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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 1998
REGISTRATION NO. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WESTERN DIGITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 95-264-7125
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
8105 IRVINE CENTER DRIVE
IRVINE, CALIFORNIA 92618
(949) 932-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL A. CORNELIUS
WESTERN DIGITAL CORPORATION
8105 IRVINE CENTER DRIVE
IRVINE, CALIFORNIA 92618
(949) 932-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
BRIAN W. COPPLE
GIBSON, DUNN & CRUTCHER LLP
4 PARK PLAZA
IRVINE, CALIFORNIA 92614
(949) 451-3800
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be 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. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING PRICE PER PROPOSED MAXIMUM
OF SECURITIES TO BE DEBENTURE OR AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1)(2) SHARE(3) OFFERING PRICE(3) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------
Zero Coupon Convertible Subordinated
Debentures due 2018....................... 1,297,200 37.625% $488,071,500 $143,981.09
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share...... 19,373,682 (4) (4) (4)
- ------------------------------------------------------------------------------------------------------------------------------
Total $488,071,500 $143,981.09
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(1) Includes 19,373,682 shares of Common Stock initially issuable upon
conversion of the Debentures at the rate of 14.935 shares of Common Stock
per $1,000 principal amount of Debentures at maturity. Pursuant to Rule 416
under the Securities Act, such number of shares of Common Stock registered
hereby shall include an indeterminate number of shares of Common Stock that
may be issued in connection with a stock split, stock dividend,
recapitalization or similar event. See "Description of Securities."
(2) The debentures were issued as an original price of $354.71 per $1,000
principal at maturity, which represents an aggregate issue price of
$460,129,812, and a redemption price at maturity of $1,297,200,000.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based upon the average of the bid and asked prices
of the Company's Debentures on the PORTAL System on May 7, 1998.
(4) Pursuant to Rule 457(i), there is no filing fee with respect to the shares
of Common Stock issuable upon conversion of the Debentures, because no
additional consideration will be received in connection with the exercise of
the conversion privilege.
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
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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 MAY 12TH, 1998
PROSPECTUS
$1,297,200,000
[LOGO]
ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURES DUE 2018
AND
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION THEREOF
------------------------
This Prospectus relates to the resale from time to time by certain holders
identified in this Prospectus (the "Selling Securityholders") of up to
$1,297,200,000 aggregate principal amount at maturity of Zero Coupon Convertible
Subordinated Debentures due 2018 (the "Debentures") of Western Digital
Corporation, a Delaware corporation ("Western Digital" or the "Company"), and
the resale of up to 19,373,682 shares of Common Stock, par value $0.01 per share
of the Company (the "Common Stock") issued or issuable upon the conversion
thereof. The Debentures were originally issued by the Company in a private
placement on February 18, 1998 to the Initial Purchasers (as defined) and were
subsequently sold by the Initial Purchasers in transactions exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), in the United States to "qualified institutional buyers" as defined in
Rule 144A under the Securities Act and to certain "accredited investors."
Prior to February 18, 2003, the Debentures are not redeemable at the option
of the Company. Thereafter, the Debentures are redeemable at the option of the
Company at Redemption Prices (as defined) equal to the Issue Price plus accrued
Original Issue Discount to the date of redemption. See "Description of
Debentures -- Redemption of Debentures at the Option of the Company."
The Debentures will be purchased by the Company, at the option of the
holder, as of February 18, 2003, February 18, 2008 and February 18, 2013 for
Purchase Prices equal to the Issue Price plus accrued Original Issue Discount to
such dates. The Company may elect to pay any such Purchase Price in cash or
Common Stock, or any combination thereof. See "Description of
Debentures -- Purchase of Debentures at the Option of the Holder." The
Debentures may be redeemed at the option of the holder if there is a Fundamental
Change (as defined) at Redemption Prices equal to the Issue Price plus accrued
Original Issue Discount to the date of redemption, subject to adjustment in
certain circumstances as described herein. See "Description of
Debentures -- Redemption at Option of the Holder Upon a Fundamental Change." The
Debentures are subordinated in right of payment to all existing and future
Senior Indebtedness (as defined) of the Company and effectively subordinated in
right of payment to all indebtedness and other liabilities of the Company's
subsidiaries.
The Debentures are convertible into shares of Common Stock of the Company
at any time before maturity, unless previously redeemed or otherwise purchased,
at a conversion rate of 14.935 shares per $1,000 principal amount at maturity.
The conversion rate will not be adjusted for accrued Original Issue Discount (as
defined), but will be subject to adjustment in certain events. See "Description
of Debentures -- Conversion of Debentures." The Common Stock is listed on the
New York Stock Exchange ("NYSE") under the trading symbol "WDC." On May 11,
1998, the last reported sale price of the Common Stock as reported on NYSE was
$19 11/16 per share.
The Selling Securityholders may offer Debentures or Common Stock issued or
issuable upon conversion of the Debentures from time to time to purchasers
directly or through underwriters, dealers or agents. Such Debentures or Common
Stock issued or issuable upon conversion of the Debentures may be sold at market
prices prevailing at the time of sale or at negotiated prices. Each Selling
Securityholder will be responsible for payment of any and all commissions to
brokers, which will be negotiated on an individual basis.
The Debentures have been designated for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") Market. Debentures
sold pursuant to this Prospectus are not eligible for trading on the PORTAL
Market.
The Company will not receive any of the proceeds from the sale by the
Selling Securityholders of any Debentures or the Common Stock issued or issuable
upon conversion thereof. The Selling Securityholders will pay all underwriting
discounts and selling commissions, if any, applicable to the sale of the
Debentures and the Common Stock issued or issuable upon conversion of the
Debentures. Expenses of preparing and filing the registration statement to which
this Prospectus relates and all post-effective amendments will be borne by the
Company. See "Plan of Distribution" for a description of the indemnification
arrangements between the Company and the Selling Securityholders.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE DEBENTURES AND THE COMMON
STOCK.
------------------------
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.
------------------------
The date of this Prospectus is May , 1998
<PAGE> 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange Commission
(the "Commission") are hereby incorporated by reference into this Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year ended June
28, 1997;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
September 27, 1997, December 27, 1997 and March 28, 1998;
3. The Company's Current Report on Form 8-K filed February 12, 1998; and
4. The description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-B, filed April 3, 1987, and any
amendments or reports filed for the purpose of updating such
description.
All documents subsequently filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), prior to the termination of the offering
to which this Prospectus relates shall be deemed to be incorporated by reference
into this Prospectus and to be a part of this Prospectus from the date of filing
of such documents. Any statement contained in any document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus and the Registration Statement of
which it is a part to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus and such Registration Statement. The
Company will provide without charge to each person, including any beneficial
owner, to whom this Prospectus is delivered, upon written or oral request of
such person, a copy of any and all of the documents that have been or may be
incorporated by reference herein (other than exhibits to such documents which
are not specifically incorporated by reference into such documents). Such
requests should be directed to Investor Relations, Western Digital Corporation,
8105 Irvine Center Drive, Irvine, California, 92618, (949) 932-5000.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed with the Commission by the Company can be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at 500 West Madison Street, Room 1400, Chicago, Illinois 60661 and at 7
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, Washington, D.C. 20549, at prescribed rates, or on the
Commission's web site at http://www.sec.gov. The Company's Common Stock is
listed on the New York Stock Exchange, and reports, proxy statements and other
materials concerning the Company can be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
FORWARD-LOOKING STATEMENTS
This Prospectus contains or incorporates by reference forward-looking
statements, within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act, that involve risks and uncertainties. These statements
appear in a number of places in this Prospectus and include statements regarding
the intentions, plans, strategies, beliefs or current expectations of the
Company, its directors or its officers with respect to, among other things: (i)
the financial prospects of the Company; (ii) the Company's financing plans;
(iii) trends affecting the Company's financial condition or operating results;
(iv) the Company's strategies for growth, operations, and product development
and commercialization; and (v) conditions or trends in or factors affecting the
hard drive industry. Prospective investors are cautioned that any such
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forward-looking statements are not guarantees of future performance and involve
risks and uncertainties that could cause actual results to differ materially
from those anticipated in the forward-looking statements. The information
contained in this Prospectus or incorporated herein by reference, including
without limitation, the information set forth under the headings "Risk Factors"
herein, and under the headings "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's
filings under the Exchange Act, identifies important factors that could cause
such differences, including without limitation, the highly competitive nature of
the hard drive industry, which is characterized by periods of severe price
competition and price erosion, which can result in shifting market share; and
rapid technological changes, which require the Company to continually develop
new hard drive products incorporating new technology on a timely and
cost-effective basis, and which can also adversely affect the volume and
profitability of sales of existing products and increase the risk of inventory
obsolescence.
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PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more detailed
information and consolidated financial statements (including the notes thereto)
appearing elsewhere in this Prospectus and in the documents incorporated by
reference herein. Except as otherwise indicated, all references to the "Company"
or "Western Digital" refer to Western Digital Corporation and its wholly-owned
subsidiaries, unless the context otherwise requires.
THE COMPANY
Western Digital is a leading manufacturer in the information storage
management industry and competes in two of the hard drive industry's major data
storage markets: the desktop personal computer hard drive market and the
"enterprise" hard drive market, directed at high-performance workstations,
servers and multi-user systems. Western Digital's products are marketed
worldwide to original equipment manufacturers, distributors, resellers and
retailers. The Company's strategy is to be the time-to-market and time-to-volume
leader, as well as a time-to-quality innovator, in the hard drive markets in
which it competes.
The Company is incorporated in the State of Delaware. Its principal
executive offices are located at 8105 Irvine Center Drive, California 92618 and
its telephone number is (949) 932-5000.
DESCRIPTION OF THE SECURITIES
Securities.................... $1,297,200,000 principal amount at maturity of
Zero Coupon Convertible Subordinated Debentures
due 2018 and shares of the Company's Common
Stock issued or issuable upon conversion of the
Debentures. There will be no periodic interest
payments on the Debentures. See "Description of
Debentures -- General."
Yield to Maturity of
Debentures.................... 5.25% per annum (computed on a semi-annual bond
equivalent basis) calculated from February 18,
1998.
Conversion.................... The Debentures are convertible, at the option
of the holder, at any time after 90 days
following the latest date of original issuance
thereof and prior to maturity, unless
previously redeemed or otherwise purchased by
the Company, into Common Stock at the rate of
14.935 shares per $1,000 principal amount at
maturity of Debentures (the "Conversion Rate").
The Conversion Rate will not be adjusted for
accrued Original Issue Discount (as defined),
but will be subject to adjustment upon the
occurrence of certain events. Upon conversion,
the holder will not receive any cash payment
representing accrued Original Issue Discount;
such accrued Original Issue Discount will be
deemed paid by the Common Stock received upon
conversion. See "Description of
Debentures -- Conversion of Debentures."
Subordination................. The Debentures are subordinated in right of
payment to all existing and future Senior
Indebtedness (as defined) of the Company and
effectively subordinated in right of payment to
all indebtedness and other liabilities of the
Company's subsidiaries. At December 27, 1997,
the Company had approximately $8 million of
indebtedness outstanding that would have
constituted Senior Indebtedness, and the
Company's subsidiaries had approximately $442
million of indebtedness and other liabilities
outstanding (excluding intercompany liabilities
and liabilities of a type not required to be
reflected
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on a balance sheet in accordance with generally
accepted accounting principles) to which the
Debentures would have been effectively
subordinated. In January 1998, the Company
entered into a $250 million secured credit
facility, consisting of a funded $50 million
term loan and a $200 million revolving credit
line (the "Senior Bank Facility"). The term
loan and any draws under the revolving credit
line will be Senior Indebtedness. The amount of
Senior Indebtedness will increase from time to
time. See "Description of Debentures --
Subordination of Debentures."
Original Issue Discount....... The Debentures were originally offered at an
Original Issue Discount for Federal income tax
purposes equal to the excess of the principal
amount at maturity of the Debenture over the
amount of its Issue Price. Prospective
purchasers of Debentures should be aware that,
although there will be no periodic payments of
interest on the Debentures, accrued Original
Issue Discount will be included periodically in
a holder's gross income for Federal income tax
purposes prior to conversion, redemption, other
disposition or maturity of such holder's
Debentures, whether or not such Debentures are
ultimately converted, redeemed, sold (to the
Company or otherwise) or paid at maturity. See
"Certain Federal Income Tax Considerations."
Sinking Fund.................. None.
Redemption.................... The Debentures are not redeemable by the
Company prior to February 18, 2003. Beginning
on February 18, 2003, the Debentures are
redeemable for cash at any time at the option
of the Company, in whole or in part, at
Redemption Prices equal to the Issue Price plus
accrued Original Issue Discount to the date of
redemption. See "Description of
Debentures -- Redemption of Debentures at the
Option of the Company."
Fundamental Change............ The Debentures may be redeemed at the option of
the holder if there is a Fundamental Change (as
defined) at a Fundamental Change Redemption
Price equal to the Issue Price plus accrued
Original Issue Discount to the date of
redemption, subject to adjustment in certain
circumstances. See "Description of
Debentures -- Redemption at Option of the
Holder Upon a Fundamental Change."
Purchase at the Option of the
Holder........................ The Company will purchase Debentures at the
option of the holder as of February 18, 2003,
February 18, 2008 and February 18, 2013 at
Purchase Prices equal to the Issue Price plus
accrued Original Issue Discount to such dates.
The Company may, at its option, elect to pay
any such Purchase Price in cash or Common
Stock, or any combination thereof. See
"Description of Debentures -- Purchase of
Debentures at the Option of the Holder."
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RISK FACTORS
An investment in the Debentures and the Common Stock issued or issuable
upon conversion of the Debentures involves a high degree of risk. Prospective
investors should carefully consider the following risk factors primarily related
to the securities offered hereby, as well as the risk factors primarily related
to the Company's business and operations set forth in the Company's filings
under the Exchange Act, which are incorporated herein by reference, in addition
to the other information set forth in this Prospectus and in the documents
incorporated by reference herein, in connection with an investment in the
Debentures or the Common Stock issued or issuable upon conversion of the
Debentures. Some of such factors have affected the Company's financial condition
or operating results in the past or are currently affecting the Company, and all
of such factors could affect the Company's future financial condition or
operating results.
The Company's Business. The Company's business is subject to a number of
risks, trends and uncertainties, some relating to the hard drive industry in
general and others relating more specifically to the Company. The hard drive
industry is intensely competitive and is characterized by periods of severe
price competition and price erosion, which can result in shifting market share.
The demands of hard drive customers for greater storage capacity and higher
performance result in rapid technological changes in hard drive products. To
maintain or grow its market share, the Company must continually develop new hard
drive products that incorporate new technology on a timely and cost-effective
basis. Rapid technology changes also can adversely affect the volume and
profitability of sales of existing products and increase the risk of inventory
obsolescence. The specific nature of these risks or their applicability to the
Company may change over time and prospective investors are urged to view the
Company's filings under the Exchange Act for information regarding the affect of
these factors on the Company and the hard drive industry. Due to these factors,
no assurance can be given as to the Company's future financial condition or
operating results.
Possible Price Volatility of Common Stock and Debentures. The market price
of the Company's Common Stock has been, and may continue to be, extremely
volatile. The market price of the Debentures and the shares of Common Stock into
which the Debentures are convertible may be significantly affected by factors
such as actual or anticipated fluctuations in the Company's operating results,
announcements of technological innovations, new products introduced by the
Company or its competitors, periods of severe pricing pressures, developments
with respect to patents or proprietary rights, conditions and trends in the hard
drive industry, changes in financial estimates by securities analysts, general
market conditions and other factors. In addition, the stock market has
experienced extreme price and volume fluctuations that have particularly
affected the market price for many high technology companies that have often
been unrelated to the operating performance of these companies. These broad
market fluctuations may adversely affect the market price of the Debentures and
the Common Stock into which the Debentures are convertible, and there can be no
assurance that the market price of the Debentures and the Common Stock into
which the Debentures are convertible will not decline below the levels
prevailing at the date of this Prospectus or the date of any purchase of the
Debentures or Common Stock offered hereby. Securities class action litigation
suits are often brought against companies following periods of volatility in the
market price of their securities. A number of such suits have been filed against
the Company and any such litigation against the Company could result in
substantial costs and a diversion of resources and management's attention.
Subordination. The Debentures are unsecured and subordinated in right of
payment to all existing and future Senior Indebtedness (as defined) of the
Company. As a result of such subordination, in the event of bankruptcy,
liquidation or reorganization of the Company and in certain other events, the
assets of the Company will be available to pay its obligations with respect to
the Debentures only after all Senior Indebtedness has been paid in full, and
there may not be sufficient assets remaining to pay amounts due on any or all of
the Debentures then outstanding. The Debentures also are effectively
subordinated in right of payment to all the liabilities, including trade
payables, of the Company's subsidiaries. The Indenture does not prohibit or
limit the incurrence of Senior Indebtedness by the Company or the incurrence of
other indebtedness and other liabilities by the Company or its subsidiaries, and
the incurrence of additional indebtedness and other liabilities by the Company
or its subsidiaries could adversely affect the Company's ability to pay its
obligations with respect to the Debentures. As of December 27, 1997, the Company
had approximately $8 million of indebtedness outstanding that would have
constituted Senior Indebtedness, and as
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of the same date the Company's subsidiaries had approximately $442 million of
indebtedness and other liabilities outstanding (excluding intercompany
liabilities and liabilities of a type not required to be reflected on a balance
sheet in accordance with generally accepted accounting principles) to which the
Debentures would have been effectively subordinated. In January 1998, the
Company entered into the Senior Bank Facility, borrowings under which will be
Senior Indebtedness. The Company anticipates that from time to time it will
incur additional indebtedness, including Senior Indebtedness, and that it and
its subsidiaries will from time to time incur other additional indebtedness and
liabilities. The amount of Senior Indebtedness can be expected to increase and
prospective investors are urged to review the Company's filings under the
Exchange Act for information regarding indebtedness of the Company that may
constitute Senior Indebtedness. See "Description of Debentures -- Subordination
of Debentures."
Limitations on Repurchases and Redemptions of Debentures. On February 18,
2003, February 18, 2008 and February 18, 2013 (each, a "Purchase Date"), the
Company will become obligated to purchase, at the option of the holder thereof,
any outstanding Debenture, subject to certain conditions. In addition, upon a
Fundamental Change (as defined), each holder of the Debentures will have certain
rights, at the holder's option, to require the Company to redeem all or a
portion of such holder's Debentures. There can be no assurance that the Company
would have sufficient funds to pay the repurchase price on any Purchase Date (in
which case, the Company could be required to issue shares of Common Stock to pay
the repurchase price at valuations based on then prevailing market prices) or,
in the event of a Fundamental Change, the redemption price for all the
Debentures tendered by the holders thereof. The agreements governing the Senior
Bank Facility provide that a Fundamental Change would constitute an event of
default thereunder and cause the subordination provisions in the Indenture to
apply, preventing redemption of the Debentures until Senior Indebtedness is paid
in full. Also, any future credit agreements (including agreements governing the
Senior Bank Facility, if it is extended beyond its initial three-year term) or
other agreements relating to other indebtedness (including other Senior
Indebtedness) to which the Company becomes a party may provide that a
Fundamental Change and the maturing of any obligation to purchase or redeem the
Debentures would constitute an event of default thereunder and may restrict or
prohibit the repurchase or redemption of the Debentures. In the event a Purchase
Date or a Fundamental Change occurs at a time when the Company is prohibited
under its then existing agreements from repurchasing or redeeming the
Debentures, the Company could seek the consent of its then existing lenders to
repurchase or redeem the Debentures or could attempt to refinance the borrowings
that contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company would remain prohibited from repurchasing the
Debentures or redeeming the Debentures. In such case, the Company's failure to
redeem Debentures required to be repurchased or redeemed under the terms of the
Indenture would constitute an Event of Default under the Indenture and would
likely constitute a default under the terms of any other indebtedness of the
Company outstanding at such time. In such circumstances, or if a Fundamental
Change would in and of itself constitute an event of default under Senior
Indebtedness then outstanding, the subordination provisions in the Indenture
would likely prohibit or restrict payments to the holders of Debentures. The
term "Fundamental Change" is limited to certain specified transactions and does
not include all events that could adversely affect the Company's financial
condition or operating results. The requirement that the Company offer to redeem
the Debentures upon a Fundamental Change will not necessarily protect holders of
the Debentures in the event of a highly leveraged transaction, reorganization,
merger or similar transaction involving the Company. See "Description of
Debentures -- Redemption at Option of the Holder Upon a Fundamental Change."
Absence of a Public Market. The Debentures were issued in a private
placement in February of 1998 to a small number of institutional buyers. The
Company does not intent to list the Debentures on any national exchange or
interdealer quotation system. Although the Initial Purchasers have made a market
in the Debentures, they are not obligated to do so and may discontinue such
market making at any time without notice. In addition, such market making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act. Accordingly, there can be no assurance that any market for the
Debentures will develop or, if one does develop, that it will be maintained. If
an active market for the Debentures fails to develop or be sustained, the
trading price of the Debentures could be adversely affected.
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Ratings Risks. Moody's Investors Service has informed the Company that it
has assigned a B3 rating to the Debentures, and the Company believes that one or
more other rating agencies may also rate the Debentures. However, there can be
no assurance that any agency that rates the Debentures will not reduce or cease
its rating, or that any other agency or agencies will rate the Debentures or, if
they do, what rating or ratings they will assign. If one or more rating agencies
assign the Debentures a rating lower than generally expected by investors, or
reduce their ratings, such event would likely have an adverse effect on the
market price of the Debentures.
Certain Anti-Takeover Features. The Company's Certificate of Incorporation
and Bylaws contain certain provisions that could have the effect of deterring or
preventing certain takeover attempts. The Company has also adopted a
shareholders rights plan that may have a similar effect. See "Description of
Capital Stock."
Original Issue Discount. The Debentures were originally offered at an
Original Issue Discount for Federal income tax purposes equal to the excess of
the principal amount at maturity of the Debenture over the amount of its Issue
Price. Prospective purchasers of Debentures should be aware that, although there
will be no periodic payments of interest on the Debentures, accrued Original
Issue Discount will be included periodically in a holder's gross income for
Federal income tax purposes prior to conversion, redemption, other disposition
or maturity of such holder's Debentures, whether or not such Debentures are
ultimately converted, redeemed, sold (to the Company or otherwise) or paid at
maturity. See "Certain Federal Income Tax Considerations."
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
---------------------------------------------------- -------------------
JUNE 30, JUNE 30, JULY 1, JUNE 29, JUNE 28, DEC. 28, DEC. 27,
1993 1994 1995 1996 1997 1996 1997
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1)................ 0.03x 5.89x 12.57x 12.90x 30.33x 23.98x N/A
Pro forma ratio of adjusted earnings to fixed
charges(2)......................................... 8.96x N/A
</TABLE>
- ---------------
(1) For purposes of determining the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes plus fixed charges. Fixed
charges consist of interest expense (including amortization of original
issue discount and debt issuance costs, as applicable) and the estimated
portion of operating lease rental expense which represents the interest
factor. For the six months ended December 27, 1997, there was a deficiency
of earnings available to cover fixed charges amounting to $70.5 million.
(2) Pro forma ratio of adjusted earnings to fixed charges reflects the ratio of
adjusted earnings to fixed charges as if the Debentures and the term
borrowings of $50 million under the Company's revolving credit and term loan
facility providing a $200 million revolving credit line and a $50 million
term loan had been outstanding for the year ended June 28, 1997 and the six
months ended December 27, 1997, and the related estimated charges had been
incurred for the year and the six months ended, respectively. For the six
months ended December 27, 1997, there was a deficiency of pro forma earnings
available to cover fixed charges amounting to $83.8 million.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sales by the
Selling Securityholders of the Debentures or the Common Stock issued or issuable
upon conversion thereof.
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<PAGE> 10
DESCRIPTION OF DEBENTURES
The Debentures were issued under an indenture dated as of February 18, 1998
(the "Indenture"), between the Company and State Street Bank and Trust Company
of California, N.A., as trustee (the "Trustee"). A copy of the form of Indenture
and Registration Rights Agreement is available from the Trustee upon request by
a registered holder of the Debentures. The following summaries of certain
provisions of the form of Debenture and the Indenture do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the form of Debenture and the Indenture, including the
definitions therein of certain terms that are not otherwise defined in this
Prospectus. Wherever particular provisions or defined terms of the Indenture (or
of the form of Debenture which is a part thereof) are referred to, such
provisions or defined terms are incorporated herein by reference. As used in
this "Description of Debentures," the "Company" refers to Western Digital
Corporation and does not, unless the context otherwise indicates, include its
subsidiaries.
GENERAL
The Debentures are unsecured obligations of the Company limited to
$1,297,200,000 aggregate principal amount at maturity and will mature on
February 18, 2018.
The Debentures were issued at a substantial discount from their principal
amount at maturity. See "Certain Federal Income Tax Considerations." There will
be no periodic payments of interest on the Debentures. The calculation of the
accrual of Original Issue Discount (the difference between the Issue Price of
the Debentures and the principal amount at maturity of a Debenture) in the
period during which a Debenture remains outstanding is on a semi-annual bond
equivalent basis using a year composed of twelve 30-day months; such accrual
commenced on the Issue Date of the Debentures. Maturity, conversion, purchase by
the Company at the option of a holder or redemption of a Debenture will cause
Original Issue Discount and interest, if any, to cease to accrue on such
Debenture, under the terms and subject to the conditions of the Indenture. The
Company may not reissue a Debenture that has matured or been converted,
purchased by the Company at the option of a holder, redeemed or otherwise
canceled (except for registration of transfer, exchange or replacement thereof).
The principal amount at maturity of each Debenture will be payable at the
office or agency of the paying agent, initially the Trustee, in the Borough of
Manhattan, The City of New York, or any other office of the paying agent
maintained for such purpose. Debentures may be presented for conversion or
exchange into Common Stock at the office of the conversion agent and Debentures
in definitive form may be presented for exchange for other Debentures or
registration of transfer at the office of the registrar, each such agent
initially being the Trustee. The Company will not charge a service charge for
any registration of transfer or exchange of Debentures; however, the Company may
require payment by a holder of a sum sufficient to cover any tax, assessment or
other governmental charge payable in connection therewith.
FORM, DENOMINATION AND REGISTRATION
The Debentures were issued in fully registered form, without coupons, in
denominations of $1,000 principal amount at maturity and multiples thereof.
Global Debenture; Book-Entry Form. Debentures originally issued to
"qualified institutional buyers," as defined in Rule 144A under the Securities
Act ("QIBs"), were evidenced by a global Debenture (the "Global Debenture"),
deposited with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC") and registered in the name of Cede & Co. ("Cede") as DTC's nominee.
Except as set forth below, the Global Debenture may be transferred, in whole or
in part, only to another nominee of DTC or to a successor of DTC or its nominee.
QIBs may hold their interests in the Global Debenture directly through DTC,
or indirectly through organizations which are participants in DTC (the
"Participants"). Transfers between Participants will be effected in the ordinary
way in accordance with DTC rules and will be settled in clearing house funds.
The laws of some states require that certain persons take physical delivery of
securities in definitive form.
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<PAGE> 11
Consequently, the ability to transfer beneficial interests in the Global
Debenture to such persons may be limited.
QIBs who are not Participants may beneficially own interests in the Global
Debenture held by DTC only through Participants or certain banks, brokers,
dealers, trust companies and other parties that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants"). So long as Cede, as the nominee of DTC, is the
registered owner of the Global Debenture, Cede for all purposes will be
considered the sole holder of the Global Debenture. Except as provided below,
owners of beneficial interests in the Global Debenture will not be entitled to
have certificates registered in their names, will not receive or be entitled to
receive physical delivery of certificates in definitive form, and will not be
considered the holders thereof.
Payment of interest (if any) on and the redemption price and the purchase
price of the Global Debenture will be made to Cede, the nominee for DTC, as the
registered owner of the Global Debenture by wire transfer of immediately
available funds. Neither the Company, the Trustee nor any paying agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global
Debenture or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company has been informed by DTC that, with respect to payment of
interest (if any) on and the redemption price or the purchase price of the
Global Debenture, DTC's practice is to credit Participants' accounts on the
payment date therefor with payments in amounts proportionate to their respective
beneficial interests in the Debentures represented by the Global Debenture as
shown on the records of DTC (adjusted as necessary so that such payments are
made with respect to whole Debentures only), unless DTC has reason to believe
that it will not receive payment on such payment date. Payments by Participants
to owners of beneficial interests in Debentures represented by the Global
Debenture held through such Participants will be the responsibility of such
Participants, as is now the case with securities held for the accounts of
customers registered in "street name."
Holders who desire to convert their Debentures into Common Stock should
contact their brokers or other Participants or Indirect Participants to obtain
information on procedures, including proper forms and cut-off times, for
submitting such request.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in the Debentures represented by the Global
Debenture to pledge such interest to persons or entities that do not participate
in the DTC system, or otherwise take actions in respect of such interest, may be
affected by the lack of a physical certificate evidencing such interest.
Neither the Company nor the Trustee (or any registrar, paying agent or
conversion agent under the Indenture) will have any responsibility for the
performance by DTC or their Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations. DTC has advised the Company that it will take any action permitted
to be taken by a holder of Debentures (including, without limitation, the
presentation of Debentures for conversion as described below) only at the
direction of one or more Participants to whose account with DTC interests in the
Global Debenture are credited and only in respect of the principal amount of the
Debentures represented by the Global Debenture as to which such Participant or
Participants has or have given such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations such as the Initial Purchasers. Certain of such
Participants (or their
10
<PAGE> 12
representatives), together with other entities, own DTC. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through, or maintain a custodial relationship with a
Participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Debenture among participants of DTC, DTC is
under no obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days, the Company will cause Debentures to be issued in
definitive form in exchange for the Global Debenture.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants and Indirect Participants to beneficial
owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements that may be in effect from time to time. Redemption
notices shall be sent to Cede. If less than all of the Debentures are being
redeemed, DTC will reduce the amount of the interest of each Participant in such
Debentures in accordance with its procedures.
Certificated Debentures. Debentures originally issued to investors that
were not QIBs were issued in definitive registered form and were not represented
by the Global Debenture. QIBs may request that any Debentures they hold in
definitive registered form be exchanged for interests in the Global Debenture.
Certificated Debentures may be issued in exchange for Debentures represented by
the Global Debenture if a depositary is unwilling or unable to continue as a
depositary for the Global Debenture as set forth above under "Global Debenture;
Book-Entry Form."
SUBORDINATION OF DEBENTURES
The Indebtedness evidenced by the Debentures is subordinated to the extent
provided in the Indenture to the prior payment in full in cash or other payment
satisfactory to the holders of Senior Indebtedness of all existing and future
Senior Indebtedness. Such subordination will not prevent the occurrence of any
Event of Default under the Indenture.
Upon any distribution of assets of the Company upon any dissolution,
winding up, voluntary or involuntary bankruptcy, insolvency, liquidation,
reorganization, receivership or similar proceeding relating to the Company or
its property, an assignment for the benefit of creditors or any marshaling of
the Company's assets or liabilities, the holders of Senior Indebtedness will be
entitled to receive payment in full, in cash or other payment satisfactory to
the holders of Senior Indebtedness, of all obligations due in respect of such
Senior Indebtedness before the holders of Debentures will be entitled to receive
any payment of the principal amount at maturity, Issue Price, accrued Original
Issue Discount, Redemption Price, Purchase Price, Fundamental Change Redemption
Price and interest, if any (including liquidated damages, if any) or other
payment in respect of the Debentures (a "Payment on the Debentures"), and until
all obligations with respect to Senior Indebtedness are paid in full in cash or
other payment satisfactory to the holders of Senior Indebtedness, any Payment on
the Debentures to which the holders of Debentures would be entitled shall be
made to the holders of Senior Indebtedness. By reason of the subordination, in
the event of the Company's dissolution, winding up, bankruptcy, liquidation,
reorganization or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets, holders of Senior Indebtedness may receive more, ratably, and the
holders of Debentures may receive less, ratably, than the other creditors of the
Company.
In the event that the Debentures are declared due and payable prior to
their stated maturity by reason of the occurrence of an Event of Default, then
the Company is obligated to notify promptly holders of Senior Indebtedness of
such acceleration. The Company may not pay monies owed pursuant to the
Debentures until 120 days have passed after such acceleration occurs and may
thereafter pay the Debentures only if the terms of the Indenture otherwise
permit payment at that time.
The Company also may not make any Payment on the Debentures if (i) a
default in any payment obligations in respect of Senior Indebtedness occurs and
is continuing, without regard to any applicable period of grace (whether at
maturity or at a date fixed for payment or by declaration or otherwise) (each a
"payment
11
<PAGE> 13
default") or (ii) any other default occurs and is continuing with respect to
Designated Senior Indebtedness that permits holders of the Designated Senior
Indebtedness as to which such default relates to accelerate its maturity and the
Trustee receives a notice of such default (a "Payment Blockage Notice") from the
Company or from a representative for any issue of Designated Senior
Indebtedness. Payments on the Debentures may and shall be resumed (a) in case of
a payment default, the earlier of the date on which such default is cured or
waived in accordance with the terms of the governing instrument or ceases to
exist and (b) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived in accordance with the terms of the
governing instrument or ceases to exist or 179 days after the date on which the
applicable Payment Blockage Notice is received by the Trustee, if the maturity
of such Designated Senior Indebtedness has not been accelerated, and in either
case only if the terms of the Indenture otherwise permit payment at that time.
No new period of payment blockage may be commenced pursuant to a Payment
Blockage Notice unless and until 365 days have elapsed since the initial
effectiveness of the immediately prior Payment Blockage Notice. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or shall be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been cured or
waived for a period of not less than 90 days (it being acknowledged that (x) any
action of the Company or any of its Subsidiaries occurring subsequent to
delivery of a Payment Blockage Notice that would give rise to any event of
default pursuant to any provision of Senior Indebtedness under which an event of
default previously existed (or was continuing at the time of delivery of such
Payment Blockage Notice) shall constitute a new event of default for this
purpose and (y) any breach of a financial covenant giving rise to a nonpayment
default for a period ending subsequent to the date of delivery of the respective
Payment Blockage Notice shall constitute a new event of default for this
purpose).
The term "Senior Indebtedness" means the principal of, premium, if any,
interest (including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding), rent and end of term
payments payable on or in connection with, and, to the extent not included in
the foregoing, all amounts payable as fees, costs, expenses, liquidated damages,
indemnities, repurchase and other put obligations and other amounts to the
extent accrued or due on or in connection with, Indebtedness (as defined) of the
Company, whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by the Company (including
all deferrals, renewals, extensions or refundings of, or amendments,
modifications or supplements to, the foregoing). Notwithstanding the foregoing,
the term Senior Indebtedness shall not include (i) Indebtedness evidenced by the
Debentures, (ii) Indebtedness of the Company to any subsidiary of the Company, a
majority of the voting stock of which is owned, directly or indirectly, by the
Company, (iii) accounts payable or other indebtedness to trade creditors created
or assumed by the Company in the ordinary course of business and (iv) any
particular Indebtedness in which the instrument creating or evidencing the same
or the assumption or guarantee thereof expressly provides that such Indebtedness
shall not be senior in right of payment to, or is pari passu with, or is
subordinated or junior to, the Debentures.
The term "Indebtedness" means, with respect to any Person (as defined) and
without duplication: (a) all indebtedness, obligations and other liabilities
(contingent or otherwise) of such Person for borrowed money (including
obligations of the Company in respect of overdrafts, foreign exchange contracts,
currency exchange agreements, interest rate protection agreements, and any loans
or advances from banks, whether or not evidenced by notes or similar
instruments) or evidenced by bonds, debentures, notes or similar instruments
(whether or not the recourse of the lender is to the whole of the assets of such
Person or to only a portion thereof); (b) all reimbursement obligations and
other liabilities (contingent or otherwise) of such Person with respect to
letters of credit, bank guarantees or bankers' acceptances; (c) all obligations
and liabilities (contingent or otherwise) in respect of leases of such Person
(i) required, in conformity with generally accepted accounting principles, to be
accounted for as capitalized lease obligations on the balance sheet of such
Person, or (ii) required, in conformity with generally accepted accounting
principles to be accounted for as an operating lease, provided either (A) such
operating lease requires, at the end of the term thereof, that such Person make
any payment other than accrued periodic rent in the event that such Person does
not acquire the leased real property and related fixtures subject to such lease,
or (B) such Person has an option to acquire the leased real property and related
fixtures, whether such option is exercisable at any time or under
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<PAGE> 14
specified circumstances; (d) all obligations of such Person (contingent or
otherwise) with respect to an interest rate swap, cap or collar agreement or
other similar instrument or agreement; (e) all direct or indirect guaranties or
similar agreements by such Person in respect of, and obligations or liabilities
(contingent or otherwise) of such Person to purchase or otherwise acquire or
otherwise assure a creditor against loss in respect of, indebtedness,
obligations or liabilities of another Person of the kind described in clauses
(a) through (d); (f) any indebtedness or other obligations described in clauses
(a) through (d) secured by any mortgage, pledge, lien or other encumbrance
existing on property which is owned or held by such Person, regardless of
whether the indebtedness or other obligation secured thereby shall have been
assumed by such Person; and (g) any and all deferrals, renewals, extensions and
refundings of, or amendments, modifications or supplements to, any indebtedness,
obligation or liability of the kind described in clauses (a) through (f).
The term "Designated Senior Indebtedness" means the Company's Senior Bank
Facility and any particular Senior Indebtedness in which the instrument creating
or evidencing the same or the assumption or guarantee thereof (or related
agreements or documents to which the Company is a party) expressly provides that
such Senior Indebtedness shall be "Designated Senior Indebtedness" for purposes
of the Indenture; provided that such instrument, agreement or other document may
place limitations and conditions on the right of such Senior Indebtedness to
exercise the rights of Designated Senior Indebtedness; and provided further that
until such time as all amounts outstanding under the Senior Bank Facility have
been paid in full and all lending commitments under the Senior Bank Facility
have terminated, the Company may not designate any other Senior Indebtedness as
"Designated Senior Indebtedness" without the prior written consent of the agent
under the Senior Bank Facility, and such agent shall be the only person
authorized under the Indenture to provide written notice to the Trustee of any
such designation.
The Debentures are obligations exclusively of the Company. Since a portion
of the operations of the Company are conducted through subsidiaries, the cash
flow and the consequent ability to service debt, including the Debentures, are
dependent upon the earnings of its subsidiaries and the distribution of those
earnings to, or upon loans or other payments of funds by those subsidiaries to,
the Company. The subsidiaries are separate and distinct legal entities and have
no obligation, contingent or otherwise, to pay any amount pursuant to the
Debentures or to make any funds available therefor, whether by dividends, loans
or other payments. In addition, the payment of dividends and making of loans and
advances to the Company by its subsidiaries may be subject to statutory or
contractual restrictions, are contingent upon the earnings of those subsidiaries
and are subject to various business considerations.
Any right of the Company to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the holders of
the Debentures to participate in those assets) will be effectively subordinated
to the claims of that subsidiary's creditors (including trade creditors), except
to the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interests in the assets of such subsidiary and any indebtedness
of such subsidiary senior to that held by the Company.
At December 27, 1997, the Company had approximately $8 million of
indebtedness outstanding that would have constituted Senior Indebtedness, and as
of the same date the Company's subsidiaries had approximately $442 million of
indebtedness and other liabilities outstanding (excluding intercompany
liabilities and liabilities of a type not required to be reflected on a balance
sheet in accordance with generally accepted accounting principles) to which the
Debentures would have been effectively subordinated. In January 1998, the
Company entered into the Senior Bank Facility, borrowings under which will be
Senior Indebtedness. The Indenture does not limit the amount of additional
indebtedness, including Senior Indebtedness, which the Company can create,
incur, assume or guarantee, nor does the Indenture limit the amount of
indebtedness which any subsidiary can create, incur, assume or guarantee. The
amount of Senior Indebtedness can be expected to increase and prospective
investors are urged to review the Company's filings under the Exchange Act for
information regarding indebtedness of the Company that may constitute Senior
Indebtedness.
In the event that, notwithstanding the foregoing, the Trustee or any holder
of the Debentures receives any payment or distribution of assets of the Company
of any kind in contravention of any of the subordination
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<PAGE> 15
provisions of the Indenture, whether in cash, property or securities, including,
without limitation, by way of set-off or otherwise, in respect of the Debentures
before all Senior Indebtedness is paid in full in cash or other payment
satisfactory to the holders of Senior Indebtedness, then such payment or
distribution will be held by the recipient in trust for the benefit of, and paid
over to, holders of Senior Indebtedness or their representatives to the extent
necessary to make payment in full in cash or other payment satisfactory to the
holders of Senior Indebtedness of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution, or provision
therefor, to or for the holders of Senior Indebtedness.
The Company is obligated to pay reasonable compensation to the Trustee and
to indemnify the Trustee against certain losses, liabilities or expenses
incurred by it in connection with its duties relating to the Debentures. The
Trustee's claims for such payments will generally be senior to those of holders
of the Debentures in respect of all funds collected or held by the Trustee.
CONVERSION OF DEBENTURES
A holder of a Debenture may convert it into Common Stock of the Company at
any time after 90 days following the latest date of original issuance of the
Debentures through the close of business on February 18, 2018; provided that if
a Debenture is called for redemption, the holder may convert it only until the
close of business on the last trading day prior to the Redemption Date unless
the Company defaults in the payment of the Redemption Price. A Debenture in
respect of which a holder has delivered a Purchase Notice exercising the option
of such holder to require the Company to purchase such Debenture may be
converted only if such notice is withdrawn in accordance with the terms of the
Indenture. Similarly, a Debenture in respect of which a holder is exercising its
option to require redemption upon a Fundamental Change may be converted only if
such holder withdraws its election to exercise its option in accordance with the
terms of the Indenture. A holder may convert such holder's Debentures in part so
long as such part is $1,000 principal amount at maturity or a multiple thereof.
The initial Conversion Rate is 14.935 shares of Common Stock per $1,000
principal amount at maturity of Debentures, subject to adjustment upon the
occurrence of certain events, as described below. A holder entitled to a
fractional share of Common Stock shall receive cash equal to the then current
market value of such fractional share.
On conversion of a Debenture, a holder will not receive any cash payment
representing accrued Original Issue Discount. The Company's delivery to the
holder of the fixed number of shares of Common Stock into which the Debenture is
convertible (together with the cash payment, if any, in lieu of fractional
Common Stock) will be deemed to satisfy the Company's obligation to pay the
principal amount of the Debenture including the accrued Original Issue Discount
attributable to the period from the Issue Date to the Conversion Date. Thus, the
accrued Original Issue Discount is deemed to be paid in full rather than
canceled, extinguished or forfeited. The Conversion Rate will not be adjusted at
any time during the term of the Debentures for such accrued Original Issue
Discount.
To convert a certificated Debenture into Common Stock, a holder must (i)
complete and manually sign the conversion notice on the back of the Debenture
(or complete and manually sign a facsimile thereof) and deliver such notice to
the conversion agent, (ii) surrender the Debenture to the conversion agent,
(iii) if required, furnish appropriate endorsements and transfer documents, and
(iv) if required, pay all transfer or similar taxes. The procedure for
converting a Global Debenture is described above under "Form, Denomination and
Registration -- Global Debenture; Book-Entry Form." Pursuant to the Indenture,
the date on which all of the foregoing requirements have been satisfied is the
Conversion Date.
The Conversion Rate is subject to adjustment under formulae as set forth in
the Indenture in certain events, including: (i) the issuance of Common Stock of
the Company as a dividend or distribution on the Common Stock; (ii) certain
subdivisions and combinations of the Common Stock; (iii) the issuance to all
holders of Common Stock of certain rights or warrants to purchase Common Stock;
(iv) the distribution to all holders of Common Stock of capital stock (other
than Common Stock) or evidences of indebtedness of the Company or of assets
(including securities; but excluding those rights, warrants, dividends and
distributions referred to above or paid in cash); (v) distributions consisting
of cash, excluding any quarterly cash dividend
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<PAGE> 16
on the Common Stock to the extent that the aggregate cash dividend per share of
Common Stock in any quarter does not exceed the greater of (x) the amount per
share of Common Stock of the next preceding quarterly cash dividend on the
Common Stock to the extent that such preceding quarterly dividend did not
require an adjustment of the Conversion Rate pursuant to this clause (v) (as
adjusted to reflect subdivisions or combinations of the Common Stock), and (y)
3.75 percent of the average of the last reported sales price of the Common Stock
during the ten trading days immediately prior to the date of declaration of such
dividend, and excluding any dividend or distribution in connection with the
liquidation, dissolution or winding up of the Company; (vi) payment in respect
of a tender offer or exchange offer by the Company or any Subsidiary of the
Company for the Common Stock to the extent that the cash and value of any other
consideration included in such payment per share of Common Stock exceeds the
Current Market Price (as defined) per share of Common Stock on the trading day
next succeeding the last date on which tenders or exchanges may be made pursuant
to such tender or exchange offer; and (vii) payment in respect of a tender offer
or exchange offer by a person other than the Company or any Subsidiary (as
defined) of the Company in which, as of the closing date of the offer, the Board
of Directors is not recommending rejection of the offer. If an adjustment is
required to be made as set forth in clause (v) above as a result of a
distribution that is a quarterly dividend, such adjustment would be based upon
the amount by which such distribution exceeds the amount of the quarterly cash
dividend permitted to be excluded pursuant to clause (v) above. If an adjustment
is required to be made as set forth in clause (v) above as a result of a
distribution that is not a quarterly dividend, such adjustment would be based
upon the full amount of the distribution. The adjustment referred to in clause
(vii) above will only be made if the tender offer or exchange offer is for an
amount that increases the offeror's ownership of Common Stock to more than 25%
of the total shares of Common Stock outstanding, and if the cash and value of
any other consideration included in such payment per share of Common Stock
exceeds the Current Market Price per share of Common Stock on the business day
next succeeding the last date on which tenders or exchanges may be made pursuant
to such tender or exchange offer. The adjustment referred to in clause (vii)
above will generally not be made, however, if as of the closing of this offer,
the offering documents with respect to such offer disclose a plan or an
intention to cause the Company to engage in a consolidation or merger of the
Company or a sale of all or substantially all of the Company's assets.
Under the terms of the Company's Stockholder Rights Plan, upon conversion
of any Debentures prior to the redemption or expiration of the Rights, the
holders of such Debentures will receive, subject to certain limited conditions,
an appropriate number of Rights with respect to the shares of Common Stock
issued upon such conversion. See "Description of Capital Stock -- Anti-Takeover
Effects." In addition, the Indenture provides that if the Company amends the
Stockholder Rights Plan or implements a replacement or successor stockholders'
rights plan, such rights plan must provide that upon conversion of the
Debentures the holders will receive, in addition to the Common Stock issuable
upon such conversion, such rights whether or not such rights have separated from
the Common Stock at the time of such conversion.
No adjustment in the Conversion Rate will be required unless such
adjustment would require a change of at least 1% in the rate then in effect;
provided that any adjustment that would otherwise be required to be made shall
be carried forward and taken into account in any subsequent adjustment. Except
as stated above, the Conversion Rate will not be adjusted for the issuance of
Common Stock or any securities convertible into or exchangeable for Common Stock
or carrying the right to purchase any of the foregoing.
In the case of (i) any reclassification of the Common Stock, or (ii) a
consolidation or merger involving the Company or a sale or conveyance to another
corporation of the property and assets of the Company as an entirety or
substantially as an entirety, in each case as a result of which holders of
Common Stock shall be entitled to receive stock, securities, other property or
assets (including cash) with respect to or in exchange for such Common Stock,
the holders of the Debentures then outstanding will be entitled thereafter to
convert such Debentures into the kind and amount of shares of stock, securities
or other property or assets (including cash) which they would have owned or been
entitled to receive upon such reclassification, consolidation, merger, sale or
conveyance had such Debentures been converted immediately prior to such
reclassification, consolidation, merger, sale or conveyance assuming that a
holder of Debentures would not have exercised any rights of election as to the
stock, securities or other property or assets (including cash) receivable in
connection therewith.
15
<PAGE> 17
In the event of a taxable distribution to holders of Common Stock or in
certain other circumstances requiring an adjustment to the Conversion Rate, the
holders of Debentures may, in certain circumstances, be deemed to have received
a distribution subject to United States income tax as a dividend; in certain
other circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock. See "Certain Federal Income Tax
Considerations" below.
The Company from time to time may to the extent permitted by law increase
the Conversion Rate by any amount for any period of at least 20 days, in which
case the Company shall give at least 15 days' notice of such increase, if the
Board of Directors has made a determination that such increase would be in the
best interests of the Company, which determination shall be conclusive. The
Company may, at its option, make such increases in the Conversion Rate, in
addition to those set forth above, as the Board of Directors deems advisable to
avoid or diminish any income tax to holders of 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. See "Certain Federal Income Tax
Considerations."
REDEMPTION OF DEBENTURES AT THE OPTION OF THE COMPANY
No sinking fund is provided for the Debentures. Prior to February 18, 2003,
the Debentures are not redeemable at the option of the Company. Beginning on
February 18, 2003, the Company may (subject to applicable contractual
restrictions including under agreements governing Senior Indebtedness) redeem
the Debentures for cash as a whole at any time, or from time to time in part,
upon not less than 30 days' nor more than 60 days' notice of redemption given by
mail to holders of Debentures. The Debentures will be redeemable in multiples of
$1,000 principal amount at maturity.
The table below shows Redemption Prices of Debentures per $1,000 principal
amount at maturity thereof at February 18, 2003 and at each February thereafter
prior to maturity and at maturity on February 18, 2018, which prices reflect the
accrued Original Issue Discount calculated to each such date. The Redemption
Price of a Debenture redeemed between such dates would include an additional
amount reflecting the additional Original Issue Discount accrued since the next
preceding date in the table to the actual Redemption Date.
<TABLE>
<CAPTION>
(2) (3)
(1) ACCRUED ORIGINAL REDEMPTION
DEBENTURE ISSUE DISCOUNT PRICE
REDEMPTION DATE ISSUE PRICE AT 5.25% (1)+(2)
--------------- ----------- ---------------- ----------
<S> <C> <C> <C>
February 18, 2003..................... $354.71 $104.93 $ 459.64
February 18, 2004..................... 354.71 129.37 484.08
February 18, 2005..................... 354.71 155.12 509.83
February 18, 2006..................... 354.71 182.24 536.95
February 18, 2007..................... 354.71 210.80 565.51
February 18, 2008..................... 354.71 240.88 595.59
February 18, 2009..................... 354.71 272.55 627.26
February 18, 2010..................... 354.71 305.92 660.63
February 18, 2011..................... 354.71 341.05 695.76
February 18, 2012..................... 354.71 378.06 732.77
February 18, 2013..................... 354.71 417.04 771.75
February 18, 2014..................... 354.71 458.08 812.79
February 18, 2015..................... 354.71 501.31 856.02
February 18, 2016..................... 354.71 546.84 901.55
February 18, 2017..................... 354.71 594.80 949.51
February 18, 2018..................... 354.71 645.29 1,000.00
</TABLE>
If less than all of the outstanding Debentures held in certificated form
are to be redeemed, the Trustee shall select the Debentures held in such form to
be redeemed in principal amounts at maturity of $1,000 or multiples thereof by
lot, pro rata or by another method the Trustee considers fair and appropriate
(as long as such method is not prohibited by the rules of any stock exchange on
which the Debentures are then listed). If
16
<PAGE> 18
a portion of a holder's certificated Debentures is selected for partial
redemption and such holder converts a portion of such Debentures, such converted
portion shall be deemed to be the portion selected for redemption. Debentures
registered in the name of DTC or its nominee will be redeemed as described under
"-- Form, Denomination and Registration -- Global Debenture; Book-Entry Form."
REDEMPTION AT OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE
If a Fundamental Change (as defined) occurs at any time prior to February
18, 2018, each holder of Debentures shall have the right, at the holder's
option, to require the Company to redeem any or all of such holder's Debentures
on the date (the "Repurchase Date") that is 45 days after the date of the
Company's notice of such Fundamental Change. The Debentures will be redeemable
in multiples of $1,000 principal amount at maturity.
The Company shall redeem such Debentures at a price (the "Fundamental
Change Redemption Price") equal to the Issue Price plus accrued Original Issue
Discount to the Repurchase Date; provided that if the Applicable Price (as
defined) in connection with the Fundamental Change is less than the Reference
Market Price (as defined), the Company shall redeem such Debentures at a price
equal to the foregoing Fundamental Change Redemption Price multiplied by the
fraction obtained by dividing the Applicable Price by the Reference Market
Price.
