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EXHIBIT 4.2
FIRST SUPPLEMENTAL INDENTURE
Dated as of November [__], 1996
Supplementing and Amending the Indenture
Dated as of December 1, 1987
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BERKSHIRE HATHAWAY INC.
TO
STATE STREET BANK AND TRUST COMPANY,
Trustee
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[___]% Senior Exchangeable Notes Due [_______], 2001
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FIRST SUPPLEMENTAL INDENTURE dated as of November [__], 1996 (this
"Supplemental Indenture"), made and entered into by and between BERKSHIRE
HATHAWAY INC., a corporation organized and existing under the laws of the State
of Delaware having its principal office at 0000 Xxxxxx Xxxxx, Xxxxx, Xxxxxxxx
00000 (the "Company"), and STATE STREET BANK AND TRUST COMPANY, as successor
trustee (together with its successors, the "Trustee").
WHEREAS the Company entered into an Indenture dated as of December 1,
1987 (the "Basic Indenture") with The First National Bank of Boston, as the
initial Trustee, for the purposes of issuing its unsecured debentures, notes or
other evidences of indebtedness to be issued in one or more series (the "Debt
Securities"), in such principal amount or amounts as may from time to time be
authorized by or pursuant to the authority granted in one or more resolutions of
the Board of Directors of the Company;
WHEREAS the Company has requested the Trustee to join with it in the
execution and delivery of this First Supplemental Indenture in order to comply
with amendments to the Trust Indenture Act and to provide for a series of Debt
Securities denominated its "[__]% Senior Exchangeable Notes Due [_________],
2001" (such Debt Securities being referred to herein as the "Notes");
WHEREAS Section 901(6) and (8) of the Basic Indenture provides that
without the consent of the Holders of Debt Securities, the Company, when
authorized by a Board Resolution, and the Trustee may enter into one or more
indentures supplemental to the Basic Indenture, in form satisfactory to the
Trustee, (a) to establish the form or terms of Debt Securities of any series and
(b) to cure any ambiguity, to correct or supplement any provision therein which
may be defective or inconsistent with any other provision therein, or to make
any other provisions with respect to matters or questions arising under the
Basic Indenture which shall not be inconsistent with the provisions of the Basic
Indenture, provided such other provisions shall not adversely affect the
interest of the Holders of Debt Securities of any series in any material
respect;
WHEREAS the entry into this Supplemental Indenture by the parties
hereto is in all respects authorized by the provisions of the Basic Indenture;
and
WHEREAS all things necessary to make this Supplemental Indenture a
valid agreement of the Company in accordance with its terms have been done.
NOW, THEREFORE, and in consideration of the premises and purchase of
the Debt Securities by the Holders thereof, it is mutually covenanted and
agreed, for the equal and proportionate benefit of all Holders, without
preference, priority or distinction of any of the Debt Securities over any of
the others by reason of difference in series or priority in time of issuance,
negotiation or maturity thereof, or otherwise except as otherwise provided in
the Basic Indenture or this Supplemental Indenture, as follows:
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SECTION 1. The Basic Indenture is hereby amended to reflect certain
amendments to the Trust Indenture Act as follows:
(a) The definition of "Trust Indenture Act" in Section 101 is amended
to add to such definition the phrase ", as amended by the Trust Indenture Reform
Act of 1990," after the date "1939" in the first line of such definition.
(b) Section 102 of the Indenture is amended to add in the first line of
the second paragraph, after the word "Indenture", the following: "(other than
certificates provided pursuant to Section 1004)".
(c) Section 107 of the Indenture is amended to read in its entirety as
follows:
"If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act which 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 which 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."
(d) Section 608 of the Indenture is amended to read in its entirety as
follows:
"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. To the extent permitted by such Act, the Trustee
shall not be deemed to have a conflicting interest by virtue of being a
trustee under this Indenture with respect to Securities of more than
one series."
(e) Section 609 of the Indenture is amended to read in its entirety as
follows:
"There shall at all times be one (and only one) Trustee
hereunder with respect to the Securities of each series, which may be
Trustee hereunder for Securities of one or more other series. Each
Trustee shall be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of
at least $50,000,000. If any such Person publishes reports of condition
at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this
Section and to the extent permitted by the Trust Indenture Act, 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 with respect to the
Securities of any series shall cease to be eligible in accordance with
the provisions of this Section, it shall resign immediately in the
manner and with the effect hereinafter specified in this Article."
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(e) Section 613 of the Indenture is amended to read in its entirety as
follows:
"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)."
(f) Section 703 of the Indenture is amended to read in its entirety as
follows:
"The Trustee shall transmit to Holders 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.
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 any Debt Securities are listed, with the Commission
and with the Company. The Company will notify the Trustee when any Debt
Securities are listed on any stock exchange."
(g) Section 1004 of the Indenture is amended by denoting the current
paragraph in Section 1004 as paragraph (a) and by adding as a new paragraph (b)
the following:
"(b) The Company will deliver to the Trustee, within 120 days
after the end of each fiscal year of the Company ending after the date
hereof, a certificate of the principal executive officer, principal
financial officer or principal accounting officer of the Company
stating whether or not to the best knowledge of the signer thereof the
Company is in default in the performance and observance of any of the
terms, provisions and conditions of this Indenture (without regard to
any period of grace or requirement of notice provided hereunder) and,
if the Company shall be in default, specifying all such defaults and
the nature and status thereof of which such signer may have knowledge."
SECTION 2. The Basic Indenture is hereby amended by amending Section
301 of the Basic Indenture by (i) adding as a new subparagraph (15) the
following: "(15) the obligation, if any, of the Company to permit the conversion
or exchange of the Debt Securities of such series into other securities (whether
or not issued by, or the obligation of, the Company), and the terms and
conditions upon which such conversion or exchange shall be effected (including,
without limitation, the initial conversion or exchange price or rate, the
conversion or exchange period and any other provision in addition to or in lieu
of those set forth in this Indenture relative to such obligation); and"; and by
(ii) renumbering current subparagraphs (15) and (16) of Section 301 to new
subparagraphs (16) and (17), respectively.
