<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER 000-25853
REDBACK NETWORKS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 77-0438443
(State of incorporation) (IRS Employer Identification No.)
1195 BORREGAS AVENUE, SUNNYVALE, CA 94089
(Address of principal executive offices, including ZIP code)
(408) 571-5200
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) Yes X No ___, and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ___.
The number of shares outstanding of the Registrant's Common Stock as of
March 31, 2000 was 145,477,311 shares.
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REDBACK NETWORKS INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
-------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheet as of March 31, 2000
and December 31, 1999 1
Unaudited Condensed Consolidated Statement of Operations for the
three months ended March 31, 2000 and 1999 2
Unaudited Condensed Consolidated Statement of Cash Flows for the
three months ended March 31, 2000 and 1999 3
Notes to Unaudited Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Qualitative and Quantitative Disclosure about Market Risk 22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 2. Changes in Securities and Use of Proceeds 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURE 25
EXHIBIT INDEX 26
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REDBACK NETWORKS INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................. $ 7,071 $ 13,888
Short-term investments ..................................... 495,374 43,072
Accounts receivable, net ................................... 30,429 15,429
Inventories ................................................ 3,204 3,960
Other current assets ....................................... 2,986 1,374
----------- --------
Total current assets .................................. 539,064 77,723
Property and equipment, net ..................................... 28,013 10,150
Other assets, net ............................................... 4,425,410 6,957
----------- --------
Total assets .......................................... $ 4,992,487 $ 94,830
=========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings, current ........................................ $ -- $ 123
Capital lease obligations, current ......................... 2,562 755
Accounts payable ........................................... 12,310 9,109
Accrued liabilities ........................................ 23,553 7,993
Deferred revenue ........................................... 10,223 9,945
----------- --------
Total current liabilities ............................. 48,648 27,925
Convertible subordinated notes .................................. 500,000 --
Capital lease obligations and other notes payable, less
current portion ............................................ 13,395 1,012
----------- --------
Total liabilities ..................................... 562,043 28,937
----------- --------
Stockholders' equity:
Convertible Preferred Stock: $0.0001 par value; 13,500
shares authorized; none issued and outstanding ........... -- --
Common Stock, par value $0.0001 per share; 200,000 shares
authorized; 145,477 and 87,794 shares issued and
outstanding, respectively ............................... 4,540,891 91,638
Deferred stock compensation ................................ (2,731) (3,266)
Notes receivable from stockholder .......................... (131) (131)
Accumulated deficit ........................................ (107,585) (22,348)
----------- --------
Total stockholders' equity ............................ 4,430,444 65,893
----------- --------
Total liabilities and stockholders' equity ............ $ 4,992,487 $ 94,830
=========== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
1
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REDBACK NETWORKS INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
2000 1999
--------- --------
<S> <C> <C>
Net revenues ............................................ $ 34,163 $ 6,517
Cost of revenues ........................................ 8,297 1,971
--------- --------
Gross profit ............................................ 25,866 4,546
--------- --------
Operating expenses:
Research and development (excluding amortization
of deferred stock compensation of $198 and $399,
respectively) ..................................... 12,139 3,105
Selling, general and administrative (excluding
amortization of deferred stock compensation of
$337 and $679, respectively) ...................... 13,255 4,138
Amortization of intangible assets .................... 70,604 --
In-process research and development .................. 15,300 --
Amortization of deferred stock compensation .......... 535 1,078
--------- --------
Total operating expenses ........................ 111,833 8,321
--------- --------
Loss from operations .................................... (85,967) (3,775)
Interest and other income ............................... 1,041 3
Interest expense ........................................ (311) (29)
--------- --------
Net loss ................................................ $ (85,237) $ (3,801)
========= ========
Basic and diluted net loss per share .................... $ (0.96) $ (0.23)
========= ========
Shares used in computing net loss per share ............. 89,137 16,728
========= ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 5
REDBACK NETWORKS INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
2000 1999
----------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .............................................................. $ (85,237) $(3,801)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ...................................... 72,510 418
Amortization of deferred stock compensation ........................ 535 1,078
Purchase of in-process research and development .................... 15,300 --
Other noncash charges .............................................. -- 107
Changes in assets and liabilities, net of effects of acquisition:
Accounts receivable, net ...................................... (15,000) (3,391)
Inventory ..................................................... 756 (312)
Other current assets .......................................... (740) (66)
Other assets .................................................. (10,229) (202)
Accounts payable .............................................. (1,107) 1,417
Accrued liabilities ........................................... 13,236 531
Deferred revenue .............................................. 278 558
----------- -------
Net cash used in operating activities (9,698) (3,663)
----------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment .................................... (11,226) (886)
Purchase of short-term investments .................................... (452,302) --
Other investment ...................................................... (3,160) --
Acquisition, net of cash acquired...................................... (18,454) --
----------- -------
Net cash used in investing activities ......................... (485,142) (886)
----------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of convertible notes ....................... 486,509 --
Proceeds from the issuance of convertible preferred stock, net ........ -- 491
Proceeds from the issuance of common stock, net ....................... 2,042 315
Principal payments under capital lease obligations .................... (405) (120)
Proceeds from bank borrowings ......................................... -- 2,500
Repayments of bank borrowings ......................................... (123) (1,562)
----------- -------
Net cash provided by financing activities ..................... 488,023 1,624
----------- -------
Net decrease in cash and cash equivalents ............................... (6,817) (2,925)
Cash and cash equivalents at beginning of period ........................ 13,888 8,189
----------- -------
Cash and cash equivalents at end of period .............................. $ 7,071 $ 5,264
=========== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest ................................................ $ 286 $ 79
=========== =======
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITY:
Property and equipment acquired under capital leases .................. $ -- $ 375
=========== =======
Issuance of Common Stock in merger with Siara Systems ................. $ 4,447,297 $ --
=========== =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 6
REDBACK NETWORKS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
Redback Networks Inc. (the "Company" or "Redback") was incorporated in
Delaware on August 30, 1996. Redback is a leading provider of advanced
networking solutions that enable carriers, cable operators and service providers
to rapidly deploy high-speed broadband access to the Internet and corporate
networks. Redback's product lines consist of the Subscriber Management System
family and the SmartEdge family. Together, these product lines are designed to
enable our customers to create end-to-end regional networks that will support
all major broadband access technologies, as well as the new services that these
high-speed connections will enable. The Company operates in one business
segment.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company and reflect all adjustments, consisting only of
normal recurring adjustments, which in the opinion of management are necessary
to present fairly the financial position, results of operations and cash flows
for the interim periods. These condensed consolidated financial statements
should be read in conjunction with the audited financial statements included in
the Company's 1999 Annual Report on Form 10-K. Results for the interim periods
are not necessarily indicative of results for the entire fiscal year.
3. STOCKHOLDERS' EQUITY
Stock Split
On March 8, 2000, Redback announced a two-for-one stock split of the
outstanding shares of the Company's Common Stock. The stock split was effective
on April 3, 2000 for holders of record on March 20, 2000. All share and per
share information for all periods has been retroactively restated to reflect
this two-for-one Common Stock split unless otherwise noted.
Other Matters
On March 8, 2000, the Company's stockholders approved an increase in the
number of authorized shares of Common Stock to 200,000,000. The Company's
stockholders also approved an increase in the number of authorized shares for
the 1999 Stock Incentive Plan from 5,000,000 to 8,000,000, an increase in the
number of authorized shares under the 1999 Employee Stock Purchase Plan from
2,000,000 to 3,000,000, and an increase in the number of authorized shares for
the 1999 Directors' Option Plan from 400,000 to 800,000. The Company's
stockholders also approved automatic increases to the number of authorized
shares in each of these plans on an annual basis.
4. MERGER WITH SIARA SYSTEMS COMPLETED
On March 8, 2000, Redback and Siara Systems, Inc. ("Siara") completed their
merger (the "Merger"). Siara was a development stage company that designed and
developed optical access networking products that enable network service
providers to offer data at multiple bandwidths to their customers in a
cost-effective way and to create new high speed data services. In connection
with the Merger, Redback issued 57,388,818 shares of its common stock and
options and warrants to purchase 5,295,038 shares of its common stock.
The Company accounted for the Merger under the purchase method of
accounting. The consolidated financial statements include the results of
operations of Siara commencing on March 9, 2000.
The purchase price, including the value of options and warrants issued in
connection with the Merger and professional fees directly related to the
acquisition, was approximately $4.5 billion. The preliminary allocation of the
purchase price to assets acquired and liabilities assumed is presented in the
table that follows (in thousands).
4
<PAGE> 7
<TABLE>
<CAPTION>
<S> <C>
Tangible assets acquired $ 10,078
Identifiable intangibles acquired:
In-process research and development 15,300
Existing technology 13,800
Noncompete agreements 10,000
In-place workforce 27,500
Goodwill 4,425,180
Liabilities assumed (35,380)
-----------
Net assets acquired $ 4,466,478
===========
</TABLE>
Amounts allocated to the non-compete agreements and in-place workforce are
being amortized over their estimated useful lives of two and three years,
respectively. Amounts allocated to existing technology and goodwill are being
amortized over their estimated useful lives of four years.
In addition, the Company recorded a $15.3 million charge for in-process
research and development related to the Merger with Siara during the first
quarter of 2000. The amount was determined by identifying research projects for
which technological feasibility had not been established and no alternative
future uses existed.
The fair value allocation to in-process research and development was
determined by identifying the research projects for which technological
feasibility has not been achieved and which have no alternative future use at
the merger date, assessing the stage and expected date of completion of the
research and development effort at the merger date, and calculating the net
present value of the cash flows expected to result from the successful
deployment of the new technology resulting from the in-process research and
development effort.
The stages of completion were determined by estimating the costs and time
incurred to date relative to the costs and time incurred to develop the
in-process technology into a commercially viable technology or product, while
considering the relative difficulty of completing the various tasks and
obstacles necessary to attain technological feasibility. As of the date of the
acquisition, Siara had five projects in process that ranged from 24%-80%
complete.
The estimated net present value of cash flows was based on incremental
future cash flows from revenues expected to be generated by the technologies in
the process of development, taking into account the characteristics and
applications of the technologies, the size and growth rate of existing and
future markets and an evaluation of past and anticipated technology and product
life cycles. Estimated net future cash flows included allocations of operating
expenses and income taxes but excluded the expected completion costs of the
in-process projects, and were discounted at a rate of 26% to arrive at a net
present value. The discount rate included a factor that took into account the
uncertainty surrounding the successful deployment of in-process technology
projects. This net present value was allocated to in-process research and
development based on the percentage of completion at the merger date.
The following unaudited pro forma net revenues, net loss and net loss per
share data for the three months ended March 31, 2000 and 1999 are based on the
respective historical financial statements of the Company and Siara. The pro
forma data reflects the consolidated results of operations as if the Merger with
Siara occurred at the beginning of each of the periods indicated and includes
the amortization of the resulting goodwill and other intangible assets. The pro
forma data excludes deferred stock compensation amortization recorded in Siara's
historical financial statements, as the value of the related options was
included in the purchase price, and the charge for in-process research and
development. The pro forma financial data presented are not necessarily
indicative of the Company's results of operations that might have occurred had
the transaction been completed at the beginning of the periods specified, and do
not purport to represent what the Company's consolidated results of operations
might be for any future period.
5
<PAGE> 8
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
2000 1999
--------- ---------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net revenue $ 34,163 $ 6,517
Net loss $(290,902) $(287,713)
Basic and diluted net loss per share $ (2.51) $ (5.02)
Shares used in basic and diluted net loss per share
calculation 115,919 57,313
</TABLE>
5. NET LOSS PER SHARE
Basic and diluted net loss per share have been computed using the
weighted-average number of shares of common stock outstanding during the period,
less shares subject to repurchase.
The following table presents the calculation of basic and diluted net loss
per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
2000 1999
--------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net loss ................................................. $ (85,237) $ (3,801)
========= ========
Basic and diluted:
Weighted-average shares of common stock
outstanding ....................................... 102,398 31,264
Less weighted-average shares subject to repurchase .. (13,261) (14,536)
--------- --------
Weighted-average shares used in computing
basic and diluted net loss per common share ....... 89,137 16,728
--------- --------
Basic and diluted net loss per common share .............. $ (0.96) $ (0.23)
========= ========
</TABLE>
For the three month periods ended March 31, 2000 and 1999, respectively,
options to purchase 21,179,497 and 11,625,644 shares of Common Stock at an
average exercise price of $28.43 and $0.87 per share, convertible promissory
notes convertible into 2,621,500 and no shares of Common Stock and warrants to
purchase 692,473 and 535,884 shares of Common Stock at an average exercise price
of $2.82 and $0.47 per share, have not been included in the computation of
diluted net loss per share as their effect would have been anti-dilutive.
6
<PAGE> 9
6. SELECTED BALANCE SHEET DATA
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------- ------
(IN THOUSANDS)
Inventory
<S> <C> <C>
Raw materials $ 2,049 $3,364
Finished goods 1,155 596
---------- ------
$ 3,204 $3,960
========== ======
OTHER ASSETS, NET
Goodwill, net $4,355,468
Other intangible assets, net 50,186
Other 19,756 $6,957
---------- ------
$4,425,410 $6,957
========== ======
ACCRUED LIABILITIES
Accrued compensation and
related items $ 14,938 $4,147
Accrued professional fees 1,785 480
Accrued warranty 1,026 928
Other 5,804 2,438
---------- ------
$ 23,553 $7,993
========== ======
</TABLE>
7. BORROWINGS AND COMMITMENTS
During March 2000, the Company issued $500 million of 5% Convertible
Subordinated Notes (the "Convertible Notes") due in April 2007 raising net
proceeds of approximately $486.5 million. The Convertible Notes are subordinated
to all existing and future senior debt and to all indebtedness and other
liabilities of the Company's subsidiaries. The Convertible Notes are convertible
into shares of Redback Common Stock at any time before the close of business on
the maturity date, unless the Company has previously redeemed or repurchased the
notes, at a conversion rate of 5.2430 shares per each $1,000 principal amount of
notes that is equivalent to a conversion price of approximately $190.73 per
share. After April 3, 2003, the Company has the right at any time to redeem some
or all of the notes at the redemption price plus accrued interest, provided that
the notes will not be redeemed after April 3, 2003 and before April 1, 2005
unless the closing price for the Company's common stock exceeds 140% of the
conversion price for at least 20 trading days within a period of 30 consecutive
trading days ending within five trading days of the notice of redemption. Each
holder of the Convertible Notes may convert their notes called for redemption or
submitted for repurchase up to and including the business day immediately
preceding the date fixed for redemption or repurchase. Interest is payable
semiannually. The Company paid approximately $13.5 million for debt issuance
costs related to the Convertible Notes.
8. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 "Accounting for Derivative
Financial Instruments and Hedging Activities", or SFAS No. 133, which
establishes methods of accounting for derivative financial instruments and
hedging activities. Because Redback currently holds no derivative instruments
and does not engage in hedging activities, Redback expects that the adoption of
SFAS No. 133 will not have a significant impact on its financial position,
results of operations or cash flows. Redback will be required to adopt SFAS No.
133 in the first quarter of 2001.
In December 1999, the SEC issued Staff Accounting Bulletin, or SAB 101,
"Revenue Recognition," which provides guidance on the recognition, presentation,
and disclosure of revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosure related to revenue recognition policies. The Company
will be required to adopt SAB 101 in the second quarter of
7
<PAGE> 10
2000. The Company does not expect the adoption of SAB 101 to have a material
effect on the Company's financial position, results of operations or cash flows.
In March 2000, the FASB issued Interpretation No. 44 ("FIN 44") "Accounting
for Certain Transactions involving Stock Compensation - an Interpretation of APB
Opinion No. 25." FIN 44 clarifies the application of Opinion 25 for (a) the
definition of an employee for purposes of applying Opinion 25, (b) the criteria
for determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award and (d) the accounting for an exchange of stock
compensation awards in a business combination. FIN 44 is effective July 1, 2000
but certain conclusions cover specific events that occur after either December
15, 1998 or January 12, 2000. Management believes that the impact of FIN 44 will
not have a material effect on the financial position or results of operations of
the Company.
8
<PAGE> 11
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion in this report on Form 10-Q contains forward-looking
statements that involve risks and uncertainties. The statements contained in
this Report that are not purely historical are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, including
statements regarding our expectations, beliefs, intentions or strategies
regarding the future. All forward-looking statements included in this document
are based on information available to us on the date hereof, and we assume no
obligation to update any such forward-looking statements. Our actual results
could differ materially from those described in our forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed under the heading "Risk Factors" herein.
GENERAL
Redback Networks Inc. ("Redback") is a leading provider of advanced
networking solutions that enable carriers, cable operators and service providers
to rapidly deploy high-speed broadband access to the Internet and corporate
networks. Redback's product lines consist of the Subscriber Management System
family and the SmartEdge family. Together, these product lines are designed to
enable our customers to create end to end regional networks that will support
all major broadband access technologies, as well as the new services that these
high speed connections will enable. The Company operates in one business
segment.
On March 8, 2000 Redback and Siara Systems, Inc. ("Siara") announced the
completion of their merger. Siara was a development stage company that designed
and developed optical access networking products that enable network service
providers to offer data at multiple bandwidths to their customers in a cost
effective way and to create new high speed data services. In connection with the
merger, Redback issued 57,388,818 shares of its common stock and options and
warrants to purchase 5,295,038 shares of its common stock. The aggregate
purchase price, including the value of options and warrants issued in connection
with the merger and professional fees directly related to the merger, was
approximately $4.5 billion. Results of operations of Siara are included with
those of Redback since the merger date. See further discussion regarding the
merger in Note 4 to the Condensed Consolidated Financial Statements.
RESULTS OF OPERATIONS
Net Revenues
Net revenues increased to $34.2 million in the quarter ended March 31, 2000
from $6.5 million in the same quarter in the prior year, a year-over-year
increase of 424%. This increase in net revenues was a result of increased unit
sales of the SMS 1000 and the SMS 1800, and increased unit sales of the SMS 500,
which was introduced in the first quarter of 1999. The increase in SMS 1000 and
SMS 1800 sales was attributable to increased marketplace penetration resulting
in new customers as well as repeat sales to existing customers.
Cost of Revenues; Gross Margins
Gross margin, expressed as a percentage of net revenues, increased in the
quarter ended March 31, 2000 as compared to the same quarter in the prior year
from 70% to 76%. This increase is primarily due to lower material costs on SMS
products as a result of component cost reduction efforts and a decrease in
percentage of related overhead costs to revenue resulting from shipments of our
products in larger quantities.
Operating Expenses
Research and development. Research and development expenditures increased in the
quarter ended March 31, 2000 to $12.1 million from $3.1 million in the year-ago
quarter. This increase is primarily attributable to costs incurred to develop
the SmartEdge product family following the merger with Siara and an overall
increase
9
<PAGE> 12
in development personnel focused on new products and existing product
enhancements. Because the market for our products is characterized by rapidly
changing technology, industry standards and customer demands, we expect our
research and development expenses to continue to increase in absolute dollars in
future periods.
Selling, general and administrative. Selling, general and administrative
expenditures increased in the quarter ended March 31, 2000 to $13.3 million from
$4.1 million in the year-ago quarter. This increase was mainly due to the hiring
of additional sales and administrative personnel, increased commissions
resulting from increased sales, and additional marketing expenses. We anticipate
that selling, general and administrative expenses will continue to increase in
absolute dollars in future periods as a result of increases in sales force
personnel, commissions on higher revenues, additional marketing activities and
costs associated with supporting a growing organization.
Amortization of intangible assets. Amortization of $70.8 million represents
amortization of intangibles related to the merger with Siara. On an annual
basis, amortization of intangibles related to the merger with Siara will
approximate $1.1 billion.
In-process research and development (IPR&D). In connection with the merger
with Siara, we recorded a $15.3 million charge for IPR&D during the first
quarter of 2000 for projects for which technological feasibility has not been
achieved and which have no alternative future use.
The fair value allocation to in-process research and development was
determined by identifying the research projects for which technological
feasibility has not been achieved and which have no alternative future use at
the merger date, assessing the stage and expected date of completion of the
research and development effort at the merger date, and calculating the net
present value of the cash flows expected to result from the successful
deployment of the new technology resulting from the in-process research and
development effort.
The stages of completion were determined by estimating the costs and time
incurred to date relative to the costs and time incurred to develop the
in-process technology into a commercially viable technology or product, while
considering the relative difficulty of completing the various tasks and
obstacles necessary to attain technological feasibility. As of the date of the
acquisition, Siara had five projects in process that ranged from 24%-80%
complete.
