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EXHIBIT 2.7
DESCRIPTION OF NOTES
The Notes are to be issued under an Indenture to be dated as of April 1,
1994 (the "Indenture") between the Company, as issuer, and Texas Commerce Bank
National Association, as trustee (the "Trustee"), a copy of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
terms of the Indenture are governed by certain provisions contained in the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following
summaries of certain provisions of the Indenture do not purport to be complete,
and where particular provisions of the Indenture are referred to, such
provisions, including the definitions of certain capitalized terms used in this
Prospectus, are incorporated by reference as a part of such summaries, which are
qualified in their entirety by reference to the provisions of the Indenture. The
section ("Section") and article ("Article") references appearing below are to
sections and articles of the Indenture.
GENERAL
The Notes will be unsecured subordinated obligations of the Company, will
mature on March 31, 2001 and will be in the aggregate principal amount of
$100,000,000 ($115,000,000 aggregate principal amount if the Underwriters'
over-allotment option is exercised in full). The Notes will bear interest from
the date of issuance at the rate per annum shown on the cover page of this
Prospectus. Interest will be payable semi-annually on March 31 and September 30
of each year, commencing September 30, 1994, to the persons in whose names such
Notes (or any predecessor Notes) are registered at the close of business on the
March 15 or September 15 preceding such Interest Payment Date (Sections 301 and
307).
Principal of and premium, if any, and interest on the Notes will be
payable, and the Notes will be convertible and may be presented for transfer and
exchange, at the office or agency maintained by the Company for such purposes,
which will initially be the office of the Trustee located at 80 Broad Street,
Fourth Floor, New York, New York 10004. However, at the option of the Company,
payment of interest on the Notes may be made by check mailed to the address of
persons entitled thereto as shown in the register of the Security Registrar. No
service charge will be made upon any registration of transfer or exchange of the
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.
The Indenture does not limit the incurrence of additional indebtedness,
including Senior Indebtedness, by the Company.
CONVERSION RIGHTS
The Notes will be convertible, in whole or from time to time in part (in
denominations of $1,000 or integral multiples thereof), at the option of the
holder thereof, into Common Stock of the Company, initially at the conversion
price stated on the cover page hereof, at any time prior to maturity, unless
previously redeemed by the Company. In the case of Notes called for redemption,
conversion rights will terminate at the close of business on the fifth business
day preceding the Redemption Date. Notwithstanding anything to the contrary in
the foregoing, the Notes will not be convertible at any time when payments on
the Notes are prohibited under the subordination provisions of the Indenture as
described under "-- Subordination of Notes" (Section 1201).
If the Company, by dividend or otherwise, declares or makes a distribution
on its Common Stock of the type referred to in clause (iv) or (v) below, the
holder of each Note, upon the conversion thereof subsequent to the close of
business on the date fixed for the determination of stockholders entitled to
receive such distribution and prior to the effectiveness of the conversion price
adjustment in respect of such distribution pursuant to clause (iv) or (v) below,
will be entitled to receive for each share of Common Stock into which such Note
is converted the portion of the evidences of indebtedness, shares of capital
stock, cash and other assets so distributed applicable to one share of Common
Stock; provided, however, that the Company may, with respect to all holders so
converting, in lieu of distributing any portion of such distribution not
consisting of
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cash or securities of the Company, pay such holder cash in an amount equal to
the fair market value thereof, as determined in good faith by the Board of
Directors (Section 1201).
The conversion price will be subject to adjustment in certain events,
including: (i) dividends (and other distributions) payable in Common Stock on
any class of capital stock of the Company; (ii) the issuance to all holders of
Common Stock of rights, warrants or options entitling them to subscribe for or
purchase Common Stock at less than the current market price (as provided in the
Indenture); provided, however, that if such rights, warrants or options are only
exercisable upon the occurrence of certain triggering events, then the
conversion price will not be adjusted until such triggering events occur; (iii)
subdivisions and combinations of Common Stock; (iv) distributions to all holders
of Common Stock of evidences of indebtedness of the Company, shares of any class
of capital stock, cash or other assets (including securities, but excluding
those dividends, rights, warrants, options and distributions referred to in
clauses (i) and (ii) above and excluding dividends and distributions exclusively
paid in cash up to the greater of (x) retained earnings of the Company on the
date such distribution or dividend was declared or (y) Net Income (as defined
below) of the Company during the four full fiscal quarters preceding the date
such distribution or dividend was declared, and other than in connection with a
tender offer or other negotiated purchase made by the Company or any Subsidiary
for all or a portion of the Common Stock); provided, however, that if any
rights, warrants or options in respect of which an adjustment is provided for in
this clause (iv) are only exercisable upon the occurrence of certain triggering
events, then the conversion price will not be adjusted until such triggering
events occur; (v) distributions consisting exclusively of cash (specifically
including distributions paid in cash up to the greater of (x) retained earnings
of the Company on the date such distribution or dividend was declared or (y) Net
Income of the Company during the four full fiscal quarters preceding the date
such distribution or dividend was declared, but excluding any cash distributions
for which an adjustment has been made pursuant to a preceding clause of this
paragraph) to all holders of Common Stock in an aggregate amount that, together
with (A) other all-cash distributions made within the preceding 12 months not
triggering a conversion price adjustment and (B) all Excess Tender Payments (as
defined below) in respect of each tender or exchange offer by the Company or any
Subsidiary for Common Stock concluded within the preceding 12 months not
triggering a conversion price adjustment, exceeds an amount equal to 20% of the
Company's deemed market capitalization on the date fixed for the determination
of stockholders entitled to receive such distribution (calculated as set forth
in the Indenture); (vi) issuances of Common Stock to an Affiliate for a net
consideration per share less than the current market price per share (other than
issuances of Common Stock under certain management benefit plans); and (vii)
payment of an Excess Tender Payment in respect of a tender or exchange offer by
the Company or any Subsidiary for Common Stock, if the aggregate amount of such
Excess Tender Payment, together with (A) the aggregate amount of any all-cash
distributions made within the preceding 12 months not triggering a conversion
price adjustment and (B) all Excess Tender Payments in respect of each tender or
exchange offer by the Company or any Subsidiary for Common Stock concluded
within the preceding 12 months not triggering a conversion price adjustment,
exceeds an amount equal to 20% of the Company's deemed market capitalization on
the expiration of such tender offer (calculated as set forth in the Indenture)
(Section 1204). For purposes of these conversion price adjustments, the term (i)
"Excess Tender Payment" means the excess of (A) the aggregate of the cash and
value of other consideration paid by the Company with respect to the shares
acquired in the tender or exchange transaction over (B) the market value of such
acquired shares after the completion of the tender or exchange offer (calculated
as set forth in the Indenture) and (ii) "Net Income" of any Person means the net
income of such Person net of non-cash charges taken as a result of accounting
changes required to be made by the Financial Accounting Standards Board after
the date of the Indenture.