SECTION 3. The Basic Indenture is hereby further amended, solely with
respect to a series of securities that consists of Notes, as follows:
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(a) By amending Section 101 to add new definitions thereto, in the
appropriate alphabetical sequence, as follows:
"Accreted Value" of a Note means the issue price of the Note plus
accrued OID thereon.
"Business Day" for purposes of the Notes means any day that is not a
Saturday, a Sunday or a day on which the NYSE, banking institutions or trust
companies in The City of New York are authorized or obligated by law or
executive order to close.
"Closing Price" of any security on any date of determination means the
closing sale price (or, if no closing price is reported, the last reported sale
price) of such security (regular way) on the NYSE on such date or, if such
security is not listed for trading on the NYSE on any such date, as reported in
the composite transactions for the principal United States securities exchange
on which such security is so listed, or if such security is not so listed on a
United States national or regional securities exchange, as reported by the
Nasdaq Stock Market, or, if such security is not so reported, the last quoted
bid price for such security in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or, if such bid price is not
available, the average of the mid-point of the last bid and ask prices for such
security from each of at least three nationally recognized investment banking
firms selected for such purpose by the Company, or if such quotes are not
available, the market value of such security on such date as determined by a
nationally recognized independent investment banking firm selected for this
purpose by the Company.
"Current Market Value" of Salomon Common Stock on any date of
determination means the greater of (1) the 10-Day Average Closing Price of
Salomon Common Stock as of such date and (2) the Closing Price of Salomon Common
Stock on the Trading Day immediately preceding such date (or, if determined
after the close of business on any Trading Day, the Closing Price of Salomon
Common Stock on such Trading Day).
"Electing Holder" has the meaning specified in Section 1402.
"Exchange Date" means the last Trading Day of each January, April, July
and October, from and including January 1997 through and including July 2001.
"Exchange Notice" has the meaning specified in Section 1402.
"Exchange Period" means the period from the opening of business on the
Business Day immediately prior to an Exchange Date until the close of business
on such Exchange Date.
"Exchange Price" of a Note on any date means (1) the Accreted Value of
such Note on such date divided by (2) the Exchange Rate in effect on such date.
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"Exchange Rate" means initially [____] shares of Salomon Common Stock
per Note, as the same may be adjusted in certain instances as provided in
Section 1405 hereof.
"Exchange Securities" has the meaning specified in Section 1405.
"Extraordinary Cash Dividend" has the meaning specified in Section 1405.
"Maturity Date" means [_________], 2001.
"New Exchange Date" has the meaning specified in Section 1402.
"NYSE" means the New York Stock Exchange.
"OID" with respect to the Notes means original issue discount
calculated on a constant yield basis using $1,000 principal amount due at
Maturity based on the excess of the principal amount due at Maturity over the
issue price of the Notes.
"Reorganization Event" has the meaning specified in Section 1405.
"Salomon" means Salomon Inc.
"Salomon Common Stock" means the common stock, par value $1.00 per
share of Salomon.
"Salomon Prospectus" means the prospectus supplement and prospectus of
Salomon covering the shares of Salomon Common Stock which may be received by a
Holder of Notes upon an exchange of Notes pursuant to Section 1402.
"Salomon Successor" has the meaning specified in Section 1405.
"Spin-Off" has the meaning specified in Section 1405.
"10-Day Average Closing Price" of Salomon Common Stock as of any date
of determination means the average Closing Price of Salomon Common Stock on the
10 Trading Days immediately prior to such date (or, if determined after the
close of business on any Trading Day, the average Closing Price of Salomon
Common Stock on such Trading Day and the nine Trading Days immediately prior to
such date).
"Trading Day" means any day on which the security the Closing Price of
which is being determined (1) is not suspended from trading on any national or
regional securities exchange or association or over-the-counter market at the
close of business and (2) has traded at least once on the national or regional
securities exchange or association or over-the-counter market that is the
primary market for the trading of such security.
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"Transaction Value" means (1) for any cash received in any
Reorganization Event, the amount of cash received per share of Salomon Common
Stock, (2) for any Reported Exchange Securities received in any Reorganization
Event, an amount equal to the average Closing Price per security of such
Reported Exchange Securities on the 10 Trading Days immediately prior to
Maturity or the date on which notice of redemption or exchange is given pursuant
to Section 1403, as applicable, multiplied by the number of such Reported
Exchange Securities received for each share of Salomon Common Stock, and (3) for
any property received in any Reorganization Event other than cash or such
Reported Exchange Securities, an amount equal to the fair market value of the
property received per share of Salomon Common Stock on the date such property is
received, as determined by a nationally recognized investment banking firm
selected for this purpose by the Company; provided however, that in the case of
clause (2), (A) with respect to securities that are Reported Exchange Securities
by virtue of only clause (i)(d) of the definition of Reported Exchange
Securities, Transaction Value with respect to any such Reported Exchange
Security means the average of the mid-point of the last bid and ask prices for
such Reported Exchange Security as of Maturity or such notice date, as
applicable, from each of at least three nationally recognized investment banking
firms selected for such purpose by the Company multiplied by the number of such
Reported Exchange Securities received for each share of Salomon Common Stock and
(B) with respect to all other Reported Exchange Securities, if there are not 10
Trading Days for any particular Reported Exchange Security occurring after the
60th calendar day immediately prior to, but not including, the date of Maturity
or such notice date, as applicable, Transaction Value with respect to such
Reported Exchange Security means the market value per security of such Reported
Exchange Security as of Maturity or such notice date, as applicable, as
determined by a nationally recognized investment banking firm selected for such
purpose by the Company multiplied by the number of such Reported Exchange
Securities received for each share of Salomon Common Stock.
(b) By amending Section 902 of the Basic Indenture by adding to the end
of paragraph (1) thereof the following: "change the terms under which the Notes
are exchangeable as set forth in Article Fourteen, or".
(c) By amending Section 1301 of the Basic Indenture to read in its
entirety as follows:
"The provisions of this Article shall not be applicable to the Notes."
(d) By adding the following Article Fourteen:
"ARTICLE FOURTEEN
EXCHANGE OF NOTES
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SECTION 1401. Payment or Exchange at Maturity.