The estimated net present value of cash flows was based on incremental
future cash flows from revenues expected to be generated by the technologies in
the process of development, taking into account the characteristics and
applications of the technologies, the size and growth rate of existing and
future markets and an evaluation of past and anticipated technology and product
life cycles. Estimated net future cash flows included allocations of operating
expenses and income taxes but excluded the expected completion costs of the
in-process projects, and were discounted at a rate of 26% to arrive at a net
present value. The discount rate included a factor that took into account the
uncertainty surrounding the successful deployment of in-process technology
projects. This net present value was allocated to in-process research and
development based on the percentage of completion at the merger date.
Amortization of deferred stock compensation. Amortization of deferred stock
compensation decreased from $1.1 million in the first quarter of 1999 to
$535,000 in the first quarter of 2000. Deferred stock compensation expense is
amortized over the vesting period of the options, generally four years.
Other Income, Expenses and Taxes
Interest income. Interest income increased to $1.0 million in the quarter
ended March 31, 2000 compared to $3,000 in the same period in 1999 due primarily
to the interest earned on invested cash and investment balances.
10
<PAGE> 13
Interest and other expense. Interest and other expense increased to $311,000
in the quarter ended March 31, 2000 as compared to $29,000 in the same period in
1999, due primarily to additional interest arising from our $500 million
offering of Convertible Subordinated Notes as well as liabilities assumed in the
merger with Siara.
Tax provision. We have not recorded a provision for income taxes because we
experienced net losses from inception through March 31, 2000. While the Company
has generated deferred tax assets during the period, management believes that,
based on a number of factors, it is more likely than not that the deferred tax
assets will not be realized. Accordingly, a full valuation allowance has been
recorded against these deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
Our principal source of liquidity as of March 31, 2000 consisted of
approximately $502.4 million in cash, cash equivalents and short-term
investments.
During the three months ended March 31, 2000, we used $9.7 million from
operating activities, as compared to the same period in the prior year where we
used $3.7 million in operating activities. The use of cash in the March 31, 2000
quarter was primarily due to an increase in accounts receivable. We anticipate
that accounts receivable will continue to increase in the future if our revenues
continue to rise.
Investments in property and equipment increased to $11.2 million in the
first quarter of 2000 from $886,000 in the same period in 1999 which consisted
primarily of tenant improvements related to our new research and development
leased facility space and computer equipment. We expect our capital expenditures
to remain at high levels as we further expand our research and development
efforts and as our employee base grows. The timing and amount of future capital
expenditures will depend primarily on our future growth.
We raised net proceeds of $486.5 million from our issuance of $500 million
of 5% Convertible Subordinated Notes which are convertible at any time and due
in April 2007. We anticipate using these net proceeds for working capital and
other general corporate purposes, including financing growth, product
development and capital expenditures. Should the opportunity arise, we may also
use a portion of the net proceeds to fund acquisitions of, or investments in,
businesses, partnerships, products or technologies that complement or expand our
businesses.
Since our inception, we have financed our operations through private and
public sales of securities, bank borrowings and equipment lease financing. We
believe that our existing cash and investment balances and anticipated cash
flows from operations will be sufficient to meet our operating and capital
requirements for at least the next twelve months. However, we could be required,
or could elect, to raise additional funds during that period and we may need to
raise additional capital in the future. Additional capital may not be available
at all, or may only be available on terms unfavorable to us. Any additional
issuance of equity or equity-related securities will be dilutive to our
stockholders.
YEAR 2000 IMPACT
We have not experienced any problems with our computer systems relating to
such systems being unable to recognize appropriate dates related to the year
2000. We are also not aware of any material problems with our customers or
suppliers. Accordingly, we do not anticipate incurring material expenses or
experiencing any material operational disruption as a result of any year 2000
issues.
RISK FACTORS
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY
We were founded in August 1996 and only began shipping products in
material quantities in the second quarter of 1998. You should consider the risks
and difficulties frequently encountered by companies like us who are in new and
rapidly evolving markets. Our ability to sell products and services, and the
level of success, if any, we achieve, depends, among other things, on the level
of demand for broadband access services, which is a new and rapidly evolving
market. Our business strategy may be unsuccessful and we may not successfully
address the risks we face.
WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR FUTURE LOSSES
We incurred net losses of $4.4 million for the year ended December 31,
1997, $9.9 million for the year ended December 31, 1998 and $7.9 million for the
year ended December 31, 1999. As of March 31, 2000, we had an accumulated
deficit of approximately $107.6 million. Although we were profitable in the
fourth quarter of 1999, we have not had a history of profitability and expect to
incur significant net losses in the future as a result of the
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acquisition of Siara, including operating losses from Siara's research and
development and selling, general and administrative expenses.
To date, we have funded our operations from both private and public sales
of equity securities, from bank borrowings and by means of equipment lease
financing. We expect to continue to incur significant product development, sales
and marketing, and general and administrative expenses. As a result, we must
generate significant revenues to achieve profitability. We may not sustain
recent growth rates in our revenues, and we may never achieve sufficient revenue
levels to achieve profitability again. If we do achieve profitability in some
future period, we cannot be certain that we would sustain profitability on a
quarterly or annual basis in the future.
IF REDBACK DOES NOT INTEGRATE SIARA'S TECHNOLOGIES AND OPERATIONS QUICKLY AND
EFFECTIVELY, OUR BUSINESS MAY SUFFER SIGNIFICANT DISRUPTIONS
In order to achieve the benefits of our merger on March 8, 2000 with
Siara, we must successfully combine the two businesses. We may not be able to
integrate the technologies and operations quickly and smoothly. In the event
that our integration with Siara does not go smoothly, serious harm to our
business, financial condition and prospects may result. Integrating the two
businesses will entail significant diversion of our management's time and
attention. The integration of Siara's technology, products and services may
require the partial or wholesale conversion or redesign of some or all of our
technologies, products and services. In addition, we may be required to spend
additional time or money on integration that would otherwise have been spent on
developing our business and services or other matters.
WE FACE RISKS ASSOCIATED WITH ACQUISITIONS GENERALLY
We expect to continue our acquisition and expansion strategy. Future
acquisitions could materially adversely affect our operating results as a result
of dilutive issuances of equity securities and the incurrence of additional
debt. In addition, the purchase price for many of these acquired businesses
likely will significantly exceed the current fair values of the net assets of
the acquired businesses. As a result, we would be required to record material
goodwill and other intangible assets that would result in significant
amortization charges in future periods. These charges, in addition to the
financial impact of such acquisitions, could have a material adverse effect on
our business, financial condition and results of operations. We cannot assure
you of the number, timing or size of future acquisitions, or the effect that any
such acquisitions might have on our operating or financial results.
OUR OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY
Factors likely to cause quarterly fluctuations in revenues and operating
results include:
- fluctuations in demand for broadband access services;
- the timing and size of sales of our products and services;
- announcements of new products and product enhancements by competitors;
- the entry of new competitors into our market, including by acquisition;
- unexpected delays in introducing new or enhanced products, including
manufacturing delays;
- unexpected delays in product shipments due to component shortages;
- our ability to control expenses;
- our ability to ship products on a timely basis and at a reasonable
cost; and
- the mix of our products sold and the mix of distribution channels
through which our products are sold.
A high percentage of our expenses, including those related to engineering,
sales and marketing, research and development, and general administrative
functions, are essentially fixed in the short term. As a result, if we
experience delays in generating or recognizing revenue, our quarterly operating
results are likely to be materially adversely affected. In addition, we plan to
increase our operating expenses to expand our engineering and sales and
marketing operations, broaden our customer support capabilities, develop new
distribution channels, fund increased levels of research and development and
build our operational infrastructure. If growth in our revenues does not
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outpace the increase in these expenses, our business, results of operations and
financial condition could be materially adversely affected.
We rely on a limited number of third-party manufacturers to build our
products. Any interruption in the operations of such manufacturers would
adversely affect our ability to meet our scheduled product deliveries to our
customers. This would cause significant variations in our quarterly operating
results and our business, results of operations and financial condition would be
materially adversely affected.
Due to these and other factors, we believe that quarter-to-quarter
comparisons of our operating results may not be meaningful. You should not rely
on our results for one quarter as any indication of our future performance. It
is likely that in some future quarter our operating results may be below the
expectations of public market analysts or investors. If this occurs, the price
of our common stock would likely decrease.
OUR LENGTHY AND VARIABLE SALES CYCLE MAKES IT DIFFICULT FOR US TO PREDICT IF OR
WHEN A SALE WILL BE MADE
The timing of our sales revenue is difficult to predict because of the
length and variability of the sales cycle for our products. Customers often view
the purchase of our products as a significant and strategic decision. The
process frequently results in a lengthy sales cycle, typically ranging from
three months to over one year. While our customers are evaluating our products
and before they place an order with us, we may incur substantial sales and
marketing expenses and expend significant management efforts. In addition,
product purchases are frequently subject to unplanned administrative, processing
and other delays. This is particularly true for larger customers for whom our
products represent a very small percentage of their overall purchase activities.
These customers are often engaged in multiple simultaneous purchasing decisions,
some of which may pertain to more immediate needs and absorb the immediate
attention of the customer. If sales forecasted from a specific customer for a
particular quarter are not realized in that quarter or at all, our business,
results of operations and financial condition could be materially adversely
affected.
IN ANY QUARTER, A SMALL NUMBER OF CUSTOMERS ARE LIKELY TO ACCOUNT FOR A
SUBSTANTIAL MAJORITY OF OUR REVENUE
In each of the nine quarters in the period ended March 31, 2000, we have
had at least one customer that accounted for 15% or more of our total revenue in
the quarter. In the first quarter of 2000, Bell Atlantic accounted for 25% of
our total revenue and GTE accounted for 13% of our total revenue. For the twelve
months ended December 31, 1999, sales to Bell Atlantic and Southwestern Bell
Information Systems, a subsidiary of SBC, accounted for 24% and 11%. We
anticipate that a small number of customers with large orders will continue to
account for a majority of our quarterly revenue. However, we do not have any
contracts or other agreements that guarantee continued sales to these or any
other customers. If our customers alter their purchasing habits or reevaluate
their need for our products, or if we fail to receive a large order in any
future period, our business, results of operations and financial condition would
be materially adversely affected.
WE ARE CURRENTLY ENTIRELY DEPENDENT ON THE SMS PRODUCT FAMILY
The SMS 1000, SMS 500 and SMS 1800 are the only products that we currently
sell. We intend to introduce new products and enhancements to existing products
in the future. We cannot be certain that the SMS 1800 or the SMS 500 or any
future products will achieve widespread market acceptance. Our inability to
timely and successfully introduce new products and product enhancements, or the
failure of these new products or enhancements to achieve market acceptance,
could materially adversely affect our business, results of operations and
financial condition.
THERE ARE A LIMITED NUMBER OF POTENTIAL CUSTOMERS FOR OUR SMS 1000 AND SMS 1800
To date, substantially all of our revenues have been derived from sales
and service related to the SMS 1000 and SMS 1800 products. The SMS 1000 and SMS
1800 and any other new high-end product that we may develop and introduce in the
future are marketed primarily to large customers. There are only a limited
number of large existing and potential customers and this number is not expected
to increase significantly in the future.
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IF OUR PRODUCTS DO NOT ANTICIPATE AND MEET SPECIFIC CUSTOMER REQUIREMENTS AND
DEMANDS, OUR BUSINESS WOULD BE ADVERSELY AFFECTED
Many of our customers require product features and capabilities that our
products may not have. The requirement that we add features to our products in
order to achieve a sale may result in a longer sales cycle, increased research
and development expenses and reduced margins on our products. To achieve market
acceptance for our products, we must effectively and timely anticipate and adapt
to customer requirements and offer products and services that meet customer
demands. Our failure to develop products or offer services that satisfy customer
requirements would materially adversely affect our business, results of
operations and financial condition.
We intend to continue to invest in product and technology development. The
development of new or enhanced products is a complex and uncertain process that
requires the accurate anticipation of technological and market trends. We may
experience design, manufacturing, marketing and other difficulties that could
delay or prevent the development, introduction or marketing of new products and
enhancements. The introduction of new or enhanced products also requires that we
manage the transition from older products in order to minimize disruption in
customer ordering patterns and ensure that adequate supplies of new products can
be delivered to meet anticipated customer demand. Our inability to effectively
manage this transition would materially adversely affect our business, results
of operations and financial condition.
WE NEED TO GAIN ACCEPTANCE IN OTHER BROADBAND ACCESS MARKETS
To date, we have derived substantially all of our revenues from sales of
the SMS family products for use in the digital subscriber line market for
broadband access. We intend to expend a substantial amount of time and resources
to achieve market acceptance of our products in other markets, including the
cable, wireless and optical markets. We may be unable to simultaneously or
effectively address evolving demands in these markets, and customers in these
markets may choose to implement competing technologies or products. In addition,
if our competitors gain market acceptance in these markets first, it will be
difficult, if not impossible, for us to gain subsequent market acceptance in
these markets. If we are unable to achieve acceptance of our products in these
markets, our ability to generate revenues will be limited, and our business,
results of operations and financial condition would be materially adversely
affected.
WE EXPECT INCREASED COMPETITION
We may be unable to compete successfully with current or future
competitors. If we do not compete successfully against current or future
competitors, our business, results of operations and financial condition will be
materially adversely affected. Currently, competition in our market is intense.
The broadband access markets we are targeting, including digital subscriber
line, cable, wireless and optical, are new and rapidly evolving and we expect
these markets to become highly competitive in the future. In addition, we expect
new competitors to emerge in the broadband access market as that market evolves
due to technological innovation and regulatory changes. We face actual and
potential competition from public and private companies providing routers
connecting to the Internet backbone, access concentrators and subscriber
aggregation systems. For instance, Cisco Systems, Inc., the leading provider of
routers connecting to the Internet backbone, offers products that compete
directly with our products, and also provides a comprehensive range of broadband
access systems and network access systems.
We expect companies that offer access concentrators and routers to
incorporate some subscriber management functionality into their products. These
companies include Nortel Networks, which acquired Shasta Networks, a private
company providing subscriber management services, and Ascend, which was acquired
by Lucent Technologies. In addition, there are several other private companies
that provide subscriber management features in access concentrators or routing
platforms.
Many of our principal competitors, including Alcatel, Cisco, Fujitsu,
Lucent Technologies, Nortel Networks, Siemens/Unisphere and some companies that
may compete with us in the future, are large public companies that have longer
operating histories and significantly greater financial, technical, marketing
and other resources than we have. As a result, these competitors are able to
devote greater resources to the development, promotion, sale and support of
their products. In addition, our competitors that have large market
capitalizations or cash reserves are much better positioned than we are to
acquire other companies, including our competitors, and thereby acquire new
technologies or products that may displace our product lines. Any of these
acquisitions could give our competitors a strategic advantage that would
materially adversely affect our business, results of operations and financial
condition.
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Many of our competitors have significantly more established customer
support and professional services organizations than we do. In addition, many of
our competitors have much greater name recognition and have a more extensive
customer base, broader customer relationships and broader product offerings than
we have. These companies can leverage their customer bases and broader product
offerings and adopt aggressive pricing policies to gain market share. We have
encountered, and expect to continue to encounter, potential customers that, due
to existing relationships with our competitors, are committed to the product
offerings of these competitors. As a result, these potential customers may not
consider purchasing our products. We expect to face competition in the following
areas:
- product pricing;
- breadth of product lines;
- sales and distribution capabilities;
- product features and enhancements, including product performance,
reliability, size, compatibility and scalability;
- product ease of deployment;
- conformance to industry standards; and
- technical support and service.
We expect that competitive pressures may result in price reductions,
reduced margins and loss of market share, which would materially adversely
affect our business, results of operations and financial condition.
THE ACCOUNTING TREATMENT OF THE SIARA MERGER WILL RESULT IN SIGNIFICANT CHARGES
TO OUR OPERATIONS
We are accounting for the merger with Siara as a purchase under generally
accepted accounting principles. The results of operations of Siara are included
in our consolidated financial statements for all periods after March 8, 2000.
The purchase price has been allocated to Siara's assets and liabilities based on
the fair values of the assets acquired and the liabilities assumed. The excess
of cost over the fair value of the net tangible assets of Siara acquired has
been recorded as goodwill and other intangible assets and will be amortized by
charges to operations under generally accepted accounting principles. This
amount of goodwill and other intangible assets is significant. Our annual
amortization of goodwill and other intangible assets is currently estimated to
be approximately $1.1 billion per year, which will have a significant negative
impact on our operating results and could cause our stock price to decline.
WE ARE DEPENDENT ON A LIMITED NUMBER OF CONTRACT MANUFACTURERS
We currently use a single third-party manufacturer, Electromax, to
assemble our SMS products. We may not be able to effectively manage our
relationship with Electromax and Electromax may not meet our future requirements
for timely delivery. We have no written agreement with Electromax. In addition,
we intend to use Flash Electronics as our primary contractor to assemble our
SmartEdge products once they are market ready. We have relationships with a
limited number of other third-party manufacturers, one of which currently builds
our prototypes. Although these other third-party manufacturers are capable of
building our products, any interruption in the operations of our contract
manufacturers would adversely affect our ability to meet our scheduled product
deliveries to our customers, which could cause the loss of existing or potential
customers and could materially adversely affect our business, results of
operations and financial condition.
In addition, the products that Electromax or any other manufacturer builds
for us may be insufficient in quality or in quantity to meet our needs.
Electromax or any other manufacturer may not meet the technological or delivery
requirements of our current products or any future products that we may develop
and introduce. The inability of Electromax or any other of our contract
manufacturers in the future to provide us with adequate supplies of high-quality
products, or the loss of Electromax or any other of our contract manufacturers
in the future, would cause a delay in our ability to fulfill customer orders
while another of our third-party manufacturers begins production and would have
a material adverse effect on our business, results of operations and financial
condition.
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SOME OF THE KEY COMPONENTS IN OUR PRODUCTS COME FROM SINGLE OR LIMITED SOURCES
OF SUPPLY
We currently purchase several key components used in our products from
single or limited sources of supply. These manufacturers include Altera,
Brooktree, Connector Technologies, Foresight, Intel, Level One, Powerspec,
Siemens and Ziatech. In addition, we rely on Wyle Electronics and LSI Logic as
our foundry for a number of our application specific integrated circuits, or
ASICs, and IBM Microelectronics as a foundry for other ASICs. We have no
guaranteed supply arrangement with these suppliers, and we, or our
manufacturers, may fail to obtain these supplies in a timely manner in the
future. Financial or other difficulties faced by these suppliers or significant
changes in demand for these components could limit the availability to us of
these components. Any interruption or delay in the supply of any of these
components, or the inability to obtain these components from alternate sources
at acceptable prices and within a reasonable amount of time, would adversely
affect our ability to meet scheduled product deliveries to our customers and
would materially adversely affect our business, results of operations and
financial condition. In addition, qualifying additional suppliers is
time-consuming and expensive.
WE DEPEND ON THIRD-PARTY TECHNOLOGY FOR OUR SMARTEDGE PRODUCT
Cerent Corporation has granted Siara a non-exclusive license to technology
related to two ASICs and parts of Cerent's system-level hardware technology that
are used in the SmartEdge product. In November 1999, Cerent was acquired by
Cisco Systems, a provider of networking products and a significant competitor of
ours. Although we believe we have sufficient rights to this Cerent technology to
conduct our business as currently conducted, we do not have a business
relationship with Cisco. Any loss of access to the technology that is the
subject of the agreement with Cerent would seriously harm our business.
WE MAY BE UNABLE TO MATCH PRODUCTION WITH PRODUCT DEMAND
We currently use a rolling six-month forecast based on anticipated product
orders, product order history and backlog to determine our materials
requirements. Lead times for the materials and components that we order vary
significantly and depend on numerous factors, including the specific supplier,
contract terms and demand for a component at a given time. If actual orders do
not match our forecasts, we may have excess or inadequate inventory of materials
and components, which could materially adversely affect our business, results of
operations and financial condition.
WE MAY BE UNABLE TO RETAIN EMPLOYEES OR PROPERLY MANAGE GROWTH
We have expanded our operations rapidly since our inception. The number of
our employees increased from 39 on February 28, 1998 to approximately 580 by the
end of the first quarter of 2000.
Our success depends in part on the continued service of certain key Siara
personnel. Despite our efforts to hire and retain quality employees, we might
lose some of these employees now that the merger is closed. Although similar,
Redback and Siara have different corporate cultures and Siara employees may be
unwilling to work for a larger company. Competitors may also recruit Siara
employees during integration, as is common in high technology mergers. In
addition, many Siara employees have acquired significant amounts of our common
stock or vested stock options in the merger, which could provide them with
substantial amounts of cash. As a result, employees from Siara could leave with
little or no prior notice. We cannot assure you that we will be able to attract,
retain and integrate employees to develop and use the Siara technology following
the merger.