No adjustments in the conversion price are required for any dividend or
distribution referred to above if the holders may participate in the dividend or
distribution (on a basis determined in good faith to be fair by the Board of
Directors) and receive the same consideration they would have received if they
had converted the Notes (Section 1213).
No adjustment of the conversion price will be required to be made until
cumulative adjustments amount to 1% or more of the conversion price as last
adjusted. In addition to the foregoing adjustments, the Company will be
permitted to make such reductions in the conversion price as it considers to be
advisable in order that
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any event treated for federal income tax purposes as a dividend of stock or
stock rights will not be taxable to the recipient (Section 1204).
Subject to any applicable right of the holders to receive the Change of
Control Purchase Price (as described below), in the case of certain
consolidations or mergers to which the Company is a party or the transfer or
lease of the Company's properties or assets substantially as an entirety, each
holder has the right to convert each Note only into the kind and amount of
securities, cash and other property receivable upon the consolidation, merger,
transfer or lease by a holder of the number of shares of Common Stock into which
such Note might have been converted immediately prior to such consolidation,
merger, transfer or lease (assuming such holder of Common Stock is not a
Constituent Person and such holder failed to exercise any rights of election and
received per share the kind and amount of consideration received per share by a
plurality of non-electing shares) (Section 1211).
Fractional shares of Common Stock will not be issued upon conversion, but,
in lieu thereof, the Company will pay a cash adjustment based upon the market
price of a share of Common Stock (Section 1203). Except as provided below, no
adjustment will be made upon a conversion of Notes for interest accrued thereon.
The Company's delivery to the holder of the fixed number of shares of Common
Stock into which the Note is convertible will be deemed to satisfy the Company's
obligation to pay the principal amount of the Note and all accrued interest that
has not previously been paid. If a Note is surrendered for conversion during the
period from the close of business on any Regular Record Date next preceding any
Interest Payment Date to the close of business on any Interest Payment Date,
then notwithstanding such conversion, interest payable in respect of the Note so
surrendered will be paid in cash to the person in whose name such Note is
registered at the close of business on such Regular Record Date, and (except in
the case of Notes with a Maturity Date prior to such Interest Payment Date) when
so surrendered for conversion, such Note must be accompanied by payment of an
amount equal to the interest thereon which the registered holder as of the close
of business on such Regular Record Date is to receive (Sections 307 and 1202).
SUBORDINATION OF NOTES
The payment of the principal of and premium, if any, and interest on the
Notes is, to the extent set forth in the Indenture, subordinated in right of
payment to the prior payment in full of all Senior Indebtedness, whether now
outstanding or incurred in the future (Section 1301). Upon any payment or
distribution of assets of the Company to creditors upon any liquidation,
dissolution, winding up, assignment for the benefit of creditors or marshalling
of assets and liabilities or any bankruptcy, insolvency, receivership,
liquidation, reorganization or similar proceedings of the Company, the holders
of all Senior Indebtedness will first be entitled to receive payment in full of
all amounts due or to become due thereon before the holders of the Notes will be
entitled to receive any payment (other than any payment in the form of Permitted
Junior Securities) on account of the principal of or premium, if any, or
interest on the Notes, including payment of the Redemption Price and the Change
of Control Purchase Price of the Notes, and before the Notes may be converted
into Common Stock (Section 1302).
No payment (other than any payment in the form of Permitted Junior
Securities) on account of principal of and premium, if any, or interest on the
Notes, including payment of the Redemption Price and the Change of Control
Purchase Price on the Notes, may be made, and the Notes may not be converted
into Common Stock, if a Payment Event of Default shall have occurred and be
continuing. In addition, no payment (other than any payment in the form of
Permitted Junior Securities) on account of principal of or premium, if any, or
interest on the Notes, including payment of the Redemption Price and the Change
of Control Purchase Price on the Notes, may be made, and the Notes may not be
converted into Common Stock, if a Non-payment Event of Default shall have
occurred and be continuing, for the period (a "Payment Blockage Period")
commencing on receipt of notice of such event of default by the Trustee from
holders of at least a majority in principal amount of any Designated Senior
Indebtedness (or any trustee or other representative therefor) and ending on the
earlier of (i) the date such Non-payment Event of Default has been cured or
waived or has ceased to exist or any acceleration of such Designated Senior
Indebtedness has been rescinded or annulled or such Designated Senior
Indebtedness shall have been discharged and (ii) the date 176 days after such
receipt
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of notice. Any number of such notices may be given; provided, however, that,
during any 360-day period, the aggregate Payment Blockage Periods shall not
exceed 176 days and there shall be a period of at least 184 consecutive days
when no Payment Blockage Period is in effect. No default existing or continuing
when a Payment Blockage Period begins may be the basis for any subsequent
Payment Blockage Period unless such default has been cured for a period of at
least 90 consecutive days. In the event that, notwithstanding the restrictions
described in the preceding sentences, the Company makes any payment to the
Trustee or a holder of Notes prohibited by any such restriction, with such
Trustee or holder, as the case may be, knowing of such contravention before
receipt thereof, then such payment will be required to be paid over and
delivered forthwith to the Company to the extent necessary to pay in full all
such Senior Indebtedness (Section 1303).