The Company shall mail to all holders of record of the Debentures a notice
of the occurrence of a Fundamental Change and of the redemption right arising as
a result thereof on or before the tenth day after the occurrence of such
Fundamental Change. The Company shall deliver to the Trustee a copy of such
notice. To exercise the redemption right, holders of Debentures must deliver, on
or before the 30th day after the date of the Company's notice of a Fundamental
Change, the Debentures to be so redeemed, duly endorsed for transfer, together
with the form entitled "Option to Elect Redemption Upon a Fundamental Change" on
the reverse thereof duly completed, to the Company (or an agent designated by
the Company for such purpose).
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with which all or substantially all Common Stock shall be
exchanged for, converted into, acquired for or constitute solely the right to
receive consideration (whether by means of an exchange offer, liquidation,
tender offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise) which is not all or substantially all common
stock listed (or, upon consummation of or immediately following such transaction
or event, which will be listed) on a United States national securities exchange
or approved for quotation on the Nasdaq National Market or any similar United
States system of automated dissemination of quotations of securities prices. The
term "Applicable Price" means (i) in the event of a Fundamental Change in which
the holders of the Common Stock receive only cash, the amount of cash received
by the holder of one share of Common Stock and (ii) in the event of any other
Fundamental Change, the average of the reported last sale price for the Common
Stock during the ten trading days prior to the record date for the determination
of the holders of Common Stock entitled to receive cash, securities, property or
other assets in connection with such Fundamental Change, or, if there is no such
record date, the date upon which the holders of the Common Stock shall have the
right to receive such cash, securities, property or other assets in connection
with the Fundamental Change. The term "Reference Market Price" shall initially
mean $12.67 (which is equal to 66 2/3% of the last sale price of the Common
Stock on February 11, 1998, the day prior to the original issuance of the
Debentures) and in the event of any adjustment to the Conversion Rate pursuant
to the provisions of the Indenture, the Reference Market Price shall also be
adjusted so that the Reference Market Price shall be equal to the initial
Reference Market Price multiplied by a fraction the numerator of which is the
Conversion Rate specified on the cover of this Prospectus (without regard to any
adjustment thereto) and the denominator of which is the Conversion Rate
following such adjustment.
The Company will comply with the provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act which may then be applicable in
connection with the redemption rights of Debenture holders in the event of a
Fundamental Change.
The redemption rights of the holders of Debentures could discourage a
potential acquiror of the Company. The Fundamental Change redemption feature,
however, is not the result of management's
17
<PAGE> 19
knowledge of any specific effort 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 anti-takeover provisions.
The term "Fundamental Change" is limited to certain specified transactions
and may not include other events that might adversely affect the financial
condition of the Company, nor would the requirement that the Company offer to
repurchase the Debentures upon a Fundamental Change necessarily afford the
holders of the Debentures protection in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving the
Company.
No Debentures may be redeemed at the option of holders upon a Fundamental
Change if there has occurred and is continuing an Event of Default described
under "Events of Default; Notice and Waiver" below (other than a default in the
payment of the Fundamental Change Redemption Price with respect to such
Debentures). In the event of a Fundamental Change and exercise by holders of the
Debentures of their associated rights to require the Company to redeem all or a
portion of their Debentures, there can be no assurance that the Company would
have sufficient funds to pay the redemption price for all the Debentures
tendered by the holders thereof. The agreements governing the Senior Bank
Facility provide that a Fundamental Change would constitute an event of default
thereunder and cause the subordination provisions in the Indenture to apply,
preventing redemption of the Debentures until Senior Indebtedness is paid in
full. Any future credit agreements (including an extension of the Senior Bank
Facility) or other agreements relating to other indebtedness (including other
Senior Indebtedness) to which the Company becomes a party may contain similar
default provisions and may provide that the maturing of any obligation to redeem
the Debentures upon a Fundamental Change would constitute an event of default
thereunder and may restrict or prohibit the redemption of the Debentures. In the
event a Fundamental Change occurs at a time when the Company is prohibited from
redeeming the Debentures, the Company could seek the consent of its then
existing lenders to redeem the Debentures or could attempt to refinance the
borrowings that contain such prohibition. If the Company does not obtain such a
consent or repay such borrowings, the Company would remain prohibited from
redeeming the Debentures. In such case, the Company's failure to redeem
Debentures required to be redeemed under the terms of the Indenture would
constitute an Event of Default under the Indenture and would likely constitute a
default under the terms of any other indebtedness of the Company outstanding at
such time. In such circumstances, or if a Fundamental Change would in and of
itself constitute an event of default under agreements governing Senior
Indebtedness then outstanding, the subordination provisions in the Indenture
would likely prohibit or restrict payments to the holders of Debentures.
PURCHASE OF DEBENTURES AT THE OPTION OF THE HOLDER
On February 18, 2003, February 18, 2008 and February 18, 2013 (each, a
"Purchase Date"), the Company will become obligated to purchase, at the option
of the holder thereof, any outstanding Debenture for which a written Purchase
Notice has been delivered by the holder to the office of the paying agent
(initially the Trustee) at any time from the opening of business on the date
that is 20 Business Days (as defined) prior to such Purchase Date until the
close of business on such Purchase Date and for which such Purchase Notice has
not been withdrawn, subject to certain additional conditions.
The Purchase Notice shall state (i) the certificate numbers of the
Debentures to be delivered by the holder thereof for purchase by the Company;
(ii) the portion of the principal amount at maturity of Debentures to be
purchased, which portion must be $1,000 or a multiple thereof; (iii) that such
Debentures are to be purchased by the Company pursuant to the applicable
provisions of the Debentures; and (iv) in the event the Company elects, pursuant
to the Company Notice (as defined), to pay the Purchase Price to be paid as of
such Purchase Date in Common Stock, in whole or in part, but such Purchase Price
is ultimately to be paid to such holder entirely in cash because any of the
conditions to payment of the Purchase Price (or portion thereof) in Common Stock
is not satisfied by the Purchase Date, as described below, whether such holder
elects (x) to withdraw such Purchase Notice as to some or all of the Debentures
to which it relates (stating the principal amount at maturity and certificate
numbers of the Debentures as to which such withdrawal shall relate), or (y) to
receive cash in respect of the entire Purchase Price for all Debentures subject
to such Purchase Notice. If the holder fails to indicate, in the Purchase Notice
and in any written notice of withdrawal relating to such Purchase Notice, such
holder's choice with respect to the election described in clause
18
<PAGE> 20
(iv) above, such holder shall be deemed to have elected to receive cash in
respect of the entire Purchase Price for all Debentures subject to such Purchase
Notice in such circumstances. For a discussion of the tax treatment of a holder
receiving cash or Common Stock pursuant to its election to tender its Debentures
to the Company on a Purchase Date, see "Certain Federal Income Tax
Considerations."
Any Purchase Notice may be withdrawn by the holder by a written notice of
withdrawal delivered to the paying agent prior to the close of business on the
Purchase Date. The notice of withdrawal shall state the principal amount at
maturity and the certificate numbers of the Debentures as to which the
withdrawal notice relates and the principal amount at maturity, if any, which
remains subject to the Purchase Notice.
The Purchase Price payable in respect of a Debenture shall be equal to the
Issue Price plus accrued Original Issue Discount to the Purchase Date. The table
below shows the Purchase Prices of a Debenture as of the specified Purchase
Dates. The Company may elect to pay the Purchase Price payable as of any
Purchase Date in cash or Common Stock or any combination thereof.
<TABLE>
<CAPTION>
PURCHASE DATE PRICE
------------- -------
<S> <C>
February 18, 2003.................................. $459.64
February 18, 2008.................................. 595.59
February 18, 2013.................................. 771.75
</TABLE>
If the Company elects to pay the Purchase Price, in whole or in part, in
Common Stock, the number of shares to be delivered in respect of the portion of
the Purchase Price to be paid in Common Stock shall be equal to such portion of
the Purchase Price divided by the Market Price (as defined) of the Common Stock.
However, no fractional Common Stock will be delivered upon any purchase by the
Company of Debentures through the delivery of Common Stock in payment, in whole
or in part, of the Purchase Price. Instead, the Company will pay cash based on
the Market Price for all fractional Common Stock.
The Company will give notice (the "Company Notice") not less than 20
Business Days prior to the Purchase Date (the "Company Notice Date") to all
holders at their addresses shown in the register of the registrar (and to
beneficial owners as required by applicable law) stating, among other things,
whether the Company will pay the Purchase Price of the Debentures in cash or
Common Stock, or any combination thereof (specifying the percentage of each)
and, if the Company elects to pay in Common Stock, in whole or in part, the
method of calculating the Market Price of the Common Stock.
The "Market Price" means the average of the Sale Prices (as defined) of the
Common Stock for the five trading day period ending on the third Business Day
prior to the applicable Purchase Date (if the third Business Day prior to the
applicable Purchase Date is a trading day or, if it is not a trading day, then
on the last trading day prior to such third Business Day), appropriately
adjusted to take into account the occurrence during the period commencing on the
first of such trading days during such five trading day period and ending on
such Purchase Date of certain events that would result in an adjustment of the
Conversion Rate under the Indenture with respect to the Common Stock. The "Sale
Price" of the Common Stock on any date means the closing per share sale price
(or if no closing sale price is reported, the average bid and ask prices or, if
more than one in either case, the average of the average bid and average ask
prices) on such date as reported in the composite transactions for the principal
United States securities exchange on which the Common Stock is traded or, if the
Common Stock is not listed on a United States national or regional stock
exchange, as reported by the National Association of Securities Dealers
Automated Quotation System. Because the Market Price of the Common Stock is
determined prior to the applicable Purchase Date, holders of Debentures bear the
market risk with respect to the value of the Common Stock to be received from
the date of determination of such Market Price to such Purchase Date. The
Company may elect to pay the Purchase Price in Common Stock only if the
information necessary to calculate the Market Price is reported in a daily
newspaper of national circulation.
Upon determination of the actual number of shares of Common Stock in
accordance with the foregoing provisions, the Company will publish such
determination in a daily newspaper of national circulation.
19
<PAGE> 21
The Company's right to purchase Debentures with Common Stock is subject to
the satisfaction of various conditions, including: (i) the registration of the
Common Stock under the Securities Act, if required; and (ii) compliance with
other applicable federal and state securities laws, if any. If such conditions
are not satisfied by a Purchase Date, the Company will pay the Purchase Price of
the Debentures to be purchased on such Purchase Date entirely in cash. See
"Certain Federal Income Tax Considerations." The Company will comply with the
provisions of Rule 13e-4 and any other tender offer rules under the Exchange Act
which may then be applicable and will file a Schedule 13E-4 or any other
schedule required thereunder in connection with any offer by the Company to
purchase Debentures at the option of holders.
Payment of the Purchase Price for a Debenture for which a Purchase Notice
has been delivered and not withdrawn is conditioned upon book-entry transfer or
delivery of such Debenture (together with necessary endorsements) to the paying
agent at its office in the Borough of Manhattan, The City of New York, or any
other office of the paying agent maintained for such purpose, at any time
(whether prior to, on or after the Purchase Date) after delivery of such
Purchase Notice. Payment of the Purchase Price for such Debenture will be made
promptly following the later of the Purchase Date or the time of book-entry
transfer or delivery of such Debenture. If the paying agent holds, in accordance
with the terms of the Indenture, money or securities sufficient to pay the
Purchase Price of such Debenture on the Business Day following the Purchase
Date, then, on and after such date, such Debenture will cease to be outstanding
and Original Issue Discount on such Debenture will cease to accrue whether or
not book-entry transfer of such Debenture is made or such Debenture is delivered
to the paying agent, and all other rights of the holder shall terminate (other
than the right to receive the Purchase Price upon delivery of the Debenture).
No Debentures may be purchased at the option of the holder for cash if
there has occurred (prior to, on or after the giving by the holders of such
Debentures of the required Purchase Notice) and is continuing an Event of
Default described under "Events of Default; Notice and Waiver" below (other than
a default in the payment of the Purchase Price with respect to such Debentures).
If the Company becomes obligated to purchase any outstanding Debenture on a
Purchase Date, there can be no assurance that the Company would have sufficient
funds to pay the Purchase Price on that Purchase Date (in which case, the
Company could be required to issue shares of Common Stock to pay the Purchase
Price at valuations based on then prevailing market prices) for all the
Debentures tendered by the holders thereof. Although the agreements governing
the Senior Bank Facility do not currently prohibit purchase of Debentures on a
Purchase Date, any future credit agreements (including an extension of the
Senior Bank Facility) or other agreements relating to other indebtedness
(including Senior Indebtedness) to which the Company becomes a party may provide
that the maturing of any obligation to purchase the Debentures would constitute
an event of default thereunder and may restrict or prohibit the repurchase of
the Debentures. In the event a Purchase Date occurs at a time when the Company
is prohibited from repurchasing the Debentures, the Company could seek the
consent of its then existing lenders to repurchase the Debentures or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
would remain prohibited from repurchasing the Debentures. The Company's failure
to repurchase Debentures required to be repurchased under the terms of the
Indenture would constitute an Event of Default under the Indenture and would
likely constitute a default under the terms of any other indebtedness of the
Company outstanding at such time, including Senior Indebtedness. In such
circumstances, the subordination provisions in the Indenture would likely
prohibit or restrict payments to the holders of Debentures.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other person or
convey, transfer or lease its properties and assets substantially as an entirety
to another person, unless, among other items, (i) the resulting, surviving or
transferee person (if other than the Company) is organized and existing under
the laws of the United States, any state thereof or the District of Columbia,
(ii) such successor person assumes all obligations of the Company under the
Debentures and the Indenture and (iii) the Company or such successor person
shall not immediately thereafter be in default under the Indenture. Upon the
assumption of the Company's obligations by such person in such circumstances,
subject to certain exceptions, the Company shall
20
<PAGE> 22
be discharged from all obligations under the Debentures and the Indenture.
Certain such transactions which would constitute a Fundamental Change would
permit each holder to require the Company to redeem the Debentures of such
holder as described under "Redemption at Option of the Holder Upon a Fundamental
Change."
EVENTS OF DEFAULT; NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein shall
have happened and be continuing, either the Trustee or the holders of not less
than 25% in aggregate principal amount at maturity of the Debentures then
outstanding may declare the Issue Price of the Debentures plus the Original
Issue Discount on the Debentures and any liquidated damages under the
Registration Rights Agreement accrued to the date of such declaration to be
immediately due and payable. In the case of certain events of bankruptcy or
insolvency, the Issue Price of the Debentures plus the Original Issue Discount
accrued thereon to the occurrence of such event shall automatically become and
be immediately due and payable. Under certain circumstances, the holders of a
majority in aggregate principal amount at maturity of the outstanding Debentures
may rescind any such acceleration with respect to the Debentures and its
consequences. Interest shall accrue at the rate of 5.25% per annum and be
payable on demand upon a default in the payment of the Issue Price, accrued
Original Issue Discount, accrued liquidated damages, if any, or any Redemption
Price, Purchase Price or Fundamental Change Redemption Price to the extent that
payment of such interest shall be legally enforceable.
Under the Indenture, Events of Default are defined as: (i) default in
payment of the principal amount at maturity, Issue Price, accrued Original Issue
Discount, accrued liquidated damages, if any, Redemption Price, Purchase Price
or Fundamental Change Redemption Price with respect to any Debenture when such
becomes due and payable (whether or not payment is prohibited by the provisions
of the Indenture), provided that in the case of any failure to pay liquidated
damages, such failure continues for a period of 30 days; (ii) failure by the
Company to comply with any of its other agreements in the Debentures or the
Indenture upon the receipt by the Company of notice of such default by the
Trustee or by holders of not less than 25% in aggregate principal amount at
maturity of the Debentures then outstanding and the Company's failure to cure
such default within 60 days after receipt by the Company of such notice; or
(iii) certain events of bankruptcy or insolvency.
The Trustee shall give notice to holders of the Debentures of any
continuing default known to the Trustee within 90 days after the occurrence
thereof, provided that the Trustee may withhold such notice if it determines in
good faith that withholding the notice is in the interests of the holders.
The holders of a majority in aggregate principal amount at maturity of the
outstanding Debentures may 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 such direction shall not be in
conflict with any law or the Indenture and subject to certain other limitations.
Before proceeding to exercise any right or power under the Indenture at the
direction of such holders, the Trustee shall be entitled to receive from such
holders reasonable security or indemnity satisfactory to it against the costs,
expenses and liabilities which might be incurred by it in complying with any
such direction. No holder of any Debenture has any right to pursue any remedy
with respect to the Indenture or the Debentures, unless (i) such holder shall
have previously given the Company and the Trustee written notice of a continuing
Event of Default; (ii) the holders of at least 25% in aggregate principal amount
at maturity of the outstanding Debentures shall have made a written request to
the Trustee to pursue such remedy; (iii) such holder or holders have offered to
the Trustee reasonable indemnity satisfactory to the Trustee; (iv) the holders
of a majority in aggregate principal amount at maturity of the outstanding
Debentures have not given the Trustee a direction inconsistent with such request
within 60 days after receipt of such request; and (v) the Trustee shall have
failed to comply with the request within such 60-day period.
However, the right of any holder (x) to receive payment of the principal
amount at maturity, Issue Price, accrued Original Issue Discount, Redemption
Price, Purchase Price, Fundamental Change Redemption Price and any interest in
respect of a default in the payment of any such amounts on a Debenture, on or
after the due
21
<PAGE> 23
date expressed in such Debenture, (y) to institute suit for the enforcement of
any such payments or conversion or (z) to convert Debentures shall not be
impaired or adversely affected without such holder's consent. The holders of at
least a majority in aggregate principal amount at maturity of the outstanding
Debentures may waive an existing default and its consequences, other than (i)
any default in any payment on the Debentures, (ii) any default with respect to
the conversion rights of the Debentures or (iii) any default in respect of
certain covenants or provisions in the Indenture which may not be modified
without the consent of the holder of each Debenture as described in
"Modification" below. The Company is required to furnish to the Trustee annually
a statement as to any default by the Company in the performance and observance
of its obligations under the Indenture.
MODIFICATION
Modification and amendment of the Indenture or the Debentures may be
effected by the Company and the Trustee with the consent of the holders of not
less than a majority in aggregate principal amount at maturity of the Debentures
then outstanding. Notwithstanding the foregoing, no such amendment may, without
the consent of each holder affected thereby: (i) reduce the principal amount at
maturity, Issue Price, Purchase Price, Fundamental Change Redemption Price or
Redemption Price, or extend the stated maturity of any Debenture or alter the
manner or rate of accrual of Original Issue Discount or interest, or make any
Debenture payable in money or securities other than that stated in the
Debenture; (ii) make any change to the principal amount at maturity of
Debentures whose holders must consent to an amendment or any waiver under the
Indenture or modify the Indenture provisions relating to such amendments or
waivers; (iii) make any change that adversely affects the right to convert any
Debenture or the right to require the Company to purchase a Debenture or the
right to require the Company to redeem a Debenture upon a Fundamental Change;
(iv) modify the provisions of the Indenture relating to the subordination of the
Debentures in a manner adverse to the holders of the Debentures; or (v) impair
the right to institute suit for the enforcement of any payment with respect to,
or conversion of, the Debentures. The Indenture also provides for certain
modifications of its terms without the consent of the holders. No amendment may
be made to the subordination provisions of the Indenture that adversely affects
the rights of any holder of Senior Indebtedness then outstanding, unless the
holders of such Senior Indebtedness (as required pursuant to the terms of such
Senior Indebtedness) consent to such change.
TAXATION OF DEBENTURES
See "Certain Federal Income Tax Considerations" for a discussion of certain
tax aspects which will apply to a holder of Debentures.
INFORMATION CONCERNING THE TRUSTEE
State Street Bank and Trust Company of California, N.A., as Trustee under
the Indenture, has been appointed by the Company as paying agent, conversion
agent, registrar and custodian with regard to the Debentures.
22
<PAGE> 24
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The Company's authorized capital stock consists of 230 million shares, of
which 225 million shares are designated as common stock, $.01 par value per
share (the "Common Stock") and 5 million shares are designated as preferred
stock, $.01 par value per share (the "Preferred Stock"). The Common Stock is
listed on the New York Stock Exchange under the symbol "WDC."
COMMON STOCK
The Company is authorized to issue 225 million shares of Common Stock.
Holders of Common Stock are entitled to one vote per share on all matters to be
voted on by stockholders and are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and
to share pro rata in any distributions to holders of Common Stock. Holders of
Common Stock do not have the power to act by written consent without a meeting
or to call special meetings of the stockholders, except that stockholders
entitled to cast not less than ten percent of the votes at a special meeting may
call such a meeting at any time. In the event of liquidation, dissolution or
winding-up of the Company, subject to any preferential or pari passu rights of
any holders of shares of Preferred Stock, all remaining assets shall be
distributed to holders of Common Stock.
PREFERRED STOCK
The authorized shares of Preferred Stock are issuable, without further
stockholder approval, in one or more series as determined by the Board of
Directors, with such designations, powers, preferences, dividend rates,
liquidation and conversion rights and other qualifications, limitations and
restrictions as are specified by the Board of Directors. The issuance of shares
of Preferred Stock would necessarily create some preferences in favor of the
holders of such shares over the holders of Common Stock. No shares of Preferred
Stock are outstanding.
In connection with the Company's shareholder rights plan, the Board of
Directors designated a series of Preferred Stock as "Series A Junior
Participating Preferred Stock" consisting of 500,000 shares. Series A Preferred
Stockholders are entitled to receive, when, as and if declared by the Board of
Directors, quarterly dividends. Such dividends are cumulative. Subject to
provisions for adjustment, each share of Series A Preferred Stock shall entitle
the holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Company. No shares of Series A Preferred Stock have been
issued.
ANTI-TAKEOVER EFFECTS
The internal affairs of the Company are governed by, among other things,
the laws of the State of Delaware, the Company's Certificate of Incorporation
(the "Certificate") and the Company's Bylaws (the "Bylaws"). The Certificate and
Bylaws contain provisions that may impede the acquisition of control of the
Company by means of a tender offer, proxy fight or other means.
The Bylaws provide that the number of directors shall be not less than five
nor more than twelve and that the specific numbers of directors at any time
shall be determined by the Board of Directors by resolution. The Bylaws provide
that any vacancy in the Board of Directors may be filled by a majority vote of
the remaining directors.
The Bylaws provide that special meetings of stockholders may be called only
by the Board of Directors, the Chairman of the Board, the President, or by
stockholders entitled to cast not less than ten percent of the votes at such
meeting. The Certificate provides that no action required to be taken or which
may be taken at any annual or special meeting of stockholders of the corporation
may be taken without a meeting, and the power of stockholders to consent in
writing without a meeting to the taking of any action is specifically denied.
The Bylaws establish an advance notice procedure for stockholder proposals to be
brought before an annual
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meeting of stockholders and for nominations by stockholders of candidates for
election as directors at a meeting at which directors are elected.
On December 1, 1988, the Company adopted a Stockholder Rights Plan and
declared a dividend of one Right for each outstanding share of Common Stock.
Pursuant to the Stockholder Rights Plan, as amended, each Right entitles a
shareholder to purchase one one-hundredth of a share of Series A Junior
Participating Preferred Stock at an exercise price of $150, subject to
adjustments. The Rights will not be exercisable or separable from the Common
Stock until ten days after a person or group publicly announces it has acquired,
or has tendered an offer for, 15% or more of the Company's outstanding Common
Stock.
If, after the Rights become exercisable, a person acquires more than 15% of
the outstanding Common Stock (except pursuant to an offer for all outstanding
shares of Common Stock which the independent directors determine to be fair to
and otherwise in the best interests of the Company and its stockholders), then
each Right holder will be entitled to receive upon exercise, Common Stock (or,
in certain circumstances, other consideration) having a value equal to two times
the exercise price of the Right. If, after the Rights become exercisable, the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation or in which the Company's
outstanding Common Stock is exchanged for cash, stock or other property (other
than a merger which follows an offer deemed by the directors to be in the best
interests of the stockholders), or 50% or more of the Company's assets or
earning power is sold or transferred, each Right holder is entitled to receive,
upon exercise, common stock of the acquiring company having a value equal to two
times the exercise price of the Right. The Company is entitled to redeem the
Rights at $.01 per Right, as adjusted to reflect any stock split, stock dividend
or similar transaction, at any time prior to the earlier of the expiration of
the Rights on November 30, 1998 or ten days following the acquisition of 15% or
more of the Company's outstanding Common Stock by a person or group. The Rights
do not have any voting rights and are not entitled to dividends.
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, pursuant to the
statute, a corporation is prohibited from engaging in a business combination (as
defined in Section 203) with any Interested Stockholder (defined to mean any
person or group owning 15% or more of the corporation's outstanding voting
stock) for a period of three years following the time such person or group
became an Interested Stockholder. This prohibition does not apply if (i) prior
to such time, the corporation's board of directors approved either the business
combination or the transaction which resulted in the stockholder becoming an
Interested Stockholder, (ii) upon consummation of the transaction which resulted
in such person or group becoming an Interested Stockholder, such Interested
Stockholder owned at least 85% of the corporation's voting stock outstanding at
the time the transaction commenced (excluding from the calculation of such 85%
ownership level, shares owned by persons who are both officers and directors and
shares owned by employee benefit plans under which participants do not have the
right to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer) or (iii) at or subsequent to such
time the business combination is approved by the corporation's board of
directors and authorized at an annual or special meeting of stockholders, not by
written consent, by the affirmative vote of at least two-thirds of the
corporation's outstanding voting stock, excluding stock owned by the Interested
Stockholder. In addition, subject to certain notice and related timing
requirements, business combinations consisting of (x) mergers or consolidations
requiring stockholder approval, (y) certain asset sales or related transactions
and (z) tender or exchange offers for 50% or more of the corporation's
outstanding voting stock are permitted where such business combination (i) is
with a person or group which either was not an Interested Stockholder during the
preceding three years or which became such with the approval of the
corporation's board of directors and (ii) is approved (or not opposed) by a
majority of the disinterested directors (as defined in Section 203). Any future
election to opt out of Section 203 can be effected only by an amendment to the
Certificate or the Bylaws. Any such election would not be effective until 12
months after the date of adoption of such amendment and would not apply to a
business combination with any Interested Stockholder who became such on or prior
to such date of adoption.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer and Trust Company.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the material U.S. federal income
tax consequences of the purchase, ownership and disposition of the Debentures
and Common Stock to U.S. Holders (as defined below), and the material U.S.
federal income and estate tax consequences relating to the purchase, ownership
and disposition of the Debentures and Common Stock to Non-U.S. Holders (as
defined below), but does not purport to be a complete analysis of all the
potential tax considerations relating thereto. This discussion is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed
Treasury Regulations, and judicial decisions and administrative interpretations
thereunder, as of the date hereof, all of which are subject to change, possibly
with retroactive effect, or different interpretations. There can be no assurance
that the Internal Revenue Service (the "IRS") will not challenge one or more of
the tax consequences described herein, and the Company has not obtained, nor
does it intend to obtain, a ruling from the IRS with respect to the U.S. federal
tax consequences of acquiring or holding Debentures or Common Stock.
This discussion does not purport to address all tax consequences that may
be important to a particular holder in light of the holder's circumstances (such
as the alternative minimum tax provisions of the Code), or to certain categories
of investors (such as certain financial institutions, insurance companies,
tax-exempt organizations, dealers in securities, or persons who hold Debentures
or Common Stock as part of a hedge, conversion or constructive sale transaction,
straddle or other risk reduction transaction) that may be subject to special
rules. This discussion is limited to holders of Debentures who hold the
Debentures and any Common Stock into which the Debentures are converted as
capital assets. This discussion also does not address the tax consequences
arising under the laws of any foreign, state or local jurisdiction.
PERSONS CONSIDERING THE PURCHASE OF A DEBENTURE SHOULD CONSULT THEIR OWN
TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING,
HOLDING, CONVERTING OR OTHERWISE DISPOSING OF THE DEBENTURES AND COMMON STOCK,
INCLUDING THE EFFECT AND APPLICABILITY OF STATE, LOCAL OR FOREIGN TAX LAWS.
U.S. HOLDERS
As used herein, the term "U.S. Holder" means a holder of a Debenture or
Common Stock that is (i) for United States federal income tax purposes, a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, (iii) an estate, the income of which is
subject to United States federal income taxation regardless of its source, (iv)
a trust, the administration of which is subject to the primary supervision of a
court within the United States and which has one or more United States persons
with authority to control all substantial decisions or (v) certain electing
trusts that were in existance on August 19, 1996 and treated as domestic trusts
on such date. As used herein, the term "Non-U.S. Holder" means a holder of a
Debenture or Common Stock that is not a U.S. Holder.
Original Issue Discount on the Debentures. The Debentures were issued at a
substantial discount from their stated redemption price at maturity. For federal
income tax purposes, the excess of the stated redemption price at maturity of
each Debenture over its issue price constitutes original issue discount
("Original Issue Discount"). The issue price of the Debentures equals the
initial price at which a substantial amount of the Debentures was sold (not
including sales to underwriters or placement agents, including the Initial
Purchasers). U.S. Holders of the Debentures will be required to include Original
Issue Discount in income as it accrues, in accordance with the constant yield
method described below, before receipt of the cash attributable to such income,
regardless of such U.S. Holder's regular method of accounting for United States
federal income tax purposes. A U.S. Holder of a Debenture must include in gross
income for federal income tax purposes the sum of the daily portions of Original
Issue Discount with respect to the Debenture for each day during the taxable
year or portion of a taxable year on which such U.S. Holder holds the Debenture.
The daily portion is determined by allocating to each day of each accrual period
a pro rata portion of an amount equal to the adjusted issue price of the
Debenture at the beginning of the accrual period multiplied by the
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yield to maturity of the Debenture (determined by compounding at the close of
each accrual period and adjusted for the length of the accrual period). The
adjusted issue price of a Debenture at the start of any accrual period will be
the issue price of the Debenture increased by the accrued Original Issue
Discount for each prior accrual period. Under these rules, U.S. Holders will
have to include in gross income increasingly greater amounts of Original Issue
Discount in each successive accrual period. A U.S. Holder's original tax basis
for determining gain or loss on the sale or other disposition of a Debenture
will be increased by any accrued Original Issue Discount includable in such U.S.
Holder's gross income.
There are several circumstances under which the Company could make a
payment on a Debenture which would affect the yield to maturity of a Debenture,
including (as described under "Description of Debentures") the payment of
Liquidated Damages or the redemption or repurchase of Notes. According to
Treasury Regulations, the possibility of a change in the yield will not be
treated as affecting the amount of Original Issue Discount required to be
realized by a holder (or the timing of such recognition) if the likelihood of
the change, as of the date the debt obligations are issued, is remote. The
Company intends to report on the basis that the likelihood of any change in the
yield on the Debentures is remote. The Company also intends to report on the
basis that there is no alternative payment schedule that would minimize the
yield on the Debentures to the Company.
Market Discount. Any principal payment or gain realized by a U.S. Holder on
disposition or retirement of a Debenture will be treated as ordinary income to
the extent that there is accrued market discount on the Debenture. The amount of
market discount on a Debenture for a U.S. Holder will equal the excess of the
adjusted issue price of such Debenture over the initial tax basis of such
Debentures in the hands of such holder. To the extent a U.S. Holder exchanges or
converts a Debenture into Common Stock in a transaction that is otherwise tax
free, any accrued market discount will carry over and generally be recognized
upon a disposition of the Common Stock. Unless a U.S. Holder irrevocably elects
to accrue market discount under a constant-interest method, accrued market
discount is the total market discount multiplied by a fraction, the numerator of
which is the number of days the U.S. Holder has held the obligation and the
denominator of which is the number of days from the date the U.S. Holder
acquired the obligation until its maturity. A U.S. Holder may be required to
defer a portion of its interest deductions for the taxable year attributable to
any indebtedness incurred or continued to purchase or carry a Debenture
purchased with market discount. Any such deferred interest expense would not
exceed the market discount that accrues during such taxable year and is, in
general, allowed as a deduction not later than the year in which such market
discount is includable in income. If the U.S. Holder elects to include market
discount in income currently as it accrues on all market discount instruments
acquired by the U.S. Holder in that taxable year or thereafter, (i) the interest
deferral described above will not apply and (ii) market discount will not carry
over into Common Stock as described above. Any such election may be terminated
only with the consent of the IRS and applies to all market discount bonds
acquired during or after the year for which it is made.
Acquisition Premium. A U.S. Holder will be considered to have "acquisition
premium" to the extent the U.S. Holder's initial tax basis in a Debenture is
greater than (x) the adjusted issue price of such Debenture but less than (y)
the stated redemption price at maturity of such Debenture. Acquisition premium
may offset the amount of Original Issue Discount received on such Debenture that
the U.S. Holder is required to include in income.
Election. A U.S. Holder, subject to certain limitations, may elect to
include in gross income for federal income tax purposes all interest that
accrues on a Debenture by using the constant interest method. For this purpose,
interest includes Original Issue Discount, market discount, and de minimis
market discount as adjusted by any acquisition premium. Such election, if made
in respect of a market discount bond, will constitute an election to include
market discount in income currently on all market discount bonds held by such
U.S. Holder. See the discussion above under the caption "Market Discount." Any
such election may be terminated only with the consent of the IRS.
Sale, Exchange or Retirement of the Debentures. Upon the sale, exchange or
retirement of a Debenture, including as a result of a tender upon the occurrence
of a Fundamental Change, and, except as discussed in the
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next paragraph, on a Purchase Date, a holder will recognize gain or loss equal
to the difference between the sale or redemption proceeds and the U.S. Holder's
adjusted tax basis in the Debenture.
If a U.S. Holder elects to exercise its option to tender the Debentures to
the Company on a Purchase Date and the Company issues Common Stock in
satisfaction of all or part of the Purchase Price, the exchange of the
Debentures for Common Stock should qualify as a reorganization for federal
income tax purposes. If the Purchase Price is paid solely in Common Stock,
except in the case of a fractional share described below, a U.S. Holder will not
be required to recognize any gain realized and will not be permitted to
recognize any loss. If the Purchase Price is paid in a combination of Common
Stock and cash (other than cash received in lieu of a fractional share), gain
(but not loss) realized by the U.S. Holder would be recognized, but only to the
extent of the cash received. A U.S. Holder's initial tax basis in the Common
Stock received would be equal to such U.S. Holder's adjusted tax basis in the
Debenture tendered (except for any portion allocable to a fractional share of
Common Stock), increased by the amount of gain recognized (other than with
respect to a fractional share) and decreased by the amount of any cash received
(except cash received in lieu of a fractional share). The holding period for
Common Stock received in the exchange will include the holding period of the
Debenture tendered to the Company in exchange therefor. The receipt of cash in
lieu of a fractional share of Common Stock should generally result in capital
gain or loss, measured by the difference between the amount of cash received for
the fractional share and the U.S. Holder's tax basis in the fractional share
interest.
A U.S. Holder's adjusted tax basis in a Debenture will generally equal the
U.S. Holder's cost of the Debenture increased by any Original Issue Discount
previously included in income by such holder with respect to such Debenture and
decreased by any payments received thereon. Except to the extent of any accrued
market discount, gain or loss realized on the sale, exchange or retirement of a
Debenture will generally be capital gain or loss and will be long-term capital
gain or loss if the Debenture is held for more than one year. For individual
U.S. Holders, the maximum rate of United States federal income tax generally is
28% if the Debenture disposed of is held for more than one year but not more
than 18 months, and the maximum rate is 20% if the Debenture disposed of is held
more than 18 months.
Conversion of Debentures. A U.S. Holder's conversion of a Debenture into
Common Stock will generally not be a taxable event (except with respect to cash
received in lieu of a fractional share). A U.S. Holder's basis in the Common
Stock received on conversion of a Debenture will be the same as the U.S.
Holder's basis in the Debenture at the time of conversion (exclusive of any tax
basis allocable to a fractional share), and the holding period for the Common
Stock received on conversion will include the holding period of the Debenture
converted. The receipt of cash in lieu of fractional Common Stock should
generally result in capital gain or loss (measured by the difference between the
cash received for the fractional share interest and the U.S. Holder's tax basis
in such fractional share interest).
Dividends; Adjustment of Conversion Price. Dividends, if any, paid on the
Common Stock generally will be includable in the income of a U.S. Holder as
ordinary income to the extent of the Company's current or accumulated earnings
and profits.
If at any time the Company makes a distribution of property to shareholders
that would be taxable to such shareholders as a dividend for federal income tax
purposes (for example, distributions of evidences of indebtedness or assets of
the Company, but generally not stock dividends or rights to subscribe for Common
Stock) and, pursuant to the anti-dilution provisions of the Indenture, the
Conversion Rate of the Debentures is increased, such increase may be deemed to
be the payment of a taxable dividend to U.S. Holders of Debentures. If the
Conversion Rate is increased at the discretion of the Company or in certain
other circumstances, such increase also may be deemed to be the payment of a
taxable dividend to U.S. Holders of Debentures.
Sale of Common Stock. Upon the sale or exchange of Common Stock, U.S.
Holders generally will recognize capital gain or capital loss (except to the
extent of any accrued market discount not previously included in income) equal
to the difference between the amount realized on such sale or exchange and the
U.S. Holder's adjusted tax basis in such shares. For individual U.S. Holders,
the maximum rate of United States federal income tax generally is 28% if the
Common Stock disposed of is held for more than one year but
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not more than 18 months, and the maximum rate is generally 20% if the Common
Stock disposed of is held more than 18 months.
NON-U.S. HOLDERS
The following discussion is a summary of the principal United States
federal income and estate tax consequences resulting from the ownership of the
Debentures or Common Stock by Non-U.S. Holders.
Withholding Tax on Payments of Principal and Original Issue Discount on
Debentures. The payment of principal (including any Original Issue Discount
included therein) of a Debenture by the Company or any paying agent of the
Company to any Non-U.S. Holder will not be subject to United States federal
withholding tax, provided that in the case of payment of cash in respect of
Original Issue Discount (i) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total voting combined power of all classes
of stock of the Company, (ii) the Non-U.S. Holder is not a controlled foreign
corporation that is related to the Company within the meaning of the Code, and
(iii) either (A) the beneficial owner of the Debenture certifies to the
applicable payor or its agent, under penalties of perjury, that it is not a U.S.
Holder and provides its name and address on United States Treasury Form W-8 (or
a suitable substitute form), or (B) a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "financial institution") and holds the
Debenture certifies under penalties of perjury that such a Form W-8 (or a
suitable substitute form) has been received from the beneficial owner by it or
by a financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof. Except to the extent otherwise provided under an
applicable tax treaty, a Non-U.S. Holder generally will be taxed in the same
manner as a U.S. Holder with respect to Original Issue Discount on a Debenture
if such Original Issue Discount is effectively connected with a U.S. trade or
business of the Non-U.S. Holder. Effectively connected interest received by a
corporate Non-U.S. Holder may also, under certain circumstances, be subject to
an additional "branch profits tax" at a 30% rate (or, if applicable, a lower
treaty rate). Such effectively connected Original Issue Discount will not be
subject to withholding tax if the holder delivers an IRS Form 4224 (and,
beginning January 1, 2000, a Form W-8) to the payor.
Dividends. Dividends, if any, paid on the Common Stock to a Non-U.S. Holder
generally will be subject to a 30% United States federal withholding tax,
subject to reduction for Non-U.S. Holders eligible for the benefits of certain
income tax treaties. Currently, for purposes of determining whether tax is to be
withheld at the 30% rate or at a reduced treaty rate, the Company will
ordinarily presume that dividends paid to an address in a foreign country are
paid to a resident of such country absent knowledge that such presumption is not
warranted. Under Treasury Regulations effective for payments after December 31,
1999, holders will be required to satisfy certain applicable certification
requirements to claim treaty benefits. Except to the extent otherwise provided
under an applicable tax treaty, a Non-U.S. Holder generally will be taxed in the
same manner as a U.S. Holder on dividends paid (or deemed paid) that are
effectively connected with the conduct of a trade or business in the U.S. by the
Non-U.S. Holder. If such Non-U.S. Holder is a foreign corporation, it may also
be subject to a United States branch profits tax on such effectively connected
income at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty.
Gain on Disposition of the Debentures and Common Stock. A Non-U.S. Holder
generally will not be subject to United States federal income tax on gain
realized on the sale, exchange or redemption of a Debenture, including the
exchange of a Debenture for Common Stock, or the sale or exchange of Common
Stock unless (i) in the case of an individual Non-U.S. Holder, such holder is
present in the United States for 183 days or more in the year of such sale,
exchange or redemption and either (A) has a "tax home" in the United States and
certain other requirements are met, or (B) the gain from the disposition is
attributable to an office or other fixed place of business in the United States,
(ii) the Non-U.S. Holder is subject to tax pursuant to the provisions of U.S.
tax law applicable to certain U.S. expatriates, (iii) the gain is effectively
connected with the conduct of a United States trade or business by the Non-U.S.
Holder, or (iv) in the case of the disposition of Common Stock, the Company is a
"United States real property holding corporation." The Company does not believe
that it is currently a "United States real property holding corporation" or that
it will become one in the future.
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U.S. Federal Estate Tax. A Debenture held by an individual who at the time
of death is not a citizen or resident of the United States (as specially defined
for United States federal estate tax purposes) will not be subject to United
States federal estate tax if the individual did not actually or constructively
own 10% or more of the total combined voting power of all classes of stock of
the Company and, at the time of the individual's death, payments with respect to
such Debenture would not have been effectively connected with the conduct by
such individual of a trade or business in the United States. Common Stock held
by an individual who at the time of death is not a citizen or resident of the
United States (as specially defined for United States federal estate tax
purposes) will be included in such individual's estate for U.S. federal estate
tax purposes, unless an applicable estate tax treaty otherwise applies.
BACKUP WITHHOLDING AND INFORMATION REPORTING
U.S. Holders. Information reporting will apply to payments of interest or
dividends on or the proceeds of the sale or other disposition of the Debentures
or shares of Common Stock made by the Company with respect to certain
noncorporate U.S. Holders, and backup withholding at a rate of 31% may apply
unless the recipient of such payment supplies a taxpayer identification number,
certified under penalties of perjury, as well as certain other information or
otherwise establishes an exemption from backup withholding. Any amount withheld
under the backup withholding rules is allowable as a credit against the U.S.
Holder's federal income tax, provided that the required information is provided
to the IRS.
Non-U.S. Holders. The Company must report annually to the IRS and to each
Non-U.S. Holder the amount of any dividends paid to, and the tax withheld with
respect to, such holder, regardless of whether any tax was actually withheld.
Copies of these information returns may also be made available under the
provisions of a specific treaty or agreement to the tax authorities of the
country in which the Non-U.S. Holder resides.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments of principal, including cash payments in
respect of Original Issue Discount, on the Debentures by the Company or any
agent thereof to a Non-U.S. Holder if the Non-U.S. Holder certifies as to its
Non-U.S. Holder status under penalties of perjury or otherwise establishes an
exemption (provided that neither the Company nor its agent has actual knowledge
that the holder is a U.S. person or that the conditions of any other exemptions
are not in fact satisfied). The payment of the proceeds on the disposition of
Debentures or shares of Common Stock to or through the United States office of a
United States or foreign broker will be subject to information reporting and
backup withholding unless the owner provides the certification described above
or otherwise establishes an exemption. The proceeds of the disposition by a
Non-U.S. Holder of Debentures or shares of Common Stock to or through a foreign
office of a broker will not be subject to backup withholding or information
reporting. However, if such broker is (i) a U.S. person, (ii) a controlled
foreign corporation for United States tax purposes, or (iii) a foreign person,
50% or more of whose gross income from all sources for certain periods is from
activities that are effectively connected with a U.S. trade or business,
information reporting requirements will apply unless such broker has documentary
evidence in its files of the holder's Non-U.S. status and has no actual
knowledge to the contrary or unless the holder otherwise establishes an
exemption. Recently finalized Treasury Regulations would modify the application
of information reporting requirements and the back-up withholding tax to
Non-U.S. Holders effective January 1, 2000.
DEDUCTIBILITY OF INTEREST BY THE COMPANY
Legislation enacted in 1997 provides that interest on debt "payable in
equity" of the issuer or certain related parties is not deductible to the
issuer. For this purpose, debt payable in equity includes (i) an obligation of
which a substantial amount of the principal or interest is at the option of the
issuer or certain related parties payable in equity of the issuer or certain
related parties, (ii) an obligation which is part of an arrangement designed to
result in payment of the obligation with or by reference to equity of the issuer
or certain related parties and (iii) certain obligations convertible at the
option of the holder into equity of the issuer or certain related parties where
the holder is substantially certain to convert. The legislative history to this
provision provides, among other things, that the provision is not expected to
affect typical convertible debt with a conversion price significantly higher
than the market price for the stock to be received upon conversion on the date
of issuance of the debt. Because the conversion price for the Common Stock to be
received upon
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conversion of the Debentures exceeded the market price for the Common Stock on
the date of issuance of the Debentures, and the Company is only permitted to pay
the principal amount of the Debentures in Common Stock at the option of the
Holders, which option is not substantially certain to be exercised, the Company
intends to take the position that Original Issue Discount accrued on the
Debentures will not be subject to this recent legislation. In addition, the
Debentures should not be subject to legislation recently proposed by the Clinton
Administration that would defer or deny deductions for Original Issue Discount
on certain convertible debt instruments.
SELLING SECURITYHOLDERS
The following table sets forth, as of May 11, 1998, the respective
principal amount at maturity of Debentures beneficially owned and offered hereby
by each Selling Securityholder, the Common Stock owned by each Selling
Securityholder and the Common Stock issued or issuable upon conversion of such
Debentures, which may be sold from time to time by such Selling Securityholder
pursuant to this Prospectus.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
AT MATURITY COMMON
OF DEBENTURES PERCENT OF STOCK OWNED COMMON STOCK
BENEFICIALLY OWNED TOTAL OUTSTANDING PRIOR TO REGISTERED
SELLING SECURITYHOLDERS AND OFFERED HEREBY DEBENTURES OFFERING HEREBY(1)
----------------------- ------------------ ----------------- ----------- --------------------
<S> <C> <C> <C> <C>
Aldebaran SAL..................... $ 60,000 * -- 896
Alexandra Global Investment Fund,
I............................... 9,000,000 * -- 134,415
Allstate Insurance Company........ 14,000,000 1 (2) 209,090
Alta Partners Holding, LDC........ 5,000,000 * -- 74,675
Alutrade International SA......... 600,000 * -- 8,961
AMOCO Corporation Master Trust.... 4,780,000 * -- 71,389
Architects Partnership, The....... 70,000 * -- 1,045
Argent Classic Convertible
Arbitrage Fund (Bermuda) L.P.... 56,500,000 4 -- 843,827
Argent Classic Convertible
Arbitrage Fund L.P.............. 13,500,000 1 -- 201,622
Associated Electric & Gas
Insurance Services Limited...... 1,500,000 * -- 22,402
Bancamerica Robertson Stephens.... 3,075,000 * -- 45,925
Bear Stearns Securities Corp...... 214,550,000 17 -- 3,203,557
Black Diamond Ltd................. 5,491,000 * 47,170 82,008
Black Diamond Partners, L.P....... 4,930,000 * 47,955 73,629
Bonannay Investments Limited...... 100,000 * -- 1,493
Bond Fund Series-Oppenheimer Fund
for Growth...................... 11,000,000 * -- 164,285
Boston College Endowment Fund..... 392,000 * -- 5,854
BT Holdings....................... 16,000,000 1 -- 238,960
Buffalo High Yield Fund, Inc...... 1,000,000 * -- 14,935
Business Investment Organisation
Co. Ltd. -- metal a/c........... 280,000 * -- 4,181
Canadian Imperial Holdings Inc.... 22,500,000 2 -- 336,037
Carrigaholt Capital (Bermuda)
L.P............................. 2,500,000 * -- 37,337
Century National Insurance
Company......................... 2,180,000 * -- 32,558
Chapin Carpenter, Mary............ 25,000 * -- 373
Chrysler Corporation Master
Retirement Trust................ 9,550,000 * -- 142,629
Chrysler Insurance
Company -- Total Return......... 120,000 * -- 1,792
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
AT MATURITY COMMON
OF DEBENTURES PERCENT OF STOCK OWNED COMMON STOCK
BENEFICIALLY OWNED TOTAL OUTSTANDING PRIOR TO REGISTERED
SELLING SECURITYHOLDERS AND OFFERED HEREBY DEBENTURES OFFERING HEREBY(1)
----------------------- ------------------ ----------------- ----------- --------------------
<S> <C> <C> <C> <C>
Class IC Company, Ltd., The....... 2,500,000 * -- 37,337
Collins US Premier Equity Trust... 250,000 * -- 3,733
Colonial Penn Life Insurance Co... 500,000 * -- 7,467
Connell, Eileen M................. 40,000 * -- 597
Corbel Investments, Ltd........... 400,000 * -- 5,974
Corporate Investment Services SAL
(Offshore) -- growth a/c........ 240,000 * -- 3,584
Cova Bond -- Debenture............ 1,500,000 * -- 22,402
Credit Suisse London Nominees
Limited......................... 4,000,000 * 91,500 59,740
Damask Capital, Ltd............... 300,000 * -- 4,480
Delozier, Joseph and Jan.......... 15,000 * -- 224
Delta Air Lines Master Trust...... 7,635,000 * -- 114,028
Deutsche Bank A.G................. 111,475,000 9 -- 1,664,879
Donaldson, Lufkin & Jenrette
Securities Corporation.......... 54,535,000 4 -- 814,480
Double Black Diamond Offshore
LDC............................. 2,316,000 * 9,300 34,589
Employers' Reinsurance
Corporation..................... 4,795,000 * -- 71,613
EQ Putnam Balanced Portfolio...... 50,000 * -- 746
Fidelity Securities Fund: Fidelity
Growth and Income Portfolio..... 70,000,000 (3) 1045,450
Fort Dearborn Life Insurance
Company......................... 360,000 * -- 5,376
Franklin Investors Securities
Trust Convertible Securities
Fund............................ 4,000,000 * -- 59,740
FSS-Franklin Small Cap Growth
Fund............................ 23,800,000 2 -- 355,453
Fundamental Investors, Inc........ 22,500,000 2 -- 336,037
George Putnam Fund of Boston,
The............................. 8,810,000 * -- 131,577
Gleneagles Fund Company, The...... 1,500,000 * -- 22,402
GLG Global Convertible Fund PLC... 10,000,000 * -- 149,350
Goldman, Sachs & Co............... 4,970,000 * -- 74,226
GPZ Trading LLC................... 10,000,000 * -- 149,350
Gruber-McBaine International...... 200,000 * -- 2,987
Habile Investments Limited........ 200,000 * -- 2,987
Hamilton Global Investors
Limited......................... 6,000,000 * -- 89,610
Hamilton Partners Limited......... 4,000,000 * -- 59,740
Heritage Finance and Trust Co..... 350,000 * -- 5,227
Highbridge Capital Corporation.... 383,000 * -- 5,720
HSBC Securities Inc............... 7,100,000 * -- 106,038
Income Fund of America, Inc.,
The............................. 67,500,000 5 -- 1,008,112
Issa, Mr. Pierre & Mrs. Claude.... 80,000 * -- 1,194
Jatyco Inc. -- No. 2 a/c.......... 120,000 * -- 1,792
Jefferies & Co.................... 95,000 * -- 1,418
Kapiolani Health.................. 365,000 * -- 5,451
Kensington Value Fund LLC......... 1,000,000 * -- 14,935
Lagunitas Partners LP............. 200,000 * -- 2,987
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
AT MATURITY COMMON
OF DEBENTURES PERCENT OF STOCK OWNED COMMON STOCK
BENEFICIALLY OWNED TOTAL OUTSTANDING PRIOR TO REGISTERED
SELLING SECURITYHOLDERS AND OFFERED HEREBY DEBENTURES OFFERING HEREBY(1)
----------------------- ------------------ ----------------- ----------- --------------------
<S> <C> <C> <C> <C>
LDG Limited....................... 1,500,000 * -- 22,402
Levin Charitable Trust............ 40,000 * -- 597
Marsh & McLennan Companies Inc.... 360,000 * -- 5,376
Mellon Bank NA, Trustee for
General Motors Employees
Domestic Group Pension Trust.... 2,500,000 * -- 37,337
Merrill Lynch International
Ltd............................. 17,500,000 1 -- 261,362
Merrill Lynch Pierce Fenner &
Smith........................... 30,750,000 2 -- 459,251
Millennium Trading Co. L.P........ 9,000,000 * -- 134,415
Museum of Fine Arts, Boston....... 590,000 * -- 8,811
New Hampshire State Retirement
System.......................... 3,100,000 * -- 46,298
Northwestern Mutual Life Insurance
Company, The (Includes
$1,000,000 in principal amount
held by The Northwestern Mutual
Life Insurance Company Group
Annuity Separate Account)....... 8,000,000 * (4) 119,480
Oakmont Holdings Limited.......... 40,000 * -- 597
OCM Convertible Limited
Partnership..................... 525,000 * -- 7,840
OCM Convertible Trust............. 13,950,000 1 -- 208,343
Oppenheimer Variable Account Funds
for the Oppenheimer Growth &
Income Fund..................... 3,000,000 * -- 44,805
Orrington International Fund
Ltd............................. 2,238,000 * -- 33,424
Orrington Investments LP.......... 3,762,000 * -- 56,185
Pacific Life Insurance Company.... 3,000,000 * -- 44,805
Palladin Overseas Fund Ltd........ 1,500,000 * -- 22,402
Palladin Partners I. L.P.......... 500,000 * -- 7,467
Paloma Securities L.L.C........... 22,650,000 2 7,400 338,277
Paloma Strategic Fund L.P......... 10,000,000 * -- 149,350
Partner Reinsurance Company
Ltd............................. 1,025,000 * -- 15,308
Pepperdine University Pool A1..... 465,000 * -- 6,944
Pepperdine University Pool A2..... 295,000 * -- 4,405
Promutual......................... 2,540,000 * -- 37,934
Putnam Balanced Retirement Fund... 2,590,000 * -- 38,681
Putnam Convertible Income --
Growth Trust.................... 24,668,000 2 -- 368,416
Putnam Convertible Opportunities
and Income Trust................ 1,945,000 * -- 29,048
Putnam Equity Income Fund......... 3,780,000 * -- 56,454
R(2) Investments, LDC............. 3,000,000 * -- 44,805
Raytheon Company Master Pension
Trust........................... 4,895,000 * -- 73,106
Rohne-Poulenc Rorer Inc. Pension
Plan............................ 590,000 * -- 8,811
Sanders, Mark and Cynthia......... 40,000 * -- 597
Shepherd Investments
International, Ltd.............. 19,000,000 1 -- 283,765
</TABLE>
32
<PAGE> 34
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
AT MATURITY COMMON
OF DEBENTURES PERCENT OF STOCK OWNED COMMON STOCK
BENEFICIALLY OWNED TOTAL OUTSTANDING PRIOR TO REGISTERED
SELLING SECURITYHOLDERS AND OFFERED HEREBY DEBENTURES OFFERING HEREBY(1)
----------------------- ------------------ ----------------- ----------- --------------------
<S> <C> <C> <C> <C>
Silverton International Fund
Limited......................... 8,600,000 * -- 128,441
Societe Generale Securities
Corporation..................... 4,500,000 * -- 67,207
Stark International............... 5,000,000 * -- 79,675
State Employees' Retirement Fund
of the State of Delaware........ 3,355,000 * -- 50,106
State of Connecticut Combined
Investment Funds................ 12,015,000 * -- 179,444
State of Oregon -- Equity......... 10,000,000 * -- 149,350
Susquehanna Capital Group......... 5,000,000 * -- 74,675
Talwar Trading & Investments
Ltd............................. 120,000 * -- 1,792
TQA Arbitrage Fund, L.P........... 1,000,000 * -- 14,935
TQA Leverage Fund, L.P............ 3,000,000 * -- 44,805
TQA Vantage Fund, Ltd............. 5,000,000 * -- 74,675
TQA Vantage Plus, Ltd............. 1,500,000 * -- 22,402
Tribeca Investments, L.L.C........ 20,000,000 2 -- 298,700
University of Rochester........... 590,000 * -- 8,811
Van Kampen American Capital
Convertible Securities Fund..... 1,280,000 * (5) 19,116
Van Kampen American Capital Harbor
Fund............................ 6,720,000 * (5) 100,363
Vanguard Convertible Securities
Fund, Inc....................... 8,550,000 * -- 127,694
Vivaldi Investments Limited....... 160,000 * -- 2,389
Worldwide Transactions Ltd........ 880,000 * 8,555 13,142
Zazove Aggressive Growth Fund,
L.P............................. 550,000 * -- 8,214
Zazove Convertible Fund, L.P...... 3,200,000 * -- 47,792
Zazove Global Convertible Fund,
L.P............................. 440,000 * -- 6,571
</TABLE>
- ---------------
* Less than one percent
(1) The shares of Common Stock registered hereby are calculated on an "as
converted" basis using the conversion rate described on the cover page of
this Prospectus.
