-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NjbC6UzowwIxjBlYfk/X3OnADa1HNglBbIs6Q98IgAJNXToWxEuXRISoL/Umqt3u 3+IRKoIvdCyCO09nbyAcLQ== 0000950116-97-001861.txt : 19971010 0000950116-97-001861.hdr.sgml : 19971010 ACCESSION NUMBER: 0000950116-97-001861 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19971009 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYSTEMS & COMPUTER TECHNOLOGY CORP CENTRAL INDEX KEY: 0000707606 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 231701520 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-37551 FILM NUMBER: 97693272 BUSINESS ADDRESS: STREET 1: GREAT VALLEY CORPORATE CTR STREET 2: 4 COUNTRY VIEW RD CITY: MALVERN STATE: PA ZIP: 19355 BUSINESS PHONE: 6106475930 MAIL ADDRESS: STREET 1: GREAT VALLEY CORP CTR STREET 2: 4 COUNTRY VIEW RD CITY: MALVERN STATE: PA ZIP: 19355 S-3 1 As filed with the Securities and Exchange Commission on October 9, 1997 Registration No. 333- =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ---------------- FORM S-3 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ---------------- SYSTEMS & COMPUTER TECHNOLOGY CORPORATION (Exact name of registrant as specified in its charter) Delaware 23-1701520 (State or other jurisdiction of (I.R.S. employer incorporation or organization) Identification No.) 4 Country View Road Malvern, Pennsylvania 19355 (610) 647-5930 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ---------------- Richard A. Blumenthal, General Counsel Systems & Computer Technology Corporation 4 Country View Road Malvern, Pennsylvania 19355 (610) 647-5930 (Name and address, including zip code, and telephone number, including area code, of agent for service) ---------------- With Copies to: Barry M. Abelson, Esquire Robert Rosenman, Esquire Paul T. Porrini, Esquire Cravath, Swaine & Moore Pepper, Hamilton & Scheetz LLP Worldwide Plaza 3000 Two Logan Square 825 Eighth Avenue Philadelphia, PA 19103-2799 New York, NY 10019 Approximate date of commencement of proposed sale to public: As soon as practicable after the effectiveness of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. / / If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. =============================================================================== CALCULATION OF REGISTRATION FEE
=========================================================================================================================== Proposed Maximum Proposed Maximum Title of Each Class of Securities to be Amount to be Offering Price Per Aggregate Offering Amount of Registered Registered(1) Unit(2) Price(2) Registration Fee - --------------------------------------------------------------------------------------------------------------------------- % Convertible Subordinated Debentures Due 2004 .................. $69,000,000 N/A N/A $20,909.09 - --------------------------------------------------------------------------------------------------------------------------- Common Stock, $.01 par value ................................. (3) N/A N/A (4) ===========================================================================================================================
(1) Includes Debentures that the Underwriters have the option to purchase to cover over-allotments, if any. (2) Estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457 of the Securities Act of 1933. (3) Such indeterminable number of shares of Common Stock as may be required for issuance upon conversion of the Debentures being registered hereunder and such additional securities as may be issuable as a result of the "anti-dilution" provisions thereof. (4) Pursuant to Rule 457(i), no registration fee is required. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED OCTOBER 9, 1997 PROSPECTUS $60,000,000 LOGO SCT Systems & Computer Technology Corporation % Convertible Subordinated Debentures Due 2004 --------------------- The Debentures offered hereby are convertible at any time prior to maturity, unless previously redeemed, into Common Stock at a conversion price of $ per share, subject to adjustment in certain events. The Common Stock is quoted on the Nasdaq National Market under the symbol "SCTC." On October 8, 1997, the closing price for the Common Stock was $45.75 per share. The Company has applied for listing of the Debentures for quotation on the Nasdaq SmallCap Market under the symbol "SCTCG." The Debentures are redeemable, in whole or in part, at any time on or after October 15, 2000, at the option of the Company, at the redemption prices set forth herein, plus accrued interest. The Debentures are unsecured and subordinated in right of payment to all present and future Senior Indebtedness of the Company. See "Description of Debentures." --------------------- See "Risk Factors" beginning on page 8 for a description of certain risks that should be considered in connection with an investment in the Debentures offered hereby. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- Underwriting Price to Discounts Proceeds to Public(1) and Commissions(2) Company(1)(3) - -------------------------------------------------------------------------------- Per Debenture ...... 100% % % - -------------------------------------------------------------------------------- Total(4) ............ $60,000,000 $ $ - -------------------------------------------------------------------------------- (1) Plus accrued interest, if any, from October , 1997. (2) The Company has agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting." (3) Before deducting expenses payable by the Company estimated to be $ . (4) The Company has granted the several Underwriters an option, exercisable within 30 days from the date hereof, to purchase up to an additional $9,000,000 principal amount of Debentures solely to cover over-allotments. If such option is exercised in full, the total Price to Public will be $69,000,000, the total Underwriting Discounts and Commissions will be $ , and the total Proceeds to Company will be $ . See "Underwriting." The Debentures are offered by the several Underwriters subject to receipt and acceptance of such Debentures by them. The Underwriters reserve the right to reject any order in whole or in part. It is expected that the Debentures will be ready for delivery on or about October , 1997. --------------------- Unterberg Harris Janney Montgomery Scott Inc. , 1997 CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE DEBENTURES OR THE COMMON STOCK, INCLUDING PURCHASES OF DEBENTURES OR COMMON STOCK TO STABILIZE THE MARKET PRICE OF THE DEBENTURES OR COMMON STOCK, PURCHASES OF DEBENTURES TO COVER SOME OR ALL OF A SHORT POSITION IN THE DEBENTURES MAINTAINED BY THE UNDERWRITER AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER AND SELLING GROUP MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING." AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files reports, proxy and information statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy and information statements and other information filed by the Company can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of the Commission: Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade Center, 13th Floor, New York, New York 10048. Such materials also may be accessed through the Commission's Internet Web site located at http://www.sec.gov. Copies of such material may be obtained from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company has filed with the Commission a Registration Statement on Form S-3 under the Securities Act of 1933 (the "Securities Act"), of which this Prospectus constitutes a part, with respect to the securities offered hereby. The Registration Statement, including exhibits and schedules thereto, may be obtained from the Commission's principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the fees prescribed by the Commission. Statements contained in this Prospectus as to the contents of any document referred to are not necessarily complete and in each instance reference is made to the copy of the appropriate document filed as an exhibit to, or incorporated by reference into, the Registration Statement, each statement being qualified in all respects by such reference. DOCUMENTS INCORPORATED BY REFERENCE The following documents, filed with the Commission (File No. 0-11521) pursuant to the Exchange Act are hereby incorporated by reference: (a) Annual Report on Form 10-K of the Company for the fiscal year ended September 30, 1996, (b) Quarterly Reports on Form 10-Q of the Company for the quarters ended December 31, 1996, March 31, 1997 and June 30, 1997, and (c) Current Report on Form 8-K of the Company dated April 9, 1997. In addition, all documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of this offering shall be deemed to be incorporated by reference herein and to be a part of this Prospectus from the respective dates of filing of such documents. Such incorporation by reference shall not be deemed to incorporate by reference the information referred to in Item 402(a)(8) of Regulation S-K. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purpose of this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom this Prospectus is delivered, upon request, a copy of any or all of the foregoing documents described above which have been incorporated by reference in this Prospectus other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Such request should be directed to Systems & Computer Technology Corporation, 4 Country View Road, Malvern, Pennsylvania 19355, Attention: Secretary, (610) 647-5930. 2 As used in this Prospectus, references to a "fiscal" year refer to the fiscal year ending September 30 of such year. Unless otherwise indicated, all information and data in this Prospectus assumes no exercise of the Underwriters' over-allotment option. BANNER(R) and SCT(R) are registered trademarks of the Company and BANNER2000(TM) and ADAGE(TM) are trademarks of the Company. All other trade names referenced herein are the service marks, trademarks or registered trademarks of their respective companies or organizations. FORWARD LOOKING STATEMENTS This Prospectus, including any document incorporated herein by reference, contains certain forward-looking statements that involve substantial risks and uncertainties as more fully described below. When used in this Prospectus or in any such documents incorporated herein by reference, the words "anticipate," "believe," "estimate," "expect" and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. From time to time, the Company or its representatives have made or may make forward-looking statements, orally or in writing. Such forward-looking statements may be included in various filings made by the Company with the Commission, or in press releases or oral statements made by or with the approval of an authorized executive officer of the Company. The Company's actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Potential risks and uncertainties that could affect the Company's future operating results include, without limitation, the effect of publicity on demand for the Company's products and services, general economic conditions, the Company's ability to attract and retain highly skilled technical, managerial, sales and marketing personnel, continued market acceptance of the Company's products and services, the timing of the receipt of software licenses, the timing of services contracts and renewals, the timing and complexity of large transactions, continued competitive and pricing pressures in the marketplace, the Company's ability to develop and market new and updated products and enhancements cost effectively and on a timely basis, and the Company's ability to complete fixed-price contracts profitably. See "Risk Factors." 3 THE COMPANY SCT develops, licenses and supports a suite of client/server, enterprise software and provides a range of information technology ("IT") outsourcing services. In addition, the Company offers a series of related services including systems implementation, systems integration and maintenance and enhancements. The Company's served vertical markets are higher education, manufacturing and distribution, utilities and local government. SCT Products and Services SCT software and services allow clients to enhance their ability to compete through improved quality of information. The Company's focus on four vertical markets enables it to develop and utilize a base of industry expertise to deliver products and services which address specific client requirements. By offering a continuum of IT solutions ranging from application software to large-scale outsourcing contracts, the Company makes available technology and management tools to enable clients to manage information resources efficiently and cost-effectively. For the nine months ended June 30, 1997, IT outsourcing services accounted for 35% of total revenue, software sales accounted for 25%, software services accounted for 21% and maintenance and enhancements accounted for 19%. Application Software. The Company develops and licenses application software to each of its served vertical markets. The component applications of the BANNER product line are developed for a client/server, ORACLE relational database environment. ADAGE software, introduced to the process manufacturing market in 1995, is an object oriented, enterprise resource planning ("ERP") system which combines client/server technology with multi-site functionality using a number of relational database platforms including Oracle and Microsoft SQL Server. The following are the Company's key application software products: BANNER2000 and Plus2000. BANNER2000 is SCT's net-centric, object-based software for administrative computing in higher education. This suite of software applications is built with a business process orientation and a business enterprise focus. The software enables institutions to process student information including financial aid, student records, admissions and registration in a centralized or distributed information environment using workflow, imaging, and end-user self service. In addition, BANNER2000 offers systems to assist with common administrative functions, including human resources and financial management. Plus2000 offers a suite of web enabled administrative applications to traditional mainframe and minicomputer-based institutions. BANNER Internet Applications. SCT's web enabled applications address client requirements for decentralized routine processing and inquiry while maintaining centralized control of information and access. These applications are currently available for the higher education market under the product names "Web for Student," "Web for Employees" and "Web for Faculty & Advisors." ADAGE. SCT offers its ADAGE ERP software to the manufacturing and distribution industry. ADAGE employs a series of workflows composed of industry-specific objects and business rules that model key business processes across the supply chain. ADAGE enables users to integrate corporate functions such as manufacturing planning, sales forecasting, procurement, inventory management, distribution and finance. ADAGE is designed to meet the specific requirements of process manufacturers including food and beverage, chemicals, metals, minerals, and consumer packaged goods manufacturers on the Windows NT and UNIX platforms. BANNER CIS. For utilities, SCT provides BANNER CIS (customer information system) to gas, electric, water, wastewater, refuse, and other utilities. BANNER CIS is rule-based, can be quickly adapted for changes in business strategy and provides utilities with customer management, marketing, and supply chain management tools to support their changing needs and competitive requirements. BANNER CIS assists utilities in providing customer service, responding to customer inquiries, supporting new service offerings, generating accurate and timely billing, and managing back office resources. BANNER for Local Governments. SCT offers a variety of administrative products including BANNER Courts, Records Indexing, Finance and Human Resources to address the requirements of local governments that are seeking simplified access to public information. For example, BANNER Courts helps to streamline complex court processing including docket management, scheduling and document management. 4 Software Services, Maintenance and Enhancements. SCT provides support services to its software licensees, including implementation, modification, user training, and consulting services. When purchasing a license for SCT software, clients typically purchase specific initial services, such as installation support and training. In addition to a license of the Company's application software, SCT offers maintenance agreements usually for terms ranging from one to seven years, which entitle clients to telephone support, regulatory updates and functional and technical enhancements. The annual maintenance fee generally is 15% of the license fee, and generally increases each year by a specified percentage. SCT also provides systems integration services in connection with the implementation of the Company's application software. Modifications to existing software or SCT products can be contracted on either a fixed price or time and materials basis. IT Outsourcing. SCT provides OnSite services, a range of IT outsourcing services which encompass end-user computing solutions, network management, applications outsourcing, and business process outsourcing. These services are designed to assume total or partial control and responsibility of clients' information resources, generally on a long-term basis. The Company provides management, staffing and support with skilled information systems personnel and industry specialists who are knowledgeable in both computer-based technologies and the functional aspects of clients' activities. In addition to offering OnSite comprehensive data center outsourcing, SCT provides separate service offerings allowing for scaleable contracts based upon client need. The Company's SinglePoint Solutions assist utilities and energy companies in serving the newly deregulated utility market. By combining software applications, IT outsourcing and operations management, a utility or energy service company can access SCT's application software products while SCT operates the client's back office functions. Markets SCT primarily serves the higher education, manufacturing and distribution, utilities and local government markets. For the first nine months of fiscal year 1997, approximately 44% of the Company's revenue was derived from higher education, approximately 23% was derived from local government, approximately 22% was derived from utilities, and approximately 11% was derived from manufacturing and distribution. The Company's foreign operations represented approximately 6% of the Company's revenue for the first nine months of fiscal year 1997. Higher Education. SCT has developed substantial functional knowledge and technical expertise about the IT requirements of higher education institutions. As institutions attempt to reduce administrative costs and focus on improving the quality of academic programs, the Company believes that efficient administrative systems that support a customer-centric, self-service paradigm are increasingly important. In the United States, SCT targets the 2,200 institutions with over 2,000 students for its software and services. SCT serves this market with its BANNER2000, Plus2000, web enabled administrative software and OnSite services. Utilities. SCT provides application software and services to a target market of approximately 1,000 water, gas and electric utilities. The Company believes that the deregulation of the utility market in the U.S. and the U.K. is driving significant investment in IT and customer services. Clients range from mid-size municipalities to investor-owned utilities serving millions of customers. Manufacturing and Distribution. ADAGE ERP software and OnSite services are marketed to the process manufacturing industry. The Company believes that ERP systems are being increasingly adopted by manufacturers, which are re-engineering their business processes to serve customers better. SCT's target market consists of the 8,400 process manufacturers and distributors which have over $100 million in annual revenue. Local Government. The IT services and application software market for local government jurisdictions is highly fragmented, with many competitors, including in-house computing departments of local governments, custom software programmers and packaged application software vendors. The Company serves its target market of approximately 1,000 local government entities with its applicable BANNER software products and its OnSite services. 5 Strategy The Company's goal is to be a leading provider of solutions to clients in its four vertical markets by providing both application software and IT services. The Company seeks to accomplish this objective by: (i) focusing on specific vertical markets in which the Company can utilize its established reputation, market presence, and broad functional and technical expertise; (ii) providing comprehensive IT solutions consisting of application software and professional and outsourcing services and making these solutions available for numerous industry standard platforms; (iii) offering object oriented, enterprise wide software solutions which are designed for flexible, rapid implementation and which allow users to accurately model the operation of their organization, and (iv) supplementing its growth through strategic acquisitions, which the Company has done in the past and regularly reviews as a means to expand its business. Nine Month Revenue In the first nine months of fiscal year 1997, revenue increased 29% to $203.0 million from the corresponding period in fiscal year 1996. Software sales experienced significant growth in this period, increasing 51% to $50.6 million from the corresponding period in fiscal year 1996. This increase was due primarily to increased licenses of ADAGE ERP software in the second and third quarters, increased BANNER software licenses to the higher education market during the third quarter and increased licenses of BANNER CIS software to the utility market in the first and second quarters of fiscal year 1997. The Company was incorporated in Delaware in 1968. Unless the context otherwise requires, "SCT" or the "Company" refers to Systems & Computer Technology Corporation and its subsidiaries. The Company's executive offices are located at 4 Country View Road, Malvern, Pennsylvania 19355, and its telephone number is (610) 647-5930. SUMMARY TERMS OF THE DEBENTURES Securities Offered ......... $60,000,000 principal amount of % Convertible Subordinated Debentures due 2004 (the "Debentures"). Interest Payment Dates ...... April 15 and October 15, commencing April 15, 1998. Conversion Rights ............ Convertible into Common Stock at a conversion price of $ per share, subject to adjustment under certain circumstances (the "Conversion Price"). Optional Redemption ......... Redeemable by the Company, in whole or in part, on or after October 15, 2000 at a redemption price of % of par in 2000, declining thereafter to par in 2003. Subordination ............... Subordinated to all existing and future Senior Indebtedness. Maturity ..................... October 15, 2004.
See "Description of Debentures." 6 RISK FACTORS Prospective investors should carefully consider the following risk factors in addition to the other information set forth in this Prospectus before making any decision to invest in the securities offered hereby. Quarterly Fluctuations of Results of Operations The Company has experienced significant variability of revenues from quarter to quarter depending primarily on new software license signings, which are typically concentrated in the last month of each quarter. As the Company's expenses are relatively fixed in the short term, the Company's operating results for a particular quarter could be adversely affected to the extent that anticipated license signings in any quarter are not realized as expected. The Company's revenues may fluctuate as a result of other factors as well, including seasonal patterns of capital spending by clients, the timing and receipt of orders, competition, pricing, new product introductions by the Company or its competitors, levels of market acceptance for new products, and general economic and political factors. Fixed Price Contracts Many OnSite service contracts provide for payment on a multi-year fixed fee basis. The Company negotiates the fee to be charged based on its estimate of the total expenses to be incurred in providing the services. In the event the Company's costs to perform an OnSite services contract become greater than originally anticipated, the Company's profit on that contract would be reduced and, in an extreme case, the Company may suffer a loss. Additionally, shorter term system integration contracts have begun to constitute a larger portion of the Company's business. These system integration contracts typically are performed on a fixed fee basis and require the Company to incur significant software modification, customization and integration costs in order to add functionality to a client's existing system. Similar to the OnSite service contracts, if the Company's costs to perform a particular system integration contract become greater than originally anticipated, the Company's profit on that contract would be reduced or, in an extreme case, the Company may suffer a loss. For example, the Company incurred additional costs in its international utility business in the second half of fiscal year 1997 as a result of contract delays and overruns. Revenue is recognized as work is performed on the Company's services contracts. Since services are typically provided at a greater rate during the early part of a services contract and at a lesser rate in the later part, while billings often remain constant, revenues in excess of billings result. Revenues in excess of billings may also result in connection with software services contracts where billings are sometimes milestone based. Although the Company's contracts typically provide for the payment of the amount of revenues accrued in excess of billings in the event of early terminations of the contract, there can be no assurance that the Company will be able to recover such amounts from the client in the event of early terminations. Certain of the Company's contracts are subject to "fiscal funding" clauses, which provide that in the event of budgetary constraints, the client is entitled to reduce the level of services to be provided by the Company with a corresponding reduction in the fee to be paid by the client, or in certain circumstances, to terminate the services altogether. While the Company has not been impacted materially by early terminations or reductions in service from the use of fiscal funding provisions in the past, there can be no assurance that such provisions will not give rise to early terminations or reductions of service in the future. If clients of the Company representing a substantial portion of the Company's revenues were to invoke the fiscal funding provisions of their OnSite services contracts, the Company's results of operations would be adversely affected. Competition In each of its markets, SCT has multiple competitors, which compete based on a variety of factors, including customer size, geographic location, and computing environment. Many established competitors have greater marketing, technical and financial resources than the Company, and there can be no assurance that SCT will be able to continue to compete successfully with existing or new competitors or that such competitors will not develop products or offer services that are superior to the Company's products and services or that achieve greater market acceptance. Further, there can be no assurance that the Company will be able to maintain and enhance its competitive position. 7 Technological Change and New Products; Software Protection The application software industry is characterized by rapid technological advances, changes in customer requirements, product introductions and evolving industry standards. The Company believes that its future success will depend on its ability to continue to develop and market new products and enhancements cost-effectively, which will necessitate continued investment in research and development and sales and marketing. There can be no assurance that the Company's existing products will not be rendered obsolete or non-competitive by new industry standards or changing technology, that the Company will be able to develop and market new products successfully or that the Company's new product offerings will be accepted by its markets. Furthermore, programs as complex as those offered by the Company may contain undetected errors or bugs when they are first introduced or as new versions are released. There can be no assurance that, despite testing by the Company and by third-party test sites, errors will not be found in new product offerings, with the possible result of unanticipated costs and delays in market acceptance of these products. The Company believes that one of the factors that has resulted in the increase in the demand for its software during fiscal year 1997 has been the year 2000 problem presently being encountered by certain organizations. The Company anticipates that such increased demand will diminish over time as organizations resolve the year 2000 problem. The Company is substantially dependent upon copyright, trade secret laws and internal non-disclosure safeguards generally incorporated in its software license agreements to protect its software and to provide it with certain competitive advantages. Although the Company believes that its functional expertise in its markets serves to reduce the potential impact to the Company which might result from misappropriation of intellectual property or trade secrets, there can be no assurance that its existing or future copyrights and other measures used by the Company will afford protection against competitors with similar software or against infringing software. Dependence on Qualified Technical Personnel The Company's success depends on its ability to attract and retain personnel with the technical skills and experience required to meet its clients' specific needs. The Company must continually identify and recruit technical personnel in each of its markets to fill new positions and to replace technical personnel who have departed. The application software industry has high turnover rates, and the demand for employees has, to date, substantially exceeded supply. This has resulted in intense competition for technical personnel and the Company expects such competition to increase in the future. There can be no assurance that the Company will attract and retain the personnel required for expanded operations. Failure to attract and retain such personnel or an increase in the Company's employee turnover rate could have a material adverse effect on the Company's business, operating results and financial condition. Contract Performance and OnSite Services Risks The Company's OnSite services contracts require the Company to assume a significant level of responsibility for developing or maintaining systems on behalf of clients. Many of the Company's OnSite services contracts are critical to the operations of its clients' businesses. The Company's failure or inability to complete such engagements to its clients' satisfaction could have a material adverse effect on its clients' operations and, consequently, may give rise to claims against the Company for damages or otherwise damage its reputation, any of which could have a material adverse effect on the Company's business, operating results and financial condition. Moreover, certain of the Company's more recent OnSite services contracts provide financial penalties in the event the Company does not meet stated performance levels. Management of Growth The continuation of the growth in Company revenues will depend, in part, on the success of certain new product offerings including ADAGE. In the event one or more new product offerings of the Company are unsuccessful, the Company's financial position or results of operations could be adversely affected. In addition, the Company may continue to grow through acquisitions. Future acquisitions will require integration of the acquired operations into those of the Company. There can be no assurance that the Company will be able to manage its expansion or successfully integrate acquired operations. The failure to do so could adversely affect the Company's financial position or results of operations. 8 Dependence on Key Management and Sales Personnel The success of the Company's business is dependent upon certain key management and sales personnel. In addition, the Company believes that to succeed in the future it will be required to continue to attract, retain and motivate additional talented and qualified management and sales personnel, who are in high demand. There can be no assurance that the Company will be able to retain its key employees or that it will be able to continue to attract, assimilate and retain other skilled management and sales personnel. The loss of certain of its existing key personnel or the inability to attract and retain additional qualified employees in the future could have a material adverse effect on the Company. Subordination The Debentures will be subordinated in right of payment to all present and future Senior Indebtedness (as hereafter defined) of the Company. The Indenture does not prohibit or limit the incurrence of additional Senior Indebtedness. See "Description of the Debentures - Subordination." Legal Proceedings In October 1995, a purported class action lawsuit was filed against the Company and certain of its officers and directors. The lawsuit alleges violations of certain disclosure and related provisions of the federal securities laws and seeks damages in an unspecified amount as well as equitable relief. A number of the plaintiffs' claims have been dismissed, and the Company believes that the remaining allegations in the lawsuit are without merit. Although the Company is defending against the lawsuit vigorously, the ultimate outcome of the matter cannot presently be determined. Absence of Public Market for the Debentures; Volatility of Securities Prices There is currently no public market for the Debentures. The Debentures will be traded in the over-the-counter market and quoted on Nasdaq, and there can be no assurance that an active trading market will develop for the Debentures or, if developed, that such market can be sustained. The Debentures may trade at a discount from the initial offering price, depending upon prevailing interest rates and other factors. Furthermore, the market price for similar securities, announcements of technological innovations, new commercial products or new contract signings by the Company or its competitors, developments concerning proprietary technologies, regulatory developments and general economic and political factors, as well as period-to-period fluctuations in financial results, may have a significant impact on the market price of the Debentures and the Common Stock into which the Debentures are convertible. Anti-Takeover Provisions; Possible Issuance of Preferred Stock The Company's Certificate of Incorporation and By-Laws contain provisions that could have the effect of delaying, deferring or preventing an unsolicited change in the control of the Company, which may adversely affect the market price of the Common Stock or the ability of stockholders to participate in a transaction in which they might otherwise receive a premium for their shares over the then-current market price. These provisions require a supermajority vote of the voting stock for removal of directors and a supermajority vote of the directors to approve a merger, consolidation, sale of substantially all of the assets of the Company or similar transaction. Additionally, the Company's Board of Directors is classified, which makes it more difficult for a third party to change its composition. The Indenture's Change in Control provisions may, in certain circumstances, make more difficult or discourage a takeover of the Company and, thus, the removal of incumbent management. Further, the Company's Certificate of Incorporation authorizes the Board of Directors to issue Preferred Stock without shareholder approval and on such terms as the Board of Directors may determine. Although no shares of Preferred Stock are currently outstanding and the Company has no present plans to issue any such shares, the rights of the holders of shares of Common Stock will be subject to, and may be adversely affected by, the rights of holders of any Preferred Stock that may be issued in the future. 9 USE OF PROCEEDS The net proceeds to the Company from the sale of the Debentures in this offering are estimated to be $ ($ if the Underwriters' over-allotment option is exercised in full), after deducting estimated underwriting discounts and commissions and estimated offering expenses. The net proceeds of this offering will be used for working capital and general corporate purposes, including product development and possible future acquisitions. The Company currently does not have any commitments or agreements for any acquisition. Pending application of the net proceeds as described above, the net proceeds of this offering will be invested in U.S. Treasury securities and other investment grade, interest-bearing instruments. CAPITALIZATION The following table sets forth the consolidated capitalization of the Company as of June 30, 1997 and as adjusted to give effect to the sale of the Debentures hereby and the application of the estimated net proceeds therefrom as described in "Use of Proceeds."