The subordination rights of holders of Senior Indebtedness will not be
prejudiced or impaired by any acts or failures to act by the Company or by any
such holder (Section 1308). The subordination of the Notes set forth above will
not prevent the occurrence of any Event of Default under the Indenture.
Furthermore, the subordination of the Notes as set forth above will not impair,
as between the Company, the holders of the Notes and creditors of the Company
other than holders of Senior Indebtedness, the obligations of the Company to
make payments on the Notes in accordance with their terms. In certain
circumstances, as set forth in the Indenture, the holders of Notes will be
subrogated to certain rights of the holders of Senior Indebtedness upon payment
in full of all Senior Indebtedness (Section 1302).
By reason of such subordination, in the event of insolvency of the Company,
the holders of Senior Indebtedness (as well as other creditors of the Company
who are holders of indebtedness that is not subordinated to the Senior
Indebtedness) may recover more, ratably, than the holders of the Notes.
The Notes will also be effectively subordinated to all liabilities,
including trade payables and capitalized lease obligations, if any, of the
Company's subsidiaries. Any right of the Company to receive the assets of any 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
subject to the prior payment of claims of that subsidiary's creditors (including
trade creditors), except to the extent that the Company is itself a creditor of
such subsidiary, in which case the claims of the Company would still be subject
to the prior payment of claims secured by security interests in the assets of
such subsidiary and any other indebtedness of such subsidiary senior to that
held by the Company.
Immediately following the sale of the Notes offered hereby and application
of the proceeds therefrom, the Company estimates that the sum of its Senior
Indebtedness and the indebtedness of its subsidiaries will total approximately
$50 million. There are no restrictions in the Indenture on the creation of
Senior Indebtedness (or any other indebtedness). The agreements under which
Senior Indebtedness may be outstanding in the future could contain provisions
which may require repayment of such respective Senior Indebtedness prior to
repayment of the Notes upon, among other things, a Change of Control. If the
Company is unable to obtain the requisite consents under its Senior Indebtedness
to enable it to repurchase the Notes or is unable to repay all Senior
Indebtedness, there would be both an Event of Default under the Notes and an
event of default under such Senior Indebtedness, as a result of which events the
Company would be prohibited by the subordination terms of the Indenture from
repurchasing Notes or making other payments in respect thereof. Furthermore, the
exercise by the holders of their right to require the Company to repurchase the
Notes could cause a default under the Designated Senior Indebtedness of the
Company, even if the Change of Control itself does not, due to the financial
effect of such repurchase on the Company. As a result, the repurchase of the
Notes could be blocked pursuant to the subordination terms of the Indenture.
Finally, the Company's ability to pay cash to the holders of Notes upon a
repurchase may be limited by the Company's then existing financial resources.
Failure of the Company to pay the Change of Control Purchase Price will create
an Event of Default with respect to the Notes, whether or not such repurchase is
permitted by the subordination terms of the Indenture. See " -- Repurchase of
Notes at the Option of the Holder Upon a Change of Control."
"Bank Credit Facility" means the Company's existing bank credit facility
and any renewals, amendments, extensions, supplements, modifications,
refinancings or replacements thereof (Section 101).
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under
the Bank Credit Facility if the sum of the amounts outstanding under the Bank
Credit Facility and the amounts available for borrowing
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thereunder is equal to or greater than $25,000,000 and (ii) all other Senior
Indebtedness having an outstanding principal amount equal to or greater than
$25,000,000 (provided, however, that the agreements, indentures or other
instruments evidencing any Senior Indebtedness referred to in this clause (ii)
specifically state that such Senior Indebtedness shall be classified as
"Designated Senior Indebtedness" for purposes of the Indenture) (Section 101).
"Indebtedness" of any Person means, without duplication, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or similar instruments, including
obligations incurred in connection with the acquisition of property, assets or
businesses; (iii) every obligation of such Person under conditional sale or
other title retention agreements relating to assets or property purchased by
such Person or issued or assumed as the deferred purchase price of property,
assets or services (but excluding trade accounts payable or accrued liabilities
arising in the ordinary course of business that are not overdue by more than 90
days or are being contested by such Person in good faith); (iv) every Capital
Lease Obligation of such Person; (v) every obligation of such Person with
respect to any Sale and Leaseback Transaction to which such Person is a party;
(vi) every obligation of such Person with respect to letters of credit, bankers
acceptances or similar facilities issued for the account of such Person; (vii)
the maximum fixed redemption or repurchase price of outstanding Redeemable Stock
of such Person; (viii) every obligation of such Person with respect to
performance, surety or similar bonds; (ix) every obligation of such Person under
interest rate, commodity or foreign currency swap, cap, hedge, exchange or
similar agreements; (x) every obligation of the type referred to in clauses (i)
through (ix) and clause (xi) of another Person the payment of which such Person
has Guaranteed or is otherwise responsible for or liable for, directly or
indirectly, as obligor, Guarantor or otherwise; and (xi) every amendment,
modification, renewal and extension of an obligation of the type referred to in
clauses (i) through (x) (Section 101).
"Non-payment Event of Default" means any event (other than a Payment Event
of Default) the occurrence of which entitles any one or more persons to
accelerate the maturity of any Designated Senior Indebtedness (Section 101).