(2) Allstate Insurance Company ("AIC") acquires investments which may exceed 10%
of a class of equity securities of an issuer as a result of its Private
Equity Group's portfolio transactions. The Public Equity Group of AIC's
Investment Department, which has responsibility for the securities which are
listed herein, is not aware of any positions, offices or other material
relationships involving AIC which should be disclosed. No independent
investigation has been made, however, as to whether there may have been any
such transactions as a result of insurance activities or actions with
respect to or by such investee companies.
(3) The entity is either an investment company or a portfolio of an investment
company registered under Section 8 of the Investment Company Act of 1940, as
amended, or a private investment account advised by Fidelity Management &
Research Company ("FMR Co."). FMR Co. is a Massachusetts corporation and an
investment advisor registered under Section 203 of the Investment Advisors
Act of 1940, as amended, and provides investment advisory services to the
Fidelity entity identified above, and to other registered investment
companies and to certain other funds which are generally offered to a
limited group of investors.
(4) In the ordinary course of business, Northwestern Mutual Investment Services,
Inc., Robert W. Baird & Co. Incorporated, Baird/Mark Capital Group, and MGIC
Mortgage Securities Corporation, each of
33
<PAGE> 35
which is a broker-dealer and affiliated with The Northwestern Mutual Life
Insurance Company, may, from time to time, have acquired or disposed of, or
may in the future acquire or dispose of, securities of the Company, for such
broker-dealers' own accounts or for the accounts of others. Other affiliates
of The Northwestern Mutual Life Insurance Company may, in the ordinary
course of business, effect transactions in the securities of the Company.
Only security holdings of The Northwestern Mutual Life Insurance Company are
reflected. The Northwestern Mutual Life Insurance Company and its affiliates
may, in the ordinary course of business, take part in transactions involving
the real property of the Company.
(5) Van Kampen American Capital Asset Management, Inc. is the securityholder's
investment advisor and acts as investment advisor to other funds which
beneficially own securities of the Company.
Unless otherwise indicated, none of the Selling Securityholders has, or
within the past three years has had, any position, office or other material
relationship with the Company or any of its affiliates. Because the Selling
Securityholders may, pursuant to this Prospectus, sell all or some portion of
the Debentures or the Common Stock issued or issuable upon conversion of the
Debentures, no estimate can be given as to the amount of the Debentures or the
Common Stock issued or issuable upon conversion of the Debentures that will be
held by the Selling Securityholders upon termination of any such sales. In
addition, the Selling Securityholders identified above may have sold,
transferred or otherwise disposed of all or a portion of their Debentures, in
transactions exempt from the registration requirements of the Securities Act,
since the date on which they provided the information regarding their
Debentures. See "Plan of Distribution."
The Debentures were originally issued by the Company in a private placement
on February 18, 1998 to the Initial Purchasers and were subsequently sold by the
Initial Purchasers, in transactions exempt from the registration requirements of
the Securities Act, to persons reasonably believed by such Initial Purchasers to
be "qualified institutional buyers" (as defined in Rule 144A under the
Securities Act) and to certain "accredited investors."
Generally, only Selling Securityholders identified in the foregoing table
who beneficially own the Debentures set forth opposite their respective names
may sell such Debentures pursuant to the shelf registration statement, of which
this Prospectus forms a part. The Company may from time to time include
additional Selling Securityholders in supplements or amendments to this
Prospectus.
34
<PAGE> 36
PLAN OF DISTRIBUTION
The Debentures and the shares of Common Stock issued or issuable upon
conversion of the Debentures (the "Registrable Securities") are being registered
to permit public secondary trading of such securities by the holders thereof
from time to time after the date of this Prospectus. The Company will not
receive any of the proceeds from the sale by the Selling Securityholders of the
Registrable Securities. The Company will bear all fees and expenses incident to
its obligation to register the Registrable Securities.
The Selling Securityholders may sell all or a portion of the Registrable
Securities beneficially owned by them and offered hereby from time to time
directly or through one or more underwriters, broker-dealers or agents. If the
Registrable Securities are sold through underwriters or broker-dealers, the
Selling Securityholder will be responsible for underwriting discounts or
commissions or agent's commission. Such Registrable Securities may be sold in
one or more transactions at fixed prices, at prevailing market prices at the
time of sale, at varying prices determined at the time of sale, or at negotiated
prices. Such sales may be effected in transactions (which may involve crosses or
block transactions) (i) on any national securities exchange or quotation service
on which the Registrable Securities may be listed or quoted at the time of sale
(including the New York Stock Exchange for the Common Stock), (ii) in the
over-the-counter market, or (iii) through the writing of options (whether such
options are listed on an options exchange or otherwise). In connection with
sales of the Registrable Securities or otherwise, the Selling Securityholder may
enter into hedging transactions with broker-dealers, which may in turn engage in
short sales of the Registrable Securities in the course of hedging in positions
they assume. The Selling Securityholder may also sell Registrable Securities
short and deliver Registrable Securities to close out short positions, or loan
or pledge Registrable Securities to broker-dealers that in turn may sell such
securities. If the Selling Securityholders effect such transactions by selling
Registrable Securities to or through underwriters, brokers, dealers or agents,
such underwriters, brokers, dealers or agents may receive commissions in the
form of discounts, concessions or commissions from the Selling Securityholders
or commissions from purchasers of Registrable Securities for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, brokers, dealers or agents may be in
excess of those customary in the types of transactions involved).
The outstanding Common Stock is listed for trading on the NYSE under the
symbol "WDC". The Company does not intend to apply for listing of the Debentures
on any securities exchange or for quotation through Nasdaq. Accordingly, no
assurance can be given as to the development of liquidity or any trading market
for the Debentures. See "Risk Factors -- Absence of Public Market."
The Selling Securityholders and any broker-dealer participating in the
distribution of the Registrable Securities may be deemed to be "underwriters'
within the meaning of the Securities Act, and any commissions paid, or any
discounts or concessions allowed to any such broker-dealer may be deemed to be
underwriting commissions or discounts under the Securities Act.
Under the securities laws of certain states, the Registrable Securities may
be sold in such states only through registered or licensed brokers or dealers.
In addition, in certain states the Registrable Securities may not be sold unless
the Registrable Securities have been registered or qualified for sale in such
state or an exemption from registration or qualification is available and is
complied with.
There can be no assurance that any Selling Securityholder will sell any or
all of the Debentures or Registrable Securities registered pursuant to the shelf
registration statement, of which this Prospectus forms a part. In addition, any
securities covered by this Prospectus that qualify for sale pursuant to Rule 144
or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A
rather than pursuant to this Prospectus.
Pursuant to the Registration Rights Agreement pursuant to which the
Registrable Securities have been registered, the Company and the Selling
Securityholders are obligated to indemnify each other against certain
liabilities arising under the Securities Act.
The Selling Securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without
35
<PAGE> 37
limitation, Regulation M, which may limit the timing of purchases and sales of
any of the Registrable Securities by the Selling Securityholders and any other
such person. Furthermore, Regulation M of the Exchange Act may restrict the
ability of any person engaged in the distribution of the Registrable Securities
to engage in market-making activities with respect to the particular Registrable
Securities being distributed. All of the foregoing may affect the marketability
of the Registrable Securities and the ability of any person or entity to engage
in market-making activities with respect to the Registrable Securities.
Upon sale pursuant to the shelf registration statement, of which this
Prospectus forms a part, the Registrable Securities will be freely tradable in
the hands of persons other than affiliates of the Company.
LEGAL MATTERS
The validity of the Debentures and the Common Stock issued or issuable upon
conversion of the Debentures was passed upon for the Company by Gibson, Dunn &
Crutcher LLP, Orange County, California.
INDEPENDENT AUDITORS
The consolidated financial statements of Western Digital Corporation as of
June 28, 1997 and June 29, 1996 and for each of the years in the three-year
period ended June 28, 1997, have been incorporated by reference herein and in
the registration statement, of which this Prospectus forms a part, in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
36
<PAGE> 38
=========================================================
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, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
SECURITYHOLDERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE AS OF WHICH SUCH INFORMATION IS GIVEN. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO 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 ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference............................. 2
Available Information................... 2
Forward-Looking Statements.............. 2
Prospectus Summary...................... 4
Risk Factors............................ 6
Ratio of Earnings to Fixed Charges...... 8
Use of Proceeds......................... 8
Description of Debentures............... 9
Description of Capital Stock............ 23
Certain Federal Income Tax
Considerations........................ 25
Selling Securityholders................. 30
Plan of Distribution.................... 35
Legal Matters........................... 36
Independent Auditors.................... 36
</TABLE>
=========================================================
=========================================================
$1,297,200,000
[LOGO]
ZERO COUPON CONVERTIBLE
SUBORDINATED DEBENTURES
DUE 2018 AND
SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION THEREOF
------------------------
PROSPECTUS
------------------------
MAY , 1998
=========================================================
<PAGE> 39
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Company in
connection with the offering of the Securities being registered hereby. The
Selling Securityholders will not share any portion of these expenses. Normal
commission expenses and brokerage fees are payable individually by the Selling
Securityholders. All amounts are estimated except the Securities and Exchange
Commission registration fee.
<TABLE>
<S> <C>
SEC Registration Fee...................................... $143,981
NYSE Fee.................................................. *
Printing Expenses......................................... 55,000
Legal Fees and Expenses................................... 35,000
Accounting Fees and Expenses.............................. 10,000
Transfer Agent and Registrar Fees......................... *
Miscellaneous............................................. *
--------
Total........................................... $
========
</TABLE>
- ---------------
* To be provided in a pre-effective amendment to this Registration Statement.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a Delaware corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no cause to believe his conduct was
unlawful.
Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if he or she acted under similar standards to
those set forth above, except that no indemnification may be made in respect to
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation unless and only to the extent that the court in
which such action or suit was brought shall determine that despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to be indemnified for such
expenses which the court shall deem proper.
Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsection (a) and (b) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against such officer
or director and incurred by him or her in any such capacity or arising out of
his or her status as such, whether or not the corporation would have the power
to indemnify him or her against such liabilities under Section 145.
II-1
<PAGE> 40
As permitted by Section 102(b)(7) of the DGCL the Company's Certificate of
Incorporation provides that a director shall not be liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director.
However, such provision does not eliminate or limit the liability of a director
for acts or omissions not in good faith or for breaching his or her duty of
loyalty, engaging in intentional misconduct or knowingly violating the law,
paying a dividend or approving a stock repurchase which was illegal, or
obtaining an improper personal benefit. A provision of this type has no effect
on the availability of equitable remedies, such as injunction or rescission, for
breach of fiduciary duty.
The Company's Bylaws require that directors and officers be indemnified to
the maximum extent permitted by Delaware law.
The Company may, from time to time, enter into indemnity agreements with
each of its directors and officers requiring that the Company pay on behalf of
each director and officer party thereto any amount that he or she is or becomes
legally obligated to pay because of any claim or claims made against him or her
because of any act or omission or neglect or breach of duty including any actual
or alleged error or misstatement or misleading statement, which he or she
commits or suffers while acting in his or her capacity as a director and/ or
officer of the Company and solely because of his or her being a director and/or
officer. Under the DGCL, absent such an indemnity agreement, indemnification of
a director or officer is discretionary rather than mandatory (except in the case
of a proceeding in which a director or officer is successful on the merits).
Consistent with the Company's Bylaw provision on the subject, the indemnity
agreements require the Company to make prompt payment of defense and
investigation costs and expenses at the request of the director or officer in
advance of indemnification, provided that the recipient undertakes to repay the
amounts if it is ultimately determined that he or she is not entitled to
indemnification for such expense and provided further that such advance shall
not be made if it is determined that the director or officer acted in bad faith
or deliberately breached his or her duty to the Company or its stockholders and,
as a result, it is more likely than not that it will ultimately be determined
that he or she is not entitled to indemnification under the terms of the
indemnity agreement. The indemnity agreements make the advance of litigation
expenses mandatory absent a special determination to the contrary, whereas under
the DGCL absent such an indemnity agreement, such advance would be
discretionary. Under the indemnity agreement, the Company would not be required
to pay or reimburse the director or officer for his or her expenses in seeking
indemnification recovery against the Company. By the terms of the indemnity
agreement, its benefits are not available if the director or officer has other
indemnification or insurance coverage for the subject claim or, with respect to
the matters giving rise to the claim, (i) received a personal benefit, (ii)
violated Section 16(b) of the Exchange Act or analogous provisions of law, or
(iii) committed certain acts of dishonesty. Absent the indemnity agreement,
indemnification that might be made available to directors and officers could be
changed by amendments to the Company's Certificate of Incorporation or Bylaws.
The Company has a policy of directors' liability insurance which insures
the directors and officers against the cost of defense, settlement or payment of
a judgment under certain circumstances.
The Selling Securityholders and the Company each have agreed to indemnify
the other and their respective officers, directors and other controlling persons
against certain liabilities in connection with this registration, including
liabilities under the Securities Act. The obligation of the Selling
Securityholders is limited to an amount equal to the proceeds such Selling
Securityholder receives from the sale of Registrable Securities sold pursuant to
this registration statement.
II-2
<PAGE> 41
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by reference:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
4.1 Purchase Agreement dated February 12, 1998, by and between
the Company and the Initial Purchasers named therein.
4.2 Indenture, dated as of February 18, 1998, between the
Company and State Street Bank and Trust Company of
California, N.A.
4.3 Registration Rights Agreement, dated as of February 18,
1998, by and between the Company and the Initial Purchasers
named therein.
4.4 The Company's Zero Coupon Convertible Subordinated Debenture
due 2018 and the Global Form of the Company's Zero Coupon
Convertible Subordinated Debenture due 2018 (which is
identical to the Company's Zero Coupon Convertible
Subordinated Debenture due 2018, except for certain
provisions as marked).
4.5 Form of Common Stock Certificate.*
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to legality of the
Securities registered hereby.**
8.1 Opinion of Gibson, Dunn & Crutcher LLP with respect to
certain tax matters.**
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
5.1).
23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
8.1).
23.3 Consent of KPMG Peat Marwick LLP, independent public
accountants.
24 Power of Attorney***
25 Statement of Eligibility of Trustee under the Trust
Indenture Act of 1939 on Form T-1.
</TABLE>
- ---------------
* Incorporated by reference to the Company's Registration Statement on Form
8-B, filed April 3, 1987
** To be filed as an exhibit to a pre-effective amendment to this Registration
Statement.
*** Contained on signature page hereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities Exchange Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
II-3
<PAGE> 42
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, 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 may be permitted to directors, officers and controlling persons of the
registrant, 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 Securities Act of 1933 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 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-4
<PAGE> 43
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, State of California, on May 7, 1998.
WESTERN DIGITAL CORPORATION
By: /s/ CHARLES A. HAGGERTY
------------------------------------
Charles A. Haggerty
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints CHARLES
A. HAGGERTY and MICHAEL A. CORNELIUS his true and lawful attorneys-in-fact and
agents, each acting alone, with full powers 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 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, each acting alone, with full powers and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as full to all intents and purposes as he
might or could do in person, hereby ratifying and confirming that all said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ CHARLES A. HAGGERTY Chairman of the Board, May 7, 1998
- -------------------------------------------------------- President and Chief Executive
Charles A. Haggerty Officer (Principal Executive
Officer)
/s/ DUSTON M. WILLIAMS Senior Vice President, and May 7, 1998
- -------------------------------------------------------- Chief Financial Officer
Duston M. Williams (Principal Financial and
Accounting Officer)
/s/ JAMES A. ABRAHAMSON Director May 7, 1998
- --------------------------------------------------------
James A. Abrahamson
/s/ PETER D. BEHRENDT Director May 7, 1998
- --------------------------------------------------------
Peter D. Behrendt
/s/ I.M. BOOTH Director May 7, 1998
- --------------------------------------------------------
I.M. Booth
/s/ IRWIN FEDERMAN Director May 7, 1998
- --------------------------------------------------------
Irwin Federman
</TABLE>
II-5
<PAGE> 44
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ANDRE R. HORN Director May 7, 1998
- --------------------------------------------------------
Andre R. Horn
Director May , 1998
- --------------------------------------------------------
Anne O. Krueger
/s/ THOMAS E. PARDUN Director May 7, 1998
- --------------------------------------------------------
Thomas E. Pardun
</TABLE>
II-6
<PAGE> 45
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF EXHIBIT NUMBERED PAGE
- ------- ---------------------- -------------
<S> <C> <C>
4.1 Purchase Agreement dated February 12, 1998, by and between
the Company and the Initial Purchasers named therein........
4.2 Indenture, dated as of February 18, 1998, between the
Company and State Street Bank and Trust Company of
California, N.A.............................................
4.3 Registration Rights Agreement, dated as of February 18,
1998, by and between the Company and the Initial Purchasers
named therein...............................................
4.4 The Company's Zero Coupon Convertible Subordinated Debenture
due 2018 and the Global Form of the Company's Zero Coupon
Convertible Subordinated Debenture due 2018 (which is
identical to the Company's Zero Coupon Convertible
Subordinated Debenture due 2018, except for certain
provisions as marked).......................................
4.5 Form of Common Stock Certificate............................ *
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to legality of the
Securities registered hereby................................ **
8.1 Opinion of Gibson, Dunn & Crutcher LLP with respect to
certain tax matters......................................... **
12.1 Computation of Ratio of Earnings to Fixed Charges...........
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
5.1)........................................................
23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
8.1)........................................................
23.3 Consent of KPMG Peat Marwick LLP, independent public
accountants.................................................
24 Power of Attorney........................................... ***
25 Statement of Eligibility of Trustee under the Trust
Indenture Act of 1939 on Form T-1...........................
</TABLE>
- ---------------
* Incorporated by reference to the Company's Registration Statement on Form
8-B, filed April 3, 1987.
** To be filed as an exhibit to a pre-effective amendment to this Registration
Statement.
*** Contained on the signature page hereto.
<PAGE> 1
EXHIBIT 4.1
$1,128,000,000
WESTERN DIGITAL CORPORATION
ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURES DUE 2018
PURCHASE AGREEMENT
February 12, 1998
<PAGE> 2
February 12, 1998
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Smith Barney Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Western Digital Corporation, a Delaware corporation (the "COMPANY"),
proposes to issue and sell to the several purchasers named in Schedule I hereto
(the "INITIAL PURCHASERS") $1,128,000,000 principal amount at maturity of its
Zero Coupon Convertible Subordinated Debentures due 2018 (the "FIRM SECURITIES")
to be issued pursuant to the provisions of an Indenture dated as of February 18,
1998 (the "INDENTURE") between the Company and State Street Bank and Trust
Company of California, N.A., as Trustee (the "TRUSTEE"). The Company also
proposes to issue and sell to the Initial Purchasers not more than an additional
$169,200,000 principal amount at maturity of its Zero Coupon Convertible
Subordinated Debentures due 2018 (the "ADDITIONAL SECURITIES") if and to the
extent that the Initial Purchasers shall have determined to exercise the right
to purchase such Zero Coupon Convertible Subordinated Debentures due 2018
granted to the Initial Purchasers in Section 2 hereof. The Firm Securities and
the Additional Securities are hereinafter collectively referred to as the
"SECURITIES." The Securities will be convertible into shares of Common Stock,
$0.01 par value of the Company (the "COMMON STOCK"), together with the rights
(the "RIGHTS") evidenced by such Common Stock to the extent provided in the
Rights Agreement (the "RIGHTS AGREEMENT"), dated as of December 1, 1988, between
the Company and American Stock Transfer & Trust Company, as successor rights
agent thereunder, as amended (such shares of Common Stock and the associated
Rights herein, the "UNDERLYING SECURITIES").
The Securities and the Underlying Securities will be offered without
being registered under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), in reliance on exemptions therefrom.
The Initial Purchasers and their direct and indirect transferees will
be entitled to the benefits of a Registration Rights Agreement dated as of the
date of the Indenture between the Company and the Initial Purchasers (the
"REGISTRATION RIGHTS AGREEMENT").
In connection with the sale of the Securities, the Company has prepared
a preliminary offering memorandum (the "PRELIMINARY MEMORANDUM") and will
prepare a final offering memorandum (the "FINAL MEMORANDUM" and, with the
Preliminary Memorandum, each a "MEMORANDUM"), including or incorporating by
reference a description of the terms of the
<PAGE> 3
Securities and the Underlying Securities, the terms of the offering and a
description of the Company. Any reference to the "MEMORANDUM" in this Agreement
refers to the Preliminary Memorandum, and after such time as the Final
Memorandum is delivered by the Initial Purchasers to confirm sales on the
Closing Date, also refers to the Final Memorandum as so delivered by the Initial
Purchasers to confirm sales on such Closing Date. As used herein, the term
"Memorandum" shall include in each case the documents incorporated by reference
therein. The terms "SUPPLEMENT", "AMENDMENT" and "AMEND" as used herein with
respect to a Memorandum shall include all documents deemed to be incorporated by
reference in the Preliminary Memorandum or Final Memorandum that are filed
subsequent to the date of such Memorandum with the Securities and Exchange
Commission (the "COMMISSION") pursuant to the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT").
1. Representations and Warranties. The Company represents and warrants
to, and agrees with, each of the Initial Purchasers that:
(a) (i) Each document, if any, filed or to be filed pursuant
to the Exchange Act and incorporated by reference in either Memorandum complied
or will comply when so filed in all material respects with the Exchange Act and
the applicable rules and regulations of the Commission thereunder and (ii) the
Preliminary Memorandum does not contain and the Final Memorandum, in the form
used by the Initial Purchasers to confirm sales when so used and on the Closing
Date (as defined in Section 4), will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in this
paragraph do not apply to statements or omissions in either Memorandum based
upon information relating to any Initial Purchaser furnished to the Company in
writing by such Initial Purchaser through you expressly for use therein.
(b) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power and authority to own its property and
to conduct its business as described in the Memorandum and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the condition,
financial or otherwise, earnings, business or operations of the Company and its
subsidiaries, taken as a whole, or on the power or ability of the Company to
perform its obligations under this Agreement, the Indenture, the Registration
Rights Agreement or the Securities or to consummate the transactions
contemplated by the Memorandum (a "Material Adverse Effect").
(c) Each subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the Memorandum and is
duly qualified to transact business and is in good standing in
-2-
<PAGE> 4
each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a Material
Adverse Effect; all of the issued shares of capital stock of each Significant
Subsidiary of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and are owned directly by the Company, free and
clear of all liens, encumbrances, equities or claims. Other than Western Digital
Deutschland GmbH, Western Digital (U.K.) Limited, Western Digital Ireland
Limited and Western Digital (S.E. Asia) Pte Ltd, the Company has no subsidiaries
that are "significant subsidiaries" as defined in Rule 1-02(w) of Regulation S-X
of the Securities Act (a "Significant Subsidiary").
(d) This Agreement has been duly authorized, executed and
delivered by the Company.
(e) The authorized capital stock of the Company and the Rights
and the Rights Agreement conform as to legal matters to the description thereof
contained in the Memorandum.
(f) The shares of Common Stock outstanding on the date hereof
have been duly authorized and are validly issued, fully paid and non-assessable.
(g) 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 Initial Purchasers in accordance with the
terms of this Agreement, will be valid and binding obligations of the Company,
enforceable in accordance with their terms, subject to applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and general
principles of equity, and will be entitled to the benefits of the Indenture and
the Registration Rights Agreement.
(h) The Underlying Securities reserved for issuance upon
conversion of the Securities have been duly authorized and reserved and, when
issued upon conversion of the Securities in accordance with the terms of the
Securities, will be validly issued, fully paid and non-assessable, and the
issuance of the Underlying Securities will not be subject to any preemptive
rights or other rights to purchase such Underlying Securities.
(i) Each of the Indenture and the Registration Rights
Agreement has been duly authorized, executed and delivered by, and is a valid
and binding agreement of, the Company, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity and except as
rights to indemnification and contribution under the Registration Rights
Agreement may be limited under applicable law.
(j) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement, the
Indenture, the Registration Rights Agreement and the Securities do not and will
not contravene any provision of applicable law or
-3-
<PAGE> 5
the certificate of incorporation or bylaws of the Company or any agreement or
other instrument binding upon the Company or any of its subsidiaries (except for
contraventions of any such agreement or instrument which would not have a
Material Adverse Effect) or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company or any subsidiary,
and no consent, approval, authorization or order of, or qualification or filing
with, any governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, the Indenture, the Registration
Rights Agreement or the Securities, except such as may be required by the
securities or Blue Sky laws of the various states in connection with the offer
and sale of the Securities and by Federal and state securities laws with respect
to the Company's obligations under the Registration Rights Agreement as
expressly contemplated by the provisions thereof.
(k) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, from that set forth in the
Memorandum.
(l) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company or any
of its subsidiaries is subject other than proceedings fairly described in all
material respects in the Memorandum and proceedings that would not have a
Material Adverse Effect and any class action lawsuits of the type described in
the Preliminary Memorandum filed since the date thereof based on similar facts
and similar class periods as the class actions described therein.
(m) The Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the aggregate,
have a Material Adverse Effect.
(n) Neither the Company nor any of its subsidiaries is liable
or otherwise legally responsible for any costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related constraints
on operating activities and any potential liabilities to third parties) which
would, singly or in the aggregate, have a Material Adverse Effect.
-4-
<PAGE> 6
(o) The Company and its subsidiaries possess all consents,
approvals, orders, certificates, authorizations and permits issued by, and have
made all declarations and filings with, all appropriate federal, state or
foreign governmental or self-regulatory authorities and all courts and other
tribunals necessary to conduct its business and to own, lease, license and use
its properties in the manner described in the Memorandum, except to the extent
that the failure to obtain or file would not have a Material Adverse Effect, and
neither the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such consent,
approval, order, certificate, authorization or permit that, singly or in the
aggregate, if the subject of any unfavorable decision, ruling or finding, or
failure to obtain or file, would have a Material Adverse Effect.
(p) The Company and its subsidiaries maintain systems of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded assets are compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.
(q) The Company and its subsidiaries own or possess adequate
licenses or other rights to use all patents, copyrights, trademarks, service
marks, trade names, technology and know-how necessary to conduct their
respective businesses in the manner described in the Memorandum or could obtain
such licenses or rights on terms that would not have a Material Adverse Effect
and, except as disclosed in the Memorandum, neither of the Company nor any of
its subsidiaries has received any notice of infringement or conflict with
asserted rights of others with respect to any patents, copyrights, trademarks,
service marks, trade names, technology or know-how which could reasonably be
expected to result in any Material Adverse Effect; and, except as disclosed in
the Memorandum, the discoveries, inventions, products or processes of the
Company and its subsidiaries referred to in the Memorandum do not, to the best
knowledge of the Company, infringe or conflict with any patent or other
intellectual property right of any third party, except for any such infringement
or conflict which would not have a Material Adverse Effect.
(r) Since December 27, 1997, (i) neither the Company nor any
of its subsidiaries has incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary course
of business; (ii) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock other than ordinary and customary dividends; and (iii)
there has not been any material change in the capital stock, short-term debt or
long-term debt of the Company or any of its subsidiaries, except in each case as
described in or contemplated by the Memorandum.
-5-
<PAGE> 7
(s) Neither the Company nor any of its subsidiaries, nor to
the Company's knowledge, any other party thereto, is in violation or breach of,
or in default with respect to, any material provision of any contract,
agreement, instrument, lease or license that is material to the Company and its
subsidiaries, taken as a whole. The Company and its subsidiaries enjoy peaceful
and undisturbed possession under all leases and licenses under which they
operate except as would not have a Material Adverse Effect. Neither the Company
nor any of its Significant Subsidiaries is in violation or breach of, or in
default with respect to, any term of its certificate of incorporation or bylaws.
(t) The Company and each of its subsidiaries have timely filed
all necessary federal, state and foreign income and franchise tax returns and
have paid all taxes shown thereon as due (except for any failure to so file or
so pay which would not have a Material Adverse Effect), and there is no tax
deficiency that has been or, to the Company's knowledge, might reasonably be
expected to be asserted against the Company or any of its subsidiaries that
would have a Material Adverse Effect; and all tax liabilities are adequately
provided for on the books of the Company.
(u) Since the date of the Preliminary Memorandum, to the
Company's knowledge after due inquiry, no executive officer or director of the
Company has sold, contracted to sell or otherwise transferred or agreed to
transfer the economic consequences or ownership of any shares of common stock of
the Company or any securities convertible into or exchangeable or exercisable
for or any rights to purchase or acquire common stock of the Company.
(v) No labor dispute with employees of the Company or any of
its subsidiaries exists or, to the knowledge of the Company, is imminent that
could result in a Material Adverse Effect.
(w) The Company is not, and after giving effect to the
offering and sale of the Securities and the application of the proceeds thereof
as described in the Memorandum, will not be an "investment company" as such term
are defined in the Investment Company Act of 1940, as amended.
(x) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act, an "AFFILIATE") of the Company
has directly, or through any agent, (i) sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the Securities
in a manner that would require the registration under the Securities Act of the
Securities or (ii) engaged in any form of general solicitation or general
advertising in connection with the offering of the Securities (as those terms
are used in Regulation D under the Securities Act), or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act.
-6-
<PAGE> 8
(y) Assuming the accuracy of the Initial Purchasers'
representations and warranties in Section 7 of this Agreement and compliance by
them with their covenants set forth in Section 7 of this Agreement, it is not
necessary in connection with the offer, sale and delivery of the Securities to
the Initial Purchasers and the initial resale by them to investors in the manner
contemplated by this Agreement to register the Securities under the Securities
Act or to qualify the Indenture under the Trust Indenture Act of 1939, as
amended.
(z) The Securities satisfy the requirements set forth in Rule
144A(d)(3) under the Securities Act.
(aa) None of the Company, its Affiliates or any person acting
on its or their behalf (other than the Initial Purchasers and persons acting on
their behalf) has engaged in any directed selling efforts (as that term is
defined in Regulation S under the Securities Act ("Regulation S")) with respect
to the Securities and the Company and its Affiliates and any person acting on
its or their behalf (other than the Initial Purchasers and persons acting on
their behalf) have complied with the offering restrictions requirement of
Regulation S.
2. Agreements to Sell and Purchase. The Company hereby agrees to sell
to the several Initial Purchasers, and each Initial Purchaser, upon the basis of
the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees, severally and not jointly, to purchase
from the Company the respective principal amount of Firm Securities set forth in
Schedule I hereto opposite its name at a purchase price of $344.07 per $1,000
principal amount at maturity thereof (the "PURCHASE PRICE").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Initial Purchasers the Additional Securities, and the Initial Purchasers
shall have a one-time right to purchase, severally and not jointly, up to
$169,200,000 principal amount at maturity of Additional Securities at the
Purchase Price. If you, on behalf of the Initial Purchasers, elect to exercise
such option, you shall so notify the Company in writing not later than 30 days
after the date of this Agreement, which notice shall specify the principal
amount at maturity of Additional Securities to be purchased by the Initial
Purchasers and the date on which such Additional Securities are to be purchased.
Such date may be the same as the Closing Date but not earlier than the Closing
Date nor later than ten business days after the date of such notice. Such
Additional Securities may be purchased as provided in Section 4 solely for the
purpose of covering over-allotments made in connection with the offering of the
Firm Securities. If any such Additional Securities are to be purchased, each
Initial Purchaser agrees, severally and not jointly, to purchase the principal
amount at maturity of Additional Securities (subject to such adjustments to
eliminate fractional Securities as you may determine) that bears the same
proportion to the total principal amount at maturity of Additional Securities to
be purchased as the principal amount at maturity of Firm Securities set forth
Schedule I opposite the name of such Initial Purchaser bears to the total
principal amount at maturity of Firm Securities.
-7-
<PAGE> 9
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Initial Purchasers, it will
not, during the period ending 90 days after the date of the Final Memorandum,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of common stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the sale of the Securities under this Agreement
or (B) the ability of the Company to grant options or issue stock upon the
exercise of outstanding stock options pursuant to the Company's stock option
plans and issue stock upon the exercise of outstanding warrants or (C)
performance under contractual commitments entered into prior to the date hereof
specifically identified in the Final Memorandum or any of the documents
incorporated by reference therein as of the date hereof.
3. Terms of Offering. You have advised the Company that the Initial
Purchasers will make an offering of the Securities purchased by the Initial
Purchasers hereunder on the terms to be set forth in the Final Memorandum, as
soon as practicable after this Agreement is entered into as in your judgment is
advisable.
4. Payment and Delivery. Payment for the Firm Securities shall be made
to the Company in Federal or other funds immediately available in New York City
against delivery of such Firm Securities for the respective accounts of the
several Initial Purchasers at 10:00 a.m., New York City time, on February 18,
1998, or at such other time on the same or such other date, not later than
February 25, 1998, as shall be designated in writing by you. The time and date
of such payment are hereinafter referred to as the "CLOSING DATE."
Payment for any Additional Securities shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Securities for the respective accounts of the several Initial
Purchasers at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 2 or at such other time on the same or on such other
date, in any event not later than March 18, 1998, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to as
the "OPTION CLOSING DATE."
Certificates for the Firm Securities and Additional Securities shall be
in definitive form or global form, as specified by you, and registered in such
names and in such denominations as you shall request in writing not later than
one full business day prior to the Closing Date or the Option Closing Date, as
the case may be. The certificates evidencing the Firm Securities and Additional
Securities shall be delivered to you on the Closing Date or the Option Closing
Date, as the case may be, for the respective accounts of the several Initial
Purchasers, with any transfer taxes payable in connection with the transfer of
the Securities to the Initial Purchasers duly paid, against payment of the
Purchase Price.
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<PAGE> 10
5. Conditions to the Initial Purchasers' Obligations. The several
obligations of the Initial Purchasers to purchase and pay for the Firm
Securities on the Closing Date are subject to the following conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or potential downgrading or
of any review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Memorandum (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement) that, in your judgment, is material and adverse and that makes it, in
your judgment, impracticable to market the Securities on the terms and in the
manner contemplated in the Memorandum.
(b) The representations and warranties of the Company
contained in this Agreement shall have been true and correct as of the date of
this Agreement and as of the Closing Date and the Company shall have complied
with all of the agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date.
(c) The Initial Purchasers shall have received on the Closing
Date a certificate, dated the Closing Date and signed on behalf of the Company
by an executive officer of the Company, to the effect set forth in Section
5(a)(i) and (b).
(d) The Initial Purchasers shall have received on the Closing
Date (i) an opinion of Gibson, Dunn & Crutcher LLP, counsel for the Company,
dated the Closing Date, to the effect set forth in Exhibit A-1 and (ii) an
opinion of Michael A. Cornelius, Esq., President--Law & Administration,
Secretary of the Company, dated the Closing Date, to the effect set forth in
Exhibit A-2. Such opinion shall be rendered to the Initial Purchasers at the
request of the Company and shall so state therein.
(e) The Initial Purchasers shall have received on the Closing
Date an opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
counsel for the Initial Purchasers, dated the Closing Date, to the effect set
forth in Exhibit B.
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<PAGE> 11
(f) The Initial Purchasers shall have received on each of the
date hereof and the Closing Date a letter, dated the date hereof or the Closing
Date, as the case may be, in form and substance satisfactory to the initial
Purchasers, from KPMG Peat Marwick LLP, independent public accountants,
containing statements and information of the type ordinarily included in
accountants "comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in or incorporated by
reference into the Memorandum; provided that the letter delivered on the Closing
Date shall use a "cut-off date" not earlier than the date hereof.
(g) The "lock-up" agreements, each substantially in the form
of Exhibit C hereto, between you and executive officers and directors of the
Company relating to sales and certain other dispositions of shares of common
stock or certain other securities, delivered to you on or before the date
hereof, shall be in full force and effect on the Closing Date.
The Company shall have furnished to you such further certificates and
documents as you shall reasonably request (including certificates on behalf of
the Company by officers of the Company), as to the accuracy of the
representations and warranties of the Company herein, as to the performance by
the Company of its obligations hereunder and as to the other conditions
concurrent and precedent to the obligations of the Initial Purchasers hereunder.
The several obligations of the Initial Purchasers to purchase
Additional Securities hereunder are subject to the delivery to you on the Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of the
Additional Securities and other matters related to the issuance of the
Additional Securities including, without limitation, the certificates, opinions
and documents set forth in this Section 5.
6. Covenants of the Company. In further consideration of the agreements
of the Initial Purchasers contained in this Agreement, the Company covenants
with each Initial Purchaser as follows:
(a) To furnish to you in New York City, without charge, prior to
10:00 a.m. New York City time on the business day next succeeding the date of
this Agreement and during the period mentioned in Section 6(c), as many copies
of the Final Memorandum, any documents incorporated by reference therein and any
supplements and amendments thereto as you may reasonably request.
(b) Before amending or supplementing either Memorandum, to furnish
to you a copy of each such proposed amendment or supplement and not to use any
such proposed amendment or supplement to which you reasonably object.
(c) If, during such period after the date hereof and prior to the
date on which all of the Securities shall have been sold by the Initial
Purchasers, any event shall occur or
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<PAGE> 12
condition exist as a result of which it is necessary to amend or supplement the
Final Memorandum in order to make the statements therein, in the light of the
circumstances when the Final Memorandum is delivered to a purchaser, not
misleading, or if, in the opinion of counsel for the Initial Purchasers or
counsel for the Company, it is necessary to amend or supplement the Final
Memorandum to comply with applicable law, forthwith to prepare and furnish to
the Initial Purchasers, at its own expense, either amendments or supplements to
the Final Memorandum so that the statements in the Final Memorandum as so
amended or supplemented will not, in the light of the circumstances when the
Final Memorandum is delivered to a purchaser, be misleading or so that the Final
Memorandum, as amended or supplemented, will comply with applicable law.
(d) To endeavor to qualify the Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall reasonably
request; provided that in connection therewith the Company shall not be required
to qualify to conduct business as a foreign corporation or to execute a general
consent to service of process in any jurisdiction.
(e) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel and
the Company's accountants in connection with the issuance and sale of the
Securities and all other fees or expenses in connection with the preparation of
the Memorandum and all amendments and supplements thereto, including all
printing costs associated therewith, and the delivering of copies thereof to the
Initial Purchasers, in the quantities herein above specified, (ii) all costs and
expenses related to the transfer and delivery of the Securities to the Initial
Purchasers, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky or legal investment memorandum in
connection with the offer and sale of the Securities under state securities laws
and all expenses in connection with the qualification of the Securities for
offer and sale as provided in Section 6(d) hereof, including filing fees and the
reasonable fees and disbursements of counsel for the Initial Purchasers in
connection with such qualification and in connection with the Blue Sky or legal
investment memorandum, (iv) any fees charged by rating agencies for the rating
of the Securities, (v) all document production charges and expenses of counsel
to the Initial Purchasers (but not including their fees for professional
services) in connection with the preparation of this Agreement, (vi) the fees
and expenses, if any, incurred in connection with the admission of the
Securities for trading in the PORTAL market or any appropriate market system,
(vii) the costs and charges of the Trustee and any conversion agent, transfer
agent, registrar or depositary, (viii) the cost of the preparation, issuance and
delivery of the Securities, (ix) the costs and expenses of the Company relating
to investor presentations on any "road show" undertaken in connection with the
marketing of the offering of the Securities, including, without limitation,
expenses associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged by the Company in connection with the
road show presentations, travel and lodging expenses of the representatives and
officers of the Company and any such consultants, and the cost of any aircraft
chartered with the prior approval of the Company in connection with the road
show, and (x) all other cost and expenses incident to the performance of the
obligations of the
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<PAGE> 13
Company hereunder for which provision is not otherwise made in this Section. It
is understood, however, that except as provided in this Section, Section 8, and
the last paragraph of Section 10, the Initial Purchasers will pay all of their
costs and expenses, including fees and disbursements of their counsel, transfer
taxes payable on resale of any of the Securities by them and any marketing
expenses connected with any offers they may make.
(f) Neither the Company nor any Affiliate will sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Securities Act) which could reasonably be integrated under
applicable law with the sale of the Securities in a manner which would require
the registration under the Securities Act of the Securities.
(g) Not to solicit any offer to buy or offer or sell the Securities
or the Underlying Securities by means of any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Securities Act.
(h) While any of the Securities or the Underlying Securities remain
"restricted securities" within the meaning of the Securities Act, to make
available, upon request, to any seller of such Securities the information
specified in Rule 144A(d)(4) under the Securities Act, unless the Company is
then subject to Section 13 or 15(d) of the Exchange Act.
(i) If requested by you, to use its best efforts to permit the
Securities to be designated PORTAL securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
relating to trading in the PORTAL market.
(j) During the period of two years after the Closing Date or the
Option Closing Date, if later, the Company will not, and will not permit any of
its affiliates (as defined in Rule 144A under the Securities Act) to resell any
of the Securities or the Underlying Securities which constitute "restricted
securities" under Rule 144A that have been acquired by any of them.
(k) Not to (and to use its best efforts to cause each of its
Affiliates and persons acting on its or their behalf (other than any Initial
Purchaser and persons acting on their behalf) not to) engage in any directed
selling effort (as that term is defined in Regulation S) with respect to the
Securities, and to comply (and use their best efforts to cause each of its
Affiliates and persons acting on its or their behalf (other than any Initial
Purchaser and persons acting on their behalf) to comply) with the offering
restrictions of Regulation S.
7. Offering of Securities; Restrictions on Transfer.
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(a) Each Initial Purchaser, severally and not jointly, represents
and warrants that such Initial Purchaser is a qualified institutional buyer as
defined in Rule 144A under the Securities Act (a "QIB"). Each Initial Purchaser,
severally and not jointly, agrees with the Company that (i) it will not solicit
offers for, or offer or sell, such Securities by any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act and (ii) it will solicit
offers for such Securities only from, and will offer such Securities only to,
persons that it reasonably believes to be (A) in the case of offers in the
United States, QIBs or other institutional accredited investors (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act ("INSTITUTIONAL
ACCREDITED INVESTORS") that, prior to their purchase of the Securities, deliver
to such Initial Purchaser a letter containing the representations and agreements
set forth in Appendix A to the Memorandum and (B) in the case of offers outside
the United States, to persons other than U.S. persons ("FOREIGN PURCHASERS,"
which term shall include dealers or other professional fiduciaries in the United
States acting on discretionary basis for foreign beneficial owners (other than
an estate or trust)) in reliance upon Regulation S under the Securities Act
that, in each case, in purchasing such Securities are deemed to have represented
and agreed as provided in the Memorandum under the caption "Transfer
Restrictions".
(b) Each Initial Purchaser, severally and not jointly represents,
warrants and agrees with respect to offers and sales outside the United States
that:
(i) it has not, and will not, take any action in any
jurisdiction that would permit a public offering of the Securities, or
possession or distribution of the Memorandum or any other offering or publicity
material relating to the Securities, in any country or jurisdiction where action
for that purpose is required;
(ii) such Initial Purchaser will comply with all applicable
laws and regulations in each jurisdiction in which it acquires, offers, sells or
delivers Securities or has in its possession or distributes the Memorandum or
any such other material, in all cases at its own expenses;
(iii) the Securities have not been and will not be registered
under the Securities Act (except as provided in the Registration Rights
Agreement) and may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except in accordance with Rule 144A or
Regulation S under the Securities Act or pursuant to another exemption from the
registration requirements of the Securities Act;
(iv) such Initial Purchaser has offered the Securities and
will offer and sell the Securities (A) as part of their distribution at any time
and (B) otherwise until 40 days after the later of the commencement of the
offering and the Closing Date (or Option Closing Date, if later), only in
accordance with Rule 903 of Regulation S or as otherwise permitted in Section
7(a). Accordingly, neither such Initial Purchaser, its Affiliates nor any
persons acting on its or their behalf have engaged or will engage in any
directed selling efforts (within the meaning
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<PAGE> 15
of Regulation S) with respect to the Securities, and such Initial Purchaser, its
Affiliates and any such persons have complied and will comply with the offering
restrictions requirement of Regulation S;
(v) such Initial Purchaser has (A) not offered or sold and,
prior to the date six months after the Closing Date, will not offer or sell any
Securities to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (B) complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Securities in, from or otherwise
involving the United Kingdom, and (C) only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the issue of the Securities to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on;
(vi) such Initial Purchaser understands that the Securities have
not been and will not be registered under the Securities and Exchange Law of
Japan, and represents that it has not offered or sold, and agrees that it will
not offer or sell, any Securities, directly or indirectly, in Japan or to or
from any resident of Japan except (i) pursuant to an exemption from the
registration requirements of the Securities and Exchange Law of Japan and (ii)
in compliance with any other applicable requirements of Japanese law; and
(vii) such Initial Purchaser agrees that at or prior to
confirmation of sales of the Securities, it will have sent to each distributor,
dealer or person receiving a selling concession, fee or other renumeration that
purchases Securities from it during the restricted period a confirmation or
notice to substantially the following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time
or (ii) otherwise until 40 days after the later of the commencement of
the offering and the closing date, except in either case in accordance
with Regulation S (or Rule 144A if available) under the Securities Act.
Terms used above have the meaning given to them by Regulation S."
Terms used in this Section 7 have the meanings given to them by Regulation S.
8. Indemnity and Contribution.
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<PAGE> 16
(a) The Company agrees to indemnify and hold harmless each Initial
Purchaser and each person, if any, who controls any Initial Purchaser within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in either Memorandum (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading, except insofar as such losses, claims, damages or liabilities
are caused by any such untrue statement or omission or alleged untrue statement
or omission based upon information relating to any Initial Purchaser furnished
to the Company in writing by such Initial Purchaser through you expressly for
use therein.
(b) Each Initial Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers and each
person, if any, who controls the Company within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to such Initial Purchaser, but only
with reference to information relating to such Initial Purchaser furnished to
the Company in writing by such Initial Purchaser through you expressly for use
in either Memorandum or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 8(a) or 8(b), such person (the "INDEMNIFIED PARTY")
shall promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the reasonable
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated, in the case of
parties indemnified pursuant to Section 8(a), and by the Company, in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall not
be liable for any
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<PAGE> 17
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel and the indemnified party would be entitled thereto pursuant to the
second and third sentences of this paragraph, the indemnifying party agrees that
it shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding (and in the event of a settlement
that involves an unconditional release of such indemnified party, the
indemnifying party will send prompt written notice of such settlement to the
indemnified party).
(d) To the extent the indemnification provided for in Section 8(a) or
8(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Initial Purchasers on the other
hand from the offering of the Securities or (ii) if the allocation provided by
clause 8(d)(i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company on the one hand and of
the Initial Purchasers on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Initial Purchasers on the other hand in
connection with the offering of the Securities shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Securities
(before deducting expenses) received by the Company and the total discounts and
commissions received by the Initial Purchasers, in each case as set forth in the
Final Memorandum, bear to the aggregate offering price of the Securities. The
relative fault of the Company on the one hand and of the Initial Purchasers on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Initial Purchasers and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Initial Purchasers' respective obligations to
contribute pursuant to this Section 8 are several in proportion to the
respective principal amount of Securities they have purchased hereunder, and not
joint.
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<PAGE> 18
(e) The Company and the Initial Purchasers agree that it would not
be just or equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation (even if the Initial Purchasers were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 8(d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in Section 8(d) shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, no Initial Purchaser shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities resold by
it and placed to investors exceeds the amount of any damages that such Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 8 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Initial Purchaser or any person
controlling any Initial Purchaser or by or on behalf of the Company, its
officers or directors or any person controlling the Company and (iii) acceptance
of and payment for any of the Securities.
9. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, either of the
New York Stock Exchange or the National Association of Securities Dealers, Inc.,
(ii) trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your judgment, is material and adverse and (b) in
the case of any of the events specified in clauses 9(a)(i) through 9(a)(iv),
such event, singly or together with any other such event, makes it, in your
judgment, impracticable to market the Securities on the terms and in the manner
contemplated in the Final Memorandum.