(a) At Maturity, if both (1) the 10-Day Average Closing Price of
Salomon Common Stock and (2) the Closing Price of Salomon Common Stock on the
last Trading Day prior to Maturity are equal to or greater than the Exchange
Price then in effect, each Note will be exchanged by the Company into shares of
Salomon Common Stock at the Exchange Rate, or the Company may, at its option,
deliver cash, in lieu of delivering shares of Salomon Common Stock, in an amount
equal to the product obtained by multiplying the Exchange Rate by the Current
Market Value of Salomon Common Stock at Maturity. In all other circumstances,
the Company will pay at Maturity, in cash, a price per Note equal to the
principal amount due at Maturity (or, in the event the Notes mature prior to the
Maturity Date, the Accreted Value thereof). In all events, accrued and unpaid
interest to Maturity shall be payable by the Company in cash on all Notes
outstanding at Maturity. The Exchange Rate or exchange consideration will be
subject to adjustment as provided in Section 1405.
(b) Not later than 15 days prior to Maturity, the Company will notify
the Depositary and the Trustee and will publish a notice in a daily newspaper of
national circulation stating whether the Company (1) will exchange the Notes for
shares of Salomon Common Stock or (2) will deliver cash equal to the product
obtained by multiplying the Exchange Rate by the Current Market Value of Salomon
Common Stock at Maturity, if at Maturity both (A) the 10-Day Average Closing
Price of Salomon Common Stock and (B) the Closing Price of Salomon Common Stock
on the last Trading Day prior to Maturity are equal to or greater than the
Exchange Price then in effect. The Salomon Common Stock, if any, to which a
Holder is entitled upon any exchange at Maturity will be delivered or made
available by the Company as soon as practicable and, in any event, not later
than the close of business on the fifth Business Day after Maturity. If the
Company delivers shares of Salomon Common Stock at Maturity, Holders of the
Notes will be responsible for the payment of any brokerage costs incurred upon
any subsequent sale of such stock.
SECTION 1402. Exchange at Option of Holder.
(a) On each Exchange Date, any Notes (other than Notes with respect to
which a notice of exchange for Salomon Common Stock has been delivered by the
Company prior to such Exchange Date) will be exchangeable, at the option of the
Holder, for shares of Salomon Common Stock at the Exchange Rate then in effect,
provided that the Closing Price of Salomon Common Stock on the Exchange Date
exceeds the Exchange Price then in effect, and subject to certain additional
conditions described below.
(b) To exchange a Note for Salomon Common Stock, a Holder must, at any
time during the relevant Exchange Period, (1) deliver to the Trustee (or such
office or agency that may be established by the Company for such purpose) a
completed and manually signed exchange notice (the "Exchange Notice") on the
back of such Note (or a facsimile thereof),
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(2) surrender or arrange for book entry transfer of such Note to the Trustee,
(3) if required, furnish appropriate endorsements and transfer documents and (4)
if required, pay all transfer or similar taxes. Any Exchange Notice may be
withdrawn by the Holder by a written notice of withdrawal delivered to the
Trustee prior to the close of business on the Exchange Date. The notice of
withdrawal shall state the principal amount due at Maturity and any certificate
number(s) of the Notes as to which the withdrawal notice relates and the
principal amount due at Maturity, if any, which remains subject to the Exchange
Notice, each of which must be $1,000 or an integral multiple thereof.
(c) In the event that a Salomon Prospectus is required to be delivered
under the Securities Act of 1933 upon an exchange of Notes and is not made
available by Salomon to the Company for use during any Exchange Period, the
Company shall, on or prior to the applicable Exchange Date, upon written notice
to each Holder that has complied with the procedures for exchange of Notes
described herein (an "Electing Holder"), postpone such Exchange Date from time
to time until such later Business Day (the "New Exchange Date") as the Company
is able to deliver a Salomon Prospectus or is no longer required to do so. In
the event that the Company postpones any Exchange Date, (1) no additional Notes
may be delivered to the Trustee by any Holder for exchange into Salomon Common
Stock at any time during the period from the original Exchange Date through and
including the New Exchange Date, (2) each Electing Holder shall have the right,
at any time until the New Exchange Date, to irrevocably withdraw any Notes
delivered to the Trustee on or prior to the original Exchange Date, and (3) any
Notes that have not been withdrawn by an Electing Holder prior to the New
Exchange Date shall be exchanged for shares of Salomon Common Stock on the New
Exchange Date, provided that the Closing Price of Salomon Common Stock on the
New Exchange Date exceeds the Exchange Price then in effect.
(d) If a Reorganization Event shall have occurred, the Notes shall not
be exchangeable at the option of the Holder for any Exchange Securities during
any Exchange Period if a prospectus covering such Exchange Securities is
required to be delivered by the Company under the Securities Act and is not
available to the Company for use during such Exchange Period.
(e) Upon any exchange of Notes at the option of the Holder, no payment
will be made in respect of accrued but unpaid interest, unless such exchange is
made concurrently with or after acceleration of the Notes following an event of
default hereunder. The Salomon Common Stock to which a Holder is entitled upon
any exchange will be delivered or made available by the Company as soon as
practicable and, in any event, not later than the close of business on the fifth
Business Day after the applicable Exchange Date.
SECTION 1403. Redemption or Exchange at Option of the Company.
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(a) The Notes will not be redeemable or exchangeable at the option of
the Company prior to [_________], 1999. Thereafter, (1) at any time when both
(A) the 10-Day Average Closing Price of Salomon Common Stock on the date on
which the applicable notice of redemption is given and (B) the Closing Price of
Salomon Common Stock on the last Trading Day prior to such date are equal to or
greater than the Exchange Price then in effect, the Company may, at its option,
either (i) exchange the Notes, in whole or in part, for shares of Salomon Common
Stock at the Exchange Rate then in effect or (ii) redeem the Notes, in whole or
in part, in cash at a price per Note equal to the product of the Exchange Rate
then in effect and the Current Market Value of Salomon Common Stock on the date
on which the applicable notice of redemption is given, and (2) at any other
time, the Company may, at its option redeem the Notes, in whole or in part, in
cash at a price per Note equal to the Accreted Value of the Notes on the date of
redemption. However, the Company may not give any notice of redemption for cash
(x) during the period from the beginning of any Exchange Period until the close
of business on the applicable Exchange Date or New Exchange Date or (y) prior to
the beginning of any Exchange Period if the Redemption Date would occur during
or after such Exchange Period. Upon any exchange or redemption described in
clause (1) above, the Holders of Notes will not receive any payment representing
accrued OID; such accrued OID will be deemed paid upon the receipt of Salomon
Common Stock or the cash equivalent received on such exchange or redemption.