"Payment Event of Default" means any default in the payment of principal of
or premium, if any, or interest on any Designated Senior Indebtedness when due
(whether at maturity, upon acceleration or otherwise) (Section 101).
"Permitted Junior Securities" means subordinated debt securities of the
Company (or any successor obligor with respect to the Senior Indebtedness)
provided for by a plan of reorganization or readjustment that are subordinated
in right of payment to all Senior Indebtedness that may be outstanding to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated as provided in the Indenture (Section 101).
"Senior Indebtedness" means all obligations of the Company for Indebtedness
(other than Indebtedness described in clause (vii) of the definition of
Indebtedness), whether now existing or hereafter incurred or assumed; provided
that, Senior Indebtedness shall not include (A) any obligation owed to a
Subsidiary or an Affiliate or Related Person of the Company, (B) any obligation
that by its terms is not superior in right of payment to the Notes, (C) any
obligation in respect of the Company's 8% Convertible Subordinated Debentures
and 6% Convertible Subordinated Debentures, if and when issued, for which the
Company's existing preferred stock is exchangeable (the Notes not being senior
in right of payment to such debentures) or (D) any obligation constituting a
trade account payable (Section 101).
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REDEMPTION
The Notes will be redeemable, at the Company's option, as a whole or from
time to time in part, at any time on or after March 31, 1997, upon not less than
20 nor more than 60 days notice mailed to the registered holders thereof, at the
redemption prices (expressed as a percentage of the principal amount thereof)
set forth below if redeemed during the 12-month period beginning March 31 of the
years indicated:
YEAR REDEMPTION PRICE
---------------------------------------------- ----------------
1997.......................................... %
1998.......................................... %
1999.......................................... %
2000.......................................... %
together, in each case, with accrued interest to the Redemption Date (subject to
the right of holders of record on the relevant record date to receive interest
due on an Interest Payment Date that is on or prior to the Redemption Date)
(Sections 203, 1101, and 1107).
If less than all the Notes are to be redeemed, the Notes to be redeemed
shall be selected by the Trustee in such manner as the Trustee shall deem
appropriate and fair (Section 1104).
The Company's existing bank credit facility prohibits the Company from
redeeming any Notes unless (i) such redemption is permitted under the restricted
payment covenant contained in such bank credit facility and (ii) at the time of
such redemption and after giving effect thereto, no default shall have occurred
under such bank credit facility.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
In the event of any Change of Control (as defined below) with respect to
the Company which constitutes a Repurchase Event (as defined below), each holder
of Notes will have the right, at such holder's option, subject to the terms and
conditions of the Indenture, to require the Company to repurchase all or any
part (provided that the principal amount must be $1,000 or an integral multiple
thereof) of the holder's Notes on the date (the "Change of Control Purchase
Date") that is 60 days after the date the Company's Change of Control Notice (as
defined below) is mailed (or such later date as is required by law), at a cash
price equal to 100% of the principal amount plus accrued interest to the Change
of Control Purchase Date (the "Change of Control Purchase Price"). The Change of
Control Purchase Price may be less than the fair market value of the Notes on
the Change of Control Purchase Date. Promptly, but in any event within 29 days
following any Change of Control, the Company is required, with respect to any
Senior Indebtedness that would prohibit the repurchase of Notes by the Company
in the event of such Change of Control, either to repay all such Senior
Indebtedness in full or obtain the requisite consents under such Senior
Indebtedness to permit the repurchase of the Notes as provided below. The
Company first is required to comply with the covenants in the preceding sentence
before it is required to repurchase Notes pursuant to a Change of Control. The
foregoing will in no way limit the occurrence of an Event of Default, including
an Event of Default arising from a default under the covenants of the second
sentence of this paragraph (Section 1401 and 1402).
Within 29 days after a Change of Control which constitutes a Repurchase
Event, the Company is obligated to mail to the Trustee and to all holders of
Notes at their addresses shown in the register of the Security Registrar (and to
beneficial owners as required by applicable law) a notice (the "Change of
Control Notice") regarding the Change of Control. The Change of Control Notice
will describe: (i) the events causing the Change of Control; (ii) the Change of
Control Purchase Price; (iii) the Change of Control Purchase Date; (iv)
information regarding the conversion rights of the Notes; and (v) the procedures
for withdrawing a Change of Control Purchase Notice. The Change of Control
Notice will also state whether or not the Company has satisfied its obligations
regarding Senior Indebtedness referred to in the preceding paragraph (Section
1401).
To exercise the right to have Notes repurchased following a Change of
Control, a holder must deliver a Change of Control Purchase Notice to the Paying
Agent at its office maintained for such purpose, prior to the
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close of business on the Change of Control Purchase Date. The Change of Control
Purchase Notice shall state: (i) the certificate numbers of the Notes to be
delivered by the holder thereof for purchase by the Company; (ii) the portion of
the principal amount of Notes to be repurchased, which portion must be $1,000 or
an integral multiple thereof; and (iii) that such Notes are to be repurchased by
the Company pursuant to the applicable provision of the Indenture (Section
1401). A holder of record of Notes shall be entitled to deliver a Change of
Control Purchase Notice with respect to any or all Notes held by it; provided,
however, that such holder may be required to provide evidence satisfactory to
the Company that, with respect to each beneficial holder of the Notes to be
delivered to the Company, such beneficial holder is exercising the right to
require the repurchase of all of the Notes in which it has a beneficial
interest.
Any Change of Control Purchase Notice may be withdrawn by the holder by a
written notice of withdrawal delivered to the Paying Agent prior to the close of
business on the Change of Control Purchase Date. The notice of withdrawal shall
state the principal amount and the certificate numbers of the Notes as to which
the withdrawal notice relates and the principal amount, if any, which remains
subject to a Change of Control Purchase Notice (Sections 1401 and 1402).
