, including the Organization Certificate and the Certificates
of Amendment dated February 17, 1969, August 31, 1977, December 31, 1980,
September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996
(see Exhibit 1 to Form T-1 filed in connection with Registration
Statement No. 333-06249, which is incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to
Commence Business (see Exhibit 2 to Form T-1 filed in connection with
Registration Statement No. 33-50010, which is incorporated by reference.
On July 14, 1996, in connection with the merger of Chemical Bank and
The Chase Manhattan Bank (National Association), Chemical Bank, the
surviving corporation, was renamed The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249,
which is incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the
Act (see Exhibit 6 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14,
1996, in connection with the merger of Chemical Bank and The Chase
Manhattan Bank (National Association), Chemical Bank, the surviving
corporation, was renamed The Chase Manhattan Bank).
7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising
or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of New York and State of New York, on
the 28th day of April, 1997.
THE CHASE MANHATTAN BANK
By: /s/ Kathleen Perry
---------------------
Kathleen Perry
Second Vice President
- 3 -
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1996, in accordance with
a call made by the Federal Reserve Bank of this District pursuant
to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Millions
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin .............................. $ 11,509
Interest-bearing balances ...................... 8,457
Securities: .............................................
Held to maturity securities............................... 3,128
Available for sale securities............................. 40,534
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold .............................. 9,222
Securities purchased under agreements to resell 422
Loans and lease financing receivables:
Loans and leases, net of unearned income $133,935
Less: Allowance for loan and lease losses 2,789
Less: Allocated transfer risk reserve .... 16
-------
Loans and leases, net of unearned income,
allowance, and reserve ......................... 131,130
Trading Assets ........................................... 49,876
Premises and fixed assets (including capitalized
leases) ........................................ 2,877
Other real estate owned .................................. 290
Investments in unconsolidated subsidiaries and
associated companies............................ 124
Customer's liability to this bank on acceptances
outstanding .................................... 2,313
Intangible assets ........................................ 1,316
Other assets ............................................. 11,231
------
TOTAL ASSETS ............................................. $272,429
========
- 4 -
LIABILITIES
Deposits
In domestic offices ................................ $87,006
Noninterest-bearing ....................... $35,783
Interest-bearing .......................... 51,223
------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's .......................................... 73,206
Noninterest-bearing ........................ $ 4,347
Interest-bearing ........................... 68,859
Federal funds purchased and securities sold under agree-
ments to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBF's
Federal funds purchased ............................ 14,980
Securities sold under agreements to repurchase ..... 10,125
Demand notes issued to the U.S. Treasury ................. 1,867
Trading liabilities ...................................... 34,783
Other Borrowed money:
With a remaining maturity of one year or less ...... 14,639
With a remaining maturity of more than one year .... 425
Mortgage indebtedness and obligations under capitalized
leases ............................................. 40
Bank's liability on acceptances executed and outstanding.. 2,267
Subordinated notes and debentures ........................ 5,471
Other liabilities ........................................ 11,343
TOTAL LIABILITIES ........................................ 256,152
-------
Limited-Life Preferred stock and related surplus 550
EQUITY CAPITAL
Common stock ............................................. 1,251
Surplus .................................................. 10,243
Undivided profits and capital reserves ................... 4,526
Net unrealized holding gains (Losses)
on available-for-sale securities ......................... (309)
Cumulative foreign currency translation adjustments ...... 16
TOTAL EQUITY CAPITAL ..................................... 15,727
------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL .............................. $272,429
========
I, Joseph L. Sclafani, S.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
EDWARD D. MILLER ) DIRECTORS
THOMAS G. LABRECQUE )
- 5 -