10. Effectiveness; Defaulting Initial Purchasers. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date, or the Option Closing Date, as the case may
be, any one or more of the Initial Purchasers shall fail or refuse to purchase
Securities that it or they have agreed to
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<PAGE> 19
purchase hereunder on such date, and the aggregate principal amount of
Securities which such defaulting Initial Purchaser or Initial Purchasers agreed
but failed or refused to purchase is not more than one-tenth of the aggregate
principal amount of Securities to be purchased on such date, the other Initial
Purchasers shall be obligated severally in the proportions that the principal
amount of Firm Securities set forth opposite the names of all such
non-defaulting Initial Purchasers, or in such other proportions as you may
specify, to purchase the Securities which such defaulting Initial Purchaser or
Initial Purchasers agreed but failed of refused to purchase on such date;
provided that in no event shall the principal amount of Securities that any
Initial Purchaser has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 10 by an amount in excess of one-ninth of such
principal amount of Securities without the written consent of such Initial
Purchaser. If, on the Closing Date any Initial Purchaser or Initial Purchasers
shall fail or refuse to purchase Firm Securities which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of Securities
with respect to which such default occurs is more than one-tenth of the
aggregate principal amount of Firm Securities to be purchased on such date, and
arrangements satisfactory to you and the Company for the purchase of such Firm
Securities are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Initial Purchaser
or of the Company. In any such case either you or the Company shall have the
right to postpone the Closing Date, but in no event for longer than seven days,
in order that the required changes, if any, in the Final Memorandum or in any
other documents or arrangements may be effected. If, on the Option Closing Date,
any Initial Purchaser or Initial Purchasers shall fail or refuse to purchase
Additional Securities and the aggregate principal amount of Additional
Securities with respect to which such default occurs is more than one-tenth of
the aggregate principal amount of Additional Securities to be purchased, the
non-defaulting Initial Purchasers shall have the option to (a) terminate their
obligation hereunder to purchase Additional Securities or (b) purchase not less
than the principal amount of Additional Securities that such non-defaulting
Initial Purchasers would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Initial Purchaser from liability in respect of any default of such Initial
Purchaser under this Agreement.
If this Agreement shall be properly terminated by the Initial
Purchasers, or any of them, because of any failure or refusal on the part of the
Company to comply with the terms or to fulfill any of the conditions of this
Agreement required to be performed or fulfilled by the Company pursuant to this
Agreement, or if for any reason the Company shall be unable to perform its
obligations under this Agreement, the Company will reimburse the Initial
Purchasers or such Initial Purchasers as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
fees and disbursements of their counsel) reasonably incurred by such initial
Purchasers in connection with this Agreement or the offering contemplated
hereunder.
11. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
-18-
<PAGE> 20
12. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
-19-
<PAGE> 21
13. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
Very truly yours.
Western Digital Corporation
By: /s/Charles A. Haggerty
------------------------------------
Name: Charles A. Haggerty
Title: Chairman of the Board,
President and Chief
Executive Officer
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Smith Barney Inc.
Acting severally on behalf of themselves and
the several Initial Purchasers named
in Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By: /s/Michael Grimes
-------------------------------
Name: Michael Grimes
Title: Principal
-20-
<PAGE> 22
SCHEDULE I
<TABLE>
<CAPTION>
INITIAL PURCHASER PRINCIPAL AMOUNT AT
----------------- MATURITY OF FIRM
SECURITIES TO BE PURCHASED
--------------------------
<S> <C>
Morgan Stanley & Co. Incorporated $ 376,000,000
Goldman, Sachs & Co. 376,000,000
Smith Barney Inc. 376,000,000
--------------
Total $1,128,000,000
==============
</TABLE>
<PAGE> 23
EXHIBIT A-1
OPINION OF GIBSON DUNN & CRUTCHER LLP
The opinion of the counsel for the Company to be delivered pursuant to
Section 5(d)(i) of the Purchase Agreement shall be to the effect that:
A. The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of Delaware, has the corporate power
and authority to own its property and to conduct its business as described in
the Final Memorandum and is duly qualified as a foreign corporation in the State
of California.
B. The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
C. The authorized capital stock of the Company and the Rights and the
Rights Agreement conform as to legal matters to the description thereof
contained in the Final Memorandum.
D. The Securities have been duly authorized by the Company and, when
executed and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers in accordance with the
terms of the Purchase Agreement, will be valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, subject
to (i) the effect of any applicable bankruptcy, insolvency, reorganization
moratorium, arrangement or other similar laws affecting enforcement of
creditor's rights generally, including, without limitation, the effect of
statutory or other laws regarding fraudulent conveyances or transfers,
preferential transfers and laws affecting distributions by corporations to
stockholders and (ii) general principles of equity, regardless of whether a
matter is considered in a proceeding in equity, at law, in an arbitration or
otherwise, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and will be entitled to the
benefits of the Indenture and the Registration Rights Agreement.
E. The shares of Common Stock to be issued upon conversion of the
Securities have been duly authorized and reserved and, when issued upon
conversion of the Securities in accordance with the terms of the Securities,
will be validly issued, fully paid and non-assessable.
F. Each of the Indenture and the Registration Rights Agreement has been
duly authorized, executed and delivered by, and is a valid and binding agreement
of, the Company, enforceable against the Company in accordance with its terms,
subject to (i) the effect of any applicable bankruptcy, insolvency,
reorganization moratorium, arrangement or other similar laws affecting
enforcement of creditor's rights generally, including, without limitation, the
effect of statutory or other laws regarding fraudulent conveyances or transfers,
preferential transfers and laws affecting distributions by corporations to
stockholders and (ii) general principles of equity,
<PAGE> 24
regardless of whether a matter is considered in a proceeding in equity, at law,
in an arbitration or otherwise, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing.
G. The execution and delivery by the Company of, and the performance by
the Company of its obligations under, the Purchase Agreement, the Indenture, the
Registration Rights Agreement and the Securities do not and will not contravene
any provision of applicable law or the certificate of incorporation or bylaws of
the Company or the Revolving Credit and Term Loan Agreement, dated as of January
28, 1998, among the Company, BankBoston, N.A. and the other lending institutions
listed on Schedule 1 thereto, and BankBoston, N.A., as Agent for itself and such
other lending institutions, as amended (the "Senior Bank Facility") or any order
or decree of any governmental body, agency or court having jurisdiction over the
Company or any subsidiary known to such counsel and no consent, approval,
authorization or order of, or qualification or filing with, any governmental
body or agency is required for the performance by the Company of its obligations
under the Purchase Agreement, the Indenture, the Registration Rights Agreement
or the Securities, except such as may be required by the securities or Blue Sky
laws of the various states in connection with the offer and sale of the
Securities and by Federal and state securities laws with respect to the
Company's obligations under the Registration Rights Agreement or expressly
contemplated by the provisions thereof.
H. The Company is not, and after giving effect to the offering and sale
of the Securities and the application of the proceeds thereof as described in
the Final Memorandum, will not be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
I. The statements in the Final Memorandum under the captions "Risk
Factors--Legal Proceedings" in the second paragraph thereunder, "Business--Legal
Proceedings" in the third paragraph thereunder, "Description of Debentures,"
"Description of Capital Stock," "Plan of Distribution" and "Transfer
Restrictions" and in "Certain Factors Affecting Western Digital Corporation
And/Or the Disk Drive Industry--Legal Proceedings" in the second paragraph
thereunder and in "Part II--Other Information, Item 1--Legal Proceedings" in the
second paragraph thereunder of the Company's most recent quarterly report on
Form 10-Q, insofar as such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly summarize the matters
referred to therein.
J. The statements in the Final Memorandum under the caption "Certain
Federal Income Tax Considerations," insofar as such statements constitute a
summary of the United States federal tax laws referred to therein, are accurate
and fairly summarize the matters referred to therein in all material respects.
K. Assuming the accuracy of the representations and warranties and
compliance with the agreements of the Company in Sections 1(x), 1(z), 1(aa),
6(f), 6(g), 6(j) and 6(k) of the Purchase Agreement and the Initial Purchasers
herein and referred to in "Plan of Distribution" and
-2-
<PAGE> 25
"Transfer Restrictions" in the Final Memorandum, it is not necessary in
connection with the offer, sale and delivery of the Securities to the Initial
Purchasers under the Purchase Agreement or in connection with the initial resale
of such Securities by the Initial Purchasers in accordance with the Purchase
Agreement and the Final Memorandum to register the Securities under the
Securities Act of 1933 or to qualify the Indenture under the Trust Indenture Act
of 1939, it being understood that no opinion is expressed as to any subsequent
resale of any Security or Underlying Security.
Such opinion may be made subject to other such qualifications as are
reasonable and customary for opinions with respect to such matters and such
counsel need express no opinion regarding the legality, validity, binding nature
or enforceability of any provision in the Purchase Agreement, the Securities,
the Indenture or the Registration Rights Agreement relating to indemnification
or contribution or the ability to obtain specific performance, injunctive relief
or other equitable relief as a remedy for noncompliance with any of the
foregoing agreements or instruments.
Such opinion shall also state such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company,
representatives of the Initial Purchasers and counsel for the Initial
Purchasers, at which conferences the contents of the Final Memorandum and
related matters were discussed; that such counsel is not passing upon and does
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Final Memorandum (other than with regard to the
opinions set forth in I and J above); that, on the basis of the foregoing, no
facts have come to such counsel's attention which lead such counsel to believe
that the Final Memorandum, on the date thereof or on the date such opinion is
delivered, contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading (it being
understood that such counsel need express no view with respect to the financial
statements and related schedules and notes thereto and the other financial,
statistical and accounting data included in the Final Memorandum).
-3-
<PAGE> 26
EXHIBIT A-2
OPINION OF COMPANY GENERAL COUNSEL
The opinion of the counsel for the Company to be delivered pursuant to
Section 5(d)(ii) of the Purchase Agreement shall be to the effect that:
A. Each Significant Subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described in the
Final Memorandum and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect; all of the issued shares of capital stock of each
Significant Subsidiary have been duly and validly authorized and issued, are
fully paid and non-assessable, and are owned directly by the Company or a
subsidiary of the Company, free and clear of all liens, encumbrances, equities
or claims.
B. The shares of common stock outstanding on the Closing Date have been
duly authorized and are validly issued, fully paid and non-assessable. The
shares of Common Stock to be issued upon conversion of the Securities have been
duly authorized and reserved and, when issued upon conversion of the Securities
in accordance with the terms of the Securities, will be validly issued, fully
paid and non-assessable, and the issuance of such Common Stock will not be
subject to any preemptive or, to such counsel's knowledge, similar rights.
C. The execution and delivery by the Company of, and the performance by
the Company of its obligations under, the Purchase Agreement, the Indenture, the
Registration Rights Agreement and the Securities do not and will not contravene
any provision of applicable law or the certificate of incorporation or bylaws of
the Company or any agreement or other instrument binding upon the Company or any
of its subsidiaries or any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Company or any subsidiary known to
such counsel and no consent, approval, authorization or order of, or
qualification or filing with, any governmental body or agency is required for
the performance by the Company of its obligations under the Purchase Agreement,
the Indenture, the Registration Rights Agreement or the Securities, except such
as may be required by the securities or Blue Sky claws of the various states in
connection with the offer and sale of the Securities and by Federal and state
securities laws with respect to the Company's obligations under the Registration
Rights Agreement or expressly contemplated by the provisions thereof.
D. After due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of the Company or
any of its subsidiaries is subject other than
<PAGE> 27
proceedings fairly summarized in all material respects in the Final Memorandum
and proceedings which such counsel believes are not likely to have a Material
Adverse Effect.
E. The statements in the Final Memorandum under the captions "Risk
Factors -- Intellectual Property," "Risk Factors -- Legal Proceedings,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Business -- Legal Proceedings,"
in "Item 3 - Legal Proceedings" of the Company's most recent annual report on
Form 10-K, and in "Certain Factors Affecting Western Digital Corporation And/Or
the Disk Drive Industry -- Legal Proceedings" and in "Part II -- Other
Information, Item 1 -- Legal Proceedings" of the Company's most recent quarterly
report on Form 10-Q, insofar as such statements constitute summaries of the
legal matters, documents or proceedings referred to therein, fairly summarize
the matters referred to therein.
F. Such counsel is of the opinion that each document incorporated by
reference in the Final Memorandum (except for financial statements and schedules
and other financial and statistical data included therein as to which such
counsel need not express any opinion), complied as to form when filed with the
Commission in all material respects with the Exchange Act and the rules and
regulations of the Commission thereunder.
Such opinion may be made subject to such qualifications as are
reasonable and customary for opinions with respect to such matters and such
counsel need express no opinion regarding the legality, validity, binding nature
or enforceability of any provision in the Purchase Agreement, the Securities,
the Indenture or the Registration Rights Agreement relating to indemnification
or contribution or the ability to obtain specific performance, injunctive relief
or other equitable relief as a remedy for noncompliance with any of the
foregoing agreements or instruments.
Such opinion shall also state such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company,
representatives of the Initial Purchasers and counsel for the Initial
Purchasers, at which conferences the contents of the Final Memorandum and
related matters were discussed; that such counsel is not passing upon and does
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Final Memorandum (other than with regard to the
Opinions set forth in E above); that, on the basis of the foregoing, no facts
have come to such counsel's attention which lead such counsel to believe that
the Final Memorandum, on the date thereof or on the date such opinion is
delivered, contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading (it being
understood that such counsel need express no view with respect to the financial
statements and related schedules and notes thereto and the other financial,
statistical and accounting data included in the Final Memorandum).
<PAGE> 28
EXHIBIT B
OPINION OF WILSON SONSINI GOODRICH & ROSATI
The opinion of Wilson Sonsini Goodrich & Rosati to be delivered
pursuant to Section 5(d) of the Purchase Agreement shall be to the effect that:
A. The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
B. The Securities have been duly authorized by the Company and, when
executed and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers in accordance with the
terms of the Purchase Agreement, will be valid and binding obligations of the
Company, enforceable in accordance with their terms, and will be entitled to the
benefits of the Indenture and the Registration Rights Agreement.
C. The Underlying Securities reserved for issuance upon conversion of
the Securities have been duly authorized and reserved and, when issued upon
conversion of the Securities in accordance with the terms of the Securities,
will be validly issued, fully paid and non-assessable, and the issuance of the
Underlying Securities will not be subject to any preemptive or, to the knowledge
of such counsel, similar rights.
D. Each of the Indenture and the Registration Rights Agreement has been
duly authorized, executed and delivered by, and is a valid and binding agreement
of, the Company, enforceable against the Company in accordance with its terms.
E. The statements in the Final Memorandum under the captions
"Description of Debentures", "Plan of Distribution" and "Transfer Restrictions,"
insofar as such statements constitute summaries of the legal matters, documents
or proceedings referred to therein, fairly summarize the matters referred to
therein.
F. Such counsel has no reason to believe that (except for financial
statements and schedules and other financial, statistical and accounting data as
to which such counsel need not express any belief) the Final Memorandum when
issued contained, or as of the date such opinion is delivered contains, any
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
G. Based upon the representations, warranties and agreements of the
Company in Sections 1(x), 1(z), 1(aa), 6(f), 6(g), 6(j) and 6(k) of the Purchase
Agreement and of the Initial Purchasers in Section 7 of the Purchase Agreement
and the Final Memorandum, it is not necessary in connection with the offer, sale
and delivery of the Securities to the Initial Purchasers
<PAGE> 29
under the Purchase Agreement or in connection with the initial resale of such
Securities by the Initial Purchasers in accordance with Section 7 of the
Purchase Agreement to register the Securities under the Securities Act of 1933
or to qualify the Indenture under the Trust Indenture Act of 1939, it being
understood that no opinion is expressed as to any subsequent resale of any
Security or Underlying Security.
Such opinion may be made subject to such qualifications as are
reasonable and customary for opinions with respect to such matters and such
counsel need express no opinion regarding the legality, validity, binding nature
or enforceability of any provision in the Purchase Agreement, the Securities,
the Indenture or the Registration Rights Agreement relating to indemnification
or contribution or the ability to obtain specific performance, injunctive relief
or other equitable relief as a remedy for noncompliance with any of the
foregoing agreements or instruments.
With respect to paragraph F above, Wilson Sonsini Goodrich & Rosati may
state that their opinion and belief are based upon their participation in the
preparation of the Final Memorandum (and any amendments or supplements thereto)
and review and discussion of the contents thereof (including the review of, but
not participation in the preparation of, the incorporated documents), but are
without independent check or verification except as specified.
-2-
<PAGE> 30
EXHIBIT C
FORM OF LOCK-UP LETTER
February 12, 1998
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Smith Barney, Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("MORGAN STANLEY") proposes to enter into a Purchase Agreement (the "PURCHASE
AGREEMENT") with Western Digital Corporation, a Delaware corporation (the
"COMPANY"), providing for the offering (the "OFFERING") by the several Initial
Purchasers, including Morgan Stanley (the "INITIAL PURCHASERS"), of
$1,128,000,000 principal amount of Zero Coupon Convertible Subordinated
Debentures due 2018 of the Company (the "SECURITIES"). The Securities will be
convertible into shares of Common Stock, $0.01 par value, of the Company (the
"COMMON STOCK").
To induce the Initial Purchasers that may participate in the Offering
to continue their efforts in connection with the Offering, the undersigned
hereby agrees that, without the prior written consent of Morgan Stanley on
behalf of the Initial Purchasers, the undersigned will not, during the period
commencing on the date hereof and ending 90 days after the date of the final
offering memorandum relating to the Offering (the "FINAL MEMORANDUM"), (1)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (2) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to transactions relating to shares of Common Stock or other securities acquired
in open market transactions after the completion of the Offering. In addition,
the undersigned agrees that, without the prior written consent of Morgan Stanley
on behalf of the Initial Purchasers, the undersigned will not, during the period
commencing on the date hereof and ending 90 days after the date of the Final
Memorandum, make any demand for or exercise any
<PAGE> 31
right with respect to, the registration of any shares of Common Stock or any
security convertible into or exercisable or exchangeable for Common Stock.
Notwithstanding the foregoing, the undersigned may, without the consent
of Morgan Stanley & Co. Incorporated, sell up to ten percent of the number of
shares of Common Stock owned by the undersigned or issuable to the undersigned
upon exercise of stock options that are vested as of the date of the Purchase
Agreement; provided, however, that the executive officers and directors of the
Company, taken as a whole, may sell no more than an aggregate of 50,000 shares
pursuant to this exception.
Whether or not the Offering actually occurs depends on a number of
factors, including market conditions. Any Offering will be made only pursuant to
a Purchase Agreement, the terms of which are subject to negotiation between the
Company and the Initial Purchasers.
Very truly yours,
---------------------------------------
(Name)
---------------------------------------
(Address)
4
<PAGE> 1
EXHIBIT 4.2
Zero Coupon Convertible Subordinated Debentures due 2018
Western Digital Corporation, Issuer
INDENTURE
Dated as of February 18, 1998
State Street Bank and Trust Company of California, N.A.,
Trustee
<PAGE> 2
CROSS REFERENCE TABLE*
TIA Indenture
Section Section
- ------- -------
310(a)(1) ....................................................... 7.10
(a)(2) .................................................... 7.10
(a)(3) .................................................... N.A.**
(a)(4) .................................................... N.A.
(b) ................................................ 7.08; 7.10
(c) ....................................................... N.A.
3.11(a) ......................................................... 7.11
(b) ...................................................... 7.11
(c) ...................................................... N.A.
3.12(a) ......................................................... 2.05
(b) ...................................................... 12.03
(c) ...................................................... 12.03
(d) ...................................................... 7.06
3.13(a) ......................................................... 7.06
(b)(1) ................................................... N.A.
(b)(2) ................................................... 7.06
(c) ...................................................... 12.02
(d) ...................................................... 7.06
3.14(a) .................................................. 4.02; 12.02
(b) ...................................................... N.A.
(c)(1) ................................................... 12.04
(c)(2) ................................................... 12.04
(c)(3) ................................................... N.A.
(d) ...................................................... N.A.
(e) ...................................................... 12.05
(f) ...................................................... 4.03
3.15(a) ......................................................... 7.01
(b) ............................................... 7.05; 12.02
(c) ...................................................... 7.01
(d) ...................................................... 7.01
(e) ...................................................... 6.11
3.16(a) (last sentence) ......................................... 2.08
(a)(1)(A) ................................................ 6.05
(a)(1)(B) ................................................ 6.04
(a)(2) ................................................... N.A.
(b) ...................................................... 6.07
3.17(a)(1) ...................................................... 6.08
(a)(2) ................................................... 6.09
(b) ...................................................... 2.04
3.18(a) ......................................................... 12.01
* Note: This Cross Reference Table shall not, for any purpose,
be deemed to be part of the Indenture
** Note: N.A. means Not Applicable
<PAGE> 3
TABLE OF CONTENTS(1)
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE ....................................................... 1
Section 1.01. Definitions .................................................................................. 1
Section 1.02. Other Definitions ............................................................................ 8
Section 1.03. Incorporation by Reference of Trust Indenture Act ............................................ 9
Section 1.04. Rules of Construction ........................................................................ 9
ARTICLE 2 THE SECURITIES ................................................................................... 10
Section 2.01. Form and Dating .............................................................................. 10
Section 2.02. Execution and Authentication ................................................................. 10
Section 2.03. Registrar, Paying Agent and Conversion Agent ................................................. 11
Section 2.04. Paying Agent to Hold Money and Securities in Trust ........................................... 11
Section 2.05. Securityholder Lists ......................................................................... 12
Section 2.06. Exchange and Registration of Transfer of Securities; Restrictions on
Transfers; Depositary ................................................................... 12
Section 2.07. Replacement Securities ....................................................................... 19
Section 2.08. Outstanding Securities; Determinations of Holders' Action .................................... 19
Section 2.09. Temporary Securities ......................................................................... 20
Section 2.10. Cancellation ................................................................................. 20
Section 2.11. Persons Deemed Owners ........................................................................ 21
ARTICLE 3 REDEMPTION AND PURCHASES ......................................................................... 21
Section 3.01. Right to Redeem; Notices to Trustee .......................................................... 21
Section 3.02. Selection of Securities to be Redeemed ....................................................... 21
Section 3.03. Notice of Redemption ......................................................................... 22
Section 3.04. Effect of Notice of Redemption ............................................................... 23
Section 3.05. Deposit of Redemption Price .................................................................. 23
Section 3.06. Securities Redeemed in Part .................................................................. 23
Section 3.07. Conversion Arrangement on Call for Redemption ................................................ 23
Section 3.08. Purchase of Securities at Option of the Holder ............................................... 24
Section 3.09. Redemption at Option of the Holder upon a Fundamental Change ................................. 30
Section 3.10. Effect of Purchase Notice or Fundamental Change Redemption Notice ............................ 31
Section 3.11. Deposit of Purchase Price or Fundamental Change Redemption Price ............................. 32
</TABLE>
- --------
1 This Table of Contents shall not, for any purpose, be deemed to be part of
the Indenture.
<PAGE> 4
<TABLE>
<S> <C>
Section 3.12. Securities Purchased in Part ..................................................................... 32
Section 3.13. Covenant to Comply with Securities Laws upon Purchase of Securities .............................. 32
Section 3.14. Repayment to the Company ......................................................................... 32
ARTICLE 4 COVENANTS............................................................................................. 33
Section 4.01. Payment of Securities ............................................................................ 33
Section 4.02. Financial Information; SEC Reports ............................................................... 33
Section 4.03. Compliance Certificate ........................................................................... 34
Section 4.04. Further Instruments and Acts ..................................................................... 34
Section 4.05. Maintenance of Office or Agency .................................................................. 34
Section 4.06. Existence ........................................................................................ 35
Section 4.07. Maintenance of Properties ........................................................................ 35
Section 4.08. Payment of Taxes and Other Claims ................................................................ 35
ARTICLE 5 SUCCESSOR CORPORATION................................................................................. 36
Section 5.01. When the Company May Merge or Transfer Assets .................................................... 36
ARTICLE 6 DEFAULTS AND REMEDIES................................................................................. 37
Section 6.01. Events of Default ................................................................................ 37
Section 6.02. Acceleration ..................................................................................... 38
Section 6.03. Other Remedies ................................................................................... 38
Section 6.04. Waiver of Past Defaults .......................................................................... 38
Section 6.05. Control by Majority .............................................................................. 38
Section 6.06. Limitation on Suits .............................................................................. 39
Section 6.07. Rights of Holders to Receive Payment ............................................................. 39
Section 6.08. Collection Suit by Trustee ....................................................................... 39
Section 6.09. Trustee May File Proofs of Claim ................................................................. 39
Section 6.10. Priorities ....................................................................................... 40
Section 6.11. Undertaking for Costs ............................................................................ 41
Section 6.12. Waiver of Stay, Extension or Usury Laws .......................................................... 41
ARTICLE 7 TRUSTEE............................................................................................... 42
Section 7.01. Duties of Trustee ................................................................................ 42
Section 7.02. Rights of Trustee ................................................................................ 43
Section 7.03. Individual Rights of Trustee ..................................................................... 43
Section 7.04. Trustee's Disclaimer ............................................................................. 43
Section 7.05. Notice of Defaults ............................................................................... 44
Section 7.06. Reports by Trustee to Holders .................................................................... 44
Section 7.07. Compensation and Indemnity ....................................................................... 44
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<S> <C>
Section 7.08. Replacement of Trustee ........................................................................... 45
Section 7.09. Successor Trustee by Merger ...................................................................... 45
Section 7.10. Eligibility; Disqualification .................................................................... 46
Section 7.11. Preferential Collection of Claims Against Company ................................................ 46
ARTICLE 8 DISCHARGE OF INDENTURE................................................................................ 46
Section 8.01. Discharge of Liability on Securities ............................................................. 46
Section 8.02. Repayment to the Company ......................................................................... 46
ARTICLE 9 AMENDMENTS............................................................................................ 47
Section 9.01. Without Consent of Holders ....................................................................... 47
Section 9.02. With Consent of Holders .......................................................................... 47
Section 9.03. Compliance with Trust Indenture Act .............................................................. 48
Section 9.04. Revocation and Effect of Consents, Waivers and Actions ........................................... 48
Section 9.05. Notation on or Exchange of Securities ............................................................ 48
Section 9.06. Trustee to Sign Supplemental Indentures .......................................................... 49
Section 9.07. Effect of Supplemental Indentures ................................................................ 49
ARTICLE 10 SUBORDINATION........................................................................................ 49
Section 10.01. Agreement of Subordination ....................................................................... 49
Section 10.02. Payments to Holders .............................................................................. 49
Section 10.03. Subrogation of Securities ........................................................................ 52
Section 10.04. Authorization by Holders ......................................................................... 53
Section 10.05. Notice to Trustee ................................................................................ 53
Section 10.06. Trustee's Relation to Senior Indebtedness ........................................................ 54
Section 10.07. No Impairment of Subordination ................................................................... 55
Section 10.08. Reliance by Holders of Senior Indebtedness on Subordination Provisions ........................... 55
Section 10.09. Reinstatement of Subordination ................................................................... 55
Section 10.10. Permitted Payments ............................................................................... 55
Section 10.11. Article Applicable to Paying Agents .............................................................. 56
Section 10.12. Treatment of Conversion Payments ................................................................. 56
Section 10.13. Reliance on Judicial Order or Certificate of Liquidating Agent ................................... 56
ARTICLE 11 CONVERSION........................................................................................... 57
Section 11.01. Conversion Privilege ............................................................................. 57
Section 11.02. Conversion Procedure ............................................................................. 57
Section 11.03. Fractional Shares ................................................................................ 58
Section 11.04. Taxes on Conversion .............................................................................. 58
Section 11.05. Company to Provide Stock ......................................................................... 58
</TABLE>
-iii-
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<TABLE>
<S> <C>
Section 11.06. Adjustment for Change in Capital Stock ........................................................... 59
Section 11.07. Adjustment for Rights Issue ...................................................................... 59
Section 11.08. Adjustment for Other Distributions ............................................................... 59
Section 11.09. When Adjustment May be Deferred .................................................................. 63
Section 11.10. When No Adjustment Required ...................................................................... 63
Section 11.11. Notice of Adjustment ............................................................................. 63
Section 11.12. Voluntary Increase ............................................................................... 63
Section 11.13. Notice of Certain Transactions ................................................................... 63
Section 11.14. Effect of Reclassification, Consolidation, Merger or Sale ........................................ 64
Section 11.15. Company Determination Final ...................................................................... 64
Section 11.16. Trustee's Adjustment Disclaimer .................................................................. 65
Section 11.17. Simultaneous Adjustments ......................................................................... 65
Section 11.18. Successive Adjustments ........................................................................... 65
Section 11.19. Rights Issued in Respect of Common Stock Issued Upon Conversion .................................. 65
Section 11.20. General Considerations ........................................................................... 66
ARTICLE 12 MISCELLANEOUS........................................................................................ 66
Section 12.01. Trust Indenture Act .............................................................................. 66
Section 12.02. Notices .......................................................................................... 66
Section 12.03. Communication by Holders with other Holders ...................................................... 67
Section 12.04. Certificate and Opinion as to Conditions Precedent ............................................... 67
Section 12.05. Statements Required in Certificate or Opinion .................................................... 68
Section 12.06. Separability Clause .............................................................................. 68
Section 12.07. Rules by Trustee, Paying Agent, Conversion Agent and Registrar ................................... 68
Section 12.08. Legal Holidays ................................................................................... 68
Section 12.09. Governing Law .................................................................................... 68
Section 12.10. No Recourse Against Others ....................................................................... 68
Section 12.11. Successors ....................................................................................... 69
Section 12.12. Multiple Originals ............................................................................... 69
</TABLE>
EXHIBIT A--Form of Security
EXHIBIT B--Form of Institutional Accredited Investor letter
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<PAGE> 7
INDENTURE, dated as of February 18, 1998, between Western Digital
Corporation, a Delaware corporation (the "Company"), and State Street Bank and
Trust Company of California, N.A., a national banking association organized and
existing under the laws of the United States of America (the "Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Company's Zero Coupon
Convertible Subordinated Debentures due 2018 (the "Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control," when used with respect to any specified Person means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Applicable Price" means (i) in the event of a Fundamental Change in
which the holders of the Common Stock receive only cash, the amount of cash
received by the holder of one share of Common Stock and (ii) in the event of any
other Fundamental Change, the average of the last reported sales price for the
Common Stock (determined as set forth in the definition of Current Market Price)
during the ten Trading Days prior to the record date for the determination of
the holders of Common Stock entitled to receive cash, securities, property or
other assets in connection with such Fundamental Change, or, if there is no such
record date, the date upon which the holders of Common Stock shall have the
right to receive such cash, securities, property or other assets in connection
with a Fundamental Change.
"Board of Directors" means either the board of directors of the Company
or any duly authorized committee of such board.
"Business Day" means each day of the year on which banking institutions
are not required or authorized to close in The City of New York or the city in
which the Corporate Trust Office is located.
"Common Stock" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and which is not subject to redemption by the Company.
<PAGE> 8
Subject to the provisions of Section 11.14, however, shares issuable upon
conversion of the Securities shall include only shares of Common Stock, par
value of $.01 per share, of the Company as it exists on the date of this
Indenture or shares of any class or classes resulting from any reclassification
or reclassifications thereof and which have no preference in respect of
dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company and which are not subject
to redemption by the Company; provided that if at any time there shall be more
than one such resulting class, the shares of each such class then so issuable
shall be substantially in the proportion which the total number of shares of
such class resulting from all such reclassifications bears to the total number
of shares of all such classes resulting from all such reclassifications.
"Company" means the party named as the "Company" in the first paragraph
of this Indenture until a successor replaces it pursuant to the applicable
provisions of this Indenture and, thereafter, shall mean such successor. The
foregoing sentence shall likewise apply to any subsequent such successor or
successors.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, a Vice Chairman,
its President or a Vice President, and by its Treasurer, an Assistant Treasurer,
its Secretary or an Assistant Secretary, and delivered to the Trustee.
"Conversion Rate" shall have the meaning specified in Section 11.01.
"Corporate Trust Office" or other similar term, shall mean the
principal office of the Trustee at which at any particular time its corporate
trust business shall be principally administered, which office is, at the date
as of which this Indenture is dated, located at 633 West 5th Street, 12th Floor,
Los Angeles, California 90071, Attention: Corporate Trust Department (Western
Digital Corporation - Zero Coupon Convertible Subordinated Debentures due 2018).
"Credit Agreement" means that certain Revolving Credit and Term Loan
Agreement, dated as of January 28, 1998, among the Company, BankBoston, N.A. and
the other lending institutions listed on Schedule 1 thereto, and BankBoston,
N.A., as agent for itself and such other lending institutions (the "Agent"), as
amended through the date hereof, as further amended, amended and restated,
supplemented or otherwise modified from time to time.
"Current Market Price" per share of the Common Stock on any date of
determination means the average of the daily closing prices of the Common Stock
on the NYSE for the 5 consecutive trading days ending on and including such date
of determination. The last reported sale price for each day shall be (i) if the
Common Stock is listed on the NYSE or listed or admitted for trading on any
national securities exchange, the last sale price, or the closing bid price if
no sale occurred, of the Common Stock on the principal, securities exchange on
which the Common Stock is listed, (ii) if the Common Stock is not listed or
admitted for trading as described in clause (i), the last reported sale price of
Common Stock on the Nasdaq National Market, or any similar system of automated
2
<PAGE> 9
dissemination of quotations of securities prices then in common use, if so
quoted, or (iii) if not quoted as described in clause (ii), the mean between the
high bid and low asked quotations for Common Stock as reported by the National
Quotation Bureau Incorporated if at least two securities dealers have inserted
both bid and asked quotations for the Common Stock on at least 5 of the 10
preceding Trading Days. If none of the conditions set forth above is met, the
last reported sale price of Common Stock on any day or the average of such last
reported sale prices for any period shall be the fair market value of the Common
Stock as determined by a member firm of the NYSE selected by the Company.
"Custodian" shall mean State Street Bank and Trust Company of
California, N.A., as custodian with respect to the Securities in global form, or
any successor entity thereto.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Depositary" means, with respect to the Securities issuable or issued
in whole or in part in global form, the Person specified in Section 2.06 as the
Depositary with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter, "Depositary" shall mean or include such successor.
The foregoing sentence shall likewise apply to any subsequent such successor or
successors.
"Designated Senior Indebtedness" means the Credit Agreement and any
particular Senior Indebtedness in which the instrument creating or evidencing
the same or the assumption or guarantee thereof (or related agreements or
documents to which the Company is a party) expressly provides that such Senior
Indebtedness shall be "Designated Senior Indebtedness" for purposes of this
Indenture; provided that such instrument, agreement or other document may place
limitations and conditions on the right of such Senior Indebtedness to exercise
the rights of Designated Senior Indebtedness; and provided further that until
such time as all amounts outstanding under the Credit Agreement have been paid
in full and all lending commitments under the Credit Agreement have terminated,
the Company may not designate any other Senior Indebtedness as "Designated
Senior Indebtedness" without the prior written consent of the Agent (as defined
under the Credit Agreement) under the Credit Agreement, and such Agent shall be
the only person authorized under this Indenture to provide written notice to the
Trustee of any such designation. If any payment made to any holder of any
Designated Senior Indebtedness or its Representative with respect to such
Designated Senior Indebtedness is rescinded or must otherwise be returned by
such holder or Representative upon the insolvency, bankruptcy or reorganization
of the Company or otherwise, the reinstated Indebtedness of the Company arising
as a result of such rescission or return shall constitute Designated Senior
Indebtedness effective as of the date of such rescission or return.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
3
<PAGE> 10
"Fundamental Change" means the occurrence of any transaction or event
in connection with which all or substantially all the Common Stock shall be
exchanged for, converted into, acquired for or constitute solely the right to
receive (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise) consideration which is not all or substantially all common stock
listed (or, upon consummation of such transaction or event, will be listed) on a
United States national securities exchange or approved for quotation in the
Nasdaq National Market or any similar system of automated dissemination of
quotations of securities prices.
"Holder" or "Securityholder" means a Person in whose name a Security is
registered on the Registrar's books.
"Indebtedness" means, with respect to any Person, and without
duplication, (a) all indebtedness, obligations and other liabilities (contingent
or otherwise) of such Person for borrowed money (including obligations of the
Company in respect of overdrafts, foreign exchange contracts, currency exchange
agreements, interest rate protection agreements, and any loans or advances from
banks, whether or not evidenced by notes or similar instruments) or evidenced by
bonds, debentures, notes or similar instruments (whether or not the recourse of
the lender is to the whole of the assets of such Person or to only a portion
thereof), (b) all reimbursement obligations and other liabilities (contingent or
otherwise) of such Person with respect to letters of credit, bank guarantees or
bankers' acceptances, (c) all obligations and liabilities (contingent or
otherwise) in respect of leases of such Person (i) required, in conformity with
generally accepted accounting principles, to be accounted for as capitalized
lease obligations on the balance sheet of such Person, or (ii) required, in
conformity with generally accepted accounting principles, to be accounted for as
an operating lease, provided either (A) such operating lease requires, at the
end of the term thereof, that such Person make any payment other than accrued
periodic rent in the event that such Person does not acquire the leased real
property and related fixtures subject to such lease, or (B) such Person has an
option to acquire the leased real property and related fixtures, whether such
option is exercisable at any time or under specific circumstances, (d) all
obligations of such Person (contingent or otherwise) with respect to an interest
rate swap, cap or collar agreement or other similar instrument or agreement, (e)
all direct or indirect guaranties or similar agreements by such Person in
respect of, and obligations or liabilities (contingent or otherwise) of such
Person to purchase or otherwise acquire or otherwise assure a creditor against
loss in respect of, indebtedness, obligations or liabilities of another Person
of the kind described in clauses (a) through (d), (f) any indebtedness or other
obligations described in clauses (a) through (d) secured by any mortgage,
pledge, lien or other encumbrance existing on property which is owned or held by
such Person, regardless of whether the indebtedness or other obligation secured
thereby shall have been assumed by such Person and (g) any and all deferrals,
renewals, extensions and refundings of, or amendments, modifications or
supplements to, any indebtedness, obligation or liability of the kind described
in clauses (a) through (f).
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
4
<PAGE> 11
"Initial Purchasers" means Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Smith Barney Inc.
"Institutional Accredited Investor" means an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Issue Date" of any Security means the date on which the Security was
originally issued or deemed issued as set forth on the face of the Security.
"Issue Price" of any Security means, in connection with the original
issuance of such Security, the initial issue price at which the Security is
issued as set forth on the face of the Security.
"Liquidated Damages" shall have the meaning specified in the
Registration Rights Agreement.
"Nasdaq National Market" means the electronic inter-dealer quotation
system operated by NASDAQ Stock Market, Inc., a subsidiary of the National
Association of Securities Dealers, Inc.
"NYSE" means The New York Stock Exchange, Inc.
"Officer" means the Chairman of the Board, any Vice Chairman, the
President, any Vice President, the Treasurer or the Secretary or any Assistant
Treasurer or Assistant Secretary of the Company.
"Officers' Certificate" means a written certificate containing the
information specified in Sections 12.04 and 12.05, signed in the name of the
Company by its Chairman of the Board, a Vice Chairman, its President or a Vice
President, and by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion containing the information
specified in Sections 12.04 and 12.05, from legal counsel who is acceptable to
the Trustee. The counsel may be an employee of, or counsel to, the Company or
the Trustee.
"Original Issue Discount" of any Security means the difference between
the Issue Price and the Principal Amount of the Security as set forth on the
face of the Security. For purposes of this Indenture and the Securities, accrual
of Original Issue Discount shall be calculated on the basis of a 360 day year of
twelve 30 day months.
"Payment Blockage Notice" has the meaning specified in Section 10.02.
"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.
5
<PAGE> 12
"Portal Market" means The Portal Market operated by the National
Association of Securities Dealers, Inc. or any successor thereto.
"Principal" or "Principal Amount" of a Security means the Principal
Amount as set forth on the face of the Security.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Redemption Date" shall mean a date specified for redemption of the
Securities (other than redemption upon a Fundamental Change at the option of the
Securityholder) in accordance with the terms of the Securities and Section 3.01
of this Indenture.
"Redemption Price" shall have the meaning set forth in paragraph 5 of
the Securities.
"Reference Market Price" shall initially mean $12 _ and in the event of
any adjustment to the Conversion Rate pursuant to Article 11, the Reference
Market Price shall be adjusted to equal the initial Reference Market Price
multiplied by a fraction the numerator of which is the Conversion Rate specified
in the form of Security attached hereto as Exhibit A (without regard to any
adjustment thereto), and the denominator of which is the Conversion Rate
following such adjustment.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of the date hereof, between the Company and the Initial
Purchasers.
"Representative" means the (a) indenture trustee or other trustee,
agent or representative for any Senior Indebtedness or (b) with respect to any
Senior Indebtedness that does not have any such trustee, agent or other
representative, (i) in the case of such Senior Indebtedness issued pursuant to
an agreement providing for voting arrangements as among the holders or owners of
such Senior Indebtedness, any holder or owner of such Senior Indebtedness acting
with the consent of the required Persons necessary to bind such holders or
owners of such Senior Indebtedness and (ii) in the case of all other such Senior
Indebtedness, the holder or owner of such Senior Indebtedness.
"Rule 144A" means Rule 144A as promulgated under the Securities Act, or
any successor rule.
"Rule 144(k)" means Rule 144(k) as promulgated under the Securities
Act, or any successor rule.
"SEC" means the Securities and Exchange Commission.
"Securities" shall have the meaning set forth in the second paragraph
of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
6
<PAGE> 13
"Securityholder" or "Holder" means a person in whose name a Security is
registered on the Registrar's books.
"Senior Indebtedness" means the principal of, premium, if any, interest
(including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding), rent and end of term
payments payable on or in connection with, and, to the extent not included in
the foregoing, all amounts payable as fees, costs, expenses, liquidated damages,
indemnities, repurchase and other put obligations and other amounts to the
extent accrued or due on or in connection with, Indebtedness of the Company,
whether outstanding on the date of this Indenture or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by the Company (including
all deferrals, renewals, extensions or refundings of, or amendments,
modifications or supplements to, the foregoing). Notwithstanding the foregoing,
the term Senior Indebtedness shall not include (i) Indebtedness evidenced by the
Securities, (ii) Indebtedness of the Company to any subsidiary of the Company, a
majority of the voting stock of which is owned, directly or indirectly, by the
Company, (iii) accounts payable or other indebtedness to trade creditors created
or assumed by the Company in the ordinary course of business and (iv) any
particular Indebtedness in which the instrument creating or evidencing the same
or the assumption or guarantee thereof expressly provides that such Indebtedness
shall not be senior in right of payment to, or is pari passu with, or is
subordinated or junior to, the Securities. Notwithstanding the foregoing, the
term Senior Indebtedness shall not include any Indebtedness of the Company to
any subsidiary of the Company, a majority of the voting stock of which is owned,
directly or indirectly, by the Company. If any payment made to any holder of any
Senior Indebtedness or its Representative with respect to such Senior
Indebtedness is rescinded or must otherwise be returned by such holder or
Representative upon the insolvency, bankruptcy or reorganization of the Company
or otherwise, the reinstated Indebtedness of the Company arising as a result of
such rescission or return shall constitute Senior Indebtedness effective as of
the date of such rescission or return.
"Stated Maturity", when used with respect to any Security, means the
date specified in such Security as the fixed date on which an amount equal to
the Principal of such Security is due and payable.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or managing
general partner of which is such person or a subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939, as amended, as in effect
on the date of this Indenture, except as provided in Section 9.03.
7
<PAGE> 14
"Trading Day" means a day during which trading in securities generally
occurs on the NYSE or, if the applicable security is not listed on the NYSE, on
the principal other national or regional securities exchange on which the
applicable security is then listed or, if the applicable security is not listed
on a national or regional securities exchange, on the Nasdaq National Market or,
if the applicable security is not quoted on the Nasdaq National Market, on the
principal other market on which the applicable security is then traded.
"Trust Officer" means any officer of the Trustee assigned by the
Trustee to administer its corporate trust matters.
"Trustee" means the party named as the "Trustee" in the first paragraph
of this Indenture until a successor replaces it pursuant to the applicable
provisions of this Indenture and, thereafter, shall mean such successor. The
foregoing sentence shall likewise apply to any subsequent such successor or
successors.
"Voting Stock" shall mean stock of any class or classes, however
designated, having ordinary voting power for the election of a majority of the
board of directors of a corporation, other than stock having such power only by
reason of the happening of a contingency.
SECTION 1.2. OTHER DEFINITIONS.
Term Defined in
Section
"Bankruptcy Law"................................... 6.01
"Cash"............................................. 3.08(b)
"Company Notice"................................... 3.08(e)
"Company Notice Date".............................. 3.08(c)
"Conversion Agent"................................. 2.03
"Expiration Time".................................. 11.08(c)
"Event of Default"................................. 6.01
"Fundamental Change Redemption Date"............... 3.09(a)
"Fundamental Change Redemption Notice"............. 3.09(a)
"Fundamental Change Redemption Price".............. 3.09(a)
"Legal Holiday".................................... 12.08
"Market Price"..................................... 3.08(d)
"Notice of Default"................................ 6.01
"Over-allotment Option"............................ 2.02
"Paying Agent"..................................... 2.03
8
<PAGE> 15
Term Defined in
Section
"Purchase Date".................................... 3.08(a)
"Purchase Notice".................................. 3.08(a)
"Purchase Price"................................... 3.08(a)
"Purchased Shares"................................. 11.08(c)
"Registrar"........................................ 2.03
"Restricted Securities"............................ 2.06(d)
"Rights"........................................... 3.08(d)
"Rights Agreement"................................. 3.08(d)
"Sale Price"....................................... 3.08(d)
"Tender Expiration Time"........................... 11.08(d)
"Tender Purchased Shares".......................... 11.08(d)
SECTION 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"Indenture Securities" means the Securities.
"Indenture Security Holder" means a Securityholder.
"Indenture to be Qualified" means this Indenture.
"Indenture Trustee" or "Institutional Trustee" means the Trustee.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rules have the
meanings assigned to them by such definitions.
SECTION 1.4. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles as in
effect from time to time;
9
<PAGE> 16
(3) "or" is not exclusive;
(4) "including" means including, without limitation; and
(5) words in the singular include the plural, and words in the
plural include the singular.
ARTICLE 2
THE SECURITIES
SECTION 2.1. FORM AND DATING. The Securities and the Trustee's
certificate of authentication for the Securities shall be substantially in the
form of Exhibit A, which is a part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or usage
(provided that any such notation, legend or endorsement required by usage is in
a form acceptable to the Company). The Company shall provide any such notations,
legends or endorsements to the Trustee in writing. Each Security shall be dated
the date of its authentication.
Any Security in global form shall represent such of the outstanding
Securities as shall be specified therein and shall provide that it shall
represent the aggregate amount of outstanding Securities from time to time
endorsed thereon and that the aggregate amount of outstanding Securities
represented thereby may from time to time be increased or reduced to reflect
transfers or exchanges permitted hereby. Any endorsement of a Security in global
form to reflect the amount of any increase or decrease in the amount of
outstanding Security represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in such manner and upon instructions
given by the Holder of such Security in accordance with this Indenture. Payment
of Principal Amount, Issue Price, accrued Original Issue Discount, accrued
Liquidated Damages, if any, Redemption Price, Purchase Price, Fundamental Change
Redemption Price or interest, if any, on any Security in global form shall be
made to the Holder of such Security.
SECTION 2.2. EXECUTION AND AUTHENTICATION. The Securities shall be
executed on behalf of the Company by its Chairman of the Board, one of its Vice
Chairmen, its President or one of its Vice Presidents, under its corporate seal
reproduced thereon and attested by its Treasurer or Secretary or one of its
Assistant Treasurers or one of its Assistant Secretaries. The signature of any
of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper Officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of authentication of such Securities.
10
<PAGE> 17
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized officer, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
The Trustee shall authenticate and deliver Securities for original
issue in an aggregate Principal Amount of $1,128,000,000 upon a Company Order
without any further action by the Company; provided, however, that if the
Company sells any Securities pursuant to the Initial Purchasers' over-allotment
option (the "Over-allotment Option") granted pursuant to the Purchase Agreement,
dated February 12, 1998, between the Company and the Initial Purchasers, then
the Trustee shall also authenticate and deliver additional Securities for
original issue in an aggregate Principal Amount of up to $169,200,000 pursuant
to the Over-Allotment Option upon an Company Order without any further action by
the Company. The aggregate Principal Amount of Securities outstanding at any
time may not exceed the amount set forth in the foregoing sentence, except as
provided in Section 2.07.
SECTION 2.3. REGISTRAR, PAYING AGENT AND CONVERSION AGENT. The Company
shall maintain an office or agency where Securities may be presented for
registration of transfer or for exchange ("Registrar"), an office or agency
where Securities may be presented for purchase or payment ("Paying Agent") and
an office or agency where Securities may be presented for conversion into Common
Stock ("Conversion Agent"). The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may have one or more
co-registrars, one or more additional paying agents and one or more additional
conversion agents. The term Paying Agent includes any additional paying agent.
The term Conversion Agent includes any additional conversion or agent, including
any named pursuant to Section 4.05.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent, Conversion Agent or co-registrar (if not the Trustee or
an Affiliate of the Trustee). The agreement shall implement the provisions of
this Indenture that relate to such agent and the relevant Security. The Company
shall notify the Trustee of the name and address of any such agent. If the
Company fails to maintain a Registrar, Paying Agent or Conversion Agent, the
Trustee shall act as such and shall be entitled to appropriate compensation
therefor pursuant to Section 7.07. The Company or an Affiliate of the Company
may act as Paying Agent, Registrar, Conversion Agent or co-registrar.
The Company initially appoints the Trustee as Registrar, Conversion
Agent and Paying Agent in connection with the Securities.
SECTION 2.4. PAYING AGENT TO HOLD MONEY AND SECURITIES IN TRUST. Except
as otherwise provided herein, prior to or on each due date of payments in
respect of any Security, the Company shall deposit with the Paying Agent a sum
of money or securities sufficient to make such payments when such payments are
due. The Company shall require each Paying Agent (other than the Trustee)
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to agree in writing that the Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all money and securities held by the Paying Agent for the
making of payments in respect of the Securities and shall notify the Trustee of
any default by the Company in making any such payment. At any time during the
continuance of any such default, the Paying Agent shall, upon the written
request of the Trustee, forthwith pay to the Trustee all money and securities so
held in trust. If the Company or an Affiliate of the Company acts as Paying
Agent, it shall segregate the money and securities held by it as Paying Agent
and hold it as a separate trust fund. The Company at any time may require a
Paying Agent to pay all money and securities held by it to the Trustee and to
account for any funds and securities disbursed by it. Upon doing so, the Paying
Agent shall have no further liability for the money or securities.
SECTION 2.5. SECURITYHOLDER LISTS. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Holders. If the Trustee is not the Registrar, the
Company shall cause to be furnished to the Trustee at least semiannually on
February 18 and August 18 a listing of Holders dated within 15 days of the date
on which the list is furnished and at such other times as the Trustee may
request in writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Holders.
SECTION 2.6. EXCHANGE AND REGISTRATION OF TRANSFER OF SECURITIES;
RESTRICTIONS ON TRANSFERS; DEPOSITARY.
(a) Upon surrender for registration of transfer of any Security at any
office or agency of the Company designated as Registrar or co-registrar pursuant
to Section 2.03 and satisfaction of the requirements for such transfer set forth
in this Section 2.06, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any authorized denominations and of a
like aggregate principal amount and bearing such restrictive legends as may be
required by this Indenture.
Securities may be exchanged for a like aggregate principal amount of
Securities of other authorized denominations. Securities to be exchanged shall
be surrendered at any office or agency to be maintained by the Company
designated as Registrar or co-registrar pursuant to Section 2.03 and the Company
shall execute and register, and the Trustee shall authenticate and deliver in
exchange therefor, the Security or Securities which the Securityholder making
the exchange shall be entitled to receive, bearing registration numbers not
contemporaneously outstanding.
All Securities presented for registration of transfer or for exchange
into like Securities, purchase, redemption or conversion into Common Stock or
payment shall (if so required by the Company, the Trustee, the Registrar or any
co-registrar) be duly endorsed by, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and the Trustee,
duly executed by the Holder or such Holder's attorney duly authorized in
writing.
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No service charge shall be charged to the Securityholder for any
exchange for like Securities or registration of transfer of Securities, but the
Company, as a condition to any exchange or transfer, may require payment of a
sum sufficient to cover any tax, assessments or other governmental charges that
may be imposed in connection therewith.
None of the Company, the Trustee, the Registrar or any co-registrar
shall be required to exchange for like Securities or register a transfer of (a)
any Securities for a period of 15 days next preceding any selection of
Securities to be redeemed, or (b) any Securities or portions thereof selected or
called for redemption, or (c) any Securities or portion thereof surrendered for
conversion into Common Stock, or (d) any Securities or portion thereof
surrendered for purchase or redemption (and not withdrawn) pursuant to Sections
3.08 or 3.09, respectively.
All Securities issued upon any transfer or exchange for like Securities
shall be valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture as the Securities surrendered
upon such exchange or transfer.
(b) So long as the Securities are eligible for book-entry settlement
with the Depositary (as defined below), or unless otherwise required by law, all
Securities that are so eligible may be represented by a Security in global form
registered in the name of the Depositary or the nominee of the Depositary,
except as otherwise specified below. The transfer and exchange of beneficial
interests in such Security in global form shall be effected through the
Depositary in accordance with this Indenture and the procedures of the
Depositary therefor.