Payment of the Change of Control Purchase Price for Notes for which a
Change of Control Purchase Notice has been delivered and not withdrawn is
conditioned upon delivery of such Notes (together with necessary endorsements)
to the Paying Agent at its office maintained for such purpose, at any time
(whether prior to, on, or after the Change of Control Purchase Date) after the
delivery of such Change of Control Purchase Notice. Payment of the Change of
Control Purchase Price for such Notes will be made promptly following the later
of the Change of Control Purchase Date and the time of delivery of such Notes
(Sections 1401 and 1402).
"Change of Control" shall occur when: (i) all or substantially all of the
Company's assets are sold as an entirety to any person or related group of
persons; (ii) there shall be consummated any consolidation or merger of the
Company (A) in which the Company is not the continuing or surviving corporation
(other than a consolidation or merger with a wholly-owned subsidiary of the
Company in which all shares of Common Stock outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for the same consideration)
or (B) pursuant to which the Common Stock would be converted into cash,
securities or other property, in each case other than a consolidation or merger
of the Company in which the holders of the Common Stock immediately prior to the
consolidation or merger have, directly or indirectly, at least a majority of the
Common Stock of the continuing or surviving corporation immediately after such
consolidation or merger; or (iii) any person or any persons acting together
which would constitute a "group" for purposes of Section 13(d) of the Exchange
Act (other than the Company, any Subsidiary, any employee stock purchase plan,
stock option plan or other stock incentive plan or program, retirement plan or
automatic dividend reinvestment plan or any substantially similar plan of the
Company or any Subsidiary or any person holding securities of the Company for or
pursuant to the terms of any such employee benefit plan), together with any
affiliates thereof, shall Beneficially Own, directly or indirectly, at least 50%
of the total Voting Stock of the Company (Section 1401). As noted above, one of
the events that constitutes a Change of Control is a sale of all or
substantially all of the assets of the Company as an entirety to any person or
related group of persons. The Indenture will be governed by New York law, and
there is no established quantitative definition under New York law of
"substantially all" of the assets of a corporation. This uncertainty may make it
more difficult for a holder of Notes to determine whether a Change of Control
has occurred in the event that the Company were to engage in a transaction in
which it sold less than all of its assets.
A Change of Control as described above shall constitute a Repurchase Event
unless (i) the closing price per share of the Common Stock on the five
consecutive Trading Days selected by the Company out of the 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 clauses (i) or (ii) of the definition of Change of Control) or ending
immediately before the Change of Control (in the case of a Change of Control
under clause (iii) of the definition of Change of Control) is at least equal to
105% of the conversion price of the Notes in effect immediately preceding the
time of such Change of Control, or (ii) all
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of the consideration (excluding cash payments for fractional shares) in the
transaction giving rise to such Change of Control to the holders of Common Stock
consists of shares of common stock that are, or immediately upon issuance will
be, listed on a national securities exchange or quoted in the Nasdaq National
Market, and as a result of such transaction the Notes become convertible solely
into such Common Stock and neither Moody's Investors Service, Inc. nor Standard
& Poor's, principally as a result of the Change of Control, has downgraded the
rating on the Notes by one or more gradations below the rating of the Notes on
the original issuance date thereof within 90 days after the date of the public
announcement of the Change of Control (which period shall be extended so long as
the rating of the Notes is under publicly announced consideration for possible
downgrade by any of the rating agencies), or (iii) the consideration in the
transaction giving rise to such Change of Control to the holders of Common Stock
consists of cash, securities that are, or immediately upon issuance will be,
listed on a national securities exchange or quoted in the Nasdaq National
Market, or a combination of cash and such securities, and the aggregate fair
market value of such consideration (which, in the case of such securities, shall
be equal to the average of the daily closing prices of such securities on the
five consecutive Trading Days selected by the Company out of the 10 consecutive
Trading Days following consummation of such transaction) is at least 105% of the
conversion price of the Notes in effect on the date immediately preceding the
closing date of such transaction (Section 1401).
The Company, to the extent applicable and if required by law, will comply
with the provisions of Rule 13e-4 and any successor or similar provision under
the Exchange Act which may then be applicable and will file a Schedule 13E-4 or
any successor or similar schedule required thereunder in connection with any
offer by the Company to purchase Notes at the option of holders upon a Change of
Control (Section 1405). The Change of Control purchase feature of the Notes may
in certain circumstances make more difficult or discourage a takeover of the
Company and, thus, the removal of incumbent management. The Change of Control
purchase feature, however, is not the result of management's knowledge of any
specific effort to accumulate shares of Common Stock or to obtain control of the
Company by means of a merger, tender offer, solicitation or otherwise, or part
of any plan by management to adopt a series of anti-takeover provisions.
Instead, the Change of Control purchase feature is a result of negotiations
between the Company and the Underwriters. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in future. Subject to the limitation on
mergers discussed below, the Company could, in the future, enter into certain
transactions, including certain recapitalizations, sales of assets, or the
liquidation of the Company, that would not constitute a Change of Control under
the Indenture, but that would increase the amount of Senior Indebtedness (or any
other indebtedness) outstanding at such time or substantially reduce or
eliminate the Company's assets. There are no restrictions in the Indenture on
the creation of additional Senior Indebtedness (or any other indebtedness), and,
under certain circumstances, the incurrence of significant amounts of additional
indebtedness could have an adverse effect on the Company's ability to service
its indebtedness, including the Notes. If a Change of Control were to occur,
there can be no assurance that the Company would have sufficient funds to pay
the Change of Control Purchase Price for all Notes tendered by the holders
thereof.
No Note may be purchased pursuant to the Change of Control provisions if
there has occurred and is continuing an Event of Default described under
"-- Events of Default" (Section 1402).
