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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 14, 2000
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CONEXANT SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 4311 JAMBOREE ROAD 25-1799439
(STATE OR OTHER JURISDICTION OF NEWPORT BEACH, CALIFORNIA 92660-3095 (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) (949) 483-4600 IDENTIFICATION NO.)
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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DENNIS E. O'REILLY, ESQ.
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
CONEXANT SYSTEMS, INC.
4311 JAMBOREE ROAD
NEWPORT BEACH, CALIFORNIA 92660-3095
(949) 483-4600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
RAYMOND LIN
LATHAM & WATKINS
885 THIRD AVENUE
NEW YORK, NEW YORK 10028
(212) 906-1200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), 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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PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER UNIT PRICE(1) REGISTRATION FEE
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4% Convertible Subordinated Notes Due 2007 $650,000,000 100% $650,000,000 $171,600
Common Stock, par value $1 per share (including 6,018,518 shares(2)
the associated Preferred Share Purchase Rights)
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(1) Equals the aggregate principal amount of the notes being registered.
Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o) under the Securities Act.
(2) Represents the number of shares of common stock, including the associated
preferred share purchase rights, that are currently issuable upon conversion
of the notes. Pursuant to Rule 416 under the Securities Act, the registrant
is also registering such indeterminate number of shares of common stock,
including the associated preferred share purchase rights, as may be issued
from time to time upon conversion of the notes as a result of the
antidilution provisions relating to the notes. No additional consideration
will be received for the common stock or the associated preferred share
purchase rights, and therefore no registration fee is required pursuant to
Rule 457(i).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS INCOMPLETE AND MAY BE CHANGED. THE SELLING
SECURITYHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 14, 2000
PROSPECTUS
$650,000,000
CONEXANT SYSTEMS, INC.
4% CONVERTIBLE SUBORDINATED NOTES DUE 2007
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
In February, 2000, we issued and sold $650,000,000 aggregate principal
amount of our 4% Convertible Subordinated Notes Due February 1, 2007 in a
private offering. This prospectus will be used by selling securityholders to
resell the notes and the common stock issuable upon conversion of the notes.
Interest on the notes is payable in arrears on February 1 and August 1 of each
year, beginning on August 1, 2000. The notes mature on February 1, 2007 unless
earlier converted or redeemed. The notes are unsecured and rank junior to our
existing and future senior indebtedness.
The holders of the notes may convert all or any portion of a note in
multiples of $1,000 into our common stock at a conversion price of $108.00 per
share, subject to adjustment in certain events. Our common stock is traded on
the Nasdaq National Market under the symbol "CNXT". On March 13, 2000, the last
reported sale price for our common stock on the Nasdaq National Market was
$84.3125 per share.
Prior to February 6, 2003, we may not redeem the notes. Beginning
February 6, 2003 we may redeem all or a portion of the notes. Holders of the
notes also have an option to require us to repurchase the notes should our
business undergo certain fundamental changes. You can find a more extensive
description of the notes, as well as a list of the prices at which the notes may
be redeemed, beginning on page 18.
We will not receive any proceeds from the sale by the selling
securityholders of the notes or the common stock issuable upon conversion of the
notes. Other than selling commissions and fees and stock transfer taxes, we will
pay all expenses of the registration and sale of the notes and the common stock.
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE
CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 2000.
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY...........................................................1
RISK FACTORS.................................................................3
RATIO OF EARNINGS TO FIXED CHARGES..........................................17
USE OF PROCEEDS.............................................................17
PRICE RANGE OF COMMON STOCK.................................................17
DIVIDEND POLICY.............................................................17
DESCRIPTION OF NOTES........................................................18
DESCRIPTION OF CAPITAL STOCK................................................27
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS...................................32
SELLING SECURITYHOLDERS.....................................................38
PLAN OF DISTRIBUTION........................................................39
LEGAL MATTERS...............................................................41
EXPERTS.....................................................................41
HOW TO OBTAIN MORE INFORMATION..............................................41
FORWARD-LOOKING STATEMENTS..................................................42
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, included or
incorporated by reference in this prospectus. For presentation purposes,
references made to any fiscal year ending September 30 relate to the fiscal year
ending on the nearest Friday to September 30 of such year.
THE COMPANY
We are the world's largest independent company focused exclusively on
providing semiconductor products for communications electronics. With more than
30 years of experience in developing dial-up modem technology, we draw upon our
expertise in mixed-signal processing and communications technology to deliver
semiconductor integrated circuit products and system-level solutions for a broad
range of communications applications. These products facilitate communications
worldwide through wireless voice and data communications networks, cordless and
cellular wireless telephony systems and emerging cable and wireless broadband
communications networks. We have aligned our business into five platforms:
Personal Computing, Personal Imaging, Wireless Communications, Digital
Infotainment and Network Access.
Before December 31, 1998, we were a wholly-owned subsidiary of Rockwell
International Corporation and, together with certain other subsidiaries and
divisions of Rockwell, operated Rockwell's semiconductor systems business
("Semiconductor Systems"). On December 31, 1998, we became an independent,
public company by means of a tax-free spin-off from Rockwell. Our principal
offices are located at 4311 Jamboree Road, Newport Beach, California 92660-3095.
Unless the context otherwise indicates, as used in this prospectus, all
references to Conexant, we, us and our are to Semiconductor Systems for periods
prior to our spin-off from Rockwell and to Conexant Systems, Inc. and its
subsidiaries for periods following the spin-off.
RECENT DEVELOPMENTS
We had revenues of $510.0 million in the quarter ended December 31,
1999, the first quarter of our fiscal 2000. This compared to revenues of $294.7
million in the first quarter of fiscal 1999 and $452.2 million in the fourth
quarter of fiscal 1999. Net income in the first quarter of fiscal 2000 was $51.8
million compared to a net loss of $57.1 million in the first quarter of fiscal
1999 (which included special charges aggregating $37.9 million) and net income
of $38.0 million in the fourth quarter of fiscal 1999.
On March 10, 2000, we completed the acquisition of Maker Communications,
Inc., a publicly-held company that is a provider of programmable, high-
performance network processors, software solutions and development tools. We
acquired Maker Communications in an all-stock transaction in which Maker
Communications shareholders received approximately 12,196,000 shares of Conexant
common stock, an aggregate purchase price of approximately $957 million based on
the closing price of our common stock on December 17, 1999. This transaction
utilizes the purchase method of accounting. Upon completion of this transaction,
we recorded additional intangible assets of approximately $908 million. In each
of the five years following the acquisition, we expect to record $182 million of
non-deductible amortization of intangible assets. In addition, we expect to
record a non-recurring charge for in-process research and development costs, the
amount of which has not yet been finally determined. The purchase accounting
adjustments are preliminary and subject to change upon receipt of final
valuation information.
In January 2000, we completed the acquisition of the wireless broadband
business unit of Oak Technology, Inc. located in Bristol, England. The purchase
price was approximately $25 million, paid in a combination of shares of our
common stock and cash. We also completed the acquisition of Microcosm
Communications Limited, a leading supplier of high-speed integrated circuits for
fiber optic communications located in Bristol, England in January 2000. The
purchase price was approximately $129 million, paid in shares of our common
stock.
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THE OFFERING
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SECURITIES OFFERED................. $650,000,000 principal amount of 4% Convertible
Subordinated Notes due 2007.
INTEREST........................... 4% per annum on the principal amount, payable
semi-annually in arrears in cash on February 1 and
August 1 of each year, commencing August 1, 2000.
CONVERSION......................... Holders of the notes may convert each note into
common stock at any time on or before February 1,
2007 at a conversion price of $108.00 per share,
subject to adjustment if certain events affecting
our common stock occur.
SUBORDINATION...................... The notes are subordinated to all of our existing
and future senior indebtedness, and are
effectively subordinated to all debt and other
liabilities of our subsidiaries (as defined in the
Indenture) see "Description of
Notes--Subordination of Notes". Neither we nor
our subsidiaries are limited from incurring debt,
including senior indebtedness under the Indenture.
OPTIONAL REDEMPTION................ At any time on or after February 6, 2003, we may
at our option redeem the notes on at least 30
days' notice, in whole or in part, at the
redemption prices set forth in this prospectus
under "Description of Notes -- Optional Redemption
by Conexant", together with accrued and unpaid
interest.
FUNDAMENTAL CHANGE................. If a fundamental change (as described under
"Description of Notes -- Redemption at Option of
the Holder") occurs on or before February 1, 2007,
each holder of a note may require us to purchase
all or part of the holder's notes at a redemption
price equal to 100% of the outstanding principal
amount of the notes being redeemed, plus accrued
and unpaid interest.
USE OF PROCEEDS.................... We will not receive any of the proceeds from the
sale of the notes or the common stock issuable
upon conversion of the notes offered by this
prospectus.
REGISTRATION RIGHTS................ Under the registration rights agreement we entered
into with the initial purchasers of the notes, we
have agreed to register the notes and the common
stock issuable upon conversion of the notes,
subject to certain conditions. For a discussion
of these conditions and the circumstances under
which we are required to pay liquidated damages to
holders of the notes upon our failure to fulfill
our registration obligations, see "Description of
Notes -- Registration Rights of Holders of the
Notes."
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RISK FACTORS
You should carefully consider and evaluate all of the information in
this prospectus, including the risk factors listed below. Any of these risks
could materially and adversely affect our business, financial condition and
results of operations, which in turn could materially and adversely affect the
price of the notes and the common stock.
OUR FUTURE SUCCESS DEPENDS LARGELY ON THE GROWTH OF OUR EXPANSION PLATFORMS.
We are dependent on the success of our plan, begun in 1995, to diversify
our business and expand into the following selected related product platforms:
- Network Access;
- Wireless Communications;
- Digital Infotainment; and
- Personal Imaging.
We believe that these platforms offer higher growth prospects than our
dial-up PC modem business. Our future financial performance and overall success,
particularly in the long term, will depend largely on two factors:
- first, the rate of sales growth and margin contribution of our
expansion platforms; and
- second, whether these platforms will increase their contribution
to our financial performance and be sufficient to offset the
decline in sales of our dial-up PC modem chipset products.
There are numerous risks inherent in our diversification and expansion
strategy, many of which are beyond our control. In certain product lines within
these expansion platforms, we currently have minimal market presence relative to
other more established competitors. Moreover, success with these expansion
platforms will depend, in part, on the ability of our customers to develop new
and enhanced products and to successfully introduce and market those products to
end users. We cannot assure you that our diversification and expansion program
will be successful. A failure of this program would have a material adverse
effect on our business, financial condition and results of operations.
WE MUST INCUR SUBSTANTIAL RESEARCH AND DEVELOPMENT EXPENSES.
The semiconductor industry requires substantial investment in research
and development. In order to remain competitive, we must continue to make
substantial investments in research and development to develop new and enhanced
products. We cannot assure you that we will have sufficient resources to develop
new and enhanced technologies and competitive products. Our failure to continue
to make sufficient investments in research and development programs could have a
material adverse effect on our business, financial condition and results of
operations.
OUR SUCCESS IS DEPENDENT UPON OUR ABILITY TO TIMELY DEVELOP NEW PRODUCTS AND
REDUCE COSTS.
Our operating results will depend largely on our ability to continue to
introduce new and enhanced semiconductor products on a timely basis. Successful
product development and introduction depends on numerous factors, including,
among others:
- our ability to anticipate customer and market requirements and
changes in technology and industry standards;
- our ability to accurately define new products;
- our ability to timely complete new products and introduce our
products to the market;
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- our ability to differentiate our products from offerings of our
competitors; and
- market acceptance of our products.
Furthermore, we are required to continually evaluate expenditures for
planned product development and to choose among alternative technologies based
upon our expectations of future market growth. We cannot assure you that we will
be able to develop and introduce new or enhanced products in a timely and
cost-effective manner, that our products will satisfy customer requirements or
achieve market acceptance, or that we will be able to anticipate new industry
standards and technological changes. We also cannot assure you that we will be
able to respond successfully to new product announcements and introductions by
competitors.
In addition, prices of established products may decline, sometimes
significantly, over time. We believe that in order to remain competitive we must
continue to reduce the cost of producing and delivering existing products at the
same time that we develop and introduce new or enhanced products. We cannot
assure you that we will be able to continue to reduce the cost of our products
to remain competitive.
WE MUST INCUR SIGNIFICANT CAPITAL EXPENDITURES FOR MANUFACTURING TECHNOLOGY AND
EQUIPMENT TO REMAIN COMPETITIVE.
The semiconductor industry is highly capital intensive. Semiconductor
manufacturing requires a constant upgrading of process technology to remain
competitive, as new and enhanced semiconductor processes are developed which
permit smaller, more efficient and more powerful semiconductor devices. We
maintain our own manufacturing, assembly and test facilities which have required
and will continue to require significant investments in manufacturing technology
and equipment.
We expect fiscal 2000 capital expenditures to be substantially higher
than the $214 million spent on capital expenditures during fiscal 1999. There
can be no assurance that we will have sufficient capital resources to make
necessary investments in manufacturing technology and equipment.
WE FACE A RISK THAT CAPITAL NEEDED FOR OUR BUSINESS WILL NOT BE AVAILABLE WHEN
WE NEED IT.
We believe that cash flows from operations, proceeds from our recent
offering of $650 million of our 4% Convertible Subordinated Notes Due 2007,
existing cash reserves and available borrowings under our three-year $350
million secured revolving credit facility will be sufficient to satisfy our
future research and development, capital expenditure, working capital and other
financing requirements. However, we cannot assure you that this will be the case
or that we will have access to alternative sources of capital on favorable terms
or at all.
In addition, we have and will continue to review on an ongoing basis
strategic investments and acquisitions which will help us grow our business.
These investments and acquisitions may require additional capital resources. We
cannot assure you that the capital required to fund these investments and
acquisitions will be available in the future.
OUR OPERATING RESULTS MAY BE IMPACTED BY SUBSTANTIAL QUARTERLY AND ANNUAL
FLUCTUATIONS AND MARKET DOWNTURNS.
These fluctuations are due to a number of factors, many of which are
beyond our control. These factors include, among others:
- the effects of competitive pricing pressures;
- decreases in average selling prices of our products;
- production capacity levels and fluctuations in manufacturing
yields;
- availability and cost of products from our suppliers;
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- the gain or loss of significant customers;
- our ability to develop, introduce and market new products and
technologies on a timely basis;
- new product and technology introductions by competitors;
- changes in the mix of products produced and sold;
- market acceptance of our products and our customers' products;
- intellectual property disputes;
- seasonal customer demand;
- the timing of significant orders; and
- the timing and extent of product development costs.
General economic or other conditions causing a downturn in the market
for semiconductor products, affecting the timing of customer orders or causing
order cancellations or rescheduling of orders, could also adversely affect our
operating results. Moreover, our customers may change delivery schedules or
cancel or reduce orders without significant penalty and generally are not
subject to minimum purchase requirements.
The foregoing factors are difficult to forecast, and these, as well as
other factors, could materially adversely affect our quarterly or annual
operating results. If our operating results fail to meet the expectations of
analysts or investors, it could materially and adversely affect the price of our
common stock.
WE FACE A RISK THAT WE WILL BE UNABLE TO INTEGRATE COMPANIES WE ACQUIRE.
We have recently completed several acquisitions, including the recent
acquisitions of Microcosm, the wireless broadband business of Oak Technology,
Inc., Istari Design, Inc., and Maker Communications, Inc. From time to time, we
evaluate acquisitions and may make additional acquisitions in the future.
Integrating acquired organizations and their products and services may be
expensive, time-consuming and a strain on our resources. Risks we could face
with respect to acquisitions include:
- the difficulty of integrating acquired technology into our
product offerings;
- the failure successfully to integrate acquired technology,
resulting in the impairment of amounts currently capitalized as
intangible assets;
- the impairment of relationships with employees and customers;
- the difficulty of coordinating and integrating
geographically-dispersed operations;
- the difficulty of coordinating and integrating overall business
strategies and sales and marketing and research and development
efforts;
- the potential disruption of our ongoing business and distraction
of management;
- the maintenance of brand recognition of acquired businesses;
- the maintenance of corporate cultures, controls, procedures and
policies; and
- the potential unknown liabilities associated with acquired
businesses.
Our inability to address any of these risks successfully could harm our
business.
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We may have difficulty in integrating any future acquisitions with our
current organization, technology and product and services offerings, and any
acquired features, functions, products or services may not achieve market
acceptance.
WE MAY NOT BE ABLE TO SUSTAIN OUR PROFITABILITY.
In September 1998, we announced a comprehensive plan to restructure our
business to position us for future profitability. This plan resulted in fourth
quarter fiscal 1998 special charges of approximately $147 million and included
workforce reductions, facility closures and other actions. Our fiscal 1998
full-year net loss was approximately $262 million, including inventory
write-offs of approximately $66 million, a charge for intellectual property
matters of approximately $43 million and the fourth quarter special charges.
Although we returned to profitability in fiscal 1999, there can be no assurance
that we will be able to sustain such profitability.
OUR CREDIT FACILITY MAY RESTRICT OUR OPERATING AND FINANCIAL FLEXIBILITY.
We entered into a three-year $350 million secured revolving credit
facility in December 1998. This credit facility is guaranteed by each of our
domestic subsidiaries and includes covenants that may restrict our operating and
financial flexibility in the future. Substantially all of our assets and the
assets of our domestic subsidiaries and the stock of our subsidiaries, subject
to certain exceptions, have been pledged as collateral to secure repayment of
this credit facility. The credit facility includes restrictions on capital
expenditures, indebtedness, acquisitions, mergers, asset sales and liens on
assets that apply to us and our subsidiaries. We also must meet certain
financial tests and maintain certain financial ratios. Although we believe that
we will be able to comply with these requirements, compliance with these
requirements may restrict our operating and financial flexibility. We cannot
assure you that we will in fact be able to satisfy all of the requirements in
the credit facility. If we do not satisfy the financial ratios or comply with
the other covenants included in the credit facility, the lenders under the
credit facility could declare all amounts owed to them due and payable and
proceed against their collateral. Such a foreclosure on the collateral would
have a material adverse effect on our business, financial condition and results
of operations.
WE ENGAGE IN LITIGATION TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND TO
DEFEND OURSELVES AGAINST CLAIMS OF INFRINGEMENT BY OTHERS.
Our business faces risks of intellectual property infringement and
litigation. The semiconductor industry is characterized by vigorous protection
and pursuit of intellectual property rights. In the past, we have found it
necessary to engage in litigation to enforce our intellectual property rights,
to protect our trade secrets or to determine the validity and scope of
proprietary rights of others, including our customers. We expect future
litigation on similar grounds.
We have received, and may continue to receive in the future, claims of
infringement of intellectual property rights of others. We are a party to
certain pending proceedings involving such claims. We cannot assure you that:
- we will prevail in pending actions;
- other actions alleging infringement by us of third-party patents
or invalidity of our patents will not be asserted or prosecuted
against us; or
- any assertions of infringement or actions seeking to establish
the invalidity of our patents will not materially and adversely
affect our business, financial condition and results of
operations.
Even if we are successful in such matters, the attempted enforcement of
intellectual property rights by or against us could result in significant costs
and diversion of our resources. It could also have a material adverse effect on
our business, financial condition and results of operations. If claims or
actions are asserted or commenced against us, in certain situations we may seek
to obtain licenses under a third party's intellectual property rights to avert
or resolve a controversy. We cannot assure you that under such circumstances a
license would be available on commercially reasonable terms, if at all.
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WE MAY NOT BE SUCCESSFUL IN PROTECTING OUR INTELLECTUAL PROPERTY RIGHTS.
We rely primarily on patent, copyright, trademark and trade secret laws,
as well as nondisclosure and confidentiality agreements and other methods, to
protect our proprietary technologies and processes. In addition, we often
incorporate the intellectual property of our customers into our designs, and
have certain obligations with respect to the non-use and non-disclosure of their
intellectual property. We cannot assure you that:
- the steps we take to prevent misappropriation or infringement of
our intellectual property or the intellectual property of our
customers will be successful;
- any existing or future patents will not be challenged,
invalidated or circumvented; or
- any of the measures described above would provide meaningful
protection.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use our technology without authorization, develop similar
technology independently or design around our patents. If any of our patents
fails to protect our technology it would make it easier for our competitors to
offer similar products. In addition, effective copyright, trademark and trade
secret protection may be unavailable or limited in certain countries.
OUR INTELLECTUAL PROPERTY INDEMNIFICATION PRACTICE MAY ADVERSELY IMPACT OUR
BUSINESS.
We have historically indemnified our customers for certain costs and
damages of patent infringement in circumstances where our product is the factor
creating the customer's infringement exposure. This practice generally excludes
coverage in circumstances where infringement arises out of the combination of
our products with products of others. This indemnification practice could have a
material adverse effect on our business, financial condition and results of
operations, particularly in situations where our products are designed for use
in devices manufactured by our customers that comply with international
standards. These international standards are often covered by patent rights held
by our competitors or our customers. The combined costs of obtaining licenses
from all holders of patent rights essential to such standards could be high and
could have a material adverse effect on our business, financial condition and
results of operations.
WE OPERATE IN THE HIGHLY CYCLICAL SEMICONDUCTOR INDUSTRY.
The semiconductor industry is highly cyclical and is characterized by
constant and rapid technological change, rapid product obsolescence and price
erosion, evolving standards, short product life cycles and wide fluctuations in
product supply and demand.
The industry has experienced significant downturns, often in connection
with, or in anticipation of, maturing product cycles (of both semiconductor
companies' and their customers' products) and declines in general economic
conditions. These downturns have been characterized by diminished product
demand, production overcapacity, high inventory levels and accelerated erosion
of average selling prices.
We have, in the recent past, experienced these conditions in our dial-up
PC modem chipset business and may experience such downturns in this and other
product platforms in the future. For example, in fiscal 1998, average selling
prices for our Personal Computing products fell by approximately 50 percent, the
annual growth rate for such products fell to approximately 20 percent and in the
fourth quarter, we made a provision for excess and obsolete inventories of
approximately $66 million due to lower than anticipated demand, price declines
and obsolescence of certain products. Any future downturns of this nature could
have a material adverse effect on our business, financial condition and results
of operations. From time to time the semiconductor industry also has experienced
periods of increased demand and production capacity constraints. We may
experience substantial changes in future operating results due to general
semiconductor industry conditions, general economic conditions and other
factors.
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WE ARE SUBJECT TO INTENSE COMPETITION AND COULD LOSE BUSINESS TO OUR
COMPETITORS.
The semiconductor industry in general and the markets in which we
compete in particular are intensely competitive. We compete worldwide with a
number of United States and international semiconductor manufacturers that are
both larger and smaller than us in terms of resources and market share. We
currently face significant competition in our markets and expect that intense
price and product competition will continue. This competition has resulted and
is expected to continue to result in declining average selling prices for our
products. We also anticipate that additional competitors will enter our markets
as a result of growth opportunities in communications electronics, the trend
toward global expansion by foreign and domestic competitors, technological and
public policy changes and relatively low barriers to entry in certain markets of
the industry.
We currently enjoy substantial market share in our V.90 and facsimile
modem chipset product lines. However, as we continue our diversification
strategy and develop our expansion platforms, we are and will be competing in
certain new markets in which we have little or no market share and existing
competitors have dominant market positions. Moreover, as with many companies in
the semiconductor industry, customers for certain of our products offer other
products that compete with similar products offered by us.
We believe that the principal competitive factors for integrated circuit
("IC") providers to our addressed markets are:
- product performance;
- level of integration;
- quality;
- compliance with industry standards;
- price;
- time-to-market;
- system cost;
- design and engineering capabilities;
- new product innovation; and
- customer support.
The specific bases on which we compete vary by product platform.
Many of our current and potential competitors have certain advantages,
including:
- longer operating histories and presence in key markets;
- greater name recognition;
- access to larger customer bases; and
- significantly greater financial, sales and marketing,
manufacturing, distribution, technical and other resources than
we have.
As a result, such competitors may be able to adapt more quickly to new
or emerging technologies and changes in customer requirements or may be able to
devote greater resources to the development, promotion and sale of their
products than Conexant.
8
<PAGE> 12
Current and potential competitors also have established or may establish
financial or strategic relationships among themselves or with our existing or
potential customers, resellers or other third parties. These relationships may
affect customers' purchasing decisions. Accordingly, it is possible that new
competitors or alliances among competitors could emerge and rapidly acquire
significant market share. We cannot assure you that we will be able to compete
successfully against current and potential competitors. We also cannot assure
you that competition will not have a material adverse effect on our business,
financial condition and results of operations.
Many of our competitors have combined with each other and consolidated
their businesses, including the consolidation of competitors with our customers.
This is attributable to a number of factors, including the high-growth nature of
the communications electronic industry and the time-to-market pressures on
suppliers to decrease the time required for product conception, research and
development, sampling and production launch before a product reaches the market.
This consolidation trend is expected to continue, since investments, alliances
and acquisitions may enable semiconductor suppliers, including Conexant and our
competitors, to augment technical capabilities or to achieve faster
time-to-market for their products than would be possible solely through internal
development.
Consolidations by industry participants, including in some cases,
acquisitions of certain of our customers by our competitors, are creating
entities with increased market share, customer base, technology and marketing
expertise in markets in which we compete. These developments may significantly
and adversely affect our current markets, the markets we are seeking to serve
and our ability to compete successfully in those markets.
WE MAY NOT BE ABLE TO KEEP ABREAST OF THE RAPID TECHNOLOGICAL CHANGES IN OUR
MARKETS.
The demand for our products can change quickly and in ways we may not
anticipate because our markets generally exhibit the following characteristics:
- rapid technological developments;
- evolving industry standards;
- changes in customer requirements;
- frequent new product introductions and enhancements; and
- short product life cycles with declining prices over the life
cycle of the product.
Our products could become obsolete sooner than anticipated because of a
faster than anticipated change in one or more of the technologies related to our
products or in market demand for products based on a particular technology,
particularly due to the introduction of new technology that represents a
substantial advance over current technology. Such an event could have a material
adverse effect on our business, financial condition and results of operations.
For example, increased market demand for sub-$1,000 PCs is causing PC OEMs to
require less expensive modem devices, such as software modems, which require
fewer semiconductor components than our traditional modem chipsets. As a result,
these devices may render obsolete the traditional hardware upgrade path for our
modem products. Currently accepted industry standards are also subject to
change, which may contribute to the obsolescence of our products.
OUR MANUFACTURING PROCESS IS EXTREMELY COMPLEX AND SPECIALIZED.
Our manufacturing operations are complex and subject to disruption due
to causes beyond our control. The fabrication of integrated circuits is an
extremely complex and precise process consisting of hundreds of separate steps.
It requires production in a highly controlled, clean environment. Minute
impurities, errors in any step of the fabrication process, defects in the masks
used to print circuits on a wafer or a number of other factors can cause a
substantial percentage of wafers to be rejected or numerous die on each wafer
not to function.
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<PAGE> 13
We are exploring wafer manufacturing alternatives, including increased
use of outside foundries, entering into business relationships with respect to
wafer manufacturing or other actions related to our wafer manufacturing
facilities. We cannot assure you that we will succeed in implementing any such
alternatives.
Our operating results are highly dependent upon our ability to produce
large volumes of integrated circuits at acceptable manufacturing yields. Our
operations may be affected by lengthy or recurring disruptions of operations at
any of our production facilities or those of our subcontractors. These
disruptions may include labor strikes, work stoppages, fire, earthquake,
flooding or other natural disasters. These disruptions could cause significant
delays in shipments until we could shift the products from an affected facility
or subcontractor to another facility or subcontractor.
In the event of these types of delays, we cannot assure you that the
required alternate capacity, particularly wafer production capacity, would be
available on a timely basis or at all. Even if alternate wafer production
capacity is available, we may not be able to obtain it on favorable terms, which
would result in a loss of customers. Any inability to obtain sufficient
manufacturing capacities to meet demand, either at our own facilities or through
foundry or similar arrangements with others, could have a material adverse
effect on our business, financial condition and results of operations. Certain
of our manufacturing facilities are located near major earthquake fault lines,
including our California and Mexico facilities. We maintain only minimal
earthquake insurance coverage on these facilities.
Due to the highly specialized nature of the gallium arsenide
semiconductor manufacturing process, in the event of a disruption at our Newbury
Park, California fabrication facility, alternate gallium arsenide production
capacity would not be readily available from third party sources. Any disruption
of operations at our Newbury Park wafer fabrication facility or the interruption
in the supply of epitaxial wafers used in our gallium arsenide process could
have a material adverse effect on our business, financial condition and results
of operations, particularly with respect to our Wireless Communications
products.
WE MAY NOT BE ABLE TO ACHIEVE MANUFACTURING YIELDS TO MAINTAIN OUR
PROFITABILITY.
Minor deviations in the manufacturing process can cause substantial
manufacturing yield loss, and in some cases, cause production to be suspended.
Manufacturing yields for new products initially tend to be lower as we complete
product development and commence volume manufacturing, and will typically
increase as we ramp to full production. Our forward product pricing includes
this assumption of improving manufacturing yields and, as a result, material
variances between projected and actual manufacturing yields have a direct effect
on our gross margin and profitability. The difficulty of forecasting
manufacturing yields accurately and maintaining cost competitiveness through
improving manufacturing yields will continue to be magnified by the ever
increasing process complexity of manufacturing integrated circuit products. Our
manufacturing operations also face pressures arising from the compression of
product life cycles which requires us to bring new products on line faster and
for shorter periods while maintaining acceptable manufacturing yields and
quality without, in many cases, reaching the longer-term, high volume
manufacturing conducive to higher manufacturing yields and declining costs.
WE ARE DEPENDENT UPON THIRD PARTIES FOR THE SUPPLY OF RAW MATERIALS AND
COMPONENTS.
We believe we have adequate sources for the supply of raw materials and
components for our manufacturing needs with suppliers located around the world.
Raw wafers and other raw materials used in the production of our CMOS products
are available from several suppliers. We are currently dependent on a single
source supplier for epitaxial wafers used in the gallium arsenide semiconductor
manufacturing processes at our Newbury Park, California facility. However, we
are in the process of arranging alternative suppliers. The number of qualified
alternative suppliers for such wafers is limited and the process of qualifying a
new epitaxial wafer supplier could require a substantial leadtime. Although we
historically have not experienced any significant difficulties in obtaining an
adequate supply of raw materials and components necessary for our manufacturing
operations, the loss of a significant supplier or the inability of a supplier to
meet performance and quality specifications or delivery schedules could have a
material adverse effect on our business, financial condition and results of
operations.
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<PAGE> 14
UNCERTAINTIES INVOLVING THE ORDERING AND SHIPMENT OF OUR PRODUCTS COULD
ADVERSELY AFFECT OUR BUSINESS.
Our sales are typically made pursuant to individual purchase orders and
we generally do not have long-term supply arrangements with our customers. Our
customers may cancel orders until 30 days prior to the shipping date. In
addition, we sell a portion of our products through distributors who have
certain rights to return unsold products to us. Moreover, semiconductor
companies, including Conexant, routinely manufacture or purchase inventory based
on estimates of customer demand for their products, which is difficult to
predict. The cancellation or deferral of product orders, the return of
previously sold products or overproduction due to the failure of anticipated
orders to materialize could result in our holding excess or obsolete inventory
which could have a material adverse effect on our business, financial condition
and results of operations. For example, in the fourth quarter of fiscal 1998, we
made a provision for excess and obsolete inventories of $66 million due to lower
than anticipated demand, price declines and the obsolescence of certain
products.
WE ARE SUBJECT TO THE RISKS OF DOING BUSINESS INTERNATIONALLY.
For the fiscal year ended September 30, 1999, approximately 61 percent
of our total sales were to customers located outside the United States,
primarily in the Asia-Pacific and European countries. In addition, we have
facilities and suppliers located outside the United States, including our
assembly and test facility in Mexicali, Mexico and third-party foundries located
in the Asia-Pacific region. Our international sales and operations are subject
to a number of risks inherent in selling and operating abroad. These include,
but are not limited to, risks regarding:
- currency exchange rate fluctuations;
- local economic and political conditions;
- disruptions of capital and trading markets;
- restrictive governmental actions (such as restrictions on
transfer of funds and trade protection measures, including export
duties and quotas and customs duties and tariffs);
- changes in legal or regulatory requirements;
- import or export licensing requirements;
- limitations on the repatriation of funds;
- difficulty in obtaining distribution and support;
- nationalization;
- the laws and policies of the United States affecting trade,
foreign investment and loans; and
- tax laws.
Because most of our international sales, other than sales to Japan
(which are denominated principally in Japanese yen), are currently denominated
in U.S. dollars, our products could become less competitive in international
markets if the value of the U.S. dollar increases relative to foreign
currencies.
Moreover, we may be competitively disadvantaged relative to our
competitors located outside the United States who may benefit from a devaluation
of their local currency. We cannot assure you that the factors described above
will not have a material adverse effect on our ability to increase or maintain
our foreign sales or on our business, financial condition and results of
operations.
Our operating performance has been impacted by the current economic
situation in the Asia-Pacific region. This economic situation has increased the
uncertainty with respect to the long-term viability of certain of our customers
and suppliers in the region. Sales to customers in Japan and other countries in
the Asia-Pacific region,
11
<PAGE> 15
principally Taiwan, South Korea and Hong Kong, represented approximately 52
percent of total revenues in fiscal 1999.
We enter into foreign currency forward exchange contracts, principally
for the Japanese yen, to minimize risk of loss from currency exchange rate
fluctuations for foreign currency commitments entered into in the ordinary
course of business. We have not experienced nor do we anticipate any material
adverse effect on our results of operations or financial condition related to
these foreign currency forward exchange contracts. We have not entered into
foreign currency forward exchange contracts for other purposes and our financial
condition and results of operations could be affected (negatively or positively)
by currency fluctuations.
OUR SUCCESS DEPENDS ON OUR ABILITY TO EFFECT SUITABLE INVESTMENTS, ALLIANCES OR
ACQUISITIONS.
Although we invest significant resources in research and development
activities, the complexity and rapidity of technological changes make it
impractical for us to pursue development of all technological solutions on our
own. As part of our goal to provide advanced semiconductor product systems, we
have and will continue to review on an ongoing basis investment, alliance and
acquisition prospects that would complement our existing product offerings,
augment our market coverage or enhance our technological capabilities. However,
we cannot assure you that we will be able to identify and consummate suitable
investment, alliance or acquisition transactions in the future.
Moreover, if we consummate such transactions, they could result in:
- the diversion of management resources,
- dilutive issuances of equity securities,
- large one-time write-offs,
- the incurrence of debt and contingent liabilities,
- amortization of expenses related to goodwill and other intangible
assets, and
- other acquisition related costs.
Any of these events could materially adversely affect our business,
financial condition and results of operations and the price of our common stock.
The ultimate success of any such investments, alliances or acquisitions
in achieving the purposes for which they are undertaken will depend on our
ability to integrate successfully any acquired business and to retain key
personnel, as well as a variety of other factors.
OUR SUCCESS COULD BE NEGATIVELY AFFECTED IF KEY PERSONNEL LEAVE.
Our future success depends largely upon the continued service of our
executive officers and other key management and technical personnel. Our success
also depends on our ability to continue to attract, retain and motivate
qualified personnel. We are dependent on key technical personnel. They represent
a significant asset, as the source of our technological and product innovations.
The competition for such personnel is intense in the semiconductor industry. We
cannot assure you that we will be able to continue to attract and retain
qualified management and other personnel necessary for the design, development,
manufacture and sale of our products.
We may have difficulty attracting and retaining key personnel during
periods of poor operating performance. The loss of the services of one or more
of our key employees or our inability to attract, retain and motivate qualified
personnel could have a material adverse effect on our business, financial
condition and results of operations. In particular, the loss of the services of
Dwight W. Decker, our Chairman and Chief Executive Officer, or certain key
design and technical personnel could materially and adversely affect us.
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<PAGE> 16
OUR MANAGEMENT TEAM MAY BE SUBJECT TO A VARIETY OF DEMANDS FOR ITS ATTENTION.
Our management currently faces a variety of challenges. These include
implementing our ongoing diversification and expansion strategy and expanding
the infrastructure and systems necessary for us to operate as an independent
public company. While we believe that we have sufficient management resources to
execute each of these initiatives, we cannot assure you that we will have these
resources or that our initiatives will be successfully implemented. Failure to
implement these initiatives successfully could have a material adverse effect on
our business, financial condition and results of operations.
WE MAY BE LIABLE FOR PENALTIES UNDER ENVIRONMENTAL LAWS, RULES AND REGULATIONS,
WHICH COULD NEGATIVELY AFFECT OUR SUCCESS.
We use a variety of chemicals in our manufacturing operations and are
subject to a wide range of environmental protection regulations in the United
States and Mexico. While we have not experienced any material adverse effect on
our operations as a result of such regulations, we cannot assure you that
current or future regulations would not have a material adverse effect on our
business, financial condition and results of operations.
In the United States, environmental regulations often require parties to
fund remedial action regardless of fault. Consequently, it is often difficult to
estimate the future impact of environmental matters, including potential
liabilities. We cannot assure you that the amount of expense and capital
expenditures that might be required to complete remedial actions and to continue
to comply with applicable environmental laws will not have a material adverse
effect on our business, financial condition and results of operations.
We have been designated as a potentially responsible party at one
Superfund site located at a former silicon wafer manufacturing facility and
steel fabrication plant in Parker Ford, Pennsylvania formerly occupied by
Semiconductor Systems. The site was also formerly occupied by Recticon
Corporation and Allied Steel Products Corporation, each of whom has been named
as a potentially responsible party and each of whom is insolvent. We have
accrued approximately $4 million at September 30, 1999 for the cost of
groundwater remediation, including installation of a public water supply line
and groundwater pump and treatment system, as well as routine groundwater
sampling. In addition, we are engaged in two other remediations of groundwater
contamination at our Newport Beach and Newbury Park, California facilities for
which we have accrued approximately $4 million for the costs of remediation at
September 30, 1999. Pursuant to our agreement with Rockwell, we have assumed
liabilities in respect of environmental matters related to current and former
operations of Conexant.
WE HAVE A LIMITED HISTORY AS AN INDEPENDENT COMPANY.
We have a limited operating history as an independent company.
Accordingly, the financial information incorporated into this prospectus for
periods prior to January 1, 1999 may not necessarily reflect the results of
operations, financial position and cash flows we would have achieved if we had
operated independently during the periods presented. We cannot assure you that
we will be profitable on an ongoing basis as a stand-alone company. Prior to the
spin-off, we relied on Rockwell for cash investments and various financial and
administrative services.
THE VALUE OF OUR COMMON STOCK MAY BE ADVERSELY AFFECTED BY MARKET VOLATILITY.
The trading price of our common stock fluctuates significantly. Since
our common stock began trading publicly, the reported sale price of our common
stock on the Nasdaq National Market has been as high as $_____ and as low as
$6.844 per share. This price may be influenced by many factors, including:
- our performance and prospects,
- the depth and liquidity of the market for our common stock,
- investor perception of Conexant and the industry in which it
operates,
- changes in earnings estimates or buy/sell recommendations by
analysts,
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<PAGE> 17
- general financial and other market conditions, and
- domestic and international economic conditions.
In addition, public stock markets have experienced extreme price and
trading volume volatility, particularly in high technology sectors of the
market. This volatility has significantly affected the market prices of
securities of many technology companies for reasons frequently unrelated to or
disproportionately impacted by the operating performance of these companies.
These broad market fluctuations may adversely affect the market price of our
common stock.
CERTAIN PROVISIONS IN OUR ORGANIZATIONAL DOCUMENTS AND RIGHTS AGREEMENT AND
DELAWARE LAW MAY MAKE IT DIFFICULT FOR SOMEONE TO ACQUIRE CONTROL OF CONEXANT.
We have established certain anti-takeover measures that may affect our
common stock and convertible notes. Our restated certificate of incorporation,
our by-laws, our rights agreement with ChaseMellon Shareholder Services, L.L.C.,
as rights agent, dated as of November 30, 1998, as amended, and the Delaware
General Corporation Law contain several provisions that would make more
difficult an acquisition of control of Conexant in a transaction not approved by
our board of directors. Our restated certificate of incorporation and by-laws
include provisions such as:
- the ability of our board of directors to issue shares of our
preferred stock in one or more series without further
authorization of our shareowners;
- a fair price provision;
- a prohibition on shareowner action by written consent;
- a requirement that shareowners provide advance notice of any
shareowner nominations of directors or any proposal of new
business to be considered at any meeting of shareowners;
- a requirement that a supermajority vote be obtained to remove a
director for cause or to amend or repeal certain provisions of
our restated certificate of incorporation or by-laws;
- elimination of the right of shareowners to call a special meeting
of shareowners; and
- the division of our board of directors into three classes to be
elected on a staggered basis, one class each year.
We also have a rights agreement which gives our shareowners certain
rights that would substantially increase the cost of acquiring us in a
transaction not approved by our board of directors.
In addition to the rights agreement and the provisions in our restated
certificate of incorporation and by-laws, Section 203 of the Delaware General
Corporation Law provides that, subject to certain exceptions, a corporation
shall not engage in any business combination with any interested shareowner
during the three-year period following the time that such shareowner becomes an
interested shareowner. The restrictions of Section 203 of the Delaware General
Corporation Law, in certain circumstances, make it more difficult for a person
who would be an interested shareowner to effect various business combinations
with a corporation during this three-year period. The provisions of Section 203
of the Delaware General Corporation Law provide that the shareowner approval
requirement may be avoided if a majority of the directors then in office
approved either the business combination or the transaction that resulted in the
shareowner becoming an interested shareowner.
THE NOTES ARE SUBORDINATED.
The notes are unsecured and subordinated in right of payment to all
existing and future senior indebtedness. In the event of our bankruptcy,
liquidation or reorganization or upon acceleration of the notes due to an event
of default under the Indenture and in certain other events, our assets will be
available to pay obligations on the notes only after all senior indebtedness has
been paid, and there may not be sufficient assets remaining to pay amounts due
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<PAGE> 18
on any or all of the notes then outstanding. The notes are also effectively
subordinated to the liabilities, including trade payables, of any of our
subsidiaries. The Indenture does not prohibit or limit the incurrence of senior
indebtedness or the incurrence of other indebtedness and other liabilities by us
or any of our subsidiaries. The incurrence of additional indebtedness and other
liabilities by us or any of our subsidiaries could adversely affect our ability
to pay our obligations on the notes. As of December 31, 1999, we had
approximately $102.8 million of senior indebtedness outstanding (as defined in
the Indenture). We anticipate that from time to time we will incur additional
indebtedness, including senior indebtedness, and that our subsidiaries will from
time to time incur other additional indebtedness and liabilities. See
"Description of Notes--Subordination of Notes."
WE MAY BE UNABLE TO REDEEM THE NOTES UPON A FUNDAMENTAL CHANGE.
We may be unable to redeem the notes when that is required. Upon a
fundamental change, as defined, a holder may, at its option, require us to
redeem all or a portion of its notes. If a fundamental change were to occur, we
cannot assure you that we would have sufficient funds to pay the redemption
price for all notes tendered by the holders of the notes. In addition, in many
cases, a fundamental change would result in an event of default under our
existing credit facility. Any future credit agreements or other agreements
relating to other indebtedness (including other senior indebtedness) to which we
become a party may contain similar provisions, may expressly prohibit the
repurchase of the notes upon a fundamental change or may provide that a
fundamental change constitutes an event of default under that agreement.
If a fundamental change occurs at a time when we are prohibited from
purchasing or redeeming notes, we could seek the consent of our lenders to the
redemption of notes or could attempt to refinance the borrowings that contain
such prohibition. If we do not obtain a consent to repay those borrowings, we
could not purchase or redeem the notes. Our failure to redeem tendered notes
would constitute an event of default under the Indenture, which might constitute
a default under the terms of our other indebtedness. In such circumstances, or
if a fundamental change would constitute an event of default under our senior
indebtedness, the subordination provisions of the Indenture would restrict
payments to the holders of notes. The term "fundamental change" is limited to
certain specified transactions and may not include other events that might
adversely affect our financial condition. Our obligation to offer to redeem the
notes upon a fundamental change would not necessarily afford holders of the
notes protection in the event of a highly leveraged transaction, reorganization,
merger or similar transaction involving Conexant. See "Description of
Notes--Redemption at Option of the Holder."
A PUBLIC MARKET MAY NOT DEVELOP FOR THE NOTES.
In February, 2000, we issued the notes to the initial purchasers in a
private placement. The notes are eligible to trade on the PORTAL market.
However, the notes resold pursuant to this prospectus will no longer trade on
the PORTAL market. As a result, there may be a limited market for the notes. We
do not intend to list the notes on any national securities exchange or on the
Nasdaq National Market.
A public market may not develop for the notes. Although the initial
purchaser advised us that they intend to make a market in the notes, 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, we
cannot assure you that any market for the notes will develop or, if one does
develop, that it will be maintained. If an active market for the notes fails to
develop or be sustained, the trading price of the notes could be materially
adversely affected.
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<PAGE> 19
WE MAY BE RESPONSIBLE FOR CERTAIN FEDERAL INCOME TAX LIABILITIES THAT RELATE TO
OUR SPIN-OFF FROM ROCKWELL.
In connection with our spin-off from Rockwell, the Internal Revenue
Service issued a tax ruling to Rockwell stating that the spin-off would qualify
as a tax-free reorganization within the meaning of Section 368(a)(1)(D) of the
Internal Revenue Code of 1986, as amended. While the tax ruling generally is
binding on the Internal Revenue Service, the continuing validity of the tax
ruling is subject to certain factual representations and assumptions. We are not
aware of any facts or circumstances that would cause such representations and
assumptions to be untrue.
The Tax Allocation Agreement dated as of December 31, 1998 between
Conexant and Rockwell provides that we will be responsible for any taxes imposed
on Rockwell, Conexant or Rockwell shareowners as a result of either:
- the failure of the spin-off from Rockwell to qualify as a tax-free
reorganization within the meaning of Section 368(a)(1)(D) of the
Internal Revenue Code or
- the subsequent disqualification of the spin-off from Rockwell as a
tax-free transaction to Rockwell under Section 361(c)(2) of the
Internal Revenue Code,
if the failure or disqualification is attributable to certain post-spin-off
actions by or in respect of Conexant (including our subsidiaries) or our
shareowners, such as our acquisition by a third party at a time and in a manner
that would cause such failure or disqualification.
The Tax Allocation Agreement also provides, among other things, that
neither Rockwell nor Conexant is to take any action inconsistent with, nor fail
to take any action required by, the request for the tax ruling or the tax ruling
unless:
- required to do so by law, or
- the other party has given its prior written consent, or
- in certain circumstances, a supplemental ruling permitting such
action is obtained.
Rockwell and Conexant have indemnified each other for any tax liability
resulting from each entity's failure to comply with these provisions.
In addition, we effected certain tax-free intragroup spin-offs as a
result of Rockwell's spin-off of Meritor Automotive, Inc. on September 30, 1997.
The Tax Allocation Agreement provides that we will be responsible for any taxes
imposed on Rockwell, Conexant or Rockwell shareowners in respect of those
intragroup spin-offs if such taxes are attributable to certain actions taken
after the spin-off from Rockwell by or in respect of Conexant (including our
subsidiaries) or our shareowners, such as our acquisition by a third party at a
time and in a manner that would cause the taxes to be incurred.
If we were required to pay any of the taxes described above, such
payment could have a material adverse effect on our financial position, results
of operations and cash flow.
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RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges is as follows:
<TABLE>
<CAPTION>
Three months ended
December 31, 1999 1999 1998(1) 1997 1996 1995
------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges ...... 15.2x 1.1x -- 46.1x 98.5x 71.6x
</TABLE>
- ------------
(1) In 1998, fixed charges exceeded earnings by $430.3 million.
These ratios are calculated by dividing (i) earnings before taxes
adjusted for fixed charges by (ii) fixed charges, which includes interest
expense plus capitalized interest and the portion of rent expense under
operating leases deemed by Conexant to be representative of the interest factor.
USE OF PROCEEDS
The selling securityholders will receive all of the proceeds from the
sale under this prospectus of the notes and the common stock issuable upon
conversion of the notes. We will not receive any proceeds from these sales.