(b) In connection with any redemption or exchange prior to Maturity of
the Notes, the Company will notify the Depositary and the Trustee and will
publish a notice in a daily newspaper of national circulation stating (1) the
Exchange Rate then in effect, (2) whether the Notes will be exchanged for shares
of Salomon Common Stock or redeemed for cash, (3) the redemption or Exchange
Date (which shall be at least 15 days but not more than 30 days after the date
of such notice) and (4) in the case of a redemption, the redemption price. On
the Exchange Date with respect to any exchange of Notes for Salomon Common
Stock, such Notes shall cease to be outstanding and shall be deemed to represent
solely the right to receive shares of Salomon Common Stock in accordance with
the terms of the Indenture. The Company will pay in cash the accrued and unpaid
interest on all Notes redeemed or exchanged to but excluding the date of
redemption or exchange. If the Company exchanges Notes for shares of Salomon
Common Stock, Holders of the Notes will be responsible for the payment of any
brokerage costs incurred upon the subsequent sale of such shares.
(c) If less than all the Notes then outstanding are to be redeemed or
exchanged prior to maturity of the Notes, the Trustee will select those to be
redeemed or exchanged as a whole or in part pro rata or by lot or by such method
as the Trustee shall deem fair and appropriate. Notice of redemption or exchange
will be given to Holders of the Notes to be redeemed or exchanged by first-class
mail, postage prepaid at their last address appearing on the Note registry
books.
SECTION 1404. No Fractional Shares.
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No fractional shares of Salomon Common Stock will be issued if any
Notes are exchanged for shares of Salomon Common Stock at or prior to Maturity.
If more than one Note from the same Holder is exchanged for Salomon Common Stock
at one time, the number of full shares of Salomon Common Stock to be delivered
upon exchange shall be computed on the basis of the aggregate number of Notes
from such Holder so exchanged at that time. In lieu of any fractional share
otherwise issuable in respect of all Notes of any Holder that are exchanged at
or prior to Maturity, the Company, through the Paying Agent, shall make a cash
payment in respect of such fractional interest to such Holder in an amount equal
to the product of such fraction of a share and the Current Market Value of
Salomon Common Stock on the applicable Exchange Date (in the case of an exchange
at the option of the Holder), the date on which the related notice of exchange
is given (in the case of an exchange at the option of the Company) or at
Maturity, as applicable. The Company shall, upon exchange of any Notes, provide
cash to the Paying Agent in an amount equal to the cash payable with respect to
any fractional shares of Salomon Common Stock deliverable upon exchange of such
Notes, and the Company shall retain such fractional shares of Salomon Common
Stock.
SECTION 1405. Adjustment of Exchange Rate.
(a) Adjustment for Distributions, Reclassification, etc. The Exchange
Rate shall be subject to adjustment from time to time as follows:
(1) If Salomon shall:
(A) pay a dividend or make a distribution with
respect to the Salomon Common Stock in shares of such stock;
(B) subdivide or split the outstanding shares of
Salomon Common Stock into a greater number of shares;
(C) combine the outstanding shares of Salomon Common
Stock into a smaller number of shares; or
(D) issue by reclassification of shares of Salomon
Common Stock any shares of common stock of Salomon;
then, in any such event, the Exchange Rate in effect immediately prior
to such event shall be adjusted so that the Holder of any Note shall
thereafter be entitled to receive, upon exchange of such Holder's Note
by the Company at Maturity or upon redemption, the number of shares of
Salomon Common Stock that such Holder would have owned or been
entitled to receive immediately following such event had such Note
been exchanged immediately prior to such event or any record date with
respect thereto. Each such adjustment shall become effective at the
opening of business on
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the Business Day next following the record date for determination of
holders of Salomon Common Stock entitled to receive such dividend or
distribution in the case of a dividend or distribution and shall
become effective immediately after the effective date in the case of a
subdivision, split, combination or reclassification. Each such
adjustment shall be made successively.
(2) If Salomon shall issue rights or warrants to all holders
of Salomon Common Stock entitling them to subscribe for or purchase
shares of Salomon Common Stock (other than rights to purchase Salomon
Common Stock pursuant to (A) a plan for the reinvestment of dividends
or interest or (B) pursuant to a shareholders rights plan or
agreement, unless a triggering event shall have occurred thereunder)
at a price per share less than the current market price of Salomon
Common Stock (determined for purposes of this clause (2) as the
Closing Price per share of Salomon Common Stock on the record date
fixed for the determination of stockholders entitled to receive such
rights or warrants), then in each case the Exchange Rate shall be
adjusted by multiplying the Exchange Rate in effect immediately prior
to such record date, by a fraction, of which (x) the numerator shall
be the number of shares of Salomon Common Stock outstanding at the
close of business on such record date, plus the number of additional
shares of Salomon Common Stock offered for subscription or purchase
pursuant to such rights or warrants, and (y) the denominator shall be
the number of shares of Salomon Common Stock outstanding at the close
of business on such record date, plus the number of additional shares
of Salomon Common Stock that the aggregate offering price of the total
number of shares of Salomon Common Stock so offered for subscription
or purchase pursuant to such rights or warrants would purchase at such
current market price (calculated at the Closing Price per share of
Salomon Common Stock on such record date), which shall be determined
by multiplying such total numbers of shares offered by the exercise
price of such rights or warrants and dividing the product so obtained
by such current market price. Such adjustment shall become effective
at the opening of business on the Business Day next following the
record date for the determination of stockholders entitled to receive
such rights or warrants. To the extent that shares of Salomon Common
Stock are not delivered after the expiration of such rights or
warrants, the Exchange Rate shall be readjusted to the Exchange Rate
which would then be in effect had such adjustments for the issuance of
such rights or warrants been made upon the basis of delivery of only
the number of shares of Salomon Common Stock actually delivered. Each
such adjustment shall be made successively.