The Company's existing bank credit facility prohibits the Company from
repurchasing any Notes unless (i) such repurchase is permitted under the
restricted payment covenant contained in such bank credit facility and (ii) at
the time of such repurchase and after giving effect thereto, no default shall
have occurred under such bank credit facility. In addition, the agreements under
which Senior Indebtedness may be outstanding in the future could contain
provisions which may require repayment of such respective Senior Indebtedness
prior to repayment of the Notes upon, among other things, a Change of Control.
If the Company is unable to obtain the requisite consents under its Senior
Indebtedness to enable it to repurchase the Notes or is unable to repay all
Senior Indebtedness, there would be both an Event of Default under the Notes and
an event of default under such Senior Indebtedness, as a result of which events
the Company could be prohibited by the subordination provisions of the Indenture
from repurchasing Notes or making other payments in respect thereof.
Furthermore, the exercise by the holders of their right to require the Company
to repurchase the
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Notes could cause a default under the Senior Indebtedness of the Company, even
if the Change of Control itself does not, due to the financial effect of such
repurchase on the Company. As a result, the repurchase of the Notes could be
blocked pursuant to the subordination terms of the Indenture. Finally, the
Company's ability to pay cash to the holders of Notes upon a repurchase may be
limited by the Company's then existing financial resources. Failure of the
Company to pay the Change of Control Purchase Price will be a default under the
Indenture and could result in an Event of Default with respect to the Notes,
whether or not such repurchase is permitted by the subordination provisions. See
"-- Events of Default."
LIMITATION ON MERGERS
The Company may, without the consent of the holders of the Notes,
consolidate with or merge into any other entity or convey, transfer or lease its
properties and assets substantially as an entirety to any person, provided that:
(1) the entity formed by such consolidation or into which the Company is merged
or the person that acquires by conveyance or transfer, or which leases the
properties and assets of the Company substantially as an entirety, must be a
corporation, partnership or trust organized and existing under the laws of the
United States, any state thereof or the District of Columbia; (2) the successor
entity expressly assumes, by a supplemental indenture executed and delivered to
the Trustee, in form satisfactory to the Trustee, the due and punctual payment
of the principal of and premium, if any, and interest on all Notes and the
performance of every covenant of the Indenture on the part of the Company to be
performed or observed and provides for conversion rights in accordance with the
Indenture; and (3) 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 (Section 801).
Upon compliance with these provisions by a successor entity, the Company (except
in the case of a lease) would be relieved of its obligations under the Indenture
and the Notes (Section 802).
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture, with certain exceptions, may
be made by the Company and the Trustee, only with the consent of the holders of
not less than a majority in aggregate principal amount of the Notes at the time
outstanding, and holders of not less than a majority in aggregate principal
amount of the Notes at the time outstanding may waive compliance by the Company
with certain provisions of the Indenture; provided, however, that no such
modification, amendment or waiver may, without the consent of the holder of each
outstanding Note affected thereby, (i) change the Stated Maturity of the
principal of or the due date of any installment of interest on any Note, (ii)
reduce the principal amount of, or the rate of interest on, or any premium
payable upon redemption of, any Note, (iii) change the currency of payment of
principal of, or premium, if any, or interest on, any Note, (iv) impair the
right to institute suit for the enforcement of any payment on or with respect to
any Note on or after the Stated Maturity, or the Redemption Date in case of the
redemption of any Note, (v) adversely affect the right of a holder to convert
Notes, (vi) modify the provisions of the Indenture with respect to the
subordination of the Notes in a manner adverse to the holders, (vii) reduce the
above-stated percentage of outstanding Notes necessary to modify or amend the
Indenture, or (viii) reduce the percentage in 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 1009).
The holders of a majority in aggregate principal amount of the outstanding
Notes may waive any past default under the Indenture except, among other things,
a default in the payment of principal of or premium, if any, or interest on any
Note, including the Redemption Price, or a default with respect to right of
holders to convert the Notes (Section 513).
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (i) failure to
pay principal of, premium, if any, or Redemption Price when due on any Note,
whether or not such payment is prohibited by the subordination provisions of the
indenture; (ii) failure to pay any interest on any Note 30 days after payment is
due, whether or not such payment is prohibited by the subordination provisions
of the Indenture; (iii) failure to perform any other covenant of the Company in
the Indenture, and such failure continues for 60 days after
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written notice by the Trustee or the holders of at least 25% in principal amount
of the outstanding Notes as provided in the Indenture; (iv) default under any
mortgage, indenture or instrument under which there may be issued, or by which
there may be secured or evidenced, any indebtedness of the Company in excess of
an aggregate of $10,000,000 either for borrowed money or representing any Senior
Indebtedness (other than indebtedness which is nonrecourse to the Company beyond
the property securing such indebtedness) resulting in the acceleration of such
indebtedness prior to its express maturity (provided however, that the Event of
Default under this clause (iv) shall be automatically deemed remedied and cured
if the default under such accelerated indebtedness is remedied or cured by the
Company or waived by the holder of such indebtedness); and (v) certain events of
bankruptcy, insolvency or reorganization of the Company (Section 501).