Securities that upon initial issuance are not owned by Institutional
Accredited Investors will be represented by one or more Securities in global
form. Transfers of interests in a Security in global form will be made in
accordance with the standing instructions and procedures of the Depository and
its participants. The Trustee shall make appropriate endorsements to reflect
increases or decreases in the Principal Amounts of such Securities in global
form as set forth on the face of the Security in global form to reflect any such
transfers.
Except as provided below, beneficial owners of a Security in global
form shall not be entitled to have certificates registered in their names, will
not receive or be entitled to receive physical delivery of certificates in
definitive form and will not be considered Holders of such Securities in global
form.
(c) So long as the Securities are eligible for book-entry settlement,
or unless otherwise required by law, upon any transfer of a definitive Security
to a QIB in accordance with Rule 144A or a Person other than a U.S. Person, and
upon receipt of the definitive Security or Securities being so transferred,
together with a certification, substantially in the form of the reverse of the
Security, from the transferor that the transfer is being made in compliance with
Rule 144A or to a Person other than a U.S. Person (or other evidence
satisfactory to the Trustee), the Trustee shall make an endorsement on the
Security in global form to reflect an increase in the aggregate Principal Amount
of the Securities represented by the Security in global form, the Trustee shall
cancel such definitive
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Security or Securities in accordance with the standing instructions and
procedures of the Depositary and the aggregate principal amount of Securities
represented by the Security in global form will be increased accordingly;
provided that no definitive Security, or portion thereof, in respect of which
the Company or an Affiliate of the Company held any beneficial interest shall be
included in such Security in global form until such definitive Security is
freely tradable in accordance with Rule 144(k); provided further that the
Trustee shall issue Securities in definitive form upon any transfer of a
beneficial interest in any Security in global form to the Company or any
Affiliate of the Company.
Upon any sale or transfer of a Security to an Institutional Accredited
Investor (other than pursuant to a registration statement that has been declared
effective under the Securities Act), such Institutional Accredited Investor
shall, prior to such sale or transfer, furnish to the Company and/or the Trustee
a signed letter containing representations and agreements relating to
restrictions on transfer substantially in the form set forth in Exhibit B to
this Indenture.
Any Security in global form may be endorsed with or have incorporated
in the text thereof such legends or recitals or changes not inconsistent with
the provisions of this Indenture as may be required by the Custodian, the
Depositary, by the NYSE or by the National Association of Securities Dealers,
Inc. in order for the Securities to be tradeable on The Portal Market or as may
be required for the Securities to be tradeable on any other market developed for
trading of securities pursuant to Rule 144A or required to comply with any
applicable law or any regulation thereunder or with the rules and regulations of
any securities exchange upon which the Securities may be listed or traded or to
conform with any usage with respect thereto, or to indicate any special
limitations or restrictions to which any particular Securities are subject.
(d) Every Security that bears or is required under this Section 2.06(d)
to bear the legend set forth in this Section 2.06(d) (together with any Common
Stock issued upon conversion of the Securities and required to bear the legend
set forth in Section 2.06(e), collectively, the "Restricted Securities") shall
be subject to the restrictions on transfer set forth in this Section 2.06(d)
(including those set forth in the legend set forth below) unless such
restrictions on transfer shall be waived by written consent of the Company, and
the holder of each such Restricted Security, by such Securityholder's acceptance
thereof, agrees to be bound by all such restrictions on transfer. As used in
Sections 2.06(d) and 2.06(e), the term "transfer" encompasses any sale, pledge,
transfer or other disposition whatsoever of any Restricted Security.
Until the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), any
certificate evidencing such Security (and all securities issued in exchange
therefor or substitution thereof, other than Common Stock, if any, issued upon
conversion therefor, which shall bear the legend set forth in Section 2.06(e),
if applicable) shall bear a legend in substantially the following form, unless
such Security has been sold pursuant to a registration statement that has been
declared effective under the Securities Act (and which continues to be effective
at the time of such transfer), or unless otherwise agreed by the Company in
writing, with written notice thereof to the Trustee:
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THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR"); OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN OFFSHORE
TRANSACTION; (2) AGREES THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE
HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY
UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY
OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITY WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT (A) TO WESTERN DIGITAL CORPORATION OR ANY SUBSIDIARY THEREOF,
(B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITY
EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRUSTEE OR A SUCCESSOR TRUSTEE, AS APPLICABLE), (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (E) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND WHICH
CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER); (3) PRIOR TO
SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 2(E) ABOVE), IT
WILL FURNISH TO STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA,
N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH
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<PAGE> 22
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND (4) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF
THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY
UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.,
AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED
TRANSFEREE IS A PURCHASER WHO IS NOT A U.S. PERSON OR AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE
(OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE
TRANSFER OF THE SECURITY EVIDENCED HEREBY PURSUANT TO CLAUSE 2(E) ABOVE
OR UPON ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K)
UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION).
Any Security (or security issued in exchange or substitution therefor)
as to which such restrictions on transfer shall have expired in accordance with
their terms or as to the conditions for removal of the foregoing legend set
forth therein have been satisfied may, upon surrender of such Securities for
exchange to the Registrar in accordance with the provisions of this Section
2.06, be exchanged for a new Security or Securities, of like tenor and aggregate
principal amount, which shall not bear the restrictive legend required by this
Section 2.06(d).
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in this Section 2.06(d)), a Security in global form may not
be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee to a successor Depositary or a nominee of such successor Depositary.
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The Depositary shall be a clearing agency registered under the Exchange
Act. The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the Securities in global form. Initially, the
Security in global form shall be issued to the Depositary, registered in the
name of Cede & Co., as the nominee of the Depositary, and deposited with the
Custodian for Cede & Co.
If at any time the Depositary for a Security in global form notifies
the Company that it is unwilling or unable to continue as Depositary for such
Security, the Company may appoint a successor Depositary with respect to such
Security. If a successor Depositary for the Security is not appointed by the
Company within 90 days after the Company receives such notice, the Company will
execute, and the Trustee, upon receipt of an Officers' Certificate for
authentication and delivery of Securities, will authenticate and deliver,
Securities in certificated form, in an aggregate principal amount equal to the
principal amount of the Security in global form, in exchange for such Security
in global form.
Securities in certificated form issued in exchange for all or a part of
a Security in global form pursuant to this Section 2.06 shall be registered in
such names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. Upon execution and authentication, the Trustee shall
deliver such Securities in certificated form to the Persons in whose names such
Securities in certificated form are so registered.
At such time as all interests in a Security in global form have been
redeemed, converted, exchanged, repurchased or canceled for Securities in
certificated form, or transferred to a transferee who receives Securities in
certificated form, such Security in global form shall be, upon receipt thereof,
canceled by the Trustee in accordance with standing procedures and instructions
existing between the Custodian and Depositary. At any time prior to such
cancellation, if any interest in a Security in global form is exchanged for
Securities in certificated form, redeemed, converted, exchanged, repurchased by
the Company pursuant to Article 3 or canceled, or transferred for part of a
Security in global form, the principal amount of such Security in global form
shall, in accordance with the standing procedures and instructions existing
between the Custodian and the Depositary, be reduced or increased, as the case
may be, and an endorsement shall be made on such Security in global form, by the
Trustee or the Custodian, at the direction of the Trustee, to reflect such
reduction or increase.
(e) Until the expiration of the holding period applicable to sales
thereof under Rule 144(k) under the Securities Act (or any successor provision),
any stock certificate representing Common Stock issued upon conversion of a
Security shall bear a legend in substantially the following form, unless such
Common Stock has been sold pursuant to a registration statement that has been
declared effective under the Securities Act (and which continues to be effective
at the time of such transfer) or such Common Stock has been issued upon
conversion of Securities that have been transferred pursuant to a registration
statement that has been declared effective under the Securities
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Act, or unless otherwise agreed by the Company in writing with written notice
thereof to the transfer agent for the Common Stock:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OF, U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES
THAT UNTIL THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF
THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES
ACT (OR ANY SUCCESSOR PROVISION), (1) IT WILL NOT RESELL OR OTHERWISE
TRANSFER THE COMMON STOCK EVIDENCED HEREBY WITHIN THE UNITED STATES OR
TO, OR FOR ACCOUNT OF U.S. PERSONS, EXCEPT (A) TO WESTERN DIGITAL
CORPORATION OR ANY SUBSIDIARY THEREOF, (B) TO A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN COMPLIANCE WITH RULE 144A, (C) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT) THAT PRIOR TO SUCH TRANSFER FURNISHES TO AMERICAN STOCK
TRANSFER AND TRUST COMPANY, AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER
AGENT, AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THE COMMON STOCK EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM SUCH TRANSFER AGENT OR SUCCESSOR TRANSFER AGENT, AS
APPLICABLE), (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (E) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER); (2) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT
TO CLAUSE 1(E) ABOVE), IT WILL FURNISH TO AMERICAN STOCK TRANSFER AND
TRUST COMPANY, AS TRANSFER AGENT (OR A SUCCESSOR TRANSFER AGENT, AS
APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS THE TRANSFER AGENT MAY REASONABLE REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE
SECURITY EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE
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1(E) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS
LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE COMMON
STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE 1(E) ABOVE OR UPON ANY
TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY AFTER THE EXPIRATION OF
THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY
UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION).
Any such Common Stock as to which such restrictions on transfer shall
have expired in accordance with their terms or as to which the conditions for
removal of the foregoing legend set forth therein have been satisfied may, upon
surrender of the certificates representing such shares of Common Stock for
exchange in accordance with the procedures of the transfer agent for the Common
Stock, be exchanged for a new certificate or certificates for a like number of
shares of Common Stock, which shall not bear the restrictive legend required by
this Section 2.06(e).
(f) Any Security or Common Stock issued upon the conversion or exchange
of a Security that, prior to the expiration of the holding period applicable to
sales thereof under Rule 144(k) under the Securities Act (or any successor
provision), is purchased or owned by the Company or any Affiliate thereof may
not be resold by the Company or such Affiliate unless registered under the
Securities Act or resold pursuant to an exemption from the registration
requirements of the Securities Act in a transaction which results in such
Securities or Common Stock, as the case may be, no longer being "restricted
securities" (as defined under Rule 144).
SECTION 2.7. REPLACEMENT SECURITIES. If (a) any mutilated Security is
surrendered to the Trustee, or (b) the Company and the Trustee receive evidence
to their satisfaction of the destruction, loss or theft of any Security, and
there is delivered to the Company and the Trustee such security or indemnity as
may be required by them to save each of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and, upon its written request,
the Trustee shall authenticate and deliver, in exchange for any such mutilated
Security or in lieu of any such destroyed, lost or stolen Security, a new
Security of like tenor and Principal Amount, bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be purchased or
redeemed by the Company pursuant to Article 3 hereof, the Company in its
discretion may, instead of issuing a new Security, pay, purchase or redeem such
Security, as the case may be.
Upon the issuance of any new Securities under this Section 2.07, the
Company may, as a condition to such issuance, 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.
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Every new Security issued pursuant to this Section 2.07 in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.8. OUTSTANDING SECURITIES; DETERMINATIONS OF HOLDERS' ACTION.
Securities outstanding at any time are all the Securities authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation
and those described in this Section 2.08 as not outstanding. A Security does not
cease to be outstanding because the Company or an Affiliate thereof holds the
Security; provided, however, that in determining whether the Holders of the
requisite Principal Amount of Securities have given or concurred in any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Securities owned by the Company or any Affiliate of the Company shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Subject to the foregoing,
only Securities outstanding at the time of such determination shall be
considered in any such determination (including, without limitation,
determinations pursuant to Articles 6 and 9).
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent holds, in accordance with this Indenture, on a
Redemption Date, or on the Business Day following a Purchase Date or a
Fundamental Change Redemption Date, or on Stated Maturity, money or securities,
if permitted hereunder, sufficient to pay Securities payable on that date, then
on and after that date such Securities shall cease to be outstanding and
Original Issue Discount and interest, if any, on such Securities shall cease to
accrue; provided, that if such Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made.
If a Security is converted in accordance with Article 11, then from and
after such conversion such Security shall cease to be outstanding and Original
Issue Discount and interest, if any, shall cease to accrue on such Security.
SECTION 2.9. TEMPORARY SECURITIES. Pending the preparation of
definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in
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lieu of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 2.03,
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like Principal Amount of
definitive Securities of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 2.10. CANCELLATION. All Securities surrendered for payment,
purchase by the Company pursuant to Article 3, conversion, redemption or
registration of transfer or exchange for the Securities shall, if surrendered to
any Person other than the Trustee, be delivered to the Trustee and shall be
promptly canceled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all Securities
so delivered shall be promptly canceled by the Trustee. The Company may not
issue new Securities to replace Securities it has paid for or delivered to the
Trustee for cancellation or that any Holder has converted pursuant to Article
11. No Securities shall be authenticated in lieu of or in exchange for any
Securities canceled as provided in this Section 2.10, except as expressly
permitted by this Indenture. All canceled Securities held by the Trustee shall
be destroyed by the Trustee and, following such destruction, the Trustee shall
deliver a certificate of destruction to the Company, unless the Company directs
by the Company Order that the Trustee deliver canceled Securities to the
Company.
SECTION 2.11. PERSONS DEEMED OWNERS. Prior to due presentment of a
Security for registration of transfer, the Company, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name such Security is
registered as the owner of such Security for the purpose of receiving payment of
Principal Amount, Issue Price, accrued Original Issue Discount, accrued
Liquidated Damages, if any, Redemption Price, Purchase Price, Fundamental Change
Redemption Price and interest, if any, in respect thereof, for the purpose of
conversion and for all other purposes whatsoever, whether or not such Security
be overdue, and none of the Company, the Trustee or any agent of the Company or
the Trustee shall be affected by notice to the contrary.
ARTICLE 3
REDEMPTION AND PURCHASES
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SECTION 3.1. RIGHT TO REDEEM; NOTICES TO TRUSTEE. The Company, at its
option, may redeem the Securities in accordance with the provisions of
paragraphs 5 and 7 of the Securities. If the Company elects to redeem Securities
pursuant to paragraph 5 of the Securities, it shall notify the Trustee in
writing of the Redemption Date, the Principal Amount of Securities to be
redeemed and the Redemption Price.
The Company shall give the notice to the Trustee provided for in this
Section 3.01 (i) in the case of any redemption of fewer than all of the
Securities, at least 45 days before the Redemption Date and (ii) in the case of
a redemption of all of the Securities, no later than the date that the Company
is required to give notice to the Holders pursuant to Section 3.03, in each case
unless a shorter notice shall be satisfactory to the Trustee.
SECTION 3.2. SELECTION OF SECURITIES TO BE REDEEMED. If less than all
the Securities held in definitive form are to be redeemed, the Trustee shall
select the definitive Securities to be redeemed pro rata or by lot or by a
method the Trustee considers fair and appropriate (as long as such method is not
prohibited by the rules of any stock exchange on which the Securities are then
listed). The Trustee shall make the selection at least 35 days, but not more
than 60 days, before the Redemption Date from outstanding definitive Securities
not previously called for redemption. The Trustee may select for redemption
portions of the Principal of Securities that have denominations larger than
$1,000. Securities and portions of them the Trustee selects shall be in
Principal Amounts of $1,000 or a multiple of $1,000. Provisions of this
Indenture that apply to definitive Securities called for redemption also apply
to portions of definitive Securities called for redemption. The Trustee shall
notify the Company promptly of the definitive Securities or portions of
definitive Securities to be redeemed.
Any interest in a Security held in global form by and registered in the
name of the Depositary or its nominee to be redeemed in whole or in part will be
redeemed in accordance with the procedures of the Depositary.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed may be treated by
the Trustee as outstanding for the purpose of such selection.
SECTION 3.3. NOTICE OF REDEMPTION. At least 30 days but not more than
60 days before a Redemption Date, the Company shall mail a notice of redemption
by first-class mail, postage prepaid, to each Holder of Securities to be
redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the Redemption Date;
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(2) the Redemption Price;
(3) the Conversion Rate;
(4) the name and address of the Paying Agent and Conversion Agent;
(5) that Securities called for redemption may be converted at any time
before the close of business on the last Trading Day prior to the Redemption
Date;
(6) that Holders who want to convert Securities must satisfy the
requirements set forth in paragraph 9 of the Securities;
(7) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(8) if fewer than all the outstanding Securities are to be redeemed,
the certificate number and Principal Amounts of the particular Securities to be
redeemed;
(9) that Original Issue Discount on Securities called for redemption
will cease to accrue on and after the Redemption Date; and
(10) the CUSIP number or numbers for the Securities.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the Holder receives such
notice. In any case, failure to give such notice by mail or any defect in the
notice to the Holder of any Security designated for redemption as a whole or in
part shall not affect the validity of the proceedings for the redemption of any
other Security.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption
is given, Securities called for redemption become due and payable on the
Redemption Date and at the Redemption Price stated in the notice except for
Securities which are converted in accordance with the terms of this Indenture.
Upon the later of the Redemption Date or the date such Securities are
surrendered to the Paying Agent, such Securities shall be paid at the Redemption
Price stated in the notice.
SECTION 3.5. DEPOSIT OF REDEMPTION PRICE. Prior to or on the Redemption
Date, the Company shall deposit with the Paying Agent (or if the Company or an
Affiliate of the Company is
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the Paying Agent, shall segregate and hold in trust) money sufficient to pay the
Redemption Price of all Securities to be redeemed on that date other than
Securities or portions of Securities called for redemption which prior thereto
have been delivered by the Company to the Trustee for cancellation or have been
converted for Common Stock, and on or after the Redemption Date (unless the
Company shall default in the payment of the Securities at the Redemption Price,
together with Original Issue Discount accrued to the Redemption Date), Original
Issue Discount on the Securities or portion of Securities called for redemption
shall cease to accrue and such Securities shall cease after the close of
business on the Business Day immediately preceding the Redemption Date to be
convertible into Common Stock and, except as provided in this Section 3.05 and
Section 8.02, to be entitled to any benefit or security under this Indenture,
and the Holders thereof shall have no right in respect of such Securities except
the right to receive the Redemption Price thereof and unpaid interest to (but
excluding) the Redemption Date. The Paying Agent shall as promptly as
practicable return to the Company any money, with interest, if any, thereon),
not required for that purpose because of conversion of Securities. If such money
is then held by the Company in trust and is not required for such purpose it
shall be discharged from such trust.
SECTION 3.6. SECURITIES REDEEMED IN PART. Upon surrender of a Security
that is redeemed in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder a new Security in an authorized
denomination equal in Principal Amount to the unredeemed portion of the Security
surrendered.
SECTION 3.7. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION. In
connection with any redemption of Securities, the Company may arrange for the
purchase and conversion for Common Stock of any Securities called for redemption
by an agreement with one or more investment bankers or other purchasers to
purchase such Securities by paying to the Paying Agent in trust for the Holders,
on or before the close of business on the Redemption Date, an amount that,
together with any amounts deposited with the Paying Agent by or on behalf of the
Company for the redemption of the Securities, is not less than the Redemption
Price, including interest, if any, to the Redemption Date, of such Securities.
Notwithstanding anything to the contrary contained in this Article 3, the
obligation of the Company to pay the Redemption Price of such Securities,
including all accrued Original Issue Discount, shall be deemed to be satisfied
and discharged to the extent such amount is so paid by such purchasers. If such
an agreement is entered into, any Securities not duly surrendered for conversion
by the Holders thereof may, at the option of the Company, be deemed, to the
fullest extent permitted by law, acquired by such purchasers from such Holders
and (notwithstanding anything to the contrary contained in Article 11)
surrendered by such purchasers for conversion, all immediately prior to the
close of business on the Redemption Date, subject to payment of the above amount
as aforesaid. The Paying Agent shall hold and pay to the Holders whose
Securities are selected for redemption any such amount paid to it in the same
manner as it would money deposited with it by the Company for the redemption of
Securities. Without the Paying Agent's prior written consent, no arrangement
between the Company and such purchasers for the purchase and conversion of any
Securities shall increase or otherwise affect any of the powers, duties,
responsibilities or obligations of the Paying Agent as set forth in this
Indenture, and
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the Company agrees to indemnify the Paying Agent from, and hold it harmless
against, any loss, liability or expense arising out of or in connection with any
such arrangement for the purchase and conversion of any Securities between the
Company and such purchasers, including the costs and expenses incurred by the
Paying Agent in the defense of any claim or liability arising out of or in
connection with the exercise or performance of any of its powers, duties,
responsibilities or obligations under this Indenture.
SECTION 3.8. PURCHASE OF SECURITIES AT OPTION OF THE HOLDER.
(a) General. Securities shall be purchased by the Company pursuant to
paragraph 6 of the Securities as of February 18, 2003, February 18, 2008 and
February 18, 2013 (each, a "Purchase Date"), at the purchase price specified
therein (each, a "Purchase Price") at the option of the Holder thereof, upon:
(1) delivery to the Paying Agent by the Holder of a written notice of
purchase (a "Purchase Notice") at any time from the opening of business on the
date that is 20 Business Days prior to a Purchase Date until the close of
business on such Purchase Date, stating:
(A) the certificate number of the Security which the Holder
will deliver to be purchased;
(B) the portion of the Principal Amount of the Security which
the Holder will deliver to be purchased, which portion must be $1,000 in
Principal Amount or a multiple thereof;
(C) that such Security shall be purchased as of the Purchase
Date pursuant to the terms and conditions specified in paragraph 6 of the
Securities and in this Indenture; and
(D) if the Company elects, pursuant to a Company Notice, to
pay the Purchase Price to be paid as of such Purchase Date, in whole or in part,
in Common Stock but such portion of the Purchase Price shall ultimately be
payable to such Holder in Cash because any of the conditions to the payment of
the Purchase Price in Common Stock are not satisfied prior to or on the Purchase
Date, as set forth in Section 3.08(d), whether such Holder elects (x) to
withdraw such Purchase Notice as to some or all of the Securities to which such
Purchase Notice relates (stating the Principal Amount and certificate numbers of
the Securities as to which such withdrawal shall relate), or (y) to receive Cash
in respect of the entire Purchase Price for all Securities (or portions thereof)
to which such Purchase Notice relates; and
(2) delivery of such Security to the Paying Agent prior to, on or after
the Purchase Date (together with all necessary endorsements) at the offices of
the Paying Agent, such delivery being a condition to receipt by the Holder of
the Purchase Price therefor; provided, however, that such Purchase Price shall
be so paid pursuant to this Section 3.08 only if the Security so delivered to
the Paying Agent shall conform in all respects to the description thereof in the
related Purchase Notice.
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If a Holder, in such Holder's Purchase Notice (and in any written
notice of withdrawal of a portion of a Holder's Securities previously submitted
for purchase pursuant to a Purchase Notice, the portion that remains subject to
the Purchase Notice), fails to indicate such Holder's choice with respect to the
election set forth in clause (D) of Section 3.08(a)(1), such Holder shall be
deemed to have elected to receive Cash in respect of the entire Purchase Price
for all Securities subject to such Purchase Notice in the circumstances set
forth in such clause (D).
The Company shall purchase from the Holder thereof, pursuant to this
Section 3.08, a portion of a Security if the Principal Amount of such portion is
$1,000 or a multiple of $1,000. Provisions of this Indenture that apply to the
purchase of all of a Security also apply to the purchase of such portion of such
Security.
Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.08 shall be consummated by the delivery of the consideration to
be received by the Holder promptly following the later of the Purchase Date and
the time of delivery of the Security.
Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Purchase Notice contemplated by this Section 3.08(a)
shall have the right at any time prior to the close of business on the Purchase
Date to withdraw such Purchase Notice by delivery of a written notice of
withdrawal to the Paying Agent in accordance with Section 3.10.
The Paying Agent shall promptly notify the Company of the receipt by it
of any Purchase Notice or written notice of withdrawal thereof.
(b) Company's Right to Elect Manner of Payment of Purchase Price. The
Company may elect with respect to any Purchase Date to pay the Purchase Price in
respect of the Securities to be purchased pursuant to Section 3.08(a) as of such
Purchase Date, in U.S. legal tender ("Cash") or Common Stock, or in any
combination of Cash and Common Stock, subject to the conditions set forth in
Sections 3.08(c) and (d). The Company shall designate, in the Company Notice
delivered pursuant to Section 3.08(e), whether the Company will purchase the
Securities for Cash or Common Stock, or, if a combination thereof, the
percentages of the Purchase Price of Securities in respect of which it will pay
in Cash and/or Common Stock; provided that the Company will pay Cash for
fractional interests in Common Stock. For purposes of determining the existence
of potential fractional interests, all Securities subject to purchase by the
Company held by a Holder shall be considered together (no matter how many
separate certificates are to be presented). Each Holder whose Securities are
purchased pursuant to this Section 3.08 shall receive the same percentage of
Cash and/or Common Stock in payment of the Purchase Price for such Securities,
except (i) as provided in Section 3.08(d) with regard to the payment of Cash in
lieu of fractional interests in Common Stock and (ii) in the event that the
Company is unable to purchase the Securities of a Holder or Holders for Common
Stock because any necessary qualifications or registrations of the Common Stock
under applicable federal or state securities laws cannot be obtained, the
Company may purchase the Securities of such Holder or Holders for Cash. Once the
Company has given its Company Notice to Holders the Company may not change its
election with
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respect to the consideration (or components or percentages of components
thereof) to be paid except pursuant to this Section 3.08(b) or Section 3.08(d).
At least two Business Days before the Company Notice Date (as defined
in Section 3.08(c)), the Company shall deliver an Officers' Certificate to the
Trustee specifying:
(i) the manner of payment selected by the Company,
(ii) the information required by Section 3.08(e),
(iii) if the Company elects to pay the Purchase Price, or a
specified percentage thereof, in Common Stock, that the conditions to such
manner of payment set forth in Section 3.08(d) have been or will be complied
with, and
(iv) whether the Company desires the Trustee to give the
Company Notice required by Section 3.08(e).
(c) Purchase with Cash. At the option of the Company, the Purchase
Price of Securities in respect of which a Purchase Notice pursuant to Section
3.08(a) has been given, or a specified percentage thereof, may be paid by the
Company with Cash equal to the aggregate Purchase Price, or such specified
percentage thereof, as the case may be, of such Securities. If the Company
elects to purchase Securities with Cash, a Company Notice as provided in Section
3.08(e) shall be sent to Holders (and to beneficial owners as required by
applicable law) not less than 20 Business Days prior to the Purchase Date (the
"Company Notice Date").
(d) Payment by Issuance of Common Stock. At the option of the Company,
the Purchase Price of Securities in respect of which a Purchase Notice pursuant
to Section 3.08(a) has been given, or a specified percentage thereof, may be
paid by the Company by the issuance of a number of shares of Common Stock equal
to the quotient obtained by dividing (i) the amount of Cash to which the Holders
would have been entitled had the Company elected to pay all or such specified
percentage, as the case may be, of the Purchase Price of such Securities in Cash
by (ii) the Market Price of a share of Common Stock, subject to the next
succeeding paragraph.
The Company will not issue a fractional share of Common Stock in
payment of the Purchase Price. Instead the Company will pay Cash for the current
market value of the fractional share. The current market value of a fraction of
a share shall be determined by multiplying the Market Price by such fraction and
rounding the product to the nearest whole cent. It is understood that if a
Holder elects to have more than one Security purchased, the number of shares of
Common Stock shall be based on the aggregate amount of Securities to be
purchased.
Each share of Common Stock issued upon purchase of Securities pursuant
to Section 3.08(a) shall be entitled to receive the appropriate number of
preferred share purchase rights (the "Rights"), if any, and the certificates
representing the Common Stock issued upon such purchase shall bear
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such legends, if any, in each case as provided by and subject to the terms of
the Rights Agreement (the "Rights Agreement") dated as of December 1, 1988,
between the Company and American Stock Transfer & Trust Company, as successor
Rights Agent thereunder, as amended through the date hereof and as in effect at
the time of such purchase.
If the Company elects to purchase the Securities by the issuance of
shares of Common Stock, a Company Notice as provided in Section 3.08(e) shall be
sent to the Holders (and to beneficial owners as required by applicable law) not
later than the Company Notice Date.
The Company's right to exercise its election to purchase the Securities
pursuant to Section 3.08 through the issuance of shares of Common Stock shall be
conditioned upon:
(i) the Company having given timely Company Notice of election
to purchase all or a specified percentage of the Securities with Common Stock as
provided herein;
(ii) the registration of the shares of Common Stock to be
issued in respect of the payment of the specified percentage of the Purchase
Price under the Securities Act; unless the shares of Common Stock so issued can
be resold by the Securityholder receiving such shares without registration under
the Securities Act pursuant to Rule 144 under the Securities Act or otherwise
(unless such Securityholder is the Company or an Affiliate of the Company);
(iii) any necessary qualification or registration under
applicable state securities laws or the availability of an exemption from such
qualification and registration; and
(iv) the receipt by the Trustee of an Officers' Certificate
and an Opinion of Counsel each stating that (A) the terms of the issuance of the
Common Stock are in conformity with this Indenture and (B) the shares of Common
Stock to be issued by the Company in payment of the specified percentage of the
Purchase Price in respect of Securities have been duly authorized and, when
issued and delivered pursuant to the terms of this Indenture in payment of the
specified percentage of the Purchase Price in respect of Securities, will be
validly issued, fully paid and nonassessable, and, in the case of such Officers'
Certificate, stating that conditions (i), (ii) and (iii) above have been
satisfied and, in the case of such Opinion of Counsel, stating that conditions
(ii) and (iii) above have been satisfied.
Such Officers' Certificate shall also set forth the number of shares of Common
Stock to be issued for each $1,000 Principal Amount of Securities and the Sale
Price of a share of Common Stock on each Trading Day during the period during
which the Market Price is calculated and ending on the Purchase Date. The
Company may elect to pay the Purchase Price (or any portion thereof) in Common
Stock only if the information necessary to calculate the Market Price is
reported in a daily newspaper of national circulation. If such conditions are
not satisfied with respect to a Holder or Holders prior to or on the Purchase
Date and the Company elected to purchase the Securities to be purchased as of
such Purchase Date pursuant to this Section 3.08 through the
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issuance of shares of Common Stock, the Company shall pay the entire Purchase
Price in respect of such Securities of such Holder or Holders in Cash.
The "Market Price" means the average of the Sale Prices of the Common
Stock for the five Trading Day period ending on (if the third Business Day prior
to the applicable Purchase Date is a Trading Day or, if it is not a Trading Day,
then on the last Trading Day prior to such third Business Day) the third
Business Day prior to the applicable Purchase Date, appropriately adjusted to
take into account the occurrence, during the period commencing on the first of
such Trading Days during such five Trading Day period and ending on such
Purchase Date, of any event described in Section 11.06, 11.07 or 11.08; subject,
however, to the conditions set forth in Sections 11.09 and 11.10. The "Sale
Price" of the Common Stock on any date means the closing per share sale price
(or if no closing sale price is reported the average of the bid and ask prices
or, if more than one, in either case, the average of the average bid and average
ask prices) on such date as reported in the composite transactions for the
principal United States securities exchange on which the Common Stock is traded
or, if the Common Stock is not listed on a United States national or regional
stock exchange, as reported by the Nasdaq National Market.
(e) Notice of Election. Company's notices of election to purchase with
Cash or Common Stock, or any combination thereof, shall be sent to the Holders
(and to beneficial owners as required by applicable law) in the manner provided
in Section 12.02 at the time specified in Section 3.08(c) or (d), as applicable
(each, a "Company Notice"). Such Company Notices shall state the manner of
payment elected and shall contain the following information:
In the event the Company has elected to pay a Purchase Price (or a
specified percentage thereof) with Common Stock, the Company Notice shall:
(1) state that each Holder will receive Common Stock with a
Market Price determined as of a specified date prior to the Purchase Date equal
to such specified percentage of the Purchase Price of the Securities held by
such Holder (except any Cash amount to be paid in lieu of fractional share); and
(2) set forth the method of calculating the Market Price and
state that because the Market Price of Common Stock will be determined prior to
the Purchase Date, the Holders will bear the market risk with respect to the
value of the Common Stock to be received from the date such Market Price is
determined to the Purchase Date.
In any case, each Company Notice shall include a form of Purchase
Notice to be completed by a Securityholder and shall state:
(i) the Purchase Price and Conversion Rate;
(ii) the name and address of the Paying Agent and the
Conversion Agent;
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(iii) that Securities as to which a Purchase Notice
has been given may be converted only if the applicable Purchase Notice has been
withdrawn in accordance with the terms of this Indenture;
(iv) that Securities must be surrendered to the
Paying Agent to collect payment;
(v) that the Purchase Price for any Security as to
which a Purchase Notice has been given and not withdrawn will be paid promptly
following the later of the Purchase Date and the time of surrender of such
Security as described in (iv);
(vi) the procedures the Holder must follow under
Section 3.08;
(vii) briefly, the conversion rights of the
Securities; and
(viii) the procedures for withdrawing a Purchase
Notice (including, without limitation, for a conditional withdrawal pursuant to
the terms of Section 3.08 (a) (1) (D) or Section 3.10).
At the Company's request, the Trustee shall give the Company Notice in
the Company's name and at the Company's expense; provided, however, that, in all
cases, the text of the Company Notice shall be prepared by the Company.
(f) Covenants of the Company. All shares of Common Stock delivered upon
conversion or purchase of the Securities shall be newly issued shares or
treasury shares, shall be fully paid and nonassessable and shall be free from
preemptive rights and free of any lien or adverse claim.
The Company shall use its best efforts to list or cause to have quoted
all such shares of Common Stock on each United States national securities
exchange or over-the-counter or other domestic market on which the Common Stock
is then listed or quoted.
(g) Procedure upon Purchase. On the Business Day following the Purchase
Date, the Company shall deposit with the Paying Agent Cash (in respect of a Cash
purchase under Section 3.08(c) or for fractional interests, as applicable), or
shares of Common Stock, or a combination thereof, as applicable, sufficient to
pay the aggregate Purchase Price of the Securities to be purchased pursuant to
this Section 3.08. As soon as practicable after the Purchase Date, the Company
shall deliver to each Holder entitled to receive Common Stock, through the
Paying Agent, a certificate for the number of full shares of Common Stock, as
applicable, issuable in payment of such Purchase Price and Cash in lieu of any
fractional interests. The Person in whose name the certificate for Common Stock
is registered shall be treated as a holder of record following the Purchase
Date. Subject to Section 3.08(d), no payment or adjustment will be made for
dividends on the Common Stock the record date for which occurred on or prior to
the Purchase Date.
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(h) Taxes. If a Holder of a Security is paid in Common Stock, the
Company shall pay any documentary, stamp or similar issue or transfer tax due on
such issue of shares of Common Stock. However, the Holder shall pay any such tax
which is due because the Holder requests the shares of Common Stock to be issued
in a name other than the Holder's name. The Paying Agent may refuse to deliver
the certificates representing the Common Stock being issued in a name other than
the Holder's name until the Paying Agent receives a sum sufficient to pay any
tax which will be due because the shares of Common Stock are to be issued in a
name other than the Holder's name. Nothing herein shall preclude any income tax
withholding required by law or regulations.
SECTION 3.9. REDEMPTION AT OPTION OF THE HOLDER UPON A FUNDAMENTAL
CHANGE.
(a) If a Fundamental Change shall occur at any time prior to February
18, 2018, each Holder of Securities shall have the right, at such Holder's
option, to require the Company to redeem such Holder's Securities on the date
(the "Fundamental Change Repurchase Date") (or if such date is not a Business
Day, the next succeeding Business Day) that is 45 days after the date of the
Company's notice of such Fundamental Change. The Securities will be redeemable
in part in multiples of $1,000 of Principal Amount. The Company shall redeem
such Securities at a price (the "Fundamental Change Redemption Price") equal to
the Issue Price plus accrued Original Issue Discount to the date of redemption;
provided that, with respect to a Fundamental Change, if the Applicable Price is
less than the Reference Market Price, the Company shall redeem such Securities
at a price equal to the foregoing Redemption Price multiplied by the fraction
obtained by dividing the Applicable Price by the Reference Market Price. No
Securities may be redeemed at the option of the Holders from a Fundamental
Change if there has occurred and is continuing an Event of Default (other than a
default in the payment of the Fundamental Change Redemption Price with respect
to such Securities).
(b) The Company, or at its request (which must be received by the
Trustee at least three Business Days prior to the date the Trustee is requested
to give such notice as described below) the Trustee in the name of and at the
expense of the Company, shall mail to all Holders of record of the Securities a
notice (a "Fundamental Change Redemption Notice") of the occurrence of a
Fundamental Change and of the redemption right arising as a result thereof on or
before the tenth day after the occurrence of such Fundamental Change. The
Company shall promptly furnish the Trustee a copy of such notice.
(c) For a Security to be so redeemed at the option of the Holder, the
Paying Agent must receive such Security with the form entitled "Option to Elect
Redemption Upon a Fundamental Change" on the reverse thereof duly completed,
together with such Security duly endorsed for transfer, on or before the 30th
day after the date of such notice (or if such 30th day is not a Business Day,
the immediately preceding Business Day). All questions as to the validity,
eligibility (including time of receipt) and acceptance of any Security for
redemption shall be determined by the Company, whose determination shall be
final and binding.
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SECTION 3.10. EFFECT OF PURCHASE NOTICE OR FUNDAMENTAL CHANGE
REDEMPTION NOTICE. Upon receipt by the Company of the Purchase Notice or
Fundamental Change Redemption Notice specified in Section 3.08(a) or Section
3.09(b), as applicable, the Holder of the Security in respect of which such
Purchase Notice or Fundamental Change Redemption Notice, as the case may be, was
given shall (unless such Purchase Notice or Fundamental Change Redemption Notice
is withdrawn as specified in the following two paragraphs) thereafter be
entitled to receive solely the Purchase Price or Fundamental Change Redemption
Price, as the case may be, with respect to such Security. Such Purchase Price or
Fundamental Change Redemption Price shall be paid to such Holder promptly
following the later of (x) the Purchase Date or the Fundamental Change
Redemption Date, as the case may be, with respect to such Security (provided the
conditions in Section 3.08(a) or Section 3.09(c), as applicable, have been
satisfied) and (y) the time of delivery of such Security to the Paying Agent by
the Holder thereof in the manner required by Section 3.08(a) or Section 3.09(c),
as applicable. Securities in respect of which a Purchase Notice or Fundamental
Change Redemption Notice, as the case may be, has been given by the Holder
thereof may not be converted for shares of Common Stock on or after the date of
the delivery of such Purchase Notice (or Fundamental Change Redemption Notice,
as the case may be), unless such Purchase Notice (or Fundamental Change
Redemption Notice, as the case may be) has first been validly withdrawn as
specified in the following two paragraphs.
A Purchase Notice or Fundamental Change Redemption Notice, as the case
may be, may be withdrawn by means of a written notice of withdrawal delivered to
the office of the Paying Agent at any time prior to the close of business on the
Purchase Date or the Fundamental Change Redemption Date, as the case may be, to
which it relates specifying:
(1) the certificate number of the Security in respect of which such
notice of withdrawal is being submitted,
(2) the Principal Amount of the Security with respect to which such
notice of withdrawal is being submitted, and
(3) the Principal Amount, if any, of such Security which remains
subject to the original Purchase Notice or Fundamental Change Redemption Notice,
as the case may be, and which has been or will be delivered for purchase by the
Company.
A written notice of withdrawal of a Purchase Notice may be in the form
of (i) a conditional withdrawal contained in a Purchase Notice pursuant to the
terms of Section 3.08(a)(1)(D) or (ii) a conditional withdrawal containing the
information set forth in Section 3.08(a)(1)(D) and the preceding paragraph and
contained in a written notice of withdrawal delivered to the Paying Agent as set
forth in the preceding paragraph.
There shall be no purchase of any Securities pursuant to Section 3.08
(other than through the issuance of Common Stock in payment of the Purchase
Price, including Cash in lieu of any fractional shares) or redemption pursuant
to Section 3.09 if there has occurred (prior to, on or after, as the case may
be, the giving, by the Holders of such Securities, of the required Purchase
Notice
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or Fundamental Change Redemption Notice, as the case may be) and is continuing
an Event of Default (other than a default in the payment of the Purchase Price
or Fundamental Change Redemption Price, as the case may be, with respect to such
Securities).
SECTION 3.11. DEPOSIT OF PURCHASE PRICE OR FUNDAMENTAL CHANGE
REDEMPTION PRICE. On or before the Business Day following a Purchase Date or a
Fundamental Change Redemption Date, as the case may be, the Company shall
deposit with the Trustee or with the Paying Agent (or, if the Company or an
Affiliate of the Company is acting as the Paying Agent, shall segregate and hold
in trust as provided in Section 2.04) an amount of money and/or securities, if
permitted hereunder, sufficient to pay the aggregate Purchase Price or
Fundamental Change Redemption Price, as the case may be, of all the Securities
or portions thereof which are to be purchased as of such Purchase Date or
Fundamental Change Redemption Date, as the case may be.
SECTION 3.12. SECURITIES PURCHASED IN PART. Any Security that is to be
purchased, or redeemed upon a Fundamental Change, only in part shall be
surrendered at the office of the Paying Agent (with, if the Company or the
Trustee so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or such Holder's attorney duly authorized in writing) and the Company
shall execute and the Trustee shall authenticate and deliver to the Holder of
such Security, without service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder in aggregate Principal
Amount equal to, and in exchange for, the portion of the Principal Amount of the
Security so surrendered which is not purchased or redeemed.
SECTION 3.13. COVENANT TO COMPLY WITH SECURITIES LAWS UPON PURCHASE OF
SECURITIES. In connection with any offer to purchase or redemption of Securities
under Section 3.08 or 3.09 hereof, the Company shall (i) comply with Rule 13e-4
(which term, as used herein, includes any successor provision thereto) under the
Exchange Act, if applicable, (ii) file the related Schedule 13E-4 (or any
successor schedule, form or report) under the Exchange Act, if applicable, and
(iii) otherwise comply with all Federal and state securities laws so as to
permit the rights and obligations under Section 3.08 and 3.09 to be exercised in
the time and in the manner specified in Section 3.08 and 3.09.
SECTION 3.14. REPAYMENT TO THE COMPANY. The Trustee and the Paying
Agent shall return to the Company any cash or shares of Common Stock that remain
unclaimed as provided in paragraph 14 of the Securities, together with interest
or dividends, if any, thereon, held by them for the payment of a Purchase Price
or Fundamental Change Redemption Price, as the case may be; provided, however,
that to the extent that the aggregate amount of cash or shares of Common Stock
deposited by the Company pursuant to Section 3.11 exceeds the aggregate Purchase
Price or Fundamental Change Redemption Price, as the case may be, of the
Securities or portions thereof which the Company is obligated to purchase as of
the Purchase Date or Fundamental Change Redemption Date, as the case may be,
then promptly after the Business Day following the Purchase Date or Fundamental
Change Redemption Date, as the case may be, the Trustee and the Paying
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Agent shall return any such excess to the Company together with interest or
dividends, if any, thereon.
ARTICLE 4
COVENANTS
SECTION 4.1. PAYMENT OF SECURITIES. The Company shall promptly make all
payments in respect of the Securities on the dates and in the manner provided in
the Securities or pursuant to this Indenture. Principal Amount, Issue Price,
accrued Original Issue Discount, accrued Liquidated Damages, if any, Redemption
Price, Purchase Price, Fundamental Change Redemption Price and interest, if any,
shall be considered paid on the applicable date due or, in the case of a
Purchase Price or Fundamental Change Redemption Price, on the Business Day
following the applicable Purchase Date or Fundamental Change Redemption Date, as
the case may be, if on such date the Trustee or the Paying Agent holds, in
accordance with this Indenture, money or securities, if permitted hereunder,
sufficient to pay all such amount then due.
The Company shall pay interest on overdue amounts at the rate set forth
in paragraph 1 of the Securities and it shall pay interest on overdue interest
at the same rate compounded semiannually (to the extent that the payment of such
interest shall be legally enforceable), which interest on overdue interest shall
accrue from the date such amounts became overdue and shall be in lieu of, and
not in addition to, the continued accrual of Original Issue Discount.
SECTION 4.2. FINANCIAL INFORMATION; SEC REPORTS. The Company will
deliver to the Trustee (a) as soon as available and in any event within 90 days
after the end of each fiscal year of the Company (i) a consolidated balance
sheet of the Company and its Subsidiaries as of the end of such fiscal year and
the related consolidated statements of operations, stockholders' equity and cash
flows for such fiscal year, all reported on by an independent public accountant
of nationally recognized standing and (ii) a report containing a management's
discussion and analysis of the financial condition and results of operations and
a description of the business and properties of the Company and (b) as soon as
available and in any event within 45 days after the end of each of the first
three quarters of each fiscal year of the Company (i) an unaudited consolidated
financial report for such quarter and (ii) a report containing a management's
discussion and analysis of the financial condition and results of operations of
the Company; provided that the foregoing shall not be required for any fiscal
year or quarter, as the case may be, with respect to which the Company files or
expects to file with the Trustee an annual report or quarterly report, as the
case may be, pursuant to the third paragraph of this Section 4.02.
So long as the Securities or the Common Stock issued upon conversion of
the Securities are Restricted Securities, if the Company is not subject to
either Section 13 or 15(d) of the Exchange Act, the Company shall at the request
of any Holder of Securities (or holders of Common Stock issued upon conversion
of the Securities) provide to such Holder of Securities (or holders of such
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Common Stock) and any prospective purchaser designated by such Holders (or
holders of such Common Stock), as the case may be, such information, if any,
required by Rule 144A(d)(4) under the Securities Act.
The Company shall file with the Trustee, within 15 days after it files
such annual and quarterly reports, information, documents and other reports with
the SEC, copies of its annual report and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) which the Company is required to file with the
SEC pursuant to Section 13 or 15(d) of the Exchange Act.
SECTION 4.3. COMPLIANCE CERTIFICATE. The Company shall deliver to the
Trustee, within 120 days after the end of each fiscal year of the Company, an
Officers' Certificate in which one of the two Officers signing such certificate
is either the principal executive officer, principal financial officer or
principal accounting officer of the Company, stating whether or not to the best
knowledge of the signers thereof the Company is in Default in the performance
and observance of any of the terms, provisions and conditions of this Indenture
(without regard to any period of grace or requirement of notice provided
hereunder) and, if the Company shall be in Default, specifying all such Defaults
and the nature and status thereof of which the signers may have knowledge.
The Company will deliver to the Trustee, forthwith upon becoming aware
of any Default in the performance or observance of any covenant, agreement or
condition contained in this Indenture, or any Event of Default, an Officers'
Certificate specifying with particularity such Default or Event of Default and
further stating what action the Company has taken, is taking or proposes to take
with respect thereto.
Any notice required to be given under this Section 4.03 shall be
delivered to the Trustee at its Corporate Trust Office.
SECTION 4.4. FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee,
the respective Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
SECTION 4.5. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain
in the Borough of Manhattan, The City of New York, an office or agency where
Securities may be presented or surrendered for payment, where Securities may be
surrendered for registration of transfer, exchange, purchase, redemption or
conversion and where notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served. The office or agency of State
Street Bank and Trust Company, N.A., an Affiliate of the Trustee located at 61
Broadway, Concourse Level, Corporate Trust Window, New York, New York 10006
(Attention: Western Digital Corporation, Zero Coupon Convertible Subordinated
Debentures due 2018) shall be such office or agency for all of the aforesaid
purposes unless the Company shall maintain some other office or agency for such
purposes and shall give prompt written notice to the Trustee of the location,
and any change in the location, of such other office or agency. If at any time
the
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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.
The Company may also from time to time designate one or more other
offices or agencies where the Securities 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
Borough of Manhattan, The City of New York, for such purposes.
SECTION 4.6. EXISTENCE. Subject to Article 5, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence and rights (charter and statutory); provided, however, that
the Company shall not be required to preserve any such right if the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 4.7. MAINTENANCE OF PROPERTIES. The Company will cause all
properties used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section 4.07 shall prevent
the Company from discontinuing the operation or maintenance of any of such
properties if such discontinuance is, in the judgment of the Company, desirable
in the conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 4.8. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or
discharge, or cause to be paid or discharged, before the same may become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary or upon the income, profits or
property, of the Company or any Subsidiary, (ii) all claims for labor, materials
and supplies which, if unpaid, might by law become a lien or charge upon the
property of the Company or any Subsidiary, and (iii) all stamps and other
duties, if any, which may be imposed by the United States or any political
subdivision thereof or therein in connection with the issuance, transfer,
exchange or conversion of any Securities or with respect to this Indenture;
provided however, that, in the case of clauses (i) and (ii), the Company shall
not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim (A) if the failure to do so will not, in the
aggregate, have a material adverse impact on the Company, or (B) if the amount
applicability or validity is being contested in good faith by appropriate
proceedings.
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ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.1. WHEN THE COMPANY MAY MERGE OR TRANSFER ASSETS.
The Company shall not consolidate with or merge with or into any other
Person (other than in a merger or consolidation in which the Company is the
surviving Person) or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, unless:
(i) the Person (if other than the Company) formed by such consolidation
or into which the Company is merged or the Person which acquires by conveyance,
transfer or lease the properties and assets of the Company substantially as an
entirety shall be a corporation, limited liability company, partnership or trust
organized and validly existing under the laws of the United States or 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 Amount, Issue
Price, accrued Original Issue Discount, accrued Liquidated Damages, if any,
Redemption Price, Purchase Price, Fundamental Change Redemption Price or
interest, if any, on the Securities, according to their tenor, and the due and
punctual performance of all of the covenants and obligations of the Company
under the Securities and this Indenture, and shall have provided for conversion
rights in accordance with the Indenture;
(ii) immediately after giving effect to such transaction, no Default
shall have occurred and be continuing; and
(iii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with this Article 5 and that all conditions precedent herein provided for
relating to such transaction have been satisfied.
The successor Person formed by such consolidation or into which the
Company is merged or the successor Person to which such conveyance, transfer or
lease is made shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such successor had been named as the Company herein; and thereafter, except in
the case of a lease, the Company shall be discharged from all obligations and
covenants under this Indenture and the Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT. An "Event of Default" occurs if:
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(1) the Company defaults in the payment of the Principal Amount, Issue
Price, accrued Original Issue Discount, accrued Liquidated Damages, if any,
Redemption Price, Purchase Price or a Fundamental Change Redemption Price on any
Security when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration, when due for purchase by the Company or otherwise
(provided that in the case of a default in the payment of Liquidated Damages,
such default in payment of Liquidated Damages continues for a period of 30
days), whether or not such payment shall be prohibited by Article 10;
(2) the Company fails to comply with any of its agreements or covenants
in the Securities or this Indenture (other than those referred to in clause (1)
above) and such failure continues for 60 days after receipt by the Company of a
Notice of Default;
(3) a decree or order by a court having jurisdiction in the premises
shall have been entered adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization of the Company
under any Bankruptcy Law, and such decree or order shall have continued
undischarged and unstayed for a period of 60 consecutive days; or a decree or
order of a court having jurisdiction in the premises of the appointment of a
receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the
Company or of its property, or for the winding-up or liquidation of its affairs,
shall have been entered, and such decree or order shall have remained in force
undischarged and unstayed of a period of 60 consecutive days; or
(4) the Company shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding
against it, or shall file a petition or answer or consent seeking reorganization
under any Bankruptcy Law, or shall consent to the filing of any such petition,
or shall consent to the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of it or of its property or shall make an
assignment for the benefit of creditors, or shall admit in writing its inability
to pay its debts generally as they become due.
"Bankruptcy Law" means Title 11, United States Code, or any similar
Federal or state law for the relief of debtors.
A Default under clause (2) above is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in aggregate
Principal Amount of the Securities at the time outstanding notify the Company
and the Trustee, of the Default and the Company does not cure such Default (and
such Default is not waived) within the time specified in clause (2) above after
actual receipt of such notice (a "Notice of Default"). Any such notice must
specify the Default, demand that it be remedied and state that such notice is a
Notice of Default.