PRICE RANGE OF COMMON STOCK
Our common stock began trading on the Nasdaq National Market under the
symbol "CNXT" on January 4, 1999. The following table lists the high and low per
share sale prices for our common stock as reported by the Nasdaq National Market
for the periods indicated. These per share sale prices reflect the 2-for-1 stock
split effected in the form of a stock dividend on October 29, 1999.
<TABLE>
<CAPTION>
High Low
---------- ----------
<S> <C> <C>
Fiscal year ended September 30, 1999:
Second quarter ......................... $ 13 27/32 $ 6 27/32
Third quarter .......................... $ 31 15/16 $ 13 3/16
Fourth quarter ......................... $ 41 17/32 $ 27 5/8
Fiscal year ending September 30, 2000
First quarter .......................... $ 76 3/16 $ 30 7/8
Second quarter (through _______, 2000).. $ $
</TABLE>
On _____________, 2000 the last bid price of the common stock as
reported on the Nasdaq National Market was $_________ per share. As of February
25, 2000 there were approximately 51,979 holders of record of our common stock.
DIVIDEND POLICY
We have never paid cash dividends on our common stock and do not
anticipate paying any cash dividends in the foreseeable future. In addition, our
existing bank credit facility limits our ability to declare and pay dividends.
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<PAGE> 21
DESCRIPTION OF NOTES
The notes are issued under an Indenture dated as of February 1, 2000
(the "Indenture"), between Conexant and Bank One, N.A. (referred to herein as
the "trustee"). This section summarizes certain provisions of the notes, the
Indenture and the registration rights agreement that we entered into with the
initial purchasers of the notes. This section is not a complete description of
all the provisions of the notes and is subject to, and qualified by reference
to, the Indenture and the registration rights agreement, including the
definitions in those documents of certain terms which are not otherwise
described in this prospectus. You may obtain a copy of the Indenture and
registration rights agreement from the trustee. Wherever particular provisions
or defined terms of the Indenture or the registration rights agreement are
referred to, such provisions or defined terms are incorporated herein by
reference. References in this section to Conexant are solely to Conexant
Systems, Inc., a Delaware corporation, and not its subsidiaries.
GENERAL
The notes represent unsecured general obligations of Conexant
subordinate in right of payment to certain other obligations of Conexant as
described under "-- Subordination of Notes" and are convertible into common
stock as described under "-- Conversion of Notes." The notes are limited to
$650,000,000 aggregate principal amount as the initial purchaser exercised in
full its right to purchase up to an additional $150,000,000 principal amount of
the notes. The notes are issued only in denominations of $1,000 and integral
multiples thereof. The notes will mature on February 1, 2007 unless earlier
converted, redeemed at the option of Conexant or redeemed at the option of the
holder upon a fundamental change.
The Indenture does not contain any financial covenants or restrictions
on the payment of dividends, the incurrence of indebtedness, including senior
indebtedness (as defined below under "-- Subordination of Notes"), or the
issuance or repurchase of securities of Conexant. The Indenture contains no
covenants or other provisions to afford protection to holders of the notes in
the event of a highly leveraged transaction or a change in control of Conexant
except to the extent described below under "-- Redemption at Option of the
Holder."
The notes bear interest at the annual rate of 4% from February 2, 2000,
or from the most recent payment date to which interest has been paid or duly
provided for. Interest will be payable semiannually in arrears on February 1 and
August 1, commencing on August 1, 2000, to holders of record at the close of
business on the preceding January 15 and July 15, respectively, except (i) that
the interest payable upon redemption (unless the date of redemption is an
interest payment date) will be payable to the person to whom principal is
payable and (ii) as set forth in the next succeeding sentence. In the case of
any note (or portion thereof) that is converted into common stock during the
period from (but excluding) a record date for any interest payment date to (but
excluding) such interest payment date either (x) if such note (or portion
thereof) has been called for redemption on a redemption date that occurs during
such period, or is to be redeemed in connection with a fundamental change on a
repurchase date (as defined below) that occurs during such period, Conexant
shall not be required to pay interest on such interest payment date in respect
of any such note (or portion thereof) or (y) if such note (or portion thereof)
has not been called for redemption on a redemption date that occurs during such
period and is not to be redeemed in connection with a fundamental change on a
repurchase date that occurs during such period, the note (or portion thereof)
submitted for conversion shall be accompanied by funds equal to the interest
payable on such interest payment date on the principal amount so converted.
See "-- Conversion of Notes."
Interest will be payable at the office of Conexant maintained by
Conexant for such purposes in the Borough of Manhattan, the City of New York,
which initially is an office or agency of the trustee and may, at Conexant's
option, be paid either (i) by check mailed to the address of the person entitled
thereto as it appears in the note register, provided that a holder of notes with
an aggregate principal amount in excess of $5 million shall, at the written
election of such holder, be paid by wire transfer in immediately available funds
or (ii) by transfer to an account maintained by such person located in the U.S.;
provided, however, that payments to The Depository Trust Company, New York, New
York ("DTC") will be made by wire transfer of immediately available funds to the
account of DTC or its nominee. Interest will be computed on the basis of a
360-day year composed of twelve 30-day months.
FORM, DENOMINATION AND REGISTRATION
We issued the notes in fully registered form, without coupons, in
denominations of $1,000 principal amount and integral multiples thereof.
GLOBAL NOTE, BOOK-ENTRY FORM
Notes that were sold to "qualified institutional buyers" as defined in
Rule 144A under the Securities Act ("QIBs") are evidenced by one or more global
notes, which were deposited with, or on behalf of, DTC and
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<PAGE> 22
registered in the name of Cede & Co. as DTC's nominee. Except as set forth
below, a global note 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 a global note directly through DTC if
such holder is a participant in DTC, or indirectly through organizations which
are participants in DTC. Transfers between participants are effected in the
ordinary way in accordance with DTC rules and are settled in clearinghouse
funds. The laws of some states require that certain persons take physical
delivery of securities in definitive form. Consequently, the ability to transfer
beneficial interests in the global note to such persons may be limited.
QIBs who are not participants may beneficially own interests in a global
note 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. So long as Cede,
as the nominee of DTC, is the registered owner of a global note, Cede for all
purposes will be considered the sole holder of such global note. Except as
provided below, owners of beneficial interests in a global note are not entitled
to have certificates registered in their names, do not receive and are not
entitled to receive physical delivery of certificates in definitive registered
form, and are not considered the holders thereof.
Payment of interest on and the redemption price of a global note is made
to Cede, the nominee for DTC as the registered owner of the global note, by wire
transfer of immediately available funds on each interest payment date or the
redemption or repurchase date, as the case may be. Neither Conexant, the trustee
nor any paying agent has any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a global note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Conexant has been informed by DTC that, with respect to any payment of
interest on, or the redemption price of, a global note, 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 principal
amount represented by a global note as shown on the records of DTC, 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 the principal
amount represented by a global note held through such participants are the
responsibility of such participants, as is now the case with securities held for
the accounts of customers registered in "street name."
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 principal amount represented by the global
note 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 Conexant nor the trustee (nor any registrar, paying agent or
conversion agent under the Indenture) has any responsibility for the performance
by DTC or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations. DTC has
advised Conexant that it will take any action permitted to be taken by a holder
of notes (including, without limitation, the presentation of notes for exchange
as described below), only at the direction of one or more participants to whose
account with DTC interests in the global note are credited, and only in respect
of the principal amount of the notes represented by the global note as to which
such participant or participants has or have given such direction.
DTC has advised Conexant 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 the 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 purchaser. Certain of such
participants (or their 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.
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<PAGE> 23
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in a global note among participants, it 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
Conexant within 90 days, Conexant will cause notes to be issued in definitive
registered form in exchange for global notes.
CERTIFICATED NOTES
QIBs may request that certificated notes be issued in exchange for notes
represented by a global note. Furthermore, certificated notes may be issued in
exchange for notes represented by a global note if no successor depositary is
appointed by Conexant as set forth above under "-- Global Note, Book-Entry
Form."
RESTRICTIONS ON TRANSFER, LEGENDS
The notes are subject to certain transfer restrictions as described
below under "Transfer Restrictions" and certificates evidencing the notes bear a
legend to such effect.
CONVERSION OF NOTES
The holders of notes are entitled at any time after the original
issuance thereof through the close of business on the final maturity date of the
notes, subject to prior redemption, to convert the principal amount of any notes
or portions thereof (in denominations of $1,000 or integral multiples thereof)
into common stock, at the conversion price of $108.00 per share, subject to
adjustment as described below. Except as described below, no payment or other
adjustment will be made on conversion of any notes for interest accrued thereon
or for dividends on any common stock issued. If any notes not called for
redemption are converted during the period from (but excluding) a record date
for any interest payment date to (but excluding) such interest payment date,
such notes must be accompanied by funds equal to the interest payable on such
interest payment date on the principal amount so converted. We are not required
to issue fractional shares of common stock upon conversion of notes and, in lieu
thereof, will pay a cash adjustment based upon the market price of common stock
on the last business day prior to the date of conversion. In the case of notes
called for redemption, conversion rights expire at the close of business on the
business day preceding the day fixed for redemption unless Conexant defaults in
the payment of the redemption price. A note 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.
The initial conversion price of $108.00 per share of common stock is
subject to adjustment under formulas as set forth in the Indenture in certain
events, including:
(i) the issuance of common stock as a dividend or distribution on
common stock;
(ii) the issuance to all holders of common stock of certain rights or
warrants to purchase common stock;
(iii) certain subdivisions and combinations of common stock;
(iv) the distribution to all holders of common stock of capital stock
(other than common stock) or evidences of our indebtedness 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 on 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 common stock to the
extent that such preceding quarterly dividend did not require an
adjustment of the conversion price pursuant to this clause (v)
(as adjusted to reflect subdivisions or combinations of common
stock), and (y) 3.75% of the average of the last reported sale
price of
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<PAGE> 24
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 our liquidation, dissolution
or winding up. If an adjustment is required to be made as set
forth in this clause (v) 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 this
clause (v). If an adjustment is required to be made as set forth
in this clause (v) as a result of a distribution that is not a
quarterly dividend, such adjustment would be based upon the full
amount of the distribution;
(vi) payment in respect of a tender offer or exchange offer by us or
any subsidiary of us for 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 in the Indenture) 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 us or any subsidiary of us in which, as of the
closing date of the offer, the board of directors is not
recommending rejection of the offer. The adjustment referred to
in this clause (vii) 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
trading 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 this clause (vii) will generally
not be made, however, if, as of the closing of the offer, the
offering documents with respect to such offer disclose a plan or
an intention to cause us to engage in a consolidation or merger
or a sale of all or substantially all of our assets.
Under the Indenture, we have agreed to use all reasonable efforts to
amend the rights agreement (see "Description of Capital Stock -- Conexant Rights
Plan") to provide, and that any future shareholder rights plans will provide,
that upon conversion of the notes into common stock, to the extent that the
rights agreement (or any such future shareholder rights plan) and any rights
granted thereunder remain outstanding and in effect upon such conversion, the
holders will receive, in addition to common stock, the Conexant rights described
therein (or any similar rights described in any such future shareholder rights
plan), whether or not the Conexant rights (or such similar rights) have
separated from common stock at the time of conversion, subject to certain
limited customary exceptions.
In the case of (i) any reclassification of common stock, or (ii) a
consolidation, merger or combination involving us or a sale or conveyance to
another person of our property and assets 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, other securities, other property or assets (including
cash) with respect to or in exchange for such common stock, the holders of the
notes then outstanding will generally be entitled thereafter to convert such
notes into the kind and amount of shares of stock, other securities or other
property or assets (including cash) which they would have owned or been entitled
to receive upon such reclassification, consolidation, merger, combination, sale
or conveyance had such notes been converted into common stock immediately prior
to such reclassification, consolidation, merger, combination, sale or
conveyance, assuming that a holder of notes would not have exercised any rights
of election as to the stock, other securities or other property or assets
(including cash) receivable in connection therewith.
In the event of a taxable distribution to holders of common stock or in
certain other circumstances requiring an adjustment to the conversion price, the
holders of notes may, in certain circumstances, be deemed to have received a
distribution subject to U.S. 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."
We from time to time may, to the extent permitted by law, reduce the
conversion price by any amount for any period of at least 20 days, in which case
we shall give at least 15 days' notice of such reduction, if the board of
directors has made a determination that such reduction would be in our best
interests, which determination shall be
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conclusive. We may, at our option, make such reductions in the conversion price,
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."
No adjustment in the conversion price is required unless such adjustment
would require a change of at least 1% in the conversion price 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 price 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.
OPTIONAL REDEMPTION BY CONEXANT
The notes are not entitled to any sinking fund. At any time on or after
February 6, 2003, the notes are redeemable at our option on at least 30 days'
notice as a whole or, from time to time, in part at the following prices
(expressed as a percentage of the principal amount), together with accrued
interest to, but excluding, the date fixed for redemption:
<TABLE>
<CAPTION>
Period Redemption Price
- ------ ----------------
<S> <C>
Beginning on February 6, 2003 and ending on January 31, 2004................. 102.286%
Beginning on February 1, 2004 and ending on January 31, 2005................. 101.714
Beginning on February 1, 2005 and ending on January 31, 2006................. 101.143
Beginning on February 1, 2006 and ending on January 31, 2007................. 100.571
</TABLE>
and 100% on February 1, 2007; provided that any accrued interest becoming due on
the date fixed for redemption shall be payable to the holders of record on the
relevant record date of the notes being redeemed.
If less than all of the outstanding notes are to be redeemed, the
trustee shall select the notes to be redeemed in principal amounts of $1,000 or
integral multiples thereof by lot, pro rata or by another method the trustee
considers fair and appropriate. If a portion of a holder's notes is selected for
partial redemption and such holder converts a portion of such notes, such
converted portion shall be deemed to be of the portion selected for redemption.
The notes (or portions thereof) so selected shall be deemed duly selected for
redemption for all purposes hereof, notwithstanding that any such note is
converted as a whole or in part before the mailing of the notice of redemption.
We may not give notice of any redemption of notes if a default in
payment of interest or premium on the notes (as defined in the Indenture) has
occurred and is continuing. Contemporaneously with our issuing a notice
regarding our intent to redeem the notes, in whole or in part, we shall issue a
press release announcing the same, as set forth in the Indenture.
REDEMPTION AT OPTION OF THE HOLDER
If a fundamental change occurs at any time prior to February 1, 2007,
each holder of notes shall have the right, at the holder's option, to require us
to redeem any or all of such holder's notes on the date (the "repurchase date")
that is 30 days after the date of our notice of such fundamental change. The
notes will be redeemable in multiples of $1,000 principal amount.
We shall redeem such notes at a price equal to 100% of the principal
amount to be redeemed plus accrued interest on the redeemed notes to, but
excluding, the repurchase date; provided that, if such repurchase date is an
interest payment date, then the interest payable on such date shall be paid to
the holder of record of the notes on the relevant record date.
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<PAGE> 26
We are required to mail to all holders of record of the notes 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. Contemporaneously with issuing that notice, we are required
to issue a press release announcing such fundamental change, as set forth in the
Indenture. We are also required to deliver to the trustee a copy of such notice.
To exercise the redemption right, a holder of notes must deliver, on or before
the 30th day after the date of our notice of a fundamental change (the
"fundamental change expiration time"), written notice of the holder's exercise
of such right, together with the notes to be so redeemed, duly endorsed for
transfer, to us (or an agent designated by us for such purpose). Payment for
notes surrendered for redemption (and not withdrawn) prior to the fundamental
change expiration time will be made promptly following the repurchase date.
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 U.S. national securities exchange or
approved for quotation on the Nasdaq National Market or any similar U.S. system
of automated dissemination of quotations of securities prices.
We will comply with the applicable tender offer rules under the Exchange
Act to the extent then applicable in connection with the redemption rights of
the holders of notes in the event of a fundamental change.
The redemption rights of the holders of notes could discourage a
potential acquiror of us. The fundamental change redemption feature, however, is
not the result of management's knowledge of any specific effort to obtain
control of us by means of a merger, tender offer, solicitation or otherwise. The
term "fundamental change" is limited to certain specified transactions and may
not include other events that might adversely affect our financial condition,
nor would the requirement that we offer to redeem the notes upon a fundamental
change necessarily afford the holders of the notes protection in the event of a
highly leveraged transaction, reorganization, merger or similar transaction
involving us.
If a fundamental change were to occur, there can be no assurance that we
would have sufficient funds to pay the redemption price for all the notes
tendered by the holders thereof. In addition, in many cases, a fundamental
change would result in an event of default under our existing credit facility.
Any future credit agreements or other agreements relating to other indebtedness
(including senior indebtedness) to which we become a party may contain similar
provisions or may expressly prohibit the repurchase of the notes on a
fundamental change or may provide that a fundamental change constitutes an event
of default thereunder. In the event a fundamental change occurs at a time when
we are prohibited from redeeming the notes, we could seek the consent of its
then existing lenders to the redemption of the notes or could attempt to
refinance the borrowings that contain such prohibition. If we do not obtain such
a consent or repay such borrowings, we would remain prohibited from redeeming
the notes. In such case, our failure to redeem tendered notes would constitute
an event of default and may constitute a default under the terms of other
indebtedness that we may enter into from time to time. In such circumstances, or
if the occurrence of a fundamental change itself constitutes an event of default
under senior indebtedness, the subordination provisions in the Indenture would
restrict or prohibit payments to the holders of notes.
SUBORDINATION OF NOTES
The indebtedness evidenced by the notes is subordinated to the extent
provided in the Indenture to the prior payment in full of all our senior
indebtedness. The notes also are effectively subordinated to all indebtedness
and other liabilities, including trade payables and lease obligations, if any,
of our subsidiaries. Upon any distribution of our assets upon any dissolution,
winding up, liquidation or reorganization, the payment of the principal of, or
premium, if any, and interest (including liquidated damages (as defined in the
Indenture), if any) on the notes is subordinated to the extent provided in the
Indenture 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. In the event of any acceleration of the notes because of an event
of default, the holders of any senior indebtedness then outstanding are entitled
to payment in full in cash or other payment satisfactory to the holders of
senior indebtedness of all obligations in respect of such senior indebtedness
before the holders of the notes are entitled to receive any payment
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<PAGE> 27
or distribution in respect thereof. The Indenture requires that we promptly
notify holders of senior indebtedness if payment of the notes is accelerated
because of an event of default.
We also may not make any payment upon or in respect of the notes
(including upon redemption) if (i) a payment default occurs and is continuing
beyond any applicable period of grace or (ii) any other default occurs and is
continuing with respect to designated senior indebtedness (as defined below)
that permits holders of such designated senior indebtedness to accelerate its
maturity, and the trustee received a notice of such default (a "payment blockage
notice") from us or another person permitted to give such notice under the
Indenture (a "non-payment default"). Payments on the notes may and shall be
resumed (a) in case of a payment default, upon the date on which such default is
cured or waived or ceases to exist and (b) in case of a non-payment default, the
earlier of the date on which such non-payment default is cured or waived or
ceases to exist or 179 days after the date on which the applicable payment
blockage notice is received. No new period of payment blockage may be commenced
pursuant to clause (ii) above unless and until (i) 365 days have elapsed since
the initial effectiveness of the immediately prior payment blockage notice and
(ii) all scheduled payments of principal, premium, if any, and interest
(including liquidated damages, if any) on the notes that have come due have been
paid in full in cash. No non-payment 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.
In the event that, notwithstanding the foregoing, the trustee, any
paying agent on behalf of us or any holder of the notes receives any payment or
distribution of our assets of any kind in contravention of any of the
subordination provisions of the Indenture, whether in cash, property or
securities, including, without limitation, by way of set-off or otherwise, in
respect of the notes before all senior indebtedness is paid in full in cash or
other payment satisfactory to holders of senior indebtedness, then such payment
or distribution will be held by the recipient in trust for the benefit of
holders of senior indebtedness or their representatives to the extent necessary
to make payment in full in cash or 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.
By reason of the subordination provisions described above, in the event
of our bankruptcy, dissolution or reorganization, holders of senior indebtedness
may receive more, ratably, and holders of the notes may receive less, ratably,
than our other creditors. Such subordination will not prevent the occurrence of
any event of default under the Indenture.
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) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts accrued or
due on or in connection with, our indebtedness (as defined below), whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed, guaranteed or in effect guaranteed by us (including all deferrals,
renewals, extensions or refundings of, or amendments, modifications or
supplements to, the foregoing), unless in the case of any particular
indebtedness 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 the notes or expressly provides that such indebtedness is
pari passu or junior to the notes. Notwithstanding the foregoing, the term
senior indebtedness shall not include our 4 1/4% Convertible Subordinated Notes
due 2006 or indebtedness of us to any subsidiary of us, a majority of the voting
stock of which is owned, directly or indirectly, by us.
The term "indebtedness" means, with respect to any person (as defined in
the Indenture), and without duplication:
(a) all indebtedness, obligations and other liabilities (contingent
or otherwise) of such person for borrowed money (including our
obligations 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
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of the assets of such person or to only a portion thereof), other
than any account payable or other accrued current liability or
obligation incurred in the ordinary course of business in
connection with the obtaining of materials or services;
(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 required, in conformity with
generally accepted accounting principles, to be accounted for as
capitalized lease obligations on the balance sheet of such person
and all obligations and other liabilities (contingent or
otherwise) under the headquarters lease (as defined in the
Indenture) and any lease or related document (including a
purchase agreement) in connection with the lease of real property
which provides that such person is contractually obligated to
purchase or cause a third party to purchase the leased property
and thereby guarantee a minimum residual value of the leased
property to the lessor and the obligations of such person under
such lease or related document to purchase or to cause a third
party to purchase such leased property;
(d) all obligations of such person (contingent or otherwise) with
respect to an interest rate or other swap, cap or collar
agreement or other similar instrument or agreement or foreign
currency hedge, exchange, purchase or 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 (e) 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 our credit facility and
our obligations under any other particular senior indebtedness with respect to
which the instrument creating or evidencing the same or the assumption or
guarantee thereof (or related agreements or documents to which we are 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).
As of December 31, 1999, we had approximately $102.8 million of
indebtedness outstanding that would have constituted senior indebtedness. The
Indenture does not limit the amount of additional indebtedness, including senior
indebtedness, which we can create, incur, assume or guarantee, nor does the
Indenture limit the amount of indebtedness or other liabilities that any
subsidiary can create, incur, assume or guarantee.
We are 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 notes. The trustee's claims
for such payments will generally be senior to those of the holders of the notes
in respect of all funds collected or held by the trustee.
EVENTS OF DEFAULT; NOTICE AND WAIVER
An event of default is defined in the indenture as being: default in
payment of the principal of or premium, if any (upon redemption or otherwise),
on the notes (whether or not such payment is permitted to be made under the
subordination provisions described above); default for 30 days in payment of any
installment of interest (including
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liquidated damages, if any) on the notes (whether or not such payment is
permitted to be made under the subordination provisions described above);
default by us for 60 days after notice in the observance or performance of any
other covenants in the Indenture; or certain events involving our bankruptcy,
insolvency or reorganization or that of our significant subsidiaries (as defined
in the Indenture). The Indenture provides that the trustee may withhold notice
to the holders of the notes of any default (except in payment of principal or
premium, if any, or interest (including liquidated damages, if any) with respect
to the notes) if the trustee considers it in the interest of the holders of the
notes to do so.
The Indenture provides that if an event of default shall have occurred
and be continuing, the trustee or the holders of not less than 25% in principal
amount of the notes then outstanding may declare the principal of, premium, if
any, and accrued interest (including liquidated damages, if any) on the notes to
be due and payable immediately. In the case of certain events of our bankruptcy
or insolvency, the principal of, premium, if any, and accrued interest
(including liquidated damages, if any) on the notes shall automatically become
and be immediately due and payable. However, if we shall cure all defaults
(except the nonpayment of principal of, premium, if any, and interest (including
liquidated damages, if any) on any of the notes which shall have become due by
acceleration) and certain other conditions are met, with certain exceptions,
such declaration may be canceled and past defaults may be waived by the holders
of a majority in principal amount of the notes then outstanding.
The Indenture provides that any payment of principal, premium, if any,
or interest (including liquidated damages, if any) that is not made when due
(whether or not such payment is permitted to be made under the subordination
provisions described above) will accrue interest, to the extent legally
permissible, at the annual rate set forth on the cover page hereof from the date
on which such payment was required under the terms of the Indenture until the
date of payment.
The holders of a majority in principal amount of the notes then
outstanding shall have the right to direct the time, method and place of
conducting any proceedings for any remedy available to the trustee, subject to
certain limitations specified in the Indenture.
The Indenture provides that no holder of the notes may pursue any remedy
under the Indenture, except for a default in the payment of principal, premium,
if any including upon redemption), or interest (including liquidated damages, if
any), on the notes, unless such holder shall have previously given to the
trustee written notice of a continuing event of default, and the holders of at
least 25% in principal amount of the outstanding notes shall have made a written
request, and offered reasonable indemnity, to the trustee to pursue the remedy,
and the trustee shall not have received from the holders of a majority in
principal amount of the outstanding notes a direction inconsistent with such
request and shall have failed to comply with such request within 60 days after
receipt of such request.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting us and the trustee, with
the consent of the holders of a majority in principal amount of the notes at the
time outstanding, to modify the Indenture or any supplemental Indenture or the
rights of the holders of the notes, except that no such modification shall (i)
extend the fixed maturity of any note, reduce the rate or extend the time for
payment of interest thereon, reduce the principal amount thereof or premium, if
any, thereon, reduce any amount payable upon redemption thereof, change our
obligation to redeem any note upon the happening of any fundamental change in a
manner adverse to the holders of the notes, impair the right of a holder to
institute suit for the payment thereof, change the currency in which the notes
are payable, impair the right to convert the notes into common stock subject to
the terms set forth in the Indenture, or modify the provisions of the Indenture
with respect to the subordination of the notes in a manner adverse to the
holders of the notes, without the consent of each holder of a note so affected
or (ii) reduce the aforesaid percentage of notes whose holders are required to
consent to any such modification of the Indenture or any such supplemental
Indenture without the consent of the holders of all of the notes then
outstanding. The Indenture also provides for certain modifications of its terms
without the consent of the holders of the notes.
REGISTRATION RIGHTS OF THE NOTEHOLDERS
On February 1, 2000, we entered into a registration rights agreement
with the initial purchaser. If the Noteholders sell the notes or common stock
issued on conversion of the notes pursuant to this prospectus, the
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holders generally will be required to be named as a selling securityholder,
deliver this prospectus to purchasers and be bound by certain provisions of the
registration rights agreement.
We are required under the registration rights agreement to keep the
shelf registration statement effective until the earlier of (i) the sale
pursuant to the shelf registration statement of all the securities registered
thereunder and (ii) the expiration of the holding period applicable to such
securities held by persons that are not our affiliates under Rule 144(k) under
the Securities Act, or any successor provision, subject to certain permitted
exceptions. We are permitted to suspend the use of this prospectus that is a
part of the shelf registration statement under certain circumstances relating to
pending corporate developments, public filings with the Commission and similar
events no more than once in any three-month period or four times in any 12-month
period. Any such suspension shall not exceed 30 days, and all such suspensions
in the aggregate shall not exceed 60 days in any three-month period or 90 days
in any 12-month period; provided, however, that we will be permitted to suspend
the use of the prospectus for a period not to exceed 60 days under certain
circumstances relating to possible acquisitions, acquisitions, financings or
similar transactions. We agreed to pay predetermined liquidated damages (i) in
respect of the notes, at a rate per annum equal to 0.5% of the principal amount
of the notes, and (ii) in respect of any shares of common stock, at a rate per
annum equal to 0.5% of the then applicable conversion price, to holders of notes
and holders of common stock issued upon conversion of the notes if the
prospectus is unavailable for periods in excess of those permitted above. A
holder who sells notes and common stock issued upon conversion of the notes
pursuant to the shelf registration statement generally will be required to be
named as a selling securityholder in the related prospectus, deliver a
prospectus to purchasers and be bound by certain provisions of the registration
rights agreement that are applicable to such holder (including certain
indemnification provisions). We will pay all expenses of the shelf registration
statement, provide to each registered holder copies of such prospectus and take
certain other actions as are required to permit, subject to the foregoing,
unrestricted resales of the notes and common stock issued upon conversion of the
notes.
The summary herein of certain provisions of the registration rights
agreement is subject to, and is qualified in its entirety by reference to, all
the provisions of the registration rights agreement, a copy of which is
available upon request to us.
INFORMATION CONCERNING THE TRUSTEE
We have an existing credit facility and one of the lenders, Bank One,
N.A., is also the trustee under both our 4 1/4% Convertible Subordinated Notes
due 2006 and with respect to these notes. We appointed the trustee under the
Indenture as paying agent, conversion agent, registrar and custodian with regard
to the notes. The Indenture contains certain limitations on the rights of the
trustee, as long as it or any of its affiliates remains our creditor, to obtain
payment of claims in certain cases or to realize on certain property received in
respect of any such claim as security or otherwise. The trustee and its
affiliates are permitted to engage in other transactions with us; provided,
however, that if it or any such affiliate continues to have any conflicting
interest (as defined) and a default occurs with respect to the notes, the
trustee must eliminate such conflict or resign.
RATING OF NOTES
One or more rating agencies may rate the notes. We cannot assure you
that an agency or agencies will rate the notes or, if they do, what rating or
ratings they will assign to the notes. If one or more rating agencies assign the
notes a rating lower than that expected by investors, it could have a material
adverse effect on the market price of the notes and common stock.
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock, as amended or superseded
by any applicable prospectus supplement, includes a summary of certain
provisions of our restated certificate of incorporation and our by-laws. This
description is subject to the detailed provisions of, and is qualified by
reference to, our certificate of incorporation and our by-laws, copies of which
have been filed as exhibits to the registration statement of which this
prospectus is a part.
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We are authorized to issue (1) 1,000,000,000 shares of common stock, of
which 203,633,659 shares of common stock were outstanding as of February 25,
2000, and (2) 25,000,000 shares of preferred stock, without par value, of which
our board of directors has designated 1,500,000 shares as Series A Junior
Participating Preferred Stock for issuance in connection with the exercise of
our preferred share purchase rights. For a more detailed discussion of our
preferred share purchase rights and how they relate to our common stock, see
"Conexant Rights Plan". The authorized shares of common stock and preferred
stock will be available for issuance without further action by our shareowners,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which our securities may be listed or
traded. If the approval of our shareowners is not so required, our board of
directors may determine not to seek shareowner approval.
Certain of the provisions described under this section entitled
"Description of Capital Stock" could have the effect of discouraging
transactions that might lead to a change of control of Conexant.
Our restated certificate of incorporation and by-laws:
- establish a classified board of directors,
- require shareowners to provide advance notice of any shareowner
nominations of directors or any proposal of new business to be
considered at any meeting of shareowners,
- require a supermajority vote to remove a director or to amend or
repeal certain provisions of our restated certificate of
incorporation or by-laws, and
- preclude shareowners from calling a special meeting of
shareowners.
COMMON STOCK
Holders of common stock are entitled to such dividends as may be
declared by our board of directors out of funds legally available therefor.
Dividends may not be paid on common stock unless all accrued dividends on
preferred stock, if any, have been paid or set aside. In the event of our
liquidation, dissolution or winding up, the holders of common stock will be
entitled to share pro rata in the assets remaining after payment to creditors
and after payment of the liquidation preference plus any unpaid dividends to
holders of any outstanding preferred stock. See "Dividend Policy".
Each holder of common stock will be entitled to one vote for each such
share outstanding in such holder's name. No holder of common stock will be
entitled to cumulate votes in voting for directors. Our certificate provides
that, unless otherwise determined by our board of directors, no holder of common
stock will have any right to purchase or subscribe for any stock of any class
which we may issue or sell.
ChaseMellon Shareholder Services, L.L.C. is the transfer agent and
registrar for our common stock.
PREFERRED STOCK
Our restated certificate of incorporation authorizes our board of
directors to establish one or more series of preferred stock of up to an
aggregate of 25,000,000 shares and to determine, with respect to any series of
our preferred stock, the terms and rights of the series. Although our board of
directors has no intention at the present time of doing so, it could issue a
series of preferred stock that could, depending on the terms of such series,
impede the completion of a merger, tender offer or other takeover attempt.
CERTAIN PROVISIONS IN OUR RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS
Our certificate and by-laws contain various provisions intended to (1)
promote the stability of our shareowner base and (2) render more difficult
certain unsolicited or hostile attempts to take us over which could disrupt us,
divert the attention of our directors, officers and employees and adversely
affect the independence and integrity of our business.
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Pursuant to our certificate, the number of directors is fixed by our
board of directors. Other than directors elected by the holders of any series of
preferred stock or any other series or class of stock except common stock, our
directors are divided into three classes, each class to consist as nearly as
possible of one-third of the directors. Directors elected by shareowners at an
annual meeting of shareowners will be elected by a plurality of all votes cast.
Currently, the terms of office of the three classes of directors expire,
respectively, at our annual meetings in 2001, 2002 and 2003. The term of the
successors of each such class of directors expires three years from the year of
election.
Our restated certificate of incorporation contains a fair price
provision pursuant to which a Business Combination (as defined in our restated
certificate of incorporation) between us or one of our subsidiaries and an
Interested Shareowner (as defined in our restated certificate of incorporation)
requires approval by the affirmative vote of the holders of not less than 80
percent of the voting power of all of our outstanding capital stock entitled to
vote generally in the election of directors, voting together as a single class,
unless the Business Combination is approved by at least two-thirds of the
Continuing Directors (as defined in our restated certificate of incorporation)
or certain fair price criteria and procedural requirements specified in the fair
price provision are met. If either the requisite approval of our board of
directors or the fair price criteria and procedural requirements were met, the
Business Combination would be subject to the voting requirements otherwise
applicable under the Delaware General Corporation Law, which for most types of
Business Combinations currently would be the affirmative vote of the holders of
a majority of all of our outstanding shares of stock entitled to vote thereon.
Any amendment or repeal of the fair price provision, or the adoption of
provisions inconsistent therewith, must be approved by the affirmative vote of
the holders of not less than 80 percent of the voting power of all of our
outstanding capital stock entitled to vote generally in the election of
directors, voting together as a single class, unless such amendment, repeal or
adoption were approved by at least two-thirds of the Continuing Directors, in
which case the provisions of the Delaware General Corporation Law would require
the affirmative vote of the holders of a majority of the outstanding shares of
our capital stock entitled to vote thereon.
Our restated certificate of incorporation and by-laws provide that a
special meeting of shareowners may be called only by a resolution adopted by a
majority of the entire board of directors. Shareowners are not permitted to
call, or to require that the board of directors call, a special meeting of
shareowners. Moreover, the business permitted to be conducted at an special
meeting of shareowners is limited to the business brought before the meeting
pursuant to the notice of the meeting given by us. In addition, our certificate
provides that any action taken by our shareowners must be effected at an annual
or special meeting of shareowners and may not be taken by written consent in
lieu of a meeting. Our by-laws establish an advance notice procedure for
shareowners to nominate candidates for election as directors or to bring other
business before meetings of our shareowners.
Our restated certificate of incorporation provides that the affirmative
vote of at least 80 percent of the voting power of all of our outstanding
capital stock entitled to vote generally in the election of directors, voting
together as a single class, would be required to:
- amend or repeal the provisions of our certificate with respect to
(a) the election of directors, (b) the right to call a special
shareowners' meeting or (c) the right to act by written consent,
- adopt any provision inconsistent with such provisions, or
- amend or repeal the provisions of our restated certificate of
incorporation with respect to amendments to our restated
certificate of incorporation or by-laws.
In addition, our restated certificate of incorporation provides that our board
of directors may make, alter, amend and repeal our by-laws and that the
amendment or repeal by shareowners of any of our by-laws would require the
affirmative vote of at least 80 percent of the voting power described above,
voting together as a single class.
CONEXANT RIGHTS PLAN
Each outstanding share of common stock also evidences one preferred
share purchase right. Each preferred share purchase right entitles the
registered holder to purchase from us one two-hundredth of a share of Series A
Junior Participating Preferred Stock, at $300, subject to adjustment. The
description and terms of the preferred
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share purchase rights are set forth in the rights agreement dated as of November
30, 1998, as amended as of December 9, 1999.
Until the earlier to occur of (1) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 20 percent or more of
the outstanding common stock or (2) 10 business days, or such later date as may
be determined by our board of directors prior to such time as any person or
group becomes an Acquiring Person, following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 20 percent or more of the outstanding common stock, preferred share
purchase rights will be attached to common stock and will be owned by the
registered owners of common stock.
The rights agreement provides that, until the preferred share purchase
rights are no longer attached to the common stock, or until the earlier
redemption or expiration of the preferred share purchase rights:
- the preferred share purchase rights will be transferred with and
only with common stock,
- certificates representing common stock and statements in respect
of shares of common stock registered in book-entry or
uncertificated form will contain a notation incorporating the
terms of the preferred share purchase rights by reference, and
- the transfer of any shares of common stock will also constitute
the transfer of the associated preferred share purchase rights.
As soon as practicable following the date the preferred share purchase rights
are no longer attached to the common stock (the "Distribution Date"), separate
certificates evidencing preferred share purchase rights will be mailed to
holders of record of common stock as of the close of business on the date the
preferred share purchase rights are no longer attached to the common stock and
the separate certificates alone will evidence preferred share purchase rights.
In addition, the rights agreement provides that in connection with the
issuance or sale of our common stock following the Distribution Date and prior
to the earlier of (1) the date the preferred share purchase rights are redeemed
and (2) the date the preferred share purchase rights expire, (a) we will, with
respect to common stock issued or sold pursuant to the exercise of stock options
or under any employee plan or arrangement in existence prior to the Distribution
Date, or upon the exercise, conversion or exchange of securities, notes or
debentures (pursuant to the terms thereof) issued by us and in existence prior
to the Distribution Date, and (b) we may, in any other case, if deemed necessary
or appropriate by the board of directors, issue certificates representing the
appropriate number of preferred share purchase rights in connection with such
issuance or sale. We will not be obligated to issue any of these certificates
if, and to the extent that, we are advised by counsel that the issuance of those
certificates would create a significant risk of material adverse tax
consequences to us or the person to whom such certificate would be issued or
would create a significant risk that the stock options or employee plans or
arrangements would fail to qualify for otherwise available special tax
treatment. In addition, no certificate will be issued if, and to the extent
that, appropriate adjustments otherwise have been made in lieu of the issuance
thereof.
Preferred share purchase rights will not be exercisable until the
Distribution Date. Preferred share purchase rights will expire on December 31,
2008, unless this expiration date is extended or unless preferred share purchase
rights are earlier redeemed by us, in each case, as described below.
The purchase price payable, and the number of shares of Series A junior
preferred stock or other securities or property issuable, upon exercise of the
preferred share purchase rights will be subject to adjustment from time to time
to prevent dilution upon the occurrence of the following events:
- in the event of a stock dividend on, or a subdivision,
combination or reclassification of, Series A junior preferred
stock,
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- upon the grant to holders of shares of Series A junior preferred
stock of certain rights or warrants to subscribe for or purchase
shares of Series A junior preferred stock at a price, or
securities convertible into shares of Series A junior preferred
stock with a conversion price, less than the then current market
price of the shares of Series A junior preferred stock, or
- upon the distribution to holders of shares of Series A junior
preferred stock of evidences of indebtedness or assets (excluding
regular periodic cash dividends or dividends payable in shares of
Series A junior preferred stock) or of subscription rights or
warrants (other than those referred to above).
The number of outstanding preferred share purchase rights and the number
of one one-hundredths of a share of Series A junior preferred stock issuable
upon exercise of each preferred share purchase right will also be subject to
adjustment in the event of a stock split of common stock or a stock dividend on
common stock payable in common stock or subdivisions, consolidations or
combinations of common stock occurring, in any such case, prior to the date the
preferred share purchase rights are no longer attached to the common stock.
We cannot redeem shares of Series A junior preferred stock purchasable
upon exercise of preferred share purchase rights. Each share of Series A junior
preferred stock will be entitled to a minimum preferential quarterly dividend
payment of $1 per share but will be entitled to an aggregate dividend of 100
times the dividend declared per share of common stock whenever such dividend is
declared. In the event of liquidation, the holders of Services A junior
preferred stock will be entitled to a minimum preferential liquidation payment
of $100 per share but will be entitled to an aggregate payment of 100 times the
payment made per share of common stock. Each share of Series A junior preferred
stock will have 100 votes, voting together with common stock. In the event of
any merger, consolidation or other transaction in which shares of common stock
are exchanged, each share of Series A junior preferred stock will be entitled to
receive 100 times the amount received per share of common stock. These rights
will be protected by customary antidilution provisions.
Because of the nature of the Series A junior preferred stock's dividend,
liquidation and voting rights, the value of the one two-hundredth interest in a
share of Series A junior preferred stock purchasable upon exercise of each
preferred share purchase right should approximate the value of one share of
common stock.
In the event that, at any time after a person has become an Acquiring
Person, we are acquired in a merger or other business combination transaction or
50 percent or more of our consolidated assets or earning power is sold, proper
provision will be made so that each holder of a preferred share purchase right
will thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of a preferred share purchase right, that number of
shares of common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of a
preferred share purchase right. In the event that any person becomes an
Acquiring Person, proper provision shall be made so that each holder of a
preferred share purchase right, other than preferred share purchase rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive upon exercise, in lieu of shares of Series
A junior preferred stock, that number of shares of common stock having a market
value of two times the exercise price of a preferred share purchase right.
At any time after any person or group of affiliated or associated
persons becomes an Acquiring Person, and prior to the acquisition by such person
or group of 50 percent or more of the outstanding shares of common stock, our
board of directors may exchange preferred share purchase rights (other than
preferred share purchase rights owned by such person or group, which will have
become void after such person became an Acquiring Person) for common stock or
Series A junior preferred stock, in whole or in part, at an exchange ratio of
one share of common stock, or two hundredths of a share of Series A junior
preferred stock (or of a share of another series of preferred stock having
equivalent rights, preferences and privileges), per preferred share purchase
right (subject to adjustment).
With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments require an adjustment of at least one
percent. No fractional shares of Series A junior preferred stock will be issued,
other than fractions which are integral multiples of one two-hundredth of a
share of Series A junior preferred stock, which may, at our election, be
evidenced by depository receipts. Instead, an adjustment in cash will be made
based on the market price of Series A junior preferred stock on the last trading
day prior to the date of exercise.
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At any time prior to the acquisition by a person or group of affiliated
or associated persons of beneficial ownership of 20 percent or more of the
outstanding shares of common stock, our board of directors may redeem preferred
share purchase rights in whole, but not in part, at a price of $.0l per
preferred share purchase right. The redemption of preferred share purchase
rights may be made effective at such time, on such basis and with such
conditions as our board of directors may determine, in its sole discretion.
Immediately upon any redemption of preferred share purchase rights, the right to
exercise preferred share purchase rights will terminate and the only right of
the holders of preferred share purchase rights will be to receive the redemption
price.
The terms of preferred share purchase rights may be amended by our board
of directors without the consent of the holders of preferred share purchase
rights, including an amendment to decrease the threshold at which a person
becomes an Acquiring Person from 20 percent to not less than 10 percent, except
that from and after such time as any person becomes an Acquiring Person no such
amendment may adversely affect the interests of the holders of preferred share
purchase rights.
Until a preferred share purchase right is exercised, the holder thereof,
as such, will have no rights as a shareowner of Conexant, including, without
limitation, the right to vote or to receive dividends.
The foregoing summary of the material terms of preferred share purchase
rights is qualified by reference to the rights agreement, a copy of which has
been filed as an exhibit to the registration statement of which this prospectus
is a part.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax
considerations relating to the purchase, ownership and disposition of the notes
and common stock into which notes may be converted, but does not purport to be a
complete analysis of all the potential tax considerations relating thereto. This
summary is based on laws, regulations, rulings and decisions now in effect, all
of which are subject to change or differing interpretation possibly with
retroactive effect. Except as specifically discussed below with regard to
Non-U.S. Holders (as defined below), this summary applies only to beneficial
owners that will hold notes and common stock into which notes may be converted
as "capital assets" (within the meaning of Section 1221 of the Code) and who,
for U.S. federal income tax purposes, are (i) individual citizens or residents
of the U.S., (ii) corporations, partnerships or other entities created or
organized in or under the laws of the U.S. or of any political subdivision
thereof (unless, in the case of a partnership, Treasury Regulations otherwise
provide), (iii) estates, the income of which is subject to U.S. federal income
taxation regardless of the source of such income, or (iv) trusts subject to the
primary supervision of a U.S. court and the control of one or more U.S. persons
("U.S. Holders"). Persons other than U.S. Holders ("Non-U.S. Holders") are
subject to special U.S. federal income tax considerations some of which are
discussed below. This discussion does not address tax considerations applicable
to an investor's particular circumstances or to investors that may be subject to
special tax rules, such as banks, holders subject to the alternative minimum
tax, tax-exempt organizations, insurance companies, foreign persons or entities
(except to the extent specifically set forth below), dealers in securities or
currencies, persons that will hold notes as a position in a hedging transaction,
"straddle" or "conversion transaction" for tax purposes or persons deemed to
sell notes or common stock under the constructive sale provisions of the Code.
This summary discusses the tax considerations applicable to the initial
purchaser who purchases the notes at their "issue price" as defined in Section
1273 of the Code and generally does not discuss the tax considerations
applicable to subsequent purchasers of the notes. We have not sought any ruling
from the IRS or an opinion of counsel with respect to the statements made and
the conclusions reached in the following summary, and there can be no assurance
that the IRS will agree with such statements and conclusions. In addition, the
IRS is not precluded from successfully adopting a contrary position. This
summary does not consider the effect of the federal estate or gift tax laws or
the tax laws (except as set forth below with respect to Non-U.S. Holders) of any
applicable foreign, state, local or other jurisdiction.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX
LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING
UNDER THE FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL
OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
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U.S. HOLDERS
TAXATION OF INTEREST
Interest paid on the notes will be included in the income of a U.S.
Holder as ordinary income at the time it is treated as received or accrued, in
accordance with such holder's regular method of accounting for U.S. federal
income tax purposes. Under Treasury Regulations, the possibility of an
additional payment under a note may be disregarded for purposes of determining
the amount of interest or original issue discount income to be recognized by a
holder in respect of such note (or the timing of such recognition) if the
likelihood of the payment, as of the date the notes are issued, is remote. A
holder may require us to redeem any and all of his notes in the event of a
fundamental change. We believe that the likelihood of a liquidated damages
payment with respect to the notes is remote and do not intend to treat such
possibility as affecting the yield to maturity of any note. Similarly, we intend
to take the position that a "fundamental change" is remote under the Treasury
Regulations, and likewise do not intend to treat the possibility of a
"fundamental change" as affecting the yield to maturity of any note. There can
be no assurance that the IRS will agree with such positions. In the event either
contingency occurs, it would affect the amount and timing of the income that
must be recognized by a U.S. Holder of notes.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange (other than a conversion) or redemption of a
note, a U.S. Holder generally will recognize capital gain or loss equal to the
difference between (i) the amount of cash proceeds and the fair market value of
any property received on the sale, exchange or redemption (except to the extent
such amount is attributable to accrued interest income not previously included
in income, which will be taxable as ordinary income, or is attributable to
accrued interest that was previously included in income, which amount may be
received without generating further income) and (ii) such holder's adjusted tax
basis in the note. A U.S. Holder's adjusted tax basis in a note generally will
equal the cost of the note to such holder. Such capital gain or loss will be
long-term capital gain or loss if the U.S. Holder's holding period in the note
is more than one year at the time of sale, exchange or redemption. Long-term
capital gains recognized by certain noncorporate U.S. Holders, including
individuals, will generally be subject to a maximum rate of tax of 20%. The
deductibility of capital losses is subject to limitations.
MARKET DISCOUNT
The market discount rules discussed below apply to any note purchased
after original issue at a price less than its stated redemption price at
maturity as well as any note purchased at original issue for an amount less than
its "issue price." Generally, the "issue price" of a note will equal the first
price at which a substantial amount of notes included in the issue of which the
note is a part is sold (ignoring sales to bond houses, brokers, or similar
persons or organizations acting in the capacity of underwriters, placement
agents, or wholesalers).