June 30, 1997 -------------------------- Actual As Adjusted ----------- ------------ (In thousands) Current portion of long-term debt .................................... $ 7,385 $ 7,385 ======== ======== Long-term debt: Notes payable ......................................................... $ 750 $ 750 Senior Revolving Credit Agreement .................................... -- -- Convertible Subordinated Debentures due 2004 ........................ -- 60,000 -------- -------- Total long-term debt ............................................. 750 60,750 Stockholders' equity: Preferred Stock, $.10 par value per share, 3,000,000 shares authorized, none issued ...................................................... -- -- Common Stock, $.01 par value per share, 24,000,000 shares authorized, 17,317,436 issued (1) ............................................. 173 173 Capital in excess of par value ....................................... 89,408 89,408 Retained Earnings ................................................... 54,202 54,202 Less: Held in treasury, 1,150,941 common shares at cost .................. (2,959) (2,959) Notes receivable from stockholders ................................. (610) (610) -------- -------- Total stockholders' equity ....................................... 140,214 140,214 -------- -------- Total capitalization ................................................ $148,349 $208,349 ======== ========
- ------------ (1) Excludes 2,543,497 shares of Common Stock reserved for issuance under currently outstanding options at an average exercise price of $14.21 per share. 10 SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data as of September 30, 1992, 1993, 1994, 1995 and 1996 and for the years then ended are derived from the consolidated financial statements of the Company which have been audited by Ernst & Young LLP, independent auditors. The selected consolidated financial data as of and for the nine months ended June 30, 1996 and 1997 are derived from unaudited consolidated financial statements which, in management's opinion, include all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the Company's financial position and the results of operations for these periods. The results of operations for the nine months ended June 30, 1997 are not necessarily indicative of the results that may be expected for the full year ending September 30, 1997. The information set forth below should be read in conjunction with the Consolidated Financial Statements and Notes thereto, and other financial information incorporated by reference herein.
Year Ended September 30, ------------------------------------------------ 1992(1)(3) 1993(3) 1994(2) -------------- --------------- --------------- (In thousands, except share and per share data) Statement of Operations Data: Revenue: OnSite services ........................... $ 43,683 $ 53,685 $ 63,979 Software sales ........................... 24,983 27,540 34,540 Maintenance and enhancements ............... 13,088 26,046 30,270 Software services ........................ 8,393 12,439 18,172 Interest and other revenue ............... 736 458 1,253 ------------ ------------- ------------- 90,883 120,168 148,214 Expenses: Cost of OnSite services .................. 35,098 42,403 50,095 Cost of software sales and maintenance and enhancements ........................ 19,987 23,578 27,055 Cost of software services .................. 7,236 10,776 14,606 Selling, general and administrative ...... 22,073 31,172 36,144 Charge for purchased research and development .............................. 7,693 0 0 Interest expense ........................... 443 1,016 2,520 ------------ ------------- ------------- 92,530 108,945 130,420 Income (Loss) Before Income Taxes and Extraordinary Credit ..................... (1,647) 11,223 17,794 Provision for income taxes .................. 803 4,511 6,148 ------------ ------------- ------------- Income (Loss) Before Extraordinary Credit (2,450) 6,712 11,646 Extraordinary Credit: Utilization of operating loss carry forwards ............ 180 2,901 0 ------------ ------------- ------------- Net income (loss) ........................ $ (2,270) $ 9,613 $ 11,646 ============ ============= ============= Earnings per share: Primary .................................... $ (0.19) $ 0.75 $ 0.86 Fully diluted .............................. $ -- $ 0.74 $ 0.83 Weighted average common shares and equivalents outstanding: Primary .................................... 11,848,423 12,780,223 13,517,146 Fully Diluted .............................. -- 13,195,672 15,817,862 Ratio of earnings to fixed charges(4) ...... -- 8.3 x 6.6 x Balance Sheet Data: Working Capital ........................... $ 20,159 $ 50,432 $ 59,239 Total Assets .............................. 72,487 110,082 128,809 Long Term Debt (net of current portion) . 12,610 34,500 34,500 Stockholders Equity ........................ 40,674 51,282 65,481 Nine Months Ended June 30, -------------------------------- 1995(1) 1996 1996 1997 --------------- --------------- --------------- --------------- Statement of Operations Data: Revenue: OnSite services ........................... $ 66,904 $ 84,183 $ 62,079 $ 70,149 Software sales ........................... 40,376 46,821 33,382 50,554 Maintenance and enhancements ............... 35,145 42,013 30,923 38,003 Software services ........................ 31,631 41,552 29,917 43,899 Interest and other revenue ............... 2,092 689 590 406 ------------- ------------- ------------- ------------- 176,148 215,258 156,891 203,011 Expenses: Cost of OnSite services .................. 51,927 67,852 50,210 57,190 Cost of software sales and maintenance and enhancements ........................ 31,681 38,546 27,833 33,063 Cost of software services .................. 27,082 36,586 27,116 36,150 Selling, general and administrative ...... 43,746 53,921 39,660 51,064 Charge for purchased research and development .............................. 8,700 0 0 0 Interest expense ........................... 2,696 2,350 1,724 1,123 ------------- ------------- ------------- ------------- 165,832 199,255 146,543 178,590 Income (Loss) Before Income Taxes and Extraordinary Credit ..................... 10,316 16,003 10,348 24,421 Provision for income taxes .................. 7,258 6,884 4,407 9,906 ------------- ------------- ------------- ------------- Income (Loss) Before Extraordinary Credit 3,058 9,119 5,941 14,515 Extraordinary Credit: Utilization of operating loss carry forwards ............ 0 0 0 0 ------------- ------------- ------------- ------------- Net income (loss) ........................ $ 3,058 $ 9,119 $ 5,941 $ 14,515 ============= ============= ============= ============= Earnings per share: Primary .................................... $ 0.22 $ 0.62 $ 0.39 $ 0.95 Fully diluted .............................. $ 0.21 $ 0.61 $ 0.39 0.87 Weighted average common shares and equivalents outstanding: Primary .................................... 14,029,700 14,696,274 15,095,911 15,270,714 Fully Diluted .............................. 14,399,182 16,781,274 15,095,911 17,293,334 Ratio of earnings to fixed charges(4) ...... 4.1 x 5.8 x 5.2 x 14.1 x Balance Sheet Data: Working Capital ........................... $ 63,555 $ 67,389 $ 63,082 $ 76,929 Total Assets .............................. 150,983 163,259 162,828 193,099 Long Term Debt (net of current portion) . 31,790 31,590 31,690 750 Stockholders Equity ........................ 85,565 96,796 91,902 140,214
- ------------ (1) Includes charges of $7,693 and $8,700 for purchased research and development in the years ended September 30, 1992 and 1995, respectively. Results without the charge for purchased research and development would have been:
1992 1995 -------- -------- Income before extraordinary credit ........................ $3,628 $11,758 Fully diluted income per share before extraordinary credit $ 0.29 $ 0.80
(2) Effective October 1, 1993, the Company adopted FAS 109, "Accounting for Income Taxes," with an immaterial cumulative effect. Prior to 1994, the benefits of net operating loss and tax credit carryforwards were classified as extraordinary credits. (3) The classification of expenses between the cost of software sales and maintenance and enhancements and the cost of software services has been estimated for 1992 and 1993 to facilitate comparability with subsequent years' presentations. (4) Earnings were inadequate to cover fixed charges for 1992. The coverage deficiency amounted to $1,647,000. If the charge for purchased research and development referred to in Note (1) were not included, the ratio for 1992 would have been 8.0x. 11 DESCRIPTION OF DEBENTURES The Debentures are to be issued under an Indenture, dated as of October 15, 1997 (the "Indenture"), between the Company and First Union National Bank, as Trustee (the "Trustee"). A copy of the Indenture substantially in the form in which it is to be executed has been filed as an exhibit to the Registration Statement. The following summarizes the material provisions of the Indenture and is subject to, and qualified in its entirety by reference to, all the provisions of the Indenture, including the definition therein of certain terms. Wherever particular articles, sections or defined terms of the Indenture are referred to, it is intended that such articles, sections or defined terms shall be incorporated herein by reference. General The Debentures will be limited to $60,000,000 aggregate principal amount (or $69,000,000 aggregate principal amount assuming exercise in full of the Underwriters' over-allotment option), will be unsecured subordinated obligations of the Company, and will mature on October 15, 2004. The Debentures will bear interest from October , 1997 at the rate per annum shown on the cover page of this Prospectus. Interest will be payable semi-annually on April 15 and October 15 of each year ("Interest Payment Dates"), subject to certain exceptions, commencing April 15, 1998, to the person in whose name the Debenture is registered at the close of business on the first day of April or October, as the case may be ("Regular Record Date"), next preceding such Interest Payment Date. Principal of, premium, if any, and interest on the Debentures will be payable, and the Debentures will be convertible and exchangeable and transfers thereof will be registrable, at the office of the Trustee or the office or agency of the Company maintained for such purpose in the City of Philadelphia or New York and at any other office or agency maintained by the Company for such purpose, provided that at the option of the Company, payment of interest may be made by check mailed to the address of the person entitled thereto as it appears in the Debenture Register. All payments of interest and principal will be made in United States Dollars. (Sections 3.01, 3.05, 3.07, 10.02, 12.02 and 13.01) The Debentures will be issued only in registered form without coupons in denominations of $1,000 or any integral multiple thereof. (Section 3.02) No service charge will be made for any registration of transfer or exchange of Debentures, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. (Section 3.05) Conversion Rights The Debentures will be convertible into Common Stock at any time prior to redemption (except as set forth in the following sentence) or maturity, initially at the conversion price stated on the cover page hereof. The right to convert Debentures called for redemption will terminate at the close of business on the Business Day immediately preceding a Redemption Date and will be lost if not exercised prior to that time. (Section 12.01) See "Optional Redemption." Debentures surrendered for conversion during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date (except Debentures called for redemption on a Redemption Date within such period) must be accompanied by payment of an amount equal to the interest thereon which the registered Holder is to receive. No other adjustment for interest or dividends is to be made upon conversion. (Sections 3.07 and 12.02) Fractional shares of Common Stock will not be issued upon conversion, but in lieu thereof, the Company will pay a cash adjustment based upon market price. (Section 12.03) The Conversion Price is subject to adjustment (under formulae set forth in the Indenture) under certain circumstances, including: (i) the issuance of Common Stock as a dividend or distribution on Common Stock; (ii) the issuance to all holders of Common Stock of rights or warrants entitling them to subscribe for or purchase Common Stock at a price per share less than the Current Market Price; (iii) certain subdivisions and combinations of Common Stock; (iv) the issuance as a dividend or distribution to all holders of Common Stock of shares of capital stock of the Company (other than Common Stock) or evidences of indebtedness, cash or other assets of the Company (including securities, but excluding those rights, warrants, dividends and distributions referred to above and dividends and distributions in connection with the liquidation, dissolution or winding up of the 12 Company or paid exclusively in cash); (v) dividends or other distributions consisting exclusively of cash (excluding any cash portion of distributions referred to in clause (iv)) to all holders of Common Stock to the extent such distributions, combined with (A) all such all-cash distributions made within the preceding 12 months in respect of which no adjustment has been made, plus (B) any cash and the fair market value of other consideration payable in respect of any tender offers by the Company or any of its subsidiaries for Common Stock concluded within the preceding 12 months in respect of which no adjustment has been made, exceeds 10% of the Company's market capitalization (being the product of the then current market price of the Common Stock times the number of shares of Common Stock then outstanding) on the record date for such distribution; and (vi) the purchase of Common Stock pursuant to a tender offer made by the Company or any of its subsidiaries to the extent that the aggregate consideration, together with (X) any cash and the fair market value of any other consideration payable in any other tender offer expiring within the 12 months preceding such tender offer in respect of which no adjustment has been made, plus (Y) the aggregate amount of any such all-cash distributions referred to in clause (v) above to all holders of Common Stock within the 12 months preceding the expiration of such tender offer in respect of which no adjustments have been made, exceeds 10% of the Company's market capitalization on the expiration of such tender offer. (Section 12.04) In the case of certain consolidations or mergers to which the Company is a party or the conveyance or transfer of the properties and assets of the Company substantially as an entirety, each Debenture then outstanding would, without the consent of any Holders of Debentures, become convertible only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer by a holder of the number of shares of Common Stock into which the Debenture might have been converted immediately prior to such consolidation, merger, conveyance or transfer, assuming such holder of Common Stock failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon the consolidation, merger, conveyance or transfer (provided that if the kind or amount of securities, cash or other property so receivable is not the same for each non-electing share, the kind and amount so receivable by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). (Section 12.10) Subordination of Debentures The Debentures will be subordinated and subject, to the extent and in the manner set forth in the Indenture, to the prior payment in full of all Senior Indebtedness. (Section 13.01) Senior Indebtedness is defined to include the principal of, premium, if any, interest and other amounts due on any indebtedness, whether now outstanding or hereafter created, incurred, assumed or guaranteed by the Company, for money borrowed from others (including obligations under capitalized leases or purchase money indebtedness) or in connection with the acquisition by the Company or a Subsidiary of any other business or entity, or in respect of letters of credit or bid, performance or surety bonds issued for the account or on the credit of the Company or a Subsidiary, and, in each case, all renewals, extensions and refundings thereof, other than (i) any such indebtedness as to which, in the instrument creating or evidencing the same, it is provided that such indebtedness is not superior in right of payment to the Debentures, (ii) indebtedness of the Company to any Affiliate and (iii) the Debentures. (Section 1.01) At September 30, 1997, the Company had approximately $1,975,000 of outstanding indebtedness that would have constituted Senior Indebtedness under the Indenture. The Indenture does not limit the amount of Senior Indebtedness that the Company may incur. No payments of principal of, premium, if any, or interest on the Debentures may be made and no Debentures may be redeemed, retired or purchased if the Company is then in default in the payment of any Senior Indebtedness or if at the time any other Event of Default under the terms of any Senior Indebtedness exists permitting acceleration thereof. Upon any payment or distribution of assets of the Company in the event of any insolvency, reorganization, liquidation or similar proceeding, all Senior Indebtedness must be repaid in full (including any interest thereon accruing after the commencement of any proceeding) before the Holders will be entitled to receive or retain any payment. If the Debentures are declared due and payable before their Stated Maturity because of the occurrence of an Event of Default, no payment may be made in respect of the Debentures unless and until all Senior Indebtedness shall have been paid in full. (Section 13.02) By reason of such subordination, in the event of insolvency, creditors of the Company who are holders of Senior Indebtedness may recover more, ratably, than Holders, and creditors of the Company who are neither holders of Senior Indebtedness nor Holders may recover less, ratably, than holders of Senior Indebtedness and may recover more, ratably, than Holders. 13 Optional Redemption The Debentures will be redeemable upon not less than 30 nor more than 60 days' notice by mail at any time, as a whole or in part, at the election of the Company, at a Redemption Price equal to the percentage of the principal amount set forth below if redeemed in the 12-month period beginning October 15 of the years indicated: Redemption Redemption Year Price Year Price ---- ---------- ---- ----------- 2000 2002 2001 2003 and thereafter at a Redemption Price equal to 100% of the principal amount, with accrued interest to the Redemption Date (subject to the right of Holders of record on Regular Record Dates to receive interest due on an Interest Payment Date), provided that the Company may not redeem any Debentures prior to October 15, 2000. (Sections 2.03, 11.01, 11.04, 11.05 and 11.06) Certain Rights to Require Repurchase of Debentures by the Company In the event of any Change in Control (as defined below) of the Company occurring after the date of issuance of the Debentures and on or prior to Maturity, each Holder of Debentures will have the right, at the Holder's option, to require the Company to repurchase all or any part of the Holder's Debentures on the date (the "Repurchase Date") that is 75 days after the date the Company gives notice of the Change in Control as described below at a price (the "Repurchase Price") equal to 100% of the principal amount thereof, together with accrued and unpaid interest to the Repurchase Date. (Section 14.01) On or prior to the Repurchase Date, the Company shall deposit with the Trustee or a Paying Agent an amount of money sufficient to pay the Repurchase Price of the Debentures which are to be repaid on the Repurchase Date. (Section 14.03) Neither the Board of Directors of the Company nor the Trustee, acting alone or together, can modify or waive this required repurchase of the Debentures. Failure by the Company to repurchase the Debentures when required under the preceding paragraph will result in an Event of Default under the Indenture whether or not such repurchase is permitted by the subordination provisions of the Indenture. (Section 5.01) On or before the 15th day after the occurrence of a Change in Control, the Company is obligated to mail to all Holders a notice of the event constituting and the date of such Change in Control, the Repurchase Date, the date by which the repurchase right must be exercised, the Repurchase Price for Debentures, and the procedures which a Holder must follow to exercise a repurchase right. To exercise the repurchase right, a Holder of a Debenture must deliver, on or before the 10th day prior to the Repurchase Date, written notice to the Company (or an agent designated by the Company for such purpose) and to the Trustee of the Holder's exercise of such right, together with the certificates evidencing the Debentures with respect to which the right is being duly exercised, duly endorsed for transfer. (Section 14.02) A "Change in 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 is 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, together with any Affiliates thereof, shall acquire beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of at least 50% of the total voting power of all classes of capital stock of the Company entitled to vote generally in the election of directors of the Company. Notwithstanding clause (iii) of the foregoing definition, a Change in Control shall not be deemed to have occurred solely by virtue of the Company, any Subsidiary, any employee stock purchase plan, stock option plan or other stock incentive plan or program, retirement 14 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, filing or becoming obligated to file a report under or in response to Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report) under the Exchange Act disclosing beneficial ownership by it of shares or securities of the Company, whether in excess of 50% or otherwise. (Section 14.05) A recapitalization or a leveraged buyout or similar transaction involving members of Management or their Affiliates will constitute a Change in Control if it meets the foregoing definition. Notwithstanding the foregoing, a Change in Control as described above shall not be deemed to have occurred if (i) the Current Market Price of the Common Stock on the date of a Change in Control is at least equal to 105% of the Conversion Price of the Debentures in effect immediately preceding the time of such Change in Control, or (ii) all of the consideration (excluding cash payments for fractional shares) in the transaction giving rise to such Change in 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 on the Nasdaq National Market, and as a result of such transaction the Debentures become convertible solely into such common stock, or (iii) the consideration in the transaction giving rise to such Change in Control to the holders of Common Stock consists of cash or securities that are, or immediately upon issuance will be, listed on a national securities exchange or quoted on 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 Price of such securities during the 10 consecutive trading days commencing with the sixth trading day following consummation of such transaction) is at least 105% of the Conversion Price of the Debentures in effect on the date immediately preceding the Closing Date of such transaction. (Section 14.05) There is no definition of the phrase "all or substantially all" as applied to the Company's assets and used in the definition of Change in Control in the Indenture, and there is no clear definition of such phrase under applicable law. As a result of the uncertainty of the meaning of this phrase, in the event the Company were to sell a significant amount of its assets, the Holders and the Company may disagree over whether the sale gave rise to the right of Holders to require the Company to repurchase the Debentures. In such case, the Holders would likely not be able to require the Company to repurchase unless and until the disagreement were resolved in favor of the Holders. The right to require the Company to repurchase Debentures as a result of the occurrence of a Change in Control could create an Event of Default under Senior Indebtedness, as a result of which any repurchase could, absent a waiver, be blocked by the subordination provisions of the Debentures. See "Subordination of Debentures." The Company's ability to pay cash to the Holders upon a repurchase may be limited by certain financial covenants contained in the Company's Senior Indebtedness. In the event a Change in Control occurs and the Holders exercise their rights to require the Company to repurchase Debentures, the Company intends to comply with applicable tender offer rules under the Exchange Act, including Rules 13e-4 and 14e-1, as then in effect, with respect to any such purchase. The Change in Control purchase feature of the Debentures may in certain circumstances make more difficult or discourage a takeover of the Company and, thus, the removal of incumbent Management. The Change in 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 a plan by Management to adopt a series of antitakeover provisions. Instead, the Change in Control purchase feature is a standard term contained in other similar debt offerings and the specific terms of this feature result from negotiations between the Company and the Underwriters. Management has no present intention to engage in a transaction involving a Change in Control. The foregoing provisions would not necessarily afford Holders protection in the event of highly leveraged or other transactions involving the Company that may adversely affect Holders. Sinking Fund There will be no sinking fund established for the retirement of the Debentures. 15 Modification of the Indenture Modifications and amendments of the Indenture may be made by the Company and the Trustee with the consent of the Holders of two-thirds in principal amount of the Outstanding Debentures provided that no such modification or amendment may, without the consent of the Holder of each Outstanding Debenture affected thereby, (i) change the stated maturity date of the principal of, or any installment of interest on, the Debentures, (ii) reduce the principal amount of, the rate of interest thereon, or any premium payable on, any Debentures, (iii) change the place of payment where, or the coin or currency in which, any Debenture or any payment or the interest thereon is payable, (iv) impair the right to institute suit for the enforcement of any such payment when due, (v) adversely affect the conversion rights of the Holders, (vi) modify the provisions of the Indenture with respect to the subordination of the Debentures in a manner adverse to the Holders, (vii) adversely affect the right to require the Company to repurchase Debentures on a Change in Control, or (viii) reduce the percentage in principal amount of Debentures the consent of whose Holders is required for modification or amendment of the Indenture or for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults. (Section 9.02) Events of Default; Notice and Waiver The following are to be Events of Default: (i) default in the payment of any interest, continued for 30 days; (ii) default in the payment of principal or premium, if any, when due; (iii) default in the payment of the Repurchase Price in respect of any Debenture on the Repurchase Date in accordance with the Indenture; (iv) default in the performance of any other covenant continued for 60 days after written notice to the Company as provided in the Indenture; (v) default in respect of indebtedness of the Company for money borrowed which results in acceleration of the maturity of $1 million or more of indebtedness, if such acceleration is not rescinded or indebtedness discharged within 30 days after written notice to the Company as provided in the Indenture; and (vi) certain events in bankruptcy, insolvency or reorganization. (Section 5.01) If any Event of Default shall happen and be continuing, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Debentures may declare the Debentures due and payable immediately. (Section 5.02) At any time after a declaration of acceleration with respect to the Debentures has been made, but before a judgment or decree based on acceleration has been obtained, the Holders of a majority in principal amount of the Outstanding Debentures may, under certain circumstances, rescind and annul such acceleration. (Section 5.02) No Holder will have any right to institute any proceeding with respect to the Indenture or for any remedy under the Indenture unless (i) the Holder previously has given to the Trustee written notice of a continuing Event of Default, (ii) the Holders of not less than 25% in principal amount of the Outstanding Debentures have made written request, and offered reasonable indemnity, to the Trustee to institute proceedings as trustee, and (iii) within 60 days after such request, the Trustee has neither instituted such proceeding nor received from the Holders of a majority in aggregate principal amount of the Outstanding Debentures a direction inconsistent with the request. (Section 5.07) The Indenture will provide that the Trustee will be under no obligation, subject to the duty of the Trustee during default to act with the required standard of care, 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 indemnification. (Section 6.03) Subject to such provisions for indemnification of the Trustee, the Holders of a majority in principal amount of the Outstanding Debentures 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 5.12) The Holders of a majority in principal amount of the Outstanding Debentures may on behalf of the Holders of all Debentures waive compliance by the Company with certain restrictive provisions of the Indenture. (Section 10.07) The Holders of a majority in principal amount of the Outstanding Debentures may on behalf of the Holders of all Debentures waive certain past defaults except a default in payment of the principal of (or premium, if any) or interest on any Debenture or in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the Holder of each Outstanding Debenture affected. (Section 5.13) 16 Consolidation, Merger, Conveyance or Transfer The Indenture provides that the Company shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any person, unless (i) any such successor assumes the Company's obligations under the Debentures and the Indenture, (ii) after giving effect thereto, no Event of Default shall have occurred and be continuing, and (iii) certain other conditions under the Indenture are met. (Section 8.01) Upon any such consolidation or merger, or any such conveyance or transfer of the properties and assets of the Company substantially as an entirety, the successor corporation formed by such consolidation, or into which the Company is merged, or to which such conveyance or transfer is made, shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture with the same effect as if such successor corporation had been named as the Company. The Company as the predecessor corporation shall be relieved of all obligations and covenants under the Indenture. (Section 8.02) Governing Law The Indenture will provide that the Debentures will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law. The Trustee First Union National Bank will be the Trustee under the Indenture. DESCRIPTION OF CAPITAL STOCK Common Stock The authorized capital stock of the Company includes 24,000,000 shares of Common Stock, par value $.01 per share, of which, on June 30, 1997, 16,166,495 were issued and outstanding. Holders of Common Stock have no preemptive rights. The outstanding shares of Common Stock are fully paid and non-assessable. Holders of Common Stock are entitled to dividends when, as and if declared by the Board of Directors of the Company out of any funds legally available to the Company for that purpose. A holder of Debentures will not be entitled to receive dividends actually declared and paid, if any, with respect to the Common Stock unless such holder has first exercised the conversion rights associated with the Debentures, and then only to the extent such holder has so converted Debentures into shares of Common Stock. Holders of Common Stock are entitled to one vote per share held of record with respect to all matters submitted to a vote of the stockholders. There is no cumulative voting for the election of directors. The Company's Board of Directors is divided into three classes, each of which is elected for a three-year term, with one class being elected each year. Directors may be removed, only for cause, and only with the approval of 66 2/3% of the voting power of the stock entitled to vote in the election of directors (the "voting stock"). The classification of directors has the effect of making it more difficult for a third party to change the composition of the Board of Directors without the support of the incumbent Board. At least two annual stockholder meetings, instead of one, will be required to effect a change in the control of the Board, unless stockholders controlling at least 66 2/3% of the voting stock vote to remove directors for cause. The Company's Certificate of Incorporation provides that unless approved by two-thirds of the Directors of the Company, the Company cannot engage in (i) a merger or consolidation, (ii) a sale, lease or exchange of substantially all of its assets, or (iii) a reclassification, recapitalization or other transaction designed to decrease the number of holders of the Company's voting stock (other than repurchases of stock for cancellation or the Company's treasury and other than redemptions permitted by the terms of the security), without the affirmative vote of holders of at least 66 2/3% of all stock entitled to vote thereon. In connection with a liquidation, dissolution or winding up of the Company, holders of Common Stock will be entitled to receive pro rata the assets remaining after creditors of the Company and the holders of any Preferred Stock have been paid in full. The Transfer Agent for the Common Stock is Registrar and Transfer Company, Cranford, New Jersey. Preferred Stock The Company is authorized to issue 3,000,000 shares of Preferred Stock, par value $.10 per share, and to establish and issue shares of Preferred Stock in series and to fix, determine and vary the voting rights, designations, preferences, qualifications, privileges, options, conversion rights and other special rights of each series of Preferred Stock. As of the date of this Prospectus no shares of Preferred Stock were issued and outstanding. 