Notwithstanding the 60-day period and notice requirement referred to in
clause (iii) above, with respect to a default under the Change of Control
provisions, (1) the 60-day period referred to in clause (iii) above will be
deemed to have begun as of the date the Change of Control Notice is required to
be sent in the event the Change of Control Notice indicates (or would, if sent,
indicate) that the Company has not complied with its obligation to either repay
or obtain the requisite consents under any Senior Indebtedness that would
prohibit the repurchase of the Notes, and either (a) the holders duly elect to
have at least 25% in principal amount of outstanding Notes repurchased or (b)
the holders of at least 25% in principal amount of the outstanding Notes or the
Trustee thereafter gives the Notice of Default to the Company and, if
applicable, the Trustee, and (2) if the breach or default is a result of a
default in the payment when due of the Change of Control Purchase Price on the
Change of Control Purchase Date, such default shall arise on the Change of
Control Purchase Date, provided that either the holders of at least 25% in
principal amount of the Notes or the Trustee thereafter gives the Notice of
Default to the Company and, if applicable, the Trustee (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 (Sections 601 and 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 shall occur and be continuing, other than an event
of bankruptcy, insolvency or reorganization of the Company, either the Trustee
or the holders of at least 25% of the principal amount of the outstanding Notes
may accelerate the maturity of all Notes upon the earlier of (1) five business
days after notice of such acceleration is received by the Company (and the
Trustee if given by holders) and (2) a payment default under or acceleration of
any Senior Indebtedness or such other earlier time as the final maturity date
for such Senior Indebtedness occurs. If an Event of Default shall occur and be
continuing which is an event of bankruptcy, insolvency or reorganization of the
Company, the maturity of all Notes shall immediately accelerate without any act
on the part of the Trustee or any holder. If an Event of Default shall occur and
be continuing as a result of an acceleration of indebtedness of the type
described in clause (iv) above, a declaration of acceleration under the
Indenture shall automatically be annulled if the holders of the accelerated
indebtedness described in clause (iv) above have rescinded their declaration of
acceleration within 90 days thereof and no other Event of Default has occurred
during such 90-day period which has not been cured or waived. After acceleration
upon the Event of Default, 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 annul such
acceleration if, among other things, all Events of Default, other than the
non-payment of accelerated principal, have been cured or waived as provided in
the Indenture (Section 502). For information as to waiver of defaults, see
"-- Modification and Waiver."
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, 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, 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
the Trustee shall have failed to
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institute such proceeding within 60 days after such notice (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 or premium, if any, or
interest on such Note or the Redemption Price 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 annually to furnish to the Trustee a statement
as to any default in its performance of certain of its obligations under the
Indenture (Section 1004).
DISCHARGE OF INDENTURE; DEFEASANCE
The Company may terminate substantially all obligations under the Indenture
at any time by delivering all outstanding Notes to the Trustee for cancellation
and paying any other sums payable under the Indenture (Article IV).
The Indenture also provides that the Company may elect:
(a) to defease and be discharged from any and all obligations with
respect to the Notes and that the provisions of the Indenture (including
the provisions described under "-- Subordination of Notes") will no longer
be in effect with respect to the Notes (except for the obligations to
register the transfer or exchange of the Notes, to replace temporary or
mutilated, destroyed, lost or stolen Notes, to maintain an office or agency
in respect of Notes and to hold monies for payment in trust)
("Defeasance"); or
(b) to be released from its obligations with respect to the Notes
under certain restrictive covenants of the Indenture, and that the event of
the type described under the clause (iv) under "-- Events of Default" will
not be deemed to be an Event of Default under the indenture and that the
provisions described under "-- Subordination of Notes" will not apply
("Covenant Defeasance").
Such Defeasance or Covenant Defeasance will take effect only upon the
deposit with the Trustee (or other qualifying trustee), in trust for such
purpose, of money or U.S. Government Obligations that, through the payment of
principal and interest in accordance with their terms, will provide money, in an
amount sufficient to pay the principal of and premium, if any, and interest on
the Notes on the dates such payments are due, which may include one or more
Redemption Dates designated by the Company (other than in connection with a
Change of Control occurring after such Defeasance or Covenant Defeasance), in
accordance with the terms of the Notes (Article XV).
Such a trust may be established with respect to the Notes only if, among
other things: (i) such Defeasance or Covenant Defeasance will not result
(whether immediately or with notice or lapse of time or both) in an Event of
Default under the Indenture; (ii) such deposit will not be prohibited by the
provisions of any agreement or instrument to which the Company is a party or is
bound; (iii) such deposit will not cause the Trustee to have any conflicting
interest with respect to other securities of the Company; (iv) the Company has
delivered to the Trustee an Opinion of Counsel to the effect that the holders of
the Notes will not recognize income, gain or loss for federal income tax purpose
as a result of such Defeasance or Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Defeasance or Covenant Defeasance had not
occurred; and (v) the Company has delivered an Officers' Certificate and an
Opinion of Counsel, each to the effect that all conditions precedent relating to
such Defeasance or Covenant Defeasance have been satisfied. Such Opinion of
Counsel, in the case of Defeasance, must refer to and be based upon a ruling of
the Internal Revenue Service or a change in applicable federal income tax law
occurring after the issue date (Article XV).
If the Company omits to comply with its remaining obligations under the
Indenture after Covenant Defeasance in respect of the Notes issued thereunder
and the Notes are declared due and payable because of the occurrence of an Event
of Default, the amount of money or U.S. Government Obligations on deposit with
the Trustee may be insufficient to pay amounts due on the Notes at the time any
acceleration of the maturity thereof resulting from such Event of Default.
However, the Company will remain liable in respect of such payments (Article
XV).
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GOVERNING LAW
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York.
THE TRUSTEE
Texas Commerce Bank National Association is the Trustee under the
Indenture. In the ordinary course of business the Company maintains other
commercial relationships with the Trustee and its affiliates. If the Trustee
shall acquire any conflicting interest (as defined in Section 301(b) of the
Trust Indenture Act) after a default under the Indenture, the Trustee either
shall eliminate such conflicting interest or resign as Trustee.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The Company's authorized capital stock consists of 75,000,000 shares of
common stock, par value $.01 per share (the "Common Stock"), of which 23,259,658
were issued and outstanding at December 31, 1993, and 10,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"), of which
2,221,005 were issued and outstanding as of December 31, 1993.