Similarly, our future performance depends on our continuing ability to
attract and retain highly qualified technical and managerial personnel. We
intend to continue to expand in order to pursue existing and potential market
opportunities and are in the process of hiring additional engineering and sales
personnel. Our ability to continue to attract and retain highly skilled
personnel is a critical factor in determining whether we will be successful in
the future. Competition for highly skilled personnel is intense, especially in
the San Francisco Bay Area. We may fail to attract, assimilate or retain
qualified personnel to fulfill our current or future needs. If we fail, our
business, results of operations and financial condition could be materially
adversely affected. Our planned rapid growth places a significant demand on
management and financial and operational resources.
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IF WE BECOME SUBJECT TO UNFAIR HIRING CLAIMS, WE COULD INCUR SUBSTANTIAL COSTS
IN DEFENDING AGAINST THESE CLAIMS
Companies in our industry whose employees accept positions with
competitors frequently claim that their competitors have engaged in unfair
hiring practices. We have received in the past, and may receive in the future,
claims of this kind as we seek to hire qualified personnel and those claims may
result in material litigation. We could incur substantial costs in defending
ourselves or our employees against such claims, regardless of their merits. In
addition, defending ourselves from such claims could divert the attention of our
management away from our operations.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY GOVERNMENT REGULATION OF THE
COMMUNICATIONS INDUSTRY
The jurisdiction of the Federal Communications Commission, or FCC, extends
to the communications industry, to our customers and to the products and
services that our customers sell. Future FCC regulations, or regulations
established by other regulatory bodies, may slow or end the growth of the
broadband access services industry. Regulation of our customers may materially
harm our business and financial condition. For example, FCC regulatory policies
that affect the availability of data and Internet services may impede our
customers' penetration into broadband access markets. In addition, international
regulatory bodies are beginning to adopt standards for the communications
industry. The delays that these governmental processes entail may cause order
cancellations or postponements or product purchases by our customers, which
would materially harm our business, results of operations and financial
condition.
OUR PLANNED EXPANSION TO INTERNATIONAL MARKETS WILL INVOLVE NEW RISKS
In 1998 and 1999, we derived approximately 15% and 7%, respectively, of
our revenues from sales to customers outside of the United States. Our ability
to achieve future success will depend in part on the expansion of our
international sales and operations. International operations are generally
subject to a number of risks, including:
- expenses associated with customizing products for foreign countries;
- protectionist laws and business practices that favor local competition;
- dependence on local vendors;
- multiple, conflicting and changing governmental laws and regulations;
- longer sales cycles;
- longer accounts receivable cycles;
- increased difficulties in collecting accounts receivable;
- difficulties in managing operations across disparate geographic areas;
- difficulties associated with enforcing agreements through foreign legal
systems;
- reduced or limited protection of our intellectual property rights in
some countries;
- foreign currency exchange rate fluctuations; and
- political and economic instability.
In addition, if we grow internationally, we will need to expand our
worldwide operations and enhance our communications infrastructure. If we fail
to implement and improve these systems, our ability to accurately forecast sales
demand, manage our supply chain and record and report financial and management
information would be adversely affected. This could materially adversely affect
our business, results of operations and financial condition.
UNDETECTED SOFTWARE OR HARDWARE ERRORS COULD HAVE A MATERIAL ADVERSE EFFECT ON
US
Networking products frequently contain undetected software or hardware
errors when first introduced or as new versions are released. We have
experienced minor errors in the past in connection with new products. We expect
that errors will be found from time to time in new or enhanced products after we
begin commercial shipments. These problems may cause us to incur significant
warranty and repair costs, divert the attention of our
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engineering personnel from our product development efforts and cause significant
customer relations problems. The occurrence of these problems could result in
the delay or loss of market acceptance of our products and would likely have a
material adverse effect on our business, results of operations and financial
condition.
Our customers use our products to provide broadband access to their
customers. Defects, integration issues or other performance problems in our
products could result in financial or other damages to our customers or could
damage market acceptance for our products. Our customers could seek damages for
losses from us, which, if they were successful, could have a material adverse
effect on our business, results of operations and financial condition. A product
liability claim brought against us, even if unsuccessful, would likely be
time-consuming and costly.
WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY
We rely on a combination of patent, copyright, trademark and trade secret
laws and restrictions on disclosure to protect our intellectual property rights.
We have filed one U.S. patent application. There can be no assurance that this
application will be approved, that any issued patents will protect our
intellectual property or that any issued patents will not be challenged by third
parties. Furthermore, other parties may independently develop similar or
competing technology or design around any patents that may be issued to us.
Although we attempt to protect our intellectual property rights, we may be
unable to prevent the misappropriation of our intellectual property,
particularly in foreign countries where the laws may not protect our proprietary
rights as fully as in the United States.
Others may allege that our products infringe upon their proprietary
rights. Any parties asserting that our products infringe upon their proprietary
rights would force us to defend ourselves or our customers, manufacturers or
suppliers against alleged infringement of intellectual property rights. We could
incur substantial costs to prosecute or defend this litigation. In addition,
intellectual property litigation could force us to do one or more of the
following:
- cease selling, incorporating or using products or services that
incorporate the challenged intellectual property;
- obtain from the holder of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not
be available on acceptable terms, if at all; or
- redesign those products or services that incorporate the disputed
technology.
In the event of a successful claim of infringement against us and our
failure or inability to develop non-infringing technology or license the
infringed technology on acceptable terms and on a timely basis, our business,
results of operations and financial condition would be materially adversely
affected. We may be subject to these claims in the future.
We may in the future initiate claims or litigation against third parties
for infringement of our proprietary rights in order to determine the scope and
validity of our proprietary rights or the proprietary rights of competitors.
These claims could result in costly litigation and the diversion of our
technical and management personnel. As a result, our business, results of
operations and financial condition could be materially adversely affected.
WE MAY NEED ADDITIONAL CAPITAL, WHICH MAY NOT BE AVAILABLE
The development and marketing of new products, particularly Siara's
products, which are not yet complete, will require a significant commitment of
resources. Likewise, the expansion of our operations and reseller channels as a
result of the merger will require significant resources.
Furthermore, if the market for broadband access develops at a slower pace
than anticipated or if we fail to establish significant market share and achieve
a meaningful level of revenue, we may continue to incur significant operating
losses and utilize significant amounts of capital. While we believe that our
existing capital resources are adequate to meet our current needs, we may
require additional capital in the future. Additional capital may not be
available to us at all, or, if available, may be available only on unfavorable
terms. Any inability to raise additional capital when we require it would
materially adversely affect our business, results of operations and financial
condition.
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WE ARE DEPENDENT ON THE WIDESPREAD ADOPTION OF BROADBAND ACCESS SERVICES
Sales of our products depend on the increased use and widespread adoption
of broadband access services, and the ability of our customers to market and
sell broadband access services. Our business, results of operations and
financial condition would be materially adversely affected if the use of
broadband access services does not increase as anticipated or if our customers'
broadband access services are not received well by the marketplace. Critical
issues concerning use of broadband access services are unresolved and will
likely affect use of broadband access services. These issues include:
- security;
- reliability;
- bandwidth;
- congestion;
- cost;
- ease of access; and
- quality of service.
Even if these issues are resolved, if the market for products that provide
broadband access to the Internet and to corporate networks fails to develop, or
develops at a slower pace than anticipated, our business, results of operations
and financial condition would be materially adversely affected.
WE MAY HAVE INSUFFICIENT CASH FLOW TO MEET OUR DEBT SERVICE OBLIGATIONS
We are required to generate cash sufficient to pay all amounts due on the
convertible debt notes and to conduct our business operations. Currently, our
earnings are insufficient to cover our anticipated debt service obligations, and
this may materially hinder our ability to make payments on the notes. Our
ability to meet our future debt service obligations will be dependent upon our
future performance, which will be subject to financial, business and other
factors affecting our operations, many of which are beyond our control.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS MAY ADVERSELY AFFECT OUR CASH
FLOW
We have substantial amounts of outstanding indebtedness, and we also may
obtain additional long-term debt and working capital lines of credit. As a
result of this indebtedness, our principal and interest payment obligations will
increase substantially. There is the possibility that we may be unable to
generate cash sufficient to pay the principal of, interest on and other amounts
due in respect of our indebtedness when due.
Our substantial leverage could have significant negative consequences,
including:
- increasing our vulnerability to general adverse economic and industry
conditions;
- limiting our ability to obtain additional financing;
- requiring the dedication of a substantial portion of our cash from
operations to service our indebtedness, thereby reducing the amount of
our cash available for other purposes, including capital expenditures;
- limiting our flexibility in planning for, or reacting to, changes in
our business and the industry which we compete; and
- placing us at a possible competitive disadvantage vis-a-vis less
leveraged competitors and competitors that have better access to
capital resources.
WE MAY BE UNABLE TO REPURCHASE THE NOTES
At maturity, the entire outstanding principal amount of the convertible
notes will become due and payable. In addition, if a change in control occurs,
each holder of the notes may require us to repurchase all or a portion of that
holder's notes. At maturity or if a change in control occurs, we may not have
sufficient funds or may be unable to arrange for additional financing to pay the
principal amount or repurchase price due. Under the terms of the
20
<PAGE> 22
indenture for the notes, we may elect, if we meet certain conditions, to pay the
repurchase price with shares of common stock. Our borrowing arrangements or
agreements relating to senior debt to which we become a party may contain
restrictions on, or prohibitions against, our repurchases of the notes. If the
maturity date or change in control occurs at a time when our other arrangements
prohibit us from repurchasing the notes, we could try to obtain the consent of
the lenders under those arrangements to purchase the notes, or we could attempt
to refinance these borrowings that contain the restrictions. If we do not obtain
the necessary consents or refinance these borrowings, we will be unable to
repurchase the notes. In that case, our failure to repurchase any tendered notes
or notes due upon maturity would constitute an event of default under the
indenture. Any such default, in turn, may cause a default under the terms of our
senior debt. As a result, in those circumstances, the subordination provisions
of the indenture would, absent a waiver, prohibit any repurchase of the notes
until we pay the senior debt in full.
PROVISIONS OF OUR CHARTER DOCUMENTS MAY HAVE ANTI-TAKEOVER EFFECTS THAT COULD
PREVENT A CHANGE IN OUR CONTROL
Provisions of our amended and restated certificate of incorporation, bylaws
and Delaware law could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders.
21
<PAGE> 23
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
As of March 31, 2000, the Company maintained cash and cash equivalents of
$7.1 million and short-term investments of $495.4 million. The Company also has
long term debt and capital leases with fixed interest rates totaling $516.0
million. If interest rates were to decrease by 10%, the Company's net loss could
increase by approximately $2.5 million, as the Company's short-term investments
would yield less interest income when the amounts were reinvested at maturity at
the lower interest rates.
Redback's sales to customers in foreign countries are denominated in U.S.
dollars. Accordingly, the company is not directly exposed to market risks from
currency exchange rate fluctuations. However, significant fluctuations in
foreign exchange rates relative to the U.S. dollar could impact our customers'
ability to pay for our products. Any changes in foreign exchange rates relative
to the U.S. dollar could have a material adverse effect on Redback's financial
position, results of operations and cash flow.
22
<PAGE> 24
PART II. OTHER INFORMATION
REDBACK NETWORKS INC.
ITEM 1. LEGAL PROCEEDINGS.
Redback is not aware of any pending legal proceedings against it that,
individually or in the aggregate, would have a material adverse effect on its
business, results of operations or financial condition. We may in the future be
party to litigation arising in the course of our business, including claims that
we allegedly engaged in unfair hiring practices or infringed third-party
trademarks and other intellectual property rights. These claims, even if not
meritorious, could result in the expenditure of significant financial and
managerial resources.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The share numbers indicated below have not been adjusted for the
two-for-one Common Stock split effected April 3, 2000.
The Annual Meeting of Stockholders of Redback Networks was held on March
7, 2000 in Sunnyvale, California. Of the total 44,135,869 shares outstanding as
of the record date, 36,676,126 shares (83.10%) were present or represented by
proxy at the meeting. The table below presents the voting results of election of
the Company's Board of Directors:
<TABLE>
<CAPTION>
VOTES FOR VOTES WITHHELD
--------- --------------
<S> <C> <C>
Dennis Barsema 36,613,549 62,577
James R. Flach 36,613,579 62,547
William Kurtz 36,613,479 62,647
Pierre R. Lamond 36,607,244 68,882
Daniel Warmenhoven 36,447,329 228,797
</TABLE>
The stockholders approved the appointment of PricewaterhouseCoopers LLP
as independent accountants of the company. The proposal received 35,569,238
affirmative votes, 422,329 negative votes, 533,426 abstentions and zero
non-votes.
The Special Meeting of Stockholders of Redback Networks was held on
March 8, 2000 in Sunnyvale, California. Of the total 44,135,869 shares
outstanding as of the record date, 35,614,601 shares (80.69%) were present or
represented by proxy at the meeting.
The stockholders approved and adopted the Merger Agreement with Siara
Systems, Inc. and approved the issuance of 31,341,986 pursuant to the Merger
Agreement. The proposal received 34,929,410 affirmative votes, 667,705 negative
votes, 17,486 abstentions, and zero non-votes.
The stockholders approved an amendment to the Company's Certificate of
Incorporation to increase the number of shares authorized from 80,000,000 to
200,000,000. The proposal received 33,678,061 affirmative votes, 1,915,453
negative votes, 21,087 abstentions, and zero non-votes.
23
<PAGE> 25
The stockholders approved an amendment to the 1999 Stock Incentive Plan
to increase the number of shares reserved for issuance from 5,000,000 to
8,000,000 and to increase the number of shares of by which the share reserve
will automatically increase on an annual basis from the lesser of 3,000,000 or
5% of the total number of shares outstanding at the time of the increase to the
lesser of 5,000,000 or 5% of the total number of shares outstanding at the time
of the increase. The proposal received 18,740,807 affirmative votes, 16,801,558
negative votes, 72,236 abstentions, and zero non-votes
The stockholders approved an amendment to the 1999 Employee Stock
Purchase Plan to increase the number of shares reserved for issuance from
2,000,000 to 3,000,000 and to increase the number of shares of by which the
share reserve will automatically restored on an annual basis from 2,000,000 to
3,000,000. The proposal received 29,635,194 affirmative votes, 5,949,537
negative votes, 29,870 abstentions, and zero non-votes.
The stockholders approved an amendment to the 1999 Directors' Option
Plan to increase the number of shares reserved for issuance from 400,000 to
800,000 and to increase the number of shares of by which the share reserve will
automatically restored on an annual basis from 400,000 to 800,000. The proposal
received 19,958,731 affirmative votes, 15,602,794 negative votes, 53,076
abstentions, and zero non-votes.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of
Redback Networks Inc.
4.1* Form of Note for Registrant's 5% Convertible Subordinated Note,
due April 1, 2007
4.2 Indenture, dated as of March 29, 2000, between Registrant and
Norwest Bank Minnesota, National Association, as trustee
4.3 Registration Rights Agreement, dated March 29, 2000, among
Registrant and Goldman, Sachs & Co., FleetBoston Robertson
Stephens Inc., Dain Rauscher Incorporated, Lehman Brothers Inc.
and U.S. Bancorp Piper Jaffray Inc.
27.1 Financial Data Schedule
</TABLE>
- ---------------
* Included as an exhibit to the Indenture under Exhibit 4.2
(b) Reports on Form 8-K
On March 20, 2000, pursuant to Item 2 to report the acquisition of Siara
Systems, Inc. on March 8, 2000 and pursuant to Item 5 to report the stock split
to be distributed on April 3, 2000.
On March 21, 2000, pursuant to Item 5 to report information set forth in
the Registrant's press release dated March 16, 2000.
24
<PAGE> 26
REDBACK NETWORKS INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REDBACK NETWORKS INC.
Date: May 11, 2000 By: /s/ Craig M. Gentner
----------------------------------
Craig M. Gentner
Sr. Vice President of Finance,
Chief Financial Officer and
Secretary (Duly Authorized Officer
and Principal Financial and
Accounting Officer)
25
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of
Redback Networks Inc.
4.1* Form of Note for Registrant's 5% Convertible Subordinated Note,
due April 1, 2007
4.2 Indenture, dated as of March 29, 2000, between Registrant and
Norwest Bank Minnesota, National Association, as trustee
4.3 Registration Rights Agreement, dated March 29, 2000, among
Registrant and Goldman, Sachs & Co., FleetBoston Robertson
Stephens Inc., Dain Rauscher Incorporated, Lehman Brothers Inc.
and U.S. Bancorp Piper Jaffray Inc.
27.1 Financial Data Schedule
</TABLE>
- ---------------
* Included as an exhibit to the Indenture under Exhibit 4.2
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF REDBACK NETWORKS INC.,
A DELAWARE CORPORATION
The undersigned, Dennis L. Barsema, hereby certifies that:
ONE: He is the duly elected and acting President of said
corporation.
TWO: The name of the corporation is Redback Networks Inc. and
that the corporation was originally incorporated on August 30, 1996 pursuant to
the General Corporation Law of the State of Delaware.
THREE: Pursuant to Section 242 and Section 245 of the General
Corporation Law of the State of Delaware, Redback Networks Inc. has adopted this
Amended and Restated Certificate of Incorporation, restating, integrating and
further amending its Amended and Restated Certificate of Incorporation dated on
or about September 11, 1998, as amended on March 24, 1999, which Amended and
Restated Certificate of Incorporation has been duly proposed by the directors
and adopted by the stockholders of this corporation (by written consent pursuant
to Section 228 of said General Corporate Law) in accordance with the provisions
of said Section 242 and Section 245.
FOUR: The Amended and Restated Certificate of Incorporation of
said corporation shall be amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is Redback Networks Inc.
ARTICLE II
The address of the registered office of this corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, 19801, County of New Castle. The name of its registered agent at
such address is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
ARTICLE IV
This corporation is authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares that this corporation is authorized to issue is two hundred and
ten million (210,000,000) shares. Two
<PAGE> 2
hundred million (200,000,000) shares shall be Common Stock, par value $.0001 per
share, and ten million (10,000,000) shares shall be Preferred Stock, par value
$.0001 per share.
The Preferred Stock may be issued from time to time in one or
more series, without further stockholder approval. The Board of Directors is
hereby authorized, in the resolution or resolutions adopted by the Board of
Directors providing for the issuance of any wholly unissued series of Preferred
Stock, within the limitations and restrictions stated in this Amended and
Restated Certificate of Incorporation (the "Restated Certificate"), to fix or
alter the dividend rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences of any wholly
unissued series of Preferred Stock, and the number of shares constituting any
such series and the designation thereof, or any of them, and to increase or
decrease the number of shares of any series subsequent to the issue of shares of
that series, but not below the number of shares of such series then outstanding.
In case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
ARTICLE V
Except as otherwise provided in this Restated Certificate, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of this corporation.
ARTICLE VI
The number of directors of this corporation shall be fixed from
time to time by a bylaw or amendment thereof duly adopted by the Board of
Directors or by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the
Bylaws of this corporation shall so provide.
ARTICLE VIII
Except as otherwise provided in this Restated Certificate, any
action required or permitted to be taken by the stockholders of the Corporation
must be effected at an annual or special meeting of the stockholders of the
Corporation, and no action required to be taken or that may be taken at any
annual or special meeting of the stockholders of the Corporation may be taken by
written consent.
ARTICLE IX
A director of this corporation shall, to the full extent
permitted by the Delaware General Corporation Law as it now exists or as it may
hereafter be amended, not be liable to this
2
<PAGE> 3
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Neither any amendment nor repeal of this Article IX, nor the
adoption of any provision of this Restated Certificate of Incorporation
inconsistent with this Article IX, shall eliminate or reduce the effect of this
Article IX in respect of any matter occurring, or any cause of action, suit or
claim that, but for this Article IX, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
ARTICLE X
This corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE XI
To the fullest extent permitted by applicable law, the
Corporation is authorized to provide indemnification of (and advancement of
expenses to) agents of the Corporation (and any other persons to which General
Corporation Law permits the Corporation to provide indemnification) through
bylaw provisions, agreements with such agents or other persons, vote of
stockholders or disinterested directors or otherwise, in excess of the
indemnification and advancement otherwise permitted by Section 145 of the
General Corporation Law, subject only to limits created by applicable General
Corporation Law (statutory or non-statutory), with respect to actions for breach
of duty to the Corporation, its stockholders, and others.
Any amendment, repeal or modification of the foregoing
provisions of this Article XI shall not adversely affect any right or protection
of a director, officer, agent, or other person existing at the time of, or
increase the liability of any director of the Corporation with respect to, any
acts or omissions of such director, officer or agent occurring prior to such
amendment, repeal or modification.