17 UNDERWRITING The Underwriters named below (the "Underwriters"), have severally agreed, subject to the terms and conditions set forth in the Underwriting Agreement, to purchase from the Company the principal amount of Debentures indicated below opposite their respective names at the public offering price less the underwriting discount set forth on the cover page of this Prospectus. The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will purchase all the Debentures offered hereby if any such Debentures are purchased. Principal Amount Underwriters of Debentures ------------ ---------------- Unterberg Harris ......................... Janney Montgomery Scott Inc. ............. ------------ Total .................................. $60,000,000 ============ The Company has been advised that the Underwriters propose initially to offer the Debentures to the public at the offering price set forth on the cover page of this Prospectus and to certain selected dealers (who may include the Underwriters) at such price less a concession not in excess of % of the principal amount thereof. The Underwriters may allow, and such dealers may reallow, a concession not in excess of % to certain other dealers. After the initial offering, the offering price and other selling terms may be changed by the Underwriters. The Debentures are offered subject to receipt and acceptance by the Underwriters, and to certain other conditions, including the right to reject orders in whole or in part. The Company has granted an option to the Underwriters, exercisable during the 30 day period after the date of this Prospectus, to purchase up to a maximum of $9,000,000 in principal amount of additional Debentures from the Company at the initial offering price less the underwriting discount shown on the cover page of this Prospectus. The Underwriters may exercise such option only to cover over-allotments made in connection with the sale of the Debentures offered hereby. To the extent the Underwriters exercise the option, the Underwriters will be committed, subject to certain conditions, to purchase a principal amount of such additional Debentures in approximately the same proportion as set forth in the above table. The Company has agreed to indemnify the Underwriters against certain liabilities that may be incurred in connection with this offering, including liabilities under the Securities Act, or to contribute to payments that the Underwriters may be required to make in respect thereof. The Company has agreed that it will not sell or dispose of, and the Company's directors and executive officers have agreed that they will not sell or dispose of, any shares of Common Stock without the prior written consent of either of the Underwriters until 90 days after the effective date of the Registration Statement of which this Prospectus is a part. Such lock-up restriction does not apply to (i) sales or other transfers of up to 50,000 shares of Common Stock owned by Michael J. Emmi, the Company's Chairman, President and Chief Executive Officer, and up to 10,000 shares of Common Stock owned by each of the other executive officers and directors of the Company (an aggregate of 120,000 shares), (ii) issuances by the Company under employee stock plans, upon exercise of options outstanding at the commencement of this offering and upon conversion of the Debentures, or (iii) private sales, transfers or issuances subject to the lock-up restriction. Thomas I. Unterberg, a Managing Director of Unterberg Harris, also serves as a director of the Company in his individual capacity. Mr. Unterberg and other partners of Unterberg Harris beneficially own 188,600 shares of Common Stock. The Underwriters have provided investment banking services to the Company and may continue to do so in the future. In connection with this offering, the Underwriters may engage in transactions that stabilize, maintain or otherwise affect the market price of the Debentures or Common Stock. Such transactions may include stabilization transactions effected in accordance with Rule 104 of Regulation M under the Exchange Act pursuant to which the Underwriters may bid for, or purchase, Debentures or Common Stock for the purpose of stabilizing the market price. The Underwriters also may create a short position by selling more Debentures in connection with this offering than it is committed to purchase from the Company, and in such case may purchase Debentures in the open market following completion of this offering to cover all or a portion of such short position. In addition, the Underwriters may impose "penalty bids" whereby it may reclaim from a dealer participating in 18 this offering the selling concession with respect to Debentures that are distributed in this offering, but subsequently purchased for the account of the Underwriters in the open market. Any of the transactions described in this paragraph may result in the maintenance of the price of the Debentures or the Common Stock at a level above that which might otherwise prevail in the open market. None of the transactions described in this paragraph is required, and, if they are undertaken, they may be discontinued at any time. As permitted by Rule 103 under the Exchange Act, the Underwriters or a market maker (a "passive market maker") in the Common Stock may make bids for or purchases of Common Stock in the Nasdaq National Market until such time, if any, when a stabilizing bid for such securities has been made. Rule 103 generally provides that (1) a passive market maker's net daily purchases of the Common Stock may not exceed 30% of its average daily trading volume in such securities for the two full consecutive calendar months (or any 60 consecutive days ending within the 10 days) immediately preceding the filing date of the registration statement of which this Prospectus forms a part, (2) a passive market maker may not effect transactions or display bids for the Common Stock at a price that exceeds the highest independent bid for the Common Stock by persons who are not passive market makers, and (3) bids made by passive market makers must be identified as such. LEGAL MATTERS The validity of the securities offered hereby is being passed upon for the Company by Pepper, Hamilton & Scheetz LLP. Certain legal matters relating to this offering have been passed upon for the Underwriters by Cravath, Swaine & Moore. EXPERTS The consolidated financial statements of Systems & Computer Technology Corporation appearing in the Company's Annual Report on Form 10-K for the year ended September 30, 1996 have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. 19 =============================================================================== No dealer, salesman or any other person has been authorized to give any information or to make any representations other than those contained in this Prospectus in connection with the offer made by this Prospectus, and, if given or made, such information or representations must not be relied upon as having been authorized. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy any security other than the securities to which it relates, nor does it constitute an offer to sell or a solicitation of an offer to buy such securities by anyone in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that information contained herein is correct as of any time subsequent to the date hereof. -------------------------------------------- TABLE OF CONTENTS Page ----- Available Information ..................... 2 Documents Incorporated by Reference ...... 2 The Company .............................. 4 Summary Terms of the Debentures ............ 6 Risk Factors .............................. 7 Use of Proceeds ........................... 10 Capitalization ........................... 10 Selected Consolidated Financial Data ...... 11 Description of Debentures .................. 12 Description of Capital Stock ............... 17 Underwriting .............................. 18 Legal Matters .............................. 19 Experts .................................... 19 =============================================================================== =============================================================================== $60,000,000 LOGO SCT SYSTEMS & COMPUTER TECHNOLOGY CORPORATION % Convertible Subordinated Debentures Due 2004 ------------ PROSPECTUS ------------ Unterberg Harris Janney Montgomery Scott Inc. , 1997 =============================================================================== PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS Item 14. Other Expenses of Issuance and Distribution.* SEC registration fee ........................... $ 20,909.09 NASD Listing Application fee ..................... 4,000.00 NASD Filing fee ................................. 7,400.00 Printing and engraving fees ..................... 30,000.00 Legal fees and expenses ........................ 85,000.00 Accounting fees and expenses ..................... 25,000.00 Trustee/Transfer agent and registrar fees ...... 3,500.00 Miscellaneous .................................... 19,190.91 ------------- TOTAL .......................................... $195,000.00 ============= - ------------ * All amounts are estimated except Securities and Exchange Commission and NASD fees. Item 15. Indemnification of Directors and Officers. Section 145 of the Delaware General Corporation Law (the "DGCL") and the Company's By-Laws provide for indemnification of the Company's directors and officers and certain other persons. Under Section 145 of the DGCL and the Company's By-Laws, directors and officers of the Company may be indemnified by the Company against all expenses incurred in connection with actions (including, under certain circumstances, derivative actions) brought against such director or officer by reason of his or her status as a representative of the Company, or by reason of the fact that such director or officer serves or served as a representative of another entity at the Company's request, so long as the director or officer acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Company. Reference is made to Item 17 of this Registration Statement for additional information regarding indemnification of directors and officers. Item 16. Exhibits. (a) Exhibits 1 Form of Underwriting Agreement. 4 Form of Indenture relating to _____% Convertible Subordinated Debentures due 2004 (including Form of Debenture). 5 Opinion and Consent of Pepper, Hamilton & Scheetz LLP. 12 Statement re: Computation of ratio of earnings to fixed charges. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Pepper, Hamilton & Scheetz LLP (included in Exhibit 5). 24 Power of Attorney (on Signature page). 25 Statement of Eligibility of Trustee. Item 17. Undertakings. The undersigned Registrant hereby undertakes that, for purposes of determining liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-1 For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be a part of this registration statement as of the time it was declared effective. For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Malvern, Pennsylvania, on October 9, 1997. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION By: /s/ Michael J. Emmi ------------------------------------------- Chairman of the Board, President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Michael J. Emmi, Eric Haskell and Richard A. Blumenthal, and each or any of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and other registration statements and amendments thereto relating to the offering contemplated by this Registration Statement (including registration statements under Rule 462 promulgated under the Securities Act of 1933), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their, his or her substitutes or substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Michael J. Emmi - -------------------------- Chairman of the Board, President and October 9, 1997 Michael J. Emmi Chief Executive Officer /s/ Eric Haskell - -------------------------- Senior Vice President, Finance and October 9, 1997 Eric Haskell Administration, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) /s/ Michael D. Chamberlain - -------------------------- President, SCT Software Group and October 9, 1997 Michael D. Chamberlain Director /s/ Gabriel A. Battista - -------------------------- Director October 9, 1997 /s/ Allen R. Freedman - -------------------------- Director October 9, 1997 Allen R. Freedman /s/ Thomas I. Unterberg - -------------------------- Director October 9, 1997 Thomas I. Unterberg
II-3 EXHIBIT INDEX Number and Description of Exhibit ----------- 1 Form of Underwriting Agreement. 4 Form of Indenture relating to ____% Convertible Subordinated Debentures due 2004 (including Form of Debenture). 5 Opinion and Consent of Pepper, Hamilton & Scheetz LLP. 12 Statement re: Computation of ratio of earnings to fixed charges. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Pepper, Hamilton & Scheetz LLP (included in Exhibit 5). 24 Power of Attorney (on Signature page). 25 Statement of Eligibility of Trustee. EX-1 2 EXHIBIT 1 [Draft--10/7/97] Systems & Computer Technology Corporation $60,000,000 [ ]% Convertible Debentures Due 2004 Underwriting Agreement New York, New York October [ ], 1997 Unterberg Harris Janney Montgomery Scott Inc. As Representatives of the several Underwriters, c/o Unterberg Harris Swiss Bank Tower 10 East 50th Street, 22nd Floor New York, New York 10022 Dear Sirs: Systems & Computer Technology Corporation, a Delaware corporation (the "Company"), proposes to sell to the underwriters named in Schedule I hereto (the "Underwriters"), for whom you (the "Representatives") are acting as representatives, $60,000,000 principal amount of its [ ]% Convertible Debentures Due 2004 (the "Underwritten Securities"), to be issued under an indenture (the "Indenture") to be dated as of October 15, 1997, between the Company and First Union National Bank, as trustee (the "Trustee"). If the firm or firms named in Schedule I hereto include only the Representatives, then the terms "Underwriters" and "Representatives", as used herein, shall each be deemed to refer to such firm or firms. The Company also proposes to grant to the Underwriters an option to purchase up to an additional $9,000,000 principal amount of its [ ]% Convertible Subordinated Debentures Due 2004 (the "Option Securities"; the Option Securities, together with the Underwritten Securities, being hereinafter called the "Securities"). The Securities are convertible into shares of Common Stock, $.01 par value, of the Company ("Common Stock"). 1. Representations and Warranties. The Company represents and warrants to, and agrees with, each 2 Underwriter as set forth below in this Section 1. Certain terms used in this Section 1 are defined in paragraph (c) hereof. (a) The Company meets the requirements for use of Form S-3 under the Securities Act of 1933 (the "Act") and has filed with the Securities and Exchange Commission (the "Commission") a registration statement (file number 333-[ ]) on such Form, including a related preliminary prospectus, for the registration under the Act of the offering and sale of the Securities. The Company may have filed one or more amendments thereto, including the related preliminary prospectus, each of which has previously been furnished to you. The Company will next file with the Commission one of the following: (i) prior to effectiveness of such registration statement, a further amendment to such registration statement, including the form of final prospectus, (ii) a final prospectus in accordance with Rules 430A and 424(b)(1) or (4), or (iii) a final prospectus in accordance with Rules 415 and 424(b)(2) or (5). In the case of clause (ii), the Company has included in such registration statement, as amended at the Effective Date, all information (other than Rule 430A Information) required by the Act and the rules thereunder to be included in the Prospectus with respect to the Securities and the offering thereof. As filed, such amendment and form of final prospectus, or such final prospectus, shall contain all Rule 430A Information, together with all other such required information, with respect to the Securities and the offering thereof and, except to the extent the Representatives shall agree in writing to a modification, shall be in all substantive respects in the form furnished to you prior to the Execution Time or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other changes (beyond that contained in the latest Preliminary Prospectus) as the Company has advised you, prior to the Execution Time, will be included or made therein. (b) On the Effective Date, the Registration Statement did or will, and when the Prospectus is first filed (if required) in accordance with Rule 424(b) and on the Closing Date, the Prospectus (and any supplements thereto) will, comply in all material respects with the applicable requirements of the Act, the Securities Exchange Act of 1934 (the "Exchange Act") and the Trust Indenture Act of 1939 (the "Trust 3 Indenture Act") and the respective rules thereunder; on the Effective Date, the Registration Statement did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; on the Effective Date and on the Closing Date the Indenture did or will comply in all material respects with the applicable requirements of the Trust Indenture Act and the rules thereunder; and, on the Effective Date and at the Execution Time, the Prospectus, if not filed pursuant to Rule 424(b), did not or will not, and on the date of any filing pursuant to Rule 424(b) and on the Closing Date, the Prospectus (together with any supplement thereto) will not, include any untrue statement of a material fact or omit to state a material fact neces sary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to (i) that part of the Registration Statement which shall consti tute the Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of the Trustee or (ii) the information contained in or omitted from the Registration Statement or the Prospectus (or any supplement thereto) in reliance upon and in conformity with information furnished herein or in writing to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion in the Registration Statement or the Prospectus (or any supplement thereto). (c) The terms which follow, when used in this Agreement, shall have the meanings indicated. The term "the Effective Date" shall mean each date that the Registration Statement and any post-effective amendment or amendments thereto became or become effective and each date after the date hereof and during the period when a Prospectus is required to be delivered on which a document incorporated by reference in the Registration Statement is filed. "Execution Time" shall mean the date and time that this Agreement is executed and delivered by the parties hereto. "Preliminary Prospectus" shall mean any preliminary prospectus referred to in paragraph (a) above and any preliminary prospectus included in the Registration Statement at the Effective Date that omits Rule 430A Information. "Prospectus" shall mean the prospectus relating to the Securities that is first filed pursuant to Rule 424(b) after the Execution Time or, if no filing pursuant to Rule 424(b) is required, shall mean the form of final prospectus 4 relating to the Securities included in the Registration Statement at the Effective Date. "Registration Statement" shall mean the registration statement referred to in paragraph (a) above, including incorporated documents, exhibits and financial statements, as amended at the Execution Time (or, if not effective at the Execution Time, in the form in which it shall become effective) and, in the event any post-effective amendment thereto becomes effective prior to the Closing Date (as hereinafter defined), shall also mean such registration statement as so amended. Such term shall include any Rule 430A Information deemed to be included therein at the Effective Date as provided by Rule 430A. "Rule 415", "Rule 424", "Rule 430A" and "Regulation S-K" refer to such rules or regulation under the Act. "Rule 430A Information" means information with respect to the Securities and the offering thereof permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A. Any reference herein to the Registration Statement, a Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Exchange Act on or before the Effective Date of the Registration Statement or the issue date of such Preliminary Prospectus or the Prospectus, as the case may be; and any reference herein to the terms "amend", "amendment" or "supplement" with respect to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the Effective Date of the Registration Statement, or the issue date of any Preliminary Prospectus or the Prospectus, as the case may be, deemed to be incorporated therein by reference. 2. Purchase and Sale. (a) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of [ ]% of the principal amount thereof, plus accrued interest, if any, on the Securities from October [ ], 1997, to the Closing Date, the principal amount of the Underwritten Securities set forth opposite such Underwriter's name in Schedule I hereto. (b) Subject to the terms and conditions and in reliance upon the representations and warranties herein set 5 forth, the Company hereby grants an option to the several Underwriters to purchase, severally and not jointly, up to $9,000,000 principal amount of the Option Securities at the same purchase price per share as the Underwriters shall pay for the Underwritten Securities. Said option may be exercised only to cover over-allotments in the sale of the Underwritten Securities by the Underwriters. Said option may be exercised in whole or in part at any time (but not more than once) on or before the 30th day after the date of the Prospectus upon written or telegraphic notice by the Representatives to the Company setting forth the number of shares of the Option Securities as to which the several Underwriters are exercising the option and the settlement date. Delivery of Option Securities by the Company, and payment therefore to the Company, shall be made as provided in Section 3 hereof. The principal amount of Option Securities to be purchased by each Underwriter shall be the same percentage of the total principal amount of Option Securities to be purchased by the several Underwriters as such Underwriter is purchasing of the Underwritten Securities, subject to such adjustments among the Underwriters as you in your absolute discretion shall make to eliminate any fractional amounts. 3. Delivery and Payment. Delivery of and payment for the Underwritten Securities and the Option Securities (if the option provided for in Section 2(b) hereof shall have been exercised on or before the third business day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on October [ ], 1997, or such later date not more than three business days after the foregoing date as the Representatives shall designate, which date and time may be postponed by agreement between the Representatives and the Company or as provided in Section 9 hereof (such date and time of delivery and payment for the Securities being herein called the "Closing Date"). Delivery of the Securities shall be made to the Representatives for the respective accounts of the several Underwriters against payment by the several Underwriters through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. Delivery of the Securities shall be made at such location as the Representatives shall reasonably designate at least one business day in advance of the Closing Date and payment for the Securities, in the manner set forth above, shall be made at the office of Cravath, Swaine & Moore, New York, New York. Certificates for the Securities shall be registered in such names and in such denominations as the 6 Representatives may request not less than three full business days in advance of the Closing Date. The Company agrees to have the Securities available for inspection, checking and packaging by the Representatives in New York, New York, not later than 1:00 PM on the business day prior to the Closing Date. If the option provided for in Section 2(b) hereof is exercised after the third business day prior to the Closing Date, the Company will deliver (at the expense of the Company) to the Representatives, at 10 East 50th Street, 22nd Floor, New York, New York, on the date specified by the Representatives (which shall be not less than two and not more than three business days after the exercise of said option), the Option Securities in such names and denominations as the Representatives shall have requested against payment of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. If settlement for the Option Securities occurs after the Closing Date, the Company will deliver to the Representatives on the settlement date for the Option Securities, and the obligation of the Underwriters to purchase the Option Securities shall be conditioned upon receipt of, supplemental opinions, certificates and letters confirming as of such date the opinions, certificates and letters delivered on the Closing Date pursuant to Section 6 hereof. 4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Securities for sale to the public as set forth in the Prospectus. 5. Agreements. The Company agrees with the several Underwriters that: (a) The Company will use its best efforts to cause the Registration Statement, if not effective at the Execution Time, and any amendment thereof, to become effective. Prior to the termination of the offering of the Securities, the Company will not file any amendment of the Registration Statement, supplement to the Prospectus unless the Company has furnished you a copy for your review prior to filing and will not file any such proposed amendment or supplement to which you reasonably object. Subject to the foregoing sentence, if the Registration Statement has become or becomes effective pursuant to Rule 430A, or filing of the Prospectus is otherwise required under Rule 424(b), 7 the Company will cause the Prospectus, properly completed, and any supplement thereto to be filed with the Commission pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to the Representatives of such timely filing. The Company will promptly advise the Representatives (i) when the Registration State ment, if not effective at the Execution Time, and any amendment thereto, shall have become effective, (ii) when the Prospectus, and any supplement thereto, shall have been filed (if required) with the Commission pursuant to Rule 424(b), (iii) when, prior to termina tion of the offering of the Securities, any amendment to the Registration Statement shall have been filed or become effective, (iv) of any request by the Commission or its staff for any amendment of the Registration Statement or supplement to the Prospectus or for any additional information, (v) of the issuance by the Commission of any stop order suspending the effective ness of the Registration Statement or the institution or threatening of any proceeding for that purpose and (vi) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or the suspension of any such qualification and, if issued, to obtain as soon as possible the withdrawal thereof. (b) If, at any time when a prospectus relating to the Securities is required to be delivered under the Act, any event occurs as a result of which the Prospectus as then supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or if it shall be necessary to amend the Registration Statement or supplement the Prospectus to comply with the Act or the Exchange Act or the respective rules thereunder, the Company promptly will (i) prepare and file with the Commission, subject to the second sentence of paragraph (a) of this Section 5, an amendment or supplement which will correct such statement or omission or effect such compliance and (ii) supply any supplemented Prospectus to you in such quantities as you may reasonably request, and you shall notify the Underwriters and all selected dealers (x) not to sell any Securities unless accompanied or preceded by such 8 supplemented Prospectus and (y) not to distribute or otherwise use any Prospectus other than such supplemented Prospectus. (c) As soon as practicable, the Company will make generally available to its security holders and to the Representatives an earnings statement or statements of the Company and its subsidiaries which will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act. (d) The Company will furnish to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement (including exhibits thereto) and to each other Underwriter a copy of the Registration Statement (without exhibits thereto) and, so long as delivery of a prospectus by an Underwriter or dealer may be required by the Act, as many copies of each Preliminary Prospectus and the Prospectus and any supplement thereto as the Representatives may reasonably request. The Company will pay the expenses of printing or other production of all documents relating to the offering. (e) The Company will arrange for, and pay all the costs and expenses (including reasonable counsel fees) in connection with, the qualification of the Securities for sale under the laws of such jurisdictions as the Representatives may designate, provided that the Company shall not thereby be required to qualify as a foreign corporation or file a general consent to service of process or become subject to termination. The Company will maintain such qualifications in effect so long as required for the initial distribution of the Securities, will arrange for the determination of the legality of the Securities for purchase by institu tional investors and will pay the fee of the National Association of Securities Dealers, Inc., in connection with its review of the offering. (f) The Company and its affiliates, except as provided in Section 6(g) herein, will not, for a period of 90 days following the Execution Time, without the prior written consent of Unterberg Harris, publicly offer, sell or contract to sell, or otherwise dispose of (or enter into any transaction which is designed to, or could be expected to result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the Company or any affiliate of the Company or any person in privity with the Company or any affiliate of the Company), 9 directly or indirectly, or announce the offering of, any other shares of Common Stock or any securities convertible into, or exchangeable for, shares of Common Stock; provided, however, that the Company may grant, issue and sell securities of the Company pursuant to any employee stock option plan, stock ownership plan or dividend reinvestment plan of the Company in effect at the Execution Time and the Company may issue Common Stock issuable upon the conversion of securities or the exercise of warrants outstanding at the Execution Time. (g) The Company confirms as of the date hereof that it is in compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-198, An Act Relating to Disclosure of Doing Business with Cuba, and the Company further agrees that if it commences engaging in business with the government of Cuba or with any person or affiliate located in Cuba after the date the Registration Statement becomes or has become effective with the Securities and Exchange Commission or with the Florida Department of Banking and Finance (the "Department"), whichever date is later, or if the information reported in the Prospectus, if any, concerning the Company's business with Cuba or with any person or affiliate located in Cuba changes in any material way, the Company will provide the Department notice of such business or change, as appropriate, in a form acceptable to the Department. 6. Conditions to the Obligations of the Underwriters. The obligations of the Underwriters to purchase the Securities shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein as of the Execution Time and the Closing Date, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions: (a) If the Registration Statement has not become effective prior to the Execution Time, unless the Representatives agree in writing to a later time, the Registration Statement will become effective not later than (i) 6:00 PM New York City time, on the date of determination of the public offering price, if such determination occurred at or prior to 3:00 PM New York City time on such date or (ii) 12:00 Noon on the business day following the day on which the public offering price was determined, if such determination occurred after 3:00 PM New York City time on such date; 10 if filing of the Prospectus, or any supplement thereto, is required pursuant to Rule 424(b), the Prospectus, and any such supplement, will be filed in the manner and within the time period required by Rule 424(b); and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or threatened. (b) The Company shall have furnished to the Representatives the opinion of Pepper, Hamilton & Scheetz LLP, counsel for the Company, dated the Closing Date, to the effect that, subject to customary qualifications: (i) each of the Company, SCT Software & Resource Management Corporation, SCT Government Systems, Inc., SCT Utility Systems, Inc., SCT Manufacturing & Distribution Systems, Inc., SCT Financial Corporation and SCT Property, Inc. (individually a "Subsidiary" and collectively the "Subsidiaries") has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate power and authority to own its properties and conduct its business as described in the Prospectus, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction specified in a certificate by the Company as a jurisdiction where such qualification is required, except where the failure to so qualify would not have a material adverse effect on the results of the operations or financial condition of the Company and the Subsidiaries taken as whole; (ii) to the knowledge of such counsel: all the outstanding shares of capital stock of each Subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Prospectus, all outstanding shares of capital stock of the Subsidiaries (other than directors' qualifying shares) are owned by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest and any other security interests, claims, liens or encumbrances; 11 (iii) the Company's authorized equity capitalization is as set forth in the Prospectus; the Securities and the Common Stock conform, as to legal matters, in all material respects to the descriptions thereof contained in the Prospectus; the Securities and the shares of Common Stock issuable upon conversion of the Securities have been approved for quotation, subject to official notice of issuance and, in the case of the Securities, evidence of satisfactory distribution, on the Nasdaq SmallCap Market and the Nasdaq National Market, respectively; the holders of the outstanding shares of capital stock of the Company are not entitled to any preemptive or other rights to subscribe for the Securities or the shares of Common Stock issuable upon the conversion thereof under applicable law or pursuant to any agreement known to such counsel; and the shares of Common Stock initially issuable upon conversion of the Securities have been duly and validly authorized and reserved for issuance upon such conversion and, when issued upon conversion, will be validly issued, fully paid and nonassessable; (iv) the Indenture has been duly authorized, executed and delivered, has been duly qualified under the Trust Indenture Act, and constitutes a legal, valid and binding instrument enforceable against the Company in accordance with its terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or other laws affecting creditors' rights generally from time to time in effect); and the Securities have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Underwriters pursuant to this Agreement, will constitute legal, valid and binding obligations of the Company entitled to the benefits of the Indenture; (v) to the knowledge of such counsel: there is no pending or threatened action, suit or proceeding before any court or governmental agency, authority or body or any arbitrator involving the Company or any of the Subsidiaries of a character required to be disclosed in the Registration Statement which is not disclosed in the Prospectus, including the documents incorporated by reference therein; and there is no 12 franchise, contract or other document of a character required to be described in the Registration Statement or Prospectus, or to be filed as an exhibit, which is not described or filed as required; (vi) based on inquiry of the Commission Staff, the Registration Statement has become effective under the Act; any required filing of the Prospectus, and any supplements thereto, pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); to the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued, no proceedings for that purpose have been instituted or threatened and the Registration Statement and the Prospectus (other than the financial statements and related notes, the financial statement schedules and other financial and statistical information contained or incorporated by reference therein and any other information or documents incorporated by reference therein, as to which such counsel need express no opinion) comply as to form in all material respects with the applicable requirements of the Act, the Exchange Act and the Trust Indenture Act and the respective rules thereunder; (vii) this Agreement has been duly authorized, executed and delivered by the Company; (viii) no consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated herein, except such as have been obtained