A U.S. Holder that purchases a note at a market discount generally will
be required to treat any principal payments on, or any gain on the disposition
on maturity of, such note as ordinary income to the extent of the accrued market
discount (not previously included in income) at the time of such payment or
disposition. In general, subject to a de minimis exception, market discount is
the amount by which the note's stated redemption price at maturity exceeds the
U.S. Holder's basis in the note immediately after the note is acquired. A note
is not treated as purchased at a market discount, however, if the market
discount is less than .25 percent of the stated redemption price at maturity of
the note multiplied by the number of complete years to maturity from the date
when the U.S. Holder acquired the note. Market discount on a note will accrue on
a straight-line basis, unless the U.S. Holder elects to accrue such discount on
a constant yield to maturity basis. This election is irrevocable and applies
only to the note for which it is made. The U.S. Holder may also elect to include
market discount in income currently as it accrues. This election, once made,
applies to all market discount obligations acquired on or after the first day of
the first taxable year to which the election applies and may not be revoked
without the consent of the IRS. If a U.S. Holder of a note acquired at a market
discount disposes of such note in any non-taxable transaction (other than a
nonrecognition transaction defined in section 1276(c) of the Code), accrued
market discount will be includable as ordinary income to the holder as if such
holder had sold the note at its fair market value. A U.S. Holder may be required
to defer until the maturity of the note or, in certain circumstances, its
earlier disposition the deduction or all or a portion of the interest expense
attributable to debt incurred or continued to purchase or carry a note with
market discount, unless an election to include the market discount on a current
basis is made.
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AMORTIZABLE BOND PREMIUM
A U.S. Holder that purchases a note for an amount in excess of its
stated redemption price at maturity will generally be considered to have
purchased the note with "amortizable bond premium." A U.S. Holder generally may
elect to amortize such premium using the constant yield to maturity method. The
amount amortized in any year will generally be treated as a reduction of the
U.S. Holder's interest income on the note. If the amortizable bond premium
allocable to a year exceeds the amount of interest allocable to that year, the
excess would be allowed as a deduction for that year but only to the extent of
the U.S. Holder's prior interest inclusions on the note. The premium on a note
held by a U.S. Holder that does not make such an election will decrease the gain
or increase the loss otherwise recognized on the sale, redemption, retirement or
other disposition of the note. The election to amortize the premium on a
constant yield to maturity method, once made, generally applies to all bonds
held or subsequently acquired by the electing U.S. Holder on or after the first
day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
CONVERSION OF THE NOTES
A U.S. Holder generally will not recognize any income, gain or loss upon
conversion of a note into common stock except to the extent common stock is
considered attributable to accrued interest not previously included in income
(which will be taxable as ordinary income) or with respect to cash received in
lieu of a fractional share of common stock. A U.S. Holder's tax basis in common
stock received on conversion of a note will be the same as such holder's
adjusted tax basis in the note at the time of conversion (reduced by any basis
allocable to a fractional share interest), and the holding period for common
stock received on conversion will generally include the holding period of the
note converted. However, a U.S. Holder's tax basis in shares of common stock
considered attributable to accrued interest generally will equal the amount of
such accrued interest included in income and the holding period for such shares
shall begin on the date of conversion.
Cash received in lieu of a fractional share of common stock upon
conversion will be treated as a payment in exchange for the fractional share of
common stock. Accordingly, the receipt of cash in lieu of a fractional share of
common stock generally will result in capital gain or loss (measured by the
difference between the cash received for the fractional share and the holder's
adjusted tax basis in the fractional share).
DIVIDENDS
Distributions, if any, made on common stock after a conversion generally
will be included in the income of a U.S. Holder as ordinary dividend income to
the extent of our current or accumulated earnings and profits. Distributions in
excess of our current and accumulated earnings and profits will be treated as a
return of capital to the extent of the U.S. Holder's basis in common stock and
thereafter as capital gain.
Holders of convertible debt instruments such as the notes may, in
certain circumstances, be deemed to have received constructive distributions
where the conversion price of such instruments is adjusted. Adjustments to the
conversion price made pursuant to a bona fide reasonable adjustment formula
which has the effect of preventing the dilution of the interest of the holders
of the debt instruments, however, will generally not be considered to result in
a constructive distribution of stock. Certain of the possible adjustments
provided in the notes (including, without limitation, adjustments in respect of
taxable dividends to our shareholders) will not qualify as being pursuant to a
bona fide reasonable adjustment formula. If such adjustments are made, the U.S.
Holders of notes will be deemed to have received constructive distributions
taxable as dividends to the extent of our current and accumulated earnings and
profits even though they have not received any cash or property as a result of
such adjustments. In certain circumstances the failure to provide for such an
adjustment may result in taxable dividend income to the U.S. Holders of common
stock.
SALE OF COMMON STOCK
Upon the sale or exchange of common stock a U.S. Holder generally will
recognize capital gain or loss equal to the difference between (i) the amount of
cash and the fair market value of any property received upon the sale or
exchange and (ii) such U.S. Holder's adjusted tax basis in common stock. Such
capital gain or loss will be
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<PAGE> 38
long-term capital gain or loss if the U.S. Holder's holding period in common
stock is more than one year at the time of the sale or exchange. Long-term
capital gains recognized by certain non-corporate U.S. Holders, including
individuals, will generally be subject to a maximum rate of tax of 20%. A U.S.
Holder's basis and holding period in common stock received upon conversion of a
note are determined as discussed above under "Conversion of the Notes". The
deductibility of capital losses is subject to limitations.
SPECIAL TAX RULES APPLICABLE TO NON-U.S. HOLDERS
In general, subject to the discussion below concerning backup
withholding:
(a) Payments of principal or interest on the notes by us or any
paying agent to a beneficial owner of a note that is a Non-U.S.
Holder will not be subject to U.S. withholding tax, provided
that, in the case of interest, (i) such Non-U.S. Holder does not
own, actually or constructively, 10% or more of the total
combined voting power of all classes of our stock entitled to
vote, within the meaning of Section 871(h)(3) of the Code, (ii)
such Non-U.S. Holder is not a "controlled foreign corporation"
with respect to which Conexant is a "related person" within the
meaning of the Code, (iii) such Non-U.S. Holder is not a bank
receiving interest described in Section 881(c)(3)(A) of the Code,
and (iv) the certification requirements under Section 871(h) or
Section 881(c) of the Code and Treasury Regulations thereunder
(discussed below) are satisfied;
(b) A Non-U.S. Holder of a note or common stock will not be subject
to U.S. federal income tax on gains realized on the sale,
exchange or other disposition of such note or common stock unless
(i) such Non-U.S. Holder is an individual who is present in the
U.S. for 183 days or more in the taxable year of sale, exchange
or other disposition, and certain conditions are met, (ii) such
gain is effectively connected with the conduct by the Non-U.S.
Holder of a trade or business in the U.S. and, if certain U.S.
income tax treaties apply, is attributable to a U.S. permanent
establishment maintained by the Non-U.S. Holder, (iii) the
Non-U.S. Holder is subject to Code provisions applicable to
certain U.S. expatriates or (iv) in the case of common stock held
by a person who holds more than 5% of such stock, we are or have
been, at any time within the shorter of the five-year period
preceding such sale or other disposition or the period such
Non-U.S. Holder held common stock, a U.S. real property holding
corporation (a "USRPHC") for U.S. federal income tax purposes. We
do not believe that we are currently a USRPHC or that we will
become one in the future; and
(c) Interest on notes not excluded from U.S. withholding tax as
described in (a) above and dividends on common stock after
conversion generally will be subject to U.S. withholding tax at a
30% rate, except where an applicable tax treaty provides for the
reduction or elimination of such withholding tax.
To satisfy the certification requirements referred to in (a)(iv) above,
Sections 871(h) and 881(c) of the Code and currently effective Treasury
Regulations thereunder require that either (i) the beneficial owner of a note
must certify, under penalties of perjury, to us or our paying agent, as the case
may be, that such owner is a Non-U.S. Holder and must provide such owner's name
and address and U.S. taxpayer identification number ("TIN"), if any, or (ii) a
securities clearing organization, bank or other financial institution that holds
customer securities in the ordinary course of its trade or business (a
"financial institution") and holds the note on behalf of the beneficial owner
thereof must certify, under penalties of perjury, to us or our paying agent, as
the case may be, that such certificate has been received from the beneficial
owner and must furnish the payor with a copy thereof. Such requirement will be
fulfilled if the beneficial owner of a note certifies on IRS Form W-8, under
penalties of perjury, that it is a Non-U.S. Holder and provides its name and
address or any financial institution holding the note on behalf of the
beneficial owner files a statement with the withholding agent to the effect that
it has received such a statement from the beneficial owner (and furnishes the
withholding agent with a copy thereof).
Treasury Regulations effective for payments made after December 31,
2000, will provide alternative methods for satisfying the certification
requirements described above and below, subject to certain grandfathering
provisions. These new regulations also require, in the case of notes held by a
foreign partnership, that (i) the
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<PAGE> 39
certification be provided by the partners rather than by the foreign partnership
and (ii) the partnership provide certain information, including a TIN. A
look-through rule will apply in the case of tiered partnerships.
If a Non-U.S. Holder of a note or common stock is engaged in a trade or
business in the U.S. and if interest on the note, dividends on common stock, or
gain realized on the sale, exchange or other disposition of the note or common
stock is effectively connected with the conduct of such trade or business (and,
if certain tax treaties apply, is attributable to a U.S. permanent establishment
maintained by the Non-U.S. Holder in the U.S.), the Non-U.S. Holder, although
exempt from U.S. withholding tax (provided that the certification requirements
discussed in the next sentence are met), will generally be subject to U.S.
federal income tax on such interest, dividends or gain on a net income basis in
the same manner as if it were a U.S. Holder. In lieu of the certificate
described above, such a Non-U.S. Holder will be required, under currently
effective Treasury Regulations, to provide Conexant with a properly executed IRS
Form 4224 in order to claim an exemption from withholding tax. In addition, if
such Non-U.S. Holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% (or such lower rate provided by an applicable treaty)
of its effectively connected earnings and profits for the taxable year, subject
to certain adjustments.
U.S. FEDERAL ESTATE TAX
A note held by an individual who at the time of death is not a citizen
or resident of the U.S. (as specially defined for U.S. federal estate tax
purposes) will not be subject to U.S. 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 Conexant and, at the time of the individual's
death, payments with respect to such note would not have been effectively
connected with the conduct by such individual of a trade or business in the U.S.
common stock held by an individual who at the time of death is not a citizen or
resident of the U.S. (as specially defined for U.S. 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.
Non-U.S. Holders should consult with their tax advisors regarding U.S.
and foreign tax consequences with respect to the notes and common stock.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding of U.S. federal income tax at a rate of 31% may apply
to payments made in respect of a note or common stock to a U.S. Holder that is
not an "exempt recipient" and that fails to provide certain identifying
information (such as the holder's TIN) in the manner required. Generally,
individuals are not exempt recipients, whereas corporations and certain other
entities are exempt recipients. Payments made in respect of a note or common
stock must be reported to the IRS, unless the U.S. Holder is an exempt recipient
or otherwise establishes an exemption.
In the case of payments of interest on a note to a Non-U.S. Holder,
Treasury Regulations provide that backup withholding and information reporting
will not apply to payments with respect to which either requisite certification
has been received or an exemption has otherwise been established (provided that
neither we nor a paying agent have actual knowledge that the holder is a U.S.
Holder or that the conditions of any other exemption are not in fact satisfied).
Dividends on common stock paid to Non-U.S. Holders that are subject to
U.S. withholding tax, as described above, generally will be exempt from U.S.
backup withholding tax but will be subject to certain information reporting.
Payments of the proceeds of the sale of a note or common stock to or
through a foreign office of a broker that is a U.S. related person (a
"controlled foreign corporation" (within the meaning of the Code) or a foreign
person, 50% or more of whose gross income from all sources for the three-year
period ending with the close of its taxable year preceding the payment was
effectively connected with the conduct of a trade or business within the U.S.)
are currently subject to certain information reporting requirements, unless the
payee is an exempt recipient or such broker has evidence in its records that the
payee is a Non-U.S. Holder and no actual knowledge that such
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<PAGE> 40
evidence is false and certain other conditions are met. Temporary Treasury
Regulations indicate that such payments are not currently subject to backup
withholding. Under current Treasury Regulations, payments of the proceeds of a
sale of a note or common stock to or through the U.S. office of a broker will be
subject to information reporting and backup withholding unless the payee
certifies under penalties of perjury as to his or her status as a Non-U.S.
Holder and satisfies certain other qualifications (and no agent or broker who is
responsible for receiving or reviewing, such statement has actual knowledge that
it is incorrect) and provides his or her name and address or the payee otherwise
establishes an exemption.
Any amounts withheld under the backup withholding rules from a payment
to a holder of a note or common stock will be allowed as a refund or credit
against such holder's U.S. federal income tax provided that the required
information is furnished to the IRS in a timely manner.
As noted above, new regulations will generally be applicable to payments
made after December 31, 2000. In general, these new regulations do not
significantly alter the substantive withholding and information reporting
requirements but unify current certification procedures and forms and clarify
reliance standards. Under these new regulations, special rules apply which
permit the shifting of primary responsibility for withholding to certain
financial intermediaries acting on behalf of beneficial owners. A holder of a
note or common stock should consult with its tax advisor regarding the
application of the backup withholding rules to its particular situation, the
availability of an exemption therefrom, the procedure for obtaining such an
exemption, if available, and the impact of these new regulations on payments
made with respect to notes or common stock after December 31, 2000.
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS IS
FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH
PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISER AS TO THE PARTICULAR U.S.
FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING
OF THE NOTES AND COMMON STOCK. TAX ADVISORS SHOULD ALSO BE CONSULTED AS TO THE
U.S. ESTATE AND GIFT TAX CONSEQUENCES AND THE FOREIGN TAX CONSEQUENCES OF
PURCHASING, HOLDING AND DISPOSING OF THE NOTES AND COMMON STOCK, AS WELL AS THE
CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.
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<PAGE> 41
SELLING SECURITYHOLDERS
The notes were originally issued by Conexant and sold by the initial
purchasers of the notes in a transaction exempt from the registration
requirements of the Securities Act to persons reasonably believed by the initial
purchasers to be qualified institutional buyers or other institutional
accredited investors. Selling securityholders, including their transferees,
pledgees or donees or their successors, may from time to time offer and sell
pursuant to this prospectus any or all of the notes and shares of common stock
into which the notes are convertible.
The following table sets forth information, as of _______, 2000, with
respect to the selling securityholders and the principal amounts of notes
beneficially owned by each selling securityholder that may be offered pursuant
to this prospectus. The information is based on information provided by or on
behalf of the selling security holders. The selling securityholders may offer
all, some or none of the notes or the common stock into which the notes are
convertible. Because the selling securityholders may offer all or some portion
of the notes or the common stock, we cannot estimate the amount of the notes or
the common stock that will be held by the selling securityholders upon
termination of any of these sales. In addition, the selling securityholders
identified below may have sold, transferred or otherwise disposed of all or a
portion of their notes since the date on which they provided the information
regarding their notes in transactions exempt from the registration requirements
of the Securities Act. The percentage of notes outstanding beneficially owned by
each selling securityholder is based on $650,000,000 aggregate principal amount
of notes outstanding. The number of shares of common stock owned prior to the
offering includes shares of common stock into which the notes are convertible.
The number of shares of common stock offered hereby is based on a conversion
price of $108.00 per share of common stock and a cash payment in lieu of any
fractional share. No selling securityholder named in the table below
beneficially owns one percent or more of our common stock based on _______
shares of common stock outstanding on ______, 2000. Information concerning other
selling securityholders will be set forth in prospectus supplements from time to
time, if required. The number of shares of common stock owned by the other
selling securityholders or any future transferee from any such holder assumes
that they do not beneficially own any common stock other than common stock into
which the notes are convertible at a conversion price of $108.00 per share.
<TABLE>
<CAPTION>
Principal Amount
of Notes
Beneficially Owned Percentage of Common Stock Owned Common Stock
Name and Offered Hereby Notes Outstanding Prior to the Offering Offered Hereby
---- ------------------ ----------------- --------------------- --------------
<S> <C> <C> <C> <C>
[Securityholders] .......
------------------ ----------------- --------------------- --------------
Total ...................
================== ================= ===================== ==============
</TABLE>
None of the selling securityholders nor any of their affiliates,
officers, directors or principal equity holders has held any position or office
or has had any material relationship with Conexant within the past three years,
except that [ ].
The initial purchasers purchased all of the notes from us in a private
transaction in February, 2000. All of the notes were "restricted securities"
under the Securities Act prior to this registration. The selling securityholders
have represented to us that they purchased the shares for their own account for
investment only and not with a view toward selling or distributing them, except
pursuant to sales registered under the Securities Act or exempt from such
registration.
Information concerning other selling securityholders will be set forth
in prospectus supplements from time to time, if required. Information concerning
the securityholders may change from time to time and any changed information
will be set forth in supplements to this prospectus if and when necessary. In
addition, the conversion price, and therefore, the number of shares of common
stock issuable upon conversion of the notes, is subject to
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<PAGE> 42
adjustment under certain circumstances. Accordingly, the aggregate principal
amount of notes and the number of shares of common stock into which the notes
are convertible may increase or decrease.
PLAN OF DISTRIBUTION
The selling securityholders and their successors, which term includes
their transferees, pledgees or donees or their successors may sell the notes and
the underlying common stock directly to purchasers or through underwriters,
broker-dealers or agents, who may receive compensation in the form of discounts,
concessions or commissions from the selling securityholders or the purchasers.
These discounts, concessions or commissions as to any particular underwriter,
broker-dealer or agent may be in excess of those customary in the types of
transactions involved.
The common stock may be sold in one or more transactions at:
- fixed prices,
- prevailing market prices at the time of sale,
- prices related to the prevailing market prices,
- varying prices determined at the time of sale, or
- negotiated prices.
These sales may be effected in transactions:
- on any national securities exchange or quotation service on which
our common stock may be listed or quoted at the time of sale,
including the Nasdaq National Market,
- in the over-the-counter market,
- otherwise than on such exchanges or services or in the
over-the-counter market,
- through the writing of options, whether the options are listed on
an options exchange or otherwise, or
- through the settlement of short sales.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as agent on both sides of the trade.
In connection with the sale of the notes and the underlying common stock
or otherwise, the selling securityholders may enter into hedging transactions
with broker-dealers or other financial institutions. These broker-dealers or
financial institutions may in turn engage in short sales of the common stock in
the course of hedging the positions they assume with selling securityholders.
The selling securityholders may also sell the notes and the underlying common
stock short and deliver these securities to close out such short positions, or
loan or pledge the notes or the underlying common stock to broker-dealers that
in turn may sell these securities.
The aggregate proceeds to the selling securityholders from the sale of
the notes or the underlying common stock offered by them hereby will be the
purchase price of the common stock less discounts and commissions, if any. Each
of the selling securityholders reserves the right to accept and, together with
their agents from time to time, to reject, in whole or in part, any proposed
purchase of common stock to be made directly or through agents. We will not
receive any of the proceeds from this offering.
Our outstanding common stock is listed for trading on the Nasdaq
National Market. We do not intend to list the notes for trading on any national
securities exchange or on the Nasdaq National Market and can give no assurance
about the development of any trading market for the notes.
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<PAGE> 43
In order to comply with the securities laws of some states, if
applicable, the notes and the underlying common stock may be sold in these
jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the notes may not be sold unless they have been
registered or qualified for sale or an exemption from registration or
qualification requirements is available and is complied with.
The selling securityholders and any broker-dealers or agents that
participate in the sale of the notes and the underlying common stock may be
deemed to be "underwriters" within the meaning of Section 2(l1) of the
Securities Act. Profits on the sale of the notes and the underlying common stock
by selling securityholders and any discounts, commissions or concessions
received by any broker-dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act. Selling securityholders who
are deemed to be "underwriters" within the meaning of Section 2(l1) of the
Securities Act will be subject to the prospectus delivery requirements of the
Securities Act. To the extent the selling securityholders may be deemed to be
"underwriters," they may be subject to statutory liabilities, including, but not
limited to, Sections 11, 12 and 17 of the Securities Act.
The selling securityholders and any other person participating in a
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder. Regulation M of the Exchange Act may limit
the timing of purchases and sales of any of the securities by the selling
securityholders and any other person. In addition, Regulation M may restrict the
ability of any person engaged in the distribution of the securities to engage in
market-making activities with respect to the particular securities being
distributed for a period of up to five business days before the distribution.
The selling securityholders have acknowledged that they understand their
obligations to comply with the provisions of the Exchange Act and the rules
thereunder relating to stock manipulation, particularly Regulation M, and have
agreed that they will not engage in any transaction in violation of such
provisions.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholder and any underwriter,
broker-dealer or agent regarding the sale of the common stock by the selling
securityholders.
A selling securityholder may decide not to sell any notes or the
underlying common stock described in this prospectus. We cannot assure you that
any selling securityholder will use this prospectus to sell any or all of the
notes or the underlying common stock. Any securities covered by this prospectus
which 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.
In addition, a selling securityholder may transfer, devise or gift the notes and
the underlying common stock by other means not described in this prospectus.
With respect to a particular offering of the notes and the underlying
common stock, to the extent required, an accompanying prospectus supplement or,
if appropriate, a post-effective amendment to the registration statement of
which this prospectus is a part will be prepared and will set forth the
following information:
- the specific notes or common stock to be offered and sold,
- the names of the selling securityholders,
- the respective purchase prices and public offering prices and
other material terms of the offering,
- the names of any participating agents, broker-dealers or
underwriters, and
- any applicable commissions, discounts, concessions and other
items constituting, compensation from the selling
securityholders.
We entered into the registration rights agreement for the benefit of
holders of the notes to register their notes and the underlying common stock
under applicable federal and state securities laws under certain circumstances
and at certain times. The registration rights agreement provides that the
selling securityholders and Conexant will indemnify each other and their
respective directors, officers and controlling persons against specific
liabilities in connection with the offer and sale of the notes and the
underlying common stock, including liabilities under the Securities Act, or will
be entitled to contribution in connection with those liabilities. We will pay
all of
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our expenses and specified expenses incurred by the selling securityholders
incidental to the registration, offering and sale of the notes and the
underlying common stock to the public, but each selling securityholder will be
responsible for payment of commissions, concessions, fees and discounts of
underwriters, broker-dealers and agents.
LEGAL MATTERS
The validity of the issuance of the notes and the common stock issuable
on conversion of the notes will be passed upon for us by Latham & Watkins, New
York, New York.
EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus by reference from the
Conexant Systems, Inc. Annual Report on Form 10-K for the year ended September
30, 1999 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of Maker Communications, Inc.
incorporated by reference in this prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated herein in reliance upon the authority of
said firm as experts in giving said reports.
HOW TO OBTAIN MORE INFORMATION
In accordance with the Exchange Act, we file reports, proxy and
information statements and other information with the Securities and Exchange
Commission. You may read and copy these reports, proxy and information
statements and other information that we file at the SEC's public reference room
at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on
the operation of the public reference room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an internet site that contains reports, proxy and
information statements and other information regarding registrants (including
Conexant) that file electronically with the SEC (http://www.sec.gov). Our
internet site is http://www.conexant.com.
You also may inspect reports, proxy statements and other information
about Conexant at the offices of The Nasdaq Stock Market, Inc. National Market
System, 1735 K Street, N.W., Washington, D.C. 20006-1500.
We have filed with the SEC a registration statement on Form S-3 under
the Securities Act. This prospectus does not contain all of the information in
the registration statement. We have omitted certain parts of the registration
statement, as permitted by the rules and regulations of the SEC. You may inspect
and copy the registration statement, including exhibits, at the SEC's public
reference room or internet site. Our statements in this prospectus about the
contents of any contract or other document are not necessarily complete. You
should refer to the copy of each contract or other document we have filed as an
exhibit to the registration statement for complete information.
The SEC's rules allow us to "incorporate by reference" into this
prospectus the information we file with the SEC. This means that we can disclose
important information to you by referring you to those filings. This information
we incorporate by reference is considered a part of this prospectus, and
subsequent information that we file with the SEC will automatically update and
supersede this information. Any such information so modified or superseded will
not constitute a part of this prospectus, except as so modified or superseded.
We incorporate by reference the following documents and any future filings we
make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
until the selling securityholders sell all of the notes or the shares of common
stock offered by this prospectus:
- The descriptions of the common stock and the preferred share
purchase rights contained on pages 78 and 85-87 in our
Registration Statement on Form 10, as amended (File Number
00-24923) dated December 1, 1998, as amended by Part II, Item 2
of the Quarterly Report on Form 10-Q for the quarter ended
December 31, 1999;
41
<PAGE> 45
- Our Annual Report on Form 10-K for the fiscal year ended
September 30, 1999 (including the portions of our Proxy Statement
for our 2000 Annual Meeting of Shareowners that are incorporated
therein by reference);
- Our Quarterly Report on Form 10-Q for the quarter ended December
31, 1999;
- Our Current Report on Form 8-K dated January 4, 2000, as amended
by our Current Report on Form 8-K/A dated January 11, 2000; and
- Our Current Report on Form 8-K dated February 16, 2000.
Upon written or oral request, we will provide you with a copy of any of
the incorporated documents without charge (not including exhibits to the
documents unless the exhibits are specifically incorporated by reference into
the documents). You may submit such a request for this material to Office of the
Secretary, Conexant Systems, Inc., 4311 Jamboree Road, Newport Beach, California
92660-3095 (telephone number (949) 483-4600).
FORWARD-LOOKING STATEMENTS
In addition to historical information, this prospectus contains
statements relating to our future results. These statements include certain
projections and business trends which are "forward looking" within the meaning
of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are made only as of the date of this prospectus. We do not undertake
to update or revise the forward-looking statements, whether as a result of new
information, future events or otherwise.
Our actual results may differ materially from projected results as a
result of certain risks and uncertainties. These risks and uncertainties
include, without limitation, those described under "Risk Factors" as well as
those set forth below and those detailed from time to time in our filings with
the SEC:
- global and market conditions, including, without limitation, the
cyclical nature of the semiconductor industry and the markets
related to our products and those of our customers;
- demand for and market acceptance of new and existing products;
- successful development of new products;
- timing of new product introductions;
- successful integration of Maker Communications, Inc. as well as
the successful integration of our other recent acquisitions;
- availability and extent of use of manufacturing capacity;
- pricing pressures and other competitive factors;
- changes in product mix;
- fluctuations in manufacturing yields;
- product obsolescence;
- our ability to develop and implement new technologies and to
obtain protection of the related intellectual property;
- the successful implementation of our diversification strategy;
- our labor relations and those of our customers and suppliers;
- uncertainties of litigation; and
- other risks and uncertainties.
The Conexant logo is a trademark of Conexant Systems, Inc. Other brands,
names and trademarks contained in this prospectus are the property of their
respective owners.
42
<PAGE> 46
$650,000,000
CONEXANT SYSTEMS, INC.
4 % CONVERTIBLE SUBORDINATED NOTES DUE 2007
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
PROSPECTUS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT
INFORMATION. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER
THAN THE DATE OF THIS PROSPECTUS. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES
IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
<PAGE> 47
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by the
registrant in connection with the sale of the 4% Convertible Subordinated Notes
Due 2007 and the common stock being registered. All of the amounts shown are
estimates except the Securities and Exchange Commission (the "Commission")
registration fee and the Nasdaq National Market additional listing fee.
<TABLE>
<CAPTION>
Amount
--------
<S> <C>
Commission Registration Fee................................................. $171,600
Nasdaq National Market additional listing fee............................... $ 0
*Costs of Printing.......................................................... $ 1,560
*Legal Fees and Expenses.................................................... $ 50,000
*Accounting Fees and Expenses............................................... $100,000
*Miscellaneous Expenses..................................................... $ 1,840
--------
*Total.................................................................... $325,000
</TABLE>
* Estimated
ITEM 15. LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law permits Delaware corporations to
eliminate or limit the monetary liability of directors for breach of their
fiduciary duty of care, subject to certain limitations. Our restated certificate
of incorporation provides that our directors are not liable to the Conexant or
its shareowners for monetary damages for breach of fiduciary duty as a director,
except for liability (1) for any breach of the director's duty of loyalty to
Conexant or its shareowners, (2) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3) for
willful or negligent violation of the laws governing the payment of dividends or
the purchase or redemption of stock or (4) for any transaction from which a
director derived an improper personal benefit.
The Delaware General Corporation Law provides for indemnification of
directors, officers, employees and agents subject to certain limitations. Our
by-laws and the appendix thereto provide for the indemnification of our
directors, officers, employees and agents to the extent permitted by Delaware
law. Our directors and officers are insured against certain liabilities for
actions taken in such capacities, including liabilities under the Securities
Act.
ITEM 16. INDEX TO EXHIBITS.
<TABLE>
<S> <C>
4.1 Indenture, dated as of February 1, 2000, between Conexant Systems, Inc.
and Bank One, N.A., as trustee, including the form of 4% Convertible
Subordinated Note Due 2007 attached as Exhibit A thereto.
4.2 Registration Rights Agreement, dated as of February 1, 2000, by and
among Conexant Systems, Inc. and Morgan Stanley & Co. Incorporated.
4.3 Restated Certificate of Incorporation of Conexant Systems, Inc., filed
as Exhibit 4.1 to Conexant's Registration Statement on Form S-8
(Registration No. 333-68755), and Amendment to Restated Certificate
</TABLE>
II-1
<PAGE> 48
<TABLE>
<S> <C>
of Incorporation, filed as Exhibit 4.a.2 to Conexant's Registration
Statement on Form S-3 (Registration No. 333-30596) are incorporated
herein by reference.
4.4 Amended By-Laws of Conexant, filed as Exhibit 4.2 to Conexant's
Registration Statement on Form S-8 (Registration No. 333-68755), is
incorporated herein by reference.
4.5 Specimen certificate for Common Stock, par value $1 per share, filed as
Exhibit 4.3 to Conexant's Registration Statement on Form 10 (File No.
000-24923), is incorporated herein by reference.
4.6 Rights Agreement, dated as of November 30, 1998, by and between Conexant
Systems, Inc. and ChaseMellon Shareholder Services, L.L.C. as rights
agent, filed as Exhibit 4.4 to Conexant's Registration Statement on Form
S-8 (Registration No. 333-68755) is incorporated herein by reference.
5 Opinion of Latham & Watkins, counsel to the registrant, regarding the
legality of the notes and the common stock into which the notes are
convertible.
12 Statement re: Computation of Ratios
23.1 Consent of Deloitte & Touche LLP, independent auditors.
23.2 Consent of Arthur Andersen LLP, independent public accountants.
23.3 Consent of Latham & Watkins, contained in its opinion filed as Exhibit 5
to this Registration Statement.
24 Power of Attorney authorizing certain persons to sign this Registration
Statement on behalf of certain directors and officers of Conexant.
25 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of Bank One, N.A., trustee under the
indenture.
</TABLE>
ITEM 17. UNDERTAKINGS.
A. The Company 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;
(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.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total increase or decrease in
volume of securities offered would not exceed that which was
registered) and any deviation from the low or high of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price, set
forth in the "Calculation of Registration Fee" table in the
effective 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;
II-2
<PAGE> 49
provided, however, that clauses (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by those clauses is
contained in periodic reports filed with or furnished to the Commission by the
Company pursuant to Section 13 or 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(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.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Company's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
B. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the provisions described above, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company 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
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE> 50
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF NEWPORT BEACH, STATE OF CALIFORNIA, ON THE 14TH DAY
OF MARCH, 2000.
CONEXANT SYSTEMS, INC.
By /s/ Dwight W. Decker
-----------------------------------
(Dwight W. Decker, Chairman and
Chief Executive Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED ON THE 14TH DAY OF MARCH, 2000 BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED:
<TABLE>
<S> <C>
DWIGHT W. DECKER* Chairman of the Board and Chief Executive Officer
(principal executive officer) and Director
DONALD R. BEALL* Director
JERRE L. STEAD* Director
BALAKRISHNAN S. IYER* Senior Vice President and Chief Financial Officer
(principal financial officer)
STEVEN M. THOMSON* Vice President and Controller
(principal accounting officer)
*By /s/ DENNIS E. O'REILLY
(Dennis E. O'Reilly, Attorney-in-fact)**
</TABLE>
** By authority of the power of attorney filed as Exhibit 24 to this
Registration Statement.
II-4
<PAGE> 51
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------
<S> <C>
4.1 Indenture, dated as of February 1, 2000, between Conexant
Systems, Inc. and Bank One, N.A., as trustee, including the
form of 4% Convertible Subordinated Notes Due 2007 attached
as Exhibit A thereto
4.2 Registration Rights Agreement, dated as of February 1, 2000,
by and among Conexant Systems, Inc. and Morgan Stanley & Co.
Incorporated
5 Opinion of Latham & Watkins, counsel to the registrant,
regarding the legality of the notes and the common stock into
which the notes are convertible
12 Statement re: Computation of Ratios
23.1 Consent of Deloitte & Touche LLP, independent auditors
23.2 Consent of Arthur Andersen LLP, independent public accountants
23.3 Consent of Latham & Watkins, contained in its opinion filed
as Exhibit 5 to this Registration Statement
24 Power of Attorney authorizing certain persons to sign this
Registration Statement on behalf of certain directors and
officers of Conexant
25 Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939, as amended, of Bank One, N.A.,
trustee under the indenture
</TABLE>
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
CONEXANT SYSTEMS, INC.
To
BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
---------------------------
INDENTURE
Dated as of
February 1, 2000
---------------------------
4% Convertible Subordinated Notes Due 2007
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE ONE - DEFINITIONS
Section 1.1 Definitions................................................................................2
Affiliate.........................................................................................2
Board of Directors................................................................................3
Business Day......................................................................................3
Closing Price.....................................................................................3
Commission........................................................................................3
Common Stock......................................................................................3
Company...........................................................................................4
Company Notice....................................................................................4
Conexant Credit Agreement.........................................................................4
Conversion Price..................................................................................4
Corporate Trust Office............................................................................4
Custodian.........................................................................................4
Default...........................................................................................4
Defaulted Interest................................................................................4
Depositary........................................................................................5
Designated Senior Indebtedness....................................................................5
Event of Default..................................................................................5
Exchange Act......................................................................................5
Fundamental Change................................................................................5
Global Note.......................................................................................6
Headquarters Lease Documentation..................................................................6
Indebtedness......................................................................................7
Indenture.........................................................................................8
Initial Purchaser.................................................................................8
Institutional Accredited Investor.................................................................8
Liquidated Damages................................................................................8
Non-Payment Default...............................................................................8
Note or Notes.....................................................................................8
Note register.....................................................................................9
Note registrar....................................................................................9
Noteholder........................................................................................9
Notice Date.......................................................................................9
Officers' Certificate.............................................................................9
Opinion of Counsel................................................................................9
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
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Optional Redemption...............................................................................9
Outstanding.......................................................................................9
Payment Blockage Notice..........................................................................10
Person...........................................................................................10
Portal Market....................................................................................10
Predecessor Note.................................................................................10
QIB..............................................................................................10
Registration Rights Agreement....................................................................10
Representative...................................................................................10
Responsible Officer..............................................................................11
Restricted Securities............................................................................11
Rights...........................................................................................11
Rights Agreement.................................................................................11
Rule 144A........................................................................................11
Securities Act...................................................................................11
Senior Indebtedness..............................................................................11
Significant Subsidiary...........................................................................12
Subsidiary.......................................................................................12
Trading Day......................................................................................13
Trigger Event....................................................................................13
Trust Indenture Act..............................................................................13
Trustee..........................................................................................13
ARTICLE TWO - ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES
Section 2.1 Designation Amount and Issue of Notes.....................................................13
Section 2.2 Form of Notes.............................................................................14
Section 2.3 Date and Denomination of Notes; Payments of Interest......................................15
Section 2.4 Execution of Notes........................................................................18
Section 2.5 Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Depositary......19
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes................................................29
Section 2.7 Temporary Notes...........................................................................31
Section 2.8 Cancellation of Notes Paid, Etc...........................................................32
Section 2.9 CUSIP Numbers.............................................................................32
</TABLE>
ii
<PAGE> 4
<TABLE>
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<S> <C>
ARTICLE THREE - REDEMPTION OF NOTES
Section 3.1 Initial Prohibition on Redemption; Optional Redemption by the Company.....................33
Section 3.2 Notice of Redemptions; Selection of Notes.................................................33
Section 3.3 Payment of Notes Called for Redemption....................................................36
Section 3.4 Conversion Arrangement on Call for Redemption.............................................38
Section 3.5 Redemption at Option of Holders...........................................................38
ARTICLE FOUR - SUBORDINATION OF NOTES
Section 4.1 Agreement of Subordination................................................................42
Section 4.2 Payments to Noteholders...................................................................43
Section 4.3 Subrogation of Notes......................................................................47
Section 4.4 Authorization to Effect Subordination.....................................................48
Section 4.5 Notice to Trustee.........................................................................49
Section 4.6 Trustee's Relation to Senior Indebtedness.................................................50
Section 4.7 No Impairment of Subordination............................................................51
Section 4.8 Certain Conversions Not Deemed Payment....................................................51
Section 4.9 Article Applicable to Paying Agents.......................................................52
Section 4.10 Senior Indebtedness Entitled to Rely.....................................................52
Section 4.11 Reliance on Judicial Order or Certificate of Liquidating Agent...........................52
ARTICLE FIVE - PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 Payment of Principal, Premium and Interest................................................53
Section 5.2 Maintenance of Office or Agency...........................................................53
Section 5.3 Appointments to Fill Vacancies in Trustee's Office........................................54
Section 5.4 Provisions as to Paying Agent.............................................................54
Section 5.5 Existence.................................................................................56
Section 5.6 Maintenance of Properties.................................................................56
Section 5.7 Payment of Taxes and Other Claims.........................................................57
Section 5.8 Rule 144A Information Requirement.........................................................57
Section 5.9 Stay, Extension and Usury Laws............................................................58
Section 5.10 Compliance Certificate...................................................................58
Section 5.11 Amendment of the Company's Rights Plan...................................................59
</TABLE>
iii
<PAGE> 5
<TABLE>
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<S> <C>
ARTICLE SIX - NOTEHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 6.1 Noteholders' Lists........................................................................60
Section 6.2 Preservation and Disclosure of Lists......................................................60
Section 6.3 Reports by Trustee........................................................................61
Section 6.4 Reports by Company........................................................................61
ARTICLE SEVEN - REMEDIES OF THE TRUSTEE AND NOTEHOLDERS ON AN EVENT OF DEFAULT
Section 7.1 Events of Default.........................................................................62
Section 7.2 Payments of Notes on Default; Suit Therefor...............................................65
Section 7.3 Application of Monies Collected by Trustee................................................67
Section 7.4 Proceedings by Noteholder.................................................................69
Section 7.5 Proceedings by Trustee....................................................................70
Section 7.6 Remedies Cumulative and Continuing........................................................70
Section 7.7 Direction of Proceedings and Waiver of Defaults by Majority of Noteholders................71
Section 7.8 Notice of Defaults........................................................................72
Section 7.9 Undertaking to Pay Costs..................................................................72
ARTICLE EIGHT - THE TRUSTEE
Section 8.1 Duties and Responsibilities of Trustee....................................................73
Section 8.2 Reliance on Documents, Opinions, Etc......................................................75
Section 8.3 No Responsibility for Recitals, Etc.......................................................76
Section 8.4 Trustee, Paying Agents, Conversion Agents or Registrar May Own Notes......................77
Section 8.5 Monies to be Held in Trust................................................................77
Section 8.6 Compensation and Expenses of Trustee......................................................77
Section 8.7 Officers' Certificate as Evidence.........................................................78
Section 8.8 Conflicting Interests of Trustee..........................................................79
Section 8.9 Eligibility of Trustee....................................................................79
Section 8.10 Resignation or Removal of Trustee........................................................79
Section 8.11 Acceptance by Successor Trustee..........................................................81
Section 8.12 Succession by Merger, Etc................................................................82
Section 8.13 Preferential Collection of Claims........................................................83
Section 8.14 Trustee's Application for Instructions from the Company..................................83
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE NINE - THE NOTEHOLDERS
Section 9.1 Action by Noteholders.....................................................................84
Section 9.2 Proof of Execution by Noteholders.........................................................84
Section 9.3 Who Are Deemed Absolute Owners............................................................85
Section 9.4 Company-Owned Notes Disregarded...........................................................85
Section 9.5 Revocation of Consents; Future Holders Bound..............................................86
ARTICLE TEN - MEETINGS OF NOTEHOLDERS
Section 10.1 Purpose of Meetings......................................................................86
Section 10.2 Call of Meetings by Trustee..............................................................87
Section 10.3 Call of Meetings by Company or Noteholders...............................................88
Section 10.4 Qualifications for Voting................................................................88
Section 10.5 Regulations..............................................................................88
Section 10.6 Voting...................................................................................89
Section 10.7 No Delay of Rights by Meeting............................................................90
ARTICLE ELEVEN - SUPPLEMENTAL INDENTURES
Section 11.1 Supplemental Indentures Without Consent of Noteholders...................................90
Section 11.2 Supplemental Indenture with Consent of Noteholders.......................................92
Section 11.3 Effect of Supplemental Indenture.........................................................94
Section 11.4 Notation on Notes........................................................................94
Section 11.5 Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee..............95
ARTICLE TWELVE - CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1 Company May Consolidate, Etc., on Certain Terms..........................................95
Section 12.2 Successor Corporation to be Substituted..................................................96
Section 12.3 Opinion of Counsel to be Given Trustee...................................................97
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE THIRTEEN - SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1 Discharge of Indenture...................................................................97
Section 13.2 Deposited Monies to be Held in Trust by Trustee..........................................98
Section 13.3 Paying Agent to Repay Monies Held........................................................98
Section 13.4 Return of Unclaimed Monies...............................................................99
Section 13.5 Reinstatement............................................................................99
ARTICLE FOURTEEN - IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 14.1 Indenture and Notes Solely Corporate Obligations.........................................99
ARTICLE FIFTEEN - CONVERSION OF NOTES
Section 15.1 Right to Convert........................................................................100
Section 15.2 Exercise of Conversion Privilege; Issuance of Common Stock on Conversion; No
Adjustment for Interest or Dividends...................................101
Section 15.3 Cash Payments in Lieu of Fractional Shares..............................................103
Section 15.4 Conversion Price........................................................................104
Section 15.5 Adjustment of Conversion Price..........................................................104
Section 15.6 Effect of Reclassification, Consolidation, Merger or Sale...............................120
Section 15.7 Taxes on Shares Issued..................................................................122
Section 15.8 Reservation of Shares; Shares to be Fully Paid; Compliance with Governmental
Requirements; Listing of Common Stock..................................122
Section 15.9 Responsibility of Trustee...............................................................123
Section 15.10 Notice to Holders Prior to Certain Actions.............................................124
</TABLE>
vi
<PAGE> 8
<TABLE>
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<S> <C>
ARTICLE SIXTEEN - MISCELLANEOUS PROVISIONS
Section 16.1 Provisions Binding on Company's Successors..............................................126
Section 16.2 Official Acts by Successor Corporation..................................................126
Section 16.3 Addresses for Notices, Etc. ............................................................126
Section 16.4 Governing Law...........................................................................127
Section 16.5 Evidence of Compliance with Conditions Precedent; Certificates to Trustee...............127
Section 16.6 Legal Holidays..........................................................................128
Section 16.7 Trust Indenture Act.....................................................................128
Section 16.8 No Security Interest Created............................................................128
Section 16.9 Benefits of Indenture...................................................................129
Section 16.10 Table of Contents, Headings, Etc.......................................................129
Section 16.11 Authenticating Agent...................................................................129
Section 16.12 Execution in Counterparts..............................................................130
Section 16.13 Severability...........................................................................130
</TABLE>
vii
<PAGE> 9
Reconciliation and Tie Between the Trust Indenture Act of 1939
and Indenture, dated as of February 1, 2000, between Conexant Systems, Inc. and
Bank One Trust Company, National Association, as Trustee.
TRUST INDENTURE ACT SECTION INDENTURE SECTION
Section 310(a)(1)................................ 8.9
(a)(2)............................ 8.9
(a)(3)............................ Not Applicable
(a)(4)............................ Not Applicable
(a)(5)............................ 8.9
(b)............................... 8.8; 8.9; 8.10; 8.11
Section 311(a) .................................. 8.13
(b)............................... 8.13
(b)(2)............................ 8.13
Section 312(a) .................................. 6.1; 6.2(a)
(b)............................... 6.2(b)
(c)............................... 6.2(c)
Section 313(a) .................................. 6.3(a)
(b)............................... 6.3(a)
(c)............................... 6.3(a)
(d)............................... 6.3(b)
Section 314(a) .................................. 6.4
(b)............................... Not Applicable
(c)(1)............................ 16.5
(c)(2)............................ 16.5
(c)(3)............................ Not Applicable
(d)............................... Not Applicable
(e)............................... 16.5
Section 315(a) .................................. 8.1
(b)............................... 7.8
(c)............................... 8.1
(d)............................... 8.1
(d)(1)............................ 8.1(a)
(d)(2)............................ 8.1(b)
(d)(3)............................ 8.1(c)
(e)............................... 7.9
Section 316(a) .................................. 7.7
(a)(1)(A)......................... 7.7
(a)(1)(B)......................... 7.7
(a)(2)............................ Not Applicable
(b)............................... 7.4
Section 317(a)(1)................................ 7.5
(a)(2)............................ 7.5
(b)............................... 5.4
Section 318(a) .................................. 16.7
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
viii
<PAGE> 10
INDENTURE
INDENTURE, dated as of February 1, 2000, between Conexant
Systems, Inc., a Delaware corporation (hereinafter called the "Company") having
its principal office at 4311 Jamboree Road, Newport Beach, California
92660-3095, and Bank One Trust Company, National Association, a national banking
association, as trustee hereunder (hereinafter called the "Trustee") having its
principal corporate office at 1 Bank One Plaza, Suite IL1-0126, Chicago,
Illinois, 60670 - 0126
W I T N E S S E T H :
WHEREAS, for its lawful corporate purposes, the Company has
duly authorized the issue of its 4% Convertible Subordinated Notes due 2007
(hereinafter called the "Notes"), in an aggregate principal amount not to exceed
$500,000,000 (or $650,000,000 if the purchase right set forth in Section 2 of
the Purchase Agreement dated January 28, 2000 (as amended from time to time by
the parties thereto) by and between the Company and the Initial Purchaser is
exercised in full) and, to provide the terms and conditions upon which the Notes
are to be authenticated, issued and delivered, the Company has duly authorized
the execution and delivery of this Indenture; and
WHEREAS, the Notes, the certificate of authentication to be
borne by the Notes, a form of assignment, a form of option to elect repayment
upon a Fundamental Change, and a form of conversion notice to be borne by the
Notes are to be substantially in the forms hereinafter provided for; and
WHEREAS, all acts and things necessary to make the Notes, when
executed by the Company and authenticated and delivered by the Trustee or a duly
authorized authenticating agent, as in this Indenture provided, the valid,
binding and legal obligations of the Company, and to constitute these presents a
valid agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized.
<PAGE> 11
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which
the Notes are, and are to be, authenticated, issued and delivered, and in
consideration of the premises and of the purchase and acceptance of the Notes by
the holders thereof, the Company covenants and agrees with the Trustee for the
equal and proportionate benefit of the respective holders from time to time of
the Notes (except as otherwise provided below), as follows:
ARTICLE ONE
DEFINITIONS
Section 1.1 Definitions. The terms defined in this Section 1.1
(except as herein otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings specified in this Section 1.1. All
other terms used in this Indenture that are defined in the Trust Indenture Act
or which are by reference therein defined in the Securities Act (except as
herein otherwise expressly provided or unless the context otherwise requires)
shall have the meanings assigned to such terms in said Trust Indenture Act and
in said Securities Act as in force at the date of the execution of this
Indenture. The words "herein", "hereof", "hereunder", and words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other Subdivision. The terms defined in this Article include the
plural as well as the singular.
"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
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"controlling" and "controlled" have meanings correlative to the foregoing.
"Board of Directors" means the Board of Directors of the
Company or a committee of such Board duly authorized to act for it hereunder.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which the banking institutions in The City of
New York or the city in which the Corporate Trust Office is located are
authorized or obligated by law or executive order to close or be closed.