SECTION 6.2. ACCELERATION. If an Event of Default (other than an Event
of Default specified in Section 6.01(3) or (4)) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in aggregate
Principal Amount of the Securities at the time outstanding by notice to the
Company and the Trustee, may declare the Issue Price and accrued
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Original Issue Discount to the date of declaration on all the Securities to be
immediately due and payable. Upon such a declaration, such Issue Price and
accrued Original Issue Discount shall be due and payable immediately. If an
Event of Default specified in Section 6.01(3) or (4) occurs and is continuing,
the Issue Price and accrued Original Issue Discount on all the Securities shall
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holders. The Holders of a majority in
aggregate Principal Amount of the Securities at the time outstanding, by notice
to the Company and the Trustee (and without notice to any other Securityholder),
may rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of the Issue Price and accrued Original
Issue Discount that have become due solely as a result of acceleration and if
all amounts due to the Trustee under Section 7.07 have been paid. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
SECTION 6.3. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of the Issue Price and accrued Original Issue Discount on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if the Trustee does not
possess any of the Securities or does not produce any of the Securities in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of, or acquiescence in, the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
SECTION 6.4. WAIVER OF PAST DEFAULTS. The Holders of a majority in
aggregate Principal Amount of the Securities at the time outstanding, by notice
to the Company and the Trustee (and without notice to any other Securityholder),
may waive an existing Default and its consequences except (1) an Event of
Default described in Section 6.01(l), (2) a Default in respect of a provision
that under Section 9.02 cannot be amended without the consent of each
Securityholder affected or (3) a Default that constitutes a failure to convert
any Security in accordance with the terms of Article 11. When a Default is
waived, it is deemed cured, but no such waiver shall extend to any subsequent or
other Default or impair any consequent right.
SECTION 6.5. CONTROL BY MAJORITY. The Holders of a majority in aggregate
Principal Amount of the Securities at the time outstanding may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or of exercising any trust or power conferred on the Trustee. However,
the Trustee may refuse to follow any direction that conflicts with law or this
Indenture or that the Trustee determines in good faith is unduly prejudicial to
the rights of other Holders or would involve the Trustee in personal liability
unless the Trustee is offered indemnity satisfactory to it.
SECTION 6.6. LIMITATION ON SUITS. A Securityholder may not pursue any
remedy with respect to this Indenture or the Securities unless:
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(1) the Holder gives to the Company and the Trustee written notice
stating that an Event of Default is continuing;
(2) the Holders of at least 25% in aggregate Principal Amount of the
Securities at the time outstanding make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense satisfactory to the Trustee;
(4) the Trustee does not comply with the request within 60 days after
receipt of the notice, the request and the offer of security or indemnity; and
(5) the Holders of a majority in aggregate Principal Amount of the
Securities at the time outstanding do not give the Trustee a direction
inconsistent with the request during such 60 day period.
A Securityholder may not use this Indenture to prejudice the rights of
any other Securityholder or to obtain a preference or priority over any other
Securityholder.
SECTION 6.7. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any
other provision of this Indenture, but subject to Article 10, the right of any
Holder to receive payment of the Principal Amount, Issue Price, accrued Original
Issue Discount, Redemption Price, Purchase Price, Fundamental Change Redemption
Price or interest, if any, in respect of the Securities held by such Holder, on
or after the respective due dates expressed in the Securities or any Redemption
Date and to convert the Securities in accordance with Article 11, or to bring
suit for the enforcement of any such payment on or after such respective dates
or the right to convert, shall not be impaired or affected adversely without the
consent of each such Holder.
SECTION 6.8. COLLECTION SUIT BY TRUSTEE. If an Event of Default
described in Section 6.01(1) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
for the whole amount owing with respect to the Securities and the amounts
provided for in Section 7.07.
SECTION 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors, the Trustee (irrespective
of whether the Principal Amount, Issue Price, accrued Original Issue Discount,
accrued Liquidated Damages, if any, Redemption Price, Purchase Price,
Fundamental Change Redemption Price or interest, if any, in respect of the
Securities shall then be due and payable as therein expressed or by declaration
or otherwise and irrespective of whether the Trustee shall have
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made any demand on the Company for the payment of any such amount) shall be
entitled and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of the Principal
Amount, Issue Price, accrued Original Issue Discount, accrued Liquidated
Damages, if any, Redemption Price, Purchase Price, Fundamental Change Redemption
Price or interest, if any, 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;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
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 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 7.07.
If the Trustee does not file a claim or proof of debt in the form
required in such proceedings prior to 30 days before the expiration of the time
to file such claims or proofs, then any holder or holders of Senior Indebtedness
or their representative or representatives shall have the right to demand, sue
for, collect, receive and receipt for the payments and distributions in respect
of the Securities which are required to be paid or delivered to the holders of
Senior Indebtedness as provided in this Article and to file and prove all claims
therefor and to take all such other action in the name of the holders or
otherwise, as such holders of Senior Indebtedness or representative thereof may
determine to be necessary or appropriate for the enforcement of the provisions
of this Article.
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 of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claims of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to
this Article 6, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to holders of Senior Indebtedness to the extent required by
Article 10;
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Third: to Holders for amounts due and unpaid on the Securities for the
Principal Amount, Issue Price, accrued Original Issue Discount, accrued
Liquidated Damages, if any, Redemption Price, Purchase Price, Fundamental Change
Redemption Price or interest, if any, as the case may be, ratably, without
preference or priority of any kind, according to such amounts due and payable on
the Securities; and
Fourth: the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.10. At least 15 days before such record date,
the Company shall mail to each Securityholder and the Trustee a notice that
states the record date, the payment date and amount to be paid.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant (other than the Trustee) in the suit of
an undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit
by Holders of more than 10% in aggregate Principal Amount of the Securities at
the time outstanding.
SECTION 6.12. WAIVER OF STAY, EXTENSION OR USURY 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 or extension law or any usury or other law
wherever enacted, now or at any time hereafter in force, which would prohibit or
forgive the Company from paying all or any portion of the Principal Amount,
Issue Price, accrued Original Issue Discount, accrued Liquidated Damages, if
any, Redemption Price, Purchase Price or Fundamental Change Redemption Price in
respect of Securities, or any interest on any such amounts, as contemplated
herein, or 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 laws 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 7
TRUSTEE
SECTION 7.1. DUTIES OF TRUSTEE.
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(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise the rights and powers vested in it by this Indenture and use the
same degree of care and skill in its exercise as a prudent individual would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
This Section 7.01(b) shall be in lieu of Section 315(a) of the TIA and such
Section 315(a) is hereby expressly excluded from this Indenture, as permitted by
the TIA.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:
(1) this paragraph (c) does not limit the effect of paragraph
(b) of this Section 7.01;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction received
by it pursuant to Section 6.05.
Subparagraphs (c)(1),(2) and (3) shall be in lieu of Sections 315(d)(1),
315(d)(2) and 315(d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and
315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the
TIA.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.01.
(e) The Trustee may refuse to perform any duty or exercise any right or
power or extend or risk its own funds or otherwise incur any financial liability
unless it receives indemnity satisfactory to it against any loss, liability or
expense.
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(f) Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law.
SECTION 7.2. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require a
Company Order, an Officers' Certificate or an Opinion of Counsel. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on a Company Order, Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
(d) Subject to the provisions of Section 7.01(c), the Trustee shall not
be liable for any action it takes or omits to take in good faith which it
believes to be authorized or within its rights or powers.
(e) The Trustee may consult with counsel selected by it and any advice
or Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such advice or Opinion of Counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture, unless the Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby.
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual
or any other capacity may become the owner or pledgee of Securities and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not Trustee. Any Paying Agent, Registrar, Conversion Agent or
co-registrar may do the same with the like rights. However, the Trustee must
comply with Section 7.10 and 7.11.
SECTION 7.4. TRUSTEE'S DISCLAIMER. The Trustee makes no representation
as to the validity or adequacy of this Indenture or the Securities, it shall not
be accountable for Company's use of the proceeds from the Securities, it shall
not be responsible for any statement in the offering memorandum for the
Securities or in the Indenture or the Securities (other than its certificate of
authentication), the acts of a prior Trustee hereunder, or the determination as
to which beneficial owners are entitled to receive any notices hereunder.
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SECTION 7.5. NOTICE OF DEFAULTS. If a Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall give to each Securityholder
notice of the Default within 90 days after it occurs. Except in the case of a
Default described in Section 6.01(1), the Trustee may withhold the notice if and
so long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of Holders. The second sentence of
this Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA
and such provision is hereby expressly excluded from this Indenture, as
permitted by the TIA. The Trustee shall not give notice of a Default pursuant to
Section 6.01(2) until at least sixty days have passed since its occurrence.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each
May 1, beginning with the May 1 following the date of this Indenture, the
Trustee shall mail to each Holder a brief report dated as of such May 1 that
complies with TIA Section 313(a), if required by such Section 313(a). The
Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each securities exchange on which the Securities are
listed. The Company agrees to notify the Trustee whenever the Securities become
listed on any securities exchange and of any delisting thereof.
SECTION 7.7. COMPENSATION AND INDEMNITY. The Company agrees:
(a) to pay to the Trustee from time to time reasonable compensation for
all services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an express
trust);
(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 expense, advances and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of this
trust, including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder.
To secure the Company's payment obligations in this Section 7.07 the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay the Principal
Amount, Issue Price, accrued Original Issue Discount, accrued Liquidated
Damages, if any, Redemption Price, Purchase Price, Fundamental Change Redemption
Price or interest, if any, as the case may be, on particular Securities.
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The Company's payment obligations pursuant to this Section 7.07 shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.01(3) or (4), the expenses
are intended to constitute expenses of administration under any Bankruptcy Law.
SECTION 7.8. REPLACEMENT OF TRUSTEE. The Trustee may resign by so
notifying the Company; provided, however, that no such resignation shall be
effective until a successor Trustee has accepted its appointment pursuant to
this Section 7.08. The Holders of a majority in aggregate Principal Amount of
the Securities at the time outstanding may remove the Trustee by so notifying
the Trustee and may appoint a successor Trustee. The Company shall remove the
Trustee if:
(1) the Trustee fails to comply with, or ceases to be eligible
under, Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint, by
resolution of its Board of Directors, a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, subject to the lien provided for
in Section 7.07.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in aggregate Principal Amount of the Securities at the
time outstanding may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trustee business (including the trust created by this Indenture) or
assets to, another corporation, the resulting, surviving or transferee
corporation without any further act shall be the successor Trustee.
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SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all
times satisfy the requirements of TIA Sections 310(a)(1) and 310(b). The Trustee
shall have a combined capital and surplus of at least $50,000,000 (or if the
Trustee is a member of a bank holding company system, its bank holding company
shall have a combined capital and surplus of $50,000,000) as set forth in its
most recent published annual report of conditions. Nothing herein contained
shall prevent the Trustee from filing with the SEC the application referred to
in the penultimate paragraph of TIA Section 310(b). If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
7.10, it shall resign immediately in the manner and with the effect hereinafter
specified in this Article 7.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.1. DISCHARGE OF LIABILITY ON SECURITIES. When (i) the Company
delivers to the Trustee all outstanding Securities (other than Securities
replaced pursuant to Section 2.07) for cancellation or (ii) all outstanding
Securities have become due and payable and the Company deposits with the Trustee
cash and/or securities, as permitted by the terms hereof, sufficient to pay at
Stated Maturity the Principal Amount of all outstanding Securities (other than
Securities replaced pursuant to Section 2.07), and if in either case the Company
pays all other sums payable hereunder by the Company, then this Indenture shall,
subject to Section 7.07, cease to be of further effect. The Trustee shall join
in the execution of a document prepared by the Company acknowledging
satisfaction and discharge of this Indenture on demand of the Company
accompanied by an Officers' Certificate and Opinion of Counsel and at the cost
and expense of the Company.
SECTION 8.2. REPAYMENT TO THE COMPANY. The Trustee and the Paying Agent
shall return to the Company upon written request any money or securities held by
them for the payment of any amount with respect to the Securities that remains
unclaimed for two years, provided, however, that the Trustee or such Paying
Agent, before being required to make any such return, shall at the expense of
the Company cause to be published once in a newspaper of general circulation in
The City of New York or mail to each such Holder notice that such money or
securities remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication or mailing, any
unclaimed money or securities then remaining will be returned to the Company.
After return to the Company, Holders entitled to the money or securities must
look to the Company for payment as general creditors unless an applicable
abandoned property law designates another person.
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ARTICLE 9
AMENDMENTS
SECTION 9.1. WITHOUT CONSENT OF HOLDERS. The Company and the Trustee may
amend this Indenture and the Securities without the consent of any
Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Article 5 or Section 11.14;
(3) to provide for uncertificated Securities in addition to
certificated Securities so long as such uncertificated Securities are in
registered form for purposes of the Internal Revenue Code of 1986, as amended;
(4) to make any change that does not adversely affect the right
of any Securityholder; or
(5) to make any change to comply with the TIA, or any amendment
thereto, or to comply with any requirement of the SEC in connection with the
qualification, if any, of the Indenture under the TIA.
SECTION 9.2. WITH CONSENT OF HOLDERS. The Company and the Trustee, with
the written consent of the Holders of at least a majority in aggregate Principal
Amount of the Securities at the time outstanding, may amend this Indenture or
the Securities. However, without the consent of each Securityholder affected, an
amendment or supplement to this Indenture or the Securities may not:
(1) make any change to the Principal Amount of Securities whose
Holders must consent to an amendment;
(2) make any change to the manner or rate of accrual in
connection with Original Issue Discount or interest, if any, reduce the rate of
interest referred to in paragraph 1 of the Securities or extend the time for
payment of Original Issue Discount or interest, if any, on any Security;
(3) reduce the Principal Amount or the Issue Price of or extend
the Stated Maturity of any Security;
(4) reduce the Redemption Price, Purchase Price or Fundamental
Change Redemption Price of any Security;
(5) make any Security payable in money or securities other than
that stated in the Security;
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(6) make any change in Article 10 that adversely affects the
rights of any Securityholder;
(7) make any change in Section 6.04, Section 6.07 or this
Section 9.02, except to increase any such percentage;
(8) make any change that adversely affects the right to convert
any Security; or
(9) make any change that adversely affects the right to require
the Company to purchase the Securities, or the right to require the Company to
redeem the Securities upon a Fundamental Change, in accordance with the terms
thereof and this Indenture.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
An amendment under this Section 9.02 or Section 9.01 may not make any
change that adversely affects the rights under Article 10 of any holder of
Senior Indebtedness then outstanding unless the requisite holders of such Senior
Indebtedness consent to such change pursuant to the terms of such Senior
Indebtedness.
After an amendment under this Section 9.02 becomes effective, the
Company shall mail to each Holder a notice briefly describing the amendment.
SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT. Every supplemental
indenture executed pursuant to this Article 9 shall comply with the TIA as then
in effect, if then required to so comply.
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS, WAIVERS AND ACTIONS.
Until an amendment, waiver or other action becomes effective, a consent to it or
any other action by a Holder of a Security is a continuing consent by the Holder
and every subsequent Holder of that Security or portion of the Security that
evidences the same obligation as the consenting Holder's Security, even if
notation of the consent, waiver or action is not made on the Security. However,
any such Holder or subsequent Holder may revoke the consent, waiver or action as
to such Holder's Security or portion of the Security if the Trustee receives the
notice or revocation before the date the amendment, waiver or action becomes
effective. After an amendment, waiver or action becomes effective, it shall bind
every Securityholder.
SECTION 9.5. NOTATION ON OR EXCHANGE OF SECURITIES. Securities
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article 9 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 shall so determine, new Securities so
modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any such
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supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for outstanding
Securities.
SECTION 9.6. TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES. The Trustee shall
sign any supplemental indenture authorized pursuant to this Article 9 if the
amendment does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may, but need not, sign such
supplemental indenture. In signing such amendment the Trustee shall be entitled
to receive, and (subject to the provisions of Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture.
SECTION 9.7. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of
any supplemental indenture under this Article 9, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
ARTICLE 10
SUBORDINATION
SECTION 10.1. AGREEMENT OF SUBORDINATION. The Company covenants and
agrees for itself and its successors, and each Holder of Securities issued
hereunder by such Holder's acceptance thereof likewise covenants and agrees,
that all Securities shall be issued subject to the provisions of this Article
10; and each Person holding any such Security whether upon original issue or
upon transfer or assignment thereof, accepts and agrees to be bound by such
provisions.
The payment of the Principal Amount, Issue Price, accrued Original Issue
Discount, accrued Liquidated Damages, if any, Redemption Price, Purchase Price,
Fundamental Change Redemption Price, interest and any other amounts payable, if
any, in respect of all Securities issued hereunder shall, to the extent and in
the manner hereinafter set forth, be subordinated and subject in right of
payment to the prior payment in full in cash or other payment satisfactory to
the holders of Senior Indebtedness of all Senior Indebtedness of the Company,
whether outstanding at the date of this Indenture or thereafter incurred, or
thereafter created, assumed or guaranteed.
No provision of this Article 10 shall prevent the occurrence of any
Default or Event of Default hereunder.
SECTION 10.2. PAYMENTS TO HOLDERS. No payment shall be made with respect
to the payment of Principal Amount, Issue Price, accrued Liquidated Damages, if
any, accrued Original Issue Discount, Redemption Price, Purchase Price,
Fundamental Change Redemption Price,
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interest and any other amounts payable, if any, on the Securities, except
payments and distributions made by the Trustee as permitted by Section 10.05,
if:
(i) a default in any payment obligations in respect of Senior
Indebtedness occurs and is continuing, without regard to any applicable period
of grace (whether at maturity or at a date fixed for payment or by declaration
or otherwise); or
(ii) any other default occurs and is continuing with respect to
Designated Senior Indebtedness that permits the holders of such Designated
Senior Indebtedness as to which such default relates to accelerate its maturity
and the Trustee receives a notice of the default (a "Payment Blockage Notice")
from a holder of Designated Senior Indebtedness, or a Representative of
Designated Senior Indebtedness.
If the Trustee receives any Payment Blockage Notice pursuant to clause
(ii) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section unless and until at least 365 days shall have elapsed
since the initial effectiveness of the immediately prior Payment Blockage
Notice. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 90 days (it being
acknowledged that (x) any action of the Company or any of its Subsidiaries
occurring subsequent to delivery of a Payment Blockage Notice that would give
rise to any event of default pursuant to any provision of Senior Indebtedness
under which an event of default previously existed (or was continuing at the
time of delivery of such Payment Blockage Notice) shall constitute a new event
of default for this purpose and (y) any breach of a financial covenant giving
rise to a nonpayment default for a period ending subsequent to the date of
delivery of the respective Payment Blockage Notice shall constitute a new event
of default for this purpose.)
The Company may and shall resume payments on and distributions in
respect of the Securities upon the earlier of:
(1) in case of a default referred to in clause (i) above, the date upon
which the default is cured or waived in accordance with the terms of the
governing instrument or ceases to exist, or
(2) in the case of a default referred to in clause (ii) above, the date
upon which the default is cured, waived in accordance with the terms of the
governing instrument or ceases to exist or 179 days pass after the applicable
Payment Blockage Notice is received if the maturity of such Designated Senior
Indebtedness has not been accelerated,
unless this Article 10 otherwise prohibits the payment or distribution at the
time of such payment or distribution.
Upon any payment by the Company or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding-up
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or liquidation or reorganization or bankruptcy of the Company, whether voluntary
or involuntary or insolvency, receivership or similar proceedings relating to
the Company or its property, or an assignment for the benefit of creditors or
any marshaling of the Company's assets or liabilities, all amounts due or to
become due upon all Senior Indebtedness of the Company shall first be paid in
full in cash or other payment satisfactory to the holders of such Senior
Indebtedness before any payment is made on account of the Principal Amount,
Issue Price, accrued Original Issue Discount, accrued Liquidated Damages, if
any, Redemption Price, Purchase Price, Fundamental Change Redemption Price,
interest or any other amounts payable, if any, in respect of the Securities
(except payments made pursuant to Article 8 hereof from monies deposited with
the Trustee pursuant thereto prior to the happening of such dissolution or
winding-up or liquidation or reorganization or bankruptcy of the Company,
whether voluntary or involuntary or insolvency, receivership or similar
proceedings relating to the Company or its property, or an assignment of the
benefit of creditors or any marshaling of the Company's assets or liabilities),
and upon any such dissolution or winding-up or liquidation or reorganization or
bankruptcy of Company, whether voluntary or involuntary or insolvency,
receivership or similar proceedings relating to the Company or its property, or
an assignment of the benefit of creditors or any marshalling of the Company's
assets or liabilities, any payment by the Company, or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to which the Holders of the Securities or the Trustee would be entitled, except
for the provisions of this Article 10, shall (except as aforesaid) be paid by
the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the Holders of
the Securities or by the Trustee under this Indenture if received by them or it,
directly to the holders of Senior Indebtedness of the Company as their interests
may appear or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing any
such Senior Indebtedness may have been issued, as their respective interests may
appear to the extent necessary to pay all such Senior Indebtedness in full in
cash or other payment satisfactory to the holders of such Senior Indebtedness,
after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness, before any payment or distribution is made
to the Holders of the Securities or to the Trustee.
In the event that any Securities are declared due and payable before
their Stated Maturity pursuant to Section 6.02, then and in such event the
Company shall promptly notify holders of its Senior Indebtedness of such
acceleration. The Company may not pay the Securities until 120 days have passed
after such acceleration occurs and may thereafter pay the Securities only to the
extent that this Article 10 permits the payment at that time.
In the event that, notwithstanding the foregoing provisions, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities (including, without limitation, by way of setoff or
otherwise), prohibited by the foregoing provisions in this Section 10.02, shall
be received by the Trustee or the Holders of the Securities before all Senior
Indebtedness of the Company is paid in full in cash or other payment
satisfactory to the holders of such Senior Indebtedness such payment or
distribution shall be held in trust for the benefit of and shall be paid over or
delivered to the holders of Senior Indebtedness of the Company or their
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representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any such Senior
Indebtedness may have been issued, as their respective interests may appear, as
calculated by the Company, for application to the payment of all such Senior
Indebtedness remaining unpaid to the extent necessary to pay all such Senior
Indebtedness in full in cash or other payment satisfactory to the holders of
such Senior Indebtedness, after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Indebtedness.
For purposes of this Article 10, the words, "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article 10 with respect
to the Securities to the payment of all Senior Indebtedness of the Company which
may at the time be outstanding; provided that (i) such Senior Indebtedness is
assumed by the new corporation, if any, resulting from any such reorganization
or readjustment, and (ii) the rights of the holders of such Senior Indebtedness
(other than leases that are not assumed by the Company or the new corporation,
as the case may be) are not, without the consent of such holders, altered by
such reorganization or readjustment. The consolidation of the Company with, or
the merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided for in Article 5 hereof shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 10.02 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article 5
hereof.
Nothing in this Section 10.02 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 7.07. This Section 10.02 shall be
subject to the further provisions of Section 10.05.
SECTION 10.3. SUBROGATION OF SECURITIES. Subject to the payment in full
in cash or other payment satisfactory to the holders of Senior Indebtedness of
all Senior Indebtedness of the Company, the rights of the Holders of the
Securities shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to such Senior Indebtedness until the
Principal Amount, Issue Price, accrued Original Issue Discount, accrued
Liquidated Damages, if any, Redemption Price, Purchase Price, Fundamental Change
Redemption Price and interest, if any, in respect of the Securities shall be
paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of such Senior Indebtedness of any cash, property
or securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article 10, and no payment over
pursuant to the provisions of this Article 10, to or for the benefit of the
holders of such Senior Indebtedness by Holders of the Securities or the Trustee,
shall, as between the Company, its creditors other than holders of its Senior
Indebtedness, and the Holders of the Securities be deemed to be a payment by the
Company to or on account of its Senior Indebtedness; and no payments or
distributions of cash, property or securities to or for the benefit of the
holders
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of the Notes pursuant to the subrogation provisions of this Article 10,
which would otherwise have been paid to the holders of Senior Indebtedness shall
be deemed to be a payment by the Company to or for the account of the
Securities. It is understood that the provisions of this Article 10 are and are
intended solely for the purpose of defining the relative rights of the Holders
of the Securities, on the one hand, and the holders of Senior Indebtedness, on
the other hand.
Nothing contained in this Article 10 or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as between the Company, its
creditors other than the holders of its Senior Indebtedness and the Holders of
the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the Principal Amount,
Issue Price, accrued Original Issue Discount, accrued Liquidated Damages, if
any, Redemption Price, Purchase Price, Fundamental Change Redemption Price and
interest, if any, in respect of the Securities as and when the same shall become
due and payable in accordance with their terms, or is intended to or shall
affect the relative rights of the Holders of the Securities and creditors of the
Company other than the holders of its Senior Indebtedness, nor shall anything
herein or therein prevent the Trustee or the Holder of any Security from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article 10 of the
holders of Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee, subject to the provisions of Section 7.01, and the
Holders of the Securities shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which such dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making such payment or distribution, delivered to the Trustee,
to the Holders of the Securities for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 10.
SECTION 10.4. AUTHORIZATION BY HOLDERS. Each Holder of a Security by
such Holder's acceptance thereof authorizes and directs the Trustee in his
behalf to take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article 10 and appoints the Trustee such Holder's
attorney-in-fact for any and all such purposes.
SECTION 10.5. NOTICE TO TRUSTEE. The Company shall give prompt written
notice in a form of an Officers' Certificate to a Trust Officer of any fact
known to the Company which would prohibit the making of any payment of monies to
or by the Trustee or any Paying Agent in respect of the Securities pursuant to
the provisions of this Article 10, but failure to give such notice shall not
affect the subordination of the Securities to the Senior Indebtedness as
provided in this Article 10. Notwithstanding the provisions of this Article 10
or any other provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts which
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would prohibit the making of any payment of monies to or by the Trustee in
respect of the Securities pursuant to the provisions of this Article 10, unless
and until a Trust Officer shall have received written notice thereof at the
Corporate Trust Office from the Company (in the form of an Officers'
Certificate) or a holder or holders of Senior Indebtedness or a Representative
or from any trustee therefor; and before the receipt of any such written notice,
the Trustee, subject to the provisions of Section 7.01, shall be entitled in all
respects to assume that no such facts exist; provided that if on a date not
fewer than two Business Days prior to the date upon which by the terms hereof
any such monies may become payable for any purpose (including, without
limitation, the payment of the Principal Amount, Issue Price, accrued Original
Issue Discount, accrued Liquidated Damages, if any, Redemption Price, Purchase
Price, Fundamental Change Redemption Price, interest or any other amounts
payable, if any, in respect of any Security) the Trustee shall not have
received, with respect to such monies, the notice provided for in this Section
10.05, then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to receive such monies and to apply
the same to the purpose for which they were received, and shall not be affected
by any notice to the contrary which may be received by it on or after such prior
date.
Notwithstanding anything to the contrary herein set forth, nothing shall
prevent any payment of amounts deposited with the Trustee pursuant to Section
8.01 so long as the Trustee had no notice that such amounts when so deposited
were prohibited pursuant to the provisions of Section 10.2.
The Trustee, subject to the provisions of Section 7.01, shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder or a Representative of Designated Senior
Indebtedness (subject to the requirements set forth in the definition of
Designated Senior Indebtedness) or a Representative of Senior Indebtedness of
the Company (or a trustee on behalf of such holder) to establish that such
notice has been given by a holder or a Representative of Designated Senior
Indebtedness (subject to the requirements set forth in the definition of
Designated Senior Indebtedness) or a Representative of such Senior Indebtedness
or a trustee on behalf of any such holder or holders. In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any Person as a holder of Senior Indebtedness of the Company to
participate in any payment or distribution pursuant to this Article 10, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article 10, 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 10.6. TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS. The Trustee in
its individual capacity shall be entitled to all the rights set forth in this
Article 10 in respect of any Senior Indebtedness of the Company at any time held
by it, to the same extent as any other holder of such
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Senior Indebtedness, and nothing or elsewhere in this Indenture shall deprive
the Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article 10, and no implied
covenants or obligations with respect to the holders of such Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the
Company and, subject to the provisions of Section 7.01, the Trustee shall not be
liable to any holder of such Senior Indebtedness if it shall pay over or deliver
to Holders of Securities, the Company or any other Person money or assets to
which any holder of Senior Indebtedness of the Company shall be entitled by
virtue of this Article 10 or otherwise.
SECTION 10.7. NO IMPAIRMENT OF SUBORDINATION. No right of any present or
future holder of any Senior Indebtedness of the Company to enforce subordination
as herein provided shall at any time in any way be prejudiced or impaired by (i)
any amendment of or addition or supplement to any such Senior Indebtedness or
any instrument or agreement relating thereto (unless otherwise expressly
provided therein), or (ii) any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of the
instrument, regardless of any knowledge thereof which any such holder may have
or otherwise be charged with or (iii) a failure to act by any Holders of
Securities or the failure of such Holder to comply with this Indenture.
SECTION 10.8. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS. Each Holder of Securities by such Holder's acceptance
thereof, acknowledges and agrees that the foregoing subordination provisions
are, and are intended to be, an inducement and a consideration to each holder of
any Senior Indebtedness of an Company, whether such Senior Indebtedness was
created, assumed or acquired before or after the issuance of the Securities, to
acquire and continue to hold, or to continue to hold, such Senior Indebtedness
and such holder of Senior Indebtedness shall be deemed conclusively to have
relied on such subordination provisions in acquiring and continuing to hold, or
in continuing to hold, such Senior Indebtedness, and no amendment or
modification of the provisions contained herein shall diminish the rights of
such holder or holders unless such holder or holders shall have agreed in
writing thereto.
SECTION 10.9. REINSTATEMENT OF SUBORDINATION. If, at any time, all or
part of any payment of any Senior Indebtedness theretofore made by the Company
or any other Person is rescinded or must otherwise be returned by the holders of
such Senior Indebtedness for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of the Company or such
other Person), these subordination provisions shall continue to be effective or
be reinstated, as the case may be, all as though such payment had not been made.
SECTION 10.10. PERMITTED PAYMENTS. Nothing contained in this Article 10
or elsewhere in this Indenture, or in the Securities shall prevent (a) the
Company at any time, except under the
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conditions described in Section 10.02, from making payments at any time of
Principal Amount, Issue Price, accrued Original Issue Discount, accrued
Liquidated Damages, if any, Redemption Price, Purchase Price, Fundamental Change
Redemption Price or interest or any other amounts payable, if any, in respect of
the Securities, or from depositing with the Trustee or any Paying Agent money
for such payments, or (b) the application by the Trustee or Paying Agent of any
moneys deposited with it under this Indenture to the payment of or on account of
the Principal Amount, Issue Price, accrued Original Issue Discount, accrued
Liquidated Damages, if any, Redemption Price, Purchase Price, Fundamental Change
Redemption Price or interest or any other amounts payable, if any, in respect of
the Securities to the Holders of the Securities entitled thereto to the
beneficiaries thereof, if such payment would not have been prohibited by the
provisions of Section 10.02.
SECTION 10.11. ARTICLE APPLICABLE TO PAYING AGENTS. If 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 10 shall
(unless the context otherwise requires) be construed as extending to and
including such Paying Agent within its meaning as fully for all intents and
purposes as if such Paying Agent were named in this Article 10 in addition to or
in place of the Trustee; provided, however, that the first paragraph of Section
10.05 shall not apply to the Company or any Affiliate of the Company if it or
such Affiliate acts as Paying Agent.
SECTION 10.12. TREATMENT OF CONVERSION PAYMENTS. Notwithstanding
anything in this Indenture to the contrary, neither the issuance and delivery of
junior securities upon conversion of the Securities in accordance with Article
11 nor the payment of cash in lieu of fractional shares of Common Stock in
accordance with Article 11 shall be deemed to constitute a payment or
distribution on account of the Principal Amount, Issue Price, accrued Original
Issue Discount, accrued Liquidated Damages, if any, Redemption Price or
Fundamental Change Purchase Price or interest or any other amounts payable, if
any, in respect of the Securities. For the purposes of this paragraph, the term
"junior securities" means (a) shares of any stock of any class of the Company,
(b) securities of the Company which are subordinated in right of payment to all
Senior Indebtedness of the Company which may be outstanding at the time of
issuance or delivery of such securities to substantially the same extent as, or
to a greater extent than, the Securities are so subordinated as provided in this
Article 10, and (c) any securities into which the Securities become convertible
pursuant to Section 11.14 which are securities of a Person required to enter
into a supplemental indenture pursuant to such section (or Section 5.01) and are
either (x) shares of any stock of any class of such Person, or (y) securities of
such Person which are subordinated in right of payment to all Senior
Indebtedness of such Person which may be outstanding at the time of issuance or
delivery of such securities to substantially the same extent as, or to a greater
extent than, the Securities or, are so subordinated as provided in this Article
10. Nothing contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the holders of the
Securities, the right, which is absolute and unconditional, of the holder of any
Security to convert such Security in accordance with Article 11.
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SECTION 10.13. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT. Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee and the Holders of Securities shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, liquidating trustee, custodian,
receiver, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the Trustee or to the Holders of
Securities, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 10.
ARTICLE 11
CONVERSION
SECTION 11.1. CONVERSION PRIVILEGE. A Holder of a Security may convert
such Security for Common Stock at any time during the period stated in paragraph
9 of the Securities. The number of shares of Common Stock issuable upon
conversion of a Security per $1,000 of Principal Amount thereof (the "Conversion
Rate") shall be that set forth in paragraph 9 in the Securities, subject to
adjustment as herein set forth.
A Holder may convert a portion of the Principal Amount of a Security if
the portion is $1,000 or a multiple of $1,000. Provisions of this Indenture that
apply to conversion of all of a Security also apply to conversion of a portion
of a Security.
SECTION 11.2. CONVERSION PROCEDURE. To convert a Security a Holder must
satisfy the requirements in paragraph 9 of the Securities. The date on which the
Holder of Securities satisfies all those requirements is the conversion date
(the "Conversion Date"). As soon as practicable after the Conversion Date the
Company shall deliver to the Holder, through the Conversion Agent, a certificate
for the number of full shares of Common Stock issuable upon the conversion and
Cash in lieu of any fractional share determined pursuant to Section 11.03. The
Person in whose name the certificate is registered shall be treated as a
stockholder of record on and after the Conversion Date; provided, however, that
no surrender of a Security on any date when the stock transfer books of the
Company shall be closed shall be effective to constitute the Person or Persons
entitled to receive the shares of Common Stock upon such conversion as the
record holder or holders of such shares of Common Stock on such date, but such
surrender shall be effective to constitute the Person or Persons entitled to
receive such shares of Common Stock as the record holder or holders thereof for
all purposes at the close of business on the next succeeding day on which such
stock transfer books are open; such conversion shall be at the Conversion Rate
in effect on the date that such Security shall have been surrendered for
conversion, as if the stock transfer books of the
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Company had not been closed. Upon conversion of a Security, such Person shall no
longer be a Holder of such Security.
No payment or adjustment will be made for dividends on or other
distribution with respect to any Common Stock except as provided in this Article
11. On conversion of a Security, that portion of accrued Original Issue Discount
attributable to the period from the Issue Date of the Security to the Conversion
Date with respect to the converted Security shall not be canceled, extinguished
or forfeited, but rather shall be deemed to be paid in full to the Holder
thereof through delivery of the Common Stock (together with the Cash payment, if
any, in lieu of fractional shares) in exchange for the Security being converted
pursuant to the provisions hereof.
If a Holder converts more than one Security at the same time, the number
of shares of Common Stock issuable upon the conversion shall be based on the
total Principal Amount of the Securities converted.
Upon surrender of a Security that is convert in part, the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder, a new
Security in an authorized denomination equal in Principal Amount to the
unconverted portion of the Security surrendered.
If the last day on which a Security may be converted is a Legal Holiday
in a place where a Conversion Agent is located, the Security may be surrendered
to that Conversion Agent on the next succeeding day that it is not a Legal
Holiday.
SECTION 11.3. FRACTIONAL SHARES. The Company will not issue a fractional
share of Common Stock upon conversion of a Security. Instead the Company will
deliver Cash for the current market value of the fractional share. The current
market value of a fractional share shall be determined to the nearest 1/10,000th
of a share by multiplying the last reported sale price (determined as set forth
in the definition of Current Market Price) on the last Trading Day prior to the
Conversion Date of a full share by the fractional amount and rounding the
product to the nearest whole cent.
SECTION 11.4. TAXES ON CONVERSION. If a Holder converts a Security, the
Company shall pay any documentary, stamp or similar issue or transfer tax due on
the issue of shares of Common Stock upon the conversion. However, the Holder
shall pay any such tax which is due because the Holder requests the shares to be
issued in a name other than the Holder's name. The Conversion Agent may refuse
to deliver the certificates representing the Common Stock being issued in a name
other than the Holder's name until the Conversion Agent receives a sum
sufficient to pay any tax which will be due because the shares are to be issued
in a name other than the Holder's name. Nothing herein shall preclude any tax
withholding required by law or regulations.
SECTION 11.5. COMPANY TO PROVIDE STOCK. The Company shall, prior to
issuance of any Securities hereunder, and from time to time as may be necessary,
reserve out of its authorized but
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unissued Common Stock a sufficient number of shares of Common Stock to permit
the conversion of the Securities.
All shares of Common Stock delivered upon conversion of the Securities
shall be newly issued shares or treasury shares, shall be duly and validly
issued and fully paid and nonassessable and shall be free from preemptive rights
and free of any lien or adverse claim.
The Company will endeavor promptly to comply with all Federal and state
securities laws regulating the order and delivery of shares of Common Stock upon
conversion of Securities, if any, and will endeavor promptly, if permitted by
the rules of such exchange, over-the-counter market or other market, to list or
cause to have quoted such shares of Common Stock on each national securities
exchange or in the over-the-counter market or such other market on which the
Common Stock is then listed or quoted.
SECTION 11.6. ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. In case the
Company shall (i) pay a dividend, or make a distribution, in shares of its
Common Stock, on its Common Stock, (ii) subdivide its outstanding Common Stock
into a greater number of shares, or (iii) combine its outstanding Common Stock
into a smaller number of shares, the Conversion Rate in effect immediately prior
thereto shall be adjusted so that the holder of any Security thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock of the Company which such Holder would have owned or have been
entitled to receive after the happening of any of the events described above had
such Security been converted immediately prior to the happening of such event.
An adjustment made pursuant to this Section 11.06 shall become effective
immediately after the effective date of such dividend, distribution, subdivision
or combination.
SECTION 11.7. ADJUSTMENT FOR RIGHTS ISSUE. In case the Company shall
issue rights or warrants to all holders of its Common Stock entitling them (for
a period expiring within 45 days after the record date mentioned below) to
subscribe for or purchase Common Stock at a price per share less than the
Current Market Price per share of Common Stock at the record date for the
determination of stockholders entitled to receive such rights or warrants, the
Conversion Rate in effect immediately prior thereto shall be adjusted so that
the same shall equal the Conversion Rate determined by multiplying the
Conversion Rate in effect immediately prior to the date of issuance of such
rights or warrants by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the denominator shall be the number of
shares of Common Stock outstanding on the date of issuance of such rights or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at such Current Market Price.
Such adjustment shall be made successively whenever any such rights or warrants
are issued, and shall become effective immediately after the opening of business
on the day following the record date for the determination of the stockholders
entitled to receive such rights or warrants. To the extent that shares of Common
Stock are not delivered after the expiration of such rights or warrants, the
Conversion Rate shall be readjusted to the Conversion Rate which would then be
in effect had the
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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 Rate
shall again be adjusted to be the Conversion Rate which would then be in effect
if such record date 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 by the Company for such rights or warrants, the value
of such consideration, if other than cash, to be determined by the Board of
Directors.
SECTION 11.8. ADJUSTMENT FOR OTHER DISTRIBUTIONS.
(a) In case the Company shall distribute to all holders of its Common
Stock (excluding any distribution in connection with the liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary) any
shares of any class of capital stock of the Company (other than Common Stock) or
evidences of its indebtedness or assets (other than cash) or rights or warrants
to subscribe for or purchase any of its securities (excluding those referred to
in Section 11.07 hereof) (any of the foregoing hereinafter in this Section
11.08(a) called the "Distributed Securities"), then, the Conversion Rate shall
be adjusted so that the same shall equal the Conversion Rate determined by
multiplying the Conversion Rate in effect immediately prior to the date of such
distribution by a fraction of which the numerator shall be the Current Market
Price per share of the Common Stock on the record date mentioned below, and the
denominator shall be the Current Market Price per share of the Common Stock on
such record date less the fair market value on such record date (as determined
by the Board of Directors of the Company, whose determination shall be
conclusive, and described in a certificate filed with the Trustee) of the
Distributed Securities so distributed applicable to one share of Common Stock.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such distribution.
Notwithstanding the foregoing, in the event the then fair market value (as so
determined) of the portion of the Distributed Securities 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 Securityholder shall
have the right to receive upon conversion the amount of Distributed Securities
such Holder would have received had such Holder converted each Security on such
record date. In the event that such distribution is not so paid or made, the
Conversion Rate shall again be adjusted to the Conversion Rate which would then
be in effect if such distribution had not been declared. If the Board of
Directors determines the fair market value of any distribution for purposes of
this Section 11.08(a) by reference to the actual or when issued trading market
for any securities, it must in doing so consider the prices in such market over
the same period used in computing the Current Market Price of the Common Stock.
Notwithstanding the foregoing provisions of this Section 11.08(a), no
adjustment shall be made thereunder for any distribution of Distributed
Securities if the Company makes proper provision so that each Holder of a
Security who converts such Security (or any portion thereof)
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after the record date for 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 Distributed Securities that such Holder would
have been entitled to receive if such Holder had, immediately prior to such
record date, converted such Security for Common Stock; provided that, with
respect to any Distributed Securities that are convertible, exchangeable or
exercisable, the foregoing provision shall only apply to the extent (and so long
as) the Distributed Securities receivable upon conversion of such Security would
be convertible, exchangeable or exercisable, as applicable, without any loss of
rights or privileges for a period of at least 60 days following conversion of
such Security.
(b) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding (x) any quarterly cash dividend
on the Common Stock to the extent the aggregate cash dividend per share of
Common Stock in any fiscal quarter does not exceed the greater of (A) the amount
per share of Common Stock of the next preceding quarterly cash dividend on the
Common Stock to the extent such preceding quarterly dividend did not require any
adjustment of the Conversion Rate pursuant to this Section 11.08(b) (as adjusted
to reflect subdivisions or combinations of the Common Stock), and (B) 3.75% of
the average of the last reported sales prices of the Common Stock (determined as
provided in the definition of Current Market Price) during the ten Trading Days
next preceding the date of declaration of such dividend and (y) any dividend or
distribution in connection with the liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary), then, in such case, unless the
Company elects to reserve such cash for distribution to the holders of the
Securities upon the conversion of the Securities so that any such holder
converting Securities will receive upon such conversion in addition to the
shares of Common Stock to which such holder is entitled, the 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 Securities for
Common Stock, the Conversion Rate shall be increased so that the same shall
equal the Conversion Rate determined by multiplying the Conversion Rate in
effect immediately prior to the record date by a fraction of which the numerator
shall be such Current Market Price of the Common Stock and the denominator shall
be the Current Market Price of the Common Stock on the record date less the
amount of cash so distributed (and not excluded as provided above) applicable to
one share of Common Stock, such increase to be effective immediately prior to
the opening of business on the day following the record date; provided, however,
that in the event the portion of the cash so distributed applicable to one share
of Common Stock is equal to or greater than the Current Market Price of the
Common Stock on the record date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each Securityholder shall have the right to
receive upon conversion the amount of cash such Holder would have received had
such Holder converted each Security on the record date. If such dividend or
distribution is not so paid or made, the Conversion Rate shall again be adjusted
to be the Conversion Rate which would then be in effect if such dividend or
distribution had not been declared. If any adjustment is required to be made as
set forth in this Section 11.08(b) as a result of a distribution that is a
quarterly dividend, such adjustment shall be based upon the amount by which such
distribution exceeds the amount of the quarterly cash dividend permitted to be
excluded pursuant hereto. If an adjustment is required to be made as set forth
in this
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Section 11.08(b) above as a result of a distribution that is not a quarterly
dividend, such adjustment shall be based upon the full amount of the
distribution.
(c) In case a tender or exchange offer made by the Company or any
Subsidiary of the Company for all or any portion of the Common Stock shall
expire and such tender or exchange offer shall involve the payment by the
Company or such Subsidiary of consideration per share of Common Stock having a
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive, and described in a resolution of such Board of Directors at
the last time (the "Expiration Time") tenders or exchanges may be made pursuant
to such tender or exchange offer (as it shall have been amended)) that exceeds
the Current Market Price of the Common Stock on the Trading Day next succeeding
the Expiration Time, the Conversion Rate shall be increased so that the same
shall equal the Conversion Rate determined by multiplying the Conversion Rate in
effect immediately prior to the Expiration Time by a fraction of which the
numerator shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) on the Expiration
Time and the Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time, and the denominator shall be the number of
shares of Common Stock outstanding (including any tendered or exchanged shares)
on the Expiration Time multiplied by the Current Market Price of the Common
Stock on the Trading Day next succeeding the Expiration Time, such increase to
become effective immediately prior to the opening of business on the day
following the Expiration Time. In the event that the Company is obligated to
purchase shares pursuant to any such tender or exchange offer, but the Company
is permanently prevented by applicable law from effecting any such purchases or
all such purchases are rescinded, the Conversion Rate shall again be adjusted to
be the Conversion Rate which would then be effect if such tender or exchange
offer had not been made.
(d) In case of a tender or exchange offer by a Person other than the
Company or any Subsidiary for an amount which increases the offeror's ownership
of Common Stock to more than 25% of the Common Stock outstanding and shall
involve the payment by such Person of consideration per share of Common Stock
having a fair market value (as determined by the Board of Directors, whose
determination shall be conclusive, and described in a resolution of the Board of
Directors at the last time (the "Tender Expiration Time") tenders or exchanges
may be made pursuant to such tender or exchange offer (as it shall have been
amended)) at the Tender Expiration Time that exceeds the Current Market Price of
the Common Stock on the Trading Day next succeeding the Tender Expiration Time,
and in which, as of the Tender Expiration Time the Board of Directors is not
recommending rejection of the offer, the Conversion Rate shall be increased so
that the same shall equal the Conversion Rate determined by multiplying the
Conversion Rate in effect immediately prior to the Tender Expiration Time by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding (including any tendered or exchanged
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shares) on the Tender Expiration Time multiplied by the Current Market Price of
the Common Stock on the Trading Day next succeeding the Tender 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 an maximum specified in the terms of the tender or exchanged
offer) of all shares validly tendered or exchanged and not withdrawn as of the
Tender Expiration Time (the shares deemed so accepted, up to any such maximum,
being referred to as the "Tender Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Tender Purchased Shares)
on the Tender Expiration Time and the Current Market Price of the Common Stock
on the Trading Day next succeeding the Tender Expiration Time, such reduction to
become effective immediately prior to the opening of business on the day
following the Tender Expiration Time. In the event that such Person is obligated
to purchase shares pursuant to any such tender or exchange offer, but such
Person is permanently prevented by applicable law from effecting any such
purchases or all such purchases are rescinded, the Conversion Rate shall again
be adjusted to be the Conversion Rate which would then be in effect if such
tender or exchange offer had not been made. Notwithstanding the foregoing, the
adjustment described in this Section 11.08(d) shall not be made if, as of the
Tender Expiration Time, the offering documents with respect to such offer
disclose a plan or intention to cause the Company to engage in any transaction
described in Article 5.
SECTION 11.9. WHEN ADJUSTMENT MAY BE DEFERRED. No adjustment in the
Conversion Rate need be made unless the adjustment would require an increase or
decrease of at least 1% in the Conversion Rate. Any adjustments that are made
shall be carried forward and taken into account any subsequent adjustment.
All calculations under this Article 11 shall be made to the nearest cent
or to the nearest 1/10,000th of a share, as the case may be.
SECTION 11.10. WHEN NO ADJUSTMENT REQUIRED. No adjustment need be made
for rights to purchase Common Stock pursuant to a Company plan for reinvestment
of dividends or interest.
No adjustment need be made for a change in the par value or no par value
of the Common Stock.
To the extent the Securities become convertible into cash, assets,
property or securities (other than capital stock of the Company), no adjustment
need be made thereafter as to the cash, assets, property or such securities.
Interest will not accrue on the cash.
SECTION 11.11. NOTICE OF ADJUSTMENT. Whenever the Conversion Rate is
adjusted, the Company shall promptly mail to Holders a notice of the adjustment.
The Company shall file with the Trustee and the Conversion Agent such notice.
The certificate shall, absent manifest error, be conclusive evidence that the
adjustment is correct. Neither the Trustee nor any Conversion Agent shall be
under any duty or responsibility with respect to any such certificate except to
exhibit the same to any Holder desiring inspection thereof.
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SECTION 11.12. VOLUNTARY INCREASE. The Company on the Securities may
make such increases in the Conversion Rate, in addition to those required by
Sections 11.06, 11.07 and 11.08, 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 may from
time to time increase the Conversion Rate by any amount for any period of time
if the period is at least 20 days, the increase is irrevocable during the period
and the Board of Directors shall have made a determination that such increase
would be in the best interests of the Company, which determination shall be
conclusive. Whenever the Conversion Rate is so increased, the Company shall mail
to Holders and file with the Trustee and the Conversion Agent a notice of such
increase. Such Company shall mail the notice at least 15 days before the date
the increased Conversion Rate takes effect. The notice shall state the increased
Conversion Rate and the period it will be in effect.
SECTION 11.13. NOTICE OF CERTAIN TRANSACTIONS. If:
(1) the Company makes any distribution or dividend that would
require an adjustment in the Conversion Rate pursuant to Section 11.06, 11.07 or
11.08; or
(2) the Company takes any action that would require a supplemental
indenture pursuant to Section 11.14; or
(3) there is a liquidation, dissolution or winding-up of the
Company;
then the Company shall mail to Holders and file with the Trustee and the
Conversion Agent a notice stating the proposed record date for a dividend or
distribution or the proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up. The Company shall file and mail the notice at least
15 days before such date. Failure to file or mail the notice or any defect in it
shall not affect the validity of the transaction.
SECTION 11.14. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any of the following events occur, namely (i) any reclassification or
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another corporation as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
or (iii) any sale or conveyance of the properties and assets of the Company as,
or substantially as, an entirety to any other corporation as a result of which
holders of Common Stock shall be entitled to receive stock, securities or other
property or assets (including cash) with respect to or in exchange for such
Common Stock, then the Company or the successor or purchasing corporation, as
the case may be, shall execute with the Trustee a
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supplemental indenture, providing that each Security shall be convertible into
the kind and amount of shares of stock and other securities or property or
assets (including cash) receivable upon such reclassification, change,
consolidation, merger, combination, sale or conveyance by a holder of a number
of shares of Common Stock issuable upon conversion of such Securities
immediately prior to such reclassification, change, consolidation, merger,
combination, sale or conveyance. Such supplemental indenture shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article.
The Company shall cause notice of the execution of such supplemental
indenture to be mailed to each Holder of Securities, at such Holder's address
appearing on the Security register provided for in Section 2.03 of this
Indenture.
The above provisions of this Section shall similarly apply to successive
reclassifications, consolidations, mergers, combinations, and sales.
If this Section applies, neither Section 11.06, 11.07 nor 11.08 applies.
SECTION 11.15. COMPANY DETERMINATION FINAL. Any determination that the
Company or the Board of Directors must make pursuant to Section 11.03, 11.06,
11.07, 11.08, 11.09, 11.10, 11.14 or 11.17 is conclusive.
SECTION 11.16. TRUSTEE'S ADJUSTMENT DISCLAIMER. The Trustee has no duty
to determine when an adjustment under this Article 11 should be made, how it
should be made or what it should be. The Trustee has no duty to determine
whether a supplemental indenture under Section 11.14 need be entered into or
whether any provisions of any supplemental indenture are correct. The Trustee
shall not be accountable for and makes no representation as to the validity or
value of any securities or assets issued upon conversion of Securities. The
Trustee shall not be responsible for the Company's failure to comply with this
Article 11, and shall not be deemed to have knowledge of any adjustment unless
and until it shall have received a notice of adjustment pursuant to Section
11.11. Each Conversion Agent shall have the same protection under this Section
11.16 as the Trustee.
SECTION 11.17. SIMULTANEOUS ADJUSTMENTS. In the event that this Article
11 requires adjustments to the Conversion Rate under more than one of Sections
11.06, 11.07, 11.08(a) or 11.08(b), and the record dates for the distributions
giving rise to such adjustments shall occur on the same date, then such
adjustments shall be made by applying, first, the provisions of Section
11.08(a), second, the provisions of Section 11.08(b), third the provisions of
Section 11.06 and, fourth, the provisions of Section 11.07.
SECTION 11.18. SUCCESSIVE ADJUSTMENTS. After an adjustment to the
Conversion Rate under this Article 11, any subsequent event requiring an
adjustment under this Article 11 shall cause an adjustment to the Conversion
Rate as so adjusted.