under the Act and such as may be required under the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Underwriters and such other approvals (specified in such opinion) as have been obtained; (ix) neither the execution and delivery of the Indenture, the issue and sale of the Securities, nor the consummation of any other of the transactions herein contemplated nor the fulfillment of the terms hereof will conflict with, result in a breach or violation of, or constitute a default under the charter or by-laws of the Company or the terms of any indenture or 13 other agreement or instrument known to such counsel and to which the Company or any of the Subsidiaries is a party or bound or any judgment, order or decree known to such counsel to be applicable to the Company or any of the Subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Company or any of the Subsidiaries; and (x) to the knowledge of such counsel, no holders of securities of the Company have rights to the registration of such securities under the Registration Statement which have not been waived. In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the Commonwealth of Pennsylvania, the Delaware General Corporation Law or the laws of the United States, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Underwriters and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials. References to the Prospectus in this paragraph (b) include any supplements thereto at the Closing Date. Such counsel shall further state, subject to customary qualifications, that no facts have come to its attention that lend it to believe that on the Effective Date or at the Execution Time the Registration Statement contains or contained any untrue statement of a material fact or omits or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus as of its date and on the Closing Date includes any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (such statements shall not relate to financial and statistical items and information incorporated by reference in the Registration Statement or Prospectus); (c) The Representatives shall have received from Cravath, Swaine & Moore, counsel for the Underwriters, such opinion or opinions, dated the Closing Date, with 14 respect to the issuance and sale of the Securities, the Indenture, the Registration Statement, the Prospectus (together with any supplement thereto) and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (d) The Company shall have furnished to the Representatives a certificate of the Company, signed by the Chairman of the Board or the President and the principal financial or accounting officer of the Company, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Registration Statement, the Prospectus, any supplements to the Prospectus and this Agreement and that: (i) the representations and warranties of the Company in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date; (ii) no stop order suspending the effective ness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or, to the Company's knowledge, threatened; and (iii) since the date of the most recent financial statements included in the Prospectus (exclusive of any supplement thereto), there has been no material adverse change in the condition (financial or other), earnings, business or properties of the Company and the Subsidiaries, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto). (e) At the Execution Time and at the Closing Date, Ernst & Young LLP shall have furnished to the Representatives a letter or letters, dated respectively as of the Execution Time and as of the Closing Date, in form and substance satisfactory to the Representatives, confirming that they are independent accountants within the meaning of the Act and the Exchange Act and the 15 respective applicable published rules and regulations thereunder and stating in effect that: (i) in their opinion the audited financial statements and financial statement schedules included or incorporated in the Registration Statement and the Prospectus and reported on by them comply in form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations; (ii) on the basis of a reading of the latest unaudited financial statements made available by the Company and its subsidiaries; carrying out certain specified procedures (but not an examina tion in accordance with generally accepted audit ing standards) which would not necessarily reveal matters of significance with respect to the comments set forth in such letter; a reading of the minutes of the meetings of the stockholders, directors, compensation and audit committees of the Company and the Subsidiaries; and inquiries of certain officials of the Company who have responsibility for financial and accounting matters of the Company and its subsidiaries as to transactions and events subsequent to [June 30, 1997], nothing came to their attention which caused them to believe that: (1) any unaudited financial statements included or incorporated in the Registration Statement and the Prospectus do not comply in form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect to financial statements included or incorporated in quarterly reports on Form 10-Q under the Exchange Act; and said unaudited financial statements are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included or incorporated in the Registration Statement and the Prospectus; or (2) with respect to the period subsequent to June 30, 1997, there were any changes, at a specified date not more than 16 five business days prior to the date of the letter, in the long-term debt of the Company and its subsidiaries or capital stock of the Company or decreases in the stockholders' equity of the Company as compared with the amounts shown on the June 30, 1997 consolidated balance sheet included or incorporated in the Registration Statement and the Prospectus, or for the period from July 1, 1997 to such specified date there were any decreases, as compared with the corresponding period in the preceding year; in net revenues or income before income taxes or in total or per share amounts of net income of the Company and its subsidiaries, except in all instances for changes or decreases set forth in such letter, in which case the letter shall be accompanied by an explanation by the Company as to the significance thereof unless said explanation is not deemed necessary by the Representatives; and (iii) they have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of the Company and its subsidiaries) set forth in the Registration Statement and the Prospectus and in Exhibit 12 to the Registration Statement. References to the Prospectus in this paragraph (e) include any supplement thereto at the date of the letter. (f) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto), there shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraph (e) of this Section 6 or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), earnings, the business or properties of the Company and the Subsidiaries, taken as a whole, whether or not arising from transactions in 17 the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto) the effect of which, in any case referred to in clause (i) or (ii) above, is, in the judgment of the Representatives, so material and reasonably adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto). (g) At the Execution Time, the Company shall have furnished to the Representatives a letter substantially in the form of Exhibit A hereto from each executive officer and director of the Company addressed to the Representatives, in which each such person agrees not to offer, sell or contract to sell, pledge or otherwise dispose of, or file a registration statement with the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any shares of capital stock of the Company or any securities convertible into, or exercisable or exchangeable for, such capital stock, or publicly announce an intention to effect any such transaction, for a period of 90 days after the date of this Agreement, other than (i) the exercise of any option or warrant or the conversion of a security, (ii) shares of Common Stock disposed of as bona fide gifts approved by Unterberg Harris and (iii) sales or other transfers of up to 50,000 shares of Common Stock owned by Michael J. Emmi and up to 10,000 shares of Common Stock owned by each of the other executive officers or the Company. (h) Prior to the Closing Date, the Company shall have furnished to the Representatives such further information, certificates and documents as the Representatives may reasonably request. If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Representatives and counsel for the Underwriters, this Agreement and all obligations of the Underwriters hereunder may be canceled at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancelation 18 shall be given to the Company in writing or by telephone or facsimile confirmed in writing. The documents required to be delivered by this Section 6 shall be delivered at the office of Cravath, Swaine & Moore, counsel for the Underwriters, at Worldwide Plaza, 825 Eighth Avenue, New York, New York, on the Closing Date. 7. Reimbursement of Underwriters' Expenses. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Underwriters, the Company will reimburse the Underwriters severally upon demand for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been reasonably incurred by them in connection with the proposed purchase and sale of the Securities. 8. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter and each person who controls any Underwriter within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Securities as originally filed or in any amendment thereof, or in any Preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, 19 damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter through the Representa tives specifically for inclusion therein, provided further that the indemnification contained in this paragraph with respect to, based on, or arising out of, an untrue statement or omission or alleged untrue statement or omission in a Preliminary Prospectus shall not inure to the benefit of any Underwriter or other person indemnified under this Section 8(a) with respect to a claim made by a third party if (i) a copy of the Prospectus, as amended or supplemented, shall not have been delivered or sent to such third party making claims or seeking damages or to impose liabilities or losses within the time required by the Act and the regulations thereunder, (ii) the untrue statement or omission or the alleged untrue statement or omission was correct in the Prospectus, as amended or supplemented, and (iii) the delivery of such Prospectus would have constituted a complete defense to the claim asserted by such person. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) Each Underwriter severally agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Registration Statement, and each person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to each Underwriter, but only with reference to written information relating to such Underwriter furnished to the Company by or on behalf of such Underwriter through the Representatives specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any Underwriter may otherwise have. The Company acknowledges that the statements set forth in [the last paragraph of the cover page and under the heading "Underwriting"] in any Preliminary Prospectus and the Prospectus constitute the only information furnished in writing by or on behalf of the several Underwriters for inclusion in any Preliminary Prospectus or the Prospectus, and you, as the Representatives, confirm that such statements are correct. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in 20 writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to repre sent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified party, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemni fied party from all liability arising out of such claim, action, suit or proceeding. 21 (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company and the Underwriters agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which the Company and one or more of the Underwriters may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company and by the Underwriters from the offering of the Securities; provided, however, that in no case shall any Underwriter (except as may be provided in any agreement among underwriters relating to the offering of the Securities) be responsible for any amount in excess of the underwriting discount or commission applicable to the Securities purchased by such Underwriter hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Underwriters shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and of the Underwriters in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses), and benefits received by the Underwriters shall be deemed to be equal to the total underwriting discounts and commissions, in each case as set forth on the cover page of the Prospectus. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the Company or the Underwriters. The Company and the Underwriters agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls an Underwriter within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of an Underwriter shall have the same rights to contribution as such Underwriter and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company 22 shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). 9. Default by an Underwriter. If any one or more Underwriters shall fail to purchase and pay for any of the Securities agreed to be purchased by such Underwriter or Underwriters hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Underwriters shall be obligated severally to take up and pay for (in the respective proportions which the principal amount of Securities set forth opposite their names in Schedule I hereto bears to the aggregate principal amount of Securities set forth opposite the names of all the remaining Underwriters) the Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase; provided, however, that in the event that the aggregate principal amount of Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate principal amount of Securities set forth in Schedule I hereto, the remaining Underwriters shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such nondefaulting Underwriters do not purchase all the Securities, this Agreement will terminate without liability to any nondefaulting Underwriter or the Company. In the event of a default by any Underwriter as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding five business days, as the Representatives shall determine in order that the required changes in the Registration Statement and the Prospectus or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Underwriter of its liability, if any, to the Company and any nondefaulting Underwriter for damages occasioned by its default hereunder. 10. Termination. This Agreement shall be subject to termination in the absolute discretion of the Representatives, by notice given to the Company prior to delivery of and payment for the Securities, if prior to such time (i) trading in the Company's Common Stock shall have been suspended by the Commission or the National Association of Securities Dealers Automated Quotation ("Nasdaq") National Market System or trading in securities generally on the New York Stock Exchange or the Nasdaq National Market System shall have been suspended or materially limited or minimum prices shall have been established on such Exchange or Market System, (ii) a banking moratorium shall have been 23 declared either by Federal or New York State authorities or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war or other calamity or crisis the effect of which on financial markets is such as to make it, in the reasonable judgment of the Representatives, impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Prospectus (exclusive of any supplement thereto). 11. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company or its officers and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of the officers, directors or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 7 and 8 hereof shall survive the termination or cancelation of this Agreement. 12. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Representatives, will be mailed, delivered or telegraphed and confirmed to them, care of Unterberg Harris, at Swiss Bank Tower, 10 East 50th Street, 22nd Floor, New York, New York, 10022; or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at 4 Country View Road, Malvern, Pennsylvania, 19355, attention of the General Counsel. 13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 8 hereof, and no other person will have any right or obligation hereunder. 14. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York. 15. Counterparts. This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement. 16. Headings. The section headings used herein are for convenience only and shall not affect the construction hereof. 24 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Company and the several Underwriters. Very truly yours, Systems & Computer Technology Corporation By: .......................... The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Unterberg Harris Janney Montgomery Scott Inc. By: Unterberg Harris By: ............................ For themselves and the other several Underwriters named in Schedule I to the foregoing Agreement. SCHEDULE I Principal Amount Underwriters of Securities to be Purchased ----------------- Unterberg Harris...................................... $ Janney Montgomery Scott Inc........................... ----------- Total............................... $60,000,000 =========== EXHIBIT A [Letterhead of executive officer or director of Systems & Computer Technology Corporation] Systems & Computer Technology Corporation Public Offering of Convertible Subordinated Debentures Due 2004 October , 1997 Unterberg Harris Janney Montgomery Scott Inc. c/o Unterberg Harris Swiss Bank Tower 10 East 50th Street New York, NY 10022 Ladies and Gentlemen: This letter is being delivered to you in connection with the proposed Underwriting Agreement (the "Underwriting Agreement"), among Systems & Computer Technology Corporation, a Delaware corporation (the "Company"), and each of you as the representatives of the Underwriters, relating to an underwritten public offering of Convertible Subordinated Debentures Due 2004, (the "Underwritten Securities"), of the Company. In order to induce you to enter into the Underwriting Agreement, the undersigned will not, without the prior written consent of Unterberg Harris, offer, sell, contract to sell, pledge or otherwise dispose of, or file a registration statement with the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for, such capital stock, or publicly announce an intention to effect any such transaction, for a period of 90 days after the date of this Agreement, other than (i) the exercise of any option or warrant or the conversion of a security, (ii) shares of Common Stock disposed of as bona fide gifts approved by Unterberg Harris and (iii) sales or other transfers of up to 10,000 [50,000, in the case of Mr. Emmi] shares of Common Stock. 2 If for any reason the Underwriting Agreement shall be terminated prior to the Closing Date (as defined in the Underwriting Agreement), the agreement set forth above shall likewise be terminated. Yours very truly, [Signature of executive officer or director] [Name and address of executive officer or director] EX-4 3 EXHIBIT 4 [Draft--10/7/97] ================================================================================ INDENTURE Between SYSTEMS & COMPUTER TECHNOLOGY CORPORATION and FIRST UNION NATIONAL BANK Trustee Dated as of October 15, 1997 [ ]% Convertible Subordinated Debentures Due 2004 ================================================================================ TABLE OF CONTENTS(1) Page PARTIES.................................................................... 1 RECITALS OF THE COMPANY.................................................... 1 ARTICLE I Definitions and Other Provisions of General Application Section 1.01 Definitions: Act........................................................... 2 Affiliate..................................................... 2 Authenticating Agent.......................................... 2 Board of Directors............................................ 2 Board Resolution.............................................. 2 Business Day.................................................. 2 Change in Control............................................. 2 Closing Price................................................. 2 Commission.................................................... 3 Common Stock.................................................. 3 Company....................................................... 3 Company Request; Company Order................................ 3 Corporate Trust Office........................................ 3 Corporation................................................... 4 Current Market Price.......................................... 4 Debenture Register; Debenture Registrar................................................ 4 Defaulted Interest............................................ 4 Event of Default.............................................. 4 Holder........................................................ 4 Indenture..................................................... 4 Interest Payment Date......................................... 4 Maturity...................................................... 4 Officers' Certificate......................................... 4 Opinion of Counsel............................................ 4 Outstanding................................................... 4 Paying Agent.................................................. 5 Person........................................................ 5 Predecessor Debenture......................................... 5 Redemption Date............................................... 6 - -------- (1)Note: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. Contents, P.2 Redemption Price.......................................... 6 Regular Record Date....................................... 6 Repurchase Date........................................... 6 Repurchase Price.......................................... 6 Responsible Officer....................................... 6 Senior Indebtedness....................................... 6 Special Record Date....................................... 7 Stated Maturity........................................... 7 Subsidiary................................................ 7 Trading Date.............................................. 7 Trigger Event............................................. 7 Trust Indenture Act....................................... 7 Trustee................................................... 7 Vice President............................................ 7 SECTION 1.02. Compliance Certificates and Opinions................................................ 8 SECTION 1.03. Form of Documents Delivered to Trustee................................................. 8 SECTION 1.04. Acts of Holders........................................... 9 SECTION 1.05. Notices, Etc. to Trustee and Company................................................. 10 SECTION 1.06. Notice to Holders; Waiver................................. 11 SECTION 1.07. Conflict with Trust Indenture Act......................... 11 SECTION 1.08. Effect of Headings and Table of Contents............................................. 11 SECTION 1.09. Successors and Assigns.................................... 11 SECTION 1.10. Separability Clause....................................... 11 SECTION 1.11. Benefits of Indenture..................................... 12 SECTION 1.12. Governing Law............................................. 12 SECTION 1.13. Legal Holidays............................................ 12 ARTICLE II Debenture Forms SECTION 2.01. Forms Generally........................................... 12 SECTION 2.02. Form of Face of Debenture................................. 13 SECTION 2.03. Form of Reverse of Debenture.............................. 15 SECTION 2.04. Form of Trustee's Certificate of Authentication....................................... 19 Contents, P.3 ARTICLE III The Debentures SECTION 3.01. Title and Terms............................................. 20 SECTION 3.02. Denominations............................................... 21 SECTION 3.03. Execution, Authentication, Delivery and Dating............................................. 21 SECTION 3.04. Temporary Debentures........................................ 21 SECTION 3.05. Registration, Registration of Transfer and Exchange........................................... 22 SECTION 3.06. Multilated, Destroyed, Lost and Stolen Debentures............................................. 23 SECTION 3.07. Payment of Interest; Interest Rights Preserved.............................................. 24 SECTION 3.08. Persons Deemed Owners....................................... 26 SECTION 3.09. Cancelation................................................. 26 SECTION 3.10. Computation of Interest..................................... 27 SECTION 3.11. CUSIP Number................................................ 27 ARTICLE IV Satisfaction and Discharge SECTION 4.01. Satisfaction and Discharge of Indenture.............................................. 27 SECTION 4.02. Application of Trust Money.................................. 28 ARTICLE V Remedies SECTION 5.01. Events of Default........................................... 29 SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.......................................... 31 SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee............................. 32 SECTION 5.04. Trustee May File Proofs of Claim............................ 33 SECTION 5.05. Trustee May Enforce Claims Without Possession of Debentures............................... 34 SECTION 5.06. Application of Money Collected.............................. 34 SECTION 5.07. Limitation on Suits......................................... 35 SECTION 5.08. Right of Holders To Receive Principal, Premium and Interest and To Convert................................................ 35 SECTION 5.09. Restoration of Rights and Remedies.......................... 36 Contents, P.4 SECTION 5.10. Rights and Remedies Cumulative............................ 36 SECTION 5.11. Delay or Omission Not Waiver.............................. 36 SECTION 5.12. Control by Holders........................................ 36 SECTION 5.13. Waiver of Past Defaults................................... 37 SECTION 5.14. Undertaking for Costs..................................... 37 SECTION 5.15. Waiver of Stay, Usury or Extension Laws................................................. 38 ARTICLE VI The Trustee SECTION 6.01. Certain Duties and Responsibilities....................... 38 SECTION 6.02. Notice of Defaults........................................ 39 SECTION 6.03. Certain Rights of Trustee................................. 40 SECTION 6.04. Not Responsible for Recitals or Issuance of Debentures............................... 41 SECTION 6.05. May Hold Debentures....................................... 41 SECTION 6.06. Money Held in Trust....................................... 42 SECTION 6.07. Compensation and Reimbursement............................ 42 SECTION 6.08. Corporate Trustee Required; Eligibility.......................................... 43 SECTION 6.09. Resignation and Removal; Appointment of Successor......................................... 43 SECTION 6.10. Acceptance of Appointment by Successor 45 SECTION 6.11. Merger, Conversion, Consolidation or Succession to Business............................... 45 SECTION 6.12. Preferential Collection of Claims Against Company...................................... 46 SECTION 6.13. Appointment of Authenticating Agent....................... 46 ARTICLE VII Holders' List and Reports by Trustee and Company SECTION 7.01. Company to furnish Trustee Names and Addresses and Company................................ 49 SECTION 7.02. Preservation of Information Communications to Holders............................ 49 SECTION 7.03. Reports by Trustee........................................ 51 SECTION 7.04. Reports by Company........................................ 52 Contents, P.5 ARTICLE VIII Consolidation, Merger, Conveyance, Transfer or Lease SECTION 8.01. Company May Consolidate, Etc., Only on Certain Terms....................................... 53 SECTION 8.02. Successor Corporation Substituted........................ 54 ARTICLE IX Supplemental Indentures SECTION 9.01. Supplemental Indentures Without Consent of Holders.................................. 54 SECTION 9.02. Supplemental Indentures with Consent of Holders.......................................... 55 SECTION 9.03. Execution of Supplemental Indentures..................... 56 SECTION 9.04. Effect of Supplemental Indentures........................ 56 SECTION 9.05. Conformity with Trust Indenture Act...................... 57 SECTION 9.06. Reference in Debentures to Supplemental Indentures............................. 57 ARTICLE X Covenants SECTION 10.01. Payment of Principal, Premium and Interest............................................ 57 SECTION 10.02. Maintenance of Office or Agency.......................... 57 SECTION 10.03. Money for Debenture Payments To Be Held in Trust....................................... 58 SECTION 10.04. Corporate Existence...................................... 59 SECTION 10.05. Maintenance of Properties................................ 60 SECTION 10.06. Payment of Taxes and Other Claims........................ 60 SECTION 10.07. Waiver of Certain Covenants.............................. 60 ARTICLE XI Redemption of Debentures SECTION 11.01. Right of Redemption...................................... 61 SECTION 11.02. Applicability of Article................................. 61 SECTION 11.03. Election To Redeem; Notice to Trustee.................... 61 SECTION 11.04. Selection by Trustee of Debentures To Be Redeemed......................................... 61 Contents, P.6 SECTION 11.05. Notice of Redemption..................................... 62 SECTION 11.06. Deposit of Redemption Price.............................. 63 SECTION 11.07. Debentures Payable on Redemption Date.................... 63 SECTION 11.08. Debentures Redeemed in Part.............................. 63 ARTICLE XII Conversion of Debentures SECTION 12.01. Conversion Privilege and Conversion Price............................................... 64 SECTION 12.02. Exercise of Conversion Privilege......................... 64 SECTION 12.03. Fractions of Shares...................................... 65 SECTION 12.04. Adjustment of Conversion Price........................... 66 SECTION 12.05. Notice of Adjustment of Conversion Price............................................... 79 SECTION 12.06. Notice of Certain Corporate Action....................... 79 SECTION 12.07. Company To Reserve Common Stock.......................... 80 SECTION 12.08. Taxes on Conversions..................................... 80 SECTION 12.09. Covenant as to Common Stock.............................. 81 SECTION 12.10. Provisions in Case of Consolidation, Merger or Conveyance or Transfer of Properties and Assets............................... 81 SECTION 12.11. Responsibility of Trustee................................ 82 ARTICLE XIII Subordination of Debentures SECTION 13.01. Debentures Subordinate to Senior Indebtedness........................................ 82 SECTION 13.02. No Payment When Senior Indebtedness in Default; Payment Over of Proceeds Upon Dissolution, Etc............................... 82 SECTION 13.03. Trustee To Effectuate Subordination...................... 86 SECTION 13.04. Trustee Not Charged with Knowledge of Prohibition......................................... 86 SECTION 13.05. Rights of Trustee as Holder of Senior Indebtedness........................................ 86 SECTION 13.06. Article Applicable to Paying Agent....................... 87 Contents, P.7 ARTICLE XIV Right To Require Repurchase SECTION 14.01. Right To Require Repurchase.............................. 87 SECTION 14.02. Notice; Method of Exercising Repurchase Right.................................... 87 SECTION 14.03. Deposit of Repurchase Price.............................. 89 SECTION 14.04. Debentures Not Repurchased on Repurchase Date..................................... 89 SECTION 14.05. "Change in Control" Defined.............................. 89 SIGNATURES AND SEALS.................................................... 92 Contents, P.8 SYSTEMS & COMPUTER TECHNOLOGY CORPORATION1 Reconciliation and tie between Trust Indenture Act of 1939 and Indenture dated as of October 15, 1997 Trust Indenture Act Section Indenture Section ----------- ----------------- ss. 310(a)(1)............................................... 6.08 (a)(2)............................................... 6.08 (a)(3)............................................... Not Applicable (a)(4)............................................... Not Applicable (a)(5)............................................... 6.08 (b).................................................. 6.08 6.09 ss. 311(a).................................................. 6.12 (b).................................................. 6.12 (b)(2)............................................... 7.03(a)(2) 7.03(b) ss. 312(a).................................................. 7.01 7.02(a) (b).................................................. 7.02(b) (c).................................................. 7.02(c) ss. 313(a).................................................. 7.03(a) (b).................................................. 7.03(b) (c).................................................. 7.03(a) (d).................................................. 7.03(c) ss. 314(a).................................................. 7.04 (b).................................................. Not Applicable (c)(1)............................................... 1.02 (c)(2)............................................... 1.02 (c)(3)............................................... Not Applicable (d).................................................. Not Applicable (e).................................................. 1.02 ss. 315(a).................................................. 6.01(a) (b).................................................. 6.02 7.03(a)(6) (c).................................................. 6.01(b) (d).................................................. 6.01(c) (d)(1)............................................... 6.01(a)(1) (d)(2)............................................... 6.01(c)(2) (d)(3)............................................... 6.01(c)(3) (e).................................................. 5.14 ss. 316(a).................................................. 1.01 (a)(1)(A)............................................ 5.02 5.12 (a)(1)(B)............................................ 5.13 - -------- (1)Note: This reconciliation and the shall not, for any purpose, be deemed to be apart of the Indenture. Contents, P.9 (a)(2)............................................... Not Applicable (b).................................................. 5.08 ss. 317(a)(1)............................................... 5.03 (a)(2)............................................... 5.04 (b)................................................. 10.03 ss. 318(a).................................................. 