"Closing Price" has the meaning specified in Section
15.5(h)(1).
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" means 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. Subject to
the provisions of Section 15.6, however, shares issuable on conversion of Notes
shall include only shares of the class designated as common stock of the Company
at the date of this Indenture (namely, the Common Stock, par value $1 per share)
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, however, 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
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<PAGE> 13
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 corporation named as the "Company" in the
first paragraph of this Indenture, and, subject to the provisions of Article
Twelve, shall include its successors and assigns.
"Company Notice" has the meaning specified in Section 3.5(b).
"Conexant Credit Agreement" means the Credit Agreement dated
as of December 21, 1998 among the Company, certain subsidiaries of the Company
from time to time party thereto, the lenders from time to time party thereto
(the "Lenders"), the Issuing Banks (as defined therein) and Credit Suisse First
Boston, as Administrative Agent and Collateral Agent for the Lenders, as such
agreement may be amended, modified, restated or supplemented from time to time
and any deferral, renewal, extension, refunding, refinancing or replacement
thereof.
"Conversion Price" has the meaning specified in Section 15.4.
"Corporate Trust Office" or other similar term, means the
designated office of the Trustee at which at any particular time its corporate
trust business shall be administered, which office is, at the date as of which
this Indenture is dated, located at 1 Bank One Plaza, Suite IL1-0126, Chicago,
Illinois, 60670-0126.
"Custodian" means Bank One Trust Company, National
Association, as custodian with respect to the Notes in global form, or any
successor entity thereto.
"Default" means any event that is, or after notice or passage
of time, or both, would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 2.3.
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"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section
2.5(d) as the Depositary with respect to such Notes, 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.
"Designated Senior Indebtedness" means (i) any Senior
Indebtedness outstanding from time to time under the Conexant Credit Agreement
and (ii) any other Senior Indebtedness with respect to 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). 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.
"Event of Default" means any event specified in Section
7.1(a), (b), (c), (d) or (e).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, as in effect from
time to time.
"Fundamental Change" means the occurrence of any transaction
or event in connection with which all or substantially all of the Common Stock
shall be exchanged for, converted into, acquired for or constitute solely the
right to receive consideration (whether by means of an
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<PAGE> 15
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.
"Global Note" has the meaning set forth in Section 2.5(b).
"Headquarters Lease Documentation" means the following
(individually and collectively):
(i) the Lease dated as of August 18, 1998 between Deutsche
Bank AG, New York Branch, as Agent Lessor for the Lessors named
therein, and the Company, as Lessee, (the "Lease");
(ii) the Guarantee dated as of August 18, 1998 made by
Rockwell International Corporation in favor of Deutsche Bank AG, New
York Branch and/or Grand Cayman Branch, in its individual capacity, as
Agent Lessor and as Agent and various financial institutions referred
to therein as Lessors or as Lenders (the "Guarantee");
(iii) the Participation Agreement dated as of August 18, 1998,
among the Company, as Lessee, Deutsche Bank AG, New York Branch and/or
Cayman Islands Branch, as Agent Lessor, Lessor, Agent for the Lenders
and Lender and Deutsche Bank Securities Inc., as Arranger (the
"Participation Agreement"); and
(iv) the other operative agreements referred to in any of the
Lease, the Guarantee or the Participation Agreement;
in each case as amended, modified, supplemented or restated from time to time.
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"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), other than any account payable or other accrued current liability or
obligation incurred in the ordinary course of business in connection with the
obtaining of materials or services; (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
required, in conformity with generally accepted accounting principles, to be
accounted for as capitalized lease obligations on the balance sheet of such
Person and all obligations and other liabilities (contingent or otherwise) under
the Headquarters Lease Documentation and any lease or related document
(including a purchase agreement) in connection with the lease of real property
which provides that such Person is contractually obligated to purchase or cause
a third party to purchase the leased property and thereby guarantee a minimum
residual value of the leased property to the lessor and the obligations of such
Person under such lease or related document to purchase or to cause a third
party to purchase such leased property; (d) all obligations of such Person
(contingent or otherwise) with respect to an interest rate or other swap, cap or
collar agreement or other similar instrument or agreement or foreign currency
hedge, exchange, purchase or 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
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<PAGE> 17
indebtedness or other obligations described in clauses (a) through (e) 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). For purposes of clause (c) of
this definition, the phrase "all obligations and other liabilities (continent or
otherwise) under the Headquarters Lease Documentation" shall mean the "Lease
Payment Obligations" as such term is defined in the Lease referred to in the
definition of Headquarters Lease Documentation, without regard to whether such
Lease Payment Obligations are paid pursuant to the Lease or the Guarantee
referred to in the definition of Headquarters Lease Documentation, but without
duplication of any obligation, liability or payment in respect of any amount
constituting Lease Payment Obligations under the Lease or the Guarantee.
"Indenture" means this instrument as originally executed or,
if amended or supplemented as herein provided, as so amended or supplemented.
"Initial Purchaser" means Morgan Stanley & Co. Incorporated.
"Institutional Accredited Investor" means an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Liquidated Damages" has the meaning specified for "Liquidated
Damages Amount" in Section 2(e) of the Registration Rights Agreement.
"Non-Payment Default" has the meaning specified in Section
4.2(ii).
"Note" or "Notes" means any Note or Notes, as the case may be,
authenticated and delivered under this Indenture, including the Global Note.
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<PAGE> 18
"Note register" has the meaning specified in Section 2.5(a).
"Note registrar" has the meaning specified in Section 2.5(a).
"Noteholder" or "holder" as applied to any Note, or other
similar terms (but excluding the term "beneficial holder"), means any Person in
whose name at the time a particular Note is registered on the Note registrar's
books.
"Notice Date" has the meaning specified in Section 3.1(b).
"Officers' Certificate", when used with respect to the
Company, means a certificate signed by both (a) the Chairman of the Board, the
Chief Executive Officer, the President or any Vice President (whether or not
designated by a number or numbers or word or words added before or after the
title "Vice President") and (b) the Treasurer or any Assistant Treasurer, the
Controller or any Assistant Controller, or the Secretary or any Assistant
Secretary of the Company.
"Opinion of Counsel" means an opinion in writing signed by
legal counsel, who may be an employee of or counsel to the Company, or other
counsel reasonably acceptable to the Trustee.
"Optional Redemption" has the meaning specified in Section
3.1(b).
"Outstanding", when used with reference to Notes and subject
to the provisions of Section 9.4, means, as of any particular time, all Notes
authenticated and delivered by the Trustee under this Indenture, except:
(a) Notes theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(b) Notes, or portions thereof, (i) for the redemption of
which monies in the necessary amount shall have been deposited in trust
with the Trustee or
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<PAGE> 19
with any paying agent (other than the Company) or (ii) which shall have
been otherwise defeased in accordance with Article Thirteen;
(c) Notes in lieu of which, or in substitution for which,
other Notes shall have been authenticated and delivered pursuant to the
terms of Section 2.6; and
(d) Notes converted into Common Stock pursuant to Article
Fifteen and Notes deemed not outstanding pursuant to Article Three.
"Payment Blockage Notice" has the meaning specified in Section
4.2(ii).
"Person" means a corporation, an association, a partnership, a
limited liability company, an individual, a joint venture, a joint stock
company, a trust, an unincorporated organization or a government or an agency or
a political subdivision thereof.
"Portal Market" means The Portal Market operated by the
National Association of Securities Dealers, Inc. or any successor thereto.
"Predecessor Note" of any particular Note means every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note, and, for the purposes of this definition, any Note
authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or
stolen Note shall be deemed to evidence the same debt as the lost, destroyed or
stolen Note that it replaces.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registration Rights Agreement" means that certain
Registration Rights Agreement, dated as of February 1, 2000, among the Company
and the Initial Purchasers, as amended from time to time in accordance with its
terms.
"Representative" means (a) the indenture trustee or other
trustee, agent or representative for any Senior
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<PAGE> 20
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.
"Responsible Officer", when used with respect to the Trustee,
means an officer of the Trustee in the Corporate Trust Office assigned and duly
authorized by the Trustee to administer this Indenture.
"Restricted Securities" has the meaning specified in Section
2.5(d).
"Rights" has the meaning specified in Section 5.11.
"Rights Agreement" has the meaning specified in Section 5.11.
"Rule 144A" means Rule 144A as promulgated under the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder, as in effect from time to
time.
"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) and rent payable on or
in connection with, and all fees, costs, expenses and other amounts 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
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guaranteed by the Company (including all deferrals, renewals, extensions or
refundings of, or amendments, modifications or supplements to, the foregoing),
unless in the case of any particular Indebtedness 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 the Notes or
expressly provides that such Indebtedness is "pari passu" or "junior" to the
Notes. Notwithstanding the foregoing, the term "Senior Indebtedness" shall not
include the Company's 4 1/4% Convertible Subordinated Notes due 2006 or 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.
"Significant Subsidiary" means, as of any date of
determination, a Subsidiary of the Company that would constitute a "significant
subsidiary" as such term is defined under Rule 1-02 of Regulation S-X of the
Commission.
"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 or other equity interest 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).
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"Trading Day" has the meaning specified in Section 15.5(h)(5).
"Trigger Event" has the meaning specified in Section 15.5(d).
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended, as it was in force at the date of this Indenture, except as provided
in Sections 11.3 and 15.6; provided, however, that, in the event the Trust
Indenture Act of 1939 is amended after the date hereof, the term "Trust
Indenture Act" shall mean, to the extent required by such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trustee" means Bank One Trust Company, National Association,
and its successors and any corporation resulting from or surviving any
consolidation or merger to which it or its successors may be a party and any
successor trustee at the time serving as successor trustee hereunder.
The definitions of certain other terms are as specified in
Sections 2.5 and 3.5 and Article Fifteen.
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION,
REGISTRATION AND EXCHANGE OF NOTES
Section 2.1 Designation Amount and Issue of Notes. The Notes
shall be designated as "4% Convertible Subordinated Notes due 2007". Notes not
to exceed the aggregate principal amount of $500,000,000 (or $650,000,000 if the
purchase right set forth in Section 2 of the Purchase Agreement dated January
28, 2000 (as amended from time to time by the parties thereto) by and between
the Company and the Initial Purchaser is exercised in full) (except pursuant to
Sections 2.5, 2.6, 3.3, 3.5 and 15.2 hereof) upon the execution of this
Indenture, or from time to time thereafter, may be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Notes to or upon the written order of the Company,
signed by (a) its Chairman of
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the Board, Chief Executive Officer, President or any Vice President (whether or
not designated by a number or numbers or word or words added before or after the
title "Vice President") and (b) its Treasurer or any Assistant Treasurer, its
Controller or any Assistant Controller or its Secretary or any Assistant
Secretary, without any further action by the Company hereunder.
Section 2.2 Form of Notes. The Notes and the Trustee's
certificate of authentication to be borne by such Notes shall be substantially
in the form set forth in Exhibit A, which is incorporated in and made a part of
this Indenture.
Any of the Notes may have such letters, numbers or other marks
of identification and such notations, legends and endorsements as the officers
executing the same may approve (execution thereof to be conclusive evidence of
such approval) and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange or automated quotation system on which the Notes may be
listed, or to conform to usage.
Any Note in global form shall represent such of the
outstanding Notes as shall be specified therein and shall provide that it shall
represent the aggregate amount of outstanding Notes from time to time endorsed
thereon and that the aggregate amount of outstanding Notes represented thereby
may from time to time be increased or reduced to reflect transfers or exchanges
permitted hereby. Any endorsement of a Note in global form to reflect the amount
of any increase or decrease in the amount of outstanding Notes 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 Notes
in accordance with this Indenture. Payment of principal of and interest and
premium, if any, on any Note in global form shall be made to the holder of such
Note.
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The terms and provisions contained in the form of Note
attached as Exhibit A hereto shall constitute, and are hereby expressly made, a
part of this Indenture and, to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Section 2.3 Date and Denomination of Notes; Payments of
Interest. The Notes shall be issuable in registered form without coupons in
denominations of $1,000 principal amount and integral multiples thereof. Every
Note shall be dated the date of its authentication and shall bear interest from
the applicable date in each case as specified on the face of the form of Note
attached as Exhibit A hereto. Interest on the Notes shall be computed on the
basis of a 360-day year comprised of twelve (12) 30-day months.
The Person in whose name any Note (or its Predecessor Note) is
registered on the Note register at the close of business on any record date with
respect to any interest payment date shall be entitled to receive the interest
payable on such interest payment date, except (i) that the interest payable upon
redemption (unless the date of redemption is an interest payment date) will be
payable to the Person to whom principal is payable and (ii) as set forth in the
next succeeding sentence. In the case of any Note (or portion thereof) that is
converted into Common Stock during the period from (but excluding) a record date
to (but excluding) the next succeeding interest payment date either (x) if such
Note (or portion thereof) has been called for redemption on a redemption date
which occurs during such period, or is to be redeemed in connection with a
Fundamental Change on a Repurchase Date (as defined in Section 3.5) that occurs
during such period, the Company shall not be required to pay interest on such
interest payment date in respect of any such Note (or portion thereof) except to
the extent required to be paid upon redemption of such Note or portion thereof
pursuant to Section 3.3 or 3.5 hereof or (y) if such Note (or portion thereof)
has not been called for redemption on a redemption date that occurs during such
period and is not to be
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redeemed in connection with a Fundamental Change on a Repurchase Date that
occurs during such period, such Note (or portion thereof) that is submitted for
conversion during such period shall be accompanied by funds equal to the
interest payable on such succeeding interest payment date on the principal
amount so converted, as provided in the penultimate paragraph of Section 15.2
hereof. Interest shall be payable at the office of the Company maintained by the
Company for such purposes in the Borough of Manhattan, City of New York, which
shall initially be an office or agency of the Trustee and may, as the Company
shall specify to the paying agent in writing by each record date, be paid either
(i) by check mailed to the address of the Person entitled thereto as it appears
in the Note register (provided that the holder of Notes with an aggregate
principal amount in excess of $5,000,000 shall, at the written election of such
holder, be paid by wire transfer in immediately available funds) or (ii) by
transfer to an account maintained by such Person located in the United States;
provided, however, that payments to the Depositary will be made by wire transfer
of immediately available funds to the account of the Depositary or its nominee.
The term "record date" with respect to any interest payment date shall mean the
January 15 or July 15 preceding the relevant February 1 or August 1,
respectively.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any February 1 or August 1 (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
Noteholder on the relevant record date by virtue of his having been such
Noteholder, and such Defaulted Interest shall be paid by the Company, at its
election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of
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Defaulted Interest to be paid on each Note and the date of the payment
(which shall be not less than twenty-five (25) days after the receipt
by the Trustee of such notice, unless the Trustee shall consent to an
earlier date), and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount to be paid in
respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Person entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a special record date
for the payment of such Defaulted Interest which shall be not more than
fifteen (15) days and not less than ten (10) days prior to the date of
the proposed payment, and not less than ten (10) days after the receipt
by the Trustee of the notice of the proposed payment, the Trustee shall
promptly notify the Company of such special record date and, in the
name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the special record date
therefor to be mailed, first-class postage prepaid, to each Noteholder
at his address as it appears in the Note register, not less than ten
(10) days prior to such special record date. Notice of the proposed
payment of such Defaulted Interest and the special record date therefor
having been so mailed, such Defaulted Interest shall be paid to the
Persons in whose names the Notes (or their respective Predecessor
Notes) were registered at the close of business on such special record
date and shall no longer be payable pursuant to the following clause
(2) of this Section 2.3.
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Notes
may be listed or designated for issuance, and upon such notice as may
be required by such exchange or automated quotation system, if, after
notice given by the Company
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to the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.
Section 2.4 Execution of Notes. The Notes shall be signed in
the name and on behalf of the Company by the manual or facsimile signature of
its Chairman of the Board, Chief Executive Officer, President or any Vice
President (whether or not designated by a number or numbers or word or words
added before or after the title "Vice President") and attested by the manual or
facsimile signature of its Secretary or any of its Assistant Secretaries or its
Treasurer or any of its Assistant Treasurers (which may be printed, engraved or
otherwise reproduced thereon, by facsimile or otherwise). Only such Notes as
shall bear thereon a certificate of authentication substantially in the form set
forth on the form of Note attached as Exhibit A hereto, manually executed by the
Trustee (or an authenticating agent appointed by the Trustee as provided by
Section 16.11), shall be entitled to the benefits of this Indenture or be valid
or obligatory for any purpose. Such certificate by the Trustee (or such an
authenticating agent) upon any Note executed by the Company shall be conclusive
evidence that the Note so authenticated has been duly authenticated and
delivered hereunder and that the holder is entitled to the benefits of this
Indenture.
In case any officer of the Company who shall have signed any
of the Notes shall cease to be such officer before the Notes so signed shall
have been authenticated and delivered by the Trustee, or disposed of by the
Company, such Notes nevertheless may be authenticated and delivered or disposed
of as though the person who signed such Notes had not ceased to be such officer
of the Company, and any Note may be signed on behalf of the Company by such
persons as, at the actual date of the execution of such Note, shall be the
proper officers of the Company, although at the date of the execution of this
Indenture any such person was not such an officer.
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Section 2.5 Exchange and Registration of Transfer of Notes;
Restrictions on Transfer; Depositary.
(a) The Company shall cause to be kept at the Corporate Trust
Office a register (the register maintained in such office and in any other
office or agency of the Company designated pursuant to Section 5.2 being herein
sometimes collectively referred to as the "Note register") in which, subject to
such reasonable regulations as it may prescribe, the Company shall provide for
the registration of Notes and of transfers of Notes. The Note register shall be
in written form or in any form capable of being converted into written form
within a reasonably prompt period of time. The Trustee is hereby appointed "Note
registrar" for the purpose of registering Notes and transfers of Notes as herein
provided. The Company may appoint one or more co-registrars in accordance with
Section 5.2.
Upon surrender for registration of transfer of any Note to the
Note registrar or any co-registrar, and satisfaction of the requirements for
such transfer set forth in this Section 2.5, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount and bearing such restrictive legends as may be
required by this Indenture.
Notes may be exchanged for other Notes of any authorized
denominations and of a like aggregate principal amount, upon surrender of the
Notes to be exchanged at any such office or agency maintained by the Company
pursuant to Section 5.2. Whenever any Notes are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the Notes
which the Noteholder making the exchange is entitled to receive bearing
registration numbers not contemporaneously outstanding.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same
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benefits under this Indenture, as the Notes surrendered upon such registration
of transfer or exchange.
All Notes presented or surrendered for registration of
transfer or for exchange, redemption or conversion shall (if so required by the
Company or the Note registrar) be duly endorsed, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company, and
the Notes shall be duly executed by the Noteholder thereof or his attorney duly
authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax, assessment or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes.
Neither the Company nor the Trustee nor any Note registrar
shall be required to exchange or register a transfer of (a) any Notes for a
period of fifteen (15) days next preceding any selection of Notes to be
redeemed, (b) any Notes or portions thereof called for redemption pursuant to
Section 3.2, (c) any Notes or portions thereof surrendered for conversion
pursuant to Article Fifteen or (d) any Notes or portions thereof tendered for
redemption (and not withdrawn) pursuant to Section 3.5.
(b) So long as the Notes are eligible for book-entry
settlement with the Depositary, or unless otherwise required by law, all Notes
that, upon initial issuance are beneficially owned by QIBs or as a result of a
sale or transfer after initial issuance are beneficially owned by QIBs, will be
represented by one or more Notes in global form registered in the name of the
Depositary or the nominee of the Depositary (the "Global Note"), except as
otherwise specified below. The transfer and exchange of beneficial interests in
any such Global Note shall be effected through the Depositary in accordance with
this Indenture and the procedures of the Depositary therefor. The Trustee shall
make appropriate endorsements to reflect increases or
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<PAGE> 30
decreases in the principal amounts of any such Global Note as set forth on the
face of the Note ("Principal Amount") to reflect any such transfers. Except as
provided below, beneficial owners of a Global Note 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 Global Note.
(c) So long as the Notes are eligible for book-entry
settlement with the Depositary, or unless otherwise required by law, upon any
transfer of a definitive Note to a QIB in accordance with Rule 144A, and upon
receipt of the definitive Note or Notes being so transferred, together with a
certification, substantially in the form on the reverse of the Note, from the
transferor that the transfer is being made in compliance with Rule 144A (or
other evidence satisfactory to the Trustee), the Trustee shall make an
endorsement on the Global Note to reflect an increase in the aggregate Principal
Amount of the Notes represented by such Global Note, and the Trustee shall
cancel such definitive Note or Notes in accordance with the standing
instructions and procedures of the Depositary, the aggregate Principal Amount of
the Notes represented by such Global Note to be increased accordingly; provided,
however, that no definitive Note, or portion thereof, in respect of which the
Company or an Affiliate of the Company held any beneficial interest shall be
included in such Global Note until such definitive Note is freely tradable in
accordance with Rule 144(k) under the Securities Act, provided further that the
Trustee shall issue Notes in definitive form upon any transfer of a beneficial
interest in the Global Note to the Company or any Affiliate of the Company.
Upon any sale or transfer of a Note 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
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this Indenture. Upon any transfer of a beneficial interest in the Global Note to
an Institutional Accredited Investor, the Trustee shall make an endorsement on
the Global Note to reflect a decrease in the aggregate Principal Amount of the
Notes represented by such Global Note, and the Company shall execute a
definitive Note or Notes in exchange therefore, and the Trustee, upon receipt of
such definitive Note or Notes and the written order of the Company, shall
authenticate and deliver such, definitive Note or Notes.
Any Note 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 or by the National Association of Securities Dealers,
Inc. in order for the Notes to be tradeable on The Portal Market or as may be
required for the Notes 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 or automated quotation system upon which the Notes 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 Notes
are subject.
(d) Every Note that bears or is required under this Section
2.5(d) to bear the legend set forth in this Section 2.5(d) (together with any
Common Stock issued upon conversion of the Notes and required to bear the legend
set forth in Section 2.5(e), collectively, the "Restricted Securities") shall be
subject to the restrictions on transfer set forth in this Section 2.5(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 Noteholder's acceptance
thereof, agrees to be bound by all such restrictions on transfer. As used in
Sections 2.5(d) and 2.5(e), the term "transfer" encompasses any sale, pledge,
loan, transfer or other disposition whatsoever of any Restricted Security.
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<PAGE> 32
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 Note (and all securities issued in exchange
therefor or substitution thereof, other than Common Stock, if any, issued upon
conversion thereof, which shall bear the legend set forth in Section 2.5(e), if
applicable) shall bear a legend in substantially the following form, unless such
Note 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:
THE NOTE 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"); (2) AGREES THAT IT WILL NOT,
PRIOR TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE
NOTE EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR
ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THE NOTE
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH
NOTE EXCEPT (A) TO CONEXANT SYSTEMS, INC. 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 BANK ONE TRUST COMPANY,
NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
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<PAGE> 33
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE NOTE
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 BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION, 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 NOTE EVIDENCED HEREBY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH
ANY TRANSFER OF THE NOTE EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF
THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE 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 BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE
(OR A SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED TRANSFEREE IS
AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A PURCHASER WHO IS NOT A
U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO BANK
ONE TRUST COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR
TRUSTEE, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS SUCH 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
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REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON
THE EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY PURSUANT TO
CLAUSE (2)(E) ABOVE OR UPON ANY TRANSFER OF THE NOTE EVIDENCED HEREBY
UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION). AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT.
Any Note (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 conditions for removal of the foregoing
legend set forth therein have been satisfied may, upon surrender of such Note
for exchange to the Note registrar in accordance with the provisions of this
Section 2.5, be exchanged for a new Note or Notes, of like tenor and aggregate
principal amount, which shall not bear the restrictive legend required by this
Section 2.5(d).
Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in the second paragraph of Section 2.5(c) and in
this Section 2.5(d)), a Note in global form may not be transferred as a whole or
in part except by the Depositary to a nominee of the Depositary or by a nominee
of the Depositary to the Depositary or another nominee of the Depositary or by
the Depositary or any such nominee to a successor Depositary or a nominee of
such successor Depositary.
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 Notes in global form. Initially, the Global
Note 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 Note in global form
notifies the Company that it is unwilling or unable to continue as Depositary
for such Note, the Company may
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appoint a successor Depositary with respect to such Note. If a successor
Depositary is not appointed by the Company within ninety (90) days after the
Company receives such notice, the Company will execute, and the Trustee, upon
receipt of an Officers' Certificate for the authentication and delivery of
Notes, will authenticate and deliver, Notes in certificated form, in aggregate
principal amount equal to the principal amount of such Note in global form, in
exchange for such Note in global form.
If a Note in certificated form is issued in exchange for any
portion of a Note in global form after the close of business at the office or
agency where such exchange occurs on any record date and before the opening of
business at such office or agency on the next succeeding interest payment date,
interest will not be payable on such interest payment date in respect of such
certificated Note, but will be payable on such interest payment date, subject to
the provisions of Section 2.3, only to the Person to whom interest in respect of
such portion of such Note in global form is payable in accordance with the
provisions of this Indenture.
Notes in certificated form issued in exchange for all or a
part of a Note in global form pursuant to this Section 2.5 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 Notes in certificated form to the Persons in whose names such Notes
in certificated form are so registered.
At such time as all interests in a Note in global form have
been redeemed, converted, canceled, exchanged for Notes in certificated form, or
transferred to a transferee who receives Notes in certificated form thereof,
such Note in global form shall, upon receipt thereof, be canceled by the Trustee
in accordance with standing procedures and instructions existing between the
Depositary and the Custodian. At any time prior to such cancellation, if any
interest in a Note in global form is exchanged for Notes in
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<PAGE> 36
certificated form, redeemed, converted, repurchased or canceled, or transferred
to a transferee who receives Notes in certificated form therefor or any Note in
certificated form is exchanged or transferred for part of a Note in global form,
the principal amount of such Note in global form shall, in accordance with the
standing procedures and instructions existing between the Depositary and the
Custodian, be appropriately reduced or increased, as the case may be, and an
endorsement shall be made on such Note 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 any Note 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 Notes that have been transferred pursuant to a registration
statement that has been declared effective under the Securities Act, or unless
otherwise agreed by the Company in writing with written notice thereof to the
transfer agent:
THE COMMON STOCK 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.
THE HOLDER HEREOF AGREES THAT, UNTIL THE EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO SALES OF THE COMMON STOCK 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 EXCEPT (A) TO CONEXANT SYSTEMS, INC. OR ANY
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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 CHASEMELLON SHAREHOLDER SERVICES, L.L.C., 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 A
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 CHASEMELLON SHAREHOLDER SERVICES, L.L.C., AS TRANSFER AGENT
(OR A SUCCESSOR TRANSFER AGENT, AS APPLICABLE), SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS SUCH TRANSFER AGENT 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 (3) IT WILL
DELIVER TO EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS
TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO CLAUSE 1(E) ABOVE) A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A PURCHASER
WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO CHASEMELLON SHAREHOLDER SERVICES, L.L.C. (OR A SUCCESSOR
TRANSFER AGENT, AS APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO
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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 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). AS USED HEREIN, THE TERMS "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT.
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 2.5(e).
(f) Any Note or Common Stock issued upon the conversion or
exchange of a Note 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 Notes or Common Stock, as the case may be, no longer being "restricted
securities" (as defined under Rule 144).
Section 2.6 Mutilated, Destroyed, Lost or Stolen Notes. In
case any Note shall become mutilated or be
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<PAGE> 39
destroyed, lost or stolen, the Company in its discretion may execute, and upon
its written request the Trustee or an authenticating agent appointed by the
Trustee shall authenticate and make available for delivery, a new Note, bearing
a number not contemporaneously outstanding, in exchange and substitution for the
mutilated Note, or in lieu of and in substitution for the Note so destroyed,
lost or stolen. In every case the applicant for a substituted Note shall furnish
to the Company, to the Trustee and, if applicable, to such authenticating agent
such security or indemnity as may be required by them to save each of them
harmless for any loss, liability, cost or expense caused by or connected with
such substitution, and, in every case of destruction, loss or theft, the
applicant shall also furnish to the Company, to the Trustee and, if applicable,
to such authenticating agent evidence to their satisfaction of the destruction,
loss or theft of such Note and of the ownership thereof.
Following receipt by the Trustee or such authenticating agent,
as the case may be, of satisfactory security or indemnity and evidence, as
described in the preceding paragraph, the Trustee or such authenticating agent
may authenticate any such substituted Note and make available for delivery such
Note. Upon the issuance of any substituted Note, the Company may require the
payment of a sum sufficient to cover any tax, assessment or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Note which has matured or is about to mature or has been
called for redemption or has been tendered for redemption (and not withdrawn) or
is to be converted into Common Stock shall become mutilated or be destroyed,
lost or stolen, the Company may, instead of issuing a substitute Note, pay or
authorize the payment of or convert or authorize the conversion of the same
(without surrender thereof except in the case of a mutilated Note), as the case
may be, if the applicant for such payment or conversion shall furnish to the
Company, to the Trustee and, if applicable, to such authenticating agent such
security or indemnity as may be required by them to save each of them harmless
for any loss, liability, cost or expense caused by or connected with such
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<PAGE> 40
substitution, and, in every case of destruction, loss or theft, the applicant
shall also furnish to the Company, the Trustee and, if applicable, any paying
agent or conversion agent evidence to their satisfaction of the destruction,
loss or theft of such Note and of the ownership thereof.
Every substitute Note issued pursuant to the provisions of
this Section 2.6 by virtue of the fact that any Note is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Note shall be found at any time,
and shall be entitled to all the benefits of (but shall be subject to all the
limitations set forth in) this Indenture equally and proportionately with any
and all other Notes duly issued hereunder. To the extent permitted by law, all
Notes shall be held and owned upon the express condition that the foregoing
provisions are exclusive with respect to the replacement or payment or
conversion of mutilated, destroyed, lost or stolen Notes and shall preclude any
and all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment or
conversion of negotiable instruments or other securities without their
surrender.
Section 2.7 Temporary Notes. Pending the preparation of Notes
in certificated form, the Company may execute and the Trustee or an
authenticating agent appointed by the Trustee shall, upon the written request of
the Company, authenticate and deliver temporary Notes (printed or lithographed).
Temporary Notes shall be issuable in any authorized denomination, and
substantially in the form of the Notes in certificated form, but with such
omissions, insertions and variations as may be appropriate for temporary Notes,
all as may be determined by the Company. Every such temporary Note shall be
executed by the Company and authenticated by the Trustee or such authenticating
agent upon the same conditions and in substantially the same manner, and with
the same effect, as the Notes in certificated form. Without unreasonable delay
the Company will execute and deliver to the Trustee or such authenticating agent
Notes in certificated form (other than
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in the case of Notes in global form) and thereupon any or all temporary Notes
(other than any such Note in global form) may be surrendered in exchange
therefor, at each office or agency maintained by the Company pursuant to Section
5.2 and the Trustee or such authenticating agent shall authenticate and make
available for delivery in exchange for such temporary Notes an equal aggregate
principal amount of Notes in certificated form. Such exchange shall be made by
the Company at its own expense and without any charge therefor. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits and subject to the same limitations under this Indenture as Notes in
certificated form authenticated and delivered hereunder.
Section 2.8 Cancellation of Notes Paid, Etc. All Notes
surrendered for the purpose of payment, redemption, conversion, exchange or
registration of transfer shall, if surrendered to the Company or any paying
agent or any Note registrar or any conversion agent, be surrendered to the
Trustee and promptly canceled by it, or, if surrendered to the Trustee, shall be
promptly canceled by it, and no Notes shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. The Trustee
shall dispose of such canceled Notes in accordance with its customary
procedures. If the Company shall acquire any of the Notes, such acquisition
shall not operate as a redemption or satisfaction of the indebtedness
represented by such Notes unless and until the same are delivered to the Trustee
for cancellation.
Section 2.9 CUSIP Numbers. The Company in issuing the Notes
may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee
shall use "CUSIP" numbers in notices of redemption as a convenience to
Noteholders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Notes or as contained in any notice of a redemption and that reliance may
be placed only on the other identification numbers printed on the Notes, and any
such redemption shall not be affected by any defect in or
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omission of such numbers. The Company will promptly notify the Trustee of any
change in the "CUSIP" numbers.
ARTICLE THREE
REDEMPTION OF NOTES
Section 3.1 (a) Initial Prohibition on Redemption. Except as
otherwise provided in Section 3.5, the Notes may not be redeemed by the Company,
in whole or in part, at any time prior to February 6, 2003.
(b) Optional Redemption by the Company. At any time on or
after February 6, 2003, and prior to maturity, the Notes may be redeemed at the
option of the Company (an "Optional Redemption"), in whole or in part, upon
notice as set forth in Section 3.2 (the "Notice Date"), at the following
Optional Redemption prices (expressed as percentages of the principal amount),
together in each case with accrued and unpaid interest, if any (including
Liquidated Damages, if any) to, but excluding, the date fixed for redemption:
Period Redemption Price
- ------ ----------------
Beginning on February 6, 2003 and ending on January 31, 2004 102.286%
Beginning on February 1, 2004 and ending on January 31, 2005 101.714%
Beginning on February 1, 2005 and ending on January 31, 2006 101.143%
Beginning on February 1, 2006 and ending on January 31, 2007 100.571%
and 100% on February 1, 2007; provided, however, that if the date fixed for
redemption is on a February 1 or August 1, then the interest payable on such
date shall be paid to the holder of record on the preceding January 15 or July
15, respectively.
Section 3.2 Notice of Redemptions; Selection of Notes. In case
the Company shall desire to exercise the
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right to redeem all or, as the case may be, any part of the Notes pursuant to
Section 3.1, it shall fix a date for redemption and it or, at its written
request received by the Trustee not fewer than forty-five (45) days prior (or
such shorter period of time as may be acceptable to the Trustee) to the date
fixed for redemption, the Trustee in the name of and at the expense of the
Company, shall mail or cause to be mailed a notice of such redemption not fewer
than thirty (30) nor more than sixty (60) days prior to the date fixed for
redemption to the holders of Notes so to be redeemed as a whole or in part at
their last addresses as the same appear on the Note register; provided, however,
that if the Company shall give such notice, it shall also give written notice,
and written notice of the Notes to be redeemed, to the Trustee. The Company may
not give notice of any redemption of the Notes if a default in payment of
interest or premium, if any, on the Notes has occurred and is continuing. Such
mailing shall be by first class mail. 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 Note designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Note. Concurrently with the mailing
of any such notice of redemption, the Company shall issue a press release
announcing such redemption, the form and content of which press release shall be
determined by the Company in its sole discretion. The failure to issue any such
press release or any defect therein shall not affect the validity of the
redemption notice or any of the proceedings for the redemption of any Note
called for redemption.
Each such notice of redemption shall specify the aggregate
principal amount of Notes to be redeemed, the CUSIP number or numbers of the
Notes being redeemed, the date fixed for redemption (which shall be a Business
Day), the redemption price at which Notes are to be redeemed, the place or
places of payment, that payment will be made upon presentation and surrender of
such Notes, that interest accrued to the date fixed for redemption will be paid
as
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specified in said notice, and that on and after said date interest thereon or on
the portion thereof to be redeemed will cease to accrue. Such notice shall also
state the current Conversion Price and the date on which the right to convert
such Notes or portions thereof into Common Stock will expire. If fewer than all
the Notes are to be redeemed, the notice of redemption shall identify the Notes
to be redeemed (including CUSIP numbers, if any). In case any Note is to be
redeemed in part only, the notice of redemption shall state the portion of the
principal amount thereof to be redeemed and shall state that, on and after the
date fixed for redemption, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion thereof will be issued.
On or prior to the redemption date specified in the notice of
redemption given as provided in this Section 3.2, the Company will deposit with
the Trustee or with one or more paying agents (or, if the Company is acting as
its own paying agent, set aside, segregate and hold in trust as provided in
Section 5.4) an amount of money in immediately available funds sufficient to
redeem on the redemption date all the Notes (or portions thereof) so called for
redemption (other than those theretofore surrendered for conversion into Common
Stock) at the appropriate redemption price, together with accrued interest to,
but excluding, the date fixed for redemption; provided, however, that if such
payment is made on the redemption date it must be received by the Trustee or
paying agent, as the case may be, by 10:00 a.m. New York City time on such date.
The Company shall be entitled to retain any interest, yield or gain on amounts
deposited with the Trustee or any paying agent pursuant to this Section 3.2 in
excess of amounts required hereunder to pay the redemption price together with
accrued interest to, but excluding, the date fixed for redemption. If any Note
called for redemption is converted pursuant hereto prior to such redemption, any
money deposited with the Trustee or any paying agent or so segregated and held
in trust for the redemption of such Note shall be paid to the Company upon its
written request, or, if then held by the Company, shall be discharged from such
trust. Whenever any Notes are to be redeemed, the Company will give the Trustee
written notice
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in the form of an Officers' Certificate not fewer than forty five (45) days (or
such shorter period of time as may be acceptable to the Trustee) prior to the
redemption date as to the aggregate principal amount of Notes to be redeemed.
If less than all of the outstanding Notes are to be redeemed,
the Trustee shall select the Notes or portions thereof of the Global Note or the
Notes in certificated form to be redeemed (in principal amounts of $1,000 or
integral multiples thereof) by lot, on a pro rata basis or by another method the
Trustee deems fair and appropriate. If any Note selected for partial redemption
is submitted for conversion in part after such selection, the portion of such
Note submitted for conversion shall be deemed (so far as may be) to be the
portion to be selected for redemption. The Notes (or portions thereof) so
selected shall be deemed duly selected for redemption for all purposes hereof,
notwithstanding that any such Note is submitted for conversion in part before
the mailing of the notice of redemption.
Upon any redemption of less than all of the outstanding Notes,
the Company and the Trustee may (but need not), solely for purposes of
determining the pro rata allocation among such Notes as are unconverted and
outstanding at the time of redemption, treat as outstanding any Notes
surrendered for conversion during the period of fifteen (15) days next preceding
the mailing of a notice of redemption and may (but need not) treat as
outstanding any Note authenticated and delivered during such period in exchange
for the unconverted portion of any Note converted in part during such period.
Section 3.3 Payment of Notes Called for Redemption. If notice
of redemption has been given as above provided, the Notes or portion of Notes
with respect to which such notice has been given shall, unless converted into
Common Stock pursuant to the terms hereof, become due and payable on the date
fixed for redemption and at the place or places stated in such notice at the
applicable redemption price, together with interest accrued to (but excluding)
the date fixed for redemption, and on and after
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said date (unless the Company shall default in the payment of such Notes at the
redemption price, together with interest accrued to said date) interest on the
Notes or portion of Notes so called for redemption shall cease to accrue and,
after the close of business on the Business Day next preceding the date fixed
for redemption, such Notes shall cease to be convertible into Common Stock and,
except as provided in Sections 8.5 and 13.4, to be entitled to any benefit or
security under this Indenture, and the holders thereof shall have no right in
respect of such Notes except the right to receive the redemption price thereof
and unpaid interest to (but excluding) the date fixed for redemption. On
presentation and surrender of such Notes at a place of payment in said notice
specified, the said Notes or the specified portions thereof shall be paid and
redeemed by the Company at the applicable redemption price, together with
interest accrued thereon to (but excluding) the date fixed for redemption;
provided, however, that if the applicable redemption date is an interest payment
date, the semi-annual payment of interest becoming due on such date shall be
payable to the holders of such Notes registered as such on the relevant record
date instead of the holders surrendering such Notes for redemption on such date.
Upon presentation of any Note redeemed in part only, the
Company shall execute and the Trustee shall authenticate and make available for
delivery to the holder thereof, at the expense of the Company, a new Note or
Notes, of authorized denominations, in principal amount equal to the unredeemed
portion of the Notes so presented.
Notwithstanding the foregoing, the Trustee shall not redeem
any Notes or mail any notice of redemption during the continuance of a default
in payment of interest or premium, if any, on the Notes. If any Note called for
redemption shall not be so paid upon surrender thereof for redemption, the
principal and premium, if any, shall, until paid or duly provided for, bear
interest from the date fixed for redemption at the rate borne by the Note and
such Note shall remain convertible into Common Stock until the principal and
premium, if any, and interest shall have been paid or duly provided for.
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Section 3.4 Conversion Arrangement on Call for Redemption. In
connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes by an agreement with one or more investment
bankers or other purchasers to purchase such Notes by paying to the Trustee in
trust for the Noteholders, on or before the date fixed for redemption, an amount
not less than the applicable redemption price, together with interest accrued to
(but excluding) the date fixed for redemption, of such Notes. Notwithstanding
anything to the contrary contained in this Article Three, the obligation of the
Company to pay the redemption price of such Notes, together with interest
accrued to (but excluding) the date fixed for redemption, 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, a copy of which will be filed
with the Trustee prior to the date fixed for redemption, any Notes 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 Fifteen) surrendered by such purchasers for conversion, all
as of immediately prior to the close of business on the date fixed for
redemption (and the right to convert any such Notes shall be extended through
such time), subject to payment of the above amount as aforesaid. At the
direction of the Company, the Trustee shall hold and dispose of any such amount
paid to it in the same manner as it would monies deposited with it by the
Company for the redemption of Notes. Without the Trustee's prior written
consent, no arrangement between the Company and such purchasers for the purchase
and conversion of any Notes shall increase or otherwise affect any of the
powers, duties, responsibilities or obligations of the Trustee as set forth in
this Indenture.
Section 3.5 Redemption at Option of Holders.
(a) If there shall occur a Fundamental Change at any time
prior to maturity of the Notes, then each Noteholder shall have the right, at
such holder's option, to require the Company to redeem all of such holder's
Notes, or
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any portion thereof that is an integral multiple of $1,000 principal amount, on
the date (the "Repurchase Date") that is thirty (30) days after the date of the
Company Notice (as defined in Section 3.5(b) below) of such Fundamental Change
(or, if such 30th day is not a Business Day, the immediately preceding Business
Day) at a redemption price equal to 100% of the principal amount thereof,
together with accrued interest to (but excluding) the Repurchase Date; provided,
however, that, if such Repurchase Date is a February 1 or August 1, then the
interest payable on such date shall be paid to the holders of record of the
Notes on the next preceding January 15 or July 15, respectively.
Upon presentation of any Note redeemed in part only, the
Company shall execute and, upon the Company's written direction to the Trustee,
the Trustee shall authenticate and deliver to the holder thereof, at the expense
of the Company, a new Note or Notes, of authorized denominations, in principal
amount equal to the unredeemed portion of the Notes so presented.
(b) On or before the tenth day after the occurrence of a
Fundamental Change, the Company or at its written request (which must be
received by the Trustee at least five (5) Business Days prior to the date the
Trustee is requested to give notice as described below, unless the Trustee shall
agree in writing to a shorter period), the Trustee in the name of and at the
expense of the Company, shall mail or cause to be mailed to all holders of
record on the date of the Fundamental Change a notice (the "Company Notice") of
the occurrence of such Fundamental Change and of the redemption right at the
option of the holders arising as a result thereof. Such notice shall be mailed
in the manner and with the effect set forth in the first paragraph of Section
3.2 (without regard for the time limits set forth therein). If the Company shall
give such notice, the Company shall also deliver a copy of the Company Notice to
the Trustee at such time as it is mailed to Noteholders. Concurrently with the
mailing of any Company Notice, the Company shall issue a press release
announcing such Fundamental Change referred to in the Company Notice, the form
and content of which press release shall be determined
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by the Company in its sole discretion. The failure to issue any such press
release or any defect therein shall not affect the validity of the Company
Notice or any proceedings for the redemption of any Note which any Noteholder
may elect to have the Company repurchase as provided in this Section 3.5.
Each Company Notice shall specify the circumstances
constituting the Fundamental Change, the Repurchase Date, the price at which the
Company shall be obligated to redeem Notes, that the holder must exercise the
redemption right on or prior to the close of business on the Repurchase Date
(the "Fundamental Change Expiration Time"), that the holder shall have the right
to withdraw any Notes surrendered prior to the Fundamental Change Expiration
Time, a description of the procedure which a Noteholder must follow to exercise
such redemption right and to withdraw any surrendered Notes, the place or places
where the holder is to surrender such holder's Notes, and the amount of interest
accrued on each Note to the Repurchase Date.
No failure of the Company to give the foregoing notices and no
defect therein shall limit the Noteholders' redemption rights or affect the
validity of the proceedings for the repurchase of the Notes pursuant to this
Section 3.5.
(c) For a Note to be so redeemed at the option of the holder,
the Company must receive at the office or agency of the Company maintained for
that purpose or, at the option of such holder, the Corporate Trust Office, such
Note with the form entitled "Option to Elect Repayment Upon A Fundamental
Change" on the reverse thereof duly completed, together with such Notes duly
endorsed for transfer, on or before the Fundamental Change Expiration Time. All
questions as to the validity, eligibility (including time of receipt) and
acceptance of any Note for repayment shall be determined by the Company, whose
determination shall be final and binding absent manifest error.
(d) On or prior to the Repurchase Date, the Company will
deposit with the Trustee or with one or more
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paying agents (or, if the Company is acting as its own paying agent, set aside,
segregate and hold in trust as provided in Section 5.4) an amount of money
sufficient to repay on the Repurchase Date all the Notes to be redeemed on such
date at the appropriate redemption price, together with accrued interest to (but
excluding) the Repurchase Date; provided, however, that if such payment is made
on the Repurchase Date it must be received by the Trustee or paying agent, as
the case may be, by 10:00 a.m. New York City time, on such date. Payment for
Notes surrendered for redemption (and not withdrawn) prior to the Fundamental
Change Expiration Time will be made promptly (but in no event more than five (5)
Business Days) following the Repurchase Date by mailing checks for the amount
payable to the holders of such Notes entitled thereto as they shall appear on
the registry books of the Company.
(e) In the case of a reclassification, change, consolidation,
merger, combination, sale or conveyance to which Section 15.6 applies, in which
the Common Stock of the Company is changed or exchanged as a result into the
right to receive stock, securities or other property or assets (including cash),
which includes shares of Common Stock of the Company or shares of common stock
of another Person that are, or upon issuance will be, traded on a United States
national securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and such shares constitute
at the time such change or exchange becomes effective in excess of 50% of the
aggregate fair market value of such stock, securities or other property or
assets (including cash) (as determined by the Company, which determination shall
be conclusive and binding), then the Person formed by such consolidation or
resulting from such merger or which acquires such assets, as the case may be,
shall execute and deliver to the Trustee a supplemental indenture (accompanied
by an Opinion of Counsel that such supplemental indenture complies with the
Trust Indenture Act as in force at the date of execution of such supplemental
indenture) modifying the provisions of this Indenture relating to the right of
holders of the Notes to cause the Company to repurchase the Notes following a
Fundamental Change, including without limitation the
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applicable provisions of this Section 3.5 and the definitions of Common Stock
and Fundamental Change, as appropriate, as determined in good faith by the
Company (which determination shall be conclusive and binding), to make such
provisions apply to such other Person if different from the Company and the
common stock issued by such Person (in lieu of the Company and the Common Stock
of the Company).
(f) The Company will comply with the provisions of Rule 13e-4
and any other tender offer rules under the Exchange Act to the extent then
applicable in connection with the redemption rights of the holders of Notes in
the event of a Fundamental Change.
ARTICLE FOUR
SUBORDINATION OF NOTES
Section 4.1 Agreement of Subordination. The Company covenants
and agrees, and each holder of Notes issued hereunder by its acceptance thereof
likewise covenants and agrees, that all Notes shall be issued subject to the
provisions of this Article Four, and each Person holding any Note, whether upon
original issue or upon registration of transfer, assignment or exchange thereof,
accepts and agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest
(including Liquidated Damages, if any) on all Notes (including, but not limited
to, the redemption price with respect to the Notes called for redemption in
accordance with Section 3.2 or submitted for redemption in accordance with
Section 3.5, as the case may be, as provided in this Indenture) 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, whether outstanding at the date of this Indenture or thereafter
incurred.
No provision of this Article Four shall prevent the occurrence
of any default or Event of Default hereunder.