(3) If Salomon shall pay a dividend or make a distribution to
all holders of Salomon Common Stock of any class of its capital stock,
evidences of its indebtedness or other assets (in each case excluding
any dividends or distributions referred to in paragraph (1) above or
any ordinary periodic cash dividends that do not constitute
Extraordinary Cash Dividends (as defined below)) or shall issue to all
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holders of Salomon Common Stock rights or warrants to subscribe for or
purchase any of its securities (other than those referred to in
paragraph (2) above), then in each such case, the Exchange Rate shall
be adjusted by multiplying the Exchange Rate in effect on the record
date mentioned below by a fraction of which (A) the numerator shall be
the current market price per share of the Salomon Common Stock on the
record date for the determination of stockholders entitled to receive
such dividend or distribution (such current market price being
determined for purposes of this paragraph as the Closing Price per
share of Salomon Common Stock on such record date) and (B) the
denominator shall be such current market price per share of Salomon
Common Stock less the fair market value (as determined by the Board of
Directors of the Company, whose determination shall be conclusive, and
described in a resolution adopted with respect thereto) as of such
record date of the portion of the capital stock, evidences of
indebtedness or other assets so distributed or of such subscription
rights or warrants applicable to one share of Salomon Common Stock;
provided, however, that in the event of a distribution of shares of
capital stock of a subsidiary of Salomon (a "Spin-Off") made to
holders of shares of Salomon Common Stock, the numerator of such
fraction shall be the sum of (i) the Closing Price of Salomon Common
Stock as of the 35th Trading Day after the effective date of such
Spin-Off and (ii) the Closing Price of the number of shares (or the
fraction of a share) of capital stock of such subsidiary of Salomon on
such 35th Trading Day which is distributed in such Spin-Off in respect
of one share of Salomon Common Stock as of such 35th Trading Day and
the denominator of which shall be the Closing Price of Salomon Common
Stock as of such 35th Trading Day. Each such adjustment shall become
effective on the opening of business on the Business Day next
following the record date for the determination of stockholders
entitled to receive such dividend or distribution (or, in the case of
an adjustment pursuant to the proviso of the immediately preceding
sentence, on the Business Day next following the 35th Trading Day
after the effective date of the Spin-Off). Each such adjustment shall
be made successively.
(4) Any shares of Salomon Common Stock issuable in payment of
a dividend shall be deemed to have been issued immediately prior to
the close of business on the record date for such dividend for
purposes of calculating the number of outstanding shares of Salomon
Common Stock under paragraph (2) above.
(5) All adjustments to the Exchange Rate shall be calculated
to the nearest 1/10,000th of a share of Salomon Common Stock (or if
there is not a nearest 1/10,000th of a share to the next lower
1/10,000th of a share). No adjustment in the Exchange Rate shall be
required unless such adjustment would require an increase or decrease
of at least one percent therein; provided, however, that any
adjustments which by reason of this paragraph are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment.
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(6) For purposes of the foregoing, the term "Extraordinary
Cash Dividend" shall mean, with respect to any consecutive 365-day
period, any cash dividend with respect to Salomon Common Stock the
amount of which, together with the aggregate amount of all other such
cash dividends on the Salomon Common Stock occurring in such 365-day
period, exceeds on a per share basis 10% of the average Closing Price
per share of the Salomon Common Stock over such 365-day period, and
for purposes of applying the formula set forth in paragraph (3) above,
the fair market value of such dividends being calculated pursuant to
such paragraph (3) shall be equal to (A) the aggregate amount of such
cash dividend together with the amounts of such other cash dividends
occurring in such period minus (B) the aggregate amount of such other
cash dividends occurring in such period for which a prior adjustment
in the Exchange Rate was previously made as described in this
subsection. In making the determinations required by the foregoing
sentence, the amount of cash dividends paid on a per share basis shall
be appropriately adjusted to reflect the occurrence during such period
of any event described in this subsection.
(b) Adjustment of Exchange Consideration for Consolidation, Merger or
Other Reorganization Event.
(1) In the event of (A) any consolidation or merger of Salomon, or any
surviving entity or subsequent surviving entity of Salomon (a "Salomon
Successor"), with or into another entity (other than a merger or consolidation
in which Salomon is the continuing corporation and in which the Salomon Common
Stock outstanding immediately prior to the merger or consolidation is not
exchanged for cash, securities ("Exchange Securities") or other property of
Salomon or another corporation), (B) any statutory exchange of securities of
Salomon or any Salomon Successor with another corporation (other than in
connection with a merger or acquisition) or (C) any liquidation, dissolution or
winding up of Salomon or any Salomon Successor (any such event, a
"Reorganization Event"), if the Company shall have the right to deliver either
cash or Salomon Common Stock at Maturity or upon redemption or exchange of the
Notes, then, at the option of the Company, each Holder of Notes will receive at
Maturity or upon such redemption or exchange, in lieu of Salomon Common Stock,
cash in an amount equal to the Exchange Rate multiplied by the Transaction
Value. Notwithstanding the foregoing, with respect to any securities received in
a Reorganization Event that (i) are (a) listed on a United States national
securities exchange, (b) reported on a United States national securities system
subject to last sale reporting, (c) traded in the over-the-counter market and
reported on the National Quotation Bureau or similar organization or (d) for
which bid and ask prices are available from at least three nationally recognized
investment banking firms and (ii) are either (x) perpetual equity securities or
(y) non-perpetual equity or debt securities with a stated maturity after the
Maturity Date ("Reported Exchange Securities"), the Company may, at its option,
in lieu of delivering the amount of cash deliverable in respect of Reported
Exchange Securities received in a Reorganization Event, as determined in
accordance with the previous sentence, deliver a number of such Reported
Exchange Securities with a value equal to such cash
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14
amount, as determined in accordance with clause (2) of the definition of
Transaction Value, as applicable; provided, however, that (i) if such option is
exercised, the Company shall deliver Reported Exchange Securities in respect of
all, but not less than all, cash amounts that would otherwise be deliverable in
respect of Reported Exchange Securities received in a Reorganization Event, (ii)
the Company may not exercise such option if the Company has elected to deliver
cash in lieu of Salomon Common Stock deliverable at Maturity or upon redemption
and (iii) the Company must exercise such option if the Company does not elect to
deliver cash in lieu of Salomon Common Stock deliverable at Maturity or upon
redemption. If the Company elects to deliver Reported Exchange Securities, each
Holder of Notes will be responsible for the payment of any and all brokerage and
other transaction costs upon the sale of such Reported Exchange Securities. If,
following any Reorganization Event, any Reported Exchange Security ceases to
qualify as a Reported Exchange Security, then (x) the Company may no longer
elect to deliver such Reported Exchange Security in lieu of an equivalent amount
of cash and (y) notwithstanding clause (2) of the definition of Transaction
Value, the Transaction Value of such Reported Exchange Security shall mean the
fair market value of such Reported Exchange Security on the date such security
ceases to qualify as a Reported Exchange Security, as determined by a nationally
recognized investment banking firm selected for this purpose by the Company.