* * *
FIVE: That thereafter said amendment and restatement was duly
adopted in accordance with the provisions of Section 242 and Section 245 of the
General Corporation Law by obtaining the vote of the holders of the majority of
the outstanding stock of the corporation in favor of said amendment and
restatement in the manner set forth in Section 228 of the General Corporation
Law.
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned has executed this
certificate on March 8, 2000.
/s/ Dennis L. Barsema
---------------------------------
Dennis L. Barsema, President
<PAGE> 1
EXHIBIT 4.2
------------------------------------
REDBACK NETWORKS INC.
ISSUER
TO
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
TRUSTEE
------------------
INDENTURE
Dated as of March 29, 2000
-------------------
5% CONVERTIBLE SUBORDINATED NOTES DUE APRIL 1, 2007
---------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION................................1
SECTION 1.1 Definitions.........................................................1
SECTION 1.2 Compliance Certificates And Opinions...............................10
SECTION 1.3 Form of Documents Delivered to the Trustee.........................11
SECTION 1.4 Acts of Holders of Securities......................................11
SECTION 1.5 Notices, Etc to the Trustee and Company............................13
SECTION 1.6 Notice to Holders of Securities; Waiver............................14
SECTION 1.7 Effect of Headings and Table of Contents...........................15
SECTION 1.8 Successors and Assigns.............................................15
SECTION 1.9 Separability Clause................................................15
SECTION 1.10 Benefits of Indenture..............................................15
SECTION 1.11 Governing Law......................................................15
SECTION 1.12 Legal Holidays.....................................................15
SECTION 1.13 Conflict With Trust Indenture Act..................................16
ARTICLE II SECURITY FORMS.......................................................................16
SECTION 2.1 Form Generally.....................................................16
SECTION 2.2 Form of Security...................................................17
SECTION 2.3 Form of Certificate of Authentication..............................29
SECTION 2.4 Form of Conversion Notice..........................................30
SECTION 2.5 Form of Assignment.................................................31
ARTICLE III THE SECURITIES......................................................................32
SECTION 3.1 Title and Terms....................................................32
SECTION 3.2 Denominations......................................................33
SECTION 3.3 Execution, Authentication, Delivery and Dating.....................33
SECTION 3.4 Global Securities; Non-global Securities; Book-entry
Provisions.........................................................33
SECTION 3.5 Registration; Registration of Transfer and Exchange;
Restrictions on Transfer...........................................35
SECTION 3.6 Mutilated, Destroyed, Lost or Stolen Securities....................38
SECTION 3.7 Payment of Interest; Interest Rights Preserved.....................39
SECTION 3.8 Persons Deemed Owners..............................................40
SECTION 3.9 Cancellation.......................................................41
SECTION 3.10 Computation of Interest............................................41
SECTION 3.11 CUSIP Numbers......................................................41
ARTICLE IV SATISFACTION AND DISCHARGE...........................................................41
SECTION 4.1 Satisfaction And Discharge of Indenture............................41
SECTION 4.2 Application of Trust Money.........................................43
ARTICLE V REMEDIES..............................................................................43
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 5.1 Events of Default..................................................43
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.................45
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Trustee............................................................46
SECTION 5.4 Trustee May File Proofs of Claim...................................47
SECTION 5.5 Trustee May Enforce Claims Without Possession of
Securities.........................................................47
SECTION 5.6 Application of Money Collected.....................................48
SECTION 5.7 Limitation on Suits................................................48
SECTION 5.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest and to Convert................................49
SECTION 5.9 Restoration of Rights and Remedies.................................49
SECTION 5.10 Rights and Remedies Cumulative.....................................49
SECTION 5.11 Delay or Omission Not Waiver.......................................50
SECTION 5.12 Control by Holders of Securities...................................50
SECTION 5.13 Waiver of Past Defaults............................................50
SECTION 5.14 Undertaking for Costs..............................................51
SECTION 5.15 Waiver of Stay, Usury or Extension Laws............................51
ARTICLE VI THE TRUSTEE..........................................................................51
SECTION 6.1 Certain Duties and Responsibilities................................51
SECTION 6.2 Notice of Defaults.................................................52
SECTION 6.3 Certain Rights of Trustee..........................................53
SECTION 6.4 Not Responsible for Recitals or Issuance of Securities.............54
SECTION 6.5 May Hold Securities, Act as Trustee under Other
Indentures.........................................................54
SECTION 6.6 Money Held in Trust................................................54
SECTION 6.7 Compensation and Reimbursement.....................................55
SECTION 6.8 Corporate Trustee Required; Eligibility............................55
SECTION 6.9 Resignation and Removal; Appointment of Successor..................56
SECTION 6.10 Acceptance of Appointment by Successor.............................57
SECTION 6.11 Merger, Conversion, Consolidation or Succession to
Business...........................................................57
SECTION 6.12 Authenticating Agents..............................................58
SECTION 6.13 Disqualification; Conflicting Interests............................59
SECTION 6.14 Preferential Collection of Claims Against Company..................59
ARTICLE VII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE................................59
SECTION 7.1 Company May Consolidate, Etc,......................................60
SECTION 7.2 Successor Substituted..............................................60
ARTICLE VIII SUPPLEMENTAL INDENTURES............................................................60
SECTION 8.1 Supplemental Indentures Without Consent of Holders of
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Securities.........................................................61
SECTION 8.2 Supplemental Indentures with Consent of Holders of
Securities.........................................................62
SECTION 8.3 Execution of Supplemental Indentures...............................63
SECTION 8.4 Effect of Supplemental Indentures..................................63
SECTION 8.5 Reference in Securities to Supplemental Indentures.................63
SECTION 8.6 Notice of Supplemental Indentures..................................63
ARTICLE IX MEETINGS OF HOLDERS OF SECURITIES....................................................64
SECTION 9.1 Purposes for Which Meetings May Be Called..........................64
SECTION 9.2 Call, Notice and Place of Meetings.................................64
SECTION 9.3 Persons Entitled to Vote at Meetings...............................64
SECTION 9.4 Quorum; Action.....................................................65
SECTION 9.5 Determination of Voting Rights; Conduct and Adjournment
of Meetings........................................................65
SECTION 9.6 Counting Votes and Recording Action of Meetings....................66
ARTICLE X COVENANTS.............................................................................67
SECTION 10.1 Payment of Principal, Premium and Interest.........................67
SECTION 10.2 Maintenance of Offices or Agencies.................................67
SECTION 10.3 Money for Security Payments to Be Held in Trust....................68
SECTION 10.4 Existence..........................................................69
SECTION 10.5 Maintenance of Properties..........................................69
SECTION 10.6 Payment of Taxes and Other Claims..................................69
SECTION 10.7 Registration and Listing...........................................70
SECTION 10.8 Statement by Officers as to Default................................70
SECTION 10.9 Delivery of Certain Information....................................71
SECTION 10.10 Resale of Certain Securities.......................................71
SECTION 10.11 Registration Rights................................................71
SECTION 10.12 Waiver of Certain Covenants........................................73
ARTICLE XI REDEMPTION OF SECURITIES.............................................................74
SECTION 11.1 Right of Redemption................................................74
SECTION 11.2 Applicability of Article...........................................74
SECTION 11.3 Election to Redeem; Notice to Trustee..............................74
SECTION 11.4 Selection by Trustee of Securities to Be Redeemed..................74
SECTION 11.5 Notice of Redemption...............................................75
SECTION 11.6 Deposit of Redemption Price........................................76
SECTION 11.7 Securities Payable on Redemption Date..............................76
SECTION 11.8 Conversion Arrangement on Call for Redemption......................77
ARTICLE XII CONVERSION OF SECURITIES............................................................78
</TABLE>
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(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
SECTION 12.1 Conversion Privilege and Conversion Rate...........................78
SECTION 12.2 Exercise of Conversion Privilege...................................78
SECTION 12.3 Fractions of Shares................................................80
SECTION 12.4 Adjustment of Conversion Rate......................................80
SECTION 12.5 Notice of Adjustments of Conversion Rate...........................85
SECTION 12.6 Notice of Certain Corporate Action.................................85
SECTION 12.7 Company to Reserve Common Stock....................................86
SECTION 12.8 Taxes on Conversions...............................................86
SECTION 12.9 Covenant as to Common Stock........................................87
SECTION 12.10 Cancellation of Converted Securities...............................87
SECTION 12.11 Provision in Case of Consolidation, Merger or Sale of
Assets.............................................................87
SECTION 12.12 Rights Issued in Respect of Common Stock...........................88
SECTION 12.13 Responsibility of Trustee for Conversion Provisions................89
ARTICLE XIII SUBORDINATION OF SECURITIES........................................................89
SECTION 13.1 Securities Subordinate to Senior Debt..............................89
SECTION 13.2 No Payment in Certain Circumstances, Payment over of
Proceeds upon Dissolution, Etc....................................90
SECTION 13.3 Prior Payment to Senior Debt upon Acceleration of
Securities.........................................................92
SECTION 13.4 Payment Permitted If No Default....................................92
SECTION 13.5 Subrogation to Rights of Holders of Senior Debt....................92
SECTION 13.6 Provisions Solely to Define Relative Rights........................93
SECTION 13.7 Trustee to Effectuate Subordination................................93
SECTION 13.8 No Waiver of Subordination Provisions..............................93
SECTION 13.9 Notice to Trustee..................................................94
SECTION 13.10 Reliance on Judicial Order or Certificate of Liquidating
Agent..............................................................95
SECTION 13.11 Trustee Not Fiduciary for Holders of Senior Debt...................95
SECTION 13.12 Reliance by Holders of Senior Debt on Subordination
Provisions.........................................................95
SECTION 13.13 Rights of Trustee as Holder of Senior Debt; Preservation
of Trustee's Rights................................................95
SECTION 13.14 Article Applicable to Paying Agents................................96
SECTION 13.15 Certain Conversions and Repurchases Deemed Payment.................96
ARTICLE XIV REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER UPON A CHANGE IN
CONTROL.................................................................................97
SECTION 14.1 Right to Require Repurchase........................................97
SECTION 14.2 Conditions to the Company's Election to Pay the
Repurchase Price in Common Stock...................................97
SECTION 14.3 Notices; Method of Exercising Repurchase Right, Etc................98
</TABLE>
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(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
SECTION 14.4 Certain Definitions...............................................101
SECTION 14.5 Consolidation, Merger, etc........................................102
ARTICLE XV HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE......................103
SECTION 15.1 Company to Furnish Trustee Names and Addresses of Holders.........103
SECTION 15.2 Preservation of Information.......................................103
SECTION 15.3 Reserved..........................................................104
SECTION 15.4 Reports by Trustee................................................104
SECTION 15.5 Reports by Company................................................104
ARTICLE XVI IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS....................104
SECTION 16.1 Indenture and Securities Solely Corporate Obligations.............104
</TABLE>
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<PAGE> 7
INDENTURE, dated as of March 29, 2000, between REDBACK NETWORKS
INC., a corporation duly organized and existing under the laws of the State of
Delaware, having its principal office at 1389 Moffett Park Drive, Sunnyvale, CA
94089 (herein called the "Company"), and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association organized under the laws of the
United States, as Trustee hereunder (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its
5% Convertible Subordinated Notes due April 1, 2007 (herein called the
"Securities") of substantially the tenor and amount hereinafter set forth, and
to provide therefor the Company has duly authorized the execution and delivery
of this Indenture.
All things necessary to make the Securities, when the Securities
are executed by the Company and authenticated and delivered hereunder, the valid
obligations of the Company, and to make this Indenture a valid agreement of the
Company, in accordance with their and its terms, have been done. Further, all
things necessary to duly authorize the issuance of the Common Stock of the
Company issuable upon the conversion of the Securities, and to duly reserve for
issuance the number of shares of Common Stock issuable upon such conversion,
have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1 Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them
in this Article and include the plural as well as the singular;
(2) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles in
the United States, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as are
generally accepted at the date of such computation; and
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(3) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder of a Security, has the
meaning specified in Section 1.4.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of The Depository Trust Company or any successor
Depository, in each case to the extent applicable to such transaction and as in
effect from time to time.
"Authenticating Agent" means any Person authorized pursuant to Section
6.12 to act on behalf of the Trustee to authenticate Securities.
"Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that board.
"Board Resolution" means a resolution duly adopted by the Board of
Directors, a copy of which, certified by the Secretary or an Assistant Secretary
of the Company to have been duly adopted by the Board of Directors and to be in
full force and effect on the date of such certification, shall have been
delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, Place of
Conversion or any other place, as the case may be, means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking institutions
in such Place of Payment, Place of Conversion or other place, as the case may
be, are authorized or obligated by law or executive order to close; provided,
however, that a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close shall not be a
Business Day for purposes of Section 13.9.
"Change in Control" has the meaning specified in Section 14.4(2).
"Closing Price Per Share" means, with respect to the Common Stock, for
any day, (i) the last reported sale price regular way on the Nasdaq National
Market or, (ii) if the Common Stock is not quoted on the Nasdaq National Market,
the last reported sale price regular way per share or, in case no such reported
sale takes place on such day, the average of the reported closing bid and asked
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<PAGE> 9
prices regular way, in either case, on the principal national securities
exchange on which the Common Stock is listed or admitted to trading, or (iii) if
the Common Stock is not quoted on the Nasdaq National Market or listed or
admitted to trading on any national securities exchange, the average of the
closing bid prices in the over-the-counter market as furnished by any New York
Stock Exchange member firm selected from time to time by the Company for that
purpose.
"Code" has the meaning specified in Section 2.l.
"Commission" means the United States 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 instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" means the Common Stock, par value $.0001 per share, of
the Company authorized at the date of this instrument as originally executed.
Subject to the provisions of Section 12.11, shares issuable on conversion or
repurchase of Securities shall include only shares of Common Stock or shares of
any class or classes of common stock resulting from any reclassification or
reclassifications thereof; provided, however, that if at any time there shall be
more than one such resulting class, the shares so issuable on conversion of
Securities shall include shares of all such classes, and the shares of each such
class then so issuable shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.
"common stock" includes any stock of any class of capital stock 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
issuer thereof and which is not subject to redemption by the issuer thereof.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Notice" has the meaning specified in Section 14.3.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its (i) Chairman of the Board, its Vice
Chairman of the Board, its Chief Executive Officer, its President, an Executive
Vice President or a Vice President, and by its (ii) principal financial officer,
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Constituent Person" has the meaning specified in Section 12.11.
"Conversion Agent" means any Person authorized by the Company to convert
Securities in accordance with Article XII. The Company has initially appointed
the Trustee as its Conversion Agent pursuant to Section 10.2 hereof.
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"Conversion Price" has the meaning specified in Section 14.4(3).
"Conversion Rate" has the meaning specified in Section 12.1.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time the trust created by this Indenture shall be principally
administered (which at the date of this Indenture is located at 333 S. Grand
Avenue, Suite 740, Los Angeles, CA 90071, Attention: Corporate Trust
Administration (Redback Networks Inc., 5% Convertible Subordinated Notes due
April 1, 2007)).
"corporation" means a corporation, company, association, joint-stock
company or business trust.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" means, with respect to any Securities (including any Global
Securities), a clearing agency that is registered as such under the Exchange Act
and is designated by the Company to act as Depositary for such Securities (or
any successor securities clearing agency so registered).
"Designated Senior Debt" means the Company's obligations under any
particular Senior Debt in which the instrument creating or evidencing the same
or the assumption or guarantee thereof (or related agreements or documents to
which the Company is a party) expressly provides that such Senior Debt shall be
"Designated Senior Debt" for purposes of this Indenture (provided that such
instrument, agreement or other document may place limitations and conditions on
the right of such Senior Debt to exercise the rights of Designated Senior Debt).
"Distribution Date" shall mean the "Distribution Date" as such term is
defined in the Registration Rights Agreement.
"Dollar" or "U.S. $" means a dollar or other equivalent unit in such
coin or currency of the United States as at the time shall be legal tender for
the payment of public and private debts.
"DTC" means The Depository Trust Company, a New York corporation.
"Effective Failure" has the meaning specified in Section 10.11.
"Effectiveness Period" has the meaning specified in Section 10.11.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the United States Securities Exchange Act of 1934
(or any successor statute), as amended from time to time.
"Global Security" means a Security that is registered in the Security
Register in the name of a Depositary or a nominee thereof.
"Holder" means the Person in whose name the Security is registered in
the Security Register.
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"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Purchasers" means Goldman, Sachs & Co., FleetBoston Robertson
Stephens Inc., Dain Rauscher Incorporated, Lehman Brothers Inc. and U.S. Bancorp
Piper Jaffray Inc.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Issue Date" means March 29, 2000.
"Liquidated Damages" has the meaning specified in Section 10.11.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption, exercise of the repurchase right set forth in
Article XIV or otherwise.
"Non-electing Share" has the meaning specified in Section 12.11.
"Notice of Default" has the meaning specified in Section 5.1.
"Officers' Certificate" means a certificate signed by (i) the Chairman
of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the
President, an Executive Vice President or a Vice President and by (ii) the
principal financial officer, the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee. One of the Officers signing an Officers' Certificate given pursuant to
Section 10.8 shall be the principal executive, financial or accounting officer
of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for the payment or redemption of which money
in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated in trust
by the Company (if the Company shall act as its own
Paying Agent) for the Holders
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of such Securities, provided that if such Securities are
to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(iii) Securities which have been paid pursuant to Section 3.6
or in exchange for or in lieu of which other Securities
have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of
which there shall have been presented to the Trustee
proof satisfactory to it that such Securities are held
by a bona fide purchaser in whose hands such Securities
are valid obligations of the Company; and
(iv) Securities converted into Common Stock pursuant to
Article XII;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities are present at a meeting of Holders
of Securities for quorum purposes or have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such determination as to the presence of a quorum or upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Securities which a Responsible Officer of the Trustee has been notified in
writing to be so owned shall be so disregarded. Securities so owned which have
been pledged in good faith may be regarded as Outstanding if the pledgee is not
the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor, and the Trustee shall be protected in relying
upon an Officer's Certificate to such effect.
"Over-allotment Option" has the meaning specified in Section 3.1.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company and, except
as otherwise specifically set forth herein, such term shall include the Company
if it shall act as its own Paying Agent. The Company has initially appointed the
Trustee as its Paying Agent pursuant to Section 10.2 hereof.
"Payment Blockage Notice" has the meaning specified in Section 13.2.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, estate, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Conversion" has the meaning specified in Section 3.1.
"Place of Payment" has the meaning specified in Section 3.1.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes
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of this definition, any Security authenticated and delivered under Section 3.6
in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
"Purchase Agreement" means the Purchase Agreement, dated as of March 23,
2000, between the Company and the Initial Purchasers, as such agreement may be
amended from time to time.
"Qualified Institutional Buyer" shall mean a "qualified institutional
buyer" as defined in Rule 144A.
"Press Release" means any press release issued by the Company and
disseminated to Reuters Business News Services and Bloomberg News Services.
"Record Date" means any Regular Record Date or Special Record Date.
"Record Date Period" means the period from the close of business of any
Regular Record Date next preceding any Interest Payment Date to the opening of
business on such Interest Payment Date.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registrable Securities" has the meaning specified in Section 10.11.
"Registration Default" has the meaning specified in Section 10.11.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of March 29, 2000, between the Company and the Initial Purchasers, as
such agreement may be amended from time to time.
"Regular Record Date" for interest payable in respect of any Security on
any Interest Payment Date means the March 15 or September 15 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
"Representative" means the (a) indenture trustee or other trustee, agent
or representative for any Senior Debt or (b) with respect to any Senior Debt
that does not have any such trustee, agent or other representative, (i) in the
case of such Senior Debt issued pursuant to an agreement providing for voting
arrangements as among the holders or owners of such Senior Debt, any holder or
owner of such Senior Debt acting with the consent of the required persons
necessary to bind such holders or owners of such Senior Debt and (ii) in the
case of all other such Senior Debt, the holder or owner of such Senior Debt.
"Repurchase Date" has the meaning specified in Section 14.1.
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"Repurchase Price" has the meaning specified in Section 14.1.
"Responsible Officer", when used with respect to the Trustee, means any
officer within the Corporate Trust Office of the Trustee with direct
responsibility for the administration of this Indenture and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge and familiarity with the particular
subject.
"Restricted Global Security" has the meaning specified in Section 2.1.
"Restricted Securities" means all Securities required pursuant to
Section 3.5(3) to bear any Restricted Securities Legend. Such term includes the
Restricted Global Security.
"Restricted Securities Certificate" means a certificate substantially in
the form set forth in Annex A.