1.07 INDENTURE dated as of October 15, 1997, between SYSTEMS & COMPUTER TECHNOLOGY CORPORATION, a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company"), having its principal office at Four Country View Road, Malvern, Pennsylvania 19355, and FIRST UNION NATIONAL BANK, a national banking association organized and existing under the laws of the United States of America, as Trustee (herein called the "Trustee"). The Company has duly authorized the creation of an issue of its Debentures (herein called the "Debentures") of substantially the tenor and amount hereinafter set forth and to provide therefor the Company has duly authorized the execution and delivery of this Indenture. All things necessary to make the Debentures, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Indenture a valid agreement of the Company, in accordance with their and its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Debentures by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Debentures, as follows: ARTICLE I Definitions and Other Provisions of General Application SECTION 1.01. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act (as hereinafter defined), 2 either directly or by reference therein, have the meanings assigned to them therein; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act" when used with respect to any Holder has the meaning specified in Section 1.04. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Debentures. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in the City of New York or Philadelphia are authorized or obligated by law or executive order to be closed. "Change in Control" has the meaning specified in Section 14.05. "Closing Price" has the meaning specified in Section 14.05. 3 "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Stock", as applied to the capital stock of any corporation, shall mean the capital stock of any class which has no preference in respect of dividends or other distributions of assets or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of such corporation and which is not subject to redemption by such corporation; provided, however, that, subject to the provisions of Section 12.10, shares issuable on conversion of Debentures shall include only shares of the class designated as Common Stock of the Company at the date of the execution of this instrument or shares of any class or classes resulting from any reclassification or reclassifications thereof which have no preference in respect of dividends or other distributions of assets or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which are not subject to redemption by the Company; provided further that, if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee. "Corporate Trust Office" means the principal office of the Trustee in the City of Philadelphia at which at any particular time its corporate trust business shall be administered, which office at the time of the execution of this indenture is located at First Union National Bank, PA 1249, 123 S. Broad Street, Philadelphia, PA 19109, Attention of Corporate Trust Administration. 4 "Corporation" includes corporations, associations, companies and business trusts. "Current Market Price" has the meaning specified in Section 14.05, except for purposes of Section 12.04 where it has the meaning set forth in such Section. "Debenture Register" and "Debenture Registrar" have the respective meanings specified in Section 3.05. "Defaulted Interest" has the meaning specified in Section 3.07. "Event of Default" has the meaning specified in Section 5.01. "Holder" means a Person in whose name a Debenture is registered in the Debenture Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Debentures. "Maturity" when used with respect to any Debenture means the date on which the principal of such Debenture becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President or a Vice President and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel acceptable to the Trustee, who may be counsel for, or employed by, the Company. "Outstanding" when used with respect to Debentures means, as of the date of determination, all Debentures theretofore authenticated and delivered under this Indenture, except: (i) Debentures theretofore canceled by the Trustee or delivered to the Trustee for cancelation; 5 (ii) Debentures for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Debentures; provided that, if such Debentures are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Debentures in exchange for or in lieu of which other Debentures have been authenticated and delivered pursuant to this Indenture; provided, however, that, in determining whether the Holders of the requisite principal amount of the Outstanding Debentures have given any request, demand, authorization, direction, notice, consent or waiver or taken any other action hereunder, Debentures owned by the Company or any other obligor upon the Debentures or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only Debentures which the Trustee has actual knowledge of being so owned shall be so disregarded. Debentures so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Debentures and that the pledgee is not the Company or any other obligor upon the Debentures or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Debentures on behalf of the Company, which may include the Company or any Affiliate. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Debenture" of any particular Debenture means every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and, for the purposes of this definition, any Debenture authenticated and delivered under 6 Section 3.06 in exchange for or in lieu of all or a portion of a mutilated, destroyed, lost or stolen Debenture shall be deemed to evidence the same debt as such mutilated, destroyed, lost or stolen Debenture or portion thereof. "Redemption Date", when used with respect to any Debenture to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Debenture to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date means the April 1 or October 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Repurchase Date" has the meaning specified in Section 14.01. "Repurchase Price" has the meaning specified in Section 14.01. "Responsible Officer", when used with respect to the Trustee, means any officer within the Corporate Trust Administration (or any successor department) of the Trustee, including, without limitation, any Vice President, any Assistant Vice President, any Assistant Secretary or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Senior Indebtedness" means the principal of (and premium, if any) and interest on and other amounts due on any indebtedness, whether outstanding on the date of execution of this Indenture or thereafter created, incurred, assumed or guaranteed by the Company, for money borrowed from others (including, for this purpose, all obligations under, respecting or constituting capitalized leases or purchase money indebtedness) or in connection with the acquisition by the Company or a Subsidiary of any other business or entity, or in respect of letters of credit or bid, performance or surety bonds issued for the account or on the credit of the Company or a Subsidiary, and, in each case, all renewals, extensions and refundings thereof, other than (a) any such indebtedness as to which, in the instrument creating or evidencing the same, it is provided 7 that such indebtedness is not superior in right of payment to the Debentures, (b) indebtedness of the Company to any Affiliate and (c) the Debentures. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.07. "Stated Maturity", when used with respect to any Debenture or any installment of interest thereon, means the date specified in such Debenture as the fixed date on which the principal of such Debenture or such installment of interest is due and payable; provided, however, that, if such date shall not be a Business Day, then the Stated Maturity shall be the next Business Day. "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Trading Day" has the meaning specified in Section 14.05. "Trigger Event" has the meaning specified in Section 12.04. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 and as in force at the date as of which this instrument was executed, except as provided in Section 9.05. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this indenture, and thereafter "Trustee" shall mean such successor Trustee. "Vice President", when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." 8 SECTION 1.02. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than certificates delivered pursuant to Section 7.04(d)) shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 1.03. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. 9 Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 1.04. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also 10 constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Debentures shall be proved by the Debenture Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Debenture shall bind every future Holder of the same Debenture and the Holder of every Debenture issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Debenture. SECTION 1.05. Notices, Etc, to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (a) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing and mailed, first-class, postage prepaid, to the Trustee at its Corporate Trust Office, Attention of Corporate Trust Administration, or (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company, or (c) the Company by the Trustee or the Trustee by the Company shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if transmitted by facsimile transmission to the Company at (610) 725-7457 or to the Trustee at (215) 985-7290 (or to such other facsimile transmission number previously furnished in writing to the Company by the Trustee or to the Trustee by the Company) and in each case confirmed by a copy sent to the Company or to the 11 Trustee, as the case may be, by guaranteed overnight courier. SECTION 1.06. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Debenture Register, not later than the latest date and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 1.07. Conflict with Trust Indenture Act. If and to the extent that any provision hereof limits, qualifies or conflicts with the duties imposed by, or with another provision (an "incorporated provision") included in this Indenture by operation of, any of Sections 3.10 to 3.18, inclusive, of the Trust Indenture Act, such imposed duties or incorporated provision shall control. SECTION 1.08. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 1.09. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 1.10. Separability Clause. In case any provision in this Indenture or in the Debentures shall be 12 invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 1.11. Benefits of Indenture. Nothing in this Indenture or in the Debentures, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Senior Indebtedness and the Holders of Debentures, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 1.12. Governing Law. This Indenture and the Debentures shall be governed by and construed in accordance with the laws of the State of New York. SECTION 1.13. Legal Holidays. In any case where any Interest Payment Date, Redemption Date, Repurchase Date or Stated Maturity of any Debenture or the last date on which a Holder has the right to convert his Debentures shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Debentures) payment of interest or principal (and premium, if any) or Repurchase Price or conversion of the Debentures need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date or Repurchase Date or at the Stated Maturity or on such last day for conversion; provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date, Repurchase Date or Stated Maturity or such last day for conversion, as the case may be. ARTICLE II Debenture Forms SECTION 2.01. Forms Generally. The Debentures and the Trustee's certificates of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, including forms of conversion and forms of assignment, if requested by the Company, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Debentures, as evidenced by their execution 13 of the Debentures. The Company shall furnish any such legends or endorsements to the Trustee in writing. The definitive Debentures shall be printed, lithographed or engraved or produced by any combination of these methods on steel-engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Debentures may be listed, all as determined by the officers executing such Debentures, as evidenced by their execution of such Debentures. SECTION 2.02. Form of Face of Debenture. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION [ ]% Convertible Subordinated Debenture Due 2004 No. $ SYSTEMS & COMPUTER TECHNOLOGY CORPORATION, a Delaware corporation (hereinafter called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to [ ] or registered assigns the principal sum of [ ]dollars on October 15, 2004, and to pay interest thereon from October [ ], 1997, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semiannually on April 15 and October 15 in each year, commencing April 15, 1998, at the rate of [ ]% per annum, until the principal hereof is paid or made available for payment. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Debentures) is registered at the close of business on the Regular Record Date for such interest, which shall be the April 1 or October 1 (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 on the due date for such payment will forthwith cease to be payable to the Holder on such Interest Payment Date and may either be paid to the Person in whose name this Debenture (or one or more Predecessor Debentures) 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 of which shall be given to the Holders of Debentures not less than 10 days 14 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 Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any) and interest on this Debenture will be made at the office or agency of the Company maintained for that purpose in the City of Philadelphia or the City of New York and at any other office or agency maintained by the Company for such purpose in such currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Debenture Register. Reference is hereby made to the further provisions of this Debenture 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 Debenture shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: SYSTEMS & COMPUTER TECHNOLOGY CORPORATION, by -------------------------------- President Attest: - ---------------------- Secretary 15 SECTION 2.03. Form of Reverse of Debenture. This Debenture is one of a duly authorized issue of Debentures of the Company designated as its [ ]% Convertible Subordinated Debentures Due 2004 (herein called the "Debentures"), limited in aggregate principal amount to $60,000,000 (subject to increase as provided in the Indenture of up to $69,000,000 aggregate principal amount), issued and to be issued under an Indenture dated as of October 15, 1997 (herein called the "Indenture"), between the Company and First Union National Bank, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Indebtedness and the Holders of the Debentures and of the terms upon which the Debentures are, and are to be, authenticated and delivered. Subject to and upon compliance with the provisions of the Indenture, the Holder of this Debenture is entitled, at his option, at any time on or before the close of business on October 15, 2004, or, in case this Debenture or a portion hereof is called for redemption, then in respect of this Debenture or such portion hereof until and including, but (unless the Company defaults in making the payment due upon redemption) not after, the close of business on the Business Day prior to the Redemption Date, to convert this Debenture (or any portion of the principal amount hereof which is $1,000 or any integral multiple thereof), at the principal amount hereof, or of such portion, into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100 of a share) of Common Stock of the Company at a conversion price equal to $[ ] aggregate principal amount of Debentures for each share of Common Stock (or at the current adjusted conversion price if an adjustment has been made as provided in the Indenture) by surrender of this Debenture, duly endorsed or assigned to the Company or in blank, at the office or agency of the Company maintained for that purpose in the City of Philadelphia or the City of New York and at any other office or agency maintained by the Company for such purpose, accompanied by written notice to the Company that the Holder hereof elects to convert this Debenture or, if less than the entire principal amount hereof is to be converted the portion hereof to be converted, and, in case such surrender shall be made during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date (unless this Debenture or the portion hereof being converted has been called for redemption on a 16 Redemption Date within such period), also accompanied by payment in New York Clearing House or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of this Debenture then being converted. Subject to the aforesaid requirement for payment and, in the case of a conversion after the Regular Record Date next preceding any Interest Payment Date and on or before such Interest Payment Date, to the right of the Holder of this Debenture (or any Predecessor Debenture) of record at such Regular Record Date to receive an installment of interest (with certain exceptions provided in the Indenture), no payment or adjustment is to be made on conversion for interest accrued hereon or for dividends on the Common Stock issued on conversion. No fractions of shares or scrip representing fractions of shares will be issued on conversion, but instead of any fractional interest the Company shall pay a cash adjustment as provided in the indenture. The conversion price is subject to adjustment as provided in the Indenture. In addition, the Indenture provides that, in case of certain consolidations or mergers to which the Company is a party or the conveyance or transfer of the properties and assets of the Company substantially as an entirety, the Indenture shall be amended, without the consent of any Holders of Debentures, so that this Debenture, if then outstanding, will be convertible thereafter, during the period this Debenture shall be convertible as specified above, only into the kind and amount of securities, cash and other property receivable upon the consolidation, merger, conveyance or transfer by a holder of the number of shares of Common Stock of the Company into which this Debenture might have been converted immediately prior to such consolidation, merger, conveyance or transfer, assuming such holder of Common Stock of the Company failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer (provided that, if the kind or amount of securities, cash and other property so receivable is not the same for each nonelecting share of Common Stock of the Company, then the kind and amount of securities, cash and other property so receivable by each nonelecting share shall be deemed to be the kind and amount so receivable per share by a plurality of the nonelecting shares). The Debentures are subject to redemption upon not less than 30 nor more than 60 days' notice by mail at any time, as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount) if redeemed during the 12-month period beginning October 15 of the years indicated: 17
Redemption Redemption Year Price Year Price ---- ----- ---- ----- 2000....................... [ ]% 2002.......................... [ ]% 2001....................... [ ]% 2003.......................... [ ]%
and thereafter at a Redemption Price equal to 100% of the principal amount, together in the case of any such redemption with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Debentures, or one or more Predecessor Debentures, of record at the close of business on the relevant Regular Record Dates referred to on the face hereof, all as provided in the Indenture. The Company may not redeem any Debentures prior to October 15, 2000. In certain circumstances involving the occurrence of a Change in Control (as defined in the Indenture), the Holder hereof shall have the right to require the Company to repurchase this Debenture at 100% of the principal amount hereof, together with accrued interest to the Repurchase Date, but interest installments whose Stated Maturity is on or prior to such Repurchase Date will be payable to the Holders of such Debentures, or one or more Predecessor Debentures, of record at the close of business on the relevant Regular Record Dates referred to on the face hereof, all as provided in the Indenture. In connection with the exercise of the repurchase right by a Holder prior to a Redemption Date, a Holder's right to exercise such repurchase right shall terminate at the close of business on the Business Day prior to the Redemption Date. In the event of redemption, repurchase or conversion of this Debenture in part only, a new Debenture or Debentures for the unredeemed, unrepurchased or unconverted portion hereof will be issued in the name of the Holder hereof upon the cancelation hereof. The indebtedness evidenced by the Debentures is, to the extent and in the manner set forth in the Indenture, expressly subordinated and subject in right of payment to the prior payment in full of all Senior Indebtedness, as defined in the Indenture, and this Debenture is issued subject to such provisions of the Indenture, and each Holder of this Debenture, by accepting the same, agrees to and shall be bound by such provisions and authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the 18 subordination as provided in the Indenture and appoints the Trustee his attorney-in-fact for any and all such purposes. If an Event of Default shall occur and be continuing, the principal of all the Debentures may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Debentures under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than two-thirds in aggregate principal amount of the Debentures at the time Outstanding. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Debentures at the time Outstanding, on behalf of the Holders of all the Debentures, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Debenture shall be conclusive and binding upon such Holder and upon all future Holders of this Debenture and of any Debenture issued upon the 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 Debenture. Except with respect to the rights of the holders of Senior Indebtedness set forth in the Indenture and in this Debenture, no reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Debenture at the times, place and rate, and in the currency, herein prescribed or to convert this Debenture as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Debenture is registrable in the Debenture Register, upon surrender of this Debenture for registration of transfer at the office or agency of the Company maintained for that purpose in the City of Philadelphia or the City of New York and at any other office or agency maintained by the Company for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company, the Trustee and the Debenture Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Debentures, of authorized 19 denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Debentures 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, Debentures are exchangeable for a like aggregate principal amount of Debentures of a different authorized denomination, as requested by the Holder surrendering the same. No service charge 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 Debenture 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 Debenture is registered as the owner hereof for all purposes, whether or not this Debenture 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 Debenture which are defined in the Indenture shall have the meanings assigned to them in the Indenture. SECTION 2.04. Form of Trustee's Certificate of Authentication. This is one of the Debentures referred to in the within-mentioned Indenture. Dated: FIRST UNION NATIONAL BANK, as Trustee, by ________________________________ Authorized Signatory 20 ARTICLE III The Debentures SECTION 3.01. Title and Terms. The aggregate principal amount of Debentures which may be authenticated and delivered under this Indenture is limited to (a) $60,000,000 plus (b) such aggregate principal amount (which may not exceed $9,000,000 principal amount) of Debentures as shall be purchased by the underwriters pursuant to the overallotment option provided in the Underwriting Agreement dated as of October [ ], 1997, between the Company and Unterberg Harris and Janney Montgomery Scott Inc., as representatives of the underwriters, except for Debentures authenticated and delivered upon registration of, transfer of, or in exchange for, or in lieu of, other Debentures pursuant to Section 3.04, 3.05, 3.06, 9.06, 11.08, 12.02 or 14.02(c). The Debentures shall be known and designated as the "[ ]% Convertible Subordinated Debentures Due 2004" of the Company. Their Stated Maturity shall be October 15, 2004, and they shall bear interest at the rate of [ ]% per annum, from October [ ], 1997, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable semiannually on April 15 and October 15, commencing April 15, 1998, until the principal thereof is paid or made available for payment. The principal of (and premium, if any) and interest on the Debentures shall be payable at the office or agency of the Company maintained for such purpose in the City of Philadelphia or the City of New York and at any other office or agency maintained by the Company for such purpose, in such currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Debenture Register. The Debentures shall be redeemable as provided in Article XI. The Debentures shall be convertible into Common Stock of the Company as provided in Article XII. The Debentures shall be subordinated in right of payment to Senior Indebtedness as provided in Article XIII. 21 The Debentures shall become subject to a Holder's right of repurchase in the event of a Change in Control as provided in Article XIV. SECTION 3.02. Denominations. The Debentures shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. SECTION 3.03. Execution, Authentication, Delivery and Dating. The Debentures shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Debentures may be manual or facsimile. Debentures bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Debentures or did not hold such offices at the date of such Debentures. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Debentures executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Debentures; and the Trustee in accordance with such Company Order shall authenticate and deliver such Debentures as in this Indenture provided and not otherwise. Each Debenture shall be dated the date of its authentication. No Debenture shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Debenture a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Debenture shall be conclusive evidence, and the only evidence, that such Debenture has been duly authenticated and delivered hereunder. SECTION 3.04. Temporary Debentures. Pending the preparation of definitive Debentures, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Debentures which are printed, lithographed, typewritten, mimeographed or 22 otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Debentures in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Debentures may determine, as evidenced by their execution of such Debentures. If temporary Debentures are issued, the Company will cause definitive Debentures to be prepared without unreasonable delay. After the preparation of definitive Debentures, the temporary Debentures shall be exchangeable for definitive Debentures upon surrender of the temporary Debentures, at any office or agency of the Company designated pursuant to Section 10.02, without charge to the Holder. Upon surrender for cancelation of any one or more temporary Debentures, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Debentures of authorized denominations. Until so exchanged, the temporary Debentures shall in all respects be entitled to the same benefits under this Indenture as definitive Debentures. SECTION 3.05. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office being herein sometimes referred to as the "Debenture Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Debentures and of transfers of Debentures. The Trustee is hereby appointed "Debenture Registrar" for the purpose of registering Debentures and transfers of Debentures as herein provided. Upon surrender for registration of transfer of any Debenture at an office or agency of the Company, the Company shall execute, and the Trustee shall register on the Debenture Register and shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Debentures of any authorized denominations, of a like aggregate principal amount. At the option of the Holder, Debentures may be exchanged for other Debentures of any authorized denominations, of a like aggregate principal amount, upon surrender of the Debentures to be exchanged at such office or agency. Whenever any Debentures are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Debentures which the Holder making the exchange is entitled to receive. 23 All Debentures issued upon any registration of transfer or exchange of Debentures shall be the valid obligations of the Company, evidencing the same debt and entitled to the same benefits under this Indenture, as the Debentures surrendered upon such registration of transfer or exchange. Every Debenture presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company, the Trustee and the Debenture Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Debentures, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Debentures, other than exchanges pursuant to Section 3.04, 9.06, 11.08, 12.02 or 14.02(c) not involving any transfer. Neither the Company nor the Trustee or Debenture Registrar shall be required (a) to issue, authenticate or register the transfer of or exchange any Debenture during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Debentures selected for redemption under Section 11.04 and ending at the close of business on the day of such mailing or (b) to register the transfer of or exchange any Debenture so selected for redemption in whole or in part, except the unredeemed portion of any Debenture being redeemed in part. SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Debentures. If any mutilated Debenture is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Debenture of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (a) evidence to their satisfaction of the destruction, loss or theft of any Debenture and (b) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Debenture has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Debenture, a new Debenture of like 24 tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Debenture has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Debenture, pay such Debenture. Upon the issuance of any new Debenture under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Debenture issued pursuant to this Section in lieu of any destroyed, lost or stolen Debenture shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debenture shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debentures duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures. SECTION 3.07. Payment of Interest; Interest Rights Preserved. Interest on any Debenture which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Debenture (or one or more Predecessor Debentures) is registered at the close of business on the Regular Record Date for such interest. The Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such interest in immediately available funds or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such interest as in this clause provided. Any interest on any Debenture which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the 25 Company, at its election in each case, as provided in clause (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Debentures (or their respective Predecessor Debentures) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Debenture and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Debenture Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Debentures (or their respective Predecessor Debentures) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b). (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Debentures may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. 26 Subject to the foregoing provisions of this Section, each Debenture delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Debenture shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Debenture. In the case of any Debenture which is converted after any Regular Record Date and on or prior to the next succeeding Interest Payment Date (other than any Debenture whose Maturity is prior to such Interest Payment Date), interest whose Stated Maturity is on such Interest Payment Date shall be payable on such Interest Payment Date notwithstanding such conversion, and such interest (whether or not punctually paid or duly provided for) shall be paid to the Person in whose name the Debenture (or one or more Predecessor Debentures) is registered at the close of business on such Regular Record Date. Except as otherwise expressly provided in the immediately preceding sentence, in the case of any Debenture which is converted, interest whose Stated Maturity is after the date of conversion of such Debenture shall not be payable. SECTION 3.08. Persons Deemed Owners. Prior to due presentment of a Debenture for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Debenture is registered as the owner of such Debenture for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 3.07) interest on such Debenture and for all other purposes whatsoever, whether or not such Debenture be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 3.09. Cancelation. All Debentures surrendered for payment, redemption, registration of transfer or exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancelation any Debentures previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Debentures so delivered shall be promptly canceled by the Trustee. No Debentures shall be authenticated in lieu of or in exchange for any Debentures canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Debentures held by the Trustee shall be destroyed and a certificate of destruction shall be delivered to the Company by the Trustee. 27 SECTION 3.10. Computation of Interest. Interest on the Debentures shall be computed on the basis of a 360 day year of twelve 30-day months. SECTION 3.11. CUSIP Number. The Company in issuing Debentures may use a "CUSIP" number, and if so, the Trustee may use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Debentures, and that reliance may be placed only on the other identification numbers printed on the Debentures. ARTICLE IV Satisfaction and Discharge SECTION 4.01. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to any surviving rights of conversion, registration of transfer or exchange of Debentures herein expressly provided for), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (i) all Debentures theretofore authenticated and delivered (other than (A) Debentures which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.06 and (B) Debentures for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 10.03) have been delivered to the Trustee for cancelation; or (ii) all such Debentures not theretofore delivered to the Trustee for cancelation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity within one year, or (C) are to be called for redemption within one year under arrangements 28 satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (A), (B) or (C) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for that purpose funds sufficient to pay and discharge the entire indebtedness on such Debentures not theretofore delivered to the Trustee for cancelation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Debentures which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be and, in the case of (B) or (C) above, has delivered to the Trustee an Opinion of Counsel stating that (1) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (2) since the date of the Indenture, there has been a change in the applicable United States Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the Debentures will not recognize income, gain or loss for United States Federal income tax purposes as a result of such satisfaction and discharge and will be subject to United States Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such satisfaction and discharge had not occurred; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate and an opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.07 and the obligations of the Trustee to any Authenticating Agent under Section 6.13 shall survive. SECTION 4.02. Application of Trust Money. All money deposited with the Trustee pursuant to Section 4.01 shall be held in trust and applied by it, in accordance with the provisions of the Debentures and this Indenture, to the payment, either directly or through any Paying Agent 29 (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee. All moneys deposited with the Trustee pursuant to Section 4.01 (and held by it or any Paying Agent) for the payment of Debentures subsequently converted shall be returned to the Company upon receipt by the Trustee of an Officers' Certificate. ARTICLE V Remedies SECTION 5.01. Events of Default. "Event of Default", wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article XIII or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of any interest upon any Debenture when it becomes due and payable, and continuance of such default for a period of 30 days; or (b) default in the payment of the principal of (or premium, if any, on) any Debenture at its Maturity; or (c) default in the payment of the Repurchase Price in respect of any Debenture on the Repurchase Date therefor in accordance with the provisions of Article XIV; or (d) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Debentures a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or 30 (e) a default under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company or under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company, whether such indebtedness now exists or shall hereafter be created, which default shall have resulted in $1,000,000 or more of such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such indebtedness having been discharged, or acceleration having been rescinded or annulled, within a period of 30 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Debentures a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such acceleration to be rescinded or annulled and stating that such notice is a "Notice of Default" hereunder; provided, however, that, subject to the provisions of Sections 6.01 and 6.02, the Trustee shall not be deemed to have knowledge of such default unless either (i) a Responsible Officer of the Trustee shall have actual knowledge of such default or (ii) the Trustee shall have received written notice thereof from the Company, from any Holder, from the holder of any such indebtedness or from the trustee under any such mortgage, indenture or other instrument; or (f) the entry by a court having jurisdiction in the premises of (i) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (ii) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (g) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or 31 State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action. SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Debentures may declare the principal of all the Debentures to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal shall become immediately due and payable. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Debentures, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequence if: (a) the Company has paid or deposited with the Trustee a sum sufficient to pay (i) all overdue installments of interest on all Debentures; (ii) the principal of (and premium, if any, on) any Debentures which have become due otherwise than by such declaration of acceleration and 32 interest thereon at the rate borne by the Debentures; (iii) to the extent that payment of such interest is lawful, interest upon overdue installments of interest at the rate borne by the Debentures; and (iv) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (b) all Events of Default, other than the non-payment of the principal of Debentures which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.13. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if: (a) default is made in the payment of any installment of interest on any Debenture when such interest becomes due and payable and such default continues for a period of 30 days; (b) default is made in the payment of the principal of (or premium, if any, on) any Debenture at the Maturity thereof; or (c) default is made in the payment of the Repurchase Price in respect of any Debenture on the Repurchase Date therefor in accordance with the provisions of Article XIV; the Company will upon demand of the Trustee, pay to it, for the benefit of the Holders of such Debentures, the whole amount then due and payable on such Debentures for principal (and premium, if any) and interest, with interest upon the overdue principal (and premium, if any) and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest, at the rate borne by the Debentures; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable 33 compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Debentures and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Debentures, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 5.04. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Debentures or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Debentures shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Debentures and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same after deduction of its charges and expenses; 34 and any receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan or reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 5.05. Trustee May Enforce Claims Without Possession of Debentures. All rights of action and claims under this Indenture or the Debentures may be prosecuted and enforced by the Trustee without the possession of any of the Debentures or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Debentures in respect of which such judgment has been recovered. SECTION 5.06. Application of Money Collected. Subject to Article XIII, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Debentures and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: (a) to the payment of all amounts due the Trustee under Section 6.07; (b) to the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Debentures in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such 35 Debentures for principal (and premium, if any) and interest, respectively; and (c) to the payment of the remainder, if any, to the Company, its successors or assigns, or to whomsoever may be lawfully entitled to the same, or as a court of competent jurisdiction may determine. SECTION 5.07. Limitation on Suits. No Holder of any Debenture shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not less than 25% in principal amount of the Outstanding Debentures shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the outstanding Debentures; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. SECTION 5.08. Right of Holders To Receive Principal, Premium and Interest and To Convert. Notwithstanding any other provision in this Indenture, but subject to Article XIII, the Holder of any Debenture shall have the right to receive payment of the principal of (and 36 premium, if any) and (subject to Section 3.07) interest on such Debenture on the Stated Maturity expressed in such Debenture (or, in the case of redemption or repurchase, on the Redemption Date or Repurchase Date) and to convert such Debenture in accordance with Article XII and to institute suit for the enforcement of any such payment and right to convert, and such rights shall not be impaired without the consent of such Holder. SECTION 5.09. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 5.10. Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 5.11. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Debenture to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 5.12. Control by Holders. The Holders of a majority in principal amount of the Outstanding Debentures shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided that: 37 (a) such direction shall not be in conflict with any rule of law or with this Indenture; (b) such direction is not unduly prejudicial to the other security holders or may involve the Trustee in personal liability or if the Trustee determines that it does not have sufficient indemnity against any loss or expense connected to such action; and (c) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 5.13. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Debentures may on behalf of the Holders of all the Debentures waive any past default hereunder and its consequences, except a default: (a) in the payment of the principal of (or premium, if any) or interest on any Debenture; or (b) in respect of a covenant or provision hereof which under Article IX cannot be modified or amended without the consent of the Holder of each Outstanding Debenture affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 5.14. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Debenture by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Debentures or to any suit instituted by any 38 Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Debenture on or after the Stated Maturity expressed in such Debenture (or, in the case of redemption or repurchase, on or after the Redemption Date or Repurchase Date) or for the enforcement of the right to convert any Debenture in accordance with Article XII. SECTION 5.15. Waiver of Stay, Usury or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, usury or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VI The Trustee SECTION 6.01. Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default: (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of wilful misconduct on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights 39 and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (i) this subsection shall not be construed to limit the effect of subsection (a) of this Section; (ii) the Trustee shall not be liable for any error of judgment made by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Debentures relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 6.02. Notice of Defaults. Within 90 days after the occurrence of any default hereunder, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Debenture Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Debenture, the Trustee shall be protected in withholding such notice if and so long as a trust committee of 40 Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders; provided further that, in the case of any default of the character specified in Section 5.01(d), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. The Trustee shall not be deemed to have knowledge of any default other than those described in Sections 5.01(a), (b) and (c) unless a Responsible Officer of the Trustee has actual knowledge of such default. SECTION 6.03. Certain Rights of Trustee. Except as otherwise provided in Section 6.01: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and 41 liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 6.04. Not Responsible for Recitals or Issuance of Debentures. The recitals contained herein and in the Debentures, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Debentures. The Trustee shall not be accountable for the use or application by the Company or any Paying Agent other than the Trustee of Debentures or the proceeds thereof. SECTION 6.05. May Hold Debentures. The Trustee, any Authenticating Agent, any Paying Agent, any Debenture Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Debentures and, subject to Section 6.12 and to Section 310(b) of the Trust Indenture Act, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Debenture Registrar or such other agent. Subject to Section 310(b) of the Trust Indenture Act, the Trustee may become and act as trustee under other indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding in the same manner as if it were not Trustee. 42 SECTION 6.06. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed on with the Company. SECTION 6.07. Compensation and Reimbursement. The Company agrees: (a) to pay to the Trustee from time to time such compensation as may be agreed upon by the Trustee and the Company from time to time for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents, counsel and other persons not regularly in its employ), except to the extent any such expense, disbursement or advance may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee (in its individual capacity and as Trustee), its officers, directors, attorneys-in-fact and agents for, and to hold each such person harmless against, any loss, claim, damage, liability or expense, incurred without negligence or bad faith on such person's part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligations of the Company under this Section 6.07 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section 6.07, the Trustee shall have a lien prior to the Debentures on all money or property held or collected by the Trustee except money or property held in trust to pay principal of (and premium, if any) or interest on particular Debentures and such lien shall survive the satisfaction and discharge of the Indenture and any other 43 termination of the Indenture including any termination under any bankruptcy law. When the Trustee incurs expenses or renders services in connection with an Event of Default of Section 5.01(b) or 501(g), the Holders by their acceptance of the Debentures hereby agree that such expenses and the compensation for such services are intended to constitute expenses of administration under any bankruptcy law. "Trustee" for the purposes of this Section 6.07 shall include any predecessor Trustee, but the negligence or willful misconduct of any Trustee shall not affect the indemnification of any other Trustee. SECTION 6.08. Corporate Trustee Required; Eligibility. The Trustee shall at all times satisfy the eligibility requirements of Section 310 of the Trust Indenture Act and together with its immediate parent maintain a combined capital and surplus of at least $50,000,000, be subject to supervision or examination by Federal or State authority and have its Corporate Trust Office in the City of Philadelphia. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 6.09. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.10. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Debentures, delivered to the Trustee and to the Company. 44 (d) If at any time: (i) the Trustee shall cease to be eligible under Section 6.08 and shall fail to resign after written request therefor by the Company or by any Holder; or (ii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide Holder of a Debenture for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Debentures delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, the Trustee or any Holder who has been a bona fide Holder of a Debenture for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to all Holders as their names and addresses appear in the Debenture Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. 45 SECTION 6.10. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges pursuant to Section 6.07, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. Any retiring trustee shall, nevertheless, retain a lien on all property or funds held or collected by such trustee to secure any amounts then due pursuant to the provisions of Section 6.07. Upon acceptance of appointment by a successor Trustee as provided in this Section, the Company shall cause such successor Trustee to mail notice of succession of such Trustee hereunder to all Holders of Debentures as the names and addresses of such Holders appear on the Debenture Register. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be eligible under this Article and qualified under Section 310(b) of the Trust Indenture Act. SECTION 6.11. Merger, Conversion, Consolidation or Succession to Business. Any corporation or national banking association into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation or national banking association resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided such corporation or national banking association shall be otherwise eligible under this Article and qualified under Section 310(b) of the Trust Indenture Act, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Debentures shall have been authenticated, but not delivered, by the 46 Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Debentures so authenticated with the same effect as if such successor Trustee had itself authenticated such Debentures. SECTION 6.12. Preferential Collection of Claims Against Company. The Trustee is subject to Section 311(a) and (b) of the Trust Indenture Act. Any Trustee that has resigned or been removed shall be subject to Section 311(a) and (b) of the Trust Indenture Act to the extent indicated therein. SECTION 6.13. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents which shall be authorized to act on behalf of the Trustee to authenticate Debentures issued upon exchange, registration of transfer or partial redemption or repurchase thereof or pursuant to Section 3.06, and Debentures so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Debentures by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation or national banking association into which an Authenticating Agent may be merged or converted or with which it may be consolidated or any 47 corporation or national banking association resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent; provided such corporation or national banking association shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders as their names and addresses appear in the Debenture Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent herein. No successor Authenticating Agent shall be appointed unless eligible under the provisions of his Section. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section. If an appointment is made pursuant to this Section, the Debentures may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: 48 This is one of the Debentures referred to in the within-mentioned Indenture. Dated: FIRST UNION NATIONAL BANK, as Trustee by -------------------------- As Authenticating Agent by -------------------------- Authorized Signatory 49 ARTICLE VII Holders' Lists and Reports by Trustee and Company SECTION 7.01. Company To Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee: (a) semiannually, not more than 15 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Debenture Registrar. SECTION 7.02. Preservation of Information Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.01 and the names and addresses of Holders received by the Trustee in its capacity as Debenture Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.01 upon receipt of a new list so furnished. (b) If three or more Holders (herein referred to as "applicants") apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such applicant has owned a Debenture for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders with respect to their rights under this Indenture or under the Debentures and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five business days after the receipt of such application, at its election, either: (i) afford such applicants access to the information preserved at the time by the Trustee in accordance with Section 7.02(a), or 50 (ii) inform such applicants as to the approximate number of Holders whose names and addresses appear in the information preserved at the time by the Trustee in accordance with Section 7.02(a), and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder whose name and address appear in the information preserved at the time by the Trustee in accordance with Section 7.02(a) a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interest of the Holders or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Holders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Every Holder of Debentures, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 7.02(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 7.02(b). 51 SECTION 7.03. Reports by Trustee. (a) Within 60 days after June 15 of each year commencing with the year 1998, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Debenture Register, a brief report dated as of such June 15 with respect to any of the following events which may have occurred during the twelve months preceding the date of such report (but if no such event has occurred within such period, no report need be transmitted): (i) any change to its eligibility under Section 6.08 and its qualifications under Section 310(b) of the Trust Indenture Act; (ii) the creation of or any material change to a relationship specified in Section 310(b)(1) through 310(b)(10) of the Trust Indenture Act; (iii) the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) which remain unpaid on the date of such report, and for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Debentures, on any property or funds held or collected by it as Trustee, except that the Trustee shall not be required (but may elect) to report such advances if such advances so remaining unpaid aggregate not more than 1/2 of 1% of the principal amount of the Debentures Outstanding on the date of such report; (iv) any change to the amount, interest rate and maturity date of all other indebtedness owing by the Company (or by any other obligor on the Debentures) to the Trustee in its individual capacity, on the date of such report, with a brief description of any property held as collateral security therefor except an indebtedness based upon a creditor relationship arising in any manner described in paragraph (2), (3), (4) or (6) of Section 311 of the Trust Indenture Act; (v) any change to the property and funds, if any, physically in the possession of the Trustee as such on the date of such report; (vi) any additional issue of Debentures which the Trustee has not previously reported; and (vii) any action taken by the Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially 52 affects the Debentures, except action in respect of a default, notice of which has been or is to be withheld by the Trustee in accordance with Section 6.02. (b) The Trustee shall transmit by mail to all Holders, as their names and address appear in the Debenture Register, a brief report with respect to the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) since the date of the last report transmitted pursuant to Subsection (a) of this Section (or if no such report has yet been so transmitted, since the date of execution of this instrument) for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Debentures, on property or funds held or collected by it as Trustee and which it has not previously reported pursuant to this Subsection, except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate 10% or less of the principal amount of the Debentures Outstanding at such time, such report to be transmitted within 90 days after such time. (c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Debentures are listed, with the Commission and with the Company. The Company will notify the Trustee when the Debentures are listed on any stock exchange. SECTION 7.04. Reports by Company. The Company shall: (a) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a 53 national securities exchange as may be prescribed from time to time in such rules and regulations; (b) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; (c) transmit by mail to all Holders, as their names and addresses appear in the Debenture Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (a) and (b) of this Section as may be required by rules and regulations prescribed from time to time by the Commission; and (d) file with the Trustee a certificate of the principal executive officer, the principal financial officer or the principal accounting officer of the Company on or before October 15 in each year, commencing with the year 1998 stating whether or not, to the knowledge of the signer, the Company has complied with all conditions and covenants on its part contained in this Indenture, and, if the signer has obtained knowledge of any default by the Company in the performance, observance or fulfillment of any such condition or covenant, specifying each such default and the nature thereof. For the purpose this Section 7.04, compliance shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture. ARTICLE VIII Consolidation, Merger, Conveyance, Transfer or Lease SECTION 8.01. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any Person, unless: (a) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer the properties and assets of the Company substantially as an entirety shall be a corporation organized and existing under the 54 laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Debentures and the performance of every covenant of this Indenture on the part of the Company to be performed or observed and shall have provided for conversion rights in accordance with Section 12.10; (b) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 8.02. Successor Corporation Substituted. Upon any consolidation or merger or any conveyance or transfer of the properties and assets of the Company substantially as an entirety in accordance with Section 8.01, the successor corporation formed by such consolidation or into which the Company is merged or to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation had been named as the Company herein, and thereafter the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Debentures. ARTICLE IX Supplemental Indentures SECTION 9.01. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form 55 satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein and in the Debentures; or (b) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (c) to make provision with respect to the conversion rights of Holders pursuant to the requirements of Section 12.10; or (d) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture; provided such action shall not adversely affect the interests of the Holders in any material respect; or (e) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect or maintain the qualification of this Indenture under the Trust Indenture Act, or under any similar Federal statute hereafter enacted. SECTION 9.02. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than two-thirds in principal amount of the Outstanding Debentures, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Debenture affected thereby, (a) change the Stated Maturity of the principal of, or any installment of interest on, any Debenture, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the place of payment where, or the currency in which, any Debenture or any premium or the interest thereon is payable, or 56 impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or adversely affect the right to convert any Debenture as provided in Article XII, or adversely affect the right to require the Company to repurchase the Debentures as provided in Article XIV or modify the provisions of this Indenture with respect to the subordination of the Debentures in a manner adverse to the Holders, or (b) reduce the percentage in principal amount of the Outstanding Debentures the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (c) modify any of the provisions of this Section or Section 5.13, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Debenture affected thereby. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 9.03. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.01) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 9.04. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be, and shall be deemed to be, modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Debentures theretofore or 57 thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 9.05. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 9.06. Reference in Debentures to Supplemental Indentures. Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Debentures so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Debentures. ARTICLE X Covenants SECTION 10.01. Payment of Principal, Premium and Interest. The Company will duly and punctually pay or cause to be paid by no later than one Business Day prior to the date such payment is due the principal of (and premium, if any) and interest on the Debentures in accordance with the terms of the Debentures and this Indenture. SECTION 10.02. Maintenance of Office or Agency. The Company will maintain in the City of Philadelphia or in the City of New York an office or agency where Debentures may be presented or surrendered for payment or repurchase where Debentures may be surrendered for registration of transfer or exchange, where Debentures may be surrendered for conversion and where notices and demands to or upon the Company in respect of the Debentures and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. 58 The Company may also from time to time designate one or more other offices or agencies (in or outside the City of Philadelphia or the City of New York) where the Debentures may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the City of Philadelphia or the City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 10.03. Money for Debenture Payments to be Held in Trust. If the Company shall at any time act as its own Paying Agent it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Debentures, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents, it will prior to each due date of the principal of (and premium if any) or interest on any Debentures, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Debentures in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any default by the Company (or any other obligor upon the Debentures) in the making of any payment of principal (and premium, if any) or interest; and 59 (c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Debenture and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Debenture shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 10.04. Corporate Existence. Subject to Article VIII, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. 60 SECTION 10.05. Maintenance of Properties. The Company will cause all properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business and not disadvantageous in any material respect to the Holders. SECTION 10.06. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges levied or imposed upon the Company or upon the income, profits or property of the Company, and (b) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 10.07. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any covenant or condition set forth in Sections 10.04 to 10.06, inclusive, if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Debentures shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. 61 ARTICLE XI Redemption of Debentures SECTION 11.01. Right of Redemption. The Debentures may be redeemed at the election of the Company, as a whole or from time to time in part, at any time, at the Redemption prices specified in the form of Debenture hereinbefore set forth for redemptions, together with accrued interest to the Redemption Date; provided, however, that the Company may not redeem any of the Debentures pursuant to such option prior to October 15, 2000. SECTION 11.02. Applicability of Article. Redemption of Debentures at the election of the Company or otherwise as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. SECTION 11.03. Election To Redeem; Notice to Trustee. The election of the Company to redeem any Debentures pursuant to Section 11.01 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company of less than all the Debentures, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee) notify the Trustee of such Redemption Date and of the principal amount of Debentures to be redeemed. SECTION 11.04. Selection by Trustee of Debentures To Be Redeemed. If less than all the Debentures are to be redeemed the particular Debentures to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Debentures not previously called for redemption, pro rata or by lot or by such other method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $1,000 or any integral multiple thereof) of the principal amount of Debentures of a denomination larger than $1,000. If any Debenture selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Debenture so selected, the converted portion of such Debenture shall be deemed (so far as may be) to be the portion selected for redemption. Debentures which have been converted during a selection of Debentures to be redeemed shall be treated by the Trustee as Outstanding for the purpose of such selection. 62 The Trustee shall promptly notify the Company and the Debenture Registrar in writing of the Debentures selected for redemption and, in the case of any Debentures selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Debentures shall relate, in the case of any Debentures redeemed or to be redeemed only in part, to the portion of the principal amount of such Debenture which has been or is to be redeemed. SECTION 11.05. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Debentures to be redeemed, at his address appearing in the Debenture Register. All notices of redemption shall state: (1) the Redemption Date; (2) the Redemption Price; (3) if less than all the Outstanding Debentures are to be redeemed the identification (and, in the case of partial redemption, the principal amounts) of the particular Debentures to be redeemed; (4) that on the Redemption Date, the Redemption Price, together with (unless the Redemption Date shall be an Interest Payment Date) interest accrued and unpaid to the Redemption Date, will become due and payable upon each such Debenture to be redeemed and that interest thereon will cease to accrue on and after said date; (5) the conversion price, the date on which the right to convert the principal of the Debentures to be redeemed will terminate and the place or places where such Debentures may be surrendered for conversion; and (6) the place or places where such Debentures are to be surrendered for payment of the Redemption Price. Notice of redemption of Debentures to be redeemed at the election of the Company shall be given by the Company or, at the Company's request by the Trustee in the name and at the expense of the Company. 63 SECTION 11.06. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on all the Debentures which are to be redeemed on that date other than any Debentures called for redemption on that date which have been converted prior to the date of such deposit. If any Debenture called for redemption is converted, any money deposited with the Trustee or with any Paying Agent or so segregated and held in trust for the redemption of such Debenture shall (subject to any right of the Holder of such Debenture or any Predecessor Debenture to receive interest as provided in the last paragraph of Section 3.07) be paid to the Company upon Company Request or, if then held by the Company, shall be discharged from such trust. SECTION 11.07. Debentures Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Debentures so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Debentures shall cease to bear interest. Upon surrender of any such Debenture for redemption in accordance with said notice, such Debenture shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Debentures, or one or more Predecessor Debentures, registered as such at the close of business on the relevant Regular Record Dates according to their terms and the provisions of Section 3.07. If any Debenture called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate borne by the Debenture. SECTION 11.08. Debentures Redeemed in Part. Any Debenture which is to be redeemed only in part shall be surrendered at any office or agency of the Company designated for that purpose (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company, 64 the Trustee and the Debenture Registrar duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Debenture without service charge, a new Debenture or Debentures, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Debenture so surrendered. ARTICLE XII Conversion of Debentures SECTION 12.01. Conversion Privilege and Conversion Price. Subject to and upon compliance with the provisions of this Article, at the option of the Holder thereof, any Debenture or any portion of the principal amount thereof which is $1,000 or an integral multiple of $1,000 may be converted at the principal amount thereof, or of such portion thereof, into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100 of a share) of Common Stock of the Company, at the conversion price, determined as hereinafter provided, in effect at the time of conversion. Such conversion right shall expire at the close of business on October 15, 2004. In case a Debenture or portion thereof is called for redemption, such conversion right in respect of the Debenture or portion so called shall expire at the close of business on the Business Day preceding the Redemption Date, unless the Company defaults in making the payment due upon redemption. The price at which shares of Common Stock shall be delivered upon conversion (herein called the "conversion price") shall be initially $[ ] per share of Common Stock. The conversion price shall be adjusted in certain instances as provided in paragraphs (a), (b), (c), (d), (e), (f) and (h) of Section 12.04. SECTION 12.02. Exercise of Conversion Privilege. In order to exercise the conversion privilege, the Holder of any Debenture to be converted shall surrender such Debenture, duly endorsed or assigned to the Company or in blank, at any office or agency of the Company maintained for that purpose, accompanied by written notice to the Company at such office or agency that the Holder elects to convert such Debenture or, if less than the entire principal amount thereof is to be converted, the portion thereof to be converted. In connection with the exercise of the 65 conversion privilege by a Holder prior to a Redemption Date, a Holder's right to exercise his conversion privilege shall terminate at the close of business on the Business Day prior to the Redemption Date. Debentures surrendered for conversion during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date shall (except in the case of Debentures or portions thereof which have been called for redemption on a Redemption Date within such period) be accompanied by payment in New York Clearing House funds or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of Debentures being surrendered for conversion. Except as provided in the preceding sentence and subject to the last paragraph of Section 3.07, no payment or adjustment shall be made upon any conversion on account of any interest accrued on the Debentures surrendered for conversion or on account of any dividends on the Common Stock issued upon conversion. Debentures shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Debentures for conversion in accordance with the foregoing provisions, and at such time the rights of the Holders of such Debentures as Holders shall cease, and the person or persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the conversion date, the Company shall issue and shall deliver at such office or agency a certificate or certificates for the number of full shares of Common Stock issuable upon conversion, together with payment in lieu of any fraction of a share, as provided in Section 12.03. In the case of any Debenture which is converted in part only, upon such conversion the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Debenture or Debentures of authorized denominations in aggregate principal amount equal to the unconverted portion of the principal amount of such Debenture. SECTION 12.03. Fractions of Shares. No fractional shares of Common Stock shall be issued upon the conversion of Debentures. If more than one Debenture shall be surrendered for conversion at one time by the same Holder, the number of full shares which shall be issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount of Debentures (or specified 66 portions thereof) so surrendered. Instead of any fractional share of Common Stock which would otherwise be issuable upon conversion of any Debenture or Debentures (or specified portions thereof), the Company shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the closing price per share of Common Stock at the close of business on the Business Day prior to the day of conversion (determined as provided in paragraph (g)(i) of Section 12.04). SECTION 12.04. Adjustment of Conversion Price. The Conversion Price shall be adjusted from time to time by the Company as follows: (a) If the Company shall hereafter pay a dividend or make a distribution to all holders of the outstanding Common Stock in shares of Common Stock, the Conversion Price in effect at the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the Record Date (as defined in Section 12.04(g)) fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the Record Date. If any dividend or distribution of the type described in this Section 12.04(a) is declared but not so paid or made, the Conversion Price shall again be adjusted to the Conversion Price which would then be in effect if such dividend or distribution had not been declared. (b) If the Company shall issue rights or warrants to all holders of its outstanding shares of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price (as defined in Section 12.04(g)) on the Record Date fixed for the determination of stockholders entitled to receive such rights or warrants, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect at the opening of business on the date after such Record Date by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the Record Date 67 plus the number of shares of Common Stock which the aggregate offering price of the total number of shares so offered would purchase at such Current Market Price and of which the denominator shall be the number of shares of Common Stock outstanding at the close of business on the Record Date plus the total number of additional shares of Common Stock so offered for subscription or purchase. Such adjustment shall become effective immediately after the opening of business on the day following the Record Date fixed for determination of stockholders entitled to receive such rights or warrants. To the extent that shares of Common Stock are not delivered pursuant to such rights or warrants, upon the expiration or termination of such rights or warrants the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered. If such rights or warrants are not so issued, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such date fixed for the determination of stockholders entitled to receive such rights or warrants had not been fixed. In determining whether any rights or warrants entitle the holders to subscribe for or purchase shares of Common Stock at less than such Current Market Price, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants, with the value of such consideration, if other than cash, to be determined by the Board of Directors. (c) If the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, if the outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. 68 (d) If the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock shares of any class of capital stock of the Company (other than any dividends or distributions to which Section 12.04(a) applies) or evidences of its indebtedness, cash or other assets (including securities, but excluding any rights or warrants of a type referred to in Section 12.04(b) and dividends and distributions paid exclusively in cash and excluding any capital stock, evidences of indebtedness, cash or assets distributed upon a merger or consolidation to which Section 12.10 applies) (the foregoing hereinafter in this Section 12.04(d) called the "Securities"), then, in each such case, the Conversion Price shall be reduced so that the same shall be equal to the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the Record Date with respect to such distribution by a fraction of which the numerator shall be the Current Market Price (determined as provided in Section 12.04(g)) on such date less the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors) on such date of the portion of the Securities so distributed applicable to one share of Common Stock and the denominator shall be such Current Market Price, such reduction to become effective immediately prior to the opening of business on the day following the Record Date; provided, however, that, in the event the then fair market value (as so determined) of the portion of the Securities so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price on the Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of Debentures shall have the right to receive upon conversion of a Debenture (or any portion thereof) the amount of Securities such holder would have received had such holder converted such Debenture (or portion thereof) immediately prior to such Record Date. If such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared. If the Board of Directors determines the fair market value of any distribution for purposes of this Section 12.04(d) by reference to the actual or when issued trading market for any securities comprising all or part of such distribution, it must in doing so consider the prices in such market over the same period used in 69 computing the Current Market Price pursuant to Section 12.04(g) to the extent possible. Rights or warrants distributed by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase shares of the Company's capital stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events ("Trigger Event"): (i) are deemed to be transferred with such shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in respect of future issuances of Common Stock, shall be deemed not to have been distributed for purposes of this Section 12.04(d) (and no adjustment to the Conversion Price under this Section 12.04(d) shall be required) until the occurrence of the earliest Trigger Event, whereupon such rights and warrants shall be deemed to have been distributed and an appropriate adjustment to the Conversion Price under this Section 12.04(d) shall be made. If any such rights or warrants, including any such existing rights or warrants distributed prior to the date of this Indenture, are subject to subsequent events, upon the occurrence of each of which such rights or warrants shall become exercisable to purchase different securities, evidences of indebtedness or other assets, then the occurrence of each such event shall be deemed to be such date of issuance and record date with respect to new rights or warrants (and a termination or expiration of the existing rights or warrants without exercise by the holder thereof). In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event with respect thereto, that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Price under this Section 12.04 was made, (1) in the case of any such rights or warrants which shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Price shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a holder or holders of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common Stock as of the date of such redemption or repurchase, and (2) in the case of such rights or warrants which shall have expired or been terminated without exercise by any holders thereof, the Conversion Price shall be 70 readjusted as if such rights and warrants had not been issued. Notwithstanding any other provision of this Section 12.04(d) to the contrary, rights, warrants, evidences of indebtedness, other securities, cash or other assets (including, without limitation, any rights distributed pursuant to any stockholder rights plan) shall be deemed not to have been distributed for purposes of this Section 12.04(d) if the Company makes proper provision so that each holder of Debentures who converts a Debenture (or any portion thereof) after the date fixed for determination of stockholders entitled to receive such distribution shall be entitled to receive upon such conversion, in addition to the shares of Common Stock issuable upon such conversion, the amount and kind of such distributions that such holder would have been entitled to receive if such holder had, immediately prior to such determination date, converted such Debenture into Common Stock. For purposes of this Section 12.04(d) and Sections 12.04(a) and (b), any dividend or distribution to which this Section 12.04(d) is applicable that also includes shares of Common Stock, or rights or warrants to subscribe for or purchase shares of Common Stock to which Section 12.04(b) applies (or both), shall be deemed instead to be (1) a dividend or distribution of the evidences of indebtedness, assets, shares of capital stock, rights or warrants other than such shares of Common Stock or rights or warrants to which Section 12.04(b) applies (and any Conversion Price reduction required by this Section 12.04(d) with respect to such dividend or distribution shall then be made) immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights or warrants (and any further Conversion Price reduction required by Sections 12.04(a) and (b) with respect to such dividend or distribution shall then be made), except that (a) the Record Date of such dividend or distribution shall be substituted as "the date fixed for the determination of stockholders entitled to receive such dividend or other distribution", "Record Date fixed for such determination" and "Record Date" within the meaning of Section 12.04(a) and as "the date fixed for the determination of stockholders entitled to receive such rights or warrants", "the Record Date fixed for the determination of the stockholders entitled to receive such rights or warrants" and "such Record Date" within the meaning of Section 12.04(b), and (b) any shares of Common Stock included in such 71 dividend or distribution shall not be deemed "outstanding at the close of business on the date fixed for such determination" within the meaning of Section 12.04(a). (e) If the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock cash (excluding any cash that is distributed upon a merger or consolidation to which Section 12.10 applies or as part of a distribution referred to in Section 12.04(d)) in an aggregate amount that, combined together with (1) the aggregate amount of any other such distributions to all holders of its Common Stock made exclusively in cash within the 12 months preceding the date of payment of such distribution, and in respect of which no adjustment pursuant to this Section 12.04(e) has been made, and (2) the aggregate of any cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors) of consideration payable in respect of any tender offer by the Company or any of its subsidiaries for all or any portion of the Common Stock concluded within the 12 months preceding the date of payment of such distribution, and in respect of which no adjustment pursuant to Section 12.04(f) has been made, exceeds 10% of the product of the Current Market Price (determined as provided in Section 12.04(g)) on the Record Date with respect to such distribution times the number of shares of Common Stock outstanding on such date, then, and in each such case, immediately after the close of business on such date, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on such Record Date by a fraction (i) the numerator of which shall be equal to the Current Market Price on the Record Date less an amount equal to the quotient of (x) the excess of such combined amount over such 10% and (y) the number of shares of Common Stock outstanding on the Record Date and (ii) the denominator of which shall be equal to the Current Market Price on such Record Date; provided, however, that, if the portion of the cash so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price of the Common Stock on the Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of Debentures shall have the right to receive upon conversion of a Debenture (or any portion thereof) the amount of cash such holder would 72 have received had such holder converted such Debenture (or portion thereof) immediately prior to such Record Date. If such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared. Any cash distribution to all holders of Common Stock as to which the Company makes the election permitted by Section 12.04(m) and as to which the Company has complied with the requirements of such Section shall be treated as not having been made for all purposes of this Section 12.04(e). (f) If a tender offer made by the Company or any of its subsidiaries for all or any portion of the Common Stock expires and such tender offer (as amended upon the expiration thereof) requires the payment to stockholders (based on the acceptance (up to any maximum specified in the terms of the tender offer) of Purchased Shares (as defined below)) of an aggregate consideration having a fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors) that, combined together with (1) the aggregate of the cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors), as of the expiration of such tender offer, of consideration payable in respect of any other tender offers, by the Company or any of its subsidiaries for all or any portion of the Common Stock expiring within the 12 months preceding the expiration of such tender offer and in respect of which no adjustment pursuant to this Section 12.04(f) has been made and (2) the aggregate amount of any distributions to all holders of the Common Stock made exclusively in cash within 12 months preceding the expiration of such tender offer and in respect of which no adjustment pursuant to Section 12.04(e) has been made, exceeds 10% of the product of the Current Market Price (determined as provided in Section 12.04(g)) as of the last time (the "Expiration Time") tenders could have been made pursuant to such tender offer (as it may be amended) times the number of shares of Common Stock outstanding (including any tendered shares) at the Expiration Time, then, and in each such case, immediately prior to the opening of business on the day after the date of the Expiration Time, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately 73 prior to the close of business on the date of the Expiration Time by a fraction of which the numerator shall be the number of shares of Common Stock outstanding (including any tendered shares) at the Expiration Time multiplied by the Current Market Price of the Common Stock on the trading day next succeeding the Expiration Time and the denominator shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender offer) of all shares validly tendered and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) at the Expiration Time and the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time, such reduction (if any) to become effective immediately prior to the opening of business on the day following the Expiration Time. If the Company is obligated to purchase shares pursuant to any such tender offer, but the Company is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such tender offer had not been made. If the application of this Section 12.04(f) to any tender offer would result in an increase in the Conversion Price, no adjustment shall be made for such tender offer under this Section 12.04(f). (g) For purposes of this Section 12.04, the following terms shall have the meaning indicated: (i) "closing price" with respect to any securities on any day means the closing price on such day or, if no such sale takes place on such day, the average of the reported high and low prices on such day, in each case on The Nasdaq National Market or the New York Stock Exchange, as applicable, or, if such security is not listed or admitted to trading on such national market or exchange, on the principal national securities exchange or quotation system on which such security is quoted or listed or admitted to trading, or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the average of the high and low prices of such security on the over-the-counter 74 market on the day in question as reported by the National Quotation Bureau Incorporated or a similar generally accepted reporting service, or, if not so available, in such manner as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors for that purpose, or a price determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors. (ii) "Current Market Price" means the average of the daily closing prices per share of Common Stock for the 10 consecutive trading days immediately prior to the date in question; provided, however, that (A) if the "ex" date (as hereinafter defined) for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 12.04(a), (b), (c), (d), (e) or (f) occurs during such 10 consecutive trading days, the closing price for each trading day prior to the "ex" date for such other event shall be adjusted by multiplying such closing price by the same fraction by which the Conversion Price is so required to be adjusted as a result of such other event, (B) if the "ex" date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 12.04(a), (b), (c), (d), (e) or (f) occurs on or after the "ex" date for the issuance or distribution requiring such computation and prior to the day in question, the closing price for each trading day on and after the "ex" date for such other event shall be adjusted by multiplying such closing price by the reciprocal of the fraction by which the Conversion Price is so required to be adjusted as a result of such other event and (C) if the "ex" date for the issuance or distribution requiring such computation is prior to the day in question, after taking into account any adjustment required pursuant to clause (A) or (B) of this proviso, the closing price for each trading day on or after such "ex" date shall be adjusted by adding thereto the amount of any cash and the fair market value (as determined by the Board of Directors in a manner consistent with any determination of such value for purposes of Section 12.04(d) or (f), whose determination shall be conclusive and 75 described in a resolution of the Board of Directors) of the evidences of indebtedness, shares of capital stock or assets being distributed applicable to one share of Common Stock as of the close of business on the day before such "ex" date. For purposes of any computation under Section 12.04(f), the Current Market Price on any date shall be deemed to be the average of the daily closing prices per share of Common Stock for such day and the next two succeeding trading days; provided, however, that, if the "ex" date for any event (other than the tender offer requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 12.04(a), (b), (c), (d), (e) or (f) occurs on or after the Expiration Time for the tender or exchange offer requiring such computation and prior to the day in question, the closing price for each trading day on and after the "ex" date for such other event shall be adjusted by multiplying such closing price by the reciprocal of the fraction by which the Conversion Price is so required to be adjusted as a result of such other event. For purposes of this paragraph, the term "ex" date (I) when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on the relevant exchange or in the relevant market from which the closing price was obtained without the right to receive such issuance or distribution, (II) when used with respect to any subdivision or combination of shares of Common Stock, means the first date on which the Common Stock trades regular way on such exchange or in such market after the time at which such subdivision or combination becomes effective and (III) when used with respect to any tender or exchange offer means the first date on which the Common Stock trades regular way on such exchange or in such market after the Expiration Time of such offer. Notwithstanding the foregoing, whenever successive adjustments to the Conversion Price are called for pursuant to this Section 12.04, such adjustments shall be made to the Current Market Price as may be necessary or appropriate to effectuate the intent of this Section 12.04 and to avoid unjust or inequitable results, as determined in good faith by the Board of Directors. 76 (iii) "fair market value" shall mean the amount which a willing buyer would pay a willing seller in an arm's-length transaction. (iv) "Record Date" shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of stockholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise). (v) "trading day" shall mean (A) if the applicable security is listed or admitted for trading on the New York Stock Exchange or another national securities exchange, a day on which the New York Stock Exchange or another national securities exchange is open for business, (B) if the applicable security is quoted on The Nasdaq National Market, a day on which trades may be made thereon or (C) if the applicable security is not so listed, admitted for trading or quoted, any day other than a Saturday or Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. (h) The Company may make such reductions in the Conversion Price, in addition to those required by Sections 12.04(a), (b), (c), (d), (e) and (f), as the Board of Directors considers to be advisable to avoid or diminish any income tax to holders of Common Stock or rights to purchase Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes. To the extent permitted by applicable law, the Company from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least 20 days, the reduction is irrevocable during the period and the Board of Directors has made a determination that such reduction would be in the Company's best interests, which determination shall be conclusive and described in a resolution of the Board of Directors. Whenever the 77 Conversion Price is reduced pursuant to the preceding sentence, the Company shall mail to the holders of Debentures at their last addresses appearing on the register of holders maintained for that purpose a notice of the reduction at least 15 days prior to the date the reduced Conversion Price takes effect, and such notice shall state the reduced Conversion Price and the period during which it will be in effect. (i) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 12.04(i) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 12 shall be made by the Company and shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be. No adjustment need be made for a change in the par value or no par value of the Common Stock. (j) Whenever the Conversion Price is adjusted as herein provided, the Company shall promptly file with the Trustee an Officers' Certificate setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Promptly after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the date on which each adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to each holder of Debentures at such holder's last address appearing on the register of holders maintained for that purpose within 20 days of the effective date of such adjustment. Failure to deliver such notice shall not affect the legality or validity of any such adjustment. (k) In any case in which this Section 12.04 provides that an adjustment shall become effective immediately after a Record Date for an event, the Company may defer until the occurrence of such event issuing to the holder of any Debenture converted after such Record Date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock 78 issuable upon such conversion before giving effect to such adjustment. (l) For purposes of this Section 12.04, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company shall not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. (m) In lieu of making any adjustment to the Conversion Price pursuant to Section 12.04(e), the Company may elect to reserve an amount of cash for distribution to the holders of Debentures upon the conversion of the Debentures so that any such holder converting Debentures will receive upon such conversion, in addition to the shares of Common Stock and other items to which such holder is entitled, the full amount of cash which such holder would have received if such holder had, immediately prior to the Record Date for such distribution of cash, converted its Debentures into Common Stock, together with any interest accrued with respect to such amount, in accordance with this Section 12.04(m). The Company may make such election by providing an Officers' Certificate to the Trustee to such effect on or prior to the payment date for any such distribution and depositing with the Trustee on or prior to such date an amount of cash equal to the aggregate amount that the holders of Debentures would have received if such holders had, immediately prior to the Record Date for such distribution, converted all the Debentures into Common Stock. Any such funds so deposited by the Company with the Trustee shall be invested by the Trustee in U.S. Government Obligations with a maturity not more than three months from the date of issuance. Upon conversion of Debentures by a holder thereof, such holder shall be entitled to receive, in addition to the Common Stock issuable upon conversion, an amount of cash equal to the amount such holder would have received if such holder had, immediately prior to the Record Date for such distribution, converted its Debentures into Common Stock, along with such holder's pro rata share of any accrued interest earned as a consequence of the investment of such funds. Promptly after making an election pursuant to this Section 12.04(m), the Company shall give or shall cause to be given notice to all holders of Debentures of such 79 election, which notice shall state the amount of cash per $1,000 principal amount of Debentures such holders shall be entitled to receive (excluding interest) upon conversion of the Debentures as a consequence of the Company having made such election. SECTION 12.05. Notice of Adjustment of Conversion Price. Whenever the conversion price is adjusted as herein provided: (a) the Company shall compute the adjusted conversion price in accordance with Section 12.04 and shall prepare a certificate signed by any Vice President or the Treasurer of the Company setting forth the adjusted conversion price and showing in reasonable detail the facts upon which such adjustment is based and the effective date of such adjustment, and such certificate shall forthwith be filed at each office or agency maintained for the purpose of conversion of Debentures; and (b) a notice stating that the conversion price has been adjusted and setting forth the adjusted conversion price shall, as soon as practicable, be mailed by the Company to all Holders at their last addresses as they shall appear in the Debenture Register. SECTION 12.06. Notice of Certain Corporate Action. In case: (a) the Company shall declare a dividend (or any other distribution) on its Common Stock payable otherwise than in cash out of its earned surplus; or (b) the Company shall authorize the granting to the holders of its Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (c) of any reclassification of the Common Stock of the Company (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or the sale or transfer of all or substantially all of the assets of the Company; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; 80 then the Company shall cause to be filed with the Trustee and at each office or agency maintained for the purpose of conversion of Debentures, and shall cause to be mailed to all Holders at their last addresses as they shall appear in the Debenture Register, at least 20 days (or 10 days in any case specified in clause (a) or (b) above) prior to the applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. Failure to give the notice requested by this Section or any defect therein shall not affect the legality or validity of any dividend, distribution, right, warrant, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up, or the vote upon any such action. SECTION 12.07. Company To Reserve Common Stock. The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of Debentures, the full number of shares of Common Stock then issuable upon the conversion of all outstanding Debentures. SECTION 12.08. Taxes on Conversions. The Company will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Debentures pursuant hereto. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that of the Holder of the Debenture or Debentures to be converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid. 81 SECTION 12.09. Covenant as to Common Stock. The Company covenants that all shares of Common Stock which may be issued upon conversion of Debentures will upon issue be duly and validly issued and fully paid and nonassessable and, except as provided in Section 12.08, the Company will pay all taxes, liens and charges with respect to the issue thereof. SECTION 12.10. Provisions in Case of Consolidation, Merger or Conveyance or Transfer of Properties and Assets. In case of any consolidation of the Company with, or merger of the Company into, any other corporation, or in case of any merger of another corporation into the Company (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company), or in case of any conveyance or transfer of the properties and assets of the Company substantially as an entirety, the corporation formed by such consolidation or resulting from such merger or which acquires by conveyance or transfer such properties and assets as the case may be, shall execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Debenture then outstanding shall have the right thereafter, during the period such Debenture shall be convertible as specified in Section 12.01, to convert such Debenture only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer by a holder of the number of shares of Common Stock of the Company into which such Debenture might have been converted immediately prior to such consolidation, merger, conveyance or transfer, assuming such holder of Common Stock of the Company failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer (provided that if the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer is not the same for each share of Common Stock of the Company in respect of which such rights of election shall not have been exercised ("nonelecting share"), then for the purpose of this Section the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer by each nonelecting share shall be deemed to be the kind and amount so receivable per share by a plurality of the nonelecting shares). Such supplemental indenture shall provide for adjustments which, for events subsequent to the effective date of such supplemental indenture, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article. The above provisions of this 82 Section shall similarly apply to successive consolidations, mergers, conveyance or transfers. SECTION 12.11. Responsibility of Trustee. The Trustee, subject to the provisions of Section 6.01, and any conversion agent shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist which may require any adjustment of the conversion price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture, provided to be employed, in making the same. Neither the Trustee nor any conversion agent shall be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any other securities or property, which may at any time be issued or delivered upon the conversion of any Debenture; and it or they do not make any representation with respect thereto. Neither the Trustee nor any conversion agent shall be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property upon the surrender of any Debenture for the purpose of conversion; and the Trustee, subject to the provisions of Section 6.01, and any conversion agent shall not be responsible for any failure of the Company to comply with any of the covenants of the Company contained in this Article. ARTICLE XIII Subordination of Debentures SECTION 13.01. Debentures Subordinate to Senior Indebtedness. The Company, for itself, its successors and assigns, covenants and agrees, and each Holder of Debentures, by his acceptance thereof likewise covenants and agrees, that all Debentures issued hereunder shall be subordinated and subject, to the extent and in the manner herein set forth, in right of payment to the prior payment in full of all Senior Indebtedness. SECTION 13.02. No Payments When Senior Indebtedness in Default; Payment Over of Proceeds upon Dissolution, Etc. In the event the Company shall default in the payment of any Senior Indebtedness when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise, then, unless and until such default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by setoff or otherwise) shall be 83 made or agreed to be made on account of the principal of (or premium, if any) or interest on the Debentures, or in respect of any redemption, retirement, purchase or other acquisition (except through the conversion thereof) of any of the Debentures. Upon the happening of an event of default with respect to any Senior Indebtedness, as defined therein or in the instrument under which the same is outstanding, permitting the holders thereof to accelerate the maturity thereof (under circumstances when the terms of the preceding paragraph are not applicable), unless and until such event of default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by setoff or otherwise) shall be made or agreed to be made on account of the principal of (or premium, if any) or interest on the Debentures, or in respect of any redemption, retirement, purchase or other acquisition (except through the conversion thereof) of any of the Debentures. In the event of: (a) any insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition or other similar proceeding relating to the Company or its property; (b) any proceeding for the liquidation, dissolution or other winding-up of the Company or its property; (c) any assignment by the Company for the benefit of creditors; or (d) any other marshalling of the assets of the Company; all Senior Indebtedness (including any interest thereon accruing after the commencement of any such proceedings) shall first be paid in full before any payment or distribution (direct or indirect), whether in cash, property or securities, by setoff or otherwise, shall be made to any Holder on account of any Debentures, and to that end any payment or distribution, whether in cash, property or securities (other than securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article with respect to the Debentures, to the payment of all Senior Indebtedness at the time outstanding and to any securities issued in respect 84 thereof under any such plan of reorganization or readjustment) which would otherwise (but for the subordination provisions contained in this Article) be payable or deliverable in respect of the Debentures shall be paid or delivered directly to the holders of Senior Indebtedness, as their respective interests may appear, until all Senior Indebtedness (including any interest thereon accruing after the commencement of any such proceedings) shall have been paid in full. If the Debentures are declared due and payable before their Stated Maturity because of the occurrence of an Event of Default (under circumstances where the preceding paragraph is not applicable), no payment (direct or indirect) shall be made in respect of any Debenture unless and until all Senior Indebtedness has been paid in full or such declaration and its consequence shall have been rescinded and all such defaults shall have been remedied or waived. If any payment or distribution (other than securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article with respect to the Debentures, to the payment of all Senior Indebtedness at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment) shall be received by the Trustee or the Holders in contravention of any of the terms of this Article and before all the Senior Indebtedness has been paid in full, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of such Senior Indebtedness at the time outstanding as their respective interests may appear for application to the payment of Senior Indebtedness until all Senior Indebtedness (including any interest thereon accruing after the commencement of any such proceeding referred to in paragraph (a), (b), (c) or (d) above) shall have been paid in full. If the Trustee or any such Holder fails to endorse or assign any such payment or distribution as required by this Section, the Trustee and the Holder of each Debenture by his acceptance thereof authorizes each holder of Senior Indebtedness, any representative or representatives of holders of Senior Indebtedness and the trustee or trustees under any indenture pursuant to which any instrument evidencing such Senior Indebtedness may have been issued to so endorse or assign the same. No holder of Senior Indebtedness shall be prejudiced in the right to enforce subordination of the 85 Debentures by any act or failure to act on the part of the Company. Subject to the payment in full of all Senior Indebtedness, the Holders shall be subrogated (equally and ratably with the holders of all indebtedness of the Company which ranks on a parity with the Debentures and is entitled to like rights of subrogation) to the rights of the holders of Senior Indebtedness to receive payments or distributions applicable to the Senior Indebtedness until the Debentures shall be paid in full, and no such payments or distributions shall, as between the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Debentures, be deemed to be a payment by the Company to or on account of the Debentures. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Debentures, on the one hand, and the holders of Senior Indebtedness, on the other hand, and nothing contained in this Article or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness and the Holders of the Debentures, the obligation of the Company to pay the Holders the principal of (and premium, if any) and interest on the Debentures as and when the same shall become due and payable in accordance with the terms thereof, or prevent the Trustee or the Holders from exercising all rights, powers and remedies otherwise permitted by applicable law or under this Indenture, upon a default or Event of Default hereunder, all subject to the rights of the holders of Senior Indebtedness to receive cash, property or securities otherwise payable or deliverable to the Trustee or the Holders. Upon any payment or distribution pursuant to this Section, the Trustee shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in this Section are pending, and the Trustee, subject as between the Trustee and the Holders to the provisions of Section 6.01, shall be entitled to rely upon a certificate of the liquidating trustee or agent or other person making such payment or distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of 86 Senior Indebtedness to participate in any payment or distribution pursuant to this Section, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, as to the extent to which such Person is entitled to participate in such payment or distribution, and as to other facts pertinent to the rights of such Person under this Section, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 13.03. Trustee To Effectuate Subordination. The Holder of each Debenture by his acceptance thereof authorizes and directs the Trustee in his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination as provided in this Article and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 13.04. Trustee Not Charged with Knowledge of Prohibition. Notwithstanding the provisions of this Article or any other provision of this Indenture, but subject as between the Trustee and the Holders to the provisions of Section 6.01, the Trustee shall not be charged with knowledge of the existence of any Senior Indebtedness, or of any default in the payment of any Senior Indebtedness, or of any facts which would prohibit the making of any payment of moneys to or by the Trustee, unless and until three Business Days after the Trustee shall have received written notice thereof from the Company or any holder of Senior Indebtedness or the representative or representatives of such holder, and the Trustee may conclusively rely on any writing purporting to be from a holder of Senior Indebtedness, or a representative of such holder, as being genuine; nor shall the Trustee be charged with knowledge of the curing of any such default or of the elimination of the act or condition preventing any such payment unless and until the Trustee shall have received an Officers' Certificate to such effect. The provisions of this Section shall not limit any rights of holders of Senior Indebtedness under this Article XIII to recover from the Holders of Debentures any payment made to any such Holder. SECTION 13.05. Rights of Trustee as Holder of Senior Indebtedness. The Trustee shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness; and nothing in Section 6.12, or elsewhere in this Indenture, 87 shall deprive the Trustee of any of its rights as such holder. SECTION 13.06. Article Applicable to Paying Agent. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that Sections 13.04 and 13.05 shall not apply to the Company or any Affiliate of the Company if the Company or such Affiliate acts as Paying Agent. ARTICLE XIV Right To Require Repurchase SECTION 14.01. Right To Require Repurchase. In the event that there shall occur a Change in Control (as defined in Section 14.05), each Holder shall have the right, at such Holder's option to require the Company to purchase, and upon the exercise of such right, the Company shall, subject to the provisions of Article XIII, purchase, all or any part of such Holder's Debentures on the date (the "Repurchase Date") that is 75 days after the date the Company gives notice of the Change in Control as contemplated in Section 14.02(a) at a price (the "Repurchase Price") equal to 100% of the principal amount thereof, together with accrued and unpaid interest to the Repurchase Date. In connection with the exercise of the repurchase right by a Holder prior to a Redemption Date, a Holder's right to exercise his repurchase right shall terminate at the close of business on the Business Day prior to the Redemption Date. SECTION 14.02. Notice; Method of Exercising Repurchase Right. (a) On or before the 15th day after the Change in Control, the Company, or at the request of the Company, the Trustee (in the name and at the expense of the Company), shall give notice of the occurrence of the Change in Control and of the repurchase right set forth herein arising as a result thereof by first-class mail, postage prepaid, to each Holder of the Debentures at such Holder's address appearing in the Debenture Register. The Company shall also deliver a copy of such notice of a repurchase right to the Trustee. 88 Each notice of a repurchase right shall state: (i) the event constituting the Change in Control and the date thereof; (ii) the Repurchase Date; (iii) the date by which the repurchase right must be exercised; (iv) the Repurchase Price; and (v) the instructions a Holder must follow to exercise a repurchase right. No failure of the Company to give the foregoing notice shall limit any Holder's right to exercise a repurchase right. The Trustee shall have no affirmative obligation to determine if there shall have occurred a Change in Control. (b) To exercise a repurchase right, a Holder shall deliver to the Company (or an agent designated by the Company for such purpose in the notice referred to in (a) above) and to the Trustee on or before the 10th day prior to the Repurchase Date (i) written notice of the Holder's exercise of such right, which notice shall set forth the name of the Holder, the principal amount of the Debenture or Debentures (or portion of a Debenture) to be repurchased, and a statement that an election to exercise the repurchase right is being made thereby, and (ii) the Debenture or Debentures with respect to which the repurchase right is being exercised, duly endorsed for transfer to the Company. Such written notice shall be irrevocable. If the Repurchase Date falls between any Regular Record Date and the next succeeding Interest Payment Date, Debentures to be repurchased must be accompanied by payment from the Holder of an amount equal to the interest thereon which the registered Holder thereof is to receive on such Interest Payment Date. A Holder that fails to exercise a repurchase right in accordance with the terms hereof shall waive such repurchase right but the rights of such Holder to receive principal of and interest on the Debentures and all other rights of such Holder under this Indenture shall not be affected thereby. (c) In the event a repurchase right shall be exercised in accordance with the terms hereof, the Company shall on the Repurchase Date pay or cause to be paid in cash to the Holder thereof the Repurchase Price of the Debenture or Debentures as to which the repurchase right has been 89 exercised. In the event that a repurchase right is exercised with respect to less than the entire principal amount of a surrendered Debenture, the Company shall execute and deliver to the Trustee and the Trustee shall authenticate for issuance in the name of the Holder a new Debenture or Debentures in the aggregate principal amount of the unrepurchased portion of such surrendered Debenture. SECTION 14.03. Deposit of Repurchase Price. On or prior to the Repurchase Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.03) an amount of money sufficient to pay the Repurchase Price of the Debentures which are to be repaid on the Repurchase Date. SECTION 14.04. Debentures Not Repurchased on Repurchase Date. If any Debenture surrendered for repurchase shall not be so paid on the Repurchase Date, the principal shall, until paid, bear interest to the extent permitted by applicable law from the Repurchase Date at a rate per annum borne by such Debenture. SECTION 14.05. "Change in Control" Defined. For purposes of this Article, "Change in Control" means any of the following events that occur after the date of this Indenture and on or prior to October 15, 2004: (a) all or substantially all of the Company's assets are sold as an entirety to any person or related group of persons; (b) there shall be consummated any consolidation or merger of the Company (i) 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 (ii) pursuant to which the Common Stock is 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 (c) any person, or any persons acting together which would constitute a "group" for purposes of 90 Section 13(d) of the Securities Exchange Act of 1934 (a "Group"), together with any Affiliates thereof, shall acquire beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of at least 50% of the total voting power of all classes of capital stock of the Company entitled to vote generally in the election of directors of the Company. Notwithstanding anything to the contrary set forth in this definition, a Change in Control shall not be deemed to have occurred: (A) under paragraph (c) above, solely by virtue of 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, filing or becoming obligated to file a report under or in response to Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report) under the Exchange Act disclosing beneficial ownership by it of shares or securities of the Company, whether in excess of 50% or otherwise; or (B) under paragraphs (a), (b) or (c) above if: (1) the Current Market Price of the Common Stock on the date the Change in Control shall have occurred is at least equal to 105% of the Conversion Price in effect immediately preceding the time of such Change in Control; or (2) all of the consideration (excluding cash payments for fractional shares) in the transaction giving rise to such Change in 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 on The Nasdaq National Market, and as a result of such transaction the Debentures become convertible solely into such common stock; or (3) the consideration in the transaction giving rise to such Change in Control to the holders of Common Stock consists of cash, securities that are, or immediately upon issuance 91 will be, listed on a national securities exchange or quoted on 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 during the 10 consecutive Trading Days commencing with the sixth Trading Day following consummation of such transaction) is at least 105% of the Conversion Price in effect on the date immediately preceding the closing date of such transaction. If a Change in Control shall have occurred under paragraph (b) above, the Company shall deliver the Officer's Certificate and Opinion of Counsel called for under Section 8.01(c) as well as the Notices called for under Section 14.02(a). For purposes of this definition of Change of Control, "Current Market Price" on any date means the average daily Closing Prices for the 5 consecutive Trading Days selected by the Company commencing not more than 10 Trading Days before, and ending not later than, the date in question; "Closing Price" for any Trading Day means the last reported sale price (or, if none on any day, the mean between the bid and asked quotations on such day) of the securities in question for such date, in either case on the New York Stock Exchange or, if the securities are not listed or admitted to trading on such exchange, on the principal national securities exchange on which such securities are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, on The Nasdaq National Market or, if the securities are not listed or admitted to trading on any national securities exchange or quoted on such National Market, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected by the Company for such purpose; and "Trading Day", with respect to any stock exchange or securities market, means any Monday, Tuesday, Wednesday, Thursday or Friday on which such stock exchange or securities market is open for business. * * * This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 92 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. SYSTEMS & COMPUTER TECHNOLOGY CORPORATION, by -------------------------- Name: Title: [Seal] Attest: _____________________________ Title: FIRST UNION NATIONAL BANK, by -------------------------- Name: Title: [Seal] Attest: ______________________________ Title: EX-5 4 EXHIBIT 5 EXHIBIT 5 October 9, 1997 Systems & Computer Technology Corporation 4 Country View Road Malvern, PA 19355 Gentlemen: We have been engaged as counsel to Systems & Computer Technology Corporation (the "Company") in connection with the (i) the proposed sale by the Company of up to $69,000,000 principal amount of % Convertible Subordinated Debentures due 2004 (the "Debentures"), including up to $9,000,000 principal amount of the Debentures which may be sold upon the exercise of an over-allotment option, and (ii) the possible issuance of the shares of Common Stock, $0.01 par value, of the Company into which the Debentures are convertible (the "Common Stock"). The Debentures are intended to be issued pursuant to an Indenture (the "Indenture") to be entered into by the Company with First Union National Bank as Trustee (the "Trustee"), in substantially the form attached as Exhibit 4 to a Registration Statement on Form S- 3 filed with the Securities and Exchange Commission ("Registration Statement"), and sold pursuant to an Underwriting Agreement in substantially in the form attached as Exhibit 1 to the Registration Statement (the "Underwriting Agreement"). We, as counsel for the Company, have examined such corporate records and certificates, the Indenture, the Underwriting Agreement and such other documents and considered questions of law as we considered necessary or appropriate for purposes of this opinion. The Indenture and the Underwriting Agreement each contain a provision in which the parties to such agreements agree that New York law will govern such agreements. The opinions set forth below are limited to the federal laws of the United States and the laws of the State of New York and the General Corporation Law of the State of Delaware. Based upon and subject to the foregoing, we advise you that, in our opinion: (1) Such of the Debentures as are sold, issued and paid for as contemplated by the Registration Statement will be duly and validly issued and will constitute legal, valid and binding obligations of the Company, subject to any limitations imposed by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium or other laws relating to or affecting the rights of creditors generally; and (2) Such of the shares of Common Stock into which the Debentures are convertible have been duly authorized and reserved for issuance upon conversion of the Debentures pursuant to the terms and conditions of the Indenture, and such shares, when and if issued upon conversion of the Debentures in accordance with the terms of the Indenture, will be validly issued, fully paid and nonassessable. We consent to the filing of this opinion as an exhibit to the Registration Statement, and to the reference to our firm under the heading "Legal Matters" in the Prospectus forming a part of such Registration Statement. In giving this consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations thereunder. Very truly yours, /s/ PEPPER, HAMILTON & SCHEETZ LLP ----------------------------------- EX-12 5 EXHIBIT 12 Computation of Ratios of Earnings to Fixed Charges (Dollar amounts in thousands)
Year Ended September 30, 1992 1993 1994 1995 1996 ------------ ------------ ------------ ------------ ------------ Earnings: Income (loss) before income taxes and extraordinary credit ..................... $ (1,647) $ 11,223 $ 17,794 $ 10,316 $ 16,003 Interest .................................... 408 902 2,359 2,422 2,199 Portion of rent expense attributable to the interest factor ........................... 418 514 665 681 970 Amortization of debt issuance expense ...... 35 114 161 274 151 -------- -------- -------- -------- -------- Earnings available for fixed charges ...... $ (786) $ 12,753 $ 20,979 $ 13,693 $ 19,323 ======== ======== ======== ======== ======== Fixed Charges: Interest .................................... $ 408 $ 902 $ 2,359 $ 2,422 $ 2,199 Portion of rent expense attributable to the interest factor ........................... 418 514 665 681 970 Amortization of debt issuance expense ...... 35 114 161 274 151 -------- -------- -------- -------- -------- Total Fixed Charges ..................... $ 861 $ 1,530 $ 3,185 $ 3,377 $ 3,320 ======== ======== ======== ======== ======== Ratio of Earnings to Fixed Charges ......... -- 8.3x 6.6x 4.1x 5.8x Deficiency of earnings to cover fixed charges .................................... 1,647 -- -- -- -- Nine Months Ended June 30, 1996 1997 ------------ ------------ Earnings: Income (loss) before income taxes and extraordinary credit ..................... $ 10,348 $ 24,421 Interest .................................... 1,611 1,035 Portion of rent expense attributable to the interest factor ........................... 727 746 Amortization of debt issuance expense ...... 114 88 -------- -------- Earnings available for fixed charges ...... $ 12,800 $ 26,290 ======== ======== Fixed Charges: Interest .................................... $ 1,611 $ 1,035 Portion of rent expense attributable to the interest factor ........................... 727 746 Amortization of debt issuance expense ...... 114 88 -------- -------- Total Fixed Charges ..................... $ 2,452 $ 1,869 ======== ======== Ratio of Earnings to Fixed Charges ......... 5.2x 14.1x Deficiency of earnings to cover fixed charges .................................... -- --
EX-23.1 6 EXHIBIT 23.1 EXHIBIT 23.1 Consent of Independent Auditors We consent to the reference to our firm under the captions "Experts" and "Selected Consolidated Financial Data" in the Registration Statement (Form S-3) and related Prospectus of Systems & Computer Technology Corporation for the registration of $60,000,000 of Convertible Subordinated Debentures Due 2004 and to the incorporation by reference therein of our report dated October 28, 1996, with respect to the consolidated financial statements and financial statement schedule of Systems & Computer Technology Corporation included in its Annual Report (Form 10-K) for the year ended September 30, 1996, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Philadelphia, Pennsylvania October 8, 1997 EX-25 7 EXHIBIT 25 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)_____ FIRST UNION NATIONAL BANK (Name of Trustee) 22-1147033 (I.R.S. Employer Identification No.) 102 PENNSYLVANIA AVENUE, AVONDALE, PENNSYLVANIA (Address of Principal Executive Offices) 19311 (Zip Code) SYSTEMS AND COMPUTER TECHNOLOGY CORPORATION (Exact name of registrants as specified in their charters) DELAWARE (State of Incorporation) 23-1701520 (I.R.S. Employer Identification No.) 4 COUNTRY VIEW ROAD MALVERN, PA 193558195-1501 (610) 647-5930 (Address of Principal Executive Offices) CONVERTIBLE SUBORDINATED DEBENTURES DUE 2004 (Title of Indenture Securities) 1. General information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervisory authority to which it is subject: Comptroller of the Currency United States Department of the Treasury Washington, D.C. 20219 Federal Reserve Bank (3rd District) Philadelphia, Pennsylvania 19106 Federal Deposit Insurance Corporation Washington, D.C. 20429 (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 3. Voting securities of the trustee. Furnish the following information as to each class of voting securities of the trustee: Not applicable - see answer to item 13. 4. Trusteeships under other indentures. If the trustee is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are outstanding, furnish the following information: Not applicable - see answer to item 13. 5. Interlocking directorates and similar relationships with the obligor or underwriters. 2 If the trustee or any of the directors or executive officers of the trustee is a director, officer, partner, employee, appointee, or representative of the obligor or of any underwriter for the obligor, identify each such person having any such connection and state the nature of each such connection. Not applicable - see answer to item 13. 6. Voting securities of the trustee owned by the obligor or its officials. Furnish the following information as to the voting securities of the trustee owned beneficially by the obligor and each director, partner, and executive officer of the obligor: Not applicable - see answer to item 13. 7. Voting securities of the trustee owned by underwriters or their officials. Furnish the following information as to the voting securities of the trustee owned beneficially by each underwriter for the obligor and each director, partner, and executive officer of each such underwriter: Not applicable - see answer to item 13. 8. Securities of the obligor owned or held by the trustee. Furnish the following information as to securities of the obligor owned beneficially or held as collateral security for obligations in default by the trustee: Not applicable - see answer to item 13. 9. Securities of underwriters owned or held by the trustee. If the trustee owns beneficially or holds as collateral security for obligations in default any securities of an underwriter for the obligor, furnish the following information as to each class of securities of such underwriter any of which are so owned or held by the trustee: Not applicable - see answer to item 13. 10. Ownership or holdings by the trustee of voting securities of certain affiliates or security holders of the obligor. If the trustee owns beneficially or holds as collateral security for obligations in default voting securities of a person who, to the knowledge of the trustee (1) owns 10 percent or more of the voting stock of the 3 obligor or (2) is an affiliate, other than a subsidiary, of the obligor, furnish the following information as to the voting securities of such person: Not applicable - see answer to item 13. 11. Ownership or holdings by the trustee of any securities of a person owning 50 percent or more of the voting securities of the obligor. If the trustee owns beneficially or holds as collateral security for obligations in default any securities of a person who, to the knowledge of the trustee, owns 50 percent or more of the voting securities of the obligor, furnish the following information as to each class of securities of such person any of which are so owned or held by the trustee: Not applicable - see answer to item 13. 12. Indebtedness of the obligor to the trustee. Except as noted in the instructions, if the obligor is indebted to the trustee, furnish the following information: Not applicable - see answer to item 13. 13. Defaults by the obligor. (a) State whether there is or has been a default with respect to the securities under this indenture. Explain the nature of any such default. None. (b) If the trustee is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are outstanding, or is trustee for more than one outstanding series of securities under the indenture, state whether there has been a default under any such indenture or series, identify the indenture or series affected, and explain the nature of any such default. None 14. Affiliations with the underwriters. If any underwriter is an affiliate of the trustee, describe each such affiliation. Not applicable - see answer to item 13. 4 15. Foreign trustee. Identify the order or rule pursuant to which the trustee is authorized to act as sole trustee under indentures qualified or to be qualified under the Act. Not applicable - trustee is a national banking association organized under the laws of the United States. 16. List of Exhibits. List below all exhibits filed as part of this statement of eligibility. _____ 1. Copy of Articles of Association of the trustee as now in effect.** _____ 2. Copy of the Certificate of the Comptroller of the Currency dated January 11, 1994, evidencing the authority of the trustee to transact business.* _____ 3. Copy of the authorization of the trustee to exercise fiduciary powers.* _____ 4. Copy of existing by-laws of the trustee.** _____ 5. Copy of each indenture referred to in Item 4, if the obligor is in default, not applicable. __X__ 6. Consent of the trustee required by Section 321(b) of the Act. __X__ 7. Copy of report of condition of the trustee at the close of business on June 30, 1997, published pursuant to the requirements of its supervising authority. _____ 8. Copy of any order pursuant to which the foreign trustee is authorized to act as sole trustee under indentures qualified or to be qualified under the Act, not applicable. _____ 9. Consent to service of process required of foreign trustees pursuant to Rule 10a-4 under the Act, not applicable. 5 *Previously filed with the Securities and Exchange Commission on February 11, 1994 as an exhibit to Form T-1 in connection with Registration Statement No. 22-73340 and ** previously filed with the Securities and Exchange Commission on May 5, 1997 as an exhibit to Form T-1 in connection with Registration Statement No. 333-23791 and incorporated herein by reference. NOTE The trustee disclaims responsibility for the accuracy or completeness of information contained in this Statement of Eligibility and Qualification not known to the trustee and not obtainable by it through reasonable investigation and as to which information it has obtained from the obligor and has had to rely or will obtain from the principal underwriters and will have to rely. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, First Union National Bank, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Philadelphia and Commonwealth of Pennsylvania, on the 8th day of October, 1997. FIRST UNION NATIONAL BANK By: s/Alan G. Finn ---------------------------- Alan G. Finn Assistant Vice President 6 EXHIBIT 4 CONSENT OF TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, and in connection with the proposed issue of Systems and Computer Technology Corporation we hereby consent that reports of examinations by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. FIRST UNION NATIONAL BANK By: s/Alan G. Finn ------------------------------- Alan G. Finn Assistant Vice President Philadelphia, PA October 8, 1997 EXHIBIT 7 REPORT OF CONDITION Consolidating domestic and foreign subsidiaries of the First Union National Bank, Avondale, Pennsylvania, at the close of business on June 30, 1997, published in response to call made by Comptroller of the Currency, under title 12, United States Code, Section 161. Charter Number 33869 Comptroller of the Currency Northeastern District. Statement of Resources and Liabilities ASSETS Thousand of Dollars ------------------- Cash and balance due from depository institutions: Noninterest-bearing balances and currency and coin......... 1,679,295 Interest-bearing balances.................................. 108,513 Securities................................................... ///////// Hold-to-maturity securities................................ 382,254 Available-for-sale securities.............................. 3,006,412 Federal funds sold and securities purchased under agreements ////////// to resell ......................................... 1,311,506 Loans and lease financing receivables: Loan and leases, net of unearned income......................19,594,861 LESS: Allowance for loan and lease losses.................... 231,011 LESS: Allocated transfer risk reserve........................ 0 Loans and leases, net of unearned income, allowance, and reserve....................................................19,363,850 Assets held in trading accounts.............................. 0 Premises and fixed assets (including capitalized leases)..... 415,290 Other real estate owned...................................... 45,964 Investment in unconsolidated subsidiaries and associated ////////// companies.................................................... 33,621 Customer's liability to this bank on acceptances outstanding. 53,824 Intangible assets............................................ 400,661 Other assets................................................. 775,903 Total assets.................................................27,577,093 LIABILITIES Deposits: In domestic offices.....................................21,060,904 Noninterest-bearing................................... 4,550,428 interest-bearing......................................16,510,476 In foreign offices, Edge and Agreement subsidiaries, and IBFs.............................................. 588,131 Noninterest-bearing................................... 76 Interest-bearing...................................... 588,055 Federal funds purchased and securities sold under agreements to repurchase.............................................. 2,288,783 Demand notes issued to the U.S. Treasury..................... 74,952 Trading liabilities.......................................... 0 Other borrowed money:........................................ ///////// With original maturity of one year or less................... 106 With original maturity of more than one year through.... 7,859 three years With original maturity of more than three years......... 6,066 Bank's liability on acceptances executed and outstanding..... 53,824 Subordinated notes and debentures............................ 450,000 Other liabilities............................................ 779,197 Total liabilities............................................25,309,822 Limited-life preferred stock and related surplus............. 0 EQUITY CAPITAL Perpetual preferred stock and related surplus................ 160,540 Common Stock................................................. 452,156 Surplus...................................................... 1,300,080 Undivided profits and capital reserves....................... 353,445 Net unrealized holding gains (losses) on available-for-sale ///////// securities.................................................. 1,050 Cumulative foreign currency translation adjustments.......... 0 Total equity capital......................................... 2,267,271 Total liabilities, limited-life preferred stock and equity... ///////// capital....................................................27,577,093 -----END PRIVACY-ENHANCED MESSAGE-----