COMMON STOCK
All shares of Common Stock have equal rights to participate in dividends
and, in the event of liquidation, assets available for distribution to
stockholders, subject to any preference established with respect to Preferred
Stock. Each holder of Common Stock is entitled to one vote for each share held
on all matters submitted to a vote of stockholders, and voting rights for the
election of directors are noncumulative. Shares of Common Stock carry no
conversion, preemptive or subscription rights, and are not subject to
redemption. All outstanding shares of Common Stock are, and any shares of Common
Stock issued upon conversion of convertible securities will be, validly issued,
fully paid and nonassessable. The Company pays dividends on Common Stock when,
as and if declared by the Board of Directors. Dividends may be declared in the
discretion of the Board of Directors from funds legally available therefor,
subject to restrictions under agreements related to Company indebtedness.
The transfer agent for the Common Stock is Society National Bank, 3200
Renaissance Tower, 1201 Elm Street, Dallas, Texas 75270.
PREFERRED STOCK
The Preferred Stock is issuable in one or more series or classes, any or
all of which may have such voting powers, full or limited, or no voting powers,
and such designations, preferences and related, participating, optional or other
special rights and qualifications, limitations or restrictions thereof, as are
set forth in the Company's Certificate of Incorporation, as amended, or in the
resolution or resolutions providing for the issue of such stock adopted by the
Board, which is expressly authorized to set such terms for any such issue.
In November 1991, the Company issued 1,200,000 shares of $4.00 Exchangeable
Convertible Preferred Stock, of which 1,186,005 shares were outstanding on
December 31, 1993. Holders of such Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available therefor, cash dividends at an annual rate of $4.00 per share, payable
quarterly in arrears. Upon liquidation, such holders are entitled to receive a
preference of $50.00 per share, plus accrued and unpaid dividends to the payment
date. Each share of such Preferred Stock is convertible into 5.51 shares of
Common Stock at any time prior to redemption (subject to adjustment), equivalent
to a conversion price of $9.07 for each share of Common Stock. The Company has
the right to exchange the shares of such Preferred Stock for the Company's 8%
Convertible Subordinated Debentures due 2006 on any dividend payment date and,
subject to certain restrictions, the right to redeem such Preferred Stock
beginning January 1, 1995.
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In April 1993, the Company issued 1,035,000 shares (represented by
4,140,000 depositary shares) of $6.00 Exchangeable Convertible Preferred Stock,
all of which were outstanding on December 31, 1993. Holders of such Preferred
Stock are entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available therefor, cash dividends at an annual
rate of $6.00 per share ($1.50 per depositary share), payable quarterly in
arrears. Upon liquidation, such holders are entitled to receive a preference of
$100.00 per share ($25.00 per depositary share), plus accrued and unpaid
dividends to the payment date. Each share of such Preferred Stock is convertible
into 4.762 shares of Common Stock at any time prior to redemption (subject to
adjustment), equivalent to a conversion price of $21.00 for each share of Common
Stock. The Company has the right to exchange the shares of such Preferred Stock
for the Company's 6% Convertible Subordinated Debentures due 2008 on any
dividend date payment on or after March 31, 1994 and the right to redeem such
Preferred Stock beginning March 31, 1996.
The existing series of Preferred Stock rank prior to the Common Stock, and
on a parity with each other, as to dividends and upon liquidation, dissolution
or winding up.
FACTORS AFFECTING ACQUISITIONS OF CONTROL
The Company's Certificate of Incorporation, as amended, provides that the
Board of Directors, in its discretion, may establish one or more class or series
of Preferred Stock having such number of shares, designations, relative voting
rights, dividend rates, liquidation and other rights, preferences and
limitations as may be fixed by the Board of Directors without any further
stockholder approval. Such rights, preferences, privileges and limitations could
have the effect of impeding or discouraging the acquisition of control of the
Company.
The Company is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law (the "DGCL"). In general, Section 203 prevents
an "interested stockholder" (defined generally as a person owning 15% or more of
a corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with a Delaware corporation for three years following
the date such person became an interested stockholder unless (i) before such
person became an interested stockholder, the board of directors of the
corporation approved the transaction in which the interested stockholder became
an interested stockholder or approved the business combination; (ii) upon
consummation of the transaction that resulted in the interested stockholder's
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock held by directors who are also officers
of the corporation and by employee stock plans that do not provide employees
with the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer); or (iii) following the
transaction in which such person became an interested stockholder, the business
combination is approved by the board of directors of the corporation and
authorized at a meeting of stockholders by the affirmative vote of the holders
of two-thirds of the outstanding voting stock of the corporation not owned by
the interested stockholder. Under Section 203, the restrictions described above
also do not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of one of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any person's becoming an
interested stockholder during the previous three years or who were recommended
for election or elected to succeed such directors by a majority of such
directors.
DIRECTORS' LIABILITY
The Company's Certificate of Incorporation, as amended, also provides for
the elimination of directors' liability for monetary damages for a breach of
certain fiduciary duties and for the indemnification of directors, officers,
employees or agents as permitted by the DGCL. These provisions cannot be amended
without the affirmative vote of the holders of at least a majority in interest
of the outstanding shares entitled to vote.
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The Company has entered into indemnification agreements with all directors
and executive officers and may, in the future, enter into such agreements with
employees and agents. Such indemnification agreements provide generally that
such persons will be indemnified, to the extent permitted by applicable law, for
expenses (including attorneys' fees), judgments, penalties, fines and amounts
paid in settlement actually and reasonably incurred by such persons in
connection with any proceeding (including, to the extent permitted by law, any
derivative action) to which such persons are, or are threatened to be made, a
party by reason of their status in such positions. Such indemnification
agreements do not change the basic legal standards for indemnity under
applicable law or as set forth in the Certificate of Incorporation.
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