"Restricted Securities Legend" means, collectively, the legends
substantially in the forms of the legends required in the form of Security set
forth in Section 2.2 to be placed upon each Restricted Security.
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"Rule 144A Information" has the meaning specified in Section 10.9.
"Securities" has the meaning ascribed to it in the first paragraph under
the caption "Recitals of the Company".
"Securities Act" means the United States Securities Act of 1933 (or any
successor statute), as amended from time to time.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Senior Debt" means the principal of (and premium, if any) and 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) on, and all fees and
other amounts payable in connection with, the following, whether absolute or
contingent, secured or unsecured, due or to become due, outstanding on the date
of this Indenture or thereafter created, incurred or assumed: (a) indebtedness
of the Company evidenced by a credit or loan agreement, note, bond, debenture or
other written obligation, (b) all obligations of the Company for money borrowed,
(c) all obligations of the Company evidenced by a note or similar instrument
given in connection with the acquisition of any businesses, properties or assets
of any kind, (d) obligations of the Company (i) as lessee under leases required
to be capitalized on the balance sheet of the lessee under generally accepted
accounting principles and (ii) as lessee under other leases for facilities,
capital equipment or related assets, whether or not capitalized, entered into or
leased for financing
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purposes, (e) all obligations of the Company under interest rate and currency
swaps, caps, floors, collars, hedge agreements, forward contracts or similar
agreements or arrangements, (f) all obligations of the Company with respect to
letters of credit, bankers' acceptances and similar facilities (including
reimbursement obligations with respect to the foregoing), (g) all obligations of
the Company issued or assumed as the deferred purchase price of property or
services (but excluding trade accounts payable and accrued liabilities arising
in the ordinary course of business), (h) all obligations of the type referred to
in clauses (a) through (g) above of another Person and all dividends of another
Person, the payment of which, in either case, the Company has assumed or
guaranteed, or for which the Company is responsible or liable, directly or
indirectly, jointly or severally, as obligor, guarantor or otherwise, or which
is secured by a lien on the property of the Company, and (i) renewals,
extensions, modifications, replacements, restatements and refundings of, or any
indebtedness or obligation issued in exchange for, any such indebtedness or
obligation described in clauses (a) through (h) of this paragraph; provided,
however, that Senior Debt shall not include any such indebtedness or obligation
if the terms of such indebtedness or obligation (or the terms of the instrument
under which, or pursuant to which it is issued) expressly provide that such
indebtedness or obligation is not superior in right of payment to the
Securities.
"Shelf Registration Statement" has the meaning specified in Section
10.11.
"Significant Subsidiary" means, with respect to any Person, a Subsidiary
of such Person that would constitute a "significant subsidiary" as such term is
defined under Rule 1-02 of Regulation S-X under the Securities Act and the
Exchange Act.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Company pursuant to Section 3.7.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock or other similar
interests in the corporation which ordinarily has or have voting power for the
election of directors, or persons performing similar functions, whether at all
times or only so long as no senior class of stock or other interests has or have
such voting power by reason of any contingency.
"Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.6 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Surrender Certificate" means a certificate substantially in the form
set forth in Annex C.
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"Trading Day" means (i) if the Common Stock is quoted on the Nasdaq
National Market or any other system of automated dissemination of quotations of
securities prices, days on which trades may be effected through such system,
(ii) if the Common Stock is listed or admitted for trading on any national or
regional securities exchange, days on which such national or regional securities
exchange is open for business, or (iii) if the Common Stock is not listed on a
national or regional securities exchange or quoted on the Nasdaq National Market
or any other system of automated dissemination of quotation of securities
prices, days on which the Common Stock is traded regular way in the
over-the-counter market and for which a closing bid and a closing asked price
for the Common Stock are available.
"Trust Indenture Act" means the Trust Indenture Act of 1939, and the
rules and regulations thereunder, as in force at the date as of which this
instrument was executed, provided, however, that in the event the Trust
Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means,
to the extent required by any such amendment, the Trust Indenture Act of 1939,
and the rules and regulations thereunder, as so amended.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"United States" means the United States of America (including the States
and the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (its "possessions" including Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana
Islands).
"Unrestricted Securities Certificate" means a certificate substantially
in the form set forth in Annex B.
SECTION 1.2. Compliance Certificates And Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (including certificates provided for
in Section 10.8) shall include:
(1) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating thereto;
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(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.3 Form of Documents Delivered to the Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company or any other Person
stating that the information with respect to such factual matters is in the
possession of the Company or such other Person, unless such counsel knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4 Acts of Holders of Securities.
(1) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided or permitted by this Indenture to be given or
taken by Holders of Securities may be embodied in and evidenced by (A) one or
more instruments of substantially similar tenor signed by such Holders in person
or by an agent or proxy duly appointed in writing by such Holders or (B) the
record of Holders of Securities voting in favor thereof, either in person or by
proxies duly appointed in writing, at any meeting of Holders of Securities duly
called and held in accordance with the provisions of Article IX. Such action
shall become effective when such instrument or instruments or record is
delivered to the Trustee and, where it is hereby expressly required, to the
Company. The Trustee shall promptly deliver to the Company copies of all such
instruments and records delivered
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to the Trustee. Such instrument or instruments and records (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders of Securities signing such instrument or instruments and so
voting at such meeting. Proof of execution of any such instrument or of a
writing appointing any such agent or proxy, or of the holding by any Person of a
Security, shall be sufficient for any purpose of this Indenture and (subject to
Section 6.1) conclusive in favor of the Trustee and the Company if made in the
manner provided in this Section. The record of any meeting of Holders of
Securities shall be proved in the manner provided in Section 9.6.
(2) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority.
(3) The principal amount and serial number of any Security held by any
Person, and the date of his holding the same, shall be proved by the Security
Register.
(4) The fact and date of execution of any such instrument or writing and
the authority of the Person executing the same may also be proved in any other
manner which the Trustee deems sufficient; and the Trustee may in any instance
require further proof with respect to any of the matters referred to in this
Section 1.4.
(5) The Company may set any day as the record date for the purpose of
determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote on
any action, authorized or permitted by this Indenture to be given or taken by
Holders. Promptly and in any case not later than ten days after setting a record
date, the Company shall notify the Trustee and the Holders of such record date.
If not set by the Company prior to the first solicitation of a Holder made by
any Person in respect of any such action, or, in the case of any such vote,
prior to such vote, the record date for any such action or vote shall be the
30th day (or, if later, the date of the most recent list of Holders required to
be provided pursuant to Section 15.1) prior to such first solicitation or vote,
as the case may be. With regard to any record date, the Holders on such date (or
their duly appointed agents or proxies), and only such Persons, shall be
entitled to give or take, or vote on, the relevant action, whether or not such
Holders remain Holders after such record date. Notwithstanding the foregoing,
the Company shall not set a record date for, and the provisions of this
paragraph shall not apply with respect to, any notice, declaration or direction
referred to in the next paragraph.
Upon receipt by the Trustee from any Holder of (i) any notice of default
or breach referred to in Section 5.1(4), if such default or breach has occurred
and is continuing and the Trustee shall not have given such a notice to the
Company, (ii) any declaration of acceleration referred to in Section 5.2, if an
Event of Default has occurred and is continuing and the Trustee shall not have
given such a declaration to the Company, or (iii) any direction referred to in
Section 5.12, if the Trustee shall not have taken the action specified in such
direction, then, with respect to clauses (ii) and (iii), a record date shall
automatically and without any action by the Company or the Trustee be set for
determining the Holders entitled to join in such declaration or direction, which
record date shall be the close of business on the tenth day (or, if such day is
not a Business Day, the first Business Day thereafter) following the day on
which the Trustee receives such declaration or direction, and, with respect to
clause (i), the Trustee may set any day as a record date for the purpose of
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determining the Holders entitled to join in such notice of default. Promptly
after such receipt by the Trustee of any such declaration or direction referred
to in clause (ii) or (iii), and promptly after setting any record date with
respect to clause (i), and as soon as practicable thereafter, the Trustee shall
notify the Company and the Holders of any such record date so fixed. The Holders
on such record date (or their duly appointed agents or proxies), and only such
Persons, shall be entitled to join in such notice, declaration or direction,
whether or not such Holders remain Holders after such record date; provided
that, unless such notice, declaration or direction shall have become effective
by virtue of Holders of the requisite principal amount of Securities on such
record date (or their duly appointed agents or proxies) having joined therein on
or prior to the 90th day after such record date, such notice, declaration or
direction shall automatically and without any action by any Person be canceled
and of no further effect. Nothing in this paragraph shall be construed to
prevent a Holder (or a duly appointed agent or proxy thereof) from giving,
before or after the expiration of such 90-day period, a notice, declaration or
direction contrary to or different from, or, after the expiration of such
period, identical to, the notice, declaration or direction to which such record
date relates, in which event a new record date in respect thereof shall be set
pursuant to this paragraph. In addition, nothing in this paragraph shall be
construed to render ineffective any notice, declaration or direction of the type
referred to in this paragraph given at any time to the Trustee and the Company
by Holders (or their duly appointed agents or proxies) of the requisite
principal amount of Securities on the date such notice, declaration or direction
is so given.
(6) Except as provided in Sections 5.12 and 5.13, any request, demand,
authorization, direction, notice, consent, election, waiver or other Act of the
Holder of any Security shall bind every future Holder of the same Security and
the Holder of every Security issued upon the registration of transfer thereof or
in exchange therefor or in lieu thereof in respect of anything done, omitted or
suffered to be done by the Trustee or the Company in reliance thereon, whether
or not notation of such action is made upon such Security.
(7) The provisions of this Section 1.4 are subject to the provisions of
Section 9.5.
SECTION 1.5 Notices, Etc to the Trustee and Company.
Any request, demand, authorization, direction, notice, consent,
election, waiver or other Act of Holders of Securities or other document
provided or permitted by this Indenture to be made upon, given or furnished to,
or filed with,
(1) the Trustee by any Holder of Securities or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with a Responsible Officer of the Trustee and received at its
Corporate Trust Office, Attention: Corporate Trust Administration (Redback
Networks Inc., 5% Convertible Subordinated Notes due April 1, 2007).
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<PAGE> 20
(2) the Company by the Trustee or by any Holder of Securities shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing, mailed, first-class postage prepaid, or telecopied and
confirmed by mail, first-class postage prepaid, or delivered by hand or
overnight courier, addressed to the Company at 1389 Moffett Park Drive,
Sunnyvale, CA 94089, Attention: Chief Financial Officer, or at any other address
previously furnished in writing to the Trustee by the Company.
SECTION 1.6 Notice to Holders of Securities; Waiver.
Except as otherwise expressly provided herein, where this Indenture
provides for notice to Holders of Securities of any event, such notice shall be
sufficiently given to Holders if in writing and mailed, first-class postage
prepaid or delivered by an overnight delivery service, to each Holder of a
Security affected by such event, at the address of such Holder as it appears in
the Security Register, not earlier than the earliest date and not later than the
latest date prescribed for the giving of such notice.
Neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder of a Security shall affect the sufficiency of
such notice with respect to other Holders of Securities. In case by reason of
the suspension of regular mail service or by reason of any other cause it shall
be impracticable to give such notice by mail, then such notification to Holders
of Securities as shall be made with the approval of the Trustee, which approval
shall not be unreasonably withheld, shall constitute a sufficient notification
to such Holders for every purpose hereunder.
Such notice shall be deemed to have been given when such notice is
mailed.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders of Securities shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
SECTION 1.7 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.8 Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 1.9 Separability Clause.
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<PAGE> 21
In case any provision in this Indenture or the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.10 Benefits of Indenture.
Except as provided in the next sentence, nothing in this Indenture or in
the Securities, express or implied, shall give to any Person, other than the
parties hereto and their successors assigns hereunder and the Holders of
Securities, any benefit or legal or equitable right, remedy or claim under this
Indenture. The provisions of Article XIII are intended to be for the benefit of,
and shall be enforceable directly by, the holders of Senior Debt.
SECTION 1.11 Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, THE UNITED STATES OF AMERICA,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 1.12 Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Repurchase
Date or Stated Maturity of any Security or the last day on which a Holder of a
Security has a right to convert his Security shall not be a Business Day at a
Place of Payment or Place of Conversion, as the case may be, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of principal of, premium, if any, or interest on, or the payment of the
Redemption Price or Repurchase Price (whether the same is payable in cash or in
shares of Common Stock in the case of the Repurchase Price) with respect to, or
delivery for conversion of, such Security need not be made at such Place of
Payment or Place of Conversion, as the case may be, on or by such day, but may
be made on or by the next succeeding Business Day at such Place of Payment or
Place of Conversion, as the case may be, with the same force and effect as if
made on the Interest Payment Date, Redemption Date or Repurchase Date, or at the
Stated Maturity or by such last day for conversion; provided, however, that in
the case that payment is made on such succeeding Business Day, no interest shall
accrue on the amount so payable for the period from and after such Interest
Payment Date, Redemption Date, Repurchase Date, Stated Maturity or last day for
conversion, as the case may be.
SECTION 1.13 Conflict With Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act that is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
that may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
Until such time as this Indenture shall be qualified under the Trust Indenture
Act, this Indenture, the Company and the Trustee shall
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<PAGE> 22
be deemed for all purposes hereof to be subject to and governed by the Trust
Indenture Act to the same extent as would be the case if this Indenture were so
qualified on the date hereof.
ARTICLE II
SECURITY FORMS
SECTION 2.1 Form Generally.
The Securities shall be in substantially the form set forth in this
Article, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange, the Internal Revenue Code of 1986, as amended, and
regulations thereunder (the "Code"), or as may, consistent herewith, be
determined by the officers executing such Securities, as evidenced by their
execution thereof. All Securities shall be in fully registered form.
The Trustee's certificates of authentication shall be in substantially
the form set forth in Section 2.3.
Conversion notices shall be in substantially the form set forth in
Section 2.4.
Repurchase notices shall be substantially in the form set forth in
Section 2.2.
The Securities shall be printed, lithographed, typewritten or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any automated quotation system or securities
exchange (including on steel engraved borders if so required by any securities
exchange upon which the Securities may be listed) on which the Securities may be
quoted or listed, as the case may be, all as determined by the officers
executing such Securities, as evidenced by their execution thereof.
Upon their original issuance, Securities issued as contemplated by the
Purchase Agreement to Qualified Institutional Buyers in reliance on Rule 144A
shall be issued in the form of one or more Global Securities in definitive,
fully registered form without interest coupons and bearing the Restricted
Securities Legend. Such Global Security shall be registered in the name of DTC,
as Depositary, or its nominee and deposited with the Trustee, as custodian for
DTC, for credit by DTC to the respective accounts of beneficial owners of the
Securities represented thereby (or such other accounts as they may direct). Such
Global Security, together with its Successor Securities which are Global
Securities, are collectively herein called the "Restricted Global Security".
SECTION 2.2 Form of Security.
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<PAGE> 23
[FORM OF FACE]
[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH RESTRICTED
SECURITY:
THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING
ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A THEREUNDER.
THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO THE
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER JURISDICTIONS OF THE UNITED
STATES.
THIS NOTE, ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION AND
ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO
MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS NOTE AND ANY SUCH
SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE
INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF
RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS NOTE AND ANY SUCH SHARES
SHALL BE DEEMED BY THE ACCEPTANCE OF THIS NOTE AND ANY SUCH SHARES TO HAVE
AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.]
[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL SECURITY:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A
NOMINEE OF THE DEPOSITARY, WHICH MAY BE
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<PAGE> 24
TREATED BY THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF
THIS SECURITY FOR ALL PURPOSES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO IN THE
INDENTURE, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE 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.]
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<PAGE> 25
REDBACK NETWORKS INC.
5% CONVERTIBLE SUBORDINATED NOTE DUE APRIL 1, 2007
No. $
-------------------- ----------------------
CUSIP NO. 757209AA9
REDBACK NETWORKS INC., a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture referred to on the reverse
hereof), for value received, hereby promises to pay to Cede & Co., or registered
assigns, the principal sum of ________ United States Dollars (U.S.$______ ) [IF
THIS SECURITY IS A GLOBAL SECURITY, THEN INSERT -- (which principal amount may
from time to time be increased or decreased to such other principal amounts
(which, taken together with the principal amounts of all other Outstanding
Securities, shall not exceed U.S. $500,000,000 (or U.S. $600,000,000 if the
Over-allotment Option is exercised in full) by adjustments made on the records
of the Trustee hereinafter referred to in accordance with the Indenture)] on
April 1, 2007 and to pay interest thereon, from March 29, 2000, or from the most
recent Interest Payment Date (as defined below) to which interest has been paid
or duly provided for, semi-annually in arrears on April 1 and October 1 in each
year (each, an "Interest Payment Date"), commencing October 1, 2000, at the rate
of 5% per annum, until the principal hereof is due, and at the rate of 5% per
annum on any overdue principal and premium, if any, and, to the extent permitted
by law, on any overdue interest. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the March 15 or September 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Except as otherwise provided in the Indenture, any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Company, notice whereof shall be
given to Holders of Securities not less than 10 days prior to the Special Record
Date, or be paid at any time in any other lawful manner not inconsistent with
the requirements of any automated quotation system or securities exchange on
which the Securities may be quoted or listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture. Payments
of principal shall be made upon the surrender of this Security at the option of
the Holder at the Corporate Trust Office of the Trustee, or at such other office
or agency of the Company as may be designated by it for such purpose in the
Borough of Manhattan, The City of New York, in such lawful monies of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts, or at such other offices or agencies as the
Company may designate. Payment of interest on this Security may be made by
United States Dollar check drawn on an account maintained at a bank in the City
of New York mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register, or by wire transfer
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<PAGE> 26
to a United States Dollar account maintained at a bank in the City of New York
(such a transfer to be made only to a Holder of an aggregate principal amount of
Securities in excess of U.S. $2,000,000 and only if such Holder shall have
furnished wire instructions in writing to the Trustee no later than 15 days
prior to the relevant payment date).
Except as specifically provided herein and in the Indenture, the Company
shall not be required to make any payment with respect to any tax, assessment or
other governmental charge imposed by any government or any political subdivision
or taxing authority thereof or therein.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the Trustee
referred to on the reverse hereof or an Authenticating Agent by the manual
signature of one of their respective authorized signatories, this Security shall
not be entitled to any benefit under the Indenture or be valid or obligatory for
any purpose.
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<PAGE> 27
IN WITNESS WHEREOF, the Company has caused this Security to be duly executed.
REDBACK NETWORKS INC.
By:
-------------------------
Name:
Title:
Attest:
By:
----------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned Indenture.
Dated:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:
----------------------------------
Authorized Signatory
<PAGE> 28
[FORM OF REVERSE]
This Security is one of a duly authorized issue of securities of the
Company designated as its "5% Convertible Subordinated Notes due April 1, 2007"
(herein called the "Securities"), limited in aggregate principal amount to U.S.
$500,000,000 (or U.S. $600,000,000 if the Over-allotment Option is exercised in
full), issued and to be issued under an Indenture, dated as of March 29, 2000
(herein called the "Indenture"), between the Company and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee, the holders of Senior Debt and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. As provided in the Indenture and subject to certain
limitations therein set forth, Securities are exchangeable for a like aggregate
principal amount of Securities of any authorized denominations as requested by
the Holder surrendering the same upon surrender of the Security or Securities to
be exchanged, at the Corporate Trust Office of the Trustee. The Trustee upon
such surrender by the Holder will issue the new Securities in the requested
denominations.
No sinking fund is provided for the Securities. The Securities will not
be subject to redemption until on or after the third Business Day after April 1,
2003 and will be redeemable on and after that date at the option of the Company,
in whole or in part, upon not less than 30 nor more than 60 days notice to the
Holders prior to the Redemption Date at the Redemption Prices (expressed as
percentages of the principal amount) set forth below; provided, however, that
the Securities will not be redeemable during the period beginning on or after
the third Business Day after April 1, 2003 and ending on March 31, 2005 unless
the Closing Price Per Share of the Common Stock exceeds 140% of the Conversion
Price for at least 20 Trading Days within a period of 30 consecutive Trading
Days ending within five Trading Days immediately preceding the aforesaid notice
to Holders.
The following table sets forth the Redemption Prices (expressed as
percentages of the principal amount) if such Security is redeemed during the
12-month period beginning April 1 and ending on March 31 (beginning the third
Business Day after April 1, 2003 and ending March 31, 2004 in the case of the
first such period):
YEAR REDEMPTION PRICE
----------- ----------------
2003 102.857%
2004 102.143%
2005 101.429%
2006 100.714%
and thereafter at a Redemption Price equal to 100% of the principal amount,
together, in each case, with accrued interest to, but excluding, the Redemption
Date; provided, however, that interest installments on Securities whose Stated
Maturity is on or prior to such Redemption Date will be
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<PAGE> 29
payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Dates
referred to on the face hereof, all as provided in the Indenture.