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SECTION 11.19. RIGHTS ISSUED IN RESPECT OF COMMON STOCK ISSUED UPON
CONVERSION. Each share of Common Stock issued upon conversion of Securities
pursuant to this Article 11 shall be entitled to receive the appropriate number
of Rights and the certificates representing the Common Stock issued upon such
conversion shall bear such legends, if any, in each case as may be provided by
the terms of the Rights Agreement. Provided that such Rights Agreement requires
that each share of Common Stock issued upon conversion of Securities shall be
entitled to receive such Rights, then, notwithstanding anything else to the
contrary in this Article 11, there shall not be any adjustment to the conversion
privilege or Conversion Rate as a result of the issuance of Rights, the
distribution of separate certificates representing the Rights, the exercise or
redemption of such Rights in accordance with any such Rights Agreement, or the
termination or invalidation of such Rights.
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 not be deemed distributed for purposes of Section 11.08(a) until the
occurrence of the earliest Trigger Event. In addition, in the event of any
distribution of rights or warrants, or any Trigger Event with respect thereto,
that shall have resulted in an adjustment to the Conversion Rate under Section
11.08(a), (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 Rate shall be readjusted upon such final redemption or repurchase to
give effect to such distribution or Trigger Event, as the case may be, as
thought it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder of Common Stock with respect to such
rights or warrants (assuming such holder had retained such rights or warrants),
made to all holders of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of any such rights or warrants all of which
shall have expired without exercise by any holder thereof, the Conversion Rate
shall be readjusted as if such issuance had not occurred.
SECTION 11.20. GENERAL CONSIDERATIONS. Whenever successive adjustments
to the Conversion Rate are called for pursuant to this Article 11, such
adjustments shall be made to the Current Market Price as may be necessary or
appropriate to effectuate the intent of this Article 11 and to avoid unjust or
inequitable results as determined in good faith by the Board of Directors.
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ARTICLE 12
MISCELLANEOUS
SECTION 12.1. TRUST INDENTURE ACT. This Indenture is hereby made subject
to, and shall be governed by, the provisions of the TIA required to be part of
and to govern indentures qualified under the TIA; provided, however that this
Section 12.01 shall not require this Indenture or the Trustee to be qualified
under the TIA prior to the time such qualification is in fact required under the
terms of the TIA, nor shall it constitute any admission or acknowledgment by any
party that any such qualification is required prior to the time such
qualification is in fact required under the terms of the TIA. If any provision
hereof limits, qualifies or conflicts with another provision hereof which is
required to be included in an indenture qualified under the TIA, such required
provision shall control.
SECTION 12.2. NOTICES. Any request, demand, authorization, notice,
waiver, consent or communication shall be in writing and delivered in Person or
mailed by first class mail, postage prepaid, addressed as follows or transmitted
by facsimile transmission (confirmed by overnight courier) to the following
facsimile numbers:
if to the Company:
Western Digital Corporation
8705 Irvine Center Drive
Irvine, California 92618
Attn: Michael A. Cornelius
Telephone Number: (712) 932-5000
Facsimile Number: (712) 932-7837
if to the Trustee:
State Street Bank and Trust Company of California, N.A.
633 West 5th Street
12th Floor
Los Angeles, California 90071
(Attention: Western Digital Corporation, Zero Coupon Convertible
Subordinated Debentures due 2018)
Telephone Number: (213) 362-7338
Facsimile Number: (213) 362-7357
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<PAGE> 75
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication given to a Securityholder shall be mailed to
the Securityholder, by first class mail, postage prepaid, at the
Securityholder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not received by the addressee.
If the Company mails a notice or communication to the Holders, it shall
mail a copy to the Trustee and each Registrar, Paying Agent, Conversion Agent or
co-registrar.
SECTION 12.3. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Holders may
communicate pursuant to TIA Section 312(b) with other Holders with respect to
their rights under this Indenture or the Securities. The Company, the Trustee,
the Registrar, the Paying Agent, the Conversion Agent and anyone else shall have
the protection of TIA Section 312(c).
SECTION 12.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 12.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
Officers' Certificate or Opinion of Counsel with respect to compliance with a
covenant or condition provided for in this Indenture shall include:
(1) a statement that each individual making such Officers' Certificate
or Opinion of Counsel has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such Officers'
Certificate or Opinion of Counsel are based;
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(3) a statement that, in the opinion of each such individual, he or she
has made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement that, in the opinion of such individual, such covenant
or condition has been complied with.
SECTION 12.6. SEPARABILITY CLAUSE. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 12.7. RULES BY TRUSTEE, PAYING AGENT, CONVERSION AGENT AND
REGISTRAR. The Trustee may make reasonable rules for action by or a meeting of
Holders. The Registrar, Conversion Agent and the Paying Agent may make
reasonable rules for their functions.
SECTION 12.8. LEGAL HOLIDAYS. A "Legal Holiday" is any day other than a
Business Day. If any specified date (including a date for giving notice) is a
Legal Holiday, the action shall be taken on the next succeeding day that is not
a Legal Holiday, and to the extent applicable no Original Issue Discount or
interest, if any, shall accrue for the intervening period.
SECTION 12.9. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THIS INDENTURE AND THE SECURITIES, WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS.
SECTION 12.10. NO RECOURSE AGAINST OTHERS. A director, officer, employee
or stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 12.11. SUCCESSORS. All agreements of the Company in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 12.12. MULTIPLE ORIGINALS. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
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IN WITNESS WHEREOF, the undersigned, being duly authorized, has executed
this Indenture on behalf of the respective parties hereto as of the date first
written above.
Western Digital Corporation
By: /s/Duston M. Williams
--------------------------------------
Name: Duston M. Williams
Title: Senior Vice Pesident and
Chief Financial Officer
State Street Bank and Trust Company of California, N.A.
By: /s/Jeanie Mar
--------------------------------------
Authorized Signatory
Authorized Signatory
<PAGE> 78
EXHIBIT A
FORM OF SECURITY - SEE EXHIBIT 4.4 OF THIS REGISTRATION STATEMENT
<PAGE> 79
EXHIBIT B
[FORM OF INSTITUTIONAL ACCREDITED INVESTOR LETTER]
Western Digital Corporation
8105 Irvine Center Drive
Irvine, California 92618
Gentlemen:
We are delivering this letter in connection with an offering of Zero
Coupon Convertible Subordinated Debentures due 2018 (the "Debentures) which are
convertible into shares of Common Stock, $.01 par value (the "Common Stock"), of
Western Digital Corporation (the "Company").
We hereby confirm that:
1. we are an "accredited investor" within the meaning of Rule 501(a)(1),
(2) or (3) under the Securities Act of 1933 (the "Securities Act") or an entity
in which all of the equity owners are accredited investors within the meaning of
Rule 501(a)(1), (2) or (3) under the Securities Act (an "Institutional
Accredited Investor"):
2. (A) any purchase of Debentures by us will be for our own account or
for the account of one or more other Institutional Accredited Investors or as
fiduciary for the account of one or more trusts, each of which is an "accredited
investor" within the meaning of Rule 501(a)(7) under the Securities Act and for
each of which we exercise sole investment discretion or (B) we are a "bank,"
within the meaning of Section 3(a)(2) of the Securities Act, or a "savings and
loan association" or other institution described in Section 3(l)(5)(a) of the
Securities Act that is acquiring Debentures as fiduciary for the account of one
or more institutions for which we exercise sole investment discretion;
3. in the event that we purchase any Debentures, we will acquire
Debentures having a minimum principal amount of not less than $250,000 for our
own account or for any separate account for which we are acting;
4. we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of purchasing the
Debentures; and
5. we are not acquiring Debentures with a view to distribution thereof
or with any present intention of offering or selling Debentures or the Common
Stock issuable upon conversion thereof, except as permitted below; provided that
the disposition of our property and property of any accounts for which we are
acting as fiduciary shall remain at all times within our control.
<PAGE> 80
We understand that the Debentures are being offered in a transaction not
involving any public offering within the United States within the meaning of the
Securities Act and that the Debentures and the shares of Common Stock issuable
upon conversion thereof have not been registered under the Securities Act, and
we agree, on our own behalf and on behalf of each account for which we acquire
any Debentures, that if in the future we decide to resell or otherwise transfer
such Debentures or the Common Stock issuable upon conversion thereof, such
Debentures or Common Stock may be resold or otherwise transferred within the
United States, or for the account or benefit of, U.S. persons only (i) to the
Company or any subsidiary thereof, or (ii) to a person who is a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A, or (iii) to an Institutional
Accredited Investor that, prior to such transfer, furnishes to the Trustee or
transfer agent for such securities a signed letter containing certain
representations and agreements relating to the restrictions on transfer of such
securities (the form of which letter can be obtained from such Trustee or
transfer agent), or (iv) pursuant to the exemption from registration provided by
Rule 144 under the Securities Art (if applicable), or (v) pursuant to a
registration statement which has been declared effective under the Securities
Act (and which continues to be effective at the time of such transfer), and in
each case, in accordance with any applicable securities laws of any State of the
United States or any other applicable jurisdiction and in accordance with the
legends set forth on the Debentures or the Common Stock issuable upon conversion
thereof, as the case may be. We further agree to provide any person purchasing
any of the Debentures or the Common Stock issuable upon conversion thereof other
than pursuant to clause (v) above from us a notice advising such purchaser that
resales of such securities are restricted as stated herein. We understand that
the Trustee or transfer agent for the Debentures and the Common Stock will not
be required to accept for registration of transfer any Debentures or any shares
of Common Stock issued upon conversion of the Debentures except upon
presentation of evidence satisfactory to the Company that the foregoing
restrictions on transfer have been complied with. We further understand that any
Debentures and any certificates representing Common Stock will be in the form of
definitive physical certificates and that such certificates will bear a legend
reflecting the substance of this paragraph other than certificates representing
Common Stock transferred pursuant to clause (v) above.
We acknowledge that the Company, others and you will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK
--------------------------------------
(Name of Purchaser)
By:
------------------------------------
Name:
Title:
Address:
<PAGE> 1
EXHBIIT 4.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of
February 18, 1998 by and among Western Digital Corporation, a Delaware
corporation ("the Company"), and Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co. and Smith Barney Inc. (the "Initial Purchasers") pursuant to the
Purchase Agreement, dated as of February 12, 1998 (the "Purchase Agreement"),
among the Company and the Initial Purchasers. In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Company has agreed to
provide the registration rights set forth in this Agreement. The execution of
this Agreement is a condition to the closing under the Purchase Agreement.
The Company agrees with the Initial Purchasers, (i) for their benefit
as Initial Purchasers and (ii) for the benefit of the beneficial owners
(including the Initial Purchasers) from time to time of the Debentures (as
defined herein) and the beneficial owners from time to time of the Underlying
Common Stock (as defined herein) issued upon conversion of the Debentures (each
of the foregoing a "Holder" and together the "Holders"), as follows:
SECTION 1. Definitions. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
Affiliate: With respect to any specified person, an "affiliate," as
defined in Rule 144, of such person.
Amendment Effectiveness Deadline Date: See Section 2(d) hereof.
Applicable Conversion Price: The Applicable Conversion Price as of any
date of determination means the Applicable Principal Amount per $1,000 principal
amount at maturity of Debentures as of such date of determination divided by the
Conversion Rate in effect as of such date of determination or, if no Debentures
are then outstanding, the Conversion Rate that would be in effect were
Debentures then outstanding.
Applicable Principal Amount: Applicable Principal Amount as of any date
of determination, with respect to each $1,000 principal amount at maturity of
Debentures means the sum of the initial issue price of such Debenture ($354.71)
plus accrued original issue discount with respect such Debenture through such
date of determination or, if no Debentures are then outstanding, such sum
calculated as if such Debentures were then outstanding.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.
<PAGE> 2
Common Stock: The shares of common stock $.01 par value of the Company
and any other shares of common stock as may constitute "Common Stock" for
purposes of the Indenture, including the Underlying Common Stock.
Conversion Rate: Conversion Rate shall have the meaning assigned such
term in the Indenture.
Damages Accrual Period: See Section 2(e) hereof.
Damages Payment Date: Each February 18 and August 18 in the case of
Debentures and the Underlying Common Stock.
Debentures: The Zero Coupon Convertible Subordinated Debentures due
2018 of the Company to be purchased pursuant to the Purchase Agreement.
Deferral Notice: See Section 3(i) hereof.
Deferral Period: See Section 3(i) hereof.
Effectiveness Deadline Date: See Section 2(a) hereof.
Effectiveness Period: The period of two years from the later of (a) the
Issue Date or (b) the last date of original issuance of the Debentures or such
shorter period ending on the date that all Registrable Securities have ceased to
be Registrable Securities.
Event: See Section 2(e) hereof.
Event Termination Date: See Section 2(e) hereof.
Event Date: See Section 2(e) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Filing Deadline Date: See Section 2(a) hereof.
Holder: See the second paragraph of this Agreement.
Indenture: The Indenture dated as of the date hereof between the
Company and State Street Bank and Trust Company of California, N.A., as trustee,
pursuant to which the Debentures are being issued.
Initial Purchasers: Morgan Stanley & Co. Incorporated, Goldman, Sachs &
Co. and Smith Barney Inc.
Initial Shelf Registration Statement: See Section 2(a) hereof.
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<PAGE> 3
Issue Date: February 18, 1998.
Liquidated Damages Amount: See Section 2(e) hereof.
Losses: See Section 6 hereof.
Material Event: See Section 3(i) hereof.
Notice and Questionnaire: A written notice delivered to the Company
containing substantially the information called for by the Selling
Securityholder Notice and Questionnaire attached as Appendix B to the Offering
Memorandum of the Company issued February 12, 1998 relating to the Debentures.
Notice Holder: On any date, any Holder that has delivered a Notice and
Questionnaire to the Company on or prior to such date.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any amendment or prospectus supplement, including
post-effective amendments, and all materials incorporated by reference or
explicitly deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the first paragraph of this Agreement.
Record Holder: With respect to any Damages Payment Date relating to any
Debenture or Underlying Common Stock as to which any Liquidated Damages Amount
has accrued, the registered holder of such Debenture or Underlying Common Stock,
as the case may be, 15 days prior to the next succeeding Damages Payment Date.
Registrable Securities: The Debentures and the Underlying Common Stock,
until such securities have been converted or exchanged, and, at all times
subsequent to any such conversion or exchange, any securities into or for which
such securities have been converted or exchanged, and any security issued with
respect thereto upon any stock dividend, split or similar event until, in the
case of any such security, (A) the earliest of (i) its effective registration
under the Securities Act and resale in accordance with the Registration
Statement covering it, (ii) expiration of the holding period that would be
applicable thereto under Rule 144(k) were it not held by an Affiliate of the
Company or (iii) its sale to the public pursuant to Rule 144, and (B) as a
result of the event or circumstance described in any of the foregoing clauses
(i) through (iii), the legends with respect to transfer restrictions required
under the Indenture are removed or removable in accordance with the terms of the
Indenture.
Registration Expenses: See Section 5 hereof.
Registration Statement: Any registration statement of the Company that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus,
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<PAGE> 4
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all materials incorporated by
reference or explicitly deemed to be incorporated by reference in such
registration statement.
Restricted Securities: As this term is defined in Rule 144.
Rule 144: Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
Rule 144A: Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.
Shelf Registration Statement: See Section 2(a) hereof.
Subsequent Shelf Registration Statement: See Section 2(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: State Street Bank and Trust Company of California, N.A. (or
any successor entity), the Trustee under the Indenture.
Underlying Common Stock: The Common Stock into which the Debentures are
convertible or issued upon any such conversion.
SECTION 2. Shelf Registration. (a) The Company shall prepare and file
or cause to be prepared and filed with the SEC, as soon as practicable but in
any event by the date (the "Filing Deadline Date") ninety (90) days after the
Issue Date, a Registration Statement for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf
Registration Statement") registering the resale from time to time by Holders
thereof of all of the Registrable Securities (the "Initial Shelf Registration
Statement"). The Initial Shelf Registration Statement shall be on Form S-3 or
another appropriate form permitting registration of such Registrable Securities
for resale by such Holders in accordance with the methods of distribution
elected by the Holders and set forth in the Initial Shelf Registration
Statement. The Company shall use its reasonable best efforts to cause the
Initial Shelf Registration Statement to be declared effective under the
Securities Act as promptly as is practicable but in any event by the date (the
"Effectiveness Deadline Date") that is one hundred and eighty (180) days after
the Issue Date, and to keep the Initial Shelf Registration Statement (or any
Subsequent Shelf Registration Statement) continuously effective under the
Securities Act until the expiration of the Effectiveness Period. At the time the
Initial Shelf Registration Statement is declared effective, each Holder that
became a Notice Holder on or prior to the date 10 Business Days prior to such
time of effectiveness shall be named as a selling securityholder in the Initial
Shelf Registration
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<PAGE> 5
Statement and the related Prospectus in such a manner as to permit such Holder
to deliver such Prospectus to purchasers of Registrable Securities in accordance
with applicable law. None of the Company's security holders (other than the
Holders of Registrable Securities) shall have the right to include any of the
Company's securities in the Shelf Registration Statement.
(b) If the Initial Shelf Registration Statement or any Subsequent
Shelf Registration Statement ceases to be effective for any reason at any time
during the Effectiveness Period (other than because all Registrable Securities
registered thereunder shall have been resold pursuant thereto or shall have
ceased to be Registrable Securities), the Company shall use its reasonable best
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within thirty (30) days of such
cessation of effectiveness amend the Shelf Registration Statement in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration Statement
covering all of the securities that as of the date of such filing are
Registrable Securities (a "Subsequent Shelf Registration Statement"). If a
Subsequent Shelf Registration Statement is filed, the Company shall use its
reasonable best efforts to cause the Subsequent Shelf Registration Statement to
become effective as promptly as is practicable after such filing and to keep
such Registration Statement (or subsequent Shelf Registration Statement)
continuously effective until the end of the Effectiveness Period.
(c) The Company shall supplement and amend the Shelf Registration
Statement if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration Statement,
if required by the Securities Act or, to the extent to which the Company does
not reasonably object, as reasonably requested by the Initial Purchasers or by
the Trustee on behalf of the registered Holders.
(d) Each Holder of Registrable Securities agrees that if such Holder
wishes to sell Registrable Securities pursuant to a Shelf Registration Statement
and related Prospectus, it will do so only in accordance with this Section 2(d)
and Section 3(i). Each Holder of Registrable Securities wishing to sell
Registrable Securities pursuant to a Shelf Registration Statement and related
Prospectus agrees to deliver a Notice and Questionnaire to the Company at least
three (3) Business Days prior to any intended distribution of Registrable
Securities under the Shelf Registration Statement. From and after the date the
Initial Shelf Registration Statement is declared effective, the Company shall,
as promptly as is practicable after the date a Notice and Questionnaire is
delivered, and in any event within [five (5)] Business Days after such date, (i)
if required by applicable law, file with the SEC a post-effective amendment to
the Shelf Registration Statement or prepare and, if required by applicable law,
file a supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein by reference or file any other required document
so that the Holder delivering such Notice and Questionnaire is named as a
selling securityholder in the Shelf Registration Statement and the related
Prospectus in such a manner as to permit such Holder to deliver such Prospectus
to purchasers of the Registrable Securities in accordance with applicable law
and, if the Company shall file a post-effective amendment to the Shelf
Registration Statement, use its reasonable best efforts to cause such
post-effective amendment to be declared effective under the Securities Act as
promptly as is practicable, but in any event by the date (the "Amendment
Effectiveness Deadline Date") that is forty-five (45) days after the date such
post-effective amendment is
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<PAGE> 6
required by this clause to be filed; (ii) provide such Holder copies of any
documents filed pursuant to Section 2(d)(i); and (iii) notify such Holder as
promptly as practicable after the effectiveness under the Securities Act of any
post-effective amendment filed pursuant to Section 2(d)(i); provided, that if
such Notice and Questionnaire is delivered during a Deferral Period, the Company
shall so inform the Holder delivering such Notice and Questionnaire and shall
take the actions set forth in clauses (i), (ii) and (iii) above upon expiration
of the Deferral Period in accordance with Section 3(i), provided, further, that
if under applicable law the Company has more than one option as to the type or
manner of making any such filing, it will make the required filing or filings in
the manner or of a type reasonably expected to result in the earliest
availability of the Prospectus for effecting resales of Registrable Securities.
Notwithstanding anything contained herein to the contrary, the Company shall be
under no obligation to name any Holder that is not a Notice Holder as a selling
securityholder in any Registration Statement or related Prospectus; provided,
however, that any Holder that becomes a Notice Holder pursuant to the provisions
of Section 2(d) of this Agreement (whether or not such Holder was a Notice
Holder at the time the Registration Statement was declared effective) shall be
named as a selling securityholder in the Registration Statement or related
Prospectus in accordance with the requirements of this Section 2(d).
(e) The parties hereto agree that the Holders of Registrable
Securities will suffer damages, and that it would not be feasible to ascertain
the extent of such damages with precision, if (i) the Initial Shelf Registration
Statement has not been filed on or prior to the Filing Deadline Date, (ii) the
Initial Shelf Registration Statement has not been declared effective under the
Securities Act on or prior to the Effectiveness Deadline Date, (iii) the Company
has failed to perform its obligations set forth in Section 2(d) within the time
period required therein, (iv) the aggregate duration of Deferral Periods in any
period exceeds the number of days permitted in respect of such period pursuant
to Section 3(i) hereof or (v) the number of Deferral Periods in any period
exceeds the number permitted in respect of such period pursuant to Section 3(i)
(each of the events of a type described in any of the foregoing clauses (i)
through (v) are individually referred to herein as an "Event," and the Filing
Deadline Date in the case of clause (i), the Effectiveness Deadline Date in the
case of clause (ii), the date by which the Company is required to perform its
obligations set forth in Section 2(d) in the case of clause (iii) (including the
filing of any post-effective amendment prior to the Amendment Effectiveness
Deadline Date), the date on which the aggregate duration of Deferral Periods in
any period exceeds the number of days permitted by Section 3(i) hereof in the
case of clause (iv), and the date of the commencement of a Deferral Period that
causes the limit on the number of Deferral Periods in any period under Section
3(i) hereof to be exceeded in the case of clause (v), being referred to herein
as an "Event Date"). Events shall be deemed to continue until the "Event
Termination Date," which shall be the following dates with respect to the
respective types of Events: the date the Initial Shelf Registration Statement is
filed in the case of an Event of the type described in clause (i), the date the
Initial Shelf Registration Statement is declared effective under the Securities
Act in the case of an Event of the type described in clause (ii), the date the
Company performs its obligations set forth in Section 2(d) in the case of an
Event of the type described in clause (iii) (including, without limitation, the
date the relevant post-effective amendment to the Shelf Registration Statement
is declared effective under the Securities Act), termination of the Deferral
Period that
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<PAGE> 7
caused the limit on the aggregate duration of Deferral Periods in a period set
forth in Section 3(i) to be exceeded in the case of the commencement of an Event
of the type described in clause (iv), and termination of the Deferral Period the
commencement of which caused the number of Deferral Periods in a period
permitted by Section 3(i) to be exceeded in the case of an Event of the type
described in clause (v).
Accordingly, commencing on (and including) any Event Date and ending on
(but excluding) the next date on which there are no Events that have occurred
and are continuing (a "Damages Accrual Period"), the Company agrees to pay, as
liquidated damages and not as a penalty, an amount (the "Liquidated Damages
Amount"), payable on the Damages Payment Dates to Record Holders of Debentures
that are Registrable Securities and of shares of Underlying Common Stock issued
upon conversion of Debentures that are Registrable Securities, as the case may
be, accruing, for each portion of such Damages Accrual Period beginning on and
including a Damages Payment Date (or, in respect of the first time that the
Liquidation Damages Amount is to be paid to Holders on a Damages Payment Date as
a result of the occurrence of any particular Event, from the Event Date) and
ending on but excluding the first to occur of (A) the date of the end of the
Damages Accrual Period or (B) the Next Damages Payment Date, at a rate per annum
equal to one-quarter of one percent (.25%) for the first 90-day period from the
Event Date and thereafter at a rate per annum equal to one-half of one percent
(.5%) of the aggregate Applicable Principal Amount of such Debentures and the
Applicable Conversion Price of such shares of Underlying Common Stock, as the
case may be, in each case determined as of the Business Day immediately
preceding the next Damages Payment Date; provided, that in the case of a Damages
Accrual Period that is in effect solely as a result of an Event of the type
described in clause (iii) of the immediately preceding paragraph, such
Liquidated Damages Amount shall be paid only to the Holders that have delivered
Notice and Questionnaires that caused the Company to incur the obligations set
forth in Section 2(d) the non-performance of which is the basis of such Event;
provided further, that any Liquidated Damages Amount accrued with respect to any
Debenture or portion thereof called for redemption on a redemption date or
converted into Underlying Common Stock on a conversion date prior to the Damages
Payment Date, shall, in any such event, be paid instead to the Holder who
submitted such Debenture or portion thereof for redemption or conversion on the
applicable redemption date or conversion date, as the case may be, on such date
(or promptly following the conversion date, in the case of conversion).
Notwithstanding the foregoing, no Liquidated Damages Amounts shall accrue as to
any Registrable Security from and after the earlier of (x) the date such
security is no longer a Registrable Security and (y) expiration of the
Effectiveness Period. The rate of accrual of the Liquidated Damages Amount with
respect to any period shall not exceed the rate provided for in this paragraph
notwithstanding the occurrence of multiple concurrent Events. Following the cure
of all Events requiring the payment by the Company of Liquidated Damages Amounts
to the Holders of Registrable Securities pursuant to this Section, the accrual
of Liquidated Damages Amounts will cease (without in any way limiting the effect
of any subsequent Event requiring the payment of Liquidated Damages Amount by
the Company).
The Trustee shall be entitled, on behalf of Holders of Debentures or
Underlying Common Stock, to seek any available remedy for the enforcement of
this Agreement, including for the payment of any Liquidated Damages Amount.
Notwithstanding the foregoing, the parties agree
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<PAGE> 8
that the sole damages payable for a violation of the terms of this Agreement
with respect to which liquidated damages are expressly provided shall be such
liquidated damages. Nothing shall preclude a Notice Holder or Holder of
Registrable Securities from pursuing or obtaining specific performance or other
equitable relief with respect to this Agreement.
All of the Company's obligations set forth in this Section 2(e) that
are outstanding with respect to any Registrable Security at the time such
security ceases to be a Registrable Security shall survive until such time as
all such obligations with respect to such security have been satisfied in full
(notwithstanding termination of this Agreement pursuant to Section 8(k)).
The parties hereto agree that the liquidated damages provided for in
this Section 2(e) constitute a reasonable estimate of the damages that may be
incurred by Holders of Registrable Securities by reason of the failure of the
Shelf Registration Statement to be filed or declared effective or available for
effecting resales of Registrable Securities in accordance with the provisions
hereof.
SECTION 3. Registration Procedures. In connection with the registration
obligations of the Company under Section 2 hereof, the Company shall:
(a) Before filing any Registration Statement or Prospectus or any
amendments or supplements thereto with the SEC, furnish to the Initial
Purchasers copies of all such documents proposed to be filed and use its
reasonable best efforts to reflect in each such document when so filed with the
SEC such comments as the Initial Purchasers reasonably shall propose within two
(2) Business Days of the delivery of such copies to the Initial Purchasers.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the applicable period
specified in Section 2(a); cause the related Prospectus to be supplemented by
any required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 (or any similar provisions then in force) under the Securities Act;
and use its reasonable best efforts to comply with the provisions of the
Securities Act applicable to it with respect to the disposition of all
securities covered by such Registration Statement during the Effectiveness
Period in accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement as so amended or such
Prospectus as so supplemented.
(c) As promptly as practicable give notice to the Notice Holders and
the Initial Purchasers (i) when any Prospectus, Prospectus supplement,
Registration Statement or post-effective amendment to a Registration Statement
has been filed with the SEC and, with respect to a Registration Statement or any
post-effective amendment, when the same has been declared effective, (ii) of any
request, following the effectiveness of the Initial Shelf Registration Statement
under the Securities Act, by the SEC or any other federal or state governmental
authority for amendments or supplements to any Registration Statement or related
Prospectus or for additional information, (iii) of the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of any Registration Statement or the initiation or threatening
of any proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
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<PAGE> 9
exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose, (v) of the occurrence of (but not the nature of or details concerning)
a Material Event and (vi) of the determination by the Company that a
post-effective amendment to a Registration Statement will be filed with the SEC,
which notice may, at the discretion of the Company (or as required pursuant to
Section 3(i)), state that it constitutes a Deferral Notice, in which event the
provisions of Section 3(i) shall apply.
(d) Use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement or the lifting of
any suspension of the qualification (or exemption from qualification) of any of
the Registrable Securities for sale in any jurisdiction in which they have been
qualified for sale, in either case at the earliest possible moment.
(e) If reasonably requested by the Initial Purchasers or any Notice
Holder, as promptly as practicable incorporate in a Prospectus supplement or
post-effective amendment to a Registration Statement such information as the
Initial Purchasers or such Notice Holder shall, on the basis of an opinion of
nationally-recognized counsel experienced in such matters, determine to be
required to be included therein by applicable law and make any required filings
of such Prospectus supplement or such post-effective amendment; provided, that
the Company shall not be required to take any actions under this Section 3(e)
that are not, in the reasonable opinion of counsel for the Company, in
compliance with applicable law.
(f) As promptly as practicable furnish to each Notice Holder and the
Initial Purchasers, without charge, at least one (1) conformed copy of the
Registration Statement and any amendment thereto, including financial statements
but excluding schedules, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits (unless requested in writing to the
Company by such Notice Holder or the Initial Purchasers, as the case may be).
(g) During the Effectiveness Period, deliver to each Notice Holder in
connection with any sale of Registrable Securities pursuant to a Registration
Statement, without charge, as many copies of the Prospectus or Prospectuses
relating to such Registrable Securities (including each preliminary prospectus)
and any amendment or supplement thereto as such Notice Holder may reasonably
request; and the Company hereby consents (except during such periods that a
Deferral Notice is outstanding and has not been revoked) to the use of such
Prospectus or each amendment or supplement thereto by each Notice Holder in
connection with any offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto in the manner set forth
therein.
(h) Prior to any public offering of the Registrable Securities
pursuant to the Shelf Registration Statement, register or qualify or cooperate
with the Notice Holders in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Notice Holder reasonably requests
in writing (which request may be included in the Notice and Questionnaire);
prior to any public offering of the Registrable Securities pursuant to the Shelf
Registration Statement, keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period in connection
with such Notice Holder's offer and sale of Registrable Securities pursuant to
such registration or qualification (or exemption therefrom) and do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of such Registrable Securities in the manner set forth in the
relevant Registration Statement and the related Prospectus; provided, that
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<PAGE> 10
the Company will not be required to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise be
required to qualify but for this Agreement or (ii) take any action that would
subject it to general service of process in suits or to taxation in any such
jurisdiction where it is not then so subject.
(i) Upon (A) the issuance by the SEC of a stop order suspending the
effectiveness of the Shelf Registration Statement or the initiation of
proceedings with respect to the Shelf Registration Statement under Section 8(d)
or 8(e) of the Securities Act, (B) the occurrence of any event or the existence
of any fact (a "Material Event") as a result of which any Registration Statement
shall contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any Prospectus shall contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or (C) the occurrence or existence
of any pending corporate development that, in the discretion of the Company,
makes it appropriate to suspend the availability of the Shelf Registration
Statement and the related Prospectus, (i) in the case of clause (B) above,
subject to the next sentence, as promptly as practicable prepare and file, if
necessary pursuant to applicable law, a post-effective amendment to such
Registration Statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document that would
be incorporated by reference into such Registration Statement and Prospectus so
that such Registration Statement does not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and such Prospectus
does not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, as thereafter delivered to the purchasers of the Registrable
Securities being sold thereunder, and, in the case of a post-effective amendment
to a Registration Statement, subject to the next sentence, use its reasonable
best efforts to cause it to be declared effective as promptly as is practicable,
and (ii) give notice to the Notice Holders that the availability of the Shelf
Registration Statement is suspended (a "Deferral Notice") and, upon receipt of
any Deferral Notice, each Notice Holder agrees not to sell any Registrable
Securities pursuant to the Registration Statement until such Notice Holder's
receipt of copies of the supplemented or amended Prospectus provided for in
clause (i) above, or until it is advised in writing by the Company that the
Prospectus may be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in such Prospectus. The Company will use its reasonable best efforts to ensure
that the use of the Prospectus may be resumed (x) in the case of clause (A)
above, as promptly as is practicable, (y) in the case of clause (B) above, as
soon as, in the sole judgment of the Company, public disclosure of such Material
Event would not be prejudicial to or contrary to the interests of the Company
or, if necessary to avoid unreasonable burden or expense, as soon as practicable
thereafter and (z) in the case of clause (C) above, as soon as, in the
discretion of the Company, such suspension is no longer appropriate. The Company
shall be entitled to exercise its right under this Section 3(i) to suspend the
availability of the Shelf Registration Statement or any Prospectus, without
incurring any obligation to pay liquidated damages pursuant to Section 2(e), no
more than one (1) time in any three (3) month period or three (3) times in any
twelve (12)
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<PAGE> 11
month period, and the period during which the availability of the Registration
Statement and any Prospectus is suspended (the "Deferral Period") shall, without
incurring any obligation to pay liquidated damages pursuant to Section 2(e), not
exceed thirty (30) days; provided, that in the case of a Material Event relating
to an acquisition or a probable acquisition or financing, recapitalization,
business combination or other similar transaction], the Company may, without
incurring any obligation to pay liquidated damages pursuant to Section 2(e),
deliver to Notice Holders a second notice to the effect set forth above, which
shall have the effect of extending the Deferral Period by up to an additional
thirty (30) days, or such shorter period of time as is specified in such second
notice; provided, that the aggregate duration of any Deferral Periods shall not,
without incurring any obligation to pay liquidated damages pursuant to Section
2(e), exceed sixty (60) days in any three (3) month period or ninety (90) days
in any twelve (12) month period.
(j) If requested in writing in connection with a disposition of
Registrable Securities pursuant to a Registration Statement, make reasonably
available for inspection during normal business hours by a representative for
the Notice Holders of such Registrable Securities and any broker-dealers,
attorneys and accountants retained by such Notice Holders, all relevant
financial and other records, pertinent corporate documents and properties of the
Company and its subsidiaries, and cause the appropriate executive officers,
directors and designated employees of the Company and its subsidiaries to make
reasonably available for inspection during normal business hours all relevant
information reasonably requested by such representative for the Notice Holders
or any such broker-dealers, attorneys or accountants in connection with such
disposition, in each case as is customary for similar "due diligence"
examinations; provided, however, that such persons shall first agree in writing
with the Company that any information that is reasonably and in good faith
designated by the Company in writing as confidential at the time of delivery of
such information shall be kept confidential by such persons and shall be used
solely for the purposes of exercising rights under this Agreement, unless (i)
disclosure of such information is required by court or administrative order or
is necessary to respond to inquiries of regulatory authorities, (ii) disclosure
of such information is required by law (including any disclosure requirements
pursuant to federal securities laws in connection with the filing of any
Registration Statement or the use of any Prospectus referred to in this
Agreement), (iii) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard by any such
person or (iv) such information becomes available to any such person from a
source other than the Company and such source is not bound by a confidentiality
agreement; and provided further, that the foregoing inspection and information
gathering shall, to the greatest extent possible, be coordinated on behalf of
all the Notice Holders and the other parties entitled thereto by the counsel
referred to in Section 5.
(k) Use its reasonable best efforts to comply with all applicable
rules and regulations of the SEC and make generally available to its
securityholders earning statements (which need not be audited) satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) commencing on the first day of the first
fiscal quarter of the Company commencing after the effective date of a
Registration Statement, which statements shall cover said 12-month periods.
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<PAGE> 12
(l) Cooperate with each Notice Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
sold or to be sold pursuant to a Registration Statement, which certificates
shall not bear any restrictive legends, and cause such Registrable Securities to
be in such denominations as are permitted by the Indenture and registered in
such names as such Notice Holder may request in writing at least two Business
Days prior to any sale of such Registrable Securities.
(m) Provide a CUSIP number for all Registrable Securities covered by
each Registration Statement not later than the effective date of such
Registration Statement and provide the Trustee and the transfer agent for the
Common Stock with printed certificates for the Registrable Securities that are
in a form eligible for deposit with The Depository Trust Company.
(n) Provide such information as is required for any filings required
to be made with the National Association of Securities Dealers, Inc.
(o) Upon (i) the filing of the Initial Registration Statement and (ii)
the effectiveness of the Initial Registration Statement, announce the same, in
each case by release to Reuters Economic Services and Bloomberg Business News.
SECTION 4. Holder's Obligations. Each Holder agrees, by acquisition of
the Registrable Securities, that no Holder of Registrable Securities shall be
entitled to sell any of such Registrable Securities pursuant to a Registration
Statement or to receive a Prospectus relating thereto, unless such Holder has
furnished the Company with a Notice and Questionnaire as required pursuant to
Section 2(d) hereof (including the information required to be included in such
Notice and Questionnaire) and the information set forth in the next sentence.
Each Notice Holder agrees promptly to furnish to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Notice Holder not misleading and any other information
regarding such Notice Holder and the distribution of such Registrable Securities
as the Company may from time to time reasonably request. Any sale of any
Registrable Securities by any Holder shall constitute a representation and
warranty by such Holder that the information relating to such Holder and its
plan of distribution is as set forth in the Prospectus delivered by such Holder
in connection with such disposition, that such Prospectus does not as of the
time of such sale contain any untrue statement of a material fact relating to or
provided by such Holder or its plan of distribution and that such Prospectus
does not as of the time of such sale omit to state any material fact relating to
or provided by such Holder or its plan of distribution necessary to make the
statements in such Prospectus, in the light of the circumstances under which
they were made, not misleading.
SECTION 5. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance by the Company of its
obligations under Sections 2 and 3 of this Agreement whether or not any of the
Registration Statements are declared effective. Such fees and expenses shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (x) with respect to filings required to be
made with the National Association of Securities Dealers, Inc. and (y) of
compliance with federal and state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of the counsel specified
in the next sentence in connection with Blue Sky qualifications of the
Registrable Securities under the laws of such jurisdictions as the Notice
Holders of a majority of the Registrable Securities being sold pursuant to a
Registration
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Statement may designate), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities in a form eligible
for deposit with The Depository Trust Company), (iii) duplication expenses
relating to copies of any Registration Statement or Prospectus delivered to any
Holders hereunder, (iv) fees and disbursements of counsel for the Company in
connection with the Shelf Registration Statement, (v) reasonable fees and
disbursements of the Trustee and its counsel and of the registrar and transfer
agent for the Common Stock and (vi) Securities Act liability insurance obtained
by the Company in its sole discretion. In addition, the Company shall bear or
reimburse the Notice Holders for the reasonable fees and disbursements of one
firm of legal counsel for the Holders, which shall initially be Wilson Sonsini
Goodrich & Rosati, P.C., but which may, with the written consent of the Initial
Purchasers (which shall not be unreasonably withheld), be another nationally
recognized law firm experienced in securities law matters designated by the
Company. In addition, the Company shall pay the internal expenses of the Company
(including, without limitation, all salaries and expenses of officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange on which similar securities of
the Company are then listed and the fees and expenses of any person, including
special experts, retained by the Company. Notwithstanding the provisions of this
Section 5, each seller of Registrable Securities shall pay all registration
expenses to the extent required by applicable law.
SECTION 6. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify and
hold harmless each Notice Holder and each person, if any, who controls any
Notice Holder (within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act) from and against all losses, liabilities,
claims, damages and expenses (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) (collectively, "Losses"), arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, provided,
however, that the Company shall not be liable in any such case to the extent
that any such Losses arise out of or are based upon an untrue statement or
alleged untrue statement contained in or omission or alleged omission from any
of such documents in reliance upon and conformity with any of the information
relating to such Holder furnished to the Company in writing by such Holder
expressly for use therein; provided further, that the indemnification contained
in this paragraph shall not inure to the benefit of any Holder of Registrable
Securities (or to the benefit of any person controlling such Holder) on account
of any such Losses arising out of or based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any preliminary
prospectus if either (A) (i) such Holder failed to send or deliver a copy of the
Prospectus with or prior to the delivery of written confirmation of the sale by
such Holder to the person asserting the claim from which such Losses arise and
(ii) the Prospectus would have corrected such untrue statement or alleged untrue
statement or such omission or alleged omission, or (B) (x) such untrue statement
or alleged untrue statement, omission or alleged
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<PAGE> 14
omission is corrected in an amendment or supplement to the Prospectus and (y)
having previously been furnished by or on behalf of the Company with copies of
the Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, with or prior to the
delivery of written confirmation of the sale of a Registrable Security to the
person asserting the claim from which such Losses arise.
(b) Indemnification by Holders of Registrable Securities. Each Holder
agrees severally and not jointly to indemnify and hold harmless the Company and
its respective directors and officers, and each person, if any, who controls the
Company (within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act), from and against all Losses arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or Prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with information furnished to the Company by such Holder expressly
for use in such Registration Statement or Prospectus or amendment or supplement
thereto. In no event shall the liability of any selling Holder of Registrable
Securities hereunder be greater in amount than the dollar amount of the proceeds
received by such Holder upon the sale of the Registrable Securities pursuant to
the Registration Statement giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the "indemnifying
party") in writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the reasonable fees and disbursements
of such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in respect of the
legal expenses of any indemnified party in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all indemnified parties, and that all such fees and expenses shall be reimbursed
as they are incurred. Such separate firm shall be designated in writing by, in
the case of parties indemnified pursuant to Section 6(a), the Holders of a
majority (with Holders of Debentures deemed to be the Holders, for purposes of
determining such majority, of the number of shares of Underlying Common Stock
into which such Debentures are or would be convertible or exchangeable as of the
date on which such designation is made) of the Registrable Securities covered by
the Registration Statement held by Holders that are
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<PAGE> 15
indemnified parties pursuant to Section 6(a) and, in the case of parties
indemnified pursuant to Section 6(b), the Company. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel and the indemnified party would be entitled
thereto pursuant to the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding (and in the event of a settlement that involves an unconditional
release of such indemnified party, the indemnifying party will send prompt
written notice of such settlement to the indemnified party).
(d) Contribution. To the extent that the indemnification provided for
in this Section 6 is unavailable to an indemnified party under Section 6(a) or
6(b) hereof in respect of any Losses or is insufficient to hold such indemnified
party harmless, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
or parties on the one hand and the indemnified party or parties on the other
hand or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions that
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 initial placement pursuant to the Purchase Agreement (before
deducting expenses) of the Registrable Securities to which such Losses relate.
Benefits received by any Holder shall be deemed to be equal to the value of
receiving Registrable Securities that are registered under the Securities Act.
The relative fault of the Holders on the one hand and the Company on the other
hand shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Holders
or by the Company, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Holders' respective obligations to contribute pursuant to this paragraph are
several in proportion to the respective number of Registrable Securities they
have sold pursuant to a Registration Statement, and not joint.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method or allocation that
15
<PAGE> 16
does not take into account the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the Losses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding this Section 6(d), an indemnifying party that is a selling
Holder of Registrable Securities shall not be required to contribute any amount
in excess of the amount by which the total price at which the Registrable
Securities sold by such indemnifying party and distributed to the public were
offered to the public exceeds the amount of any damages that such indemnifying
party has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The indemnity, contribution and expense reimbursement obligations
of the parties hereunder shall be in addition to any liability any indemnified
party may otherwise have hereunder, under the Purchase Agreement or otherwise.
(f) The indemnity and contribution provisions contained in this
Section 6 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Holder or any person controlling any Holder, or the Company, or the
Company's officers or directors or any person controlling the Company and (iii)
the sale of any Registrable Securities by any Holder.
SECTION 7. Information Requirements. (a) The Company covenants that, if
at any time before the end of the Effectiveness Period the Company is not
subject to the reporting requirements of the Exchange Act, it will cooperate
with any Holder of Registrable Securities and take such further reasonable
action as any Holder of Registrable Securities may reasonably request in writing
(including, without limitation, making such reasonable representations as any
such Holder may reasonably request), all to the extent required from time to
time to enable such Holder to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144 and Rule 144A under the Securities Act and customarily taken in
connection with sales pursuant to such exemptions. Upon the written request of
any Holder of Registrable Securities, the Company shall deliver to such Holder a
written statement as to whether it has complied with such filing requirements,
unless such a statement has been included in the Company's most recent report
required to be filed and filed pursuant to Section 13 or Section 15(d) of
Exchange Act. Notwithstanding the foregoing, nothing in this Section 7 shall be
deemed to require the Company to register any of its securities (other than the
Common Stock) under any section of the Exchange Act.
SECTION 8. Miscellaneous.
(a) No Conflicting Agreements. The Company is not, as of the date
hereof, a party to, nor shall it, on or after the date of this Agreement, enter
into, any agreement with respect to its securities that conflicts with the
rights granted to the Holders of
16
<PAGE> 17
Registrable Securities in this Agreement. The Company represents and warrants
that the rights granted to the Holders of Registrable Securities hereunder do
not in any way conflict with the rights granted to the holders of the Company's
securities under any other agreements.
(b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Company has obtained the written consent of Holders of a
majority of the then outstanding Underlying Common Stock constituting
Registrable Securities (with Holders of Debentures deemed to be the Holders, for
purposes of this Section, of the number of outstanding shares of Underlying
Common Stock into which such Debentures are or would be convertible or
exchangeable as of the date on which such consent is requested). Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Registrable Securities may be given by Holders of at
least a majority of the Registrable Securities being sold by such Holders
pursuant to such Registration Statement; provided, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence. Each Holder of Registrable
Securities outstanding at the time of any such amendment, modification,
supplement, waiver or consent or thereafter shall be bound by any such
amendment, modification, supplement, waiver or consent effected pursuant to this
Section 8(b), whether or not any notice, writing or marking indicating such
amendment, modification, supplement, waiver or consent appears on the
Registrable Securities or is delivered to such Holder.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, by telecopier, by
courier guaranteeing overnight delivery or by first-class mail, return receipt
requested, and shall be deemed given (i) when made, if made by hand delivery,
(ii) upon confirmation, if made by telecopier, (iii) one (1) Business Day after
being deposited with such courier, if made by overnight courier or (iv) on the
date indicated on the notice of receipt, if made by first-class mail, to the
parties as follows:
(w) if to a Holder of Registrable Securities, at the most
current address given by such Holder to the Company in a
Notice and Questionnaire or any amendment thereto;
(x) if to the Company, to:
Western Digital Corporation
8105 Irvine Center Drive
Irvine, CA 92718
Attention: Dustin M. Williams
Telecopy No.: (714) 932-7837
and
(y) if to the Initial Purchasers, to:
17
<PAGE> 18
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York
Attention: Equity Capital Markets
Telecopy No.: (212) 761-0356
or to such other address as such person may have furnished to the other persons
identified in this Section 8(c) in writing in accordance herewith.
(d) Approval of Holders. Whenever the consent or approval of Holders
of a specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or its affiliates (as such term is
defined in Rule 405 under the Securities Act) (other than the Initial Purchasers
or subsequent Holders of Registrable Securities if such subsequent Holders are
deemed to be such affiliates solely by reason of their holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
(e) Successors and Assigns. Any person who purchases any Registrable
Securities from the Initial Purchasers shall be deemed, for purposes of this
Agreement, to be an assignee of the Initial Purchasers. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties and shall inure to the benefit of and be binding upon each Holder
of any Registrable Securities.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be original and all of which taken together
shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES THEREOF.
(i) Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby, and the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction, it being intended that all of the rights and privileges of the
parties shall be enforceable to the fullest extent permitted by law.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and the registration rights
granted by the Company with respect to the Registrable Securities. Except as
provided in the Purchase Agreement, there are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes
18
<PAGE> 19
all prior agreements and undertakings among the parties with respect to such
registration rights. No party hereto shall have any rights, duties or
obligations other than those specifically set forth in this Agreement. Without
limiting the generality of the foregoing, the Company shall have no obligation
to participate in "road show" or, except as specifically provided in this
Agreement, "due diligence" activities in connection with any underwritten public
offering of Registrable Securities, and the Company shall have no obligation to
enter into underwriting or indemnification agreements with respect to, or
deliver opinions, comfort letters or closing certificates in connection with,
any such underwritten public offering.
(k) Termination. This Agreement and the obligations of the parties
hereunder shall terminate upon the end of the Effectiveness Period, except for
any liabilities or obligations under Sections 4, 5 or 6 hereof and the
obligations to make payments of and provide for liquidated damages under Section
2(e) hereof to the extent such damages accrue prior to the end of the
Effectiveness Period, each of which shall remain in effect in accordance with
its terms.
19
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
WESTERN DIGITAL CORPORATION
By: /s/Duston M. Williams
-------------------------------------
Name: Duston M. Williams
Title: Senior Vice President and
Chief Financial Officer
Accepted as of the date first
above written:
MORGAN STANLEY & CO. INCORPORATED
GOLDMAN SACHS & CO.
SMITH BARNEY INC.
(for the benefit of themselves and for the benefit of the Holders)
By: MORGAN STANLEY & CO. INCORPORATED
By: /s/Michael Grimes
--------------------------------
Name: Michael Grimes
Title: Principal
<PAGE> 1
EXHIBIT 4.4
[FORM OF FACE OF SECURITY]
FOR UNITED STATES FEDERAL INCOME TAX PURPOSES, THIS SECURITY BEARS ORIGINAL
ISSUE DISCOUNT. INFORMATION INCLUDING THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE
DISCOUNT, THE ISSUE DATE, AND THE YIELD TO MATURITY WILL BE MADE AVAILABLE TO
HOLDERS UPON REQUEST TO DUSTON M. WILLIAMS, SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER, AT (714) 932-7602.
[FORM OF LEGEND FOR GLOBAL SECURITY]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) , ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT)
("INSTITUTIONAL ACCREDITED INVESTOR"); OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION; (2) AGREES
THAT IT WILL NOT, PRIOR TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES
OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR
ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED
HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH SECURITY WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT (A)
TO WESTERN DIGITAL CORPORATION OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
<PAGE> 2
TO STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE (OR A
SUCCESSOR TRUSTEE, AS APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE
SECURITY EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRUSTEE OR A SUCCESSOR TRUSTEE, AS APPLICABLE), (D) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (E) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF
SUCH TRANSFER); (3) PRIOR TO SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE 2(E) ABOVE), IT WILL FURNISH TO STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE TRUSTEE MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND (4) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THE SECURITY EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD
APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A., AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE
PROPOSED TRANSFEREE IS A PURCHASER WHO IS NOT A U.S. PERSON OR AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO STATE
STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED
UPON THE EARLIER OF THE TRANSFER OF THE SECURITY EVIDENCED HEREBY PURSUANT TO
CLAUSE 2(E) ABOVE OR UPON ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY UNDER
RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION).
2
<PAGE> 3
WESTERN DIGITAL CORPORATION
ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURE DUE 2018
<TABLE>
<CAPTION>
No.__
<S> <C>
Issue Date: February 18, 1998 Original Issue Discount: $645.29
Issue Price: $354.71 (for each $1,000 Principal Amount)
(for each $1,000 Principal Amount)
CUSIP: ________
</TABLE>
Western Digital Corporation, a Delaware corporation, promises to pay
to or registered assigns, on February 18, 2018 [the Principal Amount of
Dollars($ )].(1)
This Security shall not bear interest except as specified on the other
side of this Security. Original Issue Discount will accrue as specified on the
other side of this Security. This Security is convertible as specified on the
other side of this Security.
Additional provisions of this Security are set forth on the other side of
this Security.
IN WITNESS WHEREOF, Western Digital Corporation has caused this instrument
to be duly executed under its corporate seal.
WESTERN DIGITAL CORPORATION
By:
------------------------------------
Title:
By:
------------------------------------
Title:
[SEAL]
Dated:
--------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee, certifies
that this is one of the Securities referred to in the within-mentioned
Indenture.
By
------------------------------
Authorized Signatory
- --------
(1) The global Security reads instead: "The Principal Amount then shown on
Schedule A hereto."
3
<PAGE> 4
[FORM OF REVERSE SIDE OF SECURITY]
WESTERN DIGITAL CORPORATION
ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURE DUE 2018
1. INTEREST
This Security shall not bear interest, except that if the Principal hereof
or any portion of such Principal is not paid when due (whether upon acceleration
pursuant to Section 6.02 of the Indenture, upon the date set for payment of the
Redemption Price pursuant to paragraph 5 hereof, upon the date set for payment
of a Purchase Price or Fundamental Change Redemption Price pursuant to paragraph
6 hereof or upon the Stated Maturity of this Security), then in each such case
the overdue amount shall bear interest at the rate of 5.25% per annum,
compounded semiannually (to the extent that the payment of such interest shall
be legally enforceable), which interest shall accrue from the date such overdue
amount was due to the date payment of such amount, including interest thereon,
has been made or duly provided for. All such interest shall be payable on
demand. The accrual of such interest on overdue amounts shall be in lieu of, and
not in addition to, the continued accrual of Original Issue Discount.