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Section 4.2 Payments to Noteholders. No payment shall be made
with respect to the principal of, premium, if any, or interest (including
Liquidated Damages, if any) on the Notes (including, but not limited to, the
redemption price with respect to the Notes to be called for redemption in
accordance with Section 3.2 or submitted for redemption in accordance with
Section 3.5, as the case may be, as provided in this Indenture), except payments
and distributions made by the Trustee as permitted by the first or second
paragraph of Section 4.5, if:
(i) a default in the payment of principal, premium, if any,
interest, rent or other obligations in respect of Senior Indebtedness
occurs and is continuing beyond any applicable period of grace (a
"Payment Default"); or
(ii) a default, other than a Payment Default, on any
Designated Senior Indebtedness occurs and is continuing that then
permits holders of such Designated Senior Indebtedness to accelerate
its maturity and the Trustee receives a notice of the default (a
"Payment Blockage Notice") from a holder of Designated Senior
Indebtedness, a Representative of Designated Senior Indebtedness or the
Company (a "Non-Payment Default").
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 4.2 unless and until (A) at least 365 days shall
have elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice and (B) all scheduled payments of principal, premium, if any,
and interest (including Liquidated Damages, if any) on the Notes that have come
due have been paid in full in cash. No Non-Payment 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.
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The Company may and shall resume payments on and distributions
in respect of the Notes upon:
(1) in the case of a Payment Default, the date upon which any
such Payment Default is cured or waived or ceases to exist, or
(2) in the case of a Non-Payment Default, the earlier of (a)
the date upon which such default is cured or waived or ceases to exist
or (b) 179 days after the applicable Payment Blockage Notice is
received by the Trustee,
unless this Article Four 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 or liquidation or reorganization
of the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full in cash or other payment
satisfactory to the holders of such Senior Indebtedness, or payment thereof in
accordance with its terms provided for in cash or other payment satisfactory to
the holders of such Senior Indebtedness before any payment is made on account of
the principal of, premium, if any, or interest (including Liquidated Damages, if
any) on the Notes (except payments made pursuant to Article Thirteen from monies
deposited with the Trustee pursuant thereto prior to commencement of proceedings
for such dissolution, winding up, liquidation or reorganization), and upon any
such dissolution or winding up or liquidation or reorganization of the Company
or bankruptcy, insolvency, receivership or other proceeding, 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 Notes or
the Trustee would be entitled, except for the provisions of this Article Four,
shall (except as aforesaid) be paid by the Company or by any
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receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the holders of the Notes or by the
Trustee under this Indenture if received by them or it, directly to the holders
of Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders, or as otherwise required by
law or a court order) or their Representative or Representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all 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 Senior Indebtedness, before any payment or distribution is
made to the holders of the Notes or to the Trustee.
For purposes of this Article Four, 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 Four with
respect to the Notes to the payment of all Senior Indebtedness which may at the
time be outstanding. The consolidation of the Company with, or the merger of the
Company into, another Person or the liquidation or dissolution of the Company
following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another Person upon the terms and conditions
provided for in Article Twelve shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 4.2 if such other
Person shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions stated in Article Twelve.
In the event of the acceleration of the Notes because of an
Event of Default, no payment or distribution shall be made to the Trustee or any
holder of Notes in respect of the principal of, premium, if any, or interest
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(including Liquidated Damages, if any) on the Notes (including, but not limited
to, the redemption price with respect to the Notes called for redemption in
accordance with Section 3.2 or submitted for redemption at the option of the
holder in accordance with Section 3.5, as the case may be, as provided in this
Indenture), except payments and distributions made by the Trustee as permitted
by the first or second paragraph of Section 4.5, until all Senior Indebtedness
has been paid in full in cash or other payment satisfactory to the holders of
Senior Indebtedness or such acceleration is rescinded in accordance with the
terms of this Indenture. If payment of the Notes is accelerated because of an
Event of Default, the Company or the Trustee shall promptly notify holders of
Senior Indebtedness of the acceleration.
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
4.2, shall be received by the Trustee or the holders of the Notes before all
Senior Indebtedness is paid in full in cash or other payment satisfactory to the
holders of such Senior Indebtedness, or provision is made for such payment
thereof in accordance with its terms 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 or their Representative or Representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by the Company, for application to the
payment of any Senior Indebtedness remaining unpaid to the extent necessary to
pay all 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.
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Nothing in this Section 4.2 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 8.6. This Section 4.2
shall be subject to the further provisions of Section 4.5.
Section 4.3 Subrogation of Notes. Subject to the payment in
full of all Senior Indebtedness, the rights of the holders of the Notes shall be
subrogated to the extent of the payments or distributions made to the holders of
such Senior Indebtedness pursuant to the provisions of this Article Four
(equally and ratably with the holders of all indebtedness of the Company that by
its express terms, is subordinated to other indebtedness of the Company to
substantially the same extent as the Notes are subordinated and is entitled to
like rights of subrogation) to the rights of the holders of Senior Indebtedness
to receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Indebtedness until the principal, premium, if
any, and interest (including Liquidated Damages, if any) on the Notes shall be
paid in full, and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property or
securities to which the holders of the Notes or the Trustee would be entitled
except for the provisions of this Article Four, and no payment over pursuant to
the provisions of this Article Four, to or for the benefit of the holders of
Senior Indebtedness by holders of the Notes or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Indebtedness, and the
holders of the Notes, be deemed to be a payment by the Company to or on account
of the Senior Indebtedness, and no payments or distributions of cash, property
or securities to or for the benefit of the holders of the Notes pursuant to the
subrogation provisions of this Article Four, 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 Notes. It is understood that the
provisions of this Article Four are and are intended solely for the purposes of
defining the relative rights of the holders of the Notes, on the one hand, and
the holders of the Senior Indebtedness, on the other hand.
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Nothing contained in this Article Four or elsewhere in this
Indenture or in the Notes is intended to or shall impair, as among the Company,
its creditors other than the holders of Senior Indebtedness, and the holders of
the Notes, the obligation of the Company, which is absolute and unconditional,
to pay to the holders of the Notes the principal of, premium, if any, and
interest (including Liquidated Damages, if any) on the Notes 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 Notes and creditors
of the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or the holder of any Note from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article Four 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 Four, the Trustee, subject to the provisions of
Section 8.1, and the holders of the Notes shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
bankruptcy, 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 or to the holders of the Notes, 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 and all other facts pertinent thereto or to
this Article Four.
Section 4.4 Authorization to Effect Subordination. Each holder
of a Note, by its acceptance thereof, authorizes and directs the Trustee on the
holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article Four and appoints the
Trustee to act as the
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holder's attorney-in-fact for any and all such purposes. If the Trustee does not
file a proper proof of claim or proof of debt in the form required in any
proceeding referred to in the third paragraph of Section 7.2 hereof at least
thirty (30) days before the expiration of the time to file such claim, the
holders of any Senior Indebtedness or their representatives are hereby
authorized to file an appropriate claim for and on behalf of the holders of the
Notes.
Section 4.5 Notice to Trustee. The Company shall give prompt
written notice in the form of an Officers' Certificate to a Responsible Officer
of the Trustee and to any paying agent of any fact known to the Company that
would prohibit the making of any payment of monies to or by the Trustee or any
paying agent in respect of the Notes pursuant to the provisions of this Article
Four. Notwithstanding the provisions of this Article Four or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment of monies
to or by the Trustee in respect of the Notes pursuant to the provisions of this
Article Four, unless and until a Responsible Officer of the Trustee shall have
received written notice thereof at the Corporate Trust Office from the Company
(in the form of an Officers' Certificate) or a Representative or a holder or
holders of Senior Indebtedness or from any trustee thereof, and before the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 8.1, shall be entitled in all respects to assume that no such facts
exist; provided, however, that if on a date not less 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 of, or premium, if any, or interest (including Liquidated Damages, if
any) on any Note) the Trustee shall not have received, with respect to such
monies, the notice provided for in this Section 4.5, then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power and
authority to apply monies received to the purpose for which they were received,
and shall not be affected by any notice to the contrary that may be received by
it on or after such prior date.
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Notwithstanding anything in this Article Four to the contrary,
nothing shall prevent any payment by the Trustee to the Noteholders of monies
deposited with it pursuant to Section 13.1, and any such payment shall not be
subject to the provisions of Section 4.1 or 4.2.
The Trustee, subject to the provisions of Section 8.1, shall
be entitled to rely on the delivery to it of a written notice by a
Representative or a person representing himself to be a holder of Senior
Indebtedness (or a trustee on behalf of such holder) to establish that such
notice has been given by a Representative or a holder of Senior Indebtedness or
a trustee on behalf of any such holder or holders. The Trustee shall not be
required to make any payment or distribution to or on behalf of a holder of
Senior Indebtedness pursuant to this Article Four unless it has received
satisfactory evidence as to the amount of Senior Indebtedness held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Four.
Section 4.6 Trustee's Relation to Senior Indebtedness. The
Trustee, in its individual capacity, shall be entitled to all the rights set
forth in this Article Four in respect of any Senior Indebtedness at any time
held by it, to the same extent as any other holder of Senior Indebtedness, and
nothing in Section 8.13 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, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Four, and no implied
covenants or obligations with respect to the holders of 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 and,
subject to the provisions of Section 8.1, the Trustee shall not be liable to any
holder of Senior Indebtedness (i) for any failure to make any payments or
distributions to
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such holder or (ii) if it shall pay over or deliver to holders of Notes, the
Company or any other Person money or assets to which any holder of Senior
Indebtedness shall be entitled by virtue of this Article Four or otherwise.
Section 4.7 No Impairment of Subordination. No right of any
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Section 4.8 Certain Conversions Not Deemed Payment. For the
purposes of this Article Four only, (1) the issuance and delivery of junior
securities upon conversion of Notes in accordance with Article Fifteen shall not
be deemed to constitute a payment or distribution on account of the principal
of, premium, if any, or interest (including Liquidated Damages, if any) on Notes
or on account of the purchase or other acquisition of Notes, and (2) the
payment, issuance or delivery of cash (except in satisfaction of fractional
shares pursuant to Section 15.3), property or securities (other than junior
securities) upon conversion of a Note shall be deemed to constitute payment on
account of the principal of, premium, if any, or interest (including Liquidated
Damages, if any) on such Note. For the purposes of this Section 4.8, the term
"junior securities" means (a) shares of any stock of any class of the Company or
(b) securities of the Company that are subordinated in right of payment to all
Senior Indebtedness that 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 Notes are so subordinated as provided in this Article Four. Nothing
contained in this Article Four or elsewhere in this Indenture or in the Notes is
intended to or shall impair, as among the Company, its creditors (other than
holders of Senior Indebtedness) and the Noteholders, the right, which is
absolute and
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unconditional, of the Holder of any Note to convert such Note in accordance with
Article Fifteen.
Section 4.9 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
Four 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 Four in addition to
or in place of the Trustee; provided, however, that the first paragraph of
Section 4.5 shall not apply to the Company or any Affiliate of the Company if it
or such Affiliate acts as paying agent.
The Trustee shall not be responsible for the actions or
inactions of any other paying agents (including the Company if acting as its own
paying agent) and shall have no control of any funds held by such other paying
agents.
Section 4.10 Senior Indebtedness Entitled to Rely. The holders
of Senior Indebtedness (including, without limitation, Designated Senior
Indebtedness) shall have the right to rely upon this Article Four, and no
amendment or modification of the provisions contained herein shall diminish the
rights of such holders unless such holders shall have agreed in writing thereto.
Section 4.11 Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets of the Company
referred to in this Article Four, the Trustee and the Noteholders 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
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Noteholders, 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 Four.
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY
Section 5.1 Payment of Principal, Premium and Interest. The
Company covenants and agrees that it will duly and punctually pay or cause to be
paid the principal of and premium, if any (including the redemption price upon
redemption pursuant to Article Three), and interest (including Liquidated
Damages, if any), on each of the Notes at the places, at the respective times
and in the manner provided herein and in the Notes.
Section 5.2 Maintenance of Office or Agency. The Company will
maintain an office or agency in the Borough of Manhattan, the City of New York,
where the Notes may be surrendered for registration of transfer or exchange or
for presentation for payment or for conversion or redemption and where notices
and demands to or upon the Company in respect of the Notes and this Indenture
may be served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency not
designated or appointed by the Trustee. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee at 14 Wall
Street, 8th floor, Window 2, New York, New York 10005, Attention: Corporate
Trust Administration.
The Company may also from time to time designate co-registrars
and one or more offices or agencies where the Notes may be presented or
surrendered for any or all such purposes and may from time to time rescind such
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designations. The Company will give prompt written notice of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby initially designates the Trustee as paying
agent, Note registrar, Custodian and conversion agent and the Corporate Trust
Office of the Trustee at 14 Wall Street, 8th floor, Window 2, New York, New York
10005, Attention: Corporate Trust Administration as the office or agency of the
Company for each of the aforesaid purposes.
So long as the Trustee is the Note registrar, the Trustee
agrees to mail, or cause to be mailed, the notices set forth in Section 8.10(a)
and the third paragraph of Section 8.11. If co-registrars have been appointed in
accordance with this Section, the Trustee shall mail such notices only to the
Company and the holders of Notes it can identify from its records.
Section 5.3 Appointments to Fill Vacancies in Trustee's
Office. The Company, whenever necessary to avoid or fill a vacancy in the office
of Trustee, will appoint, in the manner provided in Section 8.10, a Trustee, so
that there shall at all times be a Trustee hereunder.
Section 5.4 Provisions as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the
Trustee, or if the Trustee shall appoint such a paying agent, the Company will
cause such paying agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of this
Section 5.4:
(1) that it will hold all sums held by it as such agent for
the payment of the principal of and premium, if any, or interest on the
Notes (whether such sums have been paid to it by the Company or by any
other obligor on the Notes) in trust for the benefit of the holders of
the Notes;
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(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Notes) to make any payment of
the principal of and premium, if any, or interest on the Notes when the
same shall be due and payable; and
(3) that at any time during the continuance of an Event of
Default, upon request of the Trustee, it will forthwith pay to the
Trustee all sums so held in trust.
The Company shall, on or before each due date of the principal
of, premium, if any, or interest on the Notes, deposit with the paying agent a
sum (in funds which are immediately available on the due date for such payment)
sufficient to pay such principal, premium, if any, or interest, and (unless such
paying agent is the Trustee) the Company will promptly notify the Trustee of any
failure to take such action; provided, however, that if such deposit is made on
the due date, such deposit shall be received by the paying agent by 10:00 a.m.
New York City time, on such date.
(b) If the Company shall act as its own paying agent, it will,
on or before each due date of the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Notes, set aside, segregate and
hold in trust for the benefit of the holders of the Notes a sum sufficient to
pay such principal, premium, if any, or interest (including Liquidated Damages,
if any) so becoming due and will promptly notify the Trustee of any failure to
take such action and of any failure by the Company (or any other obligor under
the Notes) to make any payment of the principal of, premium, if any, or interest
(including Liquidated Damages, if any) on the Notes when the same shall become
due and payable.
(c) Anything in this Section 5.4 to the contrary
notwithstanding, the Company may, at any time, for the purpose of obtaining a
satisfaction and discharge of this Indenture, or for any other reason, pay or
cause to be paid to the Trustee all sums held in trust by the Company or any
paying agent hereunder as required by this Section 5.4, such sums to be held by
the Trustee upon the trusts herein
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contained and upon such payment by the Company or any paying agent to the
Trustee, the Company or such paying agent shall be released from all further
liability with respect to such sums.
(d) Anything in this Section 5.4 to the contrary
notwithstanding, the agreement to hold sums in trust as provided in this Section
5.4 is subject to Sections 13.3 and 13.4.
The Trustee shall not be responsible for the actions of any
other paying agents (including the Company if acting as its own paying agent)
and shall have no control of any funds held by such other paying agents.
Section 5.5 Existence. Subject to Article Twelve, 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 Noteholders.
Section 5.6 Maintenance of Properties. The Company will cause
all properties used or useful in the conduct of its business or the business of
any Significant Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the operation or maintenance of any of
such properties if such discontinuance is, in the judgment of the Company,
desirable in the conduct of its business or the business of any
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subsidiary and not disadvantageous in any material respect to the Noteholders.
Section 5.7 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 Significant Subsidiary or upon the income,
profits or property of the Company or any Significant 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 Significant 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 Notes 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.
Section 5.8 Rule 144A Information Requirement. Within the
period prior to the expiration of the holding period applicable to sales thereof
under Rule 144(k) under the Securities Act (or any successor provision), the
Company covenants and agrees that it shall, during any period in which it is not
subject to Section 13 or 15(d) under the Exchange Act, make available to any
holder or beneficial holder of Notes or any Common Stock issued upon conversion
thereof which continue to be Restricted Securities in connection with any sale
thereof and any prospective purchaser of Notes or such Common Stock designated
by such holder or beneficial holder, the information required pursuant to Rule
144A(d)(4) under the Securities Act upon the request of any holder or beneficial
holder of the Notes or such Common Stock and it will take such further action as
any holder or beneficial holder of such Notes or such Common Stock may
reasonably request, all to the extent required
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from time to time to enable such holder or beneficial holder to sell its Notes
or Common Stock without registration under the Securities Act within the
limitation of the exemption provided by Rule 144A, as such Rule may be amended
from time to time. Upon the request of any holder or any beneficial holder of
the Notes or such Common Stock, the Company will deliver to such holder a
written statement as to whether it has complied with such requirements.
Section 5.9 Stay, Extension and Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay, extension or usury law or other law which would
prohibit or forgive the Company from paying all or any portion of the principal
of, premium, if any, or interest (including Liquidated Damages, if any) on the
Notes as contemplated herein, wherever enacted, now or at any time hereafter in
force, or which may affect the covenants or the performance of this Indenture
and the Company (to the extent it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not, by
resort to any such law, 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.
Section 5.10 Compliance Certificate. The Company shall deliver
to the Trustee, within one hundred twenty (120) days after the end of each
fiscal year of the Company, a certificate signed by 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 signer
thereof the Company is in default in the performance and observance of any of
the terms, provisions and conditions of this Indenture (without regard to any
period of grace or requirement of notice provided hereunder) and, if the Company
shall be in default, specifying all such defaults and the nature and the status
thereof of which the signer may have knowledge.
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The Company will deliver to the Trustee, forthwith (and in any
event within five Business Days) upon becoming aware of (i) any default in the
performance or observance of any covenant, agreement or condition contained in
this Indenture, or (ii) 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 5.10 shall
be delivered to a Responsible Officer of the Trustee at its Corporate Trust
Office.
Section 5.11 Amendment of the Company's Rights Plan. The
Company shall use all reasonable efforts (i) to amend its Rights Agreement with
ChaseMellon Shareholder Services, L.L.C., as Rights Agent, dated as of November
30, 1998 (the "Rights Agreement") to provide, and (ii) to cause any future
shareholder rights plans of the Company to provide, that upon conversion of the
Notes into Common Stock as provided in Article Fifteen of this Indenture, to the
extent that the Rights Agreement (or any such future shareholder rights plan)
and any rights granted thereunder remain in effect and outstanding at the time
of such conversion, holders of the Notes will receive, in addition to Common
Stock, the Rights (as described in the Rights Agreement or any similar
securities as described in any such future shareholder rights plan), whether or
not such Rights have separated from the Common Stock at the time of conversion,
subject to such exceptions as are set forth in the Rights Agreement and apply to
all holders of Common Stock or Rights other than any Acquiring Person (as
defined in the Rights Agreement) or such customary exceptions as may be set
forth in any such future shareholder rights plan; provided, however, that
nothing in this Indenture shall obligate the Company to maintain in effect the
Rights Agreement or any Rights or to adopt (or maintain in effect if adopted)
any other shareholder rights plan.
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ARTICLE SIX
NOTEHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
Section 6.1 Noteholders' Lists. The Company covenants and
agrees that it will furnish or cause to be furnished to the Trustee,
semiannually, not more than fifteen (15) days after each January 15 and July 15
in each year beginning with July 15, 2000, and at such other times as the
Trustee may request in writing, within thirty (30) days after receipt by the
Company of any such request (or such lesser time as the Trustee may reasonably
request in order to enable it to timely provide any notice to be provided by it
hereunder), a list in such form as the Trustee may reasonably require of the
names and addresses of the holders of Notes as of a date not more than fifteen
(15) days (or such other date as the Trustee may reasonably request in order to
so provide any such notices) prior to the time such information is furnished,
except that no such list need be furnished by the Company to the Trustee so long
as the Trustee is acting as the sole Note registrar.
Section 6.2 Preservation and Disclosure of Lists.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of Notes contained in the most recent list furnished to it as provided
in Section 6.1 or maintained by the Trustee in its capacity as Note registrar or
co-registrar in respect of the Notes, if so acting. The Trustee may destroy any
list furnished to it as provided in Section 6.1 upon receipt of a new list so
furnished.
(b) The rights of Noteholders to communicate with other
holders of Notes with respect to their rights under this Indenture or under the
Notes, and the corresponding rights and duties of the Trustee, shall be as
provided by the Trust Indenture Act.
(c) Every Noteholder, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
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disclosure of information as to names and addresses of holders of Notes made
pursuant to the Trust Indenture Act.
Section 6.3 Reports by Trustee.
(a) Within sixty (60) days after May 15 of each year
commencing with the year 2001, the Trustee shall transmit to holders of Notes
such reports dated as of May 15 of the year in which such reports are made
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(b) A copy of such report shall, at the time of such
transmission to holders of Notes, be filed by the Trustee with each stock
exchange and automated quotation system upon which the Notes are listed and with
the Company. The Company will promptly notify the Trustee in writing when the
Notes are listed on any stock exchange or automated quotation system or delisted
therefrom.
Section 6.4 Reports by Company. The Company shall file with
the Trustee (and the Commission if at any time after the Indenture becomes
qualified under the Trust Indenture Act), and transmit to holders of Notes, such
information, documents and other reports and such summaries thereof, as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act, whether or not the Notes are governed by such
Act; provided, however, that any such information, documents or reports required
to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act shall be filed with the Trustee within fifteen (15) days after the same is
so required to be filed with the Commission. Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
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ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND
NOTEHOLDERS ON AN EVENT OF DEFAULT
Section 7.1 Events of Default. In case one or more of the
following Events of Default (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body) shall have occurred and
be continuing:
(a) default in the payment of any installment of interest
(including Liquidated Damages, if any) upon any of the Notes as and
when the same shall become due and payable, and continuance of such
default for a period of thirty (30) days, whether or not such payment
is permitted under Article Four hereof; or
(b) default in the payment of the principal of or premium, if
any, on any of the Notes as and when the same shall become due and
payable either at maturity or in connection with any redemption
pursuant to Article Three, by acceleration or otherwise, whether or not
such payment is permitted under Article Four hereof; or
(c) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the
Company in the Notes or in this Indenture (other than a covenant or
agreement a default in whose performance or whose breach is elsewhere
in this Section 7.1 specifically dealt with) continued for a period of
sixty (60) days after the date on which written notice of such failure,
requiring the Company to remedy the same, shall have been given to the
Company by the Trustee, or the Company and a Responsible Officer of the
Trustee by the holders of at least twenty-five percent (25%) in
aggregate principal amount of the Notes at the time outstanding
determined in accordance with Section 9.4; or
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(d) the Company or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or any Significant Subsidiary or
its or such Significant Subsidiary's debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any Significant Subsidiary or any substantial
part of the property of the Company or any Significant Subsidiary, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it or any Significant Subsidiary, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or
(e) an involuntary case or other proceeding shall be commenced
against the Company or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or any Significant
Subsidiary or its or such Significant Subsidiary's debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any Significant Subsidiary
or any substantial part of the property of the Company or any
Significant Subsidiary, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of ninety (90)
consecutive days;
then, and in each and every such case (other than an Event of Default specified
in Section 7.1(d) or (e) with respect to the Company), unless the principal of
all of the Notes shall have already become due and payable, either the Trustee
or the holders of not less than twenty-five percent (25%) in aggregate principal
amount of the Notes then outstanding hereunder determined in accordance with
Section 9.4, by notice in writing to the Company (and to the Trustee if given by
Noteholders), may declare the principal of and premium, if any, on all the Notes
and the interest accrued
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thereon (including Liquidated Damages, if any) to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Indenture or in the Notes
contained to the contrary notwithstanding. If an Event of Default specified in
Section 7.1(d) or (e) with respect to the Company occurs, the principal of all
the Notes and the interest accrued thereon shall (including Liquidated Damages,
if any) be immediately and automatically due and payable without necessity of
further action. This provision, however, is subject to the conditions that if,
at any time after the principal of the Notes shall have been so declared due and
payable, and before any judgment or decree for the payment of the monies due
shall have been obtained or entered as hereinafter provided, the Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest upon (including Liquidated Damages, if any) all Notes
and the principal of and premium, if any, on any and all Notes which shall have
become due otherwise than by acceleration (with interest on overdue installments
of interest (including Liquidated Damages, if any) (to the extent that payment
of such interest is enforceable under applicable law) and on such principal and
premium, if any, at the rate borne by the Notes, to the date of such payment or
deposit) and amounts due to the Trustee pursuant to Section 8.6, and if any and
all defaults under this Indenture, other than the nonpayment of principal of and
premium, if any, and accrued interest on (including Liquidated Damages, if any)
Notes which shall have become due by acceleration, shall have been cured or
waived pursuant to Section 7.7, then and in every such case the holders of a
majority in aggregate principal amount of the Notes then outstanding, by written
notice to the Company and to the Trustee, may waive all defaults or Events of
Default and rescind and annul such declaration and its consequences; but no such
waiver or rescission and annulment shall extend to or shall affect any
subsequent default or Event of Default, or shall impair any right consequent
thereon. The Company shall notify a Responsible Officer of the Trustee, promptly
(and in any event within five Business Days) upon becoming aware thereof, of any
Event of Default.
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In case the Trustee shall have proceeded to enforce any right
under this Indenture and such proceedings shall have been discontinued or
abandoned because of such waiver or rescission and annulment or for any other
reason or shall have been determined adversely to the Trustee, then and in every
such case the Company, the holders of Notes, and the Trustee shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the holders of Notes, and the Trustee shall
continue as though no such proceeding had been taken.
Section 7.2 Payments of Notes on Default; Suit Therefor. The
Company covenants that (a) in case default shall be made in the payment of any
installment of interest upon (including Liquidated Damages, if any) any of the
Notes as and when the same shall become due and payable, and such default shall
have continued for a period of thirty (30) days, or (b) in case default shall be
made in the payment of the principal of or premium, if any, on any of the Notes
as and when the same shall have become due and payable, whether at maturity of
the Notes or in connection with any redemption, by or under this Indenture
declaration or otherwise, then, upon demand of the Trustee, the Company will pay
to the Trustee, for the benefit of the holders of the Notes, the whole amount
that then shall have become due and payable on all such Notes for principal and
premium, if any, or interest (including Liquidated Damages, if any), as the case
may be, with interest upon the overdue principal and premium, if any, and (to
the extent that payment of such interest is enforceable under applicable law)
upon the overdue installments of interest (including Liquidated Damages, if any)
at the rate borne by the Notes, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
all other amounts due the Trustee under Section 8.6. Until such demand by the
Trustee, the Company may pay the principal of and premium, if any, and interest
on (including Liquidated Damages, if any) the Notes to the registered holders,
whether or not the Notes are overdue.
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In case the Company shall fail forthwith to pay such amounts
upon such demand, the Trustee, in its own name and as trustee of an express
trust, shall be entitled and empowered to institute any actions or proceedings
at law or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Company or any other
obligor on the Notes and collect in the manner provided by law out of the
property of the Company or any other obligor on the Notes wherever situated the
monies adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy
or for the reorganization of the Company or any other obligor on the Notes under
Title 11 of the United States Code, or any other applicable law, or in case a
receiver, assignee or trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Company or such other obligor, the property of the Company or
such other obligor, or in the case of any other judicial proceedings relative to
the Company or such other obligor upon the Notes, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 7.2, shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount of principal, premium, if
any, and interest (including Liquidated Damages, if any) owing and unpaid in
respect of the Notes, and, in case of any judicial proceedings, to file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and of the Noteholders allowed in
such judicial proceedings relative to the Company or any other obligor on the
Notes, its or their creditors, or its or their property, and to collect and
receive any monies or other property payable or deliverable on any such claims,
and to distribute the same after the
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deduction of any amounts due the Trustee under Section 8.6, and any receiver,
assignee or trustee in bankruptcy or reorganization, liquidator, custodian or
similar official is hereby authorized by each of the Noteholders 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 Noteholders, to pay to the Trustee any
amount due it for reasonable compensation, expenses, advances and disbursements,
including counsel fees incurred by it up to the date of such distribution. To
the extent that such payment of reasonable compensation, expenses, advances and
disbursements out of the estate in any such proceedings shall be denied for any
reason, payment of the same shall be secured by a lien on, and shall be paid out
of, any and all distributions, dividends, monies, securities and other property
which the holders of the Notes may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise.
All rights of action and of asserting claims under this
Indenture, or under any of the Notes, may be enforced by the Trustee without the
possession of any of the Notes, or the production thereof at any trial or other
proceeding relative thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, be for the ratable benefit of the holders of the Notes.
In any proceedings brought by the Trustee (and in any
proceedings involving the interpretation of any provision of this Indenture to
which the Trustee shall be a party) the Trustee shall be held to represent all
the holders of the Notes, and it shall not be necessary to make any holders of
the Notes parties to any such proceedings.
Section 7.3 Application of Monies Collected by Trustee. Any
monies collected by the Trustee pursuant to this Article Seven shall be applied
in the order following, at the date or dates fixed by the Trustee for the
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distribution of such monies, upon presentation of the several Notes, and
stamping thereon the payment, if only partially paid, and upon surrender
thereof, if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 8.6;
SECOND: Subject to the provisions of Article Four, in case the
principal of the outstanding Notes shall not have become due and be
unpaid, to the payment of interest on (including Liquidated Damages, if
any) the Notes in default in the order of the maturity of the
installments of such interest, with interest (to the extent that such
interest has been collected by the Trustee) upon the overdue
installments of interest (including Liquidated Damages, if any) at the
rate borne by the Notes, such payments to be made ratably to the
Persons entitled thereto;
THIRD: Subject to the provisions of Article Four, in case the
principal of the outstanding Notes shall have become due, by
declaration or otherwise, and be unpaid to the payment of the whole
amount then owing and unpaid upon the Notes for principal and premium,
if any, and interest (including Liquidated Damages, if any), with
interest on the overdue principal and premium, if any, and (to the
extent that such interest has been collected by the Trustee) upon
overdue installments of interest (including Liquidated Damages, if any)
at the rate borne by the Notes, and in case such monies shall be
insufficient to pay in full the whole amounts so due and unpaid upon
the Notes, then to the payment of such principal and premium, if any,
and interest (including Liquidated Damages, if any) without preference
or priority of principal and premium, if any, over interest (including
Liquidated Damages, if any), or of interest (including Liquidated
Damages, if any) over principal and premium, if any, or of any
installment of interest over any other installment of interest, or of
any Note over any other Note, ratably to the aggregate of such
principal and premium, if any, and accrued and unpaid interest; and
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FOURTH: Subject to the provisions of Article Four, to the
payment of the remainder, if any, to the Company or any other Person
lawfully entitled thereto.
Section 7.4 Proceedings by Noteholder. No holder of any Note
shall have any right by virtue of or by reference to any provision of this
Indenture to institute any suit, action or proceeding in equity or at law upon
or under or with respect to this Indenture, or for the appointment of a
receiver, trustee, liquidator, custodian or other similar official, or for any
other remedy hereunder, unless such holder previously shall have given to the
Trustee written notice of an Event of Default and of the continuance thereof, as
hereinbefore provided, and unless also the holders of not less than twenty-five
percent (25%) in aggregate principal amount of the Notes then outstanding shall
have made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for sixty (60)
days after its receipt of such notice, request and offer of indemnity, shall
have neglected or refused to institute any such action, suit or proceeding and
no direction inconsistent with such written request shall have been given to the
Trustee pursuant to Section 7.7; it being understood and intended, and being
expressly covenanted by the taker and holder of every Note with every other
taker and holder and the Trustee, that no one or more holders of Notes shall
have any right in any manner whatever by virtue of or by reference to any
provision of this Indenture to affect, disturb or prejudice the rights of any
other holder of Notes, or to obtain or seek to obtain priority over or
preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Notes (except as otherwise provided herein).
For the protection and enforcement of this Section 7.4, each and every
Noteholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
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Notwithstanding any other provision of this Indenture and any
provision of any Note, the right of any holder of any Note to receive payment of
the principal of and premium, if any (including the redemption price upon
redemption pursuant to Article Three), and accrued interest on (including
Liquidated Damages, if any) such Note, on or after the respective due dates
expressed in such Note or in the event of redemption, or to institute suit for
the enforcement of any such payment on or after such respective dates against
the Company shall not be impaired or affected without the consent of such
holder.
Anything in this Indenture or the Notes to the contrary
notwithstanding, the holder of any Note, without the consent of either the
Trustee or the holder of any other Note, in its own behalf and for its own
benefit, may enforce, and may institute and maintain any proceeding suitable to
enforce, its rights of conversion as provided herein.
Section 7.5 Proceedings by Trustee. In case of an Event of
Default, the Trustee may, in its discretion, proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as are necessary to protect and enforce any of such rights, either by suit in
equity or by action at law or by proceeding in bankruptcy or otherwise, whether
for the specific enforcement of any covenant or agreement contained in this
Indenture or in aid of the exercise of any power granted in this Indenture, or
to enforce any other legal or equitable right vested in the Trustee by this
Indenture or by law.
Section 7.6 Remedies Cumulative and Continuing. Except as
provided in Section 2.6, all powers and remedies given by this Article Seven to
the Trustee or to the Noteholders shall, to the extent permitted by law, be
deemed cumulative and not exclusive of any thereof or of any other powers and
remedies available to the Trustee or the holders of the Notes, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or
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omission of the Trustee or of any holder of any of the Notes to exercise any
right or power accruing upon any default or Event of Default occurring and
continuing as aforesaid shall impair any such right or power, or shall be
construed to be a waiver of any such default or any acquiescence therein, and,
subject to the provisions of Section 7.4, every power and remedy given by this
Article Seven or by law to the Trustee or to the Noteholders may be exercised
from time to time, and as often as shall be deemed expedient, by the Trustee or
by the Noteholders.
Section 7.7 Direction of Proceedings and Waiver of Defaults by
Majority of Noteholders. The holders of a majority in aggregate principal amount
of the Notes at the time outstanding determined in accordance with Section 9.4
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided, however, that (a) such direction shall
not be in conflict with any rule of law or with this Indenture, (b) the Trustee
may take any other action which is not inconsistent with such direction and (c)
the Trustee may decline to take any action that would benefit some Noteholder to
the detriment of other Noteholders. The holders of a majority in aggregate
principal amount of the Notes at the time outstanding determined in accordance
with Section 9.4 may, on behalf of the holders of all of the Notes, waive any
past default or Event of Default hereunder and its consequences except (i) a
default in the payment of interest (including Liquidated Damages, if any) or
premium, if any, on, or the principal of, the Notes, (ii) a failure by the
Company to convert any Notes into Common Stock, (iii) a default in the payment
of redemption price pursuant to Article Three or (iv) a default in respect of a
covenant or provisions hereof which under Article Eleven cannot be modified or
amended without the consent of the holders of each or all Notes then outstanding
or affected thereby. Upon any such waiver, the Company, the Trustee and the
holders of the Notes shall be restored to their former positions and rights
hereunder; but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon. Whenever
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any default or Event of Default hereunder shall have been waived as permitted by
this Section 7.7, said default or Event of Default shall for all purposes of the
Notes and this Indenture be deemed to have been cured and to be not continuing;
but no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.
Section 7.8 Notice of Defaults. The Trustee shall, within
ninety (90) days after a Responsible Officer of the Trustee has actual knowledge
of the occurrence of a default, mail to all Noteholders, as the names and
addresses of such holders appear upon the Note register, notice of all defaults
actually known to a Responsible Officer, unless such defaults shall have been
cured or waived before the giving of such notice; provided, however, that except
in the case of default in the payment of the principal of, or premium, if any,
or interest (including Liquidated Damages, if any) on any of the Notes, the
Trustee shall be protected in withholding such notice if and so long as a trust
committee of directors and/or Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interests of the
Noteholders.
Section 7.9 Undertaking to Pay Costs. All parties to this
Indenture agree, and each holder of any Note by his acceptance thereof shall be
deemed to have agreed, that any court may, in its discretion, require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant in
such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; provided, however, that the provisions of
this Section 7.9 (to the extent permitted by law) shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Noteholder, or group of
Noteholders, holding in the aggregate more than ten percent in principal amount
of the Notes at the time
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outstanding determined in accordance with Section 9.4, or to any suit instituted
by any Noteholder for the enforcement of the payment of the principal of or
premium, if any, or interest on any Note on or after the due date expressed in
such Note or to any suit for the enforcement of the right to convert any Note in
accordance with the provisions of Article Fifteen.
ARTICLE EIGHT
THE TRUSTEE
Section 8.1 Duties and Responsibilities of Trustee. The
Trustee, prior to the occurrence of an Event of Default and after the curing of
all Events of Default which may have occurred, undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture. In case an
Event of Default has occurred (which has not been cured or waived), the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default and after
the curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall
be determined solely by the express provisions of this
Indenture and the Trust Indenture Act, and the Trustee shall
not be liable except for the performance of such duties and
obligations as are specifically set forth in this Indenture
and no implied covenants or obligations shall be read into
this Indenture and the Trust Indenture Act against the
Trustee; and
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(2) in the absence of bad faith and willful
misconduct on the part of the Trustee, the Trustee may
conclusively rely as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but, in the
case of any such certificates or opinions which by any
provisions hereof are specifically required to be furnished to
the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the
requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Officers of the Trustee,
unless the Trustee was negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
written direction of the holders of not less than a majority in
principal amount of the Notes at the time outstanding determined as
provided in Section 9.4 relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture;
(d) whether or not therein provided, every provision of this
Indenture relating to the conduct or affecting the liability of, or
affording protection to, the Trustee shall be subject to the provisions
of this Section;
(e) the Trustee shall not be liable in respect of any payment
(as to the correctness of amount, entitlement to receive or any other
matters relating to payment) or notice effected by the Company or any
paying agent or any records maintained by any co-registrar with respect
to the Notes; and
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(f) if any party fails to deliver a notice relating to an
event the fact of which, pursuant to this Indenture, requires notice to
be sent to the Trustee, the Trustee may conclusively rely on its
failure to receive such notice as reason to act as if no such event
occurred.
None of the provisions contained in this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if there is reasonable ground for believing that
the repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
Section 8.2 Reliance on Documents, Opinions, Etc. Except as
otherwise provided in Section 8.1:
(a) the Trustee may conclusively rely and shall be fully
protected in acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond,
debenture, note, coupon or other paper or document (whether in its
original or facsimile form) believed by it in good faith to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors
may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its own selection
and any advice or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or omitted
by it hereunder in good faith and in accordance with such advice or
Opinion of Counsel;
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(d) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Noteholders pursuant to the provisions
of this Indenture, unless such Noteholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses
and liabilities which may be incurred therein or thereby;
(e) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation,
it shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney at the expense of the
Company and shall incur no liability or additional liability of any
kind by reason of such inquiry or investigation;
(f) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed by it with due care hereunder; and
(g) the rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right
to be indemnified, are extended to, and shall be enforceable by, the
Trustee in each of its capacities hereunder, and to each agent,
custodian and other Person employed to act hereunder.
Section 8.3 No Responsibility for Recitals, Etc. The recitals
contained herein and in the Notes (except in the Trustee's certificate of
authentication) shall be taken
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as the statements of the Company, and the Trustee assumes no responsibility for
the correctness of the same. The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Notes. The Trustee shall not
be accountable for the use or application by the Company of any Notes or the
proceeds of any Notes authenticated and delivered by the Trustee in conformity
with the provisions of this Indenture.
Section 8.4 Trustee, Paying Agents, Conversion Agents or
Registrar May Own Notes. The Trustee, any paying agent, any conversion agent or
Note registrar, in its individual or any other capacity, may become the owner or
pledgee of Notes with the same rights it would have if it were not Trustee,
paying agent, conversion agent or Note registrar.
Section 8.5 Monies to be Held in Trust. Subject to the
provisions of Section 13.4 and Section 4.2, all monies received by the Trustee
shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as may be agreed in writing from time to time by
the Company and the Trustee.
Section 8.6 Compensation and Expenses of Trustee. The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation for all services rendered by it
hereunder in any capacity (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) as mutually agreed
to from time to time in writing between the Company and the Trustee, and the
Company will pay or reimburse the Trustee upon its request for all expenses,
disbursements and advances reasonably incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ)
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except any such expense, disbursement or advance as may arise from its
negligence or willful misconduct. The Company also covenants to fully indemnify
the Trustee (or any officer, director or employee of the Trustee) and any
predecessor Trustee, in any capacity under this Indenture and its agents and any
authenticating agent for, and to hold them harmless against, any and all loss,
liability, claim, damage or expense (including taxes other than taxes based on
the income of the Trustee) incurred without negligence or willful misconduct on
the part of the Trustee or such officers, directors, employees and agent or
authenticating agent, as the case may be, and arising out of or in connection
with the acceptance or administration of this trust or in any other capacity
hereunder, including the costs and expenses of defending themselves against any
claim of liability in the premises. The obligations of the Company under this
Section 8.6 to compensate or indemnify the Trustee and to pay or reimburse the
Trustee for expenses, disbursements and advances shall be secured by a lien
prior to that of the Notes upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the benefit of the holders of
particular Notes. The obligation of the Company under this Section shall survive
the resignation or removal of the Trustee and the satisfaction and discharge of
this Indenture.
When the Trustee and its agents and any authenticating agent
incur expenses or render services after an Event of Default specified in Section
7.1(d) or (e) with respect to the Company occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any bankruptcy, insolvency or similar laws.
Section 8.7 Officers' Certificate as Evidence. Except as
otherwise provided in Section 8.1, whenever in the administration of the
provisions of this Indenture the Trustee shall deem it necessary or desirable
that a matter be proved or established prior to taking or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or willful misconduct
on the part
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of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee.
Section 8.8 Conflicting Interests of Trustee. If the Trustee
has or shall acquire a conflicting interest within the meaning of the Trust
Indenture Act, the Trustee shall either eliminate such interest or resign, to
the extent and in the manner provided by, and subject to the provisions of, the
Trust Indenture Act and this Indenture.
Section 8.9 Eligibility of Trustee. There shall at all times
be a Trustee hereunder which shall be a Person that is eligible pursuant to the
Trust Indenture Act to act as such and has a combined capital and surplus of at
least $50,000,000 (or if such Person is a member of a bank holding company
system, its bank holding company shall have a combined capital and surplus of at
least $50,000,000). If such Person publishes reports of condition at least
annually, pursuant to law or to the requirements of any supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section 8.9, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 8.10 Resignation or Removal of Trustee.
(a) The Trustee may at any time resign by giving written
notice of such resignation to the Company and to the holders of Notes. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor trustee. If no successor trustee
shall have been so appointed and have accepted appointment sixty (60) days after
the mailing of such notice of resignation to the Noteholders, the resigning
Trustee may,
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upon ten (10) business days' notice to the Company and the Noteholders, appoint
a successor identified in such notice or may petition, at the expense of the
Company, any court of competent jurisdiction for the appointment of a successor
trustee, or, if any Noteholder who has been a bona fide holder of a Note or
Notes for at least six (6) months may, subject to the provisions of Section 7.9,
on behalf of himself and all others similarly situated, petition any such court
for the appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with Section 8.8 after
written request therefor by the Company or by any Noteholder who has
been a bona fide holder of a Note or Notes for at least six (6) months;
or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.9 and shall fail to resign after written
request therefor by the Company or by any such Noteholder; or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation;
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to the
provisions of Section 7.9, any Noteholder who has been a bona fide holder of a
Note or Notes for at least six (6) months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the
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appointment of a successor trustee; provided, however, that if no successor
Trustee shall have been appointed and have accepted appointment sixty (60) days
after either the Company or the Noteholders has removed the Trustee, the Trustee
so removed may petition any court of competent jurisdiction for an appointment
of a successor trustee. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(c) The holders of a majority in aggregate principal amount of
the Notes at the time outstanding may at any time remove the Trustee and
nominate a successor trustee which shall be deemed appointed as successor
trustee unless, within ten (10) days after notice to the Company of such
nomination, the Company objects thereto, in which case the Trustee so removed or
any Noteholder, or if such Trustee so removed or any Noteholder fails to act,
the Company, upon the terms and conditions and otherwise as in Section 8.10(a)
provided, may petition any court of competent jurisdiction for an appointment of
a successor trustee.
(d) Any resignation or removal of the Trustee and appointment
of a successor trustee pursuant to any of the provisions of this Section 8.10
shall become effective upon acceptance of appointment by the successor trustee
as provided in Section 8.11.
Section 8.11 Acceptance by Successor Trustee. Any successor
trustee appointed as provided in Section 8.10 shall execute, acknowledge and
deliver to the Company and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written request
of the Company or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amount then due it and its agents and counsel pursuant to
the provisions of Section 8.6, execute
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and deliver an instrument transferring to such successor trustee all the rights
and powers of the trustee so ceasing to act. Upon request of any such successor
trustee, the Company shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers. Any trustee ceasing to act shall, nevertheless, retain a lien
upon all property and funds held or collected by such trustee as such, except
for funds held in trust for the benefit of holders of particular Notes, to
secure any amounts then due it pursuant to the provisions of Section 8.6.
No successor trustee shall accept appointment as provided in
this Section 8.11 unless, at the time of such acceptance, such successor trustee
shall be qualified under the provisions of Section 8.8 and be eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as
provided in this Section 8.11, the Company (or the former trustee, at the
expense of and at the written direction of the Company) shall mail or cause to
be mailed notice of the succession of such trustee hereunder to the holders of
Notes at their addresses as they shall appear on the Note register. If the
Company fails to mail such notice within ten (10) days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Company.
Section 8.12 Succession by Merger, Etc. Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee (including any trust created by this Indenture), shall be the successor
to the Trustee hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that in the case
of any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, such corporation shall be
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qualified under the provisions of Section 8.8 and eligible under the provisions
of Section 8.9.
In case at the time such successor to the Trustee shall
succeed to the trusts created by this Indenture, any of the Notes shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor trustee or
authenticating agent appointed by such predecessor trustee, and deliver such
Notes so authenticated; and in case at that time any of the Notes shall not have
been authenticated, any successor to the Trustee or any authenticating agent
appointed by such successor trustee may authenticate such Notes in the name of
the successor trustee; and in all such cases such certificates shall have the
full force that is provided in the Notes or in this Indenture; provided,
however, that the right to adopt the certificate of authentication of any
predecessor Trustee or authenticate Notes in the name of any predecessor Trustee
shall apply only to its successor or successors by merger, conversion or
consolidation.
Section 8.13 Preferential Collection of Claims. If and when
the Trustee shall be or become a creditor of the Company (or any other obligor
upon the Notes), the Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of the claims against the Company (or any
such other obligor).
Section 8.14 Trustee's Application for Instructions from the
Company. Any application by the Trustee for written instructions from the
Company (other than with regard to any action proposed to be taken or omitted to
be taken by the Trustee that affects the rights of the holders of the Notes or
holders of Senior Indebtedness under this Indenture, including, without
limitation, under Article Four hereof) may, at the option of the Trustee, set
forth in writing any action proposed to be taken or omitted by the Trustee under
this Indenture and the date on and/or after which such action shall be taken or
such omission shall be effective. The Trustee shall not be liable for any action
taken by, or omission of, the Trustee
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in accordance with a proposal included in such application on or after the date
specified in such application (which date shall not be less than three (3)
Business Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to any
earlier date) unless prior to taking any such action (or the effective date in
the case of an omission), the Trustee shall have received written instructions
in response to such application specifying the action to be taken or omitted.
ARTICLE NINE
THE NOTEHOLDERS
Section 9.1 Action by Noteholders. Whenever in this Indenture
it is provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action, the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by Noteholders
in person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Notes voting in favor thereof at any meeting of Noteholders duly
called and held in accordance with the provisions of Article Ten, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of Noteholders. Whenever the Company or the Trustee solicits the taking
of any action by the holders of the Notes, the Company or the Trustee may fix in
advance of such solicitation, a date as the record date for determining holders
entitled to take such action. The record date shall be not more than fifteen
(15) days prior to the date of commencement of solicitation of such action.