(2) If a Reorganization Event shall occur, subject to the conditions
described in Section 1402(d), upon exchange of any Notes at the option of the
Holder, each Holder of a Note will have the right to receive the kind and amount
of cash, Exchange Securities or other property receivable upon such
Reorganization Event by a holder of the number of shares of Salomon Common Stock
for which such Note might have been exchanged immediately prior to such
Reorganization Event (assuming that such Holder failed to exercise his rights of
election, if any, as to the kind or amount of cash, Exchange Securities, and
other property receivable in such Reorganization Event). If a Holder elects to
exchange any Notes for Exchange Securities following a Reorganization Event,
such Holder will be responsible for the payment of any and all brokerage and
other transaction costs upon the sale of such Exchange Securities.
(3) The kind and amount of securities into which the Notes shall be
exchangeable by the Company after consummation of any Reorganization Event shall
be subject to adjustment as described in paragraph (a) above following the date
of consummation of such transaction.
SECTION 1406. Notice of Adjustments and Certain Other Events.
(a) Whenever the Exchange Rate or the consideration receivable upon
exchange is adjusted as herein provided, the Company shall:
(1) forthwith compute the adjusted Exchange Rate in accordance
with Section 1405 and prepare an Officers' Certificate setting forth
the adjusted Exchange Rate or
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exchange consideration, the method of calculation thereof in
reasonable detail, and the facts requiring such adjustment and upon
which such adjustment is based, which certificate shall be conclusive,
final and binding evidence of the correctness of the adjustment, and
file such certificate forthwith with the Trustee; and
(2) within 10 Business Days following the occurrence of an
event that permits or requires an adjustment to the Exchange Rate or
exchange consideration pursuant to Section 1405 (or if the Company is
not aware of such occurrence, as soon as practicable after becoming so
aware), provide an Officers' Certificate to the Trustee and written
notice to the Holders of the Outstanding Notes of the occurrence of
such event and a statement in reasonable detail setting forth the
method by which the adjustment to the Exchange Rate or exchange
consideration was determined and setting forth the revised Exchange
Rate or exchange consideration per Note.
The Trustee shall not be deemed to know of any adjustment in the Exchange Rate
or the consideration receivable upon exchange, or of any facts requiring such an
adjustment, unless and until it shall have received, at its Corporate Trust
Office, an Officers' Certificate to such effect.
(b) In case at any time while any of the Notes are outstanding the
Company receives notice that:
(1) Salomon has declared a dividend (or any other
distribution) on or in respect of the Salomon Common Stock to which
Section 1405(a)(1) or (2) shall apply (other than any cash dividends
and distributions, if any, paid from time to time by Salomon that do
not constitute Extraordinary Cash Dividends);
(2) Salomon has authorized the issuance to all holders of
Salomon Common Stock of rights or warrants to subscribe for or
purchase shares of Salomon Common Stock or of any other subscription
rights or warrants;
(3) there shall be proposed any conversion or reclassification
of Salomon Common Stock (other than a subdivision or combination of
outstanding shares of such Salomon Common Stock) or any consolidation,
merger or reorganization to which Salomon is a party and for which
approval of any stockholders of Salomon is required; or
(4) there shall be proposed the voluntary or involuntary
dissolution, liquidation or winding up of Salomon;
then the Company shall promptly cause to be delivered to the Trustee and filed
at the office or agency maintained for the purpose of exchange of Notes in the
Borough of Manhattan, in The City of New York by the Trustee, and shall promptly
cause to be mailed to the Holders
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of the Notes at their last addresses as they shall appear upon the registration
books of the Securities Registrar, at least 10 days before the date hereinafter
specified (or the earlier of the dates hereinafter specified, in the event that
more than one is specified), a notice stating (i) the date on which a record is
to be taken for the purpose of such dividend, distribution or grant of rights or
warrants, or, if a record is not to be taken, the date as of which the holders
of Salomon Common Stock to be entitled to such dividend, distribution or grant
of rights or warrants are to be determined, or (ii) the date, if known by the
Company, on which such reclassification, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective. The Trustee shall not
be deemed to know of any declaration, issuance or proposal unless and until it
shall have received, at its Corporate Trust Office, an Officers' Certificate to
such effect.
SECTION 1407. Taxes.
(a) The Company will pay any and all documentary, stamp, transfer or
similar taxes that may be payable in respect of the transfer and delivery of
Salomon Common Stock pursuant hereto; provided, however, that the Company shall
not be required to pay any such tax which may be payable in respect of any
transfer involved in the delivery of Salomon Common Stock in a name other than
that in which the Notes so exchanged were registered, and no such transfer or
delivery shall be made unless and until the Person requesting such transfer has
paid to the Company the amount of any such tax, or has established, to the
satisfaction of the Company, that such tax has been paid.
(b) The Company and, by its purchase of a Note hereby, each Holder of
a Note agree to treat, for U.S. federal income tax purposes, each Note as a
contingent payment debt instrument subject to the U.S. Treasury regulations
under the Internal Revenue Code of 1986, as amended, governing such instruments
(Treas. Reg. Section 1.1275-4) and to report all income (or loss) with respect
to the Notes in accordance with those regulations.
SECTION 1408. Shares Free and Clear.