In the event of a redemption of the Securities, the Company will not be
required (a) to register the transfer or exchange of Securities for a period of
15 days immediately preceding the date notice is given identifying the serial
numbers of the Securities called for such redemption or (b) to register the
transfer or exchange of any Security, or portion thereof, called for redemption.
In any case where the due date for the payment of the principal of,
premium, if any, interest, or Liquidated Damages on any Security or the last day
on which a Holder of a Security has a right to convert his Security shall be, at
any Place of Payment or Place of Conversion as the case may be, a day on which
banking institutions at such Place of Payment or Place of Conversion are
authorized or obligated by law or executive order to close, then payment of
principal, premium, if any, interest, or Liquidated Damages, or delivery for
conversion of such Security need not be made on or by such date at such place
but may be made on or by the next succeeding day at such place which is not a
day on which banking institutions are authorized or obligated by law or
executive order to close, with the same force and effect as if made on the date
for such payment or the date fixed for redemption or repurchase, or by such last
day for conversion, and no interest shall accrue on the amount so payable for
the period after such date.
Subject to and upon compliance with the provisions of the Indenture, the
Holder of this Security is entitled, at his option, at any time on or before the
close of business on the date of Maturity, or in case this Security or a portion
hereof is called for redemption or the Holder hereof has exercised his right to
require the Company to repurchase this Security or such portion hereof, then in
respect of this Security until the Business Day immediately preceding, but
(unless the Company defaults in making the payment due upon redemption or
repurchase, as the case may be) not after, the close of business on the Business
Day immediately preceding the Redemption Date or the Repurchase Date, as the
case may be, to convert this Security (or any portion of the principal amount
hereof that is an integral multiple of U.S. $1,000, provided that the
unconverted portion of such principal amount is U.S. $1,000 or any integral
multiple of U.S. $1,000 in excess thereof) into fully paid and nonassessable
shares of Common Stock of the Company at an initial Conversion Rate of 5.2430
shares of Common Stock for each U.S. $1,000 principal amount of Securities (or
at the current adjusted Conversion Rate if an adjustment has been made as
provided in the Indenture) by surrender of this Security, duly endorsed or
assigned to the Company or in blank and, in case such surrender shall be made
during the period from the close of business on any Regular Record Date next
preceding any Interest Payment Date to the opening of business on such Interest
Payment Date (except if this Security or portion thereof has been called for
redemption on a Redemption Date or is repurchasable on a Repurchase Date
occurring, in either case, during such period and, as a result, the right to
convert this Security would otherwise terminate in such period if not
exercised), also accompanied by payment in New York Clearing House or other
funds acceptable to the Company of an amount equal to the interest payable on
such Interest Payment Date on the principal amount of this Security then being
converted, and also the conversion notice hereon duly executed, to the Company
at the Corporate Trust Office of the Trustee, or at such other office or agency
of the
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<PAGE> 30
Company, subject to any laws or regulations applicable thereto and subject to
the right of the Company to terminate the appointment of any Conversion Agent
(as defined below) as may be designated by it for such purpose in the Borough of
Manhattan, The City of New York, or at such other offices or agencies as the
Company may designate (each a "Conversion Agent"), provided, further, that if
this Security or portion hereof has been called for redemption on a Redemption
Date or is repurchasable on a Repurchase Date occurring, in either case, during
the period from the close of business on any Regular Record Date next preceding
any Interest Payment Date to the opening of business on such succeeding Interest
Payment Date, and as a result, the right to convert this Security would
otherwise terminate in such period if not exercised and this Security is
surrendered for conversion during such period, then the Holder of this Security
on such Regular Record Date will be entitled to receive the interest accruing
hereon from the Interest Payment Date next preceding the date of such conversion
to such succeeding Interest Payment Date and the Holder of this Security who
converts this Security or a portion hereof during such period shall not be
required to pay such interest upon surrender of this Security for conversion.
Subject to the provisions of the preceding sentence and, in the case of a
conversion after the close of business on the Regular Record Date next preceding
any Interest Payment Date and on or before the close of business on such
Interest Payment Date, to the right of the Holder of this Security (or any
Predecessor Security of record as of such Regular Record Date) to receive the
related installment of interest to the extent and under the circumstances
provided in the Indenture, no cash payment or adjustment is to be made on
conversion for interest accrued hereon from the Interest Payment Date next
preceding the day of conversion, or for dividends on the Common Stock issued on
conversion hereof. The Company shall thereafter deliver to the Holder the fixed
number of shares of Common Stock (together with any cash adjustment, as provided
in the Indenture) into which this Security is convertible and such delivery will
be deemed to satisfy the Company's obligation to pay the principal amount of
this Security. No fractions of shares or scrip representing fractions of shares
will be issued on conversion, but instead of any fractional interest (calculated
to the nearest 1/100th of a share) the Company shall pay a cash adjustment as
provided in the Indenture. The Conversion Rate is subject to adjustment as
provided in the Indenture. In addition, the Indenture provides that in case of
certain consolidations or mergers to which the Company is a party (other than a
consolidation or merger that does not result in any reclassification,
conversion, exchange or cancellation of the Common Stock) or the conveyance,
transfer, sale or lease of all or substantially all of the property and assets
of the Company, the Indenture shall be amended, without the consent of any
Holders of Securities, so that this Security, if then Outstanding, will be
convertible thereafter, during the period this Security shall be convertible as
specified above, only into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance, transfer, sale
or lease by a holder of the number of shares of Common Stock of the Company into
which this Security could have been converted immediately prior to such
consolidation, merger, conveyance, transfer, sale or lease (assuming such holder
of Common Stock is not a Constituent Person or an Affiliate of a Constituent
Person, failed to exercise any rights of election and received per share the
kind and amount received per share by a plurality of Non-electing Shares). No
adjustment in the Conversion Rate will be made until such adjustment would
require an increase or decrease of at least one percent of such rate, provided
that any adjustment that would otherwise be made will be carried forward and
taken into account in the computation of any subsequent adjustment.
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<PAGE> 31
If this Security is a Registrable Security (as defined in this
Indenture), then the Holder of this Security [IF THIS SECURITY IS A GLOBAL
SECURITY, THEN INSERT -- (including any Person that has a beneficial interest in
this Security)] and the Common Stock of the Company issuable upon conversion
hereof is entitled to the benefits of a Registration Rights Agreement, dated as
of March 29, 2000, executed by the Company (the "Registration Rights
Agreement"). Pursuant to the Registration Rights Agreement, the Company has
agreed for the benefit of the Holders from time to time of the Registrable
Securities that it will, at its expense, (a) within 90 days after the Issue Date
file a shelf registration statement (the "Shelf Registration Statement") with
the Commission with respect to resales of the Registrable Securities, (b) use
its reasonable efforts to cause such Shelf Registration Statement to be declared
effective by the Commission within 180 days after the Issue Date of the
Securities, provided, however, that the Company may, upon written notice to all
the Holders, postpone having the Shelf Registration Statement declared effective
for a reasonable period not to exceed 90 days if the Company possesses material
non-public information, the disclosure of which would have a material adverse
effect on the Company and its subsidiaries taken as a whole, and (c) use its
reasonable efforts to maintain such Shelf Registration Statement effective under
the Securities Act of 1933, as amended, until the second annual anniversary of
the date it is declared effective or such earlier date as is provided in the
Registration Rights Agreement (the "Effectiveness Period"). The Company will be
permitted to suspend the use of the prospectus which is part of the Shelf
Registration Statement during certain periods of time as provided in the
Registration Rights Agreement.
If (i) on or prior to 90 days following the Issue Date, a Shelf
Registration Statement has not been filed with the Commission, or (ii) on or
prior to the 180th day following the Issue Date, such Shelf Registration
Statement is not declared effective (each, a "Registration Default"), additional
interest ("Liquidated Damages") will accrue on this Restricted Security from and
including the day following such Registration Default to but excluding the day
on which such Registration Default has been cured. Liquidated Damages will be
paid semi-annually in arrears, with the first semi-annual payment due on the
first Interest Payment Date, as applicable, in respect of the Restricted
Securities following the date on which such Liquidated Damages begin to accrue,
and will accrue at a rate per annum equal to an additional one-quarter of one
percent (0.25%) of the principal amount of the Restricted Securities to and
including the 90th day following such Registration Default and at a rate per
annum equal to one-half of one percent (0.50%) thereof from and after the 91st
day following such Registration Default. Pursuant to the Registration Rights
Agreement, in the event that the Shelf Registration Statement ceases to be
effective (or the Holders of Registrable Securities are otherwise prevented or
restricted by the Company from effecting sales pursuant thereto) (an "Effective
Failure") during the Effectiveness Period for more than 60 days, whether or not
consecutive, during any 90-day period or for more than 120 days, whether or not
consecutive, during any 365 day period, then the interest rate borne by the
Restricted Securities shall increase by an additional one-half of one percent
(0.50%) per annum from the 61st day of the applicable 90-day period or the 121st
day of the applicable 365 day period until the earlier of (A) such time as the
Effective Failure is cured or (B) the Effectiveness Period expires.
Whenever in this Security there is a reference, in any context, to the
payment of the principal of, premium, if any, or interest on, or in respect of,
any Security, such mention shall be deemed to
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<PAGE> 32
include mention of the payment of Liquidated Damages payable as described in the
preceding paragraph to the extent that, in such context, Liquidated Damages are,
were or would be payable in respect of such Security and express mention of the
payment of Liquidated Damages (if applicable) in any provisions of this Security
shall not be construed as excluding Liquidated Damages in those provisions of
this Security where such express mention is not made.
[If this Security is a Registrable Security and the Holder of this
Security [IF THIS SECURITY IS A GLOBAL SECURITY, THEN INSERT -- (including any
Person that has a beneficial interest in this Security)] elects to sell this
Security pursuant to the Shelf Registration Statement then, by its acceptance
hereof, such Holder of this Security agrees to be bound by the terms of the
Registration Rights Agreement relating to the Registrable Securities which are
the subject of such election.]
If a Change in Control occurs, the Holder of this Security, at the
Holder's option, shall have the right, in accordance with the provisions of the
Indenture, to require the Company to repurchase this Security (or any portion of
the principal amount hereof that is at least U.S. $1,000 or an integral multiple
of U.S. $1,000 in excess thereof, provided that the portion of the principal
amount of this Security to be Outstanding after such repurchase is at least
equal to U.S. $1,000) for cash at a Repurchase Price equal to 100% of the
principal amount thereof plus interest accrued to, but excluding, the Repurchase
Date. At the option of the Company, the Repurchase Price may be paid in cash or,
subject to the conditions provided in the Indenture, by delivery of shares of
Common Stock having a fair market value equal to the Repurchase Price. For
purposes of this paragraph, the fair market value of shares of Common Stock
shall be determined by the Company and shall be equal to 95% of the average of
the Closing Prices Per Share for the five consecutive Trading Days immediately
preceding and including the third Trading Day prior to the Repurchase Date.
Whenever in this Security there is a reference, in any context, to the principal
of any Security as of any time, such reference shall be deemed to include
reference to the Repurchase Price payable in respect of such Security to the
extent that such Repurchase Price is, was or would be so payable at such time,
and express mention of the Repurchase Price in any provision of this Security
shall not be construed as excluding the Repurchase Price so payable in those
provisions of this Security when such express mention is not made; provided,
however, that, for the purposes of the third succeeding paragraph, such
reference shall be deemed to include reference to the Repurchase Price only to
the extent the Repurchase Price is payable in cash.
[THE FOLLOWING PARAGRAPH SHALL APPEAR IN EACH GLOBAL SECURITY:
In the event of a deposit or withdrawal of an interest in this Security,
including an exchange, transfer, redemption, repurchase or conversion of this
Security in part only, the Trustee, as custodian of the Depositary, shall make
an adjustment on its records to reflect such deposit or withdrawal in accordance
with the Applicable Procedures.]
[THE FOLLOWING PARAGRAPH SHALL APPEAR IN EACH SECURITY THAT IS NOT A
GLOBAL SECURITY:
In the event of redemption, repurchase or conversion of this Security in
part only, a new Security or Securities for the unredeemed, unrepurchased or
unconverted portion hereof will be issued in the name of the Holder hereof.]
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<PAGE> 33
The indebtedness evidenced by this Security is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full of all Senior Debt of the Company, and this Security
is issued subject to such provisions of the Indenture with respect thereto. Each
Holder of this Security, by accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
so provided and (c) appoints the Trustee his attorney-in-fact for any and all
such purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Securities, together with accrued interest to the date of declaration,
may be declared due and payable in the manner and with the effect provided in
the Indenture. Upon payment (i) of the amount of principal so declared due and
payable, together with accrued interest to the date of declaration, and (ii) of
interest on any overdue principal and, to the extent permitted by applicable
law, overdue interest, all of the Company's obligations in respect of the
payment of the principal of and interest on the Securities shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with either (a) the written consent of
the Holders of not less than a majority in principal amount of the Securities at
the time Outstanding, or (b) by the adoption of a resolution, at a meeting of
Holders of the Outstanding Securities at which a quorum is present, by the
Holders of at least 66-2/3% in aggregate principal amount of the Outstanding
Securities represented and entitled to vote at such meeting. The Indenture also
contains provisions permitting the Holders of specified percentages in principal
amount of the Securities at the time Outstanding, on behalf of the Holders of
all the Securities, to waive compliance by the Company with certain provisions
of the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued in exchange therefore or in lieu hereof
whether or not notation of such consent or waiver is made upon this Security or
such other Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default, the Holders of not
less than 25% in principal amount of the Outstanding Securities shall have made
written request to the Trustee to institute proceedings in respect of such Event
of Default as Trustee and offered the Trustee reasonable indemnity and the
Trustee shall not have received from the Holders of a majority in principal
amount of the Securities Outstanding a direction inconsistent with such request,
and shall have failed to institute any such proceeding, for 60 days after
receipt of such notice, request and offer of indemnity. The foregoing shall not
apply to any suit instituted by the Holder of this Security for the enforcement
of any payment of principal hereof, premiums if any, or interest (including
Liquidated Damages) hereon on or after the respective due dates expressed herein
or for the enforcement of the right to convert this Security as provided in the
Indenture.
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<PAGE> 34
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, premium, if any, and
interest (including Liquidated Damages) on this Security at the times, places
and rate, and in the coin or currency, herein prescribed or to convert this
Security as provided in the Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable on the Security Register
upon surrender of this Security for registration of transfer at the Corporate
Trust Office of the Trustee or at such other office or agency of the Company as
may be designated by it for such purpose in the Borough of Manhattan, The City
of New York (which shall initially be an office or agency of the Trustee), or at
such other offices or agencies as the Company may designate, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder thereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees by the Registrar. No service
charge shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to recover any tax or other
governmental charge payable in connection therewith.
Prior to due presentation of a this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered, as the owner
thereof for all purposes, whether or not such Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
No recourse for the payment of the principal (and premium, if any) or
interest on this Security and no recourse under or upon any obligation, covenant
or agreement of the Company in the Indenture or any indenture supplemental
thereto or in any Security, 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 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 the acceptance hereof and as
part of consideration for the issue hereof, expressly waived and released.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
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<PAGE> 35
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of
this Security, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TEN COM as tenant in common UNIF GIFT MIN ACT _____Custodian______
TEN ENT as tenants by the entireties (Cust) (Cust) (Minor)
JT TEN as joint tenants with right of under Uniform Gifts to
survivorship and not as tenants Minors Act _____
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
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<PAGE> 36
ELECTION OF HOLDER TO REQUIRE REPURCHASE
(1) Pursuant to Section 14.1 of the Indenture, the undersigned hereby
elects to have this Security repurchased by the Company.
(2) The undersigned hereby directs the Trustee or the Company to pay it
or ______________ an amount in cash or, at the Company's election, Common Stock
valued as set forth in the Indenture, equal to 100% of the principal amount to
be repurchased (as set forth below), plus interest accrued to, but excluding,
the Repurchase Date, as provided in the Indenture.
Dated:
- --------------------------------------
- --------------------------------------
Signature(s)
Signature(s) must be guaranteed by an Eligible Guarantor Institution with
membership in an approved signature guarantee program pursuant to Rule 17Ad-15
under the Securities Exchange Act of 1934.
- --------------------------------------
Signature Guaranteed
Principal amount to be repurchased (at least
U.S. $1,000 or an integral multiple of U.S. $1,000
in excess thereof): ___________________
Remaining principal amount following such
repurchase (not less than U.S. $1,000):
- --------------
NOTICE: The signature to the foregoing Election must correspond to the Name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.
SECTION 2.3 Form of Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially
the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:
----------------------
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<PAGE> 37
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Trustee
By:
------------------------------------
Authorized Signatory
SECTION 2.4 Form of Conversion Notice.
CONVERSION NOTICE
The undersigned Holder of this Security hereby irrevocably exercises the
option to convert this Security, or any portion of the principal amount hereof
(which is U.S. $1,000 or an integral multiple of U.S. $1,000 in excess thereof,
provided that the unconverted portion of such principal amount is U.S. $1,000 or
any integral multiple of U.S. $1,000 in excess thereof) below designated, into
shares of Common Stock in accordance with the terms of the Indenture referred to
in this Security, and directs that such shares, together with a check in payment
for any fractional share and any Securities representing any unconverted
principal amount hereof, be delivered to and be registered in the name of the
undersigned unless a different name has been indicated below. If shares of
Common Stock or Securities are to be registered in the name of a Person other
than the undersigned, (a) the undersigned will pay all transfer taxes payable
with respect thereto and (b) signature(s) must be guaranteed by an Eligible
Guarantor Institution with membership in an approved signature guarantee program
pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934. Any amount
required to be paid by the undersigned on account of interest accompanies this
Security.
Dated:
-------------------- --------------------------------------------------
Signature(s)
If shares or Securities are to be registered in the
name of a Person other than the Holder, please
print such Person's name and address:
- ----------------------------------------
(Name)
- ----------------------------------------
- ----------------------------------------
(Address)
- ----------------------------------------
Social Security or other Identification
Number, if any
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<PAGE> 38
- ----------------------------------------
[Signature Guaranteed]
If only a portion of the Securities is to be converted, please indicate:
1. Principal amount to be converted: U.S. $ ___________
2. Principal amount and denomination of Securities
representing unconverted principal amount to be issued:
Amount: U.S. $___________ Denominations: U.S. $____________
(U.S. $1,000 or any integral multiple of U.S. $1,000 in excess thereof, provided
that the unconverted portion of such principal amount is U.S. $1,000 or any
integral multiple of U.S. $1,000 in excess thereof)
SECTION 2.5 Form of Assignment.
For value received ________________ hereby sell(s), assign(s) and
transfer(s) unto ________________ (Please insert social security or other
identifying number of assignee) the within Security, and hereby irrevocably
constitutes and appoints ____________________as attorney to transfer the said
Security on the books of the Company, with full power of substitution in the
premises.
Dated:
--------------- -------------------------------------------------
-----------------------------
Signature(s)
Signature(s) must be
guaranteed by an Eligible
Guarantor Institution with
membership in an approved
signature guarantee program
pursuant to Rule 17Ad - 15
under the Securities Exchange
Act of 1934.
-----------------------------
Signature Guaranteed
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<PAGE> 39
ARTICLE III
THE SECURITIES
SECTION 3.1 Title and Terms.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to U.S. $500,000,000 (or U.S.
$600,000,000 if the Over-allotment Option set forth in Section 2 of the Purchase
Agreement is exercised in full (the "Over-allotment Option")), except for
Securities authenticated and delivered pursuant to Section 3.4, 3.5, 3.6, 8.5,
12.2 or 14.3(5) in exchange for, or in lieu of, other Securities previously
authenticated and delivered under this Indenture.
The Securities shall be known and designated as the "5% Convertible
Subordinated Notes due April 1, 2007" of the Company. Their Stated Maturity
shall be April 1, 2007 and they shall bear interest on their principal amount
from March 29, 2000, payable semi-annually in arrears on April 1 and October 1
in each year, commencing October 1, 2000, at the rate of 5% per annum until the
principal thereof is due and at the rate of 5% per annum on any overdue
principal and, to the extent permitted by law, on any overdue interest;
provided, however, that payments shall only be made on a Business Day as
provided in Section 1.12.
The principal of, premium, if any, and interest on the Securities shall
be payable as provided in the form of Securities set forth in Section 2.2, and
the Repurchase Price, whether payable in cash or in shares of Common Stock,
shall be payable at such places as are identified in the Company Notice given
pursuant to Section 14.3 (any city in which any Paying Agent is located being
herein called a "Place of Payment").