Section 9.2 Proof of Execution by Noteholders. Subject to the
provisions of Sections 8.1, 8.2 and 10.5, proof of the execution of any
instrument by a Noteholder or its agent or proxy shall be sufficient if made in
accordance
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with such reasonable rules and regulations as may be prescribed by the Trustee
or in such manner as shall be satisfactory to the Trustee. The holding of Notes
shall be proved by the registry of such Notes or by a certificate of the Note
registrar.
The record of any Noteholders' meeting shall be proved in the
manner provided in Section 10.6.
Section 9.3 Who Are Deemed Absolute Owners. The Company, the
Trustee, any paying agent, any conversion agent and any Note registrar may deem
the Person in whose name such Note shall be registered upon the Note register to
be, and may treat it as, the absolute owner of such Note (whether or not such
Note shall be overdue and notwithstanding any notation of ownership or other
writing thereon made by any Person other than the Company or any Note registrar)
for the purpose of receiving payment of or on account of the principal of,
premium, if any, and interest on such Note, for conversion of such Note and for
all other purposes; and neither the Company nor the Trustee nor any paying agent
nor any conversion agent nor any Note registrar shall be affected by any notice
to the contrary. All such payments so made to any holder for the time being, or
upon his order, shall be valid, and, to the extent of the sum or sums so paid,
effectual to satisfy and discharge the liability for monies payable upon any
such Note.
Section 9.4 Company-Owned Notes Disregarded. In determining
whether the holders of the requisite aggregate principal amount of Notes have
concurred in any direction, consent, waiver or other action under this
Indenture, Notes which are owned by the Company or any other obligor on the
Notes or any Affiliate of the Company or any other obligor on the Notes shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided, however, that, for the purposes of determining whether
the Trustee shall be protected in relying on any such direction, consent, waiver
or other action, only Notes which a Responsible Officer knows are so owned shall
be so disregarded. Notes so owned which have been pledged in good faith may be
regarded as outstanding for the purposes of
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this Section 9.4 if the pledgee shall establish to the satisfaction of the
Trustee the pledgee's right to vote such Notes and that the pledgee is not the
Company, any other obligor on the Notes or any Affiliate of the Company or any
such other obligor. In the case of a dispute as to such right, any decision by
the Trustee taken upon the advice of counsel shall be full protection to the
Trustee. Upon request of the Trustee, the Company shall furnish to the Trustee
promptly an Officers' Certificate listing and identifying all Notes, if any,
known by the Company to be owned or held by or for the account of any of the
above described Persons, and, subject to Section 8.1, the Trustee shall be
entitled to accept such Officers' Certificate as conclusive evidence of the
facts therein set forth and of the fact that all Notes not listed therein are
outstanding for the purpose of any such determination.
Section 9.5 Revocation of Consents; Future Holders Bound. At
any time prior to (but not after) the evidencing to the Trustee, as provided in
Section 9.1, of the taking of any action by the holders of the percentage in
aggregate principal amount of the Notes specified in this Indenture in
connection with such action, any holder of a Note which is shown by the evidence
to be included in the Notes the holders of which have consented to such action
may, by filing written notice with the Trustee at its Corporate Trust Office and
upon proof of holding as provided in Section 9.2, revoke such action so far as
concerns such Note. Except as aforesaid, any such action taken by the holder of
any Note shall be conclusive and binding upon such holder and upon all future
holders and owners of such Note and of any Notes issued in exchange or
substitution therefor, irrespective of whether any notation in regard thereto is
made upon such Note or any Note issued in exchange or substitution therefor.
ARTICLE TEN
MEETINGS OF NOTEHOLDERS
Section 10.1 Purpose of Meetings. A meeting of Noteholders may
be called at any time and from time to time
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pursuant to the provisions of this Article Ten for any of the following
purposes:
(1) to give any notice to the Company or to the Trustee or to
give any directions to the Trustee permitted under this Indenture, or
to consent to the waiving of any default or Event of Default hereunder
and its consequences, or to take any other action authorized to be
taken by Noteholders pursuant to any of the provisions of Article
Seven;
(2) to remove the Trustee and nominate a successor trustee
pursuant to the provisions of Article Eight;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.2; or
(4) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount of
the Notes under any other provision of this Indenture or under
applicable law.
Section 10.2 Call of Meetings by Trustee. The Trustee may at
any time call a meeting of Noteholders to take any action specified in Section
10.1, to be held at such time and at such place as the Trustee shall determine.
Notice of every meeting of the Noteholders, setting forth the time and the place
of such meeting and in general terms the action proposed to be taken at such
meeting and the establishment of any record date pursuant to Section 9.1, shall
be mailed to holders of Notes at their addresses as they shall appear on the
Note register. Such notice shall also be mailed to the Company. Such notices
shall be mailed not less than twenty (20) nor more than ninety (90) days prior
to the date fixed for the meeting.
Any meeting of Noteholders shall be valid without notice if
the holders of all Notes then outstanding are present in person or by proxy or
if notice is waived before or after the meeting by the holders of all Notes
outstanding, and if the Company and the Trustee are either
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present by duly authorized representatives or have, before or after the meeting,
waived notice.
Section 10.3 Call of Meetings by Company or Noteholders. In
case at any time the Company, pursuant to a resolution of its Board of
Directors, or the holders of at least ten percent (10%) in aggregate principal
amount of the Notes then outstanding, shall have requested the Trustee to call a
meeting of Noteholders, by written request setting forth in reasonable detail
the action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within twenty (20) days after receipt of such
request, then the Company or such Noteholders may determine the time and the
place for such meeting and may call such meeting to take any action authorized
in Section 10.1, by mailing notice thereof as provided in Section 10.2.
Section 10.4 Qualifications for Voting. To be entitled to vote
at any meeting of Noteholders a person shall (a) be a holder of one or more
Notes on the record date pertaining to such meeting or (b) be a person appointed
by an instrument in writing as proxy by a holder of one or more Notes on the
record date pertaining to such meeting. The only persons who shall be entitled
to be present or to speak at any meeting of Noteholders shall be the persons
entitled to vote at such meeting and their counsel and any representatives of
the Trustee and its counsel and any representatives of the Company and its
counsel.
Section 10.5 Regulations. Notwithstanding any other provisions
of this Indenture, the Trustee may make such reasonable regulations as it may
deem advisable for any meeting of Noteholders, in regard to proof of the holding
of Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by
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Noteholders as provided in Section 10.3, in which case the Company or the
Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Notes represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 9.4, at any meeting each
Noteholder or proxyholder shall be entitled to one vote for each $1,000
principal amount of Notes held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any Note challenged
as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Notes held by him or instruments in writing as aforesaid duly
designating him as the proxy to vote on behalf of other Noteholders. Any meeting
of Noteholders duly called pursuant to the provisions of Section 10.2 or 10.3
may be adjourned from time to time by the holders of a majority of the aggregate
principal amount of Notes represented at the meeting, whether or not
constituting a quorum, and the meeting may be held as so adjourned without
further notice.
Section 10.6 Voting. The vote upon any resolution submitted to
any meeting of Noteholders shall be by written ballot on which shall be
subscribed the signatures of the holders of Notes or of their representatives by
proxy and the outstanding principal amount of the Notes held or represented by
them. The permanent chairman of the meeting shall appoint two inspectors of
votes who shall count all votes cast at the meeting for or against any
resolution and who shall make and file with the secretary of the meeting their
verified written reports in duplicate of all votes cast at the meeting. A record
in duplicate of the proceedings of each meeting of Noteholders shall be prepared
by the secretary of the meeting and there shall be attached to said record the
original reports of the inspectors of votes on any vote by ballot taken thereat
and affidavits by one or more persons having knowledge of the facts setting
forth a copy of the
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notice of the meeting and showing that said notice was mailed as provided in
Section 10.2. The record shall show the principal amount of the Notes voting in
favor of or against any resolution. The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one of
the duplicates shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
Section 10.7 No Delay of Rights by Meeting. Nothing contained
in this Article Ten shall be deemed or construed to authorize or permit, by
reason of any call of a meeting of Noteholders or any rights expressly or
impliedly conferred hereunder to make such call, any hindrance or delay in the
exercise of any right or rights conferred upon or reserved to the Trustee or to
the Noteholders under any of the provisions of this Indenture or of the Notes.
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
Section 11.1 Supplemental Indentures Without Consent of
Noteholders. The Company, when authorized by the resolutions of the Board of
Directors, and the Trustee may, from time to time, and at any time enter into an
indenture or indentures supplemental hereto for one or more of the following
purposes:
(a) to make provision with respect to the conversion rights of
the holders of Notes pursuant to the requirements of Section 15.6 and
the redemption obligations of the Company pursuant to the requirements
of Section 3.5(e);
(b) subject to Article Four, to convey, transfer, assign,
mortgage or pledge to the Trustee as security for the Notes, any
property or assets;
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(c) to evidence the succession of another Person to the
Company, or successive successions, and the assumption by the successor
Person of the covenants, agreements and obligations of the Company
pursuant to Article Twelve;
(d) to add to the covenants of the Company such further
covenants, restrictions or conditions as the Board of Directors and the
Trustee shall consider to be for the benefit of the holders of Notes,
and to make the occurrence, or the occurrence and continuance, of a
default in any such additional covenants, restrictions or conditions a
default or an Event of Default permitting the enforcement of all or any
of the several remedies provided in this Indenture as herein set forth;
provided, however, that in respect of any such additional covenant,
restriction or condition, such supplemental indenture may provide for a
particular period of grace after default (which period may be shorter
or longer than that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such default or may limit the
remedies available to the Trustee upon such default;
(e) to provide for the issuance under this Indenture of Notes
in coupon form (including Notes registrable as to principal only) and
to provide for exchangeability of such Notes with the Notes issued
hereunder in fully registered form and to make all appropriate changes
for such purpose;
(f) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture that may be
defective or inconsistent with any other provision contained herein or
in any supplemental indenture, or to make such other provisions in
regard to matters or questions arising under this Indenture that shall
not materially adversely affect the interests of the holders of the
Notes;
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(g) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes; or
(h) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualifications of this Indenture under the Trust Indenture Act, or
under any similar federal statute hereafter enacted.
Upon the written request of the Company, accompanied by a copy
of the resolutions of the Board of Directors certified by its Secretary or
Assistant Secretary authorizing the execution of any supplemental indenture, the
Trustee is hereby authorized to join with the Company in the execution of any
such supplemental indenture, to make any further appropriate agreements and
stipulations that may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any supplemental indenture
that affects the Trustee's own rights, duties or immunities under this Indenture
or otherwise.
Any supplemental indenture authorized by the provisions of
this Section 11.1 may be executed by the Company and the Trustee without the
consent of the holders of any of the Notes at the time outstanding,
notwithstanding any of the provisions of Section 11.2.
Notwithstanding any other provision of the Indenture or the
Notes, the Registration Rights Agreement and the obligation to pay Liquidated
Damages thereunder may be amended, modified or waived in accordance with the
provisions of the Registration Rights Agreement.
Section 11.2 Supplemental Indenture with Consent of
Noteholders. With the consent (evidenced as provided in Article Nine) of the
holders of not less than a majority in aggregate principal amount of the Notes
at the time outstanding, the Company, when authorized by the resolutions of the
Board of Directors, and the Trustee may, from time to time and at any time,
enter into an indenture or indentures
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supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or any
supplemental indenture or of modifying in any manner the rights of the holders
of the Notes; provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any Note, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof or premium,
if any, thereon, or reduce any amount payable on redemption thereof, or impair
the right of any Noteholder to institute suit for the payment thereof, or make
the principal thereof or interest or premium, if any, thereon payable in any
coin or currency other than that provided in the Notes, or modify the provisions
of this Indenture with respect to the subordination of the Notes in a manner
adverse to the Noteholders in any material respect, or change the obligation of
the Company to redeem any Note upon the happening of a Fundamental Change in a
manner adverse to the holder of Notes, or impair the right to convert the Notes
into Common Stock subject to the terms set forth herein, including Section 15.6,
in each case, without the consent of the holder of each Note so affected, or
(ii) reduce the aforesaid percentage of Notes, the holders of which are required
to consent to any such supplemental indenture, without the consent of the
holders of all Notes then outstanding.
Upon the written request of the Company, accompanied by a copy
of the resolutions of the Board of Directors certified by its Secretary or
Assistant Secretary and authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of the consent of
Noteholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Noteholders
under this Section 11.2 to approve the
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particular form of any proposed supplemental indenture, but it shall be
sufficient if such consent shall approve the substance thereof.
Section 11.3 Effect of Supplemental Indenture. Any
supplemental indenture executed pursuant to the provisions of this Article
Eleven shall comply with the Trust Indenture Act, as then in effect, provided
that this Section 11.3 shall not require such supplemental indenture or the
Trustee to be qualified under the Trust Indenture Act prior to the time such
qualification is in fact required under the terms of the Trust Indenture Act or
the Indenture has been qualified under the Trust Indenture Act, nor shall it
constitute any admission or acknowledgment by any party to such supplemental
indenture that any such qualification is required prior to the time such
qualification is in fact required under the terms of the Trust Indenture Act or
the Indenture has been qualified under the Trust Indenture Act. Upon the
execution of any supplemental indenture pursuant to the provisions of this
Article Eleven, this Indenture shall be and be deemed to be modified and amended
in accordance therewith and the respective rights, limitation of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Notes shall thereafter be determined, exercised and
enforced hereunder, subject in all respects to such modifications and amendments
and all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
Section 11.4 Notation on Notes. Notes authenticated and
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article Eleven may bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Notes so modified as to conform,
in the opinion of the Trustee and the Board of Directors, to any modification of
this Indenture contained in any such supplemental indenture may, at the
Company's expense, be prepared and executed by the Company, authenticated by the
Trustee (or an authenticating agent duly appointed by the
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Trustee pursuant to Section 16.11) and delivered in exchange for the Notes then
outstanding, upon surrender of such Notes then outstanding.
Section 11.5 Evidence of Compliance of Supplemental Indenture
to be Furnished to Trustee. Prior to entering into any supplemental indenture,
the Trustee may request an Officers' Certificate and an Opinion of Counsel
meeting the requirements set forth in Section 16.5 as conclusive evidence that
any supplemental indenture executed pursuant hereto complies with the
requirements of this Article Eleven.
ARTICLE TWELVE
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 12.1 Company May Consolidate, Etc., on Certain Terms.
Subject to the provisions of Section 12.2, nothing contained in this Indenture
or in any of the Notes shall prevent any consolidation or merger of the Company
with or into any other Person or Persons (whether or not affiliated with the
Company), or successive consolidations or mergers in which the Company or its
successor or successors shall be a party or parties, or shall prevent any sale,
conveyance or lease (or successive sales, conveyances or leases) of all or
substantially all of the property of the Company, to any other Person (whether
or not affiliated with the Company), authorized to acquire and operate the same
and that shall be organized under the laws of the United States of America, any
state thereof or the District of Columbia; provided, however, that upon any such
consolidation, merger, sale, conveyance or lease, the due and punctual payment
of the principal of and premium, if any, and interest (including Liquidated
Damages, if any) on all of the Notes, according to their tenor and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed by the Company, shall be expressly assumed, by
supplemental indenture satisfactory in form to the Trustee, executed and
delivered to the Trustee by the Person (if other than the Company) formed by
such consolidation, or into which the
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Company shall have been merged, or by the Person that shall have acquired or
leased such property, and such supplemental indenture shall provide for the
applicable conversion rights set forth in Section 15.6.
Section 12.2 Successor Corporation to be Substituted. In case
of any such consolidation, merger, sale, conveyance or lease and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the due and
punctual payment of the principal of and premium, if any, and interest on all of
the Notes and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Company, such successor
Person shall succeed to and be substituted for the Company, with the same effect
as if it had been named herein as the party of this first part. Such successor
Person thereupon may cause to be signed, and may issue either in its own name or
in the name of Conexant Systems, Inc. any or all of the Notes, issuable
hereunder that theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the order of such successor Person instead
of the Company and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver, or cause
to be authenticated and delivered, any Notes that previously shall have been
signed and delivered by the officers of the Company to the Trustee for
authentication, and any Notes that such successor Person thereafter shall cause
to be signed and delivered to the Trustee for that purpose. All the Notes so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Notes theretofore or thereafter issued in accordance with the
terms of this Indenture as though all of such Notes had been issued at the date
of the execution hereof. In the event of any such consolidation, merger, sale,
conveyance or lease, the Person named as the "Company" in the first paragraph of
this Indenture or any successor that shall thereafter have become such in the
manner prescribed in this Article Twelve may be dissolved, wound up and
liquidated at any time thereafter and such Person shall
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be released from its liabilities as obligor and maker of the Notes and from its
obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance or
lease, such changes in phraseology and form (but not in substance) may be made
in the Notes thereafter to be issued as may be appropriate.
Section 12.3 Opinion of Counsel to be Given Trustee. The
Trustee shall receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, sale, conveyance or
lease and any such assumption complies with the provisions of this Article
Twelve.
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE OF INDENTURE
Section 13.1 Discharge of Indenture. When (a) the Company
shall deliver to the Trustee for cancellation all Notes theretofore
authenticated (other than any Notes that have been destroyed, lost or stolen and
in lieu of or in substitution for which other Notes shall have been
authenticated and delivered) and not theretofore canceled, or (b) all the Notes
not theretofore canceled or delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and the
Company shall deposit with the Trustee, in trust, funds sufficient to pay at
maturity or upon redemption of all of the Notes (other than any Notes that shall
have been mutilated, destroyed, lost or stolen and in lieu of or in substitution
for which other Notes shall have been authenticated and delivered) not
theretofore canceled or delivered to the Trustee for cancellation, including
principal and premium, if any, and interest due or to become due to such date of
maturity or redemption date, as the case may be, accompanied by a verification
report, as to the sufficiency of the deposited amount, from an independent
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certified accountant or other financial professional satisfactory to the
Trustee, and if the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company, then this Indenture shall cease to be of
further effect (except as to (i) remaining rights of registration of transfer,
substitution and exchange and conversion of Notes, (ii) rights hereunder of
Noteholders to receive payments of principal of and premium, if any, and
interest on, the Notes and the other rights, duties and obligations of
Noteholders, as beneficiaries hereof with respect to the amounts, if any, so
deposited with the Trustee and (iii) the rights, obligations and immunities of
the Trustee hereunder), and the Trustee, on written demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel as required by
Section 16.5 and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture; the
Company, however, hereby agrees to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee and to
compensate the Trustee for any services thereafter reasonably and properly
rendered by the Trustee in connection with this Indenture or the Notes.
Section 13.2 Deposited Monies to be Held in Trust by Trustee.
Subject to Section 13.4, all monies deposited with the Trustee pursuant to
Section 13.1, provided such deposit was not in violation of Article Four, shall
be held in trust for the sole benefit of the Noteholders and not to be subject
to the subordination provisions of Article Four, and such monies shall be
applied by the Trustee to the payment, either directly or through any paying
agent (including the Company if acting as its own paying agent), to the holders
of the particular Notes for the payment or redemption of which such monies have
been deposited with the Trustee, of all sums due and to become due thereon for
principal and interest and premium, if any.
Section 13.3 Paying Agent to Repay Monies Held. Upon the
satisfaction and discharge of this Indenture, all monies then held by any paying
agent of the Notes (other than the Trustee) shall, upon written request of the
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Company, be repaid to it or paid to the Trustee, and thereupon such paying agent
shall be released from all further liability with respect to such monies.
Section 13.4 Return of Unclaimed Monies. Subject to the
requirements of applicable law, any monies deposited with or paid to the Trustee
for payment of the principal of, premium, if any, or interest on Notes and not
applied but remaining unclaimed by the holders of Notes for two years after the
date upon which the principal of, premium, if any, or interest on such Notes, as
the case may be, shall have become due and payable, shall be repaid to the
Company by the Trustee on demand and all liability of the Trustee shall
thereupon cease with respect to such monies; and the holder of any of the Notes
shall thereafter look only to the Company for any payment that such holder may
be entitled to collect unless an applicable abandoned property law designates
another Person.
Section 13.5 Reinstatement. If the Trustee or the paying agent
is unable to apply any money in accordance with Section 13.2 by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 13.1 until such time as the Trustee or the paying
agent is permitted to apply all such money in accordance with Section 13.2;
provided, however, that if the Company makes any payment of interest on or
principal of any Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the holders of such Notes to
receive such payment from the money held by the Trustee or paying agent.
ARTICLE FOURTEEN
IMMUNITY OF INCORPORATORS,
STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 14.1 Indenture and Notes Solely Corporate Obligations.
No recourse for the payment of the principal
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of or premium, if any, or interest on any Note, or for any claim based thereon
or otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company in this Indenture or in any supplemental
indenture or in any Note, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder,
employee, agent, officer, director or subsidiary, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of this Indenture and the issue of the Notes.
ARTICLE FIFTEEN
CONVERSION OF NOTES
Section 15.1 Right to Convert. Subject to and upon compliance
with the provisions of this Indenture, including, without limitation, Article
Four, the holder of any Note shall have the right, at its option, at any time
after the original issuance of the Notes hereunder through the close of business
on the final maturity date of the Notes (except that, with respect to any Note
or portion of a Note that shall be called for redemption, such right shall
terminate, except as provided in Section 15.2, Section 3.2 or Section 3.4, at
the close of business on the Business Day next preceding the date fixed for
redemption of such Note or portion of a Note unless the Company shall default in
payment due upon redemption thereof) to convert the principal amount of any such
Note, or any portion of such principal amount which is $1,000 or an integral
multiple thereof, into that number of fully paid and non-assessable shares of
Common Stock (as such shares shall then be constituted) obtained by dividing the
principal amount of the Note or portion thereof surrendered for conversion by
the Conversion Price in effect at such time, by surrender of the Note so to be
converted in whole or in part in the
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manner provided, together with any required funds, in Section 15.2. A Note in
respect of which a holder is exercising its option to require redemption upon a
Fundamental Change pursuant to Section 3.5 may be converted only if such holder
withdraws its election to exercise in accordance with Section 3.5. A holder of
Notes is not entitled to any rights of a holder of Common Stock until such
holder has converted his Notes to Common Stock, and only to the extent such
Notes are deemed to have been converted to Common Stock under this Article
Fifteen.
Section 15.2 Exercise of Conversion Privilege; Issuance of
Common Stock on Conversion; No Adjustment for Interest or Dividends. In order to
exercise the conversion privilege with respect to any Note in certificated form,
the holder of any such Note to be converted in whole or in part shall surrender
such Note, duly endorsed, at an office or agency maintained by the Company
pursuant to Section 5.2, accompanied by the funds, if any, required by the
penultimate paragraph of this Section 15.2, and shall give written notice of
conversion in the form provided on the Notes (or such other notice which is
acceptable to the Company) to the office or agency that the holder elects to
convert such Note or the portion thereof specified in said notice. Such notice
shall also state the name or names (with address or addresses) in which the
certificate or certificates for shares of Common Stock which shall be issuable
on such conversion shall be issued, and shall be accompanied by transfer taxes,
if required pursuant to Section 15.7. Each such Note surrendered for conversion
shall, unless the shares issuable on conversion are to be issued in the same
name as the registration of such Note, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Company duly executed by,
the holder or his duly authorized attorney.
In order to exercise the conversion privilege with respect to
any interest in a Note in global form, the beneficial holder must complete, or
cause to be completed, the appropriate instruction form for conversion pursuant
to the Depository's book-entry conversion program, deliver, or cause to be
delivered, by book-entry delivery an interest in
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such Note in global form, furnish appropriate endorsements and transfer
documents if required by the Company or the Trustee or conversion agent, and pay
the funds, if any, required by this Section 15.2 and any transfer taxes if
required pursuant to Section 15.7.
As promptly as practicable after satisfaction of the
requirements for conversion set forth above, subject to compliance with any
restrictions on transfer if shares issuable on conversion are to be issued in a
name other than that of the Noteholder (as if such transfer were a transfer of
the Note or Notes (or portion thereof) so converted), the Company shall issue
and shall deliver to such Noteholder at the office or agency maintained by the
Company for such purpose pursuant to Section 5.2, a certificate or certificates
for the number of full shares of Common Stock issuable upon the conversion of
such Note or portion thereof as determined by the Company in accordance with the
provisions of this Article Fifteen and a check or cash in respect of any
fractional interest in respect of a share of Common Stock arising upon such
conversion, calculated by the Company as provided in Section 15.3. In case any
Note of a denomination greater than $1,000 shall be surrendered for partial
conversion, and subject to Section 2.3, the Company shall execute and the
Trustee shall authenticate and deliver to the holder of the Note so surrendered,
without charge to him, a new Note or Notes in authorized denominations in an
aggregate principal amount equal to the unconverted portion of the surrendered
Note.
Each conversion shall be deemed to have been effected as to
any such Note (or portion thereof) on the date on which the requirements set
forth above in this Section 15.2 have been satisfied as to such Note (or portion
thereof), and the Person in whose name any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become on said date the holder of record of the shares represented thereby;
provided, however, that any such surrender on any date when the stock transfer
books of the Company shall be closed shall constitute the Person in whose name
the certificates are to be issued as the record holder thereof for all
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purposes on the next succeeding day on which such stock transfer books are open,
but such conversion shall be at the Conversion Price in effect on the date upon
which such Note shall be surrendered.
No adjustment in respect of interest on any Note converted or
dividends on any shares issued upon conversion of such Note will be made upon
any conversion except as set forth in the next sentence. If this Note (or
portion hereof) is surrendered for conversion during the period from the close
of business on any record date for the payment of interest to the close of
business on the Business Day preceding the following interest payment date and
either (x) has not been called for redemption on a redemption date that occurs
during such period or (y) is not to be redeemed in connection with a Fundamental
Change on a Repurchase Date that occurs during such period, this Note (or
portion hereof being converted) must be accompanied by an amount, in New York
Clearing House funds or other funds acceptable to the Company, equal to the
interest payable on such interest payment date on the principal amount being
converted; provided, however, that no such payment shall be required if there
shall exist at the time of conversion a default in the payment of interest on
the Notes.
Upon the conversion of an interest in a Note in global form,
the Trustee (or other conversion agent appointed by the Company), or the
Custodian at the direction of the Trustee (or other conversion agent appointed
by the Company), shall make a notation on such Note in global form as to the
reduction in the principal amount represented thereby. The Company shall notify
the Trustee in writing of any conversions of Notes effected through any
conversion agent other than the Trustee.
Section 15.3 Cash Payments in Lieu of Fractional Shares. No
fractional shares of Common Stock or scrip representing fractional shares shall
be issued upon conversion of Notes. If more than one Note shall be surrendered
for conversion at one time by the same holder, the number of full shares that
shall be issuable upon conversion shall be computed on the basis of the
aggregate
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principal amount of the Notes (or specified portions thereof to the extent
permitted thereby) so surrendered. If any fractional share of stock would be
issuable upon the conversion of any Note or Notes, the Company shall make an
adjustment and payment therefor in cash at the current market price thereof to
the holder of Notes. The current market price of a share of Common Stock shall
be the Closing Price on the last Business Day immediately preceding the day on
which the Notes (or specified portions thereof) are deemed to have been
converted.
Section 15.4 Conversion Price. The conversion price shall be
as specified in the form of Note (herein called the "Conversion Price") attached
as Exhibit A hereto, subject to adjustment as provided in this Article Fifteen.
Section 15.5 Adjustment of Conversion Price. The Conversion
Price shall be adjusted from time to time by the Company as follows:
(a) In case the Company shall hereafter pay a dividend or make
a distribution to all holders of the outstanding Common Stock in shares
of Common Stock, the Conversion Price shall be reduced so that the same
shall equal the price determined by multiplying the Conversion Price in
effect at the opening of business on the date following the date fixed
for the determination of stockholders entitled to receive such dividend
or other distribution by a fraction, the numerator of which shall be
the number of shares of the Common Stock outstanding at the close of
business on the date fixed for such determination, and the denominator
of which shall be the sum of such number of shares and the total number
of shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business
on the day following the date fixed for such determination. For the
purpose of this paragraph (a), the number of shares of Common
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Stock at any time outstanding shall not include shares held in the
treasury of the Company. The Company will not pay any dividend or make
any distribution on shares of Common Stock held in the treasury of the
Company. If any dividend or distribution of the type described in this
Section 15.5(a) is declared but not so paid or made, the Conversion
Price shall again be adjusted to the Conversion Price that would then
be in effect if such dividend or distribution had not been declared.
(b) In case the Company shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them (for a
period expiring within forty-five (45) days after the date fixed for
determination of stockholders entitled to receive such rights or
warrants) to subscribe for or purchase shares of Common Stock at a
price per share less than the Current Market Price (as defined below)
on the date fixed for determination of stockholders entitled to receive
such rights or warrants, the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the date fixed for determination
of stockholders entitled to receive such rights or warrants by a
fraction, the numerator of which shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for
determination of stockholders entitled to receive such rights or
warrants plus the number of shares that the aggregate offering price of
the total number of shares so offered would purchase at such Current
Market Price, and the denominator of which shall be the number of
shares of Common Stock outstanding on the date fixed for determination
of stockholders entitled to receive such rights or warrants plus the
total number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall be successively made
whenever any such rights or warrants are issued, and shall become
effective immediately after the opening of business on the day
following the date fixed for determination of 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 Price shall be readjusted to the Conversion
Price that
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would then be in effect had the adjustments made upon the issuance of
such rights or warrants been made on the basis of delivery of only the
number of shares of Common Stock actually delivered. In the event that
such rights or warrants are not so issued, the Conversion Price shall
again be adjusted to be the Conversion Price that would then be in
effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed. In
determining whether any rights or warrants entitle the holders to
subscribe for or purchase shares of Common Stock at less than such
Current Market Price, and in determining the aggregate offering price
of such shares of Common Stock, there shall be taken into account any
consideration received by the Company for such rights or warrants and
any amount payable on exercise or conversion thereof, the value of such
consideration, if other than cash, to be determined by the Board of
Directors.
(c) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and conversely, in case outstanding shares
of Common Stock shall be combined into a smaller number of shares of
Common Stock, the Conversion Price in effect at the opening of business
on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock shares of any class of
capital stock of the Company (other than any dividends or distributions
to which Section 15.5(a) applies) or evidences of its indebtedness or
assets (including securities, but
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excluding any rights or warrants referred to in Section 15.5(b), and
excluding any dividend or distribution (x) paid exclusively in cash or
(y) referred to in Section 15.5(a) (any of the foregoing hereinafter in
this Section 15.5(d) called the "Securities")), then, in each such case
(unless the Company elects to reserve such Securities for distribution
to the Noteholders upon the conversion of the Notes so that any such
holder converting Notes will receive upon such conversion, in addition
to the shares of Common Stock to which such holder is entitled, the
amount and kind of such Securities which such holder would have
received if such holder had converted its Notes into Common Stock
immediately prior to the Record Date (as defined in Section 15.5(h)(4)
for such distribution of the Securities)), the Conversion Price shall
be reduced so that the same shall be equal to the price determined by
multiplying the Conversion Price in effect on the Record Date with
respect to such distribution by a fraction, the numerator of which
shall be the Current Market Price per share of the Common Stock on such
Record Date less the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive, and described in a
resolution of the Board of Directors) on the Record Date of the portion
of the Securities so distributed applicable to one share of Common
Stock and the denominator of which shall be the Current Market Price
per share of the Common Stock, such reduction to become effective
immediately prior to the opening of business on the day following such
Record Date; provided, however, that in the event the then fair market
value (as so determined) of the portion of the Securities so
distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price of the Common Stock on the Record
Date, in lieu of the foregoing adjustment, adequate provision shall be
made so that each Noteholder shall have the right to receive upon
conversion the amount of Securities such holder would have received had
such holder converted each Note on the Record Date. In the event that
such dividend or distribution is not so paid or made, the Conversion
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Price shall again be adjusted to be the Conversion Price that would
then be in effect if such dividend or distribution had not been
declared. If the Board of Directors determines the fair market value of
any distribution for purposes of this Section 15.5(d) 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.
Rights or warrants distributed by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or
purchase shares of the Company's capital stock (either initially or
under certain circumstances), which rights or warrants, until the
occurrence of a specified event or events ("Trigger Event"): (i) are
deemed to be transferred with such shares of Common Stock; (ii) are not
exercisable; and (iii) are also issued in respect of future issuances
of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 15.5 (and no adjustment to the Conversion
Price under this Section 15.5 will be required) until the occurrence of
the earliest Trigger Event, whereupon such rights and warrants shall be
deemed to have been distributed and an appropriate adjustment (if any
is required) to the Conversion Price shall be made under this Section
15.5(d). If any such right or warrant, including any such existing
rights or warrants distributed prior to the date of this Indenture, are
subject to events, upon the occurrence of which such rights or warrants
become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the date of the occurrence of any
and each such event shall be deemed to be the date of distribution and
record date with respect to new rights or warrants with such rights
(and a termination or expiration of the existing rights or warrants
without exercise by any of the holders thereof). In addition, in the
event of any distribution (or deemed distribution) of rights or
warrants, or any Trigger Event or other event (of the type described in
the preceding sentence) with respect
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thereto that was counted for purposes of calculating a distribution
amount for which an adjustment to the Conversion Price under this
Section 15.5 was made, (1) in the case of any such rights or warrants
that shall all have been redeemed or repurchased without exercise by
any holders thereof, the Conversion Price shall be readjusted upon such
final redemption or repurchase to give effect to such distribution or
Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price
received by a holder or holders of Common Stock with respect to such
rights or warrants (assuming such holder had retained such rights or
warrants), made to all holders of Common Stock as of the date of such
redemption or repurchase, and (2) in the case of such rights or
warrants that shall have expired or been terminated without exercise by
any holders thereof, the Conversion Price shall be readjusted as if
such rights and warrants had not been issued.
No adjustment of the Conversion Price shall be made pursuant
to this Section 15.5(d) in respect of rights or warrants distributed or
deemed distributed on any Trigger Event to the extent that such rights
or warrants are actually distributed, or reserved by the Company for
distribution to holders of Notes upon conversion by such holders of
Notes to Common Stock.
For purposes of this Section 15.5(d) and Sections 15.5(a) and
(b), any dividend or distribution to which this Section 15.5(d) is
applicable that also includes shares of Common Stock, or rights or
warrants to subscribe for or purchase shares of Common Stock (or both),
shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, assets or shares of capital stock other than
such shares of Common Stock or rights or warrants (and any Conversion
Price reduction required by this Section 15.5(d) with respect to such
dividend or distribution shall then be made) immediately followed by
(2) a dividend or distribution of such shares of Common Stock or such
rights or warrants (and any further Conversion Price
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reduction required by Sections 15.5(a) and (b) with respect to such
dividend or distribution shall then be made), except (A) the Record
Date of such dividend or distribution shall be substituted as "the date
fixed for the determination of stockholders entitled to receive such
dividend or other distribution", "the date fixed for the determination
of stockholders entitled to receive such rights or warrants" and "the
date fixed for such determination" within the meaning of Sections
15.5(a) and (b), and (B) any shares of Common Stock included in such
dividend or distribution shall not be deemed "outstanding at the close
of business on the date fixed for such determination" within the
meaning of Section 15.5(a).
(e) 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 that such preceding quarterly dividend did not require any
adjustment of the Conversion Price pursuant to this Section 15.5(e) (as
adjusted to reflect subdivisions, or combinations of the Common Stock),
and (B) 3.75% of the arithmetic average of the Closing Price
(determined as set forth in Section 15.5(h)) during the ten Trading
Days (as defined in Section 15.5(h)) immediately prior to 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, the
Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on such record date by a
fraction, the numerator of which 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)
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applicable to one share of Common Stock, and the denominator of which
shall be such Current Market Price of the Common Stock, such reduction
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 Noteholder shall have the
right to receive upon conversion the amount of cash such holder would
have received had such holder converted each Note on the record date.
In the event that such dividend or distribution is not so paid or made,
the Conversion Price shall again be adjusted to be the Conversion Price
that 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 15.5(e) 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 Section 15.5(e) 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.
(f) In case a tender or exchange offer made by the Company or
any Subsidiary for all or any portion of the Common Stock shall expire
and such tender or exchange offer (as amended upon the expiration
thereof) shall require the payment to stockholders 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) that as of the
last time (the "Expiration Time") tenders or exchanges may be made
pursuant to such tender or exchange offer (as it may be amended)
exceeds the Current Market Price of the Common Stock on the Trading
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Day next succeeding the Expiration Time, the Conversion Price shall be
reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
Expiration Time by a fraction the numerator of which shall be the
number of shares of Common Stock outstanding (including any tendered or
exchanged shares) at the Expiration Time multiplied by the Current
Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time and the denominator of which 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) at the Expiration Time and the Current Market Price of the
Common Stock on the Trading Day next succeeding the Expiration Time,
such reduction to become effective immediately prior to the opening of
business on the Trading 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 Price shall again be adjusted to be the
Conversion Price that would then be in effect if such tender or
exchange offer had not been made.
(g) In case of a tender or exchange offer made by a Person
other than the Company or any Subsidiary for an amount that increases
the offeror's ownership of Common Stock to more than twenty-five
percent (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
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of Directors) that as of the last time (the "Offer 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 Offer
Expiration Time, and in which, as of the Offer Expiration Time the
Board of Directors is not recommending rejection of the offer, the
Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the Offer Expiration Time by a fraction the
numerator of which shall be the number of shares of Common Stock
outstanding (including any tendered or exchanged shares) at the Offer
Expiration Time multiplied by the Current Market Price of the Common
Stock on the Trading Day next succeeding the Offer Expiration Time and
the denominator of which 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 Offer Expiration Time
(the shares deemed so accepted, up to any such maximum, being referred
to as the "Accepted Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Accepted
Purchased Shares) at the Offer Expiration Time and the Current Market
Price of the Common Stock on the Trading Day next succeeding the Offer
Expiration Time, such reduction to become effective immediately prior
to the opening of business on the Trading Day following the Offer
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 Price
shall again be adjusted to be the Conversion Price that would then be
in effect if such tender or exchange offer had not been made.
Notwithstanding the foregoing, the adjustment described in this Section
15.5(g) shall not be made if, as of the
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Offer 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 Twelve.
(h) For purposes of this Section 15.5, the following terms
shall have the meaning indicated:
(1) "Closing Price" with respect to any security on
any day shall mean the closing sale price, regular way, on
such day or, in case no such sale takes place on such day, the
average of the reported closing bid and asked prices, regular
way, in each case as quoted on the Nasdaq National Market or,
if such security is not quoted or listed or admitted to
trading on such Nasdaq National Market, on the principal
national securities exchange or quotation system on which such
security is quoted or listed or admitted to trading or, if not
quoted or listed or admitted to trading on any national
securities exchange or quotation system, the average of the
closing bid and asked prices of such security on the
over-the-counter market on the day in question as reported by
the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or if not so available,
in such manner as furnished by any New York Stock Exchange
member firm selected from time to time by the Board of
Directors for that purpose, or a price determined in good
faith by the Board of Directors or, to the extent permitted by
applicable law, a duly authorized committee thereof, whose
determination shall be conclusive.
(2) "Current Market Price" shall mean the average of
the daily Closing Prices per share of Common Stock for the ten
consecutive Trading Days immediately prior to the date in
question except as hereinafter provided for purposes of any
computation under Section 15.5(f) or (g); provided, however,
that (1) if the "ex" date (as
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hereinafter defined) for any event (other than the issuance or
distribution requiring such computation and other than the
tender or exchange offer requiring such computation under
Section 15.5(f) or (g)) that requires an adjustment to the
Conversion Price pursuant to Section 15.5(a), (b), (c), (d),
(e), (f) or (g) occurs during such ten consecutive Trading
Days, the Closing Price for each Trading Day prior to the "ex"
date for such other event shall be adjusted by multiplying
such Closing Price by the same fraction by which the
Conversion Price is so required to be adjusted as a result of
such other event, (2) if the "ex" date for any event (other
than the issuance or distribution requiring such computation
and other than the tender or exchange offer requiring such
computation under Section 15.5(f) or (g)) that requires an
adjustment to the Conversion Price pursuant to Section
15.5(a), (b), (c), (d), (e), (f) or (g) occurs on or after the
"ex" date for the issuance or distribution requiring such
computation and prior to the day in question, the Closing
Price for each Trading Day on and after the "ex" date for such
other event shall be adjusted by multiplying such Closing
Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of
such other event, and (3) if the "ex" date for the issuance or
distribution requiring such computation is prior to the day in
question, after taking into account any adjustment required
pursuant to clause (1) or (2) of this proviso, the Closing
Price for each Trading Day on or after such "ex" date shall be
adjusted by adding thereto the amount of any cash and the fair
market value (as determined by the Board of Directors or, to
the extent permitted by applicable law, a duly authorized
committee thereof in a manner consistent with any
determination of such value for purposes of Section 15.5(d),
(f) or (g), whose determination shall be conclusive and
described in a resolution of the Board of Directors or such
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duly authorized committee thereof, as the case may be) of the
evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as
of the close of business on the day before such "ex" date. For
purposes of any computation under Section 15.5(f) or (g), the
"Current Market Price" of the Common Stock on any date shall
be deemed to be the average of the daily Closing Prices per
share of Common Stock for such day and the next two succeeding
Trading Days; provided, however, that if the "ex" date for any
event (other than the tender or exchange offer requiring such
computation under Section 15.5(f) or (g)) that requires an
adjustment to the Conversion Price pursuant to Section
15.5(a), (b), (c), (d), (e), (f) or (g) occurs on or after the
Expiration Time or Offer Expiration Time, as the case may be,
for the tender or exchange offer requiring such computation
and prior to the day in question, the Closing Price for each
Trading Day on and after the "ex" date for such other event
shall be adjusted as provided in clauses (1), (2) and (3) of
the proviso contained in the first sentence of this Section
15.5(h)(2). For purpose of this paragraph, the term "ex" date,
(1) when used with respect to any issuance or distribution,
means the first date on which the Common Stock trades, regular
way, on the relevant exchange or in the relevant market from
which the Closing Price was obtained without the right to
receive such issuance or distribution, (2) when used with
respect to any subdivision or combination of shares of Common
Stock, means the first date on which the Common Stock trades,
regular way, on such exchange or in such market after the time
at which such subdivision or combination becomes effective,
and (3) when used with respect to any tender or exchange offer
means the first date on which the Common Stock trades, regular
way, on such exchange or in such market after the
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Expiration Time or the Offer Expiration Time of such offer.
(3) "fair market value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's-length
transaction.
(4) "Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which
the holders of Common Stock have the right to receive any
cash, securities or other property or in which the Common
Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other
property, the date fixed for determination of stockholders
entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by
statute, contract or otherwise).
(5) "Trading Day" shall mean (x) if the applicable
security is quoted on the Nasdaq National Market, a day on
which trades may be made thereon or (y) if the applicable
security is listed or admitted for trading on the New York
Stock Exchange or another national securities exchange, a day
on which the New York Stock Exchange or another national
securities exchange is open for business or (z) if the
applicable security is not so listed, admitted for trading or
quoted, any day other than a Saturday or Sunday or a day on
which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(i) The Company may make such reductions in the Conversion
Price, in addition to those required by Sections 15.5(a), (b), (c),
(d), (e), (f) or (g) 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
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stock) or from any event treated as such for income tax purposes.
To the extent permitted by applicable law, the Company from
time to time may reduce the Conversion Price by any amount for any
period of time if the period is at least twenty (20) days, the
reduction is irrevocable during the period and the Board of Directors
shall have made a determination that such reduction would be in the
best interests of the Company, which determination shall be conclusive.
Whenever the Conversion Price is reduced pursuant to the preceding
sentence, the Company shall mail to holders of record of the Notes a
notice of the reduction at least fifteen (15) days prior to the date
the reduced Conversion Price takes effect, and such notice shall state
the reduced Conversion Price and the period during which it will be in
effect.
(j) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least one percent (1%) in such price; provided, however, that any
adjustments that by reason of this Section 15.5(j) are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Article Fifteen
shall be made by the Company and shall be made to the nearest cent or
to the nearest one-hundredth (1/100) of a share, as the case may be. No
adjustment need be made for rights to purchase Common Stock pursuant to
a Company plan for reinvestment of dividends or interest. To the extent
the Notes 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.
(k) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly file with the Trustee and any
conversion agent other than the Trustee an Officers' Certificate
setting forth the
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Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Unless and until a
Responsible Officer of the Trustee shall have received such Officers'
Certificate, the Trustee shall not be deemed to have knowledge of any
adjustment of the Conversion Price and may assume without inquiry that
the last Conversion Price of which it has knowledge is still in effect.
Promptly after delivery of such certificate, the Company shall prepare
a notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the
Conversion Price to the holder of each Note at his last address
appearing on the Note register provided for in Section 2.5 of this
Indenture, within twenty (20) days after execution thereof. Failure to
deliver such notice shall not affect the legality or validity of any
such adjustment.
(l) In any case in which this Section 15.5 provides that an
adjustment shall become effective immediately after (1) a record date
or Record Date for an event, (2) the date fixed for the determination
of stockholders entitled to receive a dividend or distribution pursuant
to Section 15.5(a), (3) a date fixed for the determination of
stockholders entitled to receive rights or warrants pursuant to Section
15.5(b), (4) the Expiration Time for any tender or exchange offer
pursuant to Section 15.5(f), or (5) the Offer Expiration Time for a
tender or exchange offer pursuant to Section 15.5(g) (each a
"Determination Date"), the Company may elect to defer until the
occurrence of the relevant Adjustment Event (as hereinafter defined)
(x) issuing to the holder of any Note converted after such
Determination Date and before the occurrence of such Adjustment Event,
the additional shares of Common Stock or other securities issuable upon
such conversion by reason of the adjustment required by such Adjustment
Event over and above the Common Stock issuable upon such conversion
before giving effect to such adjustment and (y) paying to such holder
any amount in cash in
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lieu of any fraction pursuant to Section 15.3. For purposes of this
Section 15.5(l), the term "Adjustment Event" shall mean:
(a) in any case referred to in clause (1) hereof, the
occurrence of such event,
(b) in any case referred to in clause (2) hereof, the
date any such dividend or distribution is paid or made,
(c) in any case referred to in clause (3) hereof, the
date of expiration of such rights or warrants, and
(d) in any case referred to in clause (4) or clause
(5) hereof, the date a sale or exchange of Common Stock
pursuant to such tender or exchange offer is consummated and
becomes irrevocable.
(m) For purposes of this Section 15.5, the number of shares of
Common Stock at any time outstanding shall not include shares held in
the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
Company.
Section 15.6 Effect of Reclassification, Consolidation, Merger
or Sale. If any of the following events occur, namely (i) any reclassification
or change of the outstanding shares of Common Stock (other than a subdivision or
combination to which Section 15.5(c) applies), (ii) any consolidation, merger or
combination of the Company with another Person as a result of which holders of
Common Stock shall be entitled to receive stock, other 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 all or substantially all of the
properties and assets of the Company to any other Person as a result of which
holders of Common Stock shall be
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entitled to receive stock, other 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 Person, as the case may be, shall execute
with the Trustee a supplemental indenture (which shall comply with the Trust
Indenture Act as in force at the date of execution of such supplemental
indenture) providing that such Note shall be convertible into the kind and
amount of shares of stock, other securities or other 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 Notes (assuming, for such
purposes, a sufficient number of authorized shares of Common Stock are available
to convert all such Notes) immediately prior to such reclassification, change,
consolidation, merger, combination, sale or conveyance assuming such holder of
Common Stock did not exercise his rights of election, if any, as to the kind or
amount of stock, other securities or other property or assets (including cash)
receivable upon such reclassification, change, consolidation, merger,
combination, sale or conveyance (provided that, if the kind or amount of stock,
other securities or other property or assets (including cash) receivable upon
such reclassification, change, consolidation, merger, combination, sale or
conveyance is not the same for each share of Common Stock in respect of which
such rights of election shall not have been exercised ("non-electing share"),
then for the purposes of this Section 15.6 the kind and amount of stock, other
securities or other property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, sale or conveyance
for each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares). Such
supplemental indenture shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
Fifteen.