The Original Issue Discount (the difference between the Issue Price and
the Principal Amount of the Security) in the period during which a Security
remains outstanding, shall accrue at 5.25% per annum, on a semiannual bond
equivalent basis using a 360-day year composed of twelve 30-day months,
commencing on the Issue Date of this Security.
2. METHOD OF PAYMENT
Subject to the terms and conditions of the Indenture, the Company will
make payments in respect of the Securities to the Persons who are registered
Holders of Securities at the close of business on the Business Day preceding the
Redemption Date or Stated Maturity, as the case may be, or at the close of
business on a Purchase Date or Fundamental Change Redemption Date, as the case
may be. Holders must surrender Securities to a Paying Agent to collect such
payments in respect of the Securities. The Company will pay cash amounts in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may make such cash
payments by check payable in such money.
3. PAYING AGENT, CONVERSION AGENT AND REGISTRAR
Initially, State Street Bank and Trust Company of California, N.A., a
national banking association organized under the laws of the United States of
America (the "Trustee"), will act as Paying Agent, Conversion Agent and
Registrar. The Company may appoint and change any Paying Agent, Conversion
Agent, Registrar or co-registrar without notice, other than notice to the
Trustee. The Company or any of its Subsidiaries or any of their Affiliates may
act as Paying Agent, Conversion Agent, Registrar or co-registrar.
4. INDENTURE
The Company issued the Securities under an Indenture (the "Indenture"),
dated as of February 18, 1998, between the Company and the Trustee. Capitalized
terms used herein and not defined herein have
4
<PAGE> 5
the meanings ascribed thereto in the Indenture. The Securities are subject to
all such terms, and Holders are referred to the Indenture for a statement of
those terms.
The Securities are general unsecured obligations of the Company limited to
$1,297,200,000 aggregate Principal Amount (subject to Sections 2.02 and 2.07 of
the Indenture). The Indenture does not limit other indebtedness of the Company,
secured or unsecured, including Senior Indebtedness of the Company.
5. REDEMPTION AT THE OPTION OF THE COMPANY
No sinking fund is provided for the Securities. The Securities are
redeemable as a whole, or from time to time in part, at any time at the option
of the Company at the Redemption Prices set forth below, provided that the
Securities are not redeemable prior to February 18, 2003.
The table below shows Redemption Prices of a Security per $1,000 Principal
Amount on the dates shown below and at Stated Maturity, which prices reflect
accrued Original Issue Discount calculated to each such date. The Redemption
Price of a Security redeemed between such dates would include an additional
amount reflecting the additional Original Issue Discount accrued since ext
preceding date in the table to the actual Redemption Date.
<TABLE>
<CAPTION>
ACCRUED ORIGINAL
ISSUE DISCOUNT
AT 5.25% REDEMPTION PRICE
SECURITY (1) + (2)
REDEMPTION DATE ISSUE PRICE
<S> <C> <C> <C>
February 18, 2003.................. 354.71 104.93 459.64
February 18, 2004.................. 354.71 129.37 484.08
February 18, 2005.................. 354.71 155.12 509.83
February 18, 2006.................. 354.71 182.24 536.95
February 18, 2007.................. 354.71 210.80 565.51
February 18, 2008.................. 354.71 240.88 595.59
February 18, 2009.................. 354.71 272.55 627.26
February 18, 2010.................. 354.71 305.92 660.63
February 18, 2011.................. 354.71 341.05 695.76
February 18, 2012.................. 354.71 378.06 732.77
February 18, 2013.................. 354.71 417.04 771.75
February 18, 2014.................. 354.71 458.08 812.79
February 18, 2015.................. 354.71 501.31 856.02
February 18, 2016.................. 354.71 546.84 901.55
February 18, 2017.................. 354.71 594.80 949.51
At maturity........................ 354.71 645.29 1,000.00
</TABLE>
6. PURCHASE BY THE COMPANY AT THE OPTION OF THE HOLDER; REDEMPTION AT THE
OPTION OF THE HOLDER UPON A FUNDAMENTAL CHANGE
(a) Subject to the terms and conditions of the Indenture, the Company
shall become obligated to purchase, at the option of the Holder, the Securities
held by such Holder on the following Purchase Dates and at the following
Purchase Prices per $1,000 Principal Amount, upon delivery of a Purchase
5
<PAGE> 6
Notice containing the information set forth in the Indenture, from the opening
of business on the date that is 20 Business Days prior to such Purchase Date
until the close of business on such Purchase Date and upon delivery of the
Securities to the Paying Agent by the Holder as set forth in the Indenture. Such
Purchase Prices may be paid, at the option of the Company, in cash or by the
issuance and delivery of shares of Common Stock of the Company, or in any
combination thereof.
<TABLE>
<CAPTION>
PURCHASE DATE PURCHASE PRICE
<S> <C>
February 18, 2003............................ $ 459.64
February 18, 2008............................ 595.59
February 18, 2013............................ 771.75
</TABLE>
Securities in denominations larger than $1,000 of Principal Amount may be
purchased in part, but only in multiples of $1,000 of Principal Amount.
(b) At the option of the Holder and subject to the terms and
conditions of the Indenture, the Company shall become obligated to redeem the
Securities held by such Holder 45 days after the date of the Company's notice of
a Fundamental Change occurring on or prior to February 18, 2018 for a
Fundamental Change Redemption Price equal to the Issue Price plus accrued
Original Issue Discount to the Fundamental Change Redemption Date; provided
that, with respect to a Fundamental Change, if the Applicable Price is less than
the Reference Market Price, the Company shall redeem such Securities at a price
equal to the foregoing Redemption Price multiplied by a fraction obtained by
dividing the Applicable Price by the Reference Market Price, which Fundamental
Change Redemption Price shall be paid in cash. Securities in denominations
larger than $1,000 of Principal Amount may be redeemed in part in connection
with a Fundamental Change, but only in multiples of $1,000 of Principal Amount.
(c) Holders have the right to withdraw any Purchase Notice or
Fundamental Change Redemption Notice, as the case may be, by delivering to the
Paying Agent a written notice of withdrawal in accordance with the provisions of
the Indenture.
(d) If cash (and/or securities if permitted under the Indenture)
sufficient to pay a Purchase Price or Fundamental Change Redemption Price, as
the case may be, of all Securities or portions thereof to be purchased as of the
Purchase Date or the Fundamental Change Redemption Date, as the case may be, is
deposited with the Paying Agent on the Business Day following the Purchase Date
or the Fundamental Change Redemption Date, as the case may be, Original Issue
Discount ceases to accrue on such Securities (or portions thereof) on and after
such date, and the Holder thereof shall have no other rights as such (other than
the right to receive the Purchase Price or Fundamental Change Redemption Price,
as the case may be, upon surrender of such Security).
7. NOTICE OF REDEMPTION AT THE OPTION OF THE COMPANY
Notice of redemption at the option of the Company will be mailed at least
30 days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at the Holder's registered address. If money
sufficient to pay the Redemption Price of all Securities (or portions thereof)
to be redeemed on the Redemption Date is deposited with the Paying Agent prior
to or on the Redemption Date, on and after such date Original Issue Discount
ceases to accrue on such Securities or portions thereof. Securities in
denominations larger than $1,000 of Principal Amount may be redeemed in part but
only in multiples of $1,000 of Principal Amount.
6
<PAGE> 7
8. SUBORDINATION
The Securities are subordinated to all existing and future Senior
Indebtedness of the Company. To the extent provided in the Indenture, Senior
Indebtedness of the Company must be paid before the Securities may be paid. The
Indenture does not limit the present or future amount of Senior Indebtedness
that the Company may have. The Company agrees, and each Securityholder by
accepting a Security agrees, to the subordination and authorizes the Trustee to
give it effect and appoints the Trustee as attorney-in-fact for such purpose.
9. CONVERSION
Subject to the next two succeeding sentences, a Holder of a Security may
convert this Security for Common Stock of the Company at any time after 90 days
following the Issue Date of the Securities and before the close of business on
February 18, 2018. If this Security is called for redemption, the Holder may
convert it at any time before the close of the last Trading Day prior to the
Redemption Date. A Security in respect of which a Holder has delivered a notice
of exercise of the option to require the Company to purchase such Security or to
redeem such Security in the event of a Fundamental Change may be converted only
if the notice of exercise is withdrawn in accordance with the terms of the
Indenture.
The initial Conversion Rate is 14.935 shares of Common Stock per $1,000
Principal Amount, subject to adjustment in certain events described in the
Indenture. The Company will deliver cash or a check in lieu of any fractional
share of Common Stock.
To convert this Security a Holder must (1) complete and manually sign the
conversion notice on the back of this Security (or complete and manually sign a
facsimile of such notice) and deliver such notice to the Conversion Agent, (2)
surrender this Security to the Conversion Agent, (3) furnish appropriate
endorsements and transfer documents if required by the Conversion Agent, the
Company or the Trustee and (4) pay any transfer or similar tax, if required.
A Holder may convert a portion of this Security if the Principal Amount of
such portion is $1,000 or a multiple of $1,000. No payment or adjustment will be
made for dividends on the Common Stock except as provided in the Indenture. On
conversion of this Security, that portion of accrued Original Issue Discount
attributable to the period from the Issue Date to the Conversion Date with
respect to the converted portion of this Security shall not be canceled,
extinguished or forfeited, but rather shall be deemed to be paid in full to the
Holder thereof through the delivery of the Common Stock (together with any cash
payment in lieu of fractional shares) in exchange for the portion of this
Security being converted pursuant to the terms hereof.
10. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION
Any Securities called for redemption, unless surrendered for conversion
before the close of business on the last Trading Day prior to the Redemption
Date, may be deemed to be purchased from the Holders of such Securities at an
amount not less than the Redemption Price, by one or more investment bankers or
other purchasers who may agree with the Company to purchase such Securities from
the Holders, to convert them for Common Stock of the Company and to make payment
for such Securities to the Trustee in trust for such Holders.
11. REGISTRATION RIGHTS
7
<PAGE> 8
The Holder of this Security and the Common Stock issuable upon conversion
thereof is entitled to the benefits of a Registration Rights Agreement (subject
to the provisions thereof), dated as of February 18, 1998, between the Company
and the Initial Purchasers.
12. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form, without coupons, in denominations
of $1,000 of Principal Amount and multiples of $1,000. A Holder may transfer or
convert Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not transfer or exchange any Securities selected
for redemption (except, in the case of a Security to be redeemed in part, the
portion of the Security not to be redeemed) or any Securities in respect of
which a Purchase Notice or Fundamental Change Redemption Notice has been given
and not withdrawn (except, in the case of a Security to be purchased in part,
the portion of the Security not to be purchased) or any Securities for a period
of 15 days before a selection of Securities to be redeemed.
13. PERSONS DEEMED OWNERS
The registered Holder of this Security may be treated as the owner of this
Security for all purposes.
14. UNCLAIMED MONEY OR SECURITIES
The Trustee and the Paying Agent shall return to the Company upon written
request any money or securities held by them for the payment of any amount with
respect to the Securities that remains unclaimed for two years, provided,
however, that the Trustee or such Paying Agent, before being required to make
any such return, shall at the expense of the Company cause to be published once
in a newspaper of general circulation in The City of New York or mail to each
such Holder notice that such money or securities remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication or mailing, any unclaimed money or securities then
remaining will be returned to the Company. After return to the Company, Holders
entitled to the money or securities must look to the Company for payment as
general creditors unless an applicable abandoned property law designates another
Person.
15. AMENDMENT; WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in aggregate Principal Amount of the Securities
at the time outstanding and (ii) certain defaults or noncompliance with certain
provisions may be waived with the written consent of the Holders of a majority
in aggregate Principal Amount of the Securities at the time outstanding. Subject
to certain exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, defect or inconsistency, or to comply with
Article 5 or Section 11.14 of the Indenture, to provide for uncertificated
Securities in addition to or in place of certificated Securities or to make any
change that does not adversely affect the rights of any Securityholder or to
comply with any requirement of the SEC in connection with the qualification of
the Indenture under the TIA.
16. DEFAULTS AND REMEDIES
8
<PAGE> 9
Under the Indenture, Events of Default include (i) default in payment of
the Principal Amount, Issue Price, accrued Original Issue Discount, accrued
Liquidated Damages, if any, Redemption Price, Purchase Price or Fundamental
Change Redemption Price, as the case may be, in respect of the Securities when
the same becomes due and payable, provided that in the case of any failure to
pay Liquidated Damages, such failure to pay continues for a period of 30 days;
(ii) failure by the Company to comply with other agreements in the Indenture or
the Securities, subject to notice and lapse of time; and (iii) certain events of
bankruptcy or insolvency. If an Event of Default occurs and is continuing, the
Trustee, or the Holders of at least 25% in aggregate Principal Amount of the
Securities at the time outstanding, may declare all the Securities to be due and
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities being declared due and payable
immediately upon the occurrence of such Events of Default.
Holders may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee may refuse to enforce the Indenture or the
Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in aggregate Principal Amount of the
Securities at the time outstanding may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders notice of any continuing
Default (except a Default in payment of amounts specified in clause (i) above)
if it determines that withholding notice is in their interests.
17. TRUSTEE DEALINGS WITH THE COMPANY
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with and
collect obligations owed to it by the Company or its Affiliates and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not Trustee.
18. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
19. AUTHENTICATION
This Security shall not be valid until an authorized officer of the
Trustee manually signs the Trustee's Certificate of Authentication on the other
side of this Security.
20. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
21. GOVERNING LAW
9
<PAGE> 10
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS
SECURITY.
The Company will furnish to any Securityholder upon written request and
without charge a copy of the Indenture which has in it the text of this Security
in larger type. Requests may be made to:
Western Digital Corporation
8105 Irvine Center Drive
Irvine, California 92618
Attn: Duston M. Williams
10
<PAGE> 11
[FORM OF CONVERSION NOTICE]
CONVERSION NOTICE
To: Western Digital Corporation
The undersigned registered holder of this Security hereby irrevocably
exercises the option to convert this Security, or portion hereof (which is
$1,000 principal amount or a multiple thereof) below designated, for shares of
Common Stock of Western Digital Corporation in accordance with the terms of the
Indenture referred to in this Security, and directs that the shares issuable and
deliverable upon such conversion, together with any check in payment for
fractional shares and any Securities representing any unconverted principal
amount hereof, be issued and delivered to the registered holder hereof unless a
different name has been indicated below. If shares or any portion of this
Security not converted are to be issued in the name of a Person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
Dated:
----------------
------------------------------------------------
------------------------------------------------
Signature(s)
Fill in for registration of shares if to be delivered,
and Securities if to be issued other than to and in
the name of the registered holder:
(Name)
(Street Address)
(City, state and zip code)
Please print name and address
Principal amount to be converted
(if less than all):
$___,000
------------------------------------------------
Social Security or Other Taxpayer Identification
Number
11
<PAGE> 12
[FORM OF OPTION TO ELECT REDEMPTION
UPON A FUNDAMENTAL CHANGE]
To: Western Digital Corporation
The undersigned registered holder of this Security hereby acknowledges
receipt of a notice from Western Digital Corporation (the "Company") as to the
occurrence of a Fundamental Change with respect to the Company and requests and
instructs the Company to redeem this Security, or the portion hereof (which is
$1,000 Principal Amount or a multiple thereof) below designated, in accordance
with the terms of the Indenture referred to in this Security.
Dated:
----------------
------------------------------------------------
------------------------------------------------
Signature(s)
Principal amount to be redeemed
(if less than all):
$
-----------
------------------------------------------------
Social Security or Other Taxpayer Identification
Number
12
<PAGE> 13
ASSIGNMENT
For value received ________________________ hereby sell(s), assign(s) and
transfer(s) unto _____________________ (Please insert social security or other
Taxpayer Identification Number of assignee) the within Security, and hereby
irrevocably constitutes and appoints ________________ attorney to transfer the
said Security on the books of the Company, with full power of substitution in
the premises.
In connection with any transfer of the Security within the United States
or to, or for the account or benefit of, U.S. Persons within the period prior to
the expiration of the holding period applicable to sales thereof under Rule
144(k) (other than any transfer pursuant to a registration statement that has
been declared effective under the Securities Act), under the Securities Act (or
any successor provision), the undersigned confirms that such Security is being
transferred:
[ ] To Western Digital Corporation or a subsidiary thereof; or
[ ] Pursuant to and in compliance with Rule 144A under the Securities
Act of 1933, as amended; or
[ ] To an Institutional Accredited Investor pursuant to and in
compliance with the Securities Act of 1933, as amended; or
[ ] Pursuant to and in compliance with Rule 144 under the Securities
Act of 1933, as amended;
and unless the box below is checked, the undersigned confirms that to its
knowledge such Security is not being transferred to an "affiliate" of the
Company as defined in Rule 144 under the Securities Act of 1933, as amended (an
"Affiliate").
[ ] The transferee is an Affiliate of the Company.
Dated:
----------------
------------------------------------------------
------------------------------------------------
Signature(s)
Signature(s) must be guaranteed by a commercial
bank or trust company or a member firm of a
major stock exchange if shares of Common Stock
are to be issued, or Securities to be
delivered, other than to or in the name of the
registered holder.
------------------------------------------------
Signature Guarantee
NOTICE: The above signatures of the holder(s) hereof must correspond with the
name as written upon the face of the Security in every particular without
alteration or enlargement or any change whatever.
13
<PAGE> 14
[FORM OF SCHEDULE FOR ENDORSEMENTS ON GLOBAL SECURITY
TO REFLECT CHANGES IN PRINCIPAL AMOUNT]
Schedule A
Changes to Principal Amount of Global Security
<TABLE>
<CAPTION>
DATE PRINCIPAL AMOUNT OF SECURITIES BY WHICH REMAINING PRINCIPAL AMOUNT OF THIS NOTATION MADE BY
THIS GLOBAL SECURITY IS TO BE REDUCED GLOBAL SECURITY
OR INCREASED, AND REASON FOR
REDUCTION OR INCREASE
<S> <C> <C> <C>
- --------------- ----------------------------------------- ----------------------------------- ----------------
- --------------- ----------------------------------------- ----------------------------------- ----------------
- --------------- ----------------------------------------- ----------------------------------- ----------------
- --------------- ----------------------------------------- ----------------------------------- ----------------
- --------------- ----------------------------------------- ----------------------------------- ----------------
- --------------- ----------------------------------------- ----------------------------------- ----------------
- --------------- ----------------------------------------- ----------------------------------- ----------------
</TABLE>
14
<PAGE> 1
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
-------------------------------------------------------------- ---------------------
JUNE 30, JUNE 30, JULY 1, JUNE 29, JUNE 28, DEC. 28, DEC. 27,
1993 1994 1995 1996 1997 1996 1997
-------- -------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(1) 0.03x 5.89x 12.57x 12.90x 30.33x 23.98x N/A
Pro forma ratio of adjusted
earnings to fixed charges (2) 8.96x N/A
</TABLE>
(1) For purposes of determining the ratio of earnings to fixed charges,
earnings consist of income (loss) before income taxes plus fixed charges. Fixed
charges consist of interest expense (including amortization of original issue
discount and debt issuance costs, as applicable) and the estimated portion of
operating lease rental expense which represents the interest factor. For the six
months ended December 27, 1997, there was a deficiency of earnings available to
cover fixed charges amounting to $70.5 million.
(2) Pro forma ratio of adjusted earnings to fixed charges reflects the
ratio of adjusted earnings to fixed charges as if the Debentures and the term
borrowings of $50 million under the Company's revolving credit and term loan
facility providing a $200 million revolving credit line and a $50 million term
loan had been outstanding for the year ended June 28, 1997 and the six months
ended December 27, 1997, and the related estimated charges had been incurred for
the year and the six months ended, respectively. For the six months ended
December 27, 1997, there was a deficiency of pro forma earnings available to
cover fixed charges amounting to $83.8 million.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Western Digital Corporation:
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Independent Auditors" in the
prospectus.
KPMG PEAT MARWICK LLP
Orange County, California
May 11, 1998
<PAGE> 1
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 [x]
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
United States 06-1143380
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
633 West 5th Street, 12th Floor, Los Angeles, California 90071
(Address of principal executive offices) (Zip Code)
Lynda A. Vogel, Senior Vice President and Managing Director
633 West 5th Street, 12th Floor, Los Angeles, California 90071
(213) 362-7399
(Name, address and telephone number of agent for service)
Western Digital Corporation
(Exact name of obligor as specified in its charter)
Delaware 95-264-7125
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Western Digital Corporation
8105 Irvine Center Drive Irvine, California 92618
(Address of principal executive offices) (Zip Code)
Convertible Subordinated Debentures
(TYPE OF SECURITIES)
Zero Coupon Convertible Subordinated Debentures due 2018
(Title of indenture securities)
<PAGE> 2
GENERAL
Item 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, Western District Office, 50
Fremont Street, Suite 3900, San Francisco, California, 94105-2292
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its parent,
State Street Bank and Trust Company.
(See note on page 2.)
Item 3. through Item 15. Not applicable.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in
effect.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
3. A copy of the authorization of the trustee to exercise corporate
trust powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2), above.
Authorization of the Trustee to exercise fiduciary powers
(included in Exhibits 1 and 2; no separate instrument).
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
<PAGE> 3
5. A copy of each Indenture referred to in Item 4. if the obligor is in
default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any Item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company of California, N.A.,
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 Los Angeles, and
State of California, on the 7th day of May, 1998.
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, NATIONAL ASSOCIATION
By: /s/ Mark Henson
------------------------------
Mark Henson
Assistant Vice President
2
<PAGE> 4
EXHIBIT 1
Filed
Comptroller of the Currency
Northeastern District
ARTICLES OF ASSOCIATION Date 7-31-85
OF
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA,
NATIONAL ASSOCIATION
For the purpose of organizing an Association to carry on the business of a
limited purpose trust company under the laws of the United States, the
undersigned do enter into the following Articles of Association;
FIRST. The title of this Association shall be State Street Bank and Trust
Company of California, National Association.
SECOND. The Main Office of the Association shall be in the City of Culver City,
County of Los Angeles, State of California. The general business of the
Association shall be conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not less
than five nor more that twenty-five shareholders, the exact number to be fixed
and determined from time to time by resolution of a majority of the full Board
of Directors or by resolution of the shareholders at any annual or special
meeting thereof. Each Director, during the full term of his directorship, shall
own a minimum of $1,000 aggregate par value of stock of this Association or a
minimum par, market value or equity interest of $1,000 of stock in the bank
holding company controlling this Association. Any vacancy in the Board of
Directors may be filled by action of the Board of Directors.
FOURTH. There shall be an annual meeting of the shareholders to elect Directors
and transact whatever other business may be brought before the meeting. It
shall be held at the main office or any other convenient place as the Board of
Directors may designate, on the day of each year specified therefore in the
By-laws, but if no election is held on that day, it may be held on any
subsequent day according to such lawful rules as may be prescribed by the Board
of Directors.
FIFTH. The authorized amount of capital stock of this Association shall be
1,000,000 shares of common stock of the par value of one dollar ($1) each; but
said capital stock may be increased or decreased from time to time, in
accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of this Association shall
have any pre-emptive or preferential right of subscription to any shares of any
class of stock of this Association, whether now or hereafter authorized, or to
any obligations convertible into stock of this Association, issued, or sold,
nor any right of subscription to any thereof other than
<PAGE> 5
such, if any, as the Board of Directors, in its discretion may from time to
time determine and at such price as the Board of Directors may from time to
time fix.
This Association, at any time and from time to time, may authorize and issue
debt obligations, whether or not subordinated, without the approval of the
shareholders.
SIXTH. The Board of Directors shall appoint one of its members President of
this Association, who shall be Chairperson of the Board, unless the Board
appoints another director to be the Chairperson. The Board of Directors shall
have the power to appoint one or more Vice Presidents; and to appoint a Cashier
and such other officers and employees as may be required to transact the
business of this Association.
The Board of Directors shall have the power to define the duties of the officers
and employees of this Association; to fix the salaries to be paid to the
officers and employees; to dismiss officers and employees; to require bonds from
officers and employees and to fix the penalty thereof; to regulate the manner in
which any increase of the capital of this Association shall be made; to manage
and administer the business and affairs of this Association; to make all By-laws
that it may be lawful for the Board of Directors to make; and generally to do
and perform all acts that it may be legal for a Board of Directors to do and
perform.
SEVENTH. The Board of Directors shall have the power to change the location of
the main office to any other place within the limits of the City of Culver
City, without the approval of the shareholders, and shall have the power to
establish or change the location of any branch or branches of this Association
to any other location, without the approval of the shareholders.
EIGHTH. The Corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of this Association, or any shareholder owning,
in the aggregate, not less than ten percent of the stock of this Association,
may call a special meeting of shareholders at any time. Unless otherwise
provided by the laws of the United States, a notice of the time, place, and
purpose of every annual and special meeting of the shareholders shall be given
by first-class mail, postage prepaid, mailed at least ten days prior to the
date of such meeting to each shareholder of record at his address as shown upon
the books of this Association.
TENTH. This Association shall indemnify each person who is or was a director,
officer, employee or other agent of this Association, and each person who is or
was serving at the request of this Association as a director, trustee, officer,
employee or other agent of another organization in which it directly or
indirectly owns shares or of which it is directly or indirectly a
-2-
<PAGE> 6
creditor, against all liabilities, costs and expenses, including but not
limited to amount paid in satisfaction of judgments, in settlements or as fines
and penalties, and counsel fees and disbursements, reasonably incurred by such
person in connection with the defense or disposition of or otherwise in
connection with or resulting from any action, suit or other proceeding, whether
civil, criminal, administrative or investigative, before any court or
administrative or legislative or investigative body, in which such person may
be or may have been involved as a party or otherwise or with which he may be or
may have been threatened, while in office or thereafter, by reason of his being
or having been such a director, officer, employee, agent or trustee, or by
reason of any action taken or not taken in any such capacity, except with
respect to any matter as to which he shall have been finally adjudicated by a
court of competent jurisdiction not to have acted in good faith in the
reasonable belief that his action was in the best interests of this
Association. Expenses, including but not limited to counsel fees and
disbursements, so incurred by any such person in defending any such action,
suit or proceeding, may be paid from time to time by this Association in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the person indemnified to repay
the amount so paid if it shall ultimately be determined that indemnification of
such expenses is not authorized hereunder.
As to any matter disposed of by settlement by any such person, pursuant to a
consent decree or otherwise, no such indemnification either for the amount of
such settlement or for any other expenses shall be provided unless such
settlement shall be approved as in the best interests of this Association,
after notice that it involves such indemnification, (a) by vote of a majority
of the disinterested directors then in office (even though the disinterested
directors be less than a quorum), or (b) by any disinterested person or persons
to whom the question may be referred by vote of a majority of such
disinterested directors, or (c) by vote of the holders of a majority of the
outstanding stock at the time entitled to vote for directors, voting as a
single class, exclusive of any stock owned by any interested person, or (d) by
any disinterested person or persons to whom the question may be referred by
vote of the holders of a majority of such stock. No such approval shall prevent
the recovery from any such officer, director, employee, agent or trustee of any
amounts paid to such person or on his or her behalf as indemnification in
accordance with the preceding sentence if such person is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good
faith in the reasonable belief that his action was in the best interests of
this Association.
The right of indemnification hereby provided shall not be exclusive of or
affect any other rights to which any director, officer, employee, agent or
trustee may be entitled or which may lawfully be granted to such person. As
used herein, the terms "director," "officer," "employee," "agent" and "trustee"
include their respective executors, administrators and other legal
-3-
<PAGE> 7
representatives, an "interested" person is one against whom the action, suit or
other proceeding in question or another action, suit or other proceeding on the
same or similar grounds is then or had been pending or threatened, and a
"disinterested" person is a person against whom no such action, suit or other
proceeding is then or had been pending or threatened.
By action of the Board of Directors, notwithstanding any interest of the
directors in such action, this Association may purchase and maintain insurance,
in such amounts as the Board of Directors may from time to time deem
appropriate, on behalf of any person who is or was a director, officer,
employee or other agent of this Association, or is or was serving at the
request of this Association as a director, trustee, officer, employee or other
agent of another organization in which it directly or indirectly owns shares or
of which it is directly or indirectly a creditor, against any liability
incurred by such person in any such capacity, or arising out of his or her
status as such, whether or not this Association would have the power to
indemnify such person against such liability.
ELEVENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
TWELFTH. This Association may be a partner in any business or enterprise which
this Association would have power to conduct by itself.
IN WITNESS WHEREOF, we have hereunto set our hands this 25th day of July, 1985.
/s/ Peter E. Madden
---------------------------
Peter E. Madden
/s/ David A. Spina
---------------------------
David A. Spina
/s/ Charles J. Kelly
---------------------------
Charles J. Kelly
/s/ Richard J. Poznysz
---------------------------
Richard J. Poznysz
/s/ Vincent V. Grippa
---------------------------
Vincent V. Grippa
<PAGE> 8
ARTICLES OF AMENDMENT
OF
ARTICLES OF ASSOCIATION
OF
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION
I, Evalyn Lipton Fishbein, Secretary of State Street Bank and Trust
Company of California, National Association, a limited purpose trust company
organized under the laws of the United States of America, do hereby certify
that the following amendment of the Articles of Association of the Association
was duly adopted on March 18, 1986 by the unanimous written consent of the
shareholders:
RESOLVED: That Article Second of the Articles of Association of State Street
Bank and Trust Company of California, National Association, be amended
to change the location of the Main Office from the City of Culver City
to the City of Los Angeles, County of Los Angeles, State of
California.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of said
Association this 18th day of April, 1986.
/s/ Evalyn Lipton Fishbein
(SEAL) -----------------------------------
Secretary
Commonwealth of Massachusetts )
County of Suffolk )
Before the undersigned, a Notary Public of Suffolk County, personally
appeared Evalyn Lipton Fishbein, to me well known, who acknowledged that she
executed the foregoing certificate for the purposes therein mentioned.
Witness my hand and seal of
office this 18th day of
April, 1986.
/s/ June F. Phillips
-----------------------------------
JUNE F. PHILLIPS, Notary Public
My Commission Expires July 23, 1986
(Official Seal of Officer)
<PAGE> 9
ARTICLES OF AMENDMENT
OF
ARTICLES OF ASSOCIATION
OF
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION
I, Evalyn Lipton Fishbein, Secretary of State Street Bank and Trust
Company of California, National Association, a limited purpose trust company
organized under the laws of the United States of America, do hereby certify
that a meeting of the shareholders of the Association was duly called and held
on the 8th day of May, 1987, and that at said meeting, at which a quorum was
present and voting throughout, the following resolution upon motion duly made
and seconded, was duly adopted:
RESOLVED: That Article Tenth of the Articles of
Association with respect to indemnification
of directors, officers and others be amended
and restated as follows:
TENTH. This Association shall to the fullest extent legally permissible
indemnify each person who is or was a director, officer, employee or other
agent of this Association and each person who is or was serving at the request
of this Association as a director, trustee, officer, employee or other agent of
another organization or of any partnership, joint venture, trust, employee
benefit plan or other enterprise or organization against all liabilities, costs
and expenses, including but not limited to amounts paid in satisfaction of
judgments, in settlement or as fines and penalties, and counsel fees and
disbursements, reasonably incurred by him in connection with the defense or
disposition of or otherwise in connection with or resulting from any action,
suit or other proceeding, whether civil, criminal, administrative or
investigative, before any court or administrative or legislative or
investigative body, in which he may be or may have been involved as a party or
otherwise or with which he may be or may have been threatened, while in office
or thereafter, by reason of his being or having been such a director, officer,
employee, agent or trustee, or by reason of any action taken or not taken in
any such capacity, except with
<PAGE> 10
respect to any matter as to which he shall have been finally adjudicated by a
court of competent jurisdiction not to have acted in good faith in the
reasonable belief that his action was in the best interests of the corporation
(any person serving another organization in one or more of the indicated
capacities at the request of this Association who shall not have been
adjudicated in any proceeding not to have acted in good faith in the reasonable
belief that his action was in the best interest of such other organization shall
be deemed so to have acted in good faith with respect to the National Trust
Company) or to the extent that such matter relates to service with respect to an
employee benefit plan, in the best interest of participants or beneficiaries of
such employee benefit plan. Expenses, including but not limited to counsel fees
and disbursements, so incurred by any such person in defending any such action,
suit or proceeding, shall be paid from time to time by this Association in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the person indemnified to repay the amounts
so paid if it shall ultimately be determined that indemnification of such
expenses is not authorized hereunder.
As to any matter disposed of by settlement by any such person, pursuant to
a consent decree or otherwise, no such indemnification either for the amount of
such settlement or for any other expenses shall be provided unless such
settlement shall be approved as in the best interests of the National Trust
Company, after notice that it involves such indemnification, (a) by vote of a
majority of the disinterested directors then in office (even though the
disinterested directors be less than a quorum), or (b) by any disinterested
person or persons to whom the question may be referred by vote of a majority of
such disinterested directors, or (c) by vote of the holders of a majority of the
outstanding stock at the time entitled to vote for directors, voting as a single
class, exclusive of any stock owned by any interested person, or (d) by any
disinterested person or persons to whom the question may be referred by vote of
the holders of a majority of such stock. No such approval shall prevent the
recovery from any such director, officer, employee, agent or trustee of any
amounts paid to him or on his behalf as indemnification in accordance with the
preceding sentence if such person is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith in the reasonable belief
that his action was in the best interests of this Association.
The right of indemnification hereby provided shall not be exclusive of or
affect any other rights to which any director, officer, employee, agent or
trustee may be entitled or which may lawfully be granted to him. As used herein,
the terms "director", "officer", "employee", "agent" and "trustee" include their
respective executors, administrators and other legal representatives, an
"interested" person is one against whom the action, suit or other proceeding in
question or another action,
<PAGE> 11
suit or other proceeding on the same or similar grounds is then or had been
pending or threatened, and a "disinterested" person is a person against whom no
such action, suit or other proceeding is then or had been pending or threatened.
By action of the board of directors, notwithstanding any interest of the
directors in such action, this Association may purchase and maintain insurance,
in such amounts as the board of directors may from time to time deem
appropriate, on behalf of any person who is or was a director, officer,
employee or other agent of this Association, or is or was serving at the
request of this Association as a director, trustee, officer, employee or other
agent of another organization or of any partnership, joint venture, trust,
employee benefit plan or other enterprise or organization against any liability
incurred by him in any such capacity, or arising out of his status as such,
whether or not this Association would have the power to indemnify him against
such liability.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of said
Association this 15th day of May, 1987.
/s/ Evalyn Lipton Fishbein
---------------------------------
(SEAL)
Commonwealth of Massachusetts )
County of Suffolk )
Before the undersigned, a Notary Public of Suffolk County, personally
appeared Evalyn Lipton Fishbein, to me well known, who acknowledged that she
executed the foregoing certificate for the purposes therein mentioned.
Witness my hand and seal of office
this 15th day of May, 1987.
/s/ June F. Phillips
----------------------------------
JUNE F. PHILLIPS, Notary Public
My Commission Expires July 23, 1987
(Official Seal of Officer)
<PAGE> 12
EXHIBIT 2
[LOGO]
- --------------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- --------------------------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, Julie L. Williams, Acting Comptroller of the Currency, do hereby certify
that:
1. The Comptroller of the Currency, pursuant to the Revised Statutes 324,
et seq. as amended, 12 U.S.C. 1, et seq., as amended, has possession,
custody and control of all records pertaining to the chartering of all
National Banking Associations.
2. "State Street Bank and Trust Company of California, National
Association," (Charter No. 18607) is a National Banking Association formed
under the laws of the United States and is authorized thereunder to
transact the business of banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents
at the Treasury Department in the City
of Washington and District of Columbia,
this 6th day of April, 1998.
/s/ Julie L. Williams
[SEAL] ----------------------------------------
Acting Comptroller of the Currency
<PAGE> 13
EXHIBIT 2
[LOGO]
- -------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- -------------------------------------------------------------------------------
Western District Office
50 Fremont Street, Suite 3900
San Francisco, CA. 94105-2292
CERTIFICATE OF CORPORATE EXISTENCE
(WITH FIDUCIARY POWERS)
I, NANETTE G. GOULET, on behalf of the office of the Comptroller of the
Currency, hereby certify that:
1. The OFFICE OF THE COMPTROLLER OF THE CURRENCY, pursuant to Revised
Statutes 324, et seq., as amended, 12 U.S.C. 1, et Seq., as amended, has
possession, custody and control of all records pertaining to the
chartering, regulation and supervision of all NATIONAL BANKING
ASSOCIATIONS:
2. STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION,
LOS ANGELES, CALIFORNIA, CHARTER NO. 18607, is a National Banking
Association formed under the laws of the United States and authorized
hereunder and continues to hold authority to transact the business of
banking (and to act in all fiduciary capacities) permitted thereby on the
date of this certificate.
IN TESTIMONY WHEREOF, I have hereunto subscribed my
name and caused the seal of office of the Office of the
Comptroller of the Currency to be affixed, in the City
of San Francisco, California this 3RD DAY OF FEBRUARY,
1995.
Nanette G. Goulet
---------------------------------
Nanette G. Goulet
Director for Bank Analysis
<PAGE> 14
EXHIBIT 4
Restated as of March 17, 1998
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, NATIONAL ASSOCIATION
RESTATED BY-LAWS
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the
shareholders to elect directors and transact whatever other business may
properly come before the meeting, shall be held at the Main Office of the
National Trust Company, 633 West 5th Street, in the City of Los Angeles, State
of California or such other places as the Board of Directors may designate, at
10 o'clock, on the first Wednesday of April of each year. Notice of such
meeting shall be mailed, postage prepaid, at least ten days prior to the date
thereof, addressed to each shareholder at his address appearing on the books of
the National Trust Company. If, from any cause, an election of directors is not
made on the said day, the Board of Directors shall order the election to be
held on some subsequent day, as soon thereafter as practicable, according to
the provisions of law; and notice thereof shall be given in the manner herein
provided for the annual meeting.
SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically
provided by statute, special meetings of the shareholders may be called for any
purpose at any time by the Board of Directors or by any shareholder owning, in
the aggregate, not less than 10 percent of the stock of the National Trust
Company, Every such special meeting, unless otherwise provided by law, shall be
called by mailing, postage prepaid, not less than ten days prior to the date
fixed for such meeting, to each shareholder at his address appearing on the
books of the National Trust Company a notice stating the purpose of the
meeting.
SECTION 1.3. NOMINATIONS FOR DIRECTOR. Nominations for election to
the Board of Directors may be made by the Board of Directors or by any
shareholder of any outstanding class of capital stock of the National Trust
Company entitled to vote for the election of directors. Nominations, other than
those made by or on behalf of the existing management of the National Trust
Company, shall be made in writing and shall be delivered or mailed to the
President of the National Trust Company and to the Comptroller of the Currency,
Washington, D.C., not less than 14 days nor more than 50 days prior to any
meeting of shareholders called for the election of directors, provided however,
that if less than 21 days' notice of the meeting is given to shareholders, such
nomination shall be mailed or delivered to the President of the National Trust
Company and to the Comptroller of the Currency not later than the close of
business on the seventh day following the day on which the notice of meeting
was mailed. Such notification shall contain the following information to the
extent known to the notifying shareholder:
(a) the name and address of each proposed nominee; (b) the principal
occupation of each proposed nominee; (c) the total number of shares of capital
stock of the National Trust Company
<PAGE> 15
that will be voted for each proposed nominee; (d) the name and residence
address of the notifying shareholder, and (e) the number of shares of capital
stock of the National Trust Company owned by the notifying shareholder.
Nominations not made in accordance herewith may, in his/her discretion, be
disregarded by the Chairperson of the meeting, and upon his/her instructions,
the vote tellers may disregard all votes cast for each such nominee.
SECTION 1.4 PROXIES. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this National Trust Company shall act as proxy. Proxies shall be valid only
for one meeting, to be specified therein, and any adjournments of such meeting.
Proxies shall be dated and shall be filed with the records of the meeting.
SECTION 1.5 QUORUM. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
ARTICLE II
DIRECTORS
SECTION 2.1 BOARD OF DIRECTORS. The Board of Directors shall have power
to manage and administer the business and affairs of the National Trust Company.
Except as expressly limited by law, all corporate powers of the National Trust
Company shall be vested in and may be exercised by the Board of Directors.
SECTION 2.2 NUMBER. The Board of Directors shall consist of not less than
five nor more than twenty-five shareholders, the exact number within such
minimum and maximum limits to be fixed and determined from time to time by
resolution of a majority of the full Board or by resolution of the shareholders
at any meeting thereof; provided, however, that a majority of the full Board of
Directors may not increase the number of directors to a number which (i)
exceeds by more than two the number of directors last elected by shareholders
where such number was fifteen or less; and (ii) to a number which exceeds by
more than four the number of directors last elected by shareholders where such
number was sixteen or more, but in no event shall the number of directors
exceed twenty-five.
SECTION 2.3 ORGANIZATION MEETING. The Cashier, upon receiving the results
of any election, shall notify the directors-elect of their election and of the
time at which they are required to meet at the Main Office of the National
Trust Company for the purpose of organizing the new Board and electing and
appointing officers of the National Trust Company for the succeeding year. Such
meeting shall be held on the day of the election or as soon thereafter as
practicable, and, in any even, within thirty days thereof. If, at the time
fixed for such meeting, there shall not
2
<PAGE> 16
be a quorum present, the Directors present may adjourn the meeting, from time to
time, until a quorum is obtained.
SECTION 2.4. REGULAR MEETINGS. Regular Meetings of the Board of Directors
shall be held, without notice, at least once in each calendar quarter on such
days and at such hours as the Directors may from time to time determine. When
any regular meeting of the Board falls upon a holiday, the meeting shall be held
on the next banking business day unless the Board shall designate some other
day.
SECTION 2.5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board of the National Trust
Company, or at the request of three or more directors. Each member of the Board
of Directors shall be given notice stating the time and place, by telegram,
letter, or in person, of each such special meeting.
SECTION 2.6. QUORUM. A majority of the directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but a less number
may adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice.
SECTION 2.7. VACANCIES. When any vacancy occurs among the directors, the
remaining members of the Board, in accordance with the laws of the United
States, may appoint a director to fill such vacancy at any regular meeting of
the Board, or at a special meeting called for that purpose.
SECTION 2.8. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken at any meeting of the Directors may be taken without a meeting if
all the Directors consent to the action in writing and the written consents are
filed with the records of the meetings of the Directors. Such consents shall be
treated for all purposes as a vote at a meeting.
SECTION 2.9. MEETING BY TELECOMMUNICATIONS. Members of the Board of
Directors or any committee elected thereby may participate in a meeting of such
Board or committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in a meeting can hear
each other at the time and participation by such means shall constitute
presence in person at the meeting.
ARTICLE III
COMMITTEES OF THE BOARD
SECTION 3.1. INVESTMENT COMMITTEE. There shall be an Investment Committee
composed of not less than two Directors, appointed by the Board annually or more
often. The Investment Committee shall have the power to insure adherence to
Investment Policy, to recommend amendments thereto, to purchase and sell
securities, to exercise authority regarding investments and to exercise, when
the Board is not in session, all other powers of the Board regarding investment
securities that may be lawfully delegated. The Investment Committee shall keep
minutes of its meetings, and such minutes shall be submitted at the next
regular meeting of
3
<PAGE> 17
the Board of Directors at which a quorum is present, and any action taken by
the Board with respect thereto shall be entered in the minutes of the Board.
SECTION 3.2. EXAMINING COMMITTEE. There shall be an Examining Committee
composed of not less than two directors, exclusive of any active officers,
appointed by the Board annually or more often, whose duty it shall be to make
an examination at least once during each calendar year into the affairs of the
National Trust Company or cause suitable examinations to be made by auditors
responsible only to the Board of Directors and to report the result of such
examination in writing to the Board at the next regular meeting thereafter.
SECTION 3.3. OTHER COMMITTEES. The Board of Directors may appoint, from
time to time, from its own members, other committees of one or more persons,
for such purposes and with such powers as the Board may determine.
ARTICLE IV
----------
OFFICERS AND EMPLOYEES
----------------------
SECTION 4.1. CHAIRPERSON OF THE BOARD. The Board of Directors shall
appoint one of its members to be Chairperson of the Board to serve at the
pleasure of the Board. Such person shall preside at all meetings of the Board
of Directors. The Chairperson of the Board shall supervise the carrying out of
the policies adopted or approved by the Board; shall have general executive
powers, as well as the specific powers conferred by these Bylaws; and shall
also have and may exercise such further powers and duties as from time to time
may be conferred upon, or assigned by the Board of Directors.
SECTION 4.2. PRESIDENT. The Board of Directors shall appoint one of its
members to be President of the National Trust Company. In the absence of the
Chairperson, the President shall preside at any meeting of the Board. The
President shall have general executive powers, and shall have and may exercise
any and all other powers and duties pertaining by law, regulations, or
practice, to the Office of President, or imposed by these Bylaws. The President
shall also have and may exercise such further powers and duties as from time to
time may be conferred, or assigned by the Board of Directors.
SECTION 4.3. VICE PRESIDENT. The Board of Directors may appoint one or
more Vice Presidents. Each Vice President shall have such powers and duties as
may be assigned by the Board of Directors. One Vice President shall be
designated by the Board of Directors, in the absence of the President, to
perform all the duties of the President.
SECTION 4.4 SECRETARY. The Board of Directors shall appoint a Secretary,
Cashier, or other designated officer who shall be Secretary of the Board and of
the National Trust Company, and shall keep accurate minutes of all meetings.
The Secretary shall attend to the giving of all notices required by these
Bylaws to be given; shall be custodian of the corporate seal, records,
documents and papers of the National Trust Company; shall provide for the
keeping of proper records of all transactions of the National Trust Company;
shall have and may exercise any and all
4
<PAGE> 18
other powers and duties pertaining by law, regulation or practice, to the
Office of Cashier, or imposed by these Bylaws; and shall also perform such
other duties as may be assigned from time to time, by the Board of Directors.
SECTION 4.5. OTHER OFFICERS. The Board of Directors may appoint one or more
Assistant Vice Presidents, one or more Assistant Secretaries, one or more
Assistant Cashiers, one or more Managers and Assistant Managers of Branches and
such other officers and Attorneys-in-fact as from time to time may appear to the
Board of Directors to be required or desirable to transact the business of the
National Trust Company. Such officers shall respectively exercise such powers
and perform such duties as pertain to the several offices, or as may be
conferred upon, or assigned to, them by the Board of Directors, the Chairperson
of the Board, or the President.
SECTION 4.6. TENURE OF OFFICE. The President and all other officers shall
hold office for the current year for which the Board was elected, unless they
shall resign, become disqualified, or be removed, and any vacancy occurring in
the Office of President shall be filled promptly by the Board of Directors.
ARTICLE V
STOCK AND CERTIFICATES
SECTION 5.1. TRANSFERS. Shares of stock shall be transferable on the books
of the National Trust Company, and a transfer book shall be kept in which all
transfers of stock shall be recorded. Every person becoming a shareholder by
such transfer shall, in proportion to his shares, succeed to all rights of the
prior holder of such shares.
SECTION 5.2. STOCK CERTIFICATES. Certificates of stock shall bear the signature
of the President (which may be engraved, printed or impressed) and shall be
signed manually of by facsimile process by the Secretary, Assistant Secretary,
Cashier, Assistant Cashier, or any other officer appointed by the Board of
Directors for that purpose, to be known as an Authorized Officer, and the seal
of the National Trust Company shall be engraven thereon. Each certificate shall
recite on its face that the stock represented thereby is transferable only upon
the books of the National Trust Company properly endorsed.
ARTICLE VI
CORPORATE SEAL
The President, the Cashier, the Secretary or any Assistant Cashier or
Assistant Secretary, or other officer thereunto designated by the Board of
Directors, shall have authority to affix the corporate seal to any document
requiring such seal, and to attest the same. Such seal shall be substantially
in the following form:
5
<PAGE> 19
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. FISCAL YEAR. The Fiscal Year of the National Trust Company
shall be the calendar year.
SECTION 7.2. EXECUTION OF INSTRUMENTS. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or
accepted in behalf of the National Trust Company by the Chairperson of the
Board, or the President, or any Vice President, or the Secretary, or the
Cashier. Any such instruments may also be executed, acknowledged, verified,
delivered or accepted in behalf of the National Trust Company in such other
manner and by such other officers as the Board of Directors may from time to
time direct. The provisions of this Section 7.2. are supplementary to any other
provision of these Bylaws.
SECTION 7.3. RECORDS. The Articles of Association, the By-laws and the
proceedings of all meetings of the shareholders, the Board of Directors, and
standing committees of the Board, shall be recorded in appropriate minute books
provided for the purpose. The minutes of each meeting shall be signed by the
Secretary, Cashier or other Officer appointed to act as Secretary of the
meeting.
ARTICLE VIII
BY-LAWS
SECTION 8.1. INSPECTION. A copy of the By-laws, with all amendments
thereto, shall at all times be kept in a convenient place at the Main Office of
the National Trust Company, and shall be open for inspection to all
shareholders, during banking hours.
SECTION 8.2. AMENDMENTS. The By-laws may be amended, altered or repealed,
at any regular meeting of the Board of Directors, by a vote of a majority of
the total number of the Directors.
<PAGE> 20
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by Western Digital
Corporation of its Zero Coupon Convertible Subordinated Debentures due 2018, we
hereby consent that reports of examination by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, NATIONAL ASSOCIATION
By: /s/ Mark Henson
------------------------------------
Mark Henson
Assistant Vice President
DATED: May 7, 1998
<PAGE> 21
EXHIBIT 7
Consolidated Report of Condition and Income for A Bank With Domestic Offices
Only and Total Assess of Less Than $100 Million of State Street Bank and Trust
Company of California, a national banking association duly organized and
existing under and by virtue of the laws of the United States of America, at the
close of business March 31, 1998, published in accordance with a call made by
the Federal Deposit Insurance Corporation pursuant to the required law: 12
U.S.C. Section 324 (State member banks); 12 U.S.C. Section 1817 (State nonmember
banks); and 12 U.S.C. Section 161 (National banks).
<TABLE>
<CAPTION>
Thousands
of Dollars
----------
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................ 6,852
Interest-bearing balances ......................................... 0
Securities .......................................................... 38
Federal funds sold and securities purchased under agreements
to resell in domestic offices of the bank and its Edge
subsidiary ........................................................ 0
Loans and lease financing receivables:
Loans and leases, net of unearned income .......................... 0
Allowance for loan and lease losses ............................... 0
Allocated transfer risk reserve ................................... 0
Loans and leases, net of unearned income and allowances ........... 0
Assets held in trading accounts ..................................... 0
Premises and fixed assets ........................................... 253
Other real estate owned ............................................. 0
Investments in unconsolidated subsidiaries .......................... 0
Customers' liability to this bank on acceptances outstanding ........ 0
Intangible assets ................................................... 0
Other assets ........................................................ 814
-----
Total assets ........................................................ 7,957
=====
LIABILITIES
Deposits:
In domestic offices ............................................... 0
Noninterest-bearing ............................................. 0
Interest-bearing ................................................ 0
In foreign offices and Edge subsidiary ............................ 0
Noninterest-bearing ............................................. 0
Interest-bearing ................................................ 0
</TABLE>
<PAGE> 22
<TABLE>
<S> <C>
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ............................. 0
Demand notes issued to the U.S. Treasury and Trading Liabilities .. 0
Other borrowed money .............................................. 0
Subordinated notes and debentures ................................. 0
Bank's liability on acceptances executed and outstanding .......... 0
Other liabilities ................................................. 4,356
Total liabilities ................................................. 4,356
-----
EQUITY CAPITAL
Perpetual preferred stock and related surplus ..................... 0
Common stock ...................................................... 500
Surplus ........................................................... 750
Undivided profits and capital reserves/Net unrealized
gains (losses) .................................................. 2,352
Cumulative foreign currency translation adjustments ............... 0
Total equity capital .............................................. 3,602
-----
Total liabilities and equity capital .............................. 7,958
=====
</TABLE>
<PAGE> 23
I, Kevin R. Wallace, Vice President and Comptroller of the above named bank do
hereby declare that this Report of Condition and Income for this report date
have been prepared in conformance with the instructions issued by the
appropriate Federal regulatory authority and is true to the best of my
knowledge and belief.
Kevin R. Wallace
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
Lynda A. Vogel
Donald W. Beatty
Stephen Rivero