The Registrable Securities are entitled to the benefits of a
Registration Rights Agreement as provided by Section 10.11 and in the form of
Security set forth in Section 2.2. The Securities are entitled to the payment of
Liquidated Damages as provided by Section 10.11.
The Securities shall be redeemable at the option of the Company at any
time on or after the third Business Day after April 1, 2003, in whole or in
part, subject to the conditions and as otherwise provided in Article XI and in
the form of Security set forth in Section 2.2.
The Securities shall be convertible as provided in Article XII (any city
in which any Conversion Agent is located being herein called a "Place of
Conversion").
The Securities shall be subordinated in right of payment to Senior Debt
of the Company as provided in Article XIII.
The Securities shall be subject to repurchase by the Company at the
option of the Holders as provided in Article XIV.
SECTION 3.2 Denominations.
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<PAGE> 40
The Securities shall be issuable only in registered form, without
coupons, in denominations of U.S. $1,000 and integral multiples of U.S. $1,000
in excess thereof.
SECTION 3.3 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its Chief Executive
Officer, its President, one of its Executive Vice Presidents or one of its Vice
Presidents, and attested by its Chief Financial Officer, Secretary or one of its
Assistant Secretaries. Any such signature may be manual or facsimile.
Securities bearing the manual or facsimile signature of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee or to its order for authentication, together with a Company Order
for the authentication and delivery of such Securities, and the Trustee in
accordance with such Company Order shall authenticate and make available for
delivery such Securities as in this Indenture provided.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature of an authorized signatory, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
SECTION 3.4 Global Securities; Non-global Securities; Book-entry Provisions.
(1) Global Securities
(i) Each Global Security authenticated under this Indenture
shall be registered in the name of the Depositary designated by the Company for
such Global Security or a nominee thereof and delivered to such Depositary or a
nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(ii) Except for exchanges of Global Securities for definitive,
Non-global Securities at the sole discretion of the Company, no Global Security
may be exchanged in whole or in part for Securities registered, and no transfer
of a Global Security in whole or in part may be registered, in the name of any
Person other than the Depositary for such Global Security or a nominee thereof
unless (A) such Depositary (i) has notified the Company that it is unwilling or
unable to continue as Depositary for such Global Security or (ii) has ceased to
be a clearing agency registered as such under the Exchange Act or announces an
intention permanently to cease business
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<PAGE> 41
or does in fact do so or (B) there shall have occurred and be continuing an
Event of Default with respect to such Global Security. In such event, if a
successor Depositary for such Global Security is not appointed by the Company
within 90 days after the Company receives such notice or becomes aware of such
ineligibility, the Company will execute, and the Trustee, upon receipt of an
Officers' Certificate directing the authentication and delivery of Securities,
will authenticate and deliver, Securities, in any authorized denominations in an
aggregate principal amount equal to the principal amount of such Global Security
in exchange for such Global Security.
(iii) If any Global Security is to be exchanged for other
Securities or canceled in whole, it shall be surrendered by or on behalf of the
Depositary or its nominee to the Trustee, as Security Registrar, for exchange or
cancellation, as provided in this Article III. If any Global Security is to be
exchanged for other Securities or canceled in part, or if another Security is to
be exchanged in whole or in part for a beneficial interest in any Global
Security, in each case, as provided in Section 3.5, then either (A) such Global
Security shall be so surrendered for exchange or cancellation, as provided in
this Article III, or (B) the principal amount thereof shall be reduced or
increased by an amount equal to the portion thereof to be so exchanged or
canceled, or equal to the principal amount of such other Security to be so
exchanged for a beneficial interest therein, as the case may be, by means of an
appropriate adjustment made on the records of the Trustee, as Security
Registrar, whereupon the Trustee, in accordance with the Applicable Procedures,
shall instruct the Depositary or its authorized representative to make a
corresponding adjustment to its records. Upon any such surrender or adjustment
of a Global Security, the Trustee shall, subject to Section 3.5(3) and as
otherwise provided in this Article III, authenticate and deliver any Securities
issuable in exchange for such Global Security (or any portion thereof) to or
upon the order of, and registered in such names as may be directed by, the
Depositary or its authorized representative. Upon the request of the Trustee in
connection with the occurrence of any of the events specified in the preceding
paragraph, the Company shall promptly make available to the Trustee a reasonable
supply of Securities that are not in the form of Global Securities. The Trustee
shall be entitled to rely upon any order, direction or request of the Depositary
or its authorized representative which is given or made pursuant to this Article
III if such order, direction or request is given or made in accordance with the
Applicable Procedures.
(iv) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global Security
or any portion thereof, whether pursuant to this Article III or otherwise, shall
be authenticated and delivered in the form of, and shall be, a registered Global
Security, unless such Security is registered in the name of a Person other than
the Depositary for such Global Security or a nominee thereof, in which case such
Security shall be authenticated and delivered in definitive, fully registered
form, without interest coupons.
(v) The Depositary or its nominee, as registered owner of a
Global Security, shall be the Holder of such Global Security for all purposes
under the Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global Security will be
shown only on, and the transfer of such interest shall be effected only through,
records maintained
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<PAGE> 42
by the Depositary or its nominee or its Agent Members and such owners of
beneficial interests in a Global Security will not be considered the owners or
holders thereof.
(2) Non-global Securities. Securities issued upon the events described
in Section 3.4(l)(ii) shall be in definitive, fully registered form, without
interest coupons, and shall bear the Restricted Securities Legend if and as
required by this Indenture.
SECTION 3.5 Registration; Registration of Transfer and Exchange; Restrictions on
Transfer.
(1) The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office referred to as
the "Security Register") in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Securities and
of transfers of Securities. The Trustee is hereby appointed "Security Registrar"
for the purpose of registering Securities and transfers and exchanges of
Securities as herein provided.
Upon surrender for registration of transfer of any Security at an office
or agency of the Company designated pursuant to Section 10.2 for such purpose,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Securities
of any authorized denominations and of a like aggregate principal amount and
bearing such restrictive legends as may be required by this Indenture.
At the option of the Holder, and subject to the other provisions of this
Section 3.5, Securities may be exchanged for other Securities of any authorized
denomination and of a like aggregate principal amount, upon surrender of the
Securities to be exchanged at any such office or agency. Whenever any Securities
are so surrendered for exchange, and subject to the other provisions of this
Section 3.5, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive. Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Security Registrar) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company, the Trustee and the Security Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt and entitled to the same benefits under this Indenture as the Securities
surrendered upon such registration of transfer or exchange.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Securities except as provided in Section 3.6, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Securities, other than exchanges pursuant to Section
3.4, 8.5, 12.2 or 14.3 (other than where the shares of Common Stock are to be
issued or delivered in a name other than that of the Holder of the Security) not
involving any transfer and other than any stamp and other duties, if any, which
may be imposed in connection with any such transfer or exchange by the United
States or any political subdivision thereof or therein, which shall be paid by
the Company.
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<PAGE> 43
In the event of a redemption of the Securities, neither the Company nor
the Securities Registrar will be required (a) to register the transfer of or
exchange Securities for a period of 15 days immediately preceding the date
notice is given identifying the serial numbers of the Securities called for such
redemption or (b) to register the transfer of or exchange any Security, or
portion thereof, called for redemption.
(2) Certain Transfers and Exchanges. Notwithstanding any other provision
of this Indenture or the Securities, transfers and exchanges of Securities and
beneficial interests in a Global Security of the kinds specified in this Section
3.5(2) shall be made only in accordance with this Section 3.5(2).
(i) Restricted Global Security to Restricted Non-global
Security. In the event that Non-global Securities are to be issued pursuant to
Section 3.4(1)(ii) in connection with any transfer of Securities, such transfer
may be effected only in accordance with the provisions of this Clause (2)(i) and
subject to the Applicable Procedures. Upon receipt by the Trustee, as Security
Registrar, of (A) a Company Order from the Company directing the Trustee, as
Security Registrar, to (x) authenticate and deliver one or more Securities of
the same aggregate principal amount as the beneficial interest in the Restricted
Global Security to be transferred, such instructions to contain the name or
names of the designated transferee or transferees, the authorized denomination
or denominations of the Securities to be so issued and appropriate delivery
instructions and (y) decrease the beneficial interest of a specified Agent
Member's account in a Restricted Global Security by a specified principal amount
not greater than the principal amount of such Restricted Global Security, and
(B) such other certifications, legal opinions or other information as the
Company or 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, then the Trustee, as
Security Registrar, shall decrease the principal amount of the Restricted Global
Security by the specified amount and authenticate and deliver Securities in
accordance with such instructions from the Company as provided in Section
3.4(1)(iii).
(ii) Restricted Non-global Security to Restricted Global
Security. If the Holder of a Restricted Security (other than a Global Security)
wishes at any time to transfer all or any portion of such Restricted Security to
a Person who wishes to take delivery thereof in the form of a beneficial
interest in the Restricted Global Security, such transfer may be effected only
in accordance with the provisions of this Clause (2)(ii) and subject to the
Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of
(A) such Restricted Security as provided in Section 3.5(1) and instructions from
the Company directing that a beneficial interest in the Restricted Global
Security in a specified principal amount not greater than the principal amount
of such Security be credited to a specified Agent Member's account and (B) a
Restricted Securities Certificate, satisfactory to the Trustee and duly executed
by such Holder or his attorney duly authorized in writing, then the Trustee, as
Security Registrar, shall cancel such Restricted Security (and issue a new
Restricted Security in respect of any untransferred portion thereof) as provided
in Section 3.5(1) and increase the principal amount of the Restricted Global
Security by the specified principal amount as provided in Section 3.4(1)(iii).
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(iii) Exchanges Between Global Security and Non-global
Security. A beneficial interest in a Global Security may be exchanged for a
Security that is not a Global Security only as provided in Section 3.4 or only
if such exchange occurs in connection with a transfer effected in accordance
with Clause 2(i) above, provided that, if such interest is a beneficial interest
in the Restricted Global Security, then such interest shall be exchanged for a
Restricted Security (subject in each case to Section 3.5(3)). A Security that is
not a Global Security may be exchanged for a beneficial interest in a Global
Security only if such exchange occurs in connection with a transfer effected in
accordance with Clause (2)(ii) above.
(3) Securities Act Legends. All Securities issued pursuant to this
Indenture, and all Successor Securities, shall bear the Restricted Securities
Legend, subject to the following:
(i) subject to the following Clauses of this Section 3.5(3), a
Security or any portion thereof which is exchanged, upon transfer or otherwise,
for a Global Security or any portion thereof shall bear the Restricted
Securities Legend borne by such Global Security for which the Security was
exchanged;
(ii) subject to the following Clauses of this Section 3.5(3),
a new Security which is not a Global Security and is issued in exchange for
another Security (including a Global Security) or any portion thereof, upon
transfer or otherwise, shall bear the Restricted Securities Legend borne by the
Security for which the new Security was exchanged;
(iii) any Securities which are sold or otherwise disposed of
pursuant to an effective registration statement under the Securities Act
(including the Shelf Registration Statement), together with their Successor
Securities shall not bear a Restricted Securities Legend; the Company shall
inform the Trustee in writing of the effective date of any such registration
statement registering the Securities under the Securities Act and shall notify
the Trustee at any time when prospectuses must be delivered with respect to
Securities to be sold pursuant to such registration statement. The Trustee shall
not be liable for any action taken or omitted to be taken by it in good faith in
accordance with the aforementioned registration statement;
(iv) at any time after the Securities may be freely transferred
without registration under the Securities Act or without being subject to
transfer restrictions pursuant to the Securities Act, a new Security which does
not bear a Restricted Securities Legend may be issued in exchange for or in lieu
of a Security (other than a Global Security) or any portion thereof which bears
such a legend if the Trustee has received an Unrestricted Securities
Certificate, satisfactory to the Trustee and duly executed by the Holder of such
Security bearing a Restricted Securities Legend or his attorney duly authorized
in writing, and after such date and receipt of such certificate, the Trustee
shall authenticate and deliver such new Security in exchange for or in lieu of
such other Security as provided in this Article III;
(v) a new Security which does not bear a Restricted Securities
Legend may be issued in exchange for or in lieu of a Security or any portion
thereof which bears such a legend if, in the Company's judgment, placing such a
legend upon such new Security is not necessary to ensure compliance with the
registration requirements of the Securities Act, and the Trustee, at the
direction
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of the Company, shall authenticate and deliver such a new Security as provided
in this Article III; and
(vi) notwithstanding the foregoing provisions of this Section
3.5(3), a Successor Security of a Security that does not bear a Restricted
Securities Legend shall not bear such legend unless the Company has reasonable
cause to believe that such Successor Security is a "restricted security" within
the meaning of Rule 144, in which case the Trustee, at the direction of the
Company, shall authenticate and deliver a new Security bearing a Restricted
Securities Legend in exchange for such Successor Security as provided in this
Article III.
(4) Any stock certificate representing shares of Common Stock issued
upon conversion of the Securities shall bear the Restricted Securities Legend
borne by such Securities, to the extent required by this Indenture, unless such
shares of Common Stock have 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 sold pursuant to Rule 144(k) of the
Securities Act, or unless otherwise agreed by the Company in writing with
written notice thereof to the transfer agent for the Common Stock. With respect
to the transfer of shares of Common Stock issued upon conversion of the
Securities that are restricted hereunder, any deliveries of certificates, legal
opinions or other instruments that would be required to be made to the Security
Registrar in the case of a transfer of Securities, as described above, shall
instead be made to the transfer agent for the Common Stock.
(5) Neither the Trustee, the Paying Agent nor any of their agents shall
(i) have any duty to monitor compliance with or with respect to any federal or
state or other securities or tax laws or (ii) have any duty to obtain
documentation on any transfers or exchanges other than as specifically required
hereunder.
SECTION 3.6 Mutilated, Destroyed, Lost or Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there be delivered to the Company and to the Trustee:
(1) evidence to their satisfaction of the destruction, loss or theft of
any Security, and
(2) such security or indemnity as may be satisfactory to the Company and
the Trustee to save each of them and any agent of either of them harmless, then,
in the absence of actual notice to the Company or the Trustee that such Security
has been acquired by a bona fide purchaser, the Company shall execute and the
Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Security, a new Security of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
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In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion, but
subject to any conversion rights, may, instead of issuing a new Security, pay
such Security, upon satisfaction of the conditions set forth in the preceding
paragraph.
Upon the issuance of any new Security under this Section 3.6, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto (other than any
stamp and other duties, if any, which may be imposed in connection therewith by
the United States or any political subdivision thereof or therein, which shall
be paid by the Company) and any other expenses (including the fees and expenses
of the Trustee) connected therewith.
Every new Security issued pursuant to this Section 3.6 in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and such new Security shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Securities duly issued
hereunder.
The provisions of this Section 3.6 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies of any Holder with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.7 Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the 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 Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security, the date of the
proposed payment and the Special Record Date, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such
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Defaulted Interest as in this Clause provided. The Special Record Date for the
payment of such Defaulted Interest shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment. The
Trustee, in the name and at the expense of the Company, shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder at such
Holder's address as it appears in the Security Register, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so mailed,
such Defaulted Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are registered at the
close of business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this Clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 3.5,
each Security delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
Interest on any Security which is converted in accordance with Section
12.2 during a Record Date Period shall be payable in accordance with the
provisions of Section 12.2.
SECTION 3.8 Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee, any Paying Agent and any agent of the Company, the Trustee
or any Paying Agent may treat the Person in whose name such Security is
registered as the owner of such Security for the purpose of receiving payment of
principal of, premium, if any, and (subject to Section 3.7) interest on such
Security and for all other purposes whatsoever, whether or not such Security be
overdue, and neither the Company, the Trustee, any Paying Agent nor any agent of
the Company, the Trustee or any Paying Agent shall be affected by notice to the
contrary.
SECTION 3.9 Cancellation.
All Securities surrendered for payment, redemption, repurchase,
registration of transfer or exchange or conversion shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee. All Securities so
delivered to the Trustee shall be canceled promptly by the Trustee (or its
agent). No Securities shall be authenticated in lieu of or in exchange for any
Securities canceled as provided in this Section 3.9. The Trustee shall dispose
of all canceled Securities in accordance with applicable law and its customary
practices in effect from time to time.
SECTION 3.10 Computation of Interest.
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Interest on the Securities (including any Liquidated Damages) shall be
computed on the basis of a 360-day year of twelve 30-day months.
SECTION 3.11 CUSIP Numbers.
The Company in issuing Securities may use "CUSIP" numbers (if then
generally in use) in addition to serial numbers; if so, the Trustee shall use
such CUSIP numbers in addition to serial numbers in notices of redemption and
repurchase as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such CUSIP numbers
either as printed on the Securities or as contained in any notice of a
redemption or repurchase and that reliance may be placed only on the serial or
other identification numbers printed on the Securities, and any such redemption
or repurchase shall not be affected by any defect in or omission of such CUSIP
numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction And Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
(except as to any surviving rights of conversion, or registration of transfer or
exchange, or replacement of Securities herein expressly provided for and any
right to receive Liquidated Damages as provided in Section 10.11 and in the form
of Securities set forth in Section 2.2 and the Company's obligations to the
Trustee pursuant to Section 6.7), and the Trustee, at the expense of the
Company, shall execute proper instruments in form and substance satisfactory to
the Trustee acknowledging satisfaction and discharge of this Indenture, when
(1) either
(i) all Securities theretofore authenticated and delivered
(other than (A) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 3.6 and (B) Securities for
whose payment money has theretofore been deposited in trust or segregated and
held in trust by the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 10.3) have been delivered to the Trustee
for cancellation; or
(ii) all such Securities not theretofore delivered to the
Trustee or its agent for cancellation (other than Securities referred to in
clauses (A) and (B) of clause (1)(i) above)
(a) have become due and payable, or
(b) will have become due and payable at their Stated
Maturity within one year, or
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(c) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company, and
the Company, in the case of clause (a), (b) or (c) above, has deposited or
caused to be deposited with the Trustee as trust funds (immediately available to
the Holders in the case of clause (a)) in trust for the purpose an amount in
cash sufficient to pay and discharge the entire indebtedness on such Securities
not theretofore delivered to the Trustee for cancellation, for principal,
premium, if any, and interest (including any Liquidated Damages) to the date of
such deposit (in the case of Securities which have become due and payable) or to
the Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, the obligations of
the Company to any Authenticating Agent under Section 6.12, the obligation of
the Company to pay Liquidated Damages, if money shall have been deposited with
the Trustee pursuant to clause (1)(ii) of this Section 4.1, the obligations of
the Trustee under Section 4.2 and the last paragraph of Section 10.3 and the
obligations of the Company and the Trustee under Section 3.5 and Article XII
shall survive. Funds held in trust pursuant to this Section are not subject to
the provisions of Article XIII.
SECTION 4.2 Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 and in accordance with
the provisions of Article XIII shall be held in trust for the sole benefit of
the Holders and not be subject to the subordination provisions of Article XIII,
and such monies shall be applied by the Trustee, in accordance with the
provisions of the Securities and this Indenture, to the payment, either directly
or through any Paying Agent, to the Persons entitled thereto, of the principal,
premium, if any, and interest for whose payment such money has been deposited
with the Trustee.
All moneys deposited with the Trustee pursuant to Section 4.1 (and held
by it or any Paying Agent) for the payment of Securities subsequently converted
shall be returned to the Company upon Company Request.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed or assessed against all money deposited with the Trustee
pursuant to Section 4.1 (other than income taxes and franchise taxes incurred or
payable by the Trustee and such other taxes, fees or charges incurred or payable
by the Trustee that are not directly the result of the deposit of such money
with the Trustee).
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ARTICLE V
REMEDIES
SECTION 5.1 Events of Default.