The Company shall cause notice of the execution of such
supplemental indenture to be mailed to each holder of
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Notes, at its address appearing on the Note register provided for in Section 2.5
of this Indenture, within twenty (20) days after execution thereof. Failure to
deliver such notice shall not affect the legality or validity of such
supplemental indenture.
The above provisions of this Section shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
sales and conveyances.
If this Section 15.6 applies to any event or occurrence,
Section 15.5 shall not apply.
Section 15.7 Taxes on Shares Issued. The issue of stock
certificates on conversions of Notes shall be made without charge to the
converting Noteholder for any tax in respect of the issue thereof. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of stock in any name other
than that of the holder of any Note converted, and the Company shall not be
required to issue or deliver any such stock certificate unless and until the
Person or Persons requesting the issue thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
Section 15.8 Reservation of Shares; Shares to be Fully Paid;
Compliance with Governmental Requirements; Listing of Common Stock. The Company
shall provide, free from preemptive rights, out of its authorized but unissued
shares or shares held in treasury, sufficient shares of Common Stock to provide
for the conversion of the Notes from time to time as such Notes are presented
for conversion.
Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value, if any, of the shares of
Common Stock issuable upon conversion of the Notes, the Company will take all
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally
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issue shares of such Common Stock at such adjusted Conversion Price.
The Company covenants that all shares of Common Stock which
may be issued upon conversion of Notes will upon issue be fully paid and
non-assessable by the Company and free from all taxes, liens and charges with
respect to the issue thereof.
The Company covenants that, if any shares of Common Stock to
be provided for the purpose of conversion of Notes hereunder require
registration with or approval of any governmental authority under any federal or
state law before such shares may be validly issued upon conversion, the Company
will in good faith and as expeditiously as possible, to the extent then
permitted by the rules and interpretations of the Securities and Exchange
Commission (or any successor thereto), endeavor to secure such registration or
approval, as the case may be.
The Company further covenants that, if at any time the Common
Stock shall be listed on the Nasdaq National Market or any other national
securities exchange or automated quotation system, the Company will, if
permitted by the rules of such exchange or automated quotation system, list and
keep listed, so long as the Common Stock shall be so listed on such exchange or
automated quotation system, all Common Stock issuable upon conversion of the
Note; provided, however, that, if the rules of such exchange or automated
quotation system permit the Company to defer the listing of such Common Stock
until the first conversion of the Notes into Common Stock in accordance with the
provisions of this Indenture, the Company covenants to list such Common Stock
issuable upon conversion of the Notes in accordance with the requirements of
such exchange or automated quotation system at such time.
Section 15.9 Responsibility of Trustee. The Trustee and any
other conversion agent shall not at any time be under any duty or responsibility
to any holder of Notes to determine the Conversion Price or whether any facts
exist which may require any adjustment of the Conversion Price, or
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with respect to the nature or extent or calculation of any such adjustment when
made, or with respect to the method employed, or herein or in any supplemental
indenture provided to be employed, in making the same. The Trustee and any other
conversion agent shall not be accountable with respect to the validity or value
(or the kind or amount) of any shares of Common Stock, or of any securities or
property, which may at any time be issued or delivered upon the conversion of
any Note; and the Trustee and any other conversion agent make no representations
with respect thereto. Neither the Trustee nor any conversion agent shall be
responsible for any failure of the Company to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities or property or
cash upon the surrender of any Note for the purpose of conversion or to comply
with any of the duties, responsibilities or covenants of the Company contained
in this Article Fifteen. Without limiting the generality of the foregoing,
neither the Trustee nor any conversion agent shall be under any responsibility
to determine the correctness of any provisions contained in any supplemental
indenture entered into pursuant to Section 15.6 relating either to the kind or
amount of shares of stock or securities or property (including cash) receivable
by Noteholders upon the conversion of their Notes after any event referred to in
such Section 15.6 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 8.1, may accept as conclusive evidence of
the correctness of any such provisions, and shall be protected in relying upon,
the Officers' Certificate (which the Company shall be obligated to file with the
Trustee prior to the execution of any such supplemental indenture) with respect
thereto.
Section 15.10 Notice to Holders Prior to Certain Actions. In
case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock that would require an adjustment in the
Conversion Price pursuant to Section 15.5; or
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(b) the Company shall authorize the granting to the holders of
all or substantially all of its Common Stock of rights or warrants to subscribe
for or purchase any share of any class or any other rights or warrants; or
(c) of any reclassification or reorganization of the Common
Stock of the Company (other than a subdivision or combination of its outstanding
Common Stock, or a change in par value, or from par value to no par value, or
from no par value to par value), or of any consolidation or merger to which the
Company is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company or any Significant Subsidiary; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company or any Significant Subsidiary;
the Company shall cause to be filed with the Trustee and to be mailed to each
holder of Notes at his address appearing on the Note register provided for in
Section 2.5 of this Indenture, as promptly as possible but in any event at least
ten (10) days prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such
dividend, distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.
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ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
Section 16.1 Provisions Binding on Company's Successors. All
the covenants, stipulations, promises and agreements by the Company contained in
this Indenture shall bind its successors and assigns whether so expressed or
not.
Section 16.2 Official Acts by Successor Corporation. Any act
or proceeding by any provision of this Indenture authorized or required to be
done or performed by any board, committee or officer of the Company shall and
may be done and performed with like force and effect by the like board,
committee or officer of any Person that shall at the time be the lawful sole
successor of the Company.
Section 16.3 Addresses for Notices, Etc. Any notice or demand
which by any provision of this Indenture is required or permitted to be given or
served by the Trustee or by the holders of Notes on the Company shall be deemed
to have been sufficiently given or made, for all purposes, if given or served by
being deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Conexant Systems, Inc., 4311 Jamboree Road, Newport Beach,
California 92660-3095, Attention: Treasurer. Any notice, direction, request or
demand hereunder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or served by being
deposited, postage prepaid, by registered or certified mail in a post office
letter box addressed to the Corporate Trust Office, which office is, at the date
as of which this Indenture is dated, located at 1 Bank One Plaza, Suite
IL1-0126, Chicago, Illinois 60670-0126, Attention: Corporate Trust
Administration (Conexant Systems, Inc. 4% Convertible Subordinated Notes due
2007).
The Trustee, by notice to the Company, may designate
additional or different addresses for subsequent notices or communications.
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Any notice or communication mailed to a Noteholder shall be
mailed to him by first class mail, postage prepaid, at his address as it appears
on the Note register and shall be sufficiently given to him if so mailed within
the time prescribed.
Failure to mail a notice or communication to a Noteholder or
any defect in it shall not affect its sufficiency with respect to other
Noteholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
Section 16.4 Governing Law. This Indenture and each Note shall
be deemed to be a contract made under the laws of the State of New York, and for
all purposes shall be construed in accordance with the laws of the State of New
York, without regard, to the extent permitted by law, to the conflict of laws
provisions thereof.
Section 16.5 Evidence of Compliance with Conditions Precedent;
Certificates to Trustee. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions precedent have been complied
with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include: (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statement or opinion contained in such certificate or opinion is
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied
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with; and (4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
Section 16.6 Legal Holidays. In any case in which the date of
maturity of interest on or principal of the Notes or the date fixed for
redemption of any Note will not be a Business Day, then payment of such interest
on or principal of the Notes need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the date of maturity or the date fixed for redemption, and no interest shall
accrue for the period from and after such date.
Section 16.7 Trust Indenture Act. This Indenture is hereby
made subject to, and shall be governed by, the provisions of the Trust Indenture
Act required to be part of and to govern indentures qualified under the Trust
Indenture Act; provided, however, that, unless otherwise required by law,
notwithstanding the foregoing, this Indenture and the Notes issued hereunder
shall not be subject to the provisions of subsections (a)(1), (a)(2), and (a)(3)
of Section 314 of the Trust Indenture Act as now in effect or as hereafter
amended or modified; provided further that this Section 16.7 shall not require
this Indenture or the Trustee to be qualified under the Trust Indenture Act
prior to the time such qualification is in fact required under the terms of the
Trust Indenture Act, nor shall it constitute any admission or acknowledgment by
any party to the Indenture that any such qualification is required prior to the
time such qualification is in fact required under the terms of the Trust
Indenture Act. If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in an indenture
qualified under the Trust Indenture Act, such required provision shall control.
Section 16.8 No Security Interest Created. Nothing in this
Indenture or in the Notes, expressed or implied, shall be construed to
constitute a security interest under the Uniform Commercial Code or similar
legislation, as now or hereafter enacted and in effect, in
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any jurisdiction in which property of the Company or its subsidiaries is
located.
Section 16.9 Benefits of Indenture. Nothing in this Indenture
or in the Notes, express or implied, shall give to any Person, other than the
parties hereto, any paying agent, any authenticating agent, any Note registrar
and their successors hereunder, the holders of Notes and the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
Section 16.10 Table of Contents, Headings, Etc. The table of
contents and the titles and headings of the articles and sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 16.11 Authenticating Agent. The Trustee may appoint an
authenticating agent that shall be authorized to act on its behalf, and subject
to its direction, in the authentication and delivery of Notes in connection with
the original issuance thereof and transfers and exchanges of Notes hereunder,
including under Sections 2.4, 2.5, 2.6, 2.7, 3.3 and 3.5, as fully to all
intents and purposes as though the authenticating agent had been expressly
authorized by this Indenture and those Sections to authenticate and deliver
Notes. For all purposes of this Indenture, the authentication and delivery of
Notes by the authenticating agent shall be deemed to be authentication and
delivery of such Notes "by the Trustee" and a certificate of authentication
executed on behalf of the Trustee by an authenticating agent shall be deemed to
satisfy any requirement hereunder or in the Notes for the Trustee's certificate
of authentication. Such authenticating agent shall at all times be a Person
eligible to serve as trustee hereunder pursuant to Section 8.9.
Any corporation into which any authenticating agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, consolidation or conversion to which any
authenticating
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agent shall be a party, or any corporation succeeding to the corporate trust
business of any authenticating agent, shall be the successor of the
authenticating agent hereunder, if such successor corporation is otherwise
eligible under this Section 16.11, without the execution or filing of any paper
or any further act on the part of the parties hereto or the authenticating agent
or such successor corporation.
Any authenticating agent may at any time resign by giving
written notice of resignation to the Trustee and to the Company. The Trustee may
at any time terminate the agency of any authenticating agent by giving written
notice of termination to such authenticating agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time any authenticating agent shall cease to be eligible under this Section,
the Trustee shall either promptly appoint a successor authenticating agent or
itself assume the duties and obligations of the former authenticating agent
under this Indenture and, upon such appointment of a successor authenticating
agent, if made, shall give written notice of such appointment of a successor
authenticating agent to the Company and shall mail notice of such appointment of
a successor authenticating agent to all holders of Notes as the names and
addresses of such holders appear on the Note register.
The Company agrees to pay to the authenticating agent from
time to time such reasonable compensation for its services as shall be agreed
upon in writing between the Company and the authenticating agent.
The provisions of Sections 8.2, 8.3, 8.4, 9.3 and this Section
16.11 shall be applicable to any authenticating agent.
Section 16.12 Execution in Counterparts. This Indenture may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
Section 16.13 Severability. In case any provision in this
Indenture or in the Notes shall be
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invalid, illegal or unenforceable, then (to the extent permitted by law) the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Bank One Trust Company, National Association, hereby accepts
the trusts in this Indenture declared and provided, upon the terms and
conditions herein above set forth.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed.
CONEXANT SYSTEMS, INC.
By:
-----------------------------------------
Name: Balakrishnan S. Iyer
Title: Senior Vice President and
Chief Financial Officer
BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
By:
-----------------------------------------
Name:
Title:
131
<PAGE> 141
EXHIBIT A
For Global Note only: UNLESS THIS CERTIFICATE IS PRESENTED BY
AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET,
NEW YORK, NEW YORK) (THE "DEPOSITARY", WHICH TERM INCLUDES ANY SUCCESSOR
DEPOSITARY FOR THE CERTIFICATES) 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 REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT HEREIN IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY), 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 NOTE 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"); (2) AGREES THAT IT WILL NOT, PRIOR
TO EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE NOTE EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION),
RESELL OR OTHERWISE TRANSFER THE NOTE EVIDENCED HEREBY OR THE COMMON STOCK
ISSUABLE UPON CONVERSION OF SUCH NOTE EXCEPT (A) TO CONEXANT SYSTEMS, INC. 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 BANK ONE TRUST COMPANY,
NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE), A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE NOTE EVIDENCED HEREBY (THE FORM OF WHICH
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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 BANK ONE TRUST
COMPANY, NATIONAL ASSOCIATION, 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 NOTE EVIDENCED HEREBY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THE NOTE EVIDENCED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD
APPLICABLE TO SALES OF THE NOTE 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 BANK ONE TRUST COMPANY, NATIONAL
ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS APPLICABLE). IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A PURCHASER WHO IS NOT
A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO BANK ONE
TRUST COMPANY, NATIONAL ASSOCIATION, AS TRUSTEE (OR A SUCCESSOR TRUSTEE, AS
APPLICABLE), SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS SUCH
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. THIS LEGEND WILL BE REMOVED
UPON THE EARLIER OF THE TRANSFER OF THE NOTE EVIDENCED HEREBY PURSUANT TO CLAUSE
(2)(E) ABOVE OR UPON ANY TRANSFER OF THE NOTE EVIDENCED HEREBY UNDER RULE 144(K)
UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION
S UNDER THE SECURITIES ACT.
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<PAGE> 143
CONEXANT SYSTEMS, INC.
4% CONVERTIBLE SUBORDINATED NOTE DUE FEBRUARY 1, 2007
CUSIP: [207142 AD2 (144A)]
No.: __________ $___________________
Conexant Systems, Inc., a corporation duly organized and
validly existing under the laws of the State of Delaware (herein called the
"Company", which term includes any successor corporation under the Indenture
referred to on the reverse hereof), for value received hereby promises to pay to
_____________________________ or registered assigns, the principal sum of
___________________________________________________________ ($___________) on
February 1, 2007, at the office or agency of the Company maintained for that
purpose in accordance with the terms of the Indenture, in such coin or currency
of the United States of America as at the time of payment shall be legal tender
for the payment of public and private debts, and to pay interest, semi-annually
on February 1 and August 1 of each year, commencing August 1, 2000, on said
principal sum at said office or agency, in like coin or currency, at the rate
per annum of 4%, from February 1 or August 1, as the case may be, next preceding
the date of this Note to which interest has been paid or duly provided for,
unless the date hereof is a date to which interest has been paid or duly
provided for, in which case from the date of this Note, or unless no interest
has been paid or duly provided for on the Notes, in which case from February 2,
2000, until payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after any January 15 or
July 15, as the case may be, and before the following February 1 or August 1,
this Note shall bear interest from such February 1 or August 1; provided,
however, that if the Company shall default in the payment of interest due on
such February 1 or August 1, then this Note shall bear interest from the next
preceding February 1 or August 1 to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for on
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<PAGE> 144
such Note, from February 2, 2000. Except as otherwise provided in the Indenture,
the interest payable on the Note pursuant to the Indenture on any February 1 or
August 1 will be paid to the Person entitled thereto as it appears in the Note
register at the close of business on the record date, which shall be the January
15 or July 15 (whether or not a Business Day) next preceding such February 1 or
August 1, as provided in the Indenture; provided, however, that any such
interest not punctually paid or duly provided for shall be payable as provided
in the Indenture. Interest may, at the option of the Company, be paid either (i)
by check mailed to the registered address of such Person (provided that the
holder of Notes with an aggregate principal amount in excess of $5,000,000
shall, at the written election of such holder, be paid by wire transfer of
immediately available funds) or (ii) by transfer to an account maintained by
such Person located in the United States; provided, however, that payments to
the Depositary will be made by wire transfer of immediately available funds to
the account of the Depositary or its nominee.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, including, without limitation, provisions
subordinating the payment of principal of and premium, if any, and interest on
the Notes to the prior payment in full of all Senior Indebtedness, as defined in
the Indenture, and provisions giving the holder of this Note the right to
convert this Note into Common Stock of the Company on the terms and subject to
the limitations referred to on the reverse hereof and as more fully specified in
the Indenture. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Note shall be deemed to be a contract made under the laws
of the State of New York, and for all purposes shall be construed in accordance
with and governed by the laws of the State of New York, without regard to
principles of conflicts of laws.
This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication
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<PAGE> 145
hereon shall have been manually signed by the Trustee or a duly authorized
authenticating agent under the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed under its corporate seal to be affixed or imported hereon.
CONEXANT SYSTEMS, INC.
[Corporate Seal] By:
-------------------------------
Name:
-------------------------
Title:
------------------------
Attest:
---------------------------
Name:
-------------------------
Title:
------------------------
Dated:
----------------------------
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<PAGE> 146
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-named Indenture.
BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
As Authenticating Agent
(if different from Trustee)
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<PAGE> 147
FORM OF REVERSE OF NOTE
CONEXANT SYSTEMS, INC.
4% CONVERTIBLE SUBORDINATED NOTES DUE FEBRUARY 1, 2007
This Note is one of a duly authorized issue of Notes of the
Company, designated as its 4% Convertible Subordinated Notes Due February 1,
2007 (herein called the "Notes"), limited to the aggregate principal amount of
$500,000,000 (or $650,000,000 if the purchase right set forth in Section 2 of
the Purchase Agreement dated January 28, 2000 (as amended from time to time by
the parties thereto) by and between the Company and the Initial Purchaser is
exercised in full) all issued or to be issued under and pursuant to an Indenture
dated as of February 1, 2000 (herein called the "Indenture"), between the
Company and Bank One Trust Company, National Association, as trustee (herein
called the "Trustee"), to which Indenture and all indentures supplemental
thereto reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Notes.
In case an Event of Default (as defined in the Indenture)
shall have occurred and be continuing, the principal of, premium, if any, and
accrued interest (including Liquidated Damages (as defined in the Registration
Rights Agreement), if any) on all Notes may be declared by either the Trustee or
the holders of not less than 25% in aggregate principal amount of the Notes then
outstanding, and upon said declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Notes at the time outstanding, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner
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<PAGE> 148
the rights of the holders of the Notes; provided, however, that no such
supplemental indenture shall (i) extend the fixed maturity of any Note, or
reduce the rate or extend the time of payment of interest thereon, or reduce the
principal amount thereof or premium, if any, thereon, or reduce any amount
payable upon redemption thereof, or impair the right of any Noteholder to
institute suit for the payment thereof, or make the principal thereof or
interest or premium, if any, thereon payable in any coin or currency other than
that provided in the Notes, or modify the provisions of the Indenture with
respect to the subordination of the Notes in a manner adverse to the Noteholders
in any material respect, or change the obligation of the Company to redeem any
Note upon the happening of a Fundamental Change (as defined in the Indenture) in
a manner adverse to the holders of the Notes, or impair the right to convert the
Notes into Common Stock subject to the terms set forth in the Indenture,
including Section 15.6 thereof, without the consent of the holder of each Note
so affected or (ii) reduce the aforesaid percentage of Notes, the holders of
which are required to consent to any such supplemental indenture, without the
consent of the holders of all Notes then outstanding. Subject to the provisions
of the Indenture, the holders of a majority in aggregate principal amount of the
Notes at the time outstanding may on behalf of the holders of all of the Notes
waive any past default or Event of Default under the Indenture and its
consequences except a default in the payment of interest (including Liquidated
Damages, if any) or any premium on, or the principal of, any of the Notes, or a
failure by the Company to convert any Notes into Common Stock of the Company, or
a default in the payment of the redemption price pursuant to Article Three of
the Indenture, or a default in respect of a covenant or provisions of the
Indenture which under Article Eleven of the Indenture cannot be modified without
the consent of the holders of each or all Notes then outstanding or affected
thereby. Any such consent or waiver by the holder of this Note (unless revoked
as provided in the Indenture) shall be conclusive and binding upon such holder
and upon all future holders and owners of this Note and any Notes which may be
issued in exchange or substitution hereof, irrespective of whether or
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<PAGE> 149
not any notation thereof is made upon this Note or such other Notes.
The indebtedness evidenced by the Notes is, to the extent and
in the manner provided in the Indenture, expressly subordinated and subject in
right of payment to the prior payment in full of all Senior Indebtedness (as
defined in the Indenture) of the Company, whether outstanding at the date of the
Indenture or thereafter incurred, and this Note is issued subject to the
provisions of the Indenture with respect to such subordination. Each holder of
this Note, by accepting the same, agrees to and shall be bound by such
provisions and authorizes the Trustee on its behalf to take such action as may
be necessary or appropriate to effectuate the subordination so provided and
appoints the Trustee his attorney-in-fact for such purpose.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and any premium and
interest (including Liquidated Damages, if any) on this Note at the place, at
the respective times, at the rate and in the coin or currency herein prescribed.
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
The Notes are issuable in fully registered form, without
coupons, in denominations of $1,000 principal amount and any integral multiple
of $1,000. At the office or agency of the Company referred to on the face
hereof, and in the manner and subject to the limitations provided in the
Indenture, without payment of any service charge but with payment of a sum
sufficient to cover any tax, assessment or other governmental charge that may be
imposed in connection with any registration or exchange of Notes, Notes may be
exchanged for a like aggregate principal amount of Notes of any other authorized
denominations.
The Notes will not be redeemable at the option of the Company
prior to February 6, 2003. At any time on or after February 6, 2003, and prior
to maturity, the Notes may
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<PAGE> 150
be redeemed at the option of the Company, in whole or in part, upon mailing a
notice of such redemption not less than 30 days before the date fixed for
redemption to the holders of Notes at their last registered addresses, all as
provided in the Indenture, at the following optional redemption prices
(expressed as percentages of the principal amount), together in each case with
accrued and unpaid interest (including Liquidated Damages, if any) to, but
excluding, the date fixed for redemption:
Period Redemption Price
- ------ ----------------
Beginning on February 6, 2003 and ending on January 31, 2004 102.286%
Beginning on February 1, 2004 and ending on January 31, 2005 101.714%
Beginning on February 1, 2005 and ending on January 31, 2006 101.143%
Beginning on February 1, 2006 and ending on January 31, 2007 100.571%
and 100% on February 1, 2007; provided, however, that if the date fixed for
redemption is on a February 1 or August 1, then the interest payable on such
date shall be paid to the holder of record on the preceding January 15 or July
15, respectively.
The Company may not give notice of any redemption of the Notes
if a default in the payment of interest or premium, if any, on the Notes has
occurred and is continuing.
The Notes are not subject to redemption through the operation
of any sinking fund.
If a Fundamental Change occurs at any time prior to maturity
of the Notes, the Notes will be redeemable on the 30th day after notice thereof
(the "Repurchase Date") at the option of the holder of the Notes at a redemption
price
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<PAGE> 151
equal to 100% of the principal amount thereof, together with accrued interest to
(but excluding) the date of redemption; provided, however, that, if such
Repurchase Date is a February 1 or August 1, the interest payable on such date
shall be paid to the holder of record of the Notes on the preceding January 15
or July 15, respectively. The Notes will be redeemable in multiples of $1,000
principal amount. The Company shall mail to all holders of record of the Notes a
notice of the occurrence of a Fundamental Change and of the redemption right
arising as a result thereof on or before the 10th day after the occurrence of
such Fundamental Change. For a Note to be so redeemed at the option of the
holder, the Company must receive at the office or agency of the Company
maintained for that purpose in accordance with the terms of the Indenture, such
Note with the form entitled "Option to Elect Repayment Upon a Fundamental
Change" on the reverse thereof duly completed, together with such Note, duly
endorsed for transfer, on or before the 30th day after the date of such notice
of a Fundamental Change (or if such 30th day is not a Business Day, the
immediately preceding Business Day).
Subject to the provisions of the Indenture, the holder hereof
has the right, at its option, at any time after the original issuance of any
Notes through the close of business on the final maturity date of the Notes, or,
as to all or any portion hereof called for redemption, prior to the close of
business on the Business Day immediately preceding the date fixed for redemption
(unless the Company shall default in payment due upon redemption thereof), to
convert the principal hereof or any portion of such principal which is $1,000 or
an integral multiple thereof into that number of shares of the Company's Common
Stock (as such shares shall be constituted at the date of conversion) obtained
by dividing the principal amount of this Note or portion thereof to be converted
by the Conversion Price of $108.00, as may adjusted from time to time as
provided in the Indenture, upon surrender of this Note, together with a
conversion notice as provided in the Indenture (the form entitled "Conversion
Notice" on the reverse hereof), to the Company at the office or agency of the
Company maintained for that purpose in accordance with the terms of the
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Indenture, or at the option of such holder, the Corporate Trust Office, and,
unless the shares issuable on conversion are to be issued in the same name as
this Note, duly endorsed by, or accompanied by instruments of transfer in form
satisfactory to the Company duly executed by, the holder or by his duly
authorized attorney. No adjustment in respect of interest on any Note converted
or dividends on any shares issued upon conversion of such Note will be made upon
any conversion except as set forth in the next sentence. If this Note (or
portion hereof) is surrendered for conversion during the period from the close
of business on any record date for the payment of interest to the close of
business on the Business Day preceding the following interest payment date and
either (x) has not been called for redemption on a redemption date that occurs
during such period or (y) is not to be redeemed in connection with a Fundamental
Change on a Repurchase Date that occurs during such period, this Note (or
portion hereof being converted) must be accompanied by an amount, in New York
Clearing House funds or other funds acceptable to the Company, equal to the
interest payable on such interest payment date on the principal amount being
converted; provided, however, that no such payment shall be required if there
shall exist at the time of conversion a default in the payment of interest on
the Notes. No fractional shares will be issued upon any conversion, but an
adjustment and payment in cash will be made, as provided in the Indenture, in
respect of any fraction of a share which would otherwise be issuable upon the
surrender of any Note or Notes for conversion. A Note in respect of which a
holder is exercising its right to require redemption upon a Fundamental Change
may be converted only if such holder withdraws its election to exercise such
right in accordance with the terms of the Indenture. Any Notes called for
redemption, unless surrendered for conversion by the holders thereof on or
before the close of business on the Business Day preceding the date fixed for
redemption, may be deemed to be redeemed from the holders of such Notes for an
amount equal to the applicable redemption price, together with accrued but
unpaid interest (including Liquidated Damages, if any) to (but excluding) the
date fixed for redemption, by one or more investment banks or other purchasers
who may agree with
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the Company (i) to purchase such Notes from the holders thereof and convert them
into shares of the Company's Common Stock and (ii) to make payment for such
Notes as aforesaid to the Trustee in trust for the holders.
Upon due presentment for registration of transfer of this Note
at the office or agency of the Company maintained for that purpose in accordance
with the terms of the Indenture, a new Note or Notes of authorized denominations
for an equal aggregate principal amount will be issued to the transferee in
exchange thereof; subject to the limitations provided in the Indenture, without
charge except for any tax, assessment or other governmental charge imposed in
connection therewith.
The Company, the Trustee, any authenticating agent, any paying
agent, any conversion agent and any Note registrar may deem and treat the
registered holder hereof as the absolute owner of this Note (whether or not this
Note shall be overdue and notwithstanding any notation of ownership or other
writing hereon made by anyone other than the Company or any Note registrar) for
the purpose of receiving payment hereof, or on account hereof, for the
conversion hereof and for all other purposes, and neither the Company nor the
Trustee nor any other authenticating agent nor any paying agent nor other
conversion agent nor any Note registrar shall be affected by any notice to the
contrary. All payments made to or upon the order of such registered holder
shall, to the extent of the sum or sums paid, satisfy and discharge liability
for monies payable on this Note.
No recourse for the payment of the principal of or any premium
or interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any supplemental indenture or in any Note, or
because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any successor
corporation, either directly or through
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<PAGE> 154
the Company or any successor corporation, whether by virtue of any constitution,
statute or rule of law or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released.
This Note shall be deemed to be a contract made under the laws
of New York, and for all purposes shall be construed in accordance with the laws
of New York, without regard to principles of conflicts of laws.
Terms used in this Note and defined in the Indenture are used
herein as therein defined.
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<PAGE> 155
ABBREVIATIONS
The following abbreviations, when used in the inscription of
the face of this Note, shall be construed as though they were written out in
full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenant by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants in common
UNIF GIFT MIN ACT - ____________ Custodian _____________
(Cust) (Minor)
under Uniform Gifts to Minors Act
_______________________________________________
(State)
Additional abbreviations may also be used though not in the above list.
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<PAGE> 156
CONVERSION NOTICE
TO: CONEXANT SYSTEMS, INC.
The undersigned registered owner of this Note hereby
irrevocably exercises the option to convert this Note, or the portion thereof
(which is $1,000 or an integral multiple thereof) below designated, into shares
of Common Stock of Conexant Systems, Inc. in accordance with the terms of the
Indenture referred to in this Note, and directs that the shares issuable and
deliverable upon such conversion, together with any check in payment for
fractional shares and any Notes 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 Note
not converted are to be issued in the name of a person other than the
undersigned, the undersigned will provide the appropriate information below and
pay all transfer taxes payable with respect thereto. Any amount required to be
paid by the undersigned on account of interest accompanies this Note.
Dated: ___________________
-----------------------------
-----------------------------
Signature(s)
Signature(s) must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Note registrar,
which requirements include membership or
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<PAGE> 157
participation in the Security Transfer
Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may
be determined by the Note registrar in
addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.
------------------------------------------
Signature Guarantee
Fill in the registration of shares of Common Stock if to be issued, and Notes if
to be delivered, 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):
$_______________________________
Social Security or Other Taxpayer
Identification Number:
- ---------------------------------
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<PAGE> 158
OPTION TO ELECT REPAYMENT
UPON A FUNDAMENTAL CHANGE
TO: CONEXANT SYSTEMS, INC.
The undersigned registered owner of this Note hereby
irrevocably acknowledges receipt of a notice from Conexant Systems, Inc. (the
"Company") as to the occurrence of a Fundamental Change with respect to the
Company and requests and instructs the Company to repay the entire principal
amount of this Note, or the portion thereof (which is $1,000 or an integral
multiple thereof) below designated, in accordance with the terms of the
Indenture referred to in this Note at the price of 100% of such entire principal
amount or portion thereof, together with accrued interest to, but excluding,
such repayment date, to the registered holder hereof.
Dated: ___________________
------------------------------------------
------------------------------------------
Signature(s)
NOTICE: The above signatures of the
holder(s) hereof must correspond
with the name as written upon the
face of the Note in every
particular without alteration or
enlargement or any change whatever.
Principal amount to be repaid (if
less than all):
$__________________________________
___________________________________
Social Security or Other Taxpayer
Identification Number
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<PAGE> 159
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address
including postal zip code of assignee)
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints
- --------------------------------------------------------------------------------
Attorney to transfer said Note on the books of the Company, with full power of
substitution in the premises.
In connection with any transfer of the Note within the "United
States" or to, or for the account of, "U.S. persons" (in each case as defined in
Regulation S under the Securities Act) and within the period prior to the
expiration of the holding period applicable to sales thereof under Rule 144(k)
under the Securities Act (or any successor provision) (other than any transfer
pursuant to a registration statement that has been declared effective
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<PAGE> 160
under the Securities Act), the undersigned confirms that such Note is being
transferred:
[ ] To Conexant Systems, Inc. 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, in a
minimum denomination of $200,000; 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 such Note 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
an "eligible guarantor institution"
meeting the requirements of the
Note registrar, which requirements
include membership or participation
in the Security Transfer Agent
Medallion Program ("STAMP") or such
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<PAGE> 161
other "signature guarantee program"
as may be determined by the Note
registrar in addition to, or in
substitution for, STAMP, all in
accordance with the Securities
Exchange Act of 1934, as amended.
-----------------------------------
Signature Guarantee
NOTICE: The signature of the conversion notice, the option to elect repayment
upon a Fundamental Change or the assignment must correspond with the name as
written upon the face of the Note in every particular without alteration or
enlargement or any change whatever.
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<PAGE> 162
EXHIBIT B
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, CA 92660-3095
Bank One Trust Company, National Association, as Trustee
1 Bank One Plaza, Suite IL1-0126
Chicago, IL 60670-0126
Attention: Corporate Trust Administration
Ladies and Gentlemen:
In connection with our proposed purchase of 4% Convertible
Subordinated Notes Due February 1, 2007 (the "Notes") of Conexant Systems, Inc.,
a Delaware corporation (the "Company"), we confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (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");
(ii) (A) any purchase of Notes 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(a)(5)(A)
of the Securities Act that is acquiring Notes as fiduciary for the
account of one or more institutions for which we exercise sole
investment discretion;
(iii) in the event that we purchase any Notes, we will acquire
Notes having a minimum purchase price of
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<PAGE> 163
not less than $200,000 for our own account or for any separate account
for which we are acting;
(iv) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and risks
of purchasing Notes; and
(v) we are not acquiring Notes with a view to distribution
thereof or with any present intention of offering or selling Notes or
the Common Stock of the Company 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.
We understand that the Notes 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 Notes and the
Common Stock of the Company 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 Notes,
that if in the future we decide to resell or otherwise transfer such
Notes or the Common Stock of the Company issuable upon conversion
thereof, such Notes or Common Stock of the Company may be resold or
otherwise transferred within the United States or to, or for the
account or benefit of, U.S. persons only (i) to the Company or any
subsidiary thereof, (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, (iii) to an
Institutional Accredited Investor that, prior to such transfer,
furnishes to the Trustee for the Notes (or in the case of Common Stock
of the Company, the transfer agent therefor) 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 the Trustee or the
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<PAGE> 164
transfer agent, as the case may be), (iv) pursuant to the exemption
from registration provided by Rule 144 under the Securities Act (if
applicable), or (v) 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), and in each case, in
accordance with any applicable securities law of any State of the U.S.
and in accordance with the legends set forth on the Notes or the Common
Stock of the Company issuable upon conversion thereof. We further agree
to provide any person purchasing any of the Notes or the Common Stock
of the Company issuable upon conversion thereof (other than pursuant to
clause (iv) or (v) above) from us a notice advising such purchaser that
resales of such securities are restricted as stated herein. We
understand that the Trustee and transfer agent for the Notes and the
Common Stock of the Company will not be required to accept for
registration of transfer any Notes or any Common Stock of the Company
issued upon conversion of the Notes, except upon presentation of
evidence satisfactory to the Company that the foregoing restrictions on
transfer have been complied with. We further understand that any Notes
and any Common Stock of the Company issued upon conversion of the Notes
will be in the form of definitive physical certificates and that such
certificates will bear a legend reflecting the substance of this
paragraph.
The Company and the Trustee and their respective counsel are
entitled to rely upon this letter and are irrevocably authorized to produce this
letter or a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered hereby.
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:
---------------------------
-----------------------------------
-----------------------------------
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<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
BY AND BETWEEN
CONEXANT SYSTEMS, INC.
AS ISSUER,
AND
MORGAN STANLEY & CO. INCORPORATED
AS THE INITIAL PURCHASER
DATED AS OF FEBRUARY 1, 2000
<PAGE> 2
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of
February 1, 2000 by and among Conexant Systems, Inc., a Delaware corporation
(the "COMPANY"), and Morgan Stanley & Co. Incorporated pursuant to the Purchase
Agreement, dated January 28, 2000 (the "PURCHASE AGREEMENT"), between the
Company and the Initial Purchaser. In order to induce the Initial Purchaser 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 Purchaser, (i) for its benefit as
Initial Purchaser and (ii) for the benefit of the beneficial owners (including
the Initial Purchaser) from time to time of the Notes (as defined herein) and
the beneficial owners from time to time of the Underlying Common Stock (as
defined herein) issued upon conversion of the Notes (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 Conversion Price in effect as of such
date of determination or, if no Notes are then outstanding, the Conversion Price
that would be in effect were Notes 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.
COMMON STOCK: The shares of common stock, par value $1.00 per
share, 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 PRICE: Conversion Price shall have the meaning
assigned such term in the Indenture.
DAMAGES ACCRUAL PERIOD: See Section 2(e) hereof.
DAMAGES PAYMENT DATE: Each interest payment date under the
Indenture in the case of Notes, and each February 1 and August 1 in the case of
the Underlying Common Stock.
DEFERRAL NOTICE: See Section 3(i) hereof.
<PAGE> 3
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 (b) the last date of original issuance of the Notes, 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 DATE: See Section 2(e) hereof.
EVENT TERMINATION 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 February 1, 2000, between the
Company and Bank One Trust Company, National Association, as trustee, pursuant
to which the Notes are being issued.
INITIAL PURCHASER: Morgan Stanley & Co. Incorporated
INITIAL SHELF REGISTRATION STATEMENT: See Section 2(a) hereof.
ISSUE DATE: February 2, 2000.
LIQUIDATED DAMAGES AMOUNT: See Section 2(e) hereof.
LOSSES: See Section 6 hereof.
MATERIAL EVENT: See Section 3(i) hereof.
NOTES: The 4% Convertible Subordinated Notes due 2007 of the
Company to be purchased pursuant to the Purchase Agreement.
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 Annex A to the Offering
Memorandum of the Company issued January 28, 2000 relating to the Notes.
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<PAGE> 4
NOTICE HOLDER: On any date, any Holder that has delivered a
Notice and Questionnaire to the Company on or prior to such date.
PURCHASE AGREEMENT: See the preamble hereof.
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.
RECORD HOLDER: (i) With respect to any Damages Payment Date
relating to any Notes as to which any such Liquidated Damages Amount has
accrued, the holder of record of such Note on the record date with respect to
the interest payment date under the Indenture on which such Damages Payment Date
shall occur and (ii) with respect to any Damages Payment Date relating to the
Underlying Common Stock as to which any such Liquidated Damages Amount has
accrued, the registered holder of such Underlying Common Stock fifteen (15) days
prior to such Damages Payment Date.
REGISTRABLE SECURITIES: The Notes until such Notes have been
converted into or exchanged for the Underlying Common Stock and, at all times
subsequent to any such conversion or exchange the Underlying Common Stock and
any securities into or for which such Underlying Common Stock has 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 legend with
respect to transfer restrictions required under the Indenture are removed or
removable in accordance with the terms of the Indenture or such legend, as the
case may be.
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, 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.
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<PAGE> 5
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: Bank One Trust Company, National Association, the
Trustee under the Indenture.
UNDERLYING COMMON STOCK: The Common Stock into which the Notes
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 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
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 ten (10) Business Days prior to such time of effectiveness shall be named
as a selling securityholder in the Initial Shelf Registration 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.
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<PAGE> 6
(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
otherwise ceased to be Registrable Securities), the Company shall use its
reasonable 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
reasonable 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 as reasonably requested by the Initial
Purchaser 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 practicable after the date a Notice and
Questionnaire is delivered, and in any event upon the later of (x) five (5)
Business Days after such date or (y) five (5) Business Days after the expiration
of any Deferral Period in effect when the Notice and Questionnaire is delivered
or put into effect within five (5) Business Days of such delivery 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 reasonable 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 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,
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<PAGE> 7
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).
Notwithstanding anything contained herein to the contrary, (i) 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 and
(ii) the Amendment Effectiveness Deadline Date shall be extended by up to ten
(10) Business Days from the expiration of a Deferral Period (and the Company
shall incur no obligation to pay Liquidated Damages during such extension) if
such Deferral Period shall be in effect on the Amendment Effectiveness Deadline
Date.
(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)
hereof (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 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
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<PAGE> 8
penalty, an amount (the "LIQUIDATED DAMAGES AMOUNT"), payable on the Damages
Payment Dates to Record Holders of Notes that are Registrable Securities and of
shares of Underlying Common Stock issued upon conversion of Notes 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 Liquidated 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-half of one percent (0.5
%) of the aggregate principal amount of such Notes or, in the case of Notes that
have been converted into or exchanged for Underlying Common Stock, 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
Note 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
Note 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 Notes 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 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)).
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<PAGE> 9
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 counsel to the
Initial Purchaser copies of all such documents proposed to be filed and use
reasonable efforts to reflect in each such document when so filed with the SEC
such comments as counsel to the Initial Purchaser reasonably shall propose
within five (5) Business Days of the delivery of such copies to the Initial
Purchaser.
(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 counsel to the
Notice Holders and the Initial Purchaser (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 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 reasonable 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
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<PAGE> 10
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 Purchaser 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 Purchaser or such Notice Holder shall, on the basis of a written 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.
(f) As promptly as practicable furnish to each Notice Holder and
the Initial Purchaser, 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 Purchaser, 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 reasonably 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
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
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<PAGE> 11
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 reasonable 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
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 all reasonable 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 or accruing any obligation to pay liquidated damages pursuant to
Section 2(e), no more than one (1) time in any three month period or four (4)
times in any twelve month period, and any such 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 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 30 days, or
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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 60
days in any three month period or 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 and pertinent corporate documents and properties of
the Company and its subsidiaries, and cause the appropriate officers, directors
and employees of the Company and its subsidiaries to make reasonably available
for inspection during normal business hours on reasonable notice 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, 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 and provided further, that the Company shall not be required to
disclose any information subject to the attorney-client or attorney work product
privilege if and to the extent such disclosure would constitute a waiver of such
privilege.
(k) Use all reasonable 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 3-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 periods.
(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
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<PAGE> 13
in such names as such Notice Holder may request in writing at least two (2)
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 Statement may designate), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities
in a form
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<PAGE> 14
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, Professional Corporation, but which may, with the
written consent of the Initial Purchaser (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 by the Company 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 selling expenses and 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 any 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 the Holders furnished to the Company in writing by a 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 provided in each case the Company has performed its obligations under
Section 3(a) hereof 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 omission is
corrected in an amendment or supplement to the Prospectus and (y) having
previously been
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<PAGE> 15
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) or any other Holder, 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 Notes deemed to be the Holders,
for purposes of determining such majority, of the number of shares of Underlying
Common Stock into which such Notes 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
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<PAGE> 16
Holders that are 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. 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.
(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 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
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<PAGE> 17
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 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 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.
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<PAGE> 18
(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 Notes deemed to be the Holders, for
purposes of this Section, of the number of outstanding shares of Underlying
Common Stock into which such Notes 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:
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, California 92660-3095
Attention: General Counsel
Telecopy No.: (949) 483-4391
and
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attention: Christopher L. Kaufman
Telecopy No.: (650) 463-2600
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<PAGE> 19
(y) if to the Initial Purchaser, to:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York
Attention: Equity Capital Markets
Telecopy No.: (212) 761-0538
And
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: John A. Fore, Esq.
Telecopy No.: (650) 493-6811
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
Purchaser 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 Purchaser shall be deemed, for purposes
of this Agreement, to be an assignee of the Initial Purchaser. 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.
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<PAGE> 20
(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 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. In no event will such methods of
distribution take the form of an underwritten offering of the Registrable
Securities without the prior agreement of the Company.
-19-
<PAGE> 21
(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 Section 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.
-20-
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CONEXANT SYSTEMS, INC.
By
--------------------------------------
Name:
Title:
Confirmed and accepted as of the date first above written:
MORGAN STANLEY & CO. INCORPORATED
By:
-------------------------------------
Name:
Title:
-21-
<PAGE> 1
EXHIBIT 5
[LATHAM & WATKINS LETTERHEAD]
March 9, 2000
Conexant Systems, Inc.
4311 Jamboree Road
Newport Beach, California 92660-3095
Re: Conexant Systems, Inc: Registration Statement
on Form S-3 (Registration No. 333- )
-----------------------------------------
Ladies and Gentlemen:
We are acting as counsel for Conexant Systems, Inc. (the "Company") in
connection with the registration statement on Form S-3 (the "Registration
Statement") being filed by you with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, relating to the
registration of (i) $650,000,000 aggregate principal amount of the Company's 4%
Convertible Subordinated Notes Due 2007 (the "Securities") issued pursuant to an
Indenture dated as of February 1, 2000 (the "Indenture") between the Company and
Bank One, N.A., as trustee (the "Trustee"), and (ii) such indeterminate number
of shares of Common Stock, par value $1 per share, of the Company (including the
Preferred Share Purchase Rights of the Company) issuable upon conversion of the
Securities (the "Conversion Shares").
In our capacity as your counsel in connection with such registration,
we are familiar with the proceedings taken by the Company in connection with the
authorization and issuance of the Securities. In addition, we have made such
legal and factual examinations and inquiries, including an examination of
originals or copies certified or otherwise identified to our satisfaction of
such documents, corporate records and instruments, as we have deemed necessary
or appropriate for purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity to authentic original documents of all documents submitted to us as
copies.
<PAGE> 2
LATHAM & WATKINS
Conexant Systems, Inc.
March 9, 2000
Page 2
We have been furnished with, and with your consent have relied upon,
certificates of officers of the Company with respect to certain factual matters.
In addition, we have obtained and relied upon such certificates and assurances
from public officials as we have deemed necessary.
We are opining herein as to the effect on the subject transaction only
of the federal laws of the United States and the General Corporation Law of the
State of Delaware, including statutory and reported decisional law thereunder,
and we express no opinion with respect to the applicability thereto, or the
effect thereon, of the laws of any other jurisdiction or, in the case of
Delaware any other laws, or as to any matters of municipal law or the laws of
any local agencies within any state.
Subject to the foregoing and the other matters set forth herein, it is
our opinion that, as of the date hereof:
1. The Securities have been duly authorized and issued by all necessary
corporate action of the Company and constitute legally valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms.
2. The Conversion Shares issuable upon conversion of the Securities
have been duly authorized by all necessary corporate action of the Company, and
when issued upon conversion of the Securities in accordance with the terms of
the Indenture and the Securities, will be validly issued, fully paid and
nonassessable.
The opinions set forth above are subject to the following exceptions,
limitations and qualifications: (i) the effect of bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies of
creditors, (ii) the effect of general principles of equity, whether enforcement
is considered in a proceeding in equity or law, the discretion of the court
before which any proceeding therefor may be brought, (iii) the unenforceability
under certain circumstances under law or court decisions of provisions providing
for the indemnification of or contribution to a party with respect to a
liability where such indemnification or contribution is contrary to public
policy; and (iv) we express no opinion concerning the enforceability of the
waiver of rights or defenses contained in Section 5.9 of the Indenture.
To the extent that the obligations of the Company under the Securities
may be dependent upon such matters, we assume for purposes of this opinion that
the Trustee is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization; that the Trustee is duly qualified to
engage in the activities contemplated by the Indenture and the Securities; that
the Indenture has been duly authorized, executed and delivered by the Trustee
<PAGE> 3
LATHAM & WATKINS
Conexant Systems, Inc.
March 9, 2000
Page 3
and constitutes the legal, valid and binding obligation of the Trustee,
enforceable against the Trustee in accordance with its terms; that the Trustee
is in compliance, generally and with respect to acting as a trustee under the
Indenture, with all applicable laws and regulations; and that the Trustee has
the requisite organizational and legal power and authority to perform its
obligations under the Indenture.
We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the prospectus included therein.
This opinion is rendered only to you and is solely for your benefit in
connection with the transactions covered hereby. This opinion may not be relied
upon by you for any other purpose, or furnished to, quoted to, or relied upon by
any other person, firm or corporation for any purpose, without our prior written
consent.
Very truly yours,
LATHAM & WATKINS
<PAGE> 1
EXHIBIT 12
CONEXANT SYSTEMS, INC.