The Company hereby warrants that upon exchange of any Note for Salomon
Common Stock pursuant to this Indenture, the Holder of such Note shall receive
all rights held by the Company in the Salomon Common Stock for which such Note
is at such time exchangeable pursuant to this Indenture, free and clear of any
and all liens, claims, charges and encumbrances other than any liens, claims,
charges and encumbrances which may have been placed on any Salomon Common Stock
by the prior owner thereof, prior to the time such Salomon Common Stock was
acquired by the Company. Except as provided in Section 1407, the Company will
pay all taxes and charges with respect to the delivery of Salomon Common Stock
delivered in exchange for Notes hereunder. In addition, the Company further
warrants that any Salomon Common Stock so delivered in exchange for Notes
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hereunder shall be free of any transfer restrictions (other than such as are
solely attributable to any Holder's status as an affiliate of Salomon).
SECTION 1409. Cancellation of Debt Security.
Upon receipt by the Trustee of Notes delivered to it for exchange
under this Article Fourteen, the Trustee shall cancel and dispose of the same as
provided in Section 309."
(e) By amending the table of contents of the Basic Indenture to
reflect the additions described in subsections (a) and (d) of this Section 3.
SECTION 4. The form of Notes attached hereto as Exhibit A is hereby
adopted, pursuant to Section 202 of the Indenture, as a form of Debt Securities
of a series that consists of Notes.
SECTION 5. The Basic Indenture, as supplemented and amended by this
Supplemental Indenture and all other indentures thereto, is in all respects
ratified and confirmed, and the Basic Indenture, this Supplemental Indenture and
all indentures supplemental thereto shall be read, taken and construed as one
and the same instrument.
SECTION 6. If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this Supplemental
Indenture by any of the provisions of the Trust Indenture Act, such required
provision shall control.
SECTION 7. All covenants and agreements in this Supplemental Indenture
by the Company shall bind its successors and assigns, whether so expressed or
not.
SECTION 8. In case any provision in this Supplemental Indenture or in
the Debt Securities of any series shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions (or of the
other series of Debt Securities) shall not in any way be affected or impaired
thereby. If the Company elects to deliver cash in lieu of Salomon Common Stock
at Maturity, the Company will be obligated to deliver cash with respect to all,
but not less than all, of the shares of Salomon Common Stock that would
otherwise be deliverable; provided, however, that the Company will deliver
Salomon Common Stock to any Holder if in the Company's determination the
delivery of cash to such Holder may violate applicable law.
SECTION 9. Nothing in this Supplemental Indenture, expressed or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Holders of each series of Debt Securities any
benefit or any legal or equitable right, remedy or claim under this Supplemental
Indenture.
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SECTION 10. This Supplemental Indenture and each Debt Security of any
series shall be deemed to be a contract made under the laws of the State of New
York and this Supplemental Indenture and each such Debt Security shall be
governed by and construed in accordance with the laws of the State of New York.
SECTION 11. All capitalized terms used in this Supplemental Indenture
and not otherwise defined herein that are defined in the Basic Indenture shall
have the meanings set forth therein.
SECTION 12. This Supplemental Indenture may be executed in any number
of counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
SECTION 13. The recitals contained herein and in the Debt Securities,
except the certificate of authentication of the Trustee thereon, shall be taken
as 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 the Basic Indenture, this Supplemental Indenture or of the Debt
Securities and shall not be accountable for the use or application by the
Company of the Debt Securities or the proceeds thereof.
20
19
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
BERKSHIRE HATHAWAY INC.
By...............................
Attest:
...................................
STATE STREET BANK AND TRUST
COMPANY, Trustee
By...............................
Attest:
...................................
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20
STATE OF NEBRASKA )
) ss.:
COUNTY OF XXXXXXX )
On the .... day of November, 1996, before me personally came
..........................., to me known, who, being by me duly sworn, did
depose and say that he/she is .................... of Berkshire Hathaway 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 signed his
name thereto by like authority.
..................................
STATE OF ________ )
) ss.:
COUNTY OF ________ )
On the .... day of November, 1996, before me personally came
..........................., to me known, who, being by me duly sworn, did
depose and say that he/she is .................... of State Street Bank and
Trust Company, a Massachusetts trust company described in and which executed the
foregoing instrument; that he/she knows the seal of said trust company; 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 signed
his name thereto by like authority.
.................................
22
Exhibit A
GLOBAL NOTE
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF CEDE & CO., THE NOMINEE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"). UNLESS THIS
SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF 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 THEREIN.
BERKSHIRE HATHAWAY INC.
[___]% Senior Exchangeable Notes Due [________], 2001
No. ......... $ ........
Berkshire Hathaway Inc., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of [________________] Dollars ($[___________]) on [__________],
2001, and to pay interest thereon from [__________], 1996 or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, semi-annually on [__________] and [__________] in each year, commencing
[__________], 1997 at the rate of [___]% per annum, until the principal hereof
is paid or made available for payment. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in
such Indenture, be paid to the Person in whose name this 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 [__________] and
[__________] (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. 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 Trustee, notice whereof shall be given to Holders of Securities of this
series 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 securities exchange on which the Securities of this series may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
23
At Maturity, if both (1) the 10-Day Average Closing Price of Salomon
Common Stock and (2) the Closing Price of Salomon Common Stock on the last
Trading Day prior to Maturity are equal to or greater than the Exchange Price
then in effect, each Note will be exchanged by the Company into shares of
Salomon Common Stock at the Exchange Rate, or the Company may, at its option,
deliver cash, in lieu of delivering shares of Salomon Common Stock, in an amount
equal to the product obtained by multiplying the Exchange Rate by the Current
Market Price of Salomon Common Stock at Maturity. In all other circumstances,
the Company will pay at Maturity, in cash, a price per Note equal to the
principal amount due at Maturity (or, in the event the Notes mature prior to the
Maturity Date, the Accreted Value thereof). In all events, accrued and unpaid
interest to Maturity shall be payable by the Company in cash on all Notes
outstanding at Maturity. The Exchange Rate or exchange consideration will be
subject to adjustment as provided in the Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security will be made on each Interest Payment Date or at Maturity by the
Trustee as Paying Agent by wire transfer of immediately available funds to a
separate account of the Depositary or its nominee at the Federal Reserve Bank of
New York, provided that, in the case of payments made at Maturity of this
Security, this Security is presented to the Trustee in time for the Trustee to
make such payments in accordance with its normal procedures.