STATEMENT RE: COMPUTATION OF RATIOS
(UNAUDITED, DOLLARS IN THOUSANDS)
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Three months
Year ended September 30, ended
--------------------------------------------------------- December 31,
1995 1996 1997 1998 1999 1999
-------- -------- --------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income before provision
for income taxes $110,487 $197,161 $ 179,762 $(430,328) $ 2,756 $74,045
Add: Fixed charges, net
of capitalized interest 1,566 2,022 3,984 5,795 15,283 4,550
-------- -------- --------- --------- ------- -------
$112,053 $199,183 $ 183,746 $(424,533) $18,039 $78,595
======== ======== ========= ========= ======= =======
Fixed charges:
Interest expense $ -- $ -- $ -- $ -- $10,800 $ 3,567
Capitalized interest -- -- -- -- 1,511 624
Interest portion of rental expense 1,566 2,022 3,984 5,795 4,483 983
-------- -------- --------- --------- ------- -------
$ 1,566 $ 2,022 $ 3,984 $ 5,795 $16,794 $ 5,174
======== ======== ========= ========= ======= =======
Ratio of earnings to fixed charges 71.6 98.5 46.1 --(1) 1.1 15.2
======== ======== ========= ========= ======= =======
</TABLE>
(1) For the year ended September 30, 1998, the Company had a deficiency of
earnings compared to its fixed charges of $430.3 million.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Conexant Systems, Inc. on Form S-3 of our report dated October 29, 1999,
appearing in the Annual Report on Form 10-K of Conexant Systems, Inc. for the
year ended September 30, 1999, and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Costa Mesa, California
March 13, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-3 of Conexant Systems, Inc.
of our report dated February 10, 1999 on the consolidated financial statements
of Maker Communications, Inc. included in Conexant Systems, Inc.'s Form 8-K
dated February 16, 2000 and to all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN
Boston, Massachusetts
March 10, 2000
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
I, the undersigned Director and/or Officer of Conexant Systems, Inc., a
Delaware corporation (the "Company"), hereby constitute DENNIS E. O'REILLY,
JASMINA A. THEODORE and RAYMOND LIN, and each of them singly, my true and lawful
attorneys with full power to them and each of them to sign for me, and in my
name and in the capacity or capacities indicated below, the Registration
Statement on Form S-3 to be filed by the Company with the Securities and
Exchange Commission (the "Commission") for the purpose of registering under the
Securities Act of 1933, as amended (the "Securities Act"), (i) the offer and
resale by certain holders of (a) up to $650,000,000 aggregate principal amount
of the Company's 4% Convertible Subordinated Notes Due 2007 (the "Notes")
previously sold by the Company in a private placement to certain qualified
institutional buyers (as defined in Rule 144A under the Securities Act) and a
limited number of other institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and (ii) shares of Common
Stock, par value $1 per share, of the Company (including the associated
Preferred Share Purchase Rights) (collectively, the "Common Stock") issuable or
deliverable upon conversion of such Notes, and any and all amendments (including
post-effective amendments) and supplements to such Registration Statement and
(b) qualifying the related Indenture dated as of February 1, 2000 between the
Company and Bank One, N.A. under the Trust Indenture Act of 1939, as amended.
SIGNATURE TITLE
--------- -----
/s/ DWIGHT DECKER Chairman of the Board and
- ---------------------------------- Chief Executive Officer (principal
Dwight W. Decker executive officer) and Director
/s/ DONALD R. BEALL Director
- ----------------------------------
Donald R. Beall
/s/ RICHARD M. BRESSLER Director
- ----------------------------------
Richard M. Bressler
/s/ F. CRAIG FARRILL Director
- ----------------------------------
F. Craig Farrill
/s/ JERRE L. STEAD Director
- ----------------------------------
Jerre L. Stead
<PAGE> 2
/s/BALAKRISHNAN S. IYER Senior Vice President and
- ---------------------------------- Chief Financial Officer
Balakrishnan S. Iyer (principal financial officer)
/s/ STEVEN M. THOMSON Vice President and Controller
- ---------------------------------- (principal accounting officer)
Steven M. Thomson
<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)
----------
BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 31-0838515
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
100 EAST BROAD STREET, COLUMBUS, OHIO 43271-0181
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION
100 EAST BROAD STREET
COLUMBUS, OHIO 43271-0181
ATTN: JOHN R. PRENDIVILLE, SENIOR COUNSEL, (312) 661-5223
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------
CONEXANT SYSTEMS, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE 25-1799439
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
4311 JAMBOREE ROAD
NEWPORT BEACH, CALIFORNIA 92660-3095
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
DEBT SECURITIES
(TITLE OF INDENTURE SECURITIES)
<PAGE> 2
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING
AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C.;
Federal Deposit Insurance Corporation,
Washington, D.C.; The Board of Governors of
the Federal Reserve System, Washington D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST
POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART
OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.
2. A copy of the certificate of authority of the
trustee to commence business.
3. A copy of the authorization of the trustee to
exercise corporate trust powers.
4. A copy of the existing by-laws of the trustee.
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
<PAGE> 3
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bank One Trust Company, National Association, a
national banking association organized and existing under the laws of
the United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 1st day of March, 2000.
BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION,
TRUSTEE
BY
-----------------------------------------
JOHN R. PRENDIVILLE
SENIOR COUNSEL
<PAGE> 4
EXHIBIT 1
A COPY OF THE ARTICLES OF ASSOCIATION OF THE
TRUSTEE NOW IN EFFECT
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION
FIRST. The title of this Association shall be BANK ONE TRUST COMPANY, National
Association.
SECOND. The main office of the Association shall be in the City of Columbus,
County of Franklin, State of Ohio.
The business of the Association will be limited to the fiduciary powers and the
support of activities incidental to the exercise of those powers. The
Association will not expand or alter its business beyond that stated in this
article without the prior approval of the Comptroller of the Currency.
THIRD. The Board of Directors of this Association shall consist of not less than
five nor more than twenty-five persons, 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 a majority of the shareholders at any annual or
special meeting thereof. Each director shall own common or preferred stock of
the Association, or of a holding company owning the Association, with an
aggregate par, fair market or equity value of not less than $1,000, as of either
(i) the date of purchase, (ii) the date the person became a director, or (iii)
the date of that person's most recent election to the Board of Directors,
whichever is more recent. Any combination of common or preferred stock of the
Association or holding company may be used.
Any vacancy in the Board of Directors may be filled by action of a majority of
the remaining directors between meetings of shareholders. The Board of Directors
may not increase the number of directors between meetings of shareholders to a
number which: (1) exceeds by more than two the number of directors last elected
by shareholders where the number was 15 or less; or (2) exceeds by more than
four the number of directors last elected by shareholders where the number was
16 or more, but in no event shall the number of directors exceed 25.
Terms of directors, including directors selected to fill vacancies, shall expire
at the next regular meeting of shareholders at which directors are elected,
unless the directors resign or are removed from office.
Despite the expiration of a director's term, the director shall continue to
serve until his or her successor is elected and qualifies or until there is a
decrease in the number of directors and his or her position is eliminated.
Honorary or advisory members of the Board of Directors, without voting power or
power of final decision in matters concerning the business of the Association,
may be appointed by resolution of a majority of the full Board of Directors, or
by resolution of shareholders at any annual or special meeting. Honorary or
advisory directors shall not be counted to determine the number of
<PAGE> 5
directors of the Association or the presence of a quorum in connection with any
board action, and shall not be required to own qualifying shares.
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 the Board of Directors
may designate, on the day of each year specified therefor in the Bylaws or, if
that day falls on a legal holiday in the state in which the Association is
located, on the next following banking day. If no election is held on the day
fixed or in the event of a legal holiday on the following banking day, an
election may be held on any subsequent day within 60 days of the day fixed, to
be designated by the Board of Directors or, if the directors fail to fix the
day, by shareholders representing two-thirds of the shares issued and
outstanding. In all cases at least 10 days advance notice of the meeting shall
be given to the shareholders by first class mail.
In all elections of directors, the number of votes each common shareholder may
cast will be determined by multiplying the number of shares such shareholder
owns by the number of directors to be elected. Those votes may be cumulated and
cast for a single candidate or may be distributed among two or more candidates
in the manner selected by the shareholder. On all other questions, each common
shareholder shall be entitled to one vote for each share of stock held by such
shareholder. If the issuance of preferred stock with voting rights has been
authorized by a vote of shareholders owning a majority of the common stock of
the association, preferred shareholders will have cumulative voting rights and
will be included within the same class as common shareholders, for purposes of
elections of directors.
A director may resign at any time by delivering written notice to the Board of
Directors, its chairperson, or to the Association, which resignation shall be
effective when the notice is delivered unless the notice specifies a later
effective date.
A director may be removed by shareholders at a meeting called to remove him or
her, when notice of the meeting stating that the purpose or one of the purposes
is to remove him or her is provided, if there is a failure to fulfill one of the
affirmative requirements for qualification, or for cause, provided, however,
that a director may not be removed if the number of votes sufficient to elect
him or her under cumulative voting is voted against his or her removal.
FIFTH. The authorized amount of capital stock of this Association shall be
eighty thousand shares of common stock of the par value of ten dollars ($10.00)
each; but said capital stock may be increased or decreased from time to time,
according to the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the Association shall
have any preemptive or preferential right of subscription to any shares of any
class of stock of the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the Association, issued or sold, nor
any right of subscription to any thereof other than 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.
Unless otherwise specified in the Articles of Association or required by law,
(1) all matters requiring shareholder action, including amendments to the
Articles of Association, must be approved by shareholders owning a majority
voting interest in the outstanding voting stock, and (2) each shareholder shall
be entitled to one vote per share.
<PAGE> 6
Unless otherwise specified in the Articles of Association or required by law,
all shares of voting stock shall be voted together as a class on any matters
requiring shareholder approval. If a proposed amendment would affect two or more
classes or series in the same or a substantially similar way, all the classes or
series so affected must vote together as a single voting group on the proposed
amendment.
Shares of the same class or series may be issued as a dividend on a pro rata
basis and without consideration. Shares of another class or series may be issued
as share dividends in respect of a class or series of stock if approved by a
majority of the votes entitled to be cast by the class or series to be issued
unless there are no outstanding shares of the class or series to be issued.
Unless otherwise provided by the Board of Directors, the record date for
determining shareholders entitled to a share dividend shall be the date the
Board of Directors authorizes the share dividend.
Unless otherwise provided in the Bylaws, the record date for determining
shareholders entitled to notice of and to vote at any meeting is the close of
business on the day before the first notice is mailed or otherwise sent to the
shareholders, provided that in no event may a record date be more than 70 days
before the meeting.
If a shareholder is entitled to fractional shares pursuant to preemptive rights,
a stock dividend, consolidation or merger, reverse stock split or otherwise, the
Association may: (a) issue fractional shares or; (b) in lieu of the issuance of
fractional shares, issue script or warrants entitling the holder to receive a
full share upon surrendering enough script or warrants to equal a full share;
(c) if there is an established and active market in the Association's stock,
make reasonable arrangements to provide the shareholder with an opportunity to
realize a fair price through sale of the fraction, or purchase of the additional
fraction required for a full share; (d) remit the cash equivalent of the
fraction to the shareholder; or (e) sell full shares representing all the
fractions at public auction or to the highest bidder after having solicited and
received sealed bids from at least three licensed stock brokers, and distribute
the proceeds pro rata to shareholders who otherwise would be entitled to the
fractional shares. The holder of a fractional share is entitled to exercise the
rights for shareholder, including the right to vote, to receive dividends, and
to participate in the assets of the Association upon liquidation, in proportion
to the fractional interest. The holder of script or warrants is not entitled to
any of these rights unless the script or warrants explicitly provide for such
rights. The script or warrants may be subject to such additional conditions as:
(1) that the script or warrants will become void if not exchanged for full
shares before a specified date; and (2) that the shares for which the script or
warrants are exchangeable may be sold at the option of the Association and the
proceeds paid to scriptholders.
The 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. Obligations classified as debt, whether or not subordinated, which
may be issued by the Association without the approval of shareholders, do not
carry voting rights on any issue, including an increase or decrease in the
aggregate number of the securities, or the exchange or reclassification of all
or part of securities into securities of another class or series.
SIXTH. The Board of Directors shall appoint one of its members president of this
Association, and one of its members chairperson of the board and shall have the
power to appoint one or more vice presidents, a secretary who shall keep minutes
of the directors' and shareholders' meetings and be responsible for
authenticating the records of the Association, and such other officers and
employees as may be required to transact the business of this Association. A
duly appointed
<PAGE> 7
officer may appoint one or more officers or assistant officers if authorized by
the Board of Directors in accordance with the Bylaws.
The Board of Directors shall have the power to:
(1) Define the duties of the officers, employees, and agents of the
Association.
(2) Delegate the performance of its duties, but not the responsibility for
its duties, to the officers, employees, and agents of the Association.
(3) Fix the compensation and enter into employment contracts with its
officers and employees upon reasonable terms and conditions consistent
with applicable law.
(4) Dismiss officers and employees.
(5) Require bonds from officers and employees and to fix the penalty
thereof.
(6) Ratify written policies authorized by the Association's management or
committees of the board.
(7) Regulate the manner in which any increase or decrease of the capital of
the Association shall be made, provided that nothing herein shall
restrict the power of shareholders to increase or decrease the capital
of the association in accordance with law, and nothing shall raise or
lower from two-thirds the percentage for shareholder approval to
increase or reduce the capital.
(8) Manage and administer the business and affairs of the Association.
(9) Adopt initial Bylaws, not inconsistent with law or the Articles of
Association, for managing the business and regulating the affairs of
the Association.
(10) Amend or repeal Bylaws, except to the extent that the Articles of
Association reserve this power in whole or in part to shareholders.
(11) Make contracts.
(12) Generally perform all acts that are legal for a Board of Directors to
perform.
SEVENTH. The Board of Directors shall have the power to change the location of
the main office of this Association to any other place within the limits of the
City of Columbus, State of Ohio, without the approval of the shareholders; and
shall have the power to change the location of the main office of this
Association to any other place outside the limits of the City of Columbus, State
of Ohio, but not more than thirty miles beyond such limits, with the affirmative
vote of shareholders owning two-thirds of the stock of the Association, subject
to receipt of a certificate of approval from the Comptroller of the Currency.
The Board of Directors shall have the power to establish or change the location
of any branch or branches of the Association to any other location permitted
under applicable law without the approval of the shareholders, subject to
approval by the Office of the Comptroller of the Currency. The Board of
Directors shall have the power to establish or change the location of any
nonbranch office or facility of the Association without the approval of the
shareholders.
<PAGE> 8
EIGHTH. The corporate existence of this Association shall continue until
termination according to the laws of the United States.
NINTH. The Board of Directors of this Association, or any shareholders owning,
in the aggregate, not less than 20 percent of the stock of this Association, may
call a special meeting of shareholders at any time. Unless otherwise provided by
the Bylaws or the laws of the United States, or waived by shareholders, 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 10, and no more than 60, days prior to the date of the meeting to each
shareholder of record at his/her address as shown upon the books of this
Association. Unless otherwise provided by the Bylaws, any action requiring
approval of shareholders must be effected at a duly called annual or special
meeting.
TENTH. The Association shall provide indemnification as set forth below:
Every person who is or was a Director, officer or employee of the Association or
of any other corporation which he served as a Director, officer or employee at
the request of the Association as part of his regularly assigned duties may be
indemnified by the Association in accordance with the provisions of this Article
against all liability (including, without limitation, judgments, fines,
penalties, and settlements) and all reasonable expenses (including, without
limitation, attorneys' fees and investigative expenses) that may be incurred or
paid by him in connection with any claim, action, suit or proceeding, whether
civil, criminal or administrative (all referred to hereafter in this Article as
"Claims") or in connection with any appeal relating thereto in which he may
become involved as a party or otherwise or with which he may be threatened by
reason of his being or having been a Director, officer or employee of the
Association or such other corporation, or by reason of any action taken or
omitted by him in his capacity as such Director, officer or employee, whether or
not he continues to be such at the time such liability or expenses are incurred;
provided that nothing contained in this Article shall be construed to permit
indemnification of any such person who is adjudged guilty of, or liable for,
willful misconduct, gross neglect of duty or criminal acts, unless, at the time
such indemnification is sought, such indemnification in such instance is
permissible under applicable law and regulations, including published rulings of
the Comptroller of the Currency or other appropriate supervisory or regulatory
authority; and provided further that there shall be no indemnification of
Directors, officers, or employees against expenses, penalties, or other payments
incurred in an administrative proceeding or action instituted by an appropriate
regulatory agency which proceeding or action results in a final order assessing
civil money penalties or requiring affirmative action by an individual or
individuals in the form of payments to the Association.
Every person who may be indemnified under the provisions of this Article and who
has been wholly successful on the merits with respect to any Claim shall be
entitled to indemnification as of right. Except as provided in the preceding
sentence, any indemnification under this Article shall be at the sole discretion
of the Board of Directors and shall be made only if the Board of Directors or
the Executive Committee acting by a quorum consisting of Directors who are not
parties to such Claim shall find or if independent legal counsel (who may be the
regular counsel of the Association) selected by the Board of Directors or
Executive Committee whether or not a disinterested quorum exists shall render
their opinion that in view of all of the circumstances then surrounding the
Claim, such indemnification is equitable and in the best interests of the
Association. Among the circumstances to be taken into consideration in arriving
at such a finding or opinion is the existence or non-existence of a contract of
insurance or indemnity under which the Association would be wholly or partially
reimbursed for such indemnification, but the
<PAGE> 9
existence or non-existence of such insurance is not the sole circumstance to be
considered nor shall it be wholly determinative of whether such indemnification
shall be made. In addition to such finding or opinion, no indemnification under
this Article shall be made unless the Board of Directors or the Executive
Committee acting by a quorum consisting of Directors who are not parties to such
Claim shall find or if independent legal counsel (who may be the regular counsel
of the Association) selected by the Board of Directors or Executive Committee
whether or not a disinterested quorum exists shall render their opinion that the
Directors, officer or employee acted in good faith in what he reasonably
believed to be the best interests of the Association or such other corporation
and further in the case of any criminal action or proceeding, that the Director,
officer or employee reasonably believed his conduct to be lawful. Determination
of any Claim by judgment adverse to a Director, officer or employee by
settlement with or without Court approval or conviction upon a plea of guilty or
of nolo contendere or its equivalent shall not create a presumption that a
Director, officer or employee failed to meet the standards of conduct set forth
in this Article. Expenses incurred with respect to any Claim may be advanced by
the Association prior to the final disposition thereof upon receipt of an
undertaking satisfactory to the Association by or on behalf of the recipient to
repay such amount unless it is ultimately determined that he is entitled to
indemnification under this Article.
The rights of indemnification provided in this Article shall be in addition to
any rights to which any Director, officer or employee may otherwise be entitled
by contract or as a matter of law. Every person who shall act as a Director,
officer or employee of this Association shall be conclusively presumed to be
doing so in reliance upon the right of indemnification provided for in this
Article.
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. The Association's Board of Directors may propose one or
more amendments to the Articles of Association for submission to the
shareholders.
<PAGE> 10
EXHIBIT 2
A COPY OF THE CERTIFICATE OF AUTHORITY OF THE
TRUSTEE TO COMMENCE BUSINESS
CERTIFICATE
I, John D. Hawke, Jr., Comptroller of the Currency, do hereby certify that:
1. 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 of all National Banking
Associations.
2. "Bank One Trust Company, National Association," Columbus, Ohio, (Charter No.
16235) 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
15th day of September, 1999.
/s/ John D. Hawke, Jr.
---------------------------------------------
Comptroller of the Currency
<PAGE> 11
EXHIBIT 3
A COPY OF THE AUTHORIZATION OF THE TRUSTEE
TO EXERCISE CORPORATE TRUST POWERS
CERTIFICATE
I, John D. Hawke, Jr., Comptroller of the Currency, do hereby certify that:
1. 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 of all National Banking
Associations.
2. "Bank One Trust Company, National Association," Columbus, Ohio, (Charter No.
16235) was granted, under the hand and seal of the Comptroller, the right to act
in all fiduciary capacities authorized under the provisions of the Act of
Congress approved September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a, and that the
authority so granted remains in full force and effect 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
15th day of September, 1999.
/s/ John D. Hawke, Jr.
---------------------------------------------
Comptroller of the Currency
<PAGE> 12
EXHIBIT 4
A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE
BANK ONE TRUST COMPANY, National Association
BY-LAWS
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the shareholders of
the Bank for the election of Directors and for the transaction of such business
as may properly come before the meeting shall be held at its main office, or
other convenient place duly authorized by the Board of Directors, on the same
day upon which any regular or special Board meeting is held from and including
the first Monday of January to, and including, the fourth Monday of February of
each year, or on the next succeeding banking day, if the day fixed falls on a
legal holiday. If from any cause, an election of Directors is not made on the
day fixed for the regular meeting of the shareholders or, in the event of a
legal holiday, on the next succeeding banking 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. Notice of such
annual meeting shall be given by or under the direction of the Secretary, or
such other officer as may be designated by the Chief Executive Officer, by
first-class mail, postage prepaid, to all shareholders of record of the Bank at
their respective addresses as shown upon the books of the Bank mailed not less
than ten days prior to the date fixed for such meeting.
SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of the
Bank may be called at any time by the Board of Directors or by any three or more
shareholders owning, in the aggregate, not less than ten percent of the stock of
the Bank. Notice of any special meeting of the shareholders called by the Board
of Directors, stating the time, place and purpose of the meeting, shall be given
by or under the direction of the Secretary, or such other officer as is
designated by the Chief Executive Officer, by first-class mail, postage prepaid,
to all shareholders of record of the Bank at their respective addresses as shown
upon the books of the Bank mailed not less than ten days prior to the date fixed
for such meeting. Any special meeting of shareholders shall be conducted and its
proceedings recorded in the manner prescribed in these By-Laws for annual
meetings of shareholders.
SECTION 1.03. SECRETARY OF MEETING OF SHAREHOLDERS. The Board of Directors may
designate a person to be the secretary of the meeting of shareholders. In the
absence of a presiding officer, as designated by these By-Laws, the Board of
Directors may designate a person to act as the presiding officer. In the event
the Board of Directors fails to designate a person to preside at a meeting of
shareholders and a secretary of such meeting, the shareholders present or
represented shall elect a person to preside and a person to serve as secretary
of the meeting. The secretary of the meeting of shareholders shall cause the
returns made by the judges of election and other proceedings to be recorded in
the minute books of the Bank. The presiding officer shall notify the
Directors-elect of their election and to meet forthwith for the organization of
the new Board of Directors. The minutes of the meeting shall be signed by the
presiding officer and the secretary designated for the meeting.
SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as many as
three shareholders to be judges of the election, who shall hold and conduct the
same, and who shall, after the election has been held, notify, in writing over
their signatures, the secretary of the meeting of shareholders of the result
thereof and the names of the Directors elected; provided, however, that upon
failure for any reason of any judge or judges of election, so appointed by the
Directors, to serve, the presiding officer of the meeting shall appoint other
shareholders or their
<PAGE> 13
proxies to fill the vacancies. The judges of election, at the request of the
chairman of the meeting, shall act as tellers of any other vote by ballot taken
at such meeting, and shall notify, in writing over their signature, the
secretary of the Board of Directors of the result thereof.
SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of
record, who is qualified to vote under the provisions of Federal Law, shall have
the right to vote the number of shares of record in such shareholder's name for
as many persons as there are Directors to be elected, or to cumulate such shares
as provided by Federal Law. In deciding all other questions at meetings of
shareholders, each shareholder shall be entitled to one vote on each share of
stock of record in such shareholder's name. Shareholders may vote by proxy duly
authorized in writing. All proxies used at the annual meeting shall be secured
for that meeting only, or any adjournment thereof, and shall be dated, if not
dated by the shareholder, as of the date of the receipt thereof. No officer or
employee of this Bank may act as proxy.
SECTION 1.06. QUORUM. Holders of record of a majority of the shares of the
capital stock of the Bank, eligible to be voted, present either in person or by
proxy, shall constitute a quorum for the transaction of business at any meeting
of shareholders, but shareholders present at any meeting and constituting less
than a quorum may, without further notice, adjourn the meeting from time to time
until a quorum is obtained. 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 2.01. QUALIFICATIONS. Each Director shall have the qualifications
prescribed by law. No person elected as a Director may exercise any of the
powers of office until such Director has taken the oath of such office.
SECTION 2.02. VACANCIES. Directors of the Bank shall hold office for one year or
until their successors are elected and qualified. Any vacancy in the Board shall
be filled by appointment of the remaining Directors, and any Director so
appointed shall hold office until the next election.
SECTION 2.03. ORGANIZATION MEETING. The Directors elected by the shareholders
shall meet for organization of the new Board of Directors at the time and place
fixed by the presiding officer of the annual meeting. If at the time fixed for
such meeting there is no quorum present, the Directors in attendance may adjourn
from time to time until a quorum is obtained. A majority of the number of
Directors elected by the shareholders shall constitute a quorum for the
transaction of business.
SECTION 2.04. REGULAR MEETINGS. The regular meetings of the Board of Directors
shall be held at such date, time and place as the Board may previously
designate, or should the Board fail to so designate, at such date, time and
place as the Chairman of the Board, Chief Executive Officer, or President may
fix. Whenever a quorum is not present, the Directors in attendance shall adjourn
the meeting to a time not later than the date fixed by the By-Laws for the next
<PAGE> 14
succeeding regular meeting of the Board. Members of the Board of Directors may
participate in such meetings through use of conference telephone or similar
communications equipment, so long as all members participating in such meetings
can hear one another.
SECTION 2.05. SPECIAL MEETINGS. Special meetings of the Board of Directors shall
be held at the call of the Chairman of the Board, Chief Executive Officer, or
President, or at the request of two or more Directors. Any special meeting may
be held at such place and at such time as may be fixed in the call. Written or
oral notice shall be given to each Director not later than the day next
preceding the day on which the special meeting is to be held, which notice may
be waived in writing. The presence of a Director at any meeting of the Board of
Directors shall be deemed a waiver of notice thereof by such Director. Whenever
a quorum is not present, the Directors in attendance shall adjourn the special
meeting from day to day until a quorum is obtained. Members of the Board of
Directors may participate in such meetings through use of conference telephone
or similar communications equipment, so long as all members participating in
such meetings can hear one another.
SECTION 2.06. QUORUM. A majority of the Directors shall constitute a quorum at
any meeting, except when otherwise provided by law; but a lesser number may
adjourn any meeting, from time-to-time, and the meeting may be held, as
adjourned, without further notice. When, however, less than a quorum as herein
defined, but at least one-third and not less than two of the authorized number
of Directors are present at a meeting of the Directors, business of the Bank may
be transacted and matters before the Board approved or disapproved by the
unanimous vote of the Directors present.
SECTION 2.07. COMPENSATION. Each member of the Board of Directors shall receive
such fees for attendance at Board and Board committee meetings and such fees for
service as a Director, irrespective of meeting attendance, as from time to time
are fixed by resolution of the Board; provided, however, that payment hereunder
shall not be made to a Director for meetings attended and/or Board service which
are not for the Bank's sole benefit and which are concurrent and duplicative
with meetings attended or Board service for an affiliate of the Bank for which
the Director receives payment; and provided further that fees hereunder shall
not be paid in the case of any Director in the regular employment of the Bank or
of one of its affiliates. Each member of the Board of Directors, whether or not
such Director is in the regular employment of the Bank or of one of its
affiliates, shall be reimbursed for travel expenses incident to attendance at
Board and Board committee meetings.
SECTION 2.08. EXECUTIVE COMMITTEE. There may be a standing committee of the
Board of Directors known as the Executive Committee which shall possess and
exercise, when the Board is not in session, all the powers of the Board that may
lawfully be delegated. The Executive Committee shall consist of at least three
Board members, one of whom shall be the Chairman of the Board, Chief Executive
Officer or the President. The other members of the Executive Committee shall be
appointed by the Chairman of the Board, the Chief Executive Officer, or the
President, with the approval of the Board, and who shall continue as members of
the Executive Committee until their successors are appointed, provided, however,
that any member of the Executive Committee may be removed by the Board upon a
majority vote thereof at any regular or special meeting of the Board. The
Chairman, Chief Executive Officer, or President shall fill any vacancy in the
Executive Committee by the appointment of another
<PAGE> 15
Director, subject to the approval of the Board of Directors. The Executive
Committee shall meet at the call of the Chairman, Chief Executive Officer, or
President or any two members thereof at such time or times and place as may be
designated. In the event of the absence of any member or members of the
Executive Committee, the presiding member may appoint a member or members of the
Board to fill the place or places of such absent member or members to serve
during such absence. Two members of the Executive Committee shall constitute a
quorum. When neither the Chairman of the Board, the Chief Executive Officer, nor
President are present, the Executive Committee shall appoint a presiding
officer. The Executive Committee shall report its proceedings and the action
taken by it to the Board of Directors.
SECTION 2.09. OTHER COMMITTEES. The Board of Directors may appoint such special
committees from time to time as are in its judgment necessary in the interest of
the Bank.
ARTICLE III
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES
SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.
(a) The executive officers of the Bank shall include a Chairman of the Board,
Chief Executive Officer, President, Chief Financial Officer, Secretary, Security
Officer, and may include one or more Senior Managing Directors or Managing
Directors. The Chairman of the Board, Chief Executive Officer, President, any
Senior Managing Director, any Managing Director, Chief Financial Officer,
Secretary, and Security Officer shall be elected by the Board. The Chairman of
the Board, Chief Executive Officer, and the President shall be elected by the
Board from their own number. Such officers as the Board shall elect from their
own number shall hold office from the date of their election as officers until
the organization meeting of the Board of Directors following the next annual
meeting of shareholders, provided, however, that such officers may be relieved
of their duties at any time by action of the Board of Directors, in which event
all the powers incident to their office shall immediately terminate. The
Chairman of the Board, Chief Executive Officer, or the President shall preside
at all meetings of shareholders and meetings of the Board of Directors.
(b) The management staff of the Bank shall include officers elected by the
Board, officers appointed by the Chairman of the Board, the Chief Executive
Officer, the President, any Senior Managing Director, any Managing Director, the
Chief Financial Officer, and such other persons in the employment of the Bank
who, pursuant to authorization by a duly authorized officer of the Bank, perform
management functions and have management responsibilities. Any two or more
offices may be held by the same person except that no person shall hold the
office of Chairman of the Board, Chief Executive Officer and/or President and at
the same time also hold the office of Secretary.
(c) Except as provided in the case of the elected officers who are members of
the Board, all officers and employees, whether elected or appointed, shall hold
office at the pleasure of the Board. Except as otherwise limited by law or these
By-Laws, the Board assigns to the Chairman of the Board, the Chief Executive
Officer, the President, any Senior Managing Director, any Managing Director, the
Chief Financial Officer, and/or each of their respective designees the authority
to control all personnel, including elected and appointed officers and employees
of the
<PAGE> 16
Bank, to employ or direct the employment of such officers and employees as he or
she may deem necessary, including the fixing of salaries and the dismissal of
such officers and employees at pleasure, and to define and prescribe the duties
and responsibilities of all officers and employees of the Bank, subject to such
further limitations and directions as he or she may from time to time deem
appropriate.
(d) The Chairman of the Board, the Chief Executive Officer, the President, any
Senior Managing Director, any Managing Director, the Chief Financial Officer,
and any other officer of the Bank, to the extent that such officer is authorized
in writing by the Chairman of the Board, the Chief Executive Officer, the
President, any Senior Managing Director, any Managing Director, or the Chief
Financial Officer may appoint persons other than officers who are in employment
of the Bank to serve in management positions and in connection therewith, the
appointing officer may assign such title, salary, responsibilities and functions
as are deemed appropriate, provided, however, that nothing contained herein
shall be construed as placing any limitation on the authority of the Chairman of
the Board, the Chief Executive Officer, the President, any Senior Managing
Director, any Managing Director, or the Chief Financial Officer as provided in
this and other sections of these By-Laws.
(e) The Senior Managing Directors and the Managing Directors of the Bank shall
have general and active authority over the management of the business of the
Bank, shall see that all orders and resolutions of the Board of Directors are
carried into effect, and shall do or cause to be done all things necessary or
proper to carry on the business of the Bank in accordance with provisions of
applicable law and regulations. Each Senior Managing Director and Managing
Director shall perform all duties incident to his or her office and such other
and further duties, as may from time to time be required by the Chief Executive
Officer, the President, the Board of Directors, or the shareholders. The
specification of authority in these By-Laws wherever and to whomever granted
shall not be construed to limit in any manner the general powers of delegation
granted to a Senior Managing Director or a Managing Director in conducting the
business of the Bank. In the absence of a Senior Managing Director or a Managing
Director, such officer as is designated by the Senior Managing Director or the
Managing Director shall be vested with all the powers and perform all the duties
of the Senior Managing Director or the Managing Director as defined by these
By-Laws.
(f) Each Managing Director who is assigned oversight of one or more trust
service offices shall appoint a management committee known as the Investment
Management and Trust Committee consisting of the Managing Director of the trust
service offices and at least three other members who shall be capable and
experienced officers of the Bank appointed from time to time by the Managing
Director and who shall continue as members of the Investment Management and
Trust Committee until their successors are appointed, provided, however, that
any member of the Investment Management and Trust Committee may be removed by
the Managing Director as provided in this and other sections of these By-Laws.
The Managing Director shall fill any vacancy in the Investment Management and
Trust Committee by the appointment of another capable and experienced officer of
the Bank. Each Investment Management and Trust Committee shall meet at such
date, time and place as the Managing Director shall fix. In the event of the
absence of any member or members of the Investment Management and Trust
Committee, the Managing Director may, in his or her discretion, appoint another
officer of the Bank to fill the place or places of such absent member or members
to serve during such absence.
<PAGE> 17
A majority of each Investment Management and Trust Committee shall constitute a
quorum. Each Investment Management and Trust Committee shall carry out the
policies of the Bank, as adopted by the Board of Directors, which shall be
formulated and executed in accordance with State and Federal Law, Regulations of
the Comptroller of the Currency, and sound fiduciary principles. In carrying out
the policies of the Bank, each Investment Management and Trust Committee is
hereby authorized to establish management teams whose duties and
responsibilities shall be specifically set forth in the policies of the Bank.
Each such management team shall report such proceedings and the actions taken
thereby to the Investment Management and Trust Committee. Each Managing Director
shall then report such proceedings and the actions taken thereby to the Board of
Directors.
SECTION 3.02. POWERS AND DUTIES OF MANAGEMENT STAFF. Pursuant to the fiduciary
powers granted to this Bank under the provisions of Federal Law and Regulations
of the Comptroller of the Currency, the Chairman of the Board, the Chief
Executive Officer, the President, the Senior Managing Directors, the Managing
Directors, the Chief Financial Officer, and those officers so designated and
authorized by the Chairman of the Board, the Chief Executive Officer, the
President, the Senior Managing Directors, the Managing Directors, or the Chief
Financial Officer are authorized for and on behalf of the Bank, and to the
extent permitted by law, to make loans and discounts; to purchase or acquire
drafts, notes, stocks, bonds, and other securities for investment of funds held
by the Bank; to execute and purchase acceptances; to appoint, empower and direct
all necessary agents and attorneys; to sign and give any notice required to be
given; to demand payment and/or to declare due for any default any debt or
obligation due or payable to the Bank upon demand or authorized to be declared
due; to foreclose any mortgages; to exercise any option, privilege or election
to forfeit, terminate, extend or renew any lease; to authorize and direct any
proceedings for the collection of any money or for the enforcement of any right
or obligation; to adjust, settle and compromise all claims of every kind and
description in favor of or against the Bank, and to give receipts, releases and
discharges therefor; to borrow money and in connection therewith to make,
execute and deliver notes, bonds or other evidences of indebtedness; to pledge
or hypothecate any securities or any stocks, bonds, notes or any property real
or personal held or owned by the Bank, or to rediscount any notes or other
obligations held or owned by the Bank, whenever in his or her judgment it is
reasonably necessary for the operation of the Bank; and in furtherance of and in
addition to the powers hereinabove set forth to do all such acts and to take all
such proceedings as in his or her judgment are necessary and incidental to the
operation of the Bank.
SECTION 3.03. SECRETARY. The Secretary or such other officers as may be
designated by the Chief Executive Officer shall have supervision and control of
the records of the Bank and, subject to the direction of the Chief Executive
Officer, shall undertake other duties and functions usually performed by a
corporate secretary. Other officers may be designated by the Secretary as
Assistant Secretary to perform the duties of the Secretary.
SECTION 3.04. EXECUTION OF DOCUMENTS. Any member of the Bank's management staff
or any employee of the Bank designated as an officer on the Bank's payroll
system is hereby authorized for and on behalf of the Bank to sell, assign,
lease, mortgage, transfer, deliver and convey any real or personal property,
including shares of stock, bonds, notes, certificates of indebtedness (including
the assignment and redemption of registered United States obligations) and all
other forms of intangible property now or hereafter owned by or standing in the
name of the Bank, or its nominee, or held by the Bank as collateral security, or
standing in the name of
<PAGE> 18
the Bank, or its nominee, in any fiduciary capacity or in the name of any
principal for whom this Bank may now or hereafter be acting under a power of
attorney or as agent, and to execute and deliver such partial releases from any
discharges or assignments of mortgages and assignments or surrender of insurance
policies, deeds, contracts, assignments or other papers or documents as may be
appropriate in the circumstances now or hereafter held by the Bank in its own
name, in a fiduciary capacity, or owned by any principal for whom this Bank may
now or hereafter be acting under a power of attorney or as agent; provided,
however, that, when necessary, the signature of any such person shall be
attested or witnessed in each case by another officer of the Bank.
Any member of the Bank's management staff or any employee of the Bank designated
as an officer on the Bank's payroll system is hereby authorized for and on
behalf of the Bank to execute any indemnity and fidelity bonds, trust
agreements, proxies or other papers or documents of like or different character
necessary, desirable or incidental to the appointment of the Bank in any
fiduciary capacity, the conduct of its business in any fiduciary capacity, or
the conduct of its other banking business; to sign and issue checks, drafts,
orders for the payment of money and certificates of deposit; to sign and endorse
bills of exchange, to sign and countersign foreign and domestic letters of
credit, to receive and receipt for payments of principal, interest, dividends,
rents, fees and payments of every kind and description paid to the Bank, to sign
receipts for money or other property acquired by or entrusted to the Bank, to
guarantee the genuineness of signatures on assignments of stocks, bonds or other
securities, to sign certifications of checks, to endorse and deliver checks,
drafts, warrants, bills, notes, certificates of deposit and acceptances in all
business transactions of the Bank; also to foreclose any mortgage, to execute
and deliver receipts for any money or property; also to sign stock certificates
for and on behalf of this Bank as transfer agent or registrar, and to
authenticate bonds, debentures, land or lease trust certificates or other forms
of security issued pursuant to any indenture under which this Bank now or
hereafter is acting as trustee or in any other fiduciary capacity; to execute
and deliver various forms of documents or agreements necessary to effectuate
certain investment strategies for various fiduciary or custody customers of the
Bank, including, without limitation, exchange funds, options, both listed and
over-the-counter, commodities trading, futures trading, hedge funds, limited
partnerships, venture capital funds, swap or collar transactions and other
similar investment vehicles for which the Bank now or in the future may deem
appropriate for investment of fiduciary customers or in which non-fiduciary
customers may direct investment by the Bank.
Without limitation on the foregoing, the Chief Executive Officer, Chairman of
the Board, or President of the Bank shall have the authority from time to time
to appoint officers of the Bank as Vice President for the sole purpose of
executing releases or other documents incidental to the conduct of the Bank's
business in any fiduciary capacity where required by state law or the governing
document. In addition, other persons in the employment of the Bank or its
affiliates may be authorized by the Chief Executive Officer, Chairman of the
Board, President, Senior Managing Directors, Managing Directors, or Chief
Financial Officer to perform acts and to execute the documents described in the
paragraph above, subject, however, to such limitations and conditions as are
contained in the authorization given to such person.
<PAGE> 19
SECTION 3.05. PERFORMANCE BOND. All officers and employees of the Bank shall be
bonded for the honest and faithful performance of their duties for such amount
as may be prescribed by the Board of Directors.
ARTICLE IV
STOCKS AND STOCK CERTIFICATES
SECTION 4.01. STOCK CERTIFICATES. The shares of stock of the Bank shall be
evidenced by certificates which shall bear the signature of the Chairman of the
Board, the Chief Executive Officer, or the President (which signature may be
engraved, printed or impressed), and shall be signed manually by the Secretary,
or any other officer appointed by the Chief Executive Officer for that purpose.
In case any such officer who has signed or whose facsimile signature has been
placed upon such certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Bank with the same effect as if
such officer had not ceased to be such at the time of its issue. Each such
certificate shall bear the corporate seal of the Bank, shall recite on its face
that stock represented thereby is transferable only upon the books of the Bank
when properly endorsed and shall recite such other information as is required by
law and deemed appropriate by the Board. The corporate seal may be facsimile
engraved or printed.
SECTION 4.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank shall be
transferable only upon the stock transfer books of the Bank and, except as
hereinafter provided, no transfer shall be made or new certificates issued
except upon the surrender for cancellation of the certificate or certificates
previously issued therefor. In the case of the loss, theft, or destruction of
any certificate, a new certificate may be issued in place of such certificate
upon the furnishing of an affidavit setting forth the circumstances of such
loss, theft, or destruction and indemnity satisfactory to the Chairman of the
Board, the Chief Executive Officer, or the President. The Board of Directors or
the Chairman of the Board, Chief Executive Officer, or the President may
authorize the issuance of a new certificate therefor without the furnishing of
indemnity. Stock transfer books, in which all transfers of stock shall be
recorded, shall be provided. The stock transfer books may be closed for a
reasonable period and under such conditions as the Board of Directors may at any
time determine, for any meeting of shareholders, the payment of dividends or any
other lawful purpose. In lieu of closing the transfer books, the Board of
Directors may, in its discretion, fix a record date and hour constituting a
reasonable period prior to the day designated for the holding of any meeting of
the shareholders or the day appointed for the payment of any dividend, or for
any other purpose at the time as of which shareholders entitled to notice of and
to vote at any such meeting or to receive such dividend or to be treated as
shareholders for such other purpose shall be determined, and only shareholders
of record at such time shall be entitled to notice of or to vote at such meeting
or to receive such dividends or to be treated as shareholders for such other
purpose.
<PAGE> 20
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.01. SEAL. The seal of the Bank shall be circular in form with "SEAL"
in the center, and the name "BANK ONE TRUST COMPANY, National Association"
located clockwise around the upper half of the seal.
SECTION 5.02. MINUTE BOOK. The organization papers of this Bank, the Articles of
Association, the returns of judges of elections, the By-Laws and any amendments
thereto, the proceedings of all regular and special meetings of the shareholders
and of the Board of Directors, and reports of the committees of the Board of
Directors shall be recorded in the minute books of the Bank. The minutes of each
such meeting shall be signed by the presiding officer and attested by the
secretary of the meeting.
SECTION 5.03. CORPORATE POWERS. The corporate existence of the Bank shall
continue until terminated in accordance with the laws of the United States. The
purpose of the Bank shall be to carry on the general business of a commercial
bank trust department and to engage in such activities as are necessary,
incident, or related to such business. The Articles of Association of the Bank
shall not be amended, or any other provision added elsewhere in the Articles
expanding the powers of the Bank, without the prior approval of the Comptroller
of the Currency.
SECTION 5.04. AMENDMENT OF BY-LAWS. The By-Laws may be amended, altered or
repealed, at any regular or special meeting of the Board of Directors, by a vote
of a majority of the Directors.
<PAGE> 21
As amended April 24, 1991 Section 3.01 (Officers and Management Staff)
Section 3.02 (Chief Executive Officer)
Section 3.03 (Powers and Duties of
Officers and Management Staff)
Section 3.05 (Execution of Documents)
As amended January 27, 1995 Section 2.04 (Regular Meetings)
Section 2.05 (Special Meetings)
Section 3.01(f) (Officers and Management Staff)
Section 3.03(e) (Powers and Duties of Officers
and Management Staff)
Section 5.01 (Seal)
Amended and restated in its entirety effective May 1, 1996
As amended August 1, 1996 Section 2.09 (Trust Examining Committee)
Section 2.10 (Other Committees)
As amended October 16, 1997 Section 3.01 (Officers and Management Staff)
Section 3.02 (Powers and Duties of Officers and
Management Staff)
Section 3.04 (Execution of Documents)
As amended January 1, 1998 Section 1.01 (Annual Meeting)
<PAGE> 22
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
March 1, 2000
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
In connection with the qualification of an indenture between Conexant Systems,
Inc. and Bank One Trust Company, National Association (successor in interest to
The First National Bank of Chicago), as Trustee, the undersigned, in accordance
with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby
consents that the reports of examinations of the undersigned, made by Federal or
State authorities authorized to make such examinations, may be furnished by such
authorities to the Securities and Exchange Commission upon its request therefor.
Very truly yours,
BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION
BY:
--------------------------------------------
JOHN R. PRENDIVILLE
SENIOR COUNSEL
<PAGE> 23
EXHIBIT 7
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 12/31/99 State #: 391581 FFIEC 032
Address: 100 Broad Street Vendor ID: D Cert #: 21377 Page RC-1
City, State Zip: Columbus, OH 43271 Transit #: 04400003
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1999
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN THOUSANDS
------------------------------
C300 RCON BIL MIL THOU
---- ---- ------------
<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): RCON
----
a. Noninterest-bearing balances and currency and coin(1)................... 0081 123,692 1.a
b. Interest-bearing balances(2)............................................ 0071 17,687 1.b
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A)............... 1754 0 2.a
b. Available-for-sale securities (from Schedule RC-B, column D)............ 1773 5,860 2.b
3. Federal funds sold and securities purchased under agreements to resell..... 1350 364,813 3.
4. Loans and lease financing receivables: RCON
----
a. Loans and leases, net of unearned income (from Schedule RC-C)........... 2122 58,020 4.a
b. LESS: Allowance for loan and lease losses............................... 3123 10 4.b
c. LESS: Allocated transfer risk reserve................................... 3128 0 4.c
RCON
d. Loans and leases, net of unearned income, allowance, and reserve ----
(item 4.a minus 4.b and 4.c)............................................ 2125 58,010 4.d
5. Trading assets (from Schedule RD-D)........................................ 3545 0 5.
6. Premises and fixed assets (including capitalized leases)................... 2145 22,547 6.
7. Other real estate owned (from Schedule RC-M)............................... 2150 0 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)............................................. 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding............... 2155 0 9.
10. Intangible assets (from Schedule RC-M)..................................... 2143 27,151 10.
11. Other assets (from Schedule RC-F).......................................... 2160 141,759 11.
12. Total assets (sum of items 1 through 11)................................... 2170 761,519 12.
</TABLE>
- ----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 24
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 12/31/99 State #: 391581 FFIEC 032
Address: 100 Broad Street Vendor ID: D Cert #: 21377 Page RC-2
City, State Zip: Columbus, OH 43271 Transit #: 04400003
</TABLE>
SCHEDULE RC-CONTINUED
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN THOUSANDS
------------------------------
C300 RCON BIL MIL THOU
---- ---- ------------
<S> <C> <C> <C>
LIABILITIES
13. Deposits: RCON
a. In domestic offices (sum of totals of columns A and C from ----
Schedule RC-E, part 1).............................................. 2200 589,846 13.a
(1) Noninterest-bearing(1).......................................... 6631 517,140 13.a1
(2) Interest-bearing................................................ 6636 72,706 13.a2
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II)..................................
(1) Noninterest bearing.............................................
(2) Interest-bearing................................................
14. Federal funds purchased and securities sold under agreements
to repurchase:......................................................... RCFD 2800 0 14
15. a. Demand notes issued to the U.S. Treasury............................ RCON 2840 0 15.a
b. Trading Liabilities (from Sechedule RC-D)........................... RCFD 3548 0 15.b
RCON
16. Other borrowed money: ----
a. With original maturity of one year or less.......................... 2332 0 16.a
b. With original maturity of more than one year....................... A547 0 16.b
c. With original maturity of more than three years .................... A548 0 16.c
17. Not applicable
18. Bank's liability on acceptance executed and outstanding................ 2920 0 18.
19. Subordinated notes and debentures...................................... 3200 0 19.
20. Other liabilities (from Schedule RC-G)................................. 2930 63,244 20.
21. Total liabilities (sum of items 13 through 20)......................... 2948 653,090 21.
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus.......................... 3838 0 23.
24. Common stock........................................................... 3230 800 24.
25. Surplus (exclude all surplus related to preferred stock)............... 3839 45,157 25.
26. a. Undivided profits and capital reserves.............................. 3632 62,458 26.a
b. Net unrealized holding gains (losses) on available-for-sale
securities.......................................................... 8434 14 26.b
c. Accumulated net gains (losses) on cash flow hedges ................. 4336 0 26.c
27. Cumulative foreign currency translation adjustments....................
28. Total equity capital (sum of items 23 through 27)...................... 3210 108,429 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28).................................. 3300 761,519 29.
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of
the statement below that best describes the
most comprehensive level of auditing work
performed for the bank by independent external Number
auditors as of any date during 1996........... RCFD 6724 N/A M.1.
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ----------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
24