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.
A-2
24
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: November [__], 0000
XXXXXXXXX XXXXXXXX INC.
By............................
Attest:
...............................
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the Series designated herein referred
to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, Trustee
By............................
A-3
25
REVERSE OF SECURITY
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of December 1, 1987, between the Company and
State Street Bank and Trust Company, as successor Trustee thereunder (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), as supplemented by a First Supplemental Indenture, dated as of
November [___], 1996, between the Company and the Trustee (herein collectively
called the "Indenture"), and reference is hereby made to the Indenture for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof,
limited in aggregate principal amount to [______________] dollars
($[__________]).
Subject to and upon compliance with the provisions of the Indenture,
on the last Trading Day of each January, April, July and October, from and
including January 1997 through and including July 2001, any Notes (other than
Notes with respect to which a notice of exchange for Salomon Common Stock has
been delivered by the Company prior to such Exchange Date) will be exchangeable,
at the option of the Holder, for shares of Salomon Common Stock at the Exchange
Rate of [____] shares of Salomon Common Stock per Note (or at the current
adjusted Exchange Rate if an adjustment has been made as provided in the
Indenture), provided that the Closing Price of Salomon Common Stock on the
Exchange Date exceeds the Exchange Price then in effect, and subject to certain
additional conditions described below. In the event that a prospectus supplement
and prospectus of Salomon covering the shares of Salomon Common Stock which may
be received by a Holder of Notes upon an exchange is required to be delivered
under the Securities Act of 1933 and is not made available by Salomon to the
Company for use during any Exchange Period, the Company shall, on or prior to
the applicable Exchange Date, upon written notice to each Holder that has
complied with the procedures for exchange of Notes described herein (an
"Electing Holder"), postpone such Exchange Date from time to time until such
later Business Day (the "New Exchange Date") as the Company is able to deliver a
Salomon Prospectus or is no longer required to do so. In the event that the
Company postpones any Exchange Date, (1) no additional Notes may be delivered to
the Trustee by any Holder for exchange into Salomon Common Stock at any time
during the period from the original Exchange Date through and including the New
Exchange Date, (2) each Electing Holder shall have the right, until the New
Exchange Date, to irrevocably withdraw any Notes delivered to the Trustee on or
prior to the original Exchange Date, and (3) any Notes that have not been
withdrawn by an Electing Holder prior to the New Exchange Date shall be
exchanged for shares of Salomon Common Stock on the New Exchange Date, provided
that the Closing Price of Salomon Common Stock on the New Exchange Date exceeds
the Exchange Price then in effect. In addition, if a Reorganization Event shall
have occurred, the Notes shall not be exchangeable at the option of the Holder
for any Exchange Securities during any Exchange Period if a prospectus covering
such Exchange Securities is required to be delivered by the Company under the
Securities Act and is not available to the Company for use during such Exchange
Period.
A-4
26
The Notes will not be redeemable or exchangeable at the option of the
Company prior to [_________], 1999. Thereafter, (1) at any time when both (A)
the 10-Day Average Closing Price of the Salomon Common Stock on the date on
which the applicable notice of redemption is given and (B) the Closing Price of
Salomon Common Stock on the last Trading Day prior to such date are equal to or
greater than the Exchange Price then in effect, the Company may, at its option,
either (i) exchange the Notes, in whole or in part, for shares of Salomon Common
Stock at the Exchange Rate then in effect or (ii) redeem the Notes, in whole or
in part, in cash at a price per Note equal to the product of the Exchange Rate
then in effect and the Current Market Value of Salomon Common Stock on the date
on which the applicable notice of redemption is given, and (2) at any other
time, the Company may, at its option redeem the Notes, in whole or in part, in
cash at a price per Note equal to the Accreted Value of the Notes on the date of
redemption. However, the Company may not give any notice of redemption for cash
(x) during the period from the beginning of any Exchange Period until the close
of business on the applicable Exchange Date or New Exchange Date or (y) prior to
the beginning of any Exchange Period if the Redemption Date would occur during
or after such Exchange Period. Upon any exchange or redemption described in
clause (1) above, the Holders of Notes will not receive any payment representing
accrued OID; such accrued OID will be deemed paid upon the receipt of Salomon
Common Stock or the cash equivalent received on such exchange or redemption.
In connection with any redemption or exchange prior to Maturity of the
Notes, the Company will notify the Depositary and the Trustee and will publish a
notice in a daily newspaper of national circulation stating (1) the Exchange
Rate then in effect, (2) whether the Notes will be exchanged for shares of
Salomon Common Stock or redeemed for cash and (3) the redemption or Exchange
Date (which shall be at least 15 days but not more than 30 days after the date
of such notice). On the Exchange Date with respect to any exchange of Notes for
Salomon Common Stock, such Notes shall cease to be outstanding and shall be
deemed to represent solely the right to receive shares of Salomon Common Stock
in accordance with the terms of the Indenture. The Company will pay in cash the
accrued and unpaid interest on all Notes redeemed or exchanged to but excluding
the date of redemption or exchange.
In any exchange of Notes for shares of Salomon Common Stock at or
prior to Maturity of the Notes, no fractional shares of Salomon Common Stock
will be issued, as provided in the Indenture. If the Company exchanges Notes for
shares of Salomon Common Stock, Holders of the Notes will be responsible for the
payment of any brokerage costs incurred upon the subsequent sale of such shares.
If less than all the Notes then outstanding are to be redeemed or
exchanged prior to maturity of the Notes, the Trustee will select those to be
redeemed or exchanged as a whole or in part pro rata or by lot or by such method
as the Trustee shall deem fair and appropriate. Notice of redemption or exchange
will be given to holders of the Notes to be redeemed or exchanged by first-class
mail, postage prepaid at their last address appearing on the Note registry
books.
A-5
27
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the Accreted Value of the Securities of this series 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 of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of 66 2/3% in principal amount of the Securities at the
time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, 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.
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 with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time 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 or any premium or interest hereon
on or after the respective due dates expressed herein.
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 any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, 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 in any place where the principal of and any
premium and interest on this Security are payable, 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
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
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The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
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.
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