"Event of Default", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
occasioned by the provisions of Article XIII or be voluntary or involuntary or
be effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or governmental
body):
(1) default in the payment of the principal of or premium, if any, on
any Security at its Maturity, whether or not such payment is prohibited by the
subordination provisions of the Securities or of this Indenture; or
(2) default in the payment of any interest (including any Liquidated
Damages) upon any Security when it becomes due and payable, and continuance of
such default for a period of 30 days, whether or not such payment is prohibited
by the subordination provisions of the Securities or of this Indenture; or
(3) failure by the Company to give a Company Notice in accordance with
Section 14.3; or
(4) default in the performance of any covenant of the Company in this
Indenture (other than a covenant a default in the performance of which is
specifically dealt with elsewhere in this Section), and continuance of such
default for a period of 60 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least 25% in principal amount of the Outstanding Securities
a written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder; or
(5) any indebtedness under any bonds, debentures, notes or other
evidences of indebtedness for money borrowed (or guarantee thereof) by the
Company or any Significant Subsidiary or under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any indebtedness for money borrowed by the Company or any Significant
Subsidiary (an "Instrument") with an aggregate principal amount in excess of
U.S. $25,000,000, whether such indebtedness now exists or shall hereafter be
created, is not paid at final maturity of any Instrument (either at its stated
maturity or upon acceleration thereof), and such indebtedness is not discharged,
or such acceleration is not rescinded or annulled, within a period of 30 days
after there shall have been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 25% in principal amount of the Outstanding Securities a written notice
specifying such default and requiring the Company to cause such indebtedness to
be discharged or cause such default to be cured or waived or such acceleration
to be rescinded or annulled and stating that such notice is a "Notice of
Default" hereunder; or
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(6) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company or any Significant Subsidiary a bankrupt
or insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or any
Significant Subsidiary under any applicable Federal or State law, or appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Significant Subsidiary or of any
substantial part of the property of either, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect for a period of
60 consecutive days; or
(7) the commencement by the Company or any Significant Subsidiary of a
voluntary case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by either
to the entry of a decree or order for relief in respect of the Company or any
Significant Subsidiary in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding against
either, or the filing by either of a petition or answer or consent seeking
reorganization or similar relief under any applicable Federal or State law, or
the consent by either to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Significant
Subsidiary or of any substantial part of the property of either, or the making
by either of an assignment for the benefit of creditors, or the admission by
either in writing of its inability to pay its debts generally as they become
due, or the taking of corporate action by the Company or any Significant
Subsidiary in furtherance of any such action.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.1(6) or 5.1(7) with respect to the Company) occurs and is continuing,
then in every such case the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities may, subject to the provisions of
Article XIII, declare the principal of all the Securities to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by the Holders), and upon any such declaration such principal and all accrued
interest thereon shall become immediately due and payable. If an Event of
Default specified in Section 5.1(6) or 5.1(7) with respect to the Company
occurs, the principal of, and accrued interest on, all the Securities shall,
subject to the provisions of Article XIII, ipso facto become immediately due and
payable without any declaration or other Act of the Holders or any act on the
part of the Trustee.
At any time after such declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article V provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written
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notice to the Company and the Trustee, may, on behalf of all Holders, rescind
and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum sufficient
to pay
(i) all overdue interest on all Securities,
(ii) the principal of and premium, if any, on any Securities
which have become due otherwise than by such declaration of acceleration and any
interest thereon at the rate borne by the Securities,
(iii) to the extent permitted by applicable law, interest upon
overdue interest at a rate of 5% per annum, and
(iv) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel;
(2) all Events of Default, other than the nonpayment of the principal of
and any premium and interest on, Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in Section
5.13; and
(3) such rescission and annulment would not conflict with any judgment
or decree issued in appropriate judicial proceedings regarding the payment by
the Trustee to the Holders of the amounts referred to in 5.2(1).
No rescission or annulment referred to above shall affect any subsequent
default or impair any right consequent thereon.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if:
(1) default is made in the payment of any interest (including any
Liquidated Damages) on any Security when it becomes due and payable and such
default continues for a period of 30 days, or
(2) default is made in the payment of the principal of or premium, if
any, on any Security at the Maturity thereof,
the Company will, upon demand of the Trustee but subject to the provisions of
Article XIII pay to it, for the benefit of the Holders of such Securities the
whole amount then due and payable on such Securities for principal and interest
(including any Liquidated Damages) and interest on any overdue principal and
premium, if any, and, to the extent permitted by applicable law, on any overdue
interest (including any Liquidated Damages), at a rate of 5% per annum, and in
addition thereto, such further amount as shall be sufficient to cover the
reasonable costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
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If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders of Securities by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any such rights, whether for
the specific enforcement of any covenant or agreement in this Indenture or in
aid of the exercise of any power granted herein, or to enforce any other proper
remedy.
SECTION 5.4 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or the
creditors of either, the Trustee (irrespective of whether the principal of, and
any interest on, the Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Company for the payment of overdue principal
or interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise,
(1) to file and prove a claim for the whole amount of principal,
premium, if any, and interest owing and unpaid in respect of the Securities and
take such other actions, including participating as a member, voting or
otherwise, of any official committee of creditors appointed in such matter, and
to file such other papers or documents, in each of the foregoing cases, as may
be necessary or advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and of the Holders of Securities allowed
in such judicial proceeding, and
(2) to collect and receive any moneys or other property payable or
deliverable on any such claim and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder of
Securities to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders of
Securities to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel and any other amounts due the Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Security
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder of a Security in any such proceeding;
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provided, however, that the Trustee may, on behalf of such Holders, vote for the
election of a trustee in bankruptcy or similar official.
SECTION 5.5 Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which judgment
has been recovered.
SECTION 5.6 Application of Money Collected.
Subject to Article XIII, any money collected by the Trustee pursuant to
this Article V shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal, premium, if any, or interest, upon presentation of the Securities
and the notation thereon of 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 6.7;
SECOND: To the payment of the amounts then due and unpaid for principal
of, premium, if any, or interest (including Liquidated Damages, if any) on, the
Securities in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal, premium, if any, and
interest (including Liquidated Damages, if any), respectively;
THIRD: To such other Person or Persons, if any, to the extent entitled
thereto; and
FOURTH: Any remaining amounts shall be repaid to the Company.
SECTION 5.7 Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
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(3) such Holder or Holders have furnished to the Trustee, and if
requested, shall have provided, reasonable indemnity against the costs, expenses
and liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice and receipt
of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60 day period by the Holders of a majority in
principal amount of the Outstanding Securities, it being understood and intended
that no one or more of such Holders shall have any right in any manner whatever
by virtue of, or by availing of, any provision of this Indenture to affect,
disturb or prejudice the rights of any other of such Holders, or to obtain or
seek to obtain priority or preference over any other of such Holders or to
enforce any right under this Indenture, except in the manner herein provided and
for the equal and ratable benefit of all such Holders.
SECTION 5.8 Unconditional Right of Holders to Receive Principal, Premium and
Interest and to Convert.
Notwithstanding any other provision in this Indenture, but subject to
the provisions of Article XIII, the Holder of any Security shall have the right,
which is absolute and unconditional, to receive payment of the principal of,
premium, if any, and (subject to Section 3.7) interest (including Liquidated
Damages, if any) on such Security on the respective Stated Maturities expressed
in such Security (or, in the case of redemption or repurchase, on the Redemption
Date or Repurchase Date, as the case may be), and to convert such Security in
accordance with Article XII, and to institute suit for the enforcement of any
such payment and right to convert, and such rights shall not be impaired without
the consent of such Holder.
SECTION 5.9 Restoration of Rights and Remedies.
If the Trustee or any Holder of a Security has instituted any proceeding
to enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders of
Securities shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
such Holders shall continue as though no such proceeding had been instituted.
SECTION 5.10 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders of Securities is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy
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hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or any
acquiescence therein. Every right and remedy given by this Article V or by law
to the Trustee or to the Holders of Securities may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or (subject to the
limitations contained in this Indenture) by the Holders of Securities as the
case may be.
SECTION 5.12 Control by Holders of Securities.
Subject to Section 6.3, the Holders of a majority in principal amount of
the Outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or with
this Indenture, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it in
personal liability or be unjustly prejudicial to the Holders of Securities not
consenting.
SECTION 5.13 Waiver of Past Defaults.
The Holders, either (i) through the written consent of not less than a
majority in principal amount of the Outstanding Securities or (ii) by the
adoption of a resolution, at a meeting of Holders of the Outstanding Securities
at which a quorum is present, by the Holders of at least 66-2/3% in principal
amount of the Outstanding Securities represented at such meeting, may on behalf
of the Holders of all the Securities waive any past default hereunder and its
consequences, except a default (A) in the payment of the principal of, premium,
if any, or interest (including Liquidated Damages) on any Security, or (B) in
respect of a covenant or provision hereof which under Article VIII cannot be
modified or amended without the consent of the Holder of each Outstanding
Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14 Undertaking for Costs.
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All parties to this Indenture agree, and each Holder of any Security 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 any suit against the Trustee for any action taken, suffered
or omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.14 shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in principal
amount of the Outstanding Securities, or to any suit instituted by any Holder of
any Security for the enforcement of the payment of the principal of, premium, if
any, or interest on any Security on or after the respective Stated Maturity or
Maturities expressed in such Security (or, in the case of redemption or
repurchase, on or after the Redemption Date or Repurchase Date, as the case may
be) or for the enforcement of the right to convert any Security in accordance
with Article XII.
SECTION 5.15 Waiver of Stay, Usury or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, usury or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede by reason of such law the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
SECTION 6.1 Certain Duties and Responsibilities.
(1) Except during the continuance of an Event of Default,
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture, but in the case of
any such certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the requirements of
this Indenture, but not to verify the contents thereof.
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(2) In case an Event of Default has occurred and is continuing, 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 man would exercise or use under the circumstances in the conduct of his
own affairs.
(3) 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
(i) this paragraph (3) shall not be construed to limit the effect
of paragraph (1) of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in principal amount of the Outstanding
Securities relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture; and
(iv) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(4) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 6.2 Notice of Defaults.
Within 90 days after the occurrence of any default hereunder as to which
the Trustee has received written notice, the Trustee shall give to all Holders
of Securities, in the manner provided in Section 1.6, notice of such default,
unless such default shall have been cured or waived; provided, however, that,
except in the case of a default in the payment of the principal of, premium, if
any, or interest on any Security the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee or
a trust committee of directors or Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interest of the
Holders; and provided, further, that in the case of any default of the character
specified in Section 5.1(4), no such notice to Holders of Securities shall be
given until at least 60 days after the occurrence thereof or, if applicable, the
cure period specified therein. For the purpose of this Section,
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the term "default" means any event which is, or after notice or lapse of time or
both would become, an Event of Default.
SECTION 6.3 Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(1) the Trustee may rely, and shall be protected in acting or refraining
from acting, upon any resolution, Officers' Certificate, other certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, coupon, other evidence of indebtedness or other
paper or document (collectively, the "Documents") believed by it to be genuine
and to have been signed or presented by the proper party or parties, and the
Trustee need not investigate any fact or matter stated in such Documents;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors shall be sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be the one specifically prescribed) may, in the absence of bad faith on its
part, request and rely upon an Officers' Certificate or Opinion of Counsel;
(4) the Trustee may consult with counsel of its selection and the advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders of Securities pursuant to this Indenture, unless such Holders
shall have furnished and delivered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, coupon, other evidence of indebtedness or other paper or document, but the
Trustee may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney; and
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
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SECTION 6.4 Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities (except the
Trustee's certificates of authentication) shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture, of the Securities or of the Common Stock issuable upon the conversion
of the Securities. The Trustee shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
SECTION 6.5 May Hold Securities, Act as Trustee under Other Indentures.
The Trustee, any Authenticating Agent, any Paying Agent, any Conversion
Agent or any other agent of the Company or the Trustee, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Conversion Agent or such other agent.
The Trustee may become and act as trustee under other indentures under
which other securities, or certificates of interest or participation in other
securities, of the Company are outstanding in the same manner as if it were not
Trustee hereunder.
SECTION 6.6 Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company.
SECTION 6.7 Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time such reasonable compensation
as the Company and the Trustee shall from time to time agree in writing for its
acceptance of this Indenture and for all services rendered by it hereunder
(which compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee (including costs and expenses of enforcing this
Indenture and defending itself against any claim (whether asserted by the
Company, any Holder of Securities or any other Person) or liability in
connection with the exercise of any of its powers or duties hereunder) in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
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(3) to indemnify the Trustee (and its directors, officers, employees and
agents) for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this trust, including the
reasonable costs, expenses and reasonable attorneys' fees of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 5.1(6) or Section 5.1(7), the expenses
(including the reasonable charges of its counsel) and the compensation for the
services are intended to constitute expenses of the administration under any
applicable Federal or state bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the termination of this
Indenture or the earlier resignation or removal of the Trustee.
SECTION 6.8 Corporate Trustee Required; Eligibility.
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, having (or
being part of a holding company group with) a combined capital and surplus of at
least U.S. $50,000,000, subject to supervision or examination by federal or
state authority, and in good standing. The Trustee or an Affiliate of the
Trustee shall maintain an established place of business in the Borough of
Manhattan, The City of New York. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article and a
successor shall be appointed pursuant to Section 6.9.
SECTION 6.9 Resignation and Removal; Appointment of Successor.
(1) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.10.
(2) The Trustee may resign at any time by giving written notice thereof
to the Company. If the instrument of acceptance by a successor Trustee required
by Section 6.10 shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(3) The Trustee may be removed at any time by an Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and the Company. If the instrument of acceptance by a successor Trustee
required by Section 6.10 shall not have been delivered to the Trustee within 30
days after the giving of such notice of removal, the removed Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
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(4) If at any time:
(i) the Trustee shall cease to be eligible under Section 6.8 and
shall fail to resign after written request therefor by the Company or by any
Holder of a Security who has been a bona fide Holder of a Security for at least
six months, or
(ii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, any Holder of a Security who has been
a bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
(5) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee and
shall comply with the applicable requirements of this Section and Section 6.10.
If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 6.10, become the successor Trustee
and supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders of Securities
and accepted appointment in the manner required by this Section and Section
6.10, any Holder of a Security who has been a bona fide Holder of a Security for
at least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(6) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to all Holders of
Securities in the manner provided in Section 1.6. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 6.10 Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee
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hereunder. Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be eligible under this Article.
SECTION 6.11 Merger, Conversion, Consolidation or Succession to Business.
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 the trust created by this Indenture), shall
be the successor of the Trustee hereunder, provided such corporation shall be
otherwise eligible under this Article, without the execution or filing of any
paper or any further act on the part of any of the parties hereto. In case any
Securities shall have been authenticated, but not delivered, by the Trustee then
in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
SECTION 6.12 Authenticating Agents.
The Trustee may, with the consent of the Company, appoint an
Authenticating Agent or Agents acceptable to the Company with respect to the
Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities issued upon exchange or substitution pursuant to this
Indenture.
Securities authenticated by an Authenticating Agent shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder, and every reference in
this Indenture to the authentication and delivery of Securities by the Trustee
or the Trustee's certificate of authentication shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be subject to acceptance
by the Company and shall at all times be a corporation organized and doing
business under the laws of the United States of America, any State thereof or
the District of Columbia, authorized under such laws to act as Authenticating
Agent and subject to supervision or examination by government or other fiscal
authority. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section 6.12, such Authenticating Agent
shall resign immediately in the manner and with the effect specified in this
Section 6.12.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section 6.12,
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without the execution or filing of any paper or any further act on the part of
the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.12, the Trustee may appoint a successor
Authenticating Agent which shall be subject to acceptance by the Company. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section 6.12.
The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section 6.12.
If an Authenticating Agent is appointed with respect to the Securities
pursuant to this Section 6.12, the Securities may have endorsed thereon, in
addition to or in lieu of the Trustee's certification of authentication, an
alternative certificate of authentication in the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
as Trustee
By:
------------------------------------------
As Authenticating Agent
By:
------------------------------------------
Authorized Signatory
SECTION 6.13 Disqualification; Conflicting Interests.
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 6.14 Preferential Collection of Claims Against Company.
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If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
ARTICLE VII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 7.1 Company May Consolidate, Etc, . Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person or
convey, transfer, sell or lease all its properties and assets substantially as
an entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer, sell or lease
such Person's properties and assets substantially as an entirety to the Company
unless:
(1) the Person formed by such consolidation or into or with which the
Company is merged or the Person to which the properties and assets of the
Company are so conveyed, transferred, sold or leased shall be a corporation,
limited liability company, partnership or trust organized and validly existing
under the laws of the United States of America, any State thereof or the
District of Columbia and, if other than the Company, shall expressly assume, by
an indenture supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the principal of,
premium, if any, and interest (including Liquidated Damages, if any) on all of
the Securities as applicable, and the performance or observance of every
covenant of this Indenture on the part of the Company to be performed or
observed and shall have provided for conversion rights in accordance with
Article XII;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event that after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer, sale or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply with
this Article and that all conditions precedent herein provided for relating to
such transaction have been complied with, together with any documents required
under Section 8.3.
SECTION 7.2 Successor Substituted.
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Upon any consolidation of the Company with, or merger of the Company
into any other Person or any conveyance, transfer or lease of all or
substantially all the properties and assets of the Company in accordance with
Section 7.1, the successor Person formed by such consolidation or into or with
which the Company is merged or to which such conveyance, transfer, sale or lease
is made shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor Person shall be relieved of all obligations
and covenants under this Indenture and the Securities.
ARTICLE VIII
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures Without Consent of Holders of Securities.
Without the consent of any Holders of Securities the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto for any of the
following purposes:
(1) to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants and obligations of the Company
herein and in the Securities as permitted by Article VII of this Indenture; or
(2) to add to the covenants of the Company for the benefit of the
Holders of Securities or to surrender any right or power herein conferred upon
the Company; or
(3) to secure the Securities; or
(4) to make provision with respect to the conversion rights of Holders
of Securities pursuant to Section 12.11 or to make provision with respect to the
repurchase rights of Holders of Securities pursuant to Section 14.5; or
(5) to make any changes or modifications to this Indenture necessary in
connection with the registration of any Registrable Securities under the
Securities Act as contemplated by Section 10.11, provided such action pursuant
to this clause (5) shall not adversely affect the interests of the Holders of
Securities in any material respect; or
(6) to comply with the requirements of the Trust Indenture Act or the
rules and regulations of the Commission thereunder in order to effect or
maintain the qualification of this Indenture under the Trust Indenture Act, as
contemplated by this Indenture or otherwise; or
(7) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee; or
(8) subject to Section 13.12, to make any change in Article XIII that
would limit or terminate the benefits available to any holder of Senior Debt
under such Article; or
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(9) to cure any ambiguity, to correct or supplement any provision herein
which may be inconsistent with any other provision herein or which is otherwise
defective, or to make any other provisions with respect to matters or questions
arising under this Indenture as the Company and the Trustee may deem necessary
or desirable, provided such action pursuant to this clause (9) shall not
adversely affect the interests of the Holders of Securities in any material
respect.
Upon Company Request, accompanied by a Board Resolution authorizing the
execution of any such supplemental indenture, and subject to and upon receipt by
the Trustee of the documents described in Section 8.3 hereof, the Trustee shall
join with the Company in the execution of any supplemental indenture authorized
or permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained.
SECTION 8.2 Supplemental Indentures with Consent of Holders of Securities.
With either (i) the written consent of the Holders of not less than a
majority in principal amount of the Outstanding Securities, by the Act of said
Holders delivered to the Company and the Trustee, or (ii) by the adoption of a
resolution, at a meeting of Holders of the Outstanding Securities at which a
quorum is present, by the Holders of at least 66-2/3% in principal amount of the
Outstanding Securities represented at such meeting, the Company, when authorized
by a Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of Securities under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent or affirmative vote of the Holder of each Outstanding Security
affected thereby,
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Security, or reduce the principal amount of, or the premium,
if any, or the rate of interest payable thereon, or reduce the amount payable
upon a redemption or mandatory repurchase, or change the place or currency of
payment of the principal of, premium, if any, or interest on any Security
(including any payment of Liquidated Damages or Redemption Price or Repurchase
Price in respect of such Security) or impair the right to institute suit for the
enforcement of any payment in respect of any Security on or after the Stated
Maturity thereof (or, in the case of redemption or any repurchase, on or after
the Redemption Date or Repurchase Date, as the case may be) or, except as
permitted by Section 12.11, adversely affect the right of Holders to convert any
Security as provided in Article XII, or modify the provisions of this Indenture
with respect to the subordination of the Securities in a manner adverse to the
Holders; or
(2) reduce the requirements of Section 9.4 for quorum or voting, or
reduce the percentage in principal amount of the Outstanding Securities the
consent of whose Holders is required for any such supplemental indenture or the
consent of whose Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture; or
(3) modify the obligation of the Company to maintain an office or agency
in the Borough of Manhattan, The City of New York, pursuant to Section 10.2; or
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(4) modify any of the provisions of this Section or Section 5.13 or
10.12, except to increase any percentage contained herein or therein or to
provide that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security affected
thereby; or
(5) modify the provisions of Article XIV in a manner adverse to the
Holders; or
(6) modify any of the provisions of Section 10.9.
It shall not be necessary for any Act of Holders of Securities under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
SECTION 8.3 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Sections 6.1 and 6.3) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture, and that such supplemental
indenture has been duly authorized, executed and delivered by the Company and
constitutes a valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 8.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
appertaining thereto shall be bound thereby.
SECTION 8.5 Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Company and the
Trustee, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 8.6 Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 8.2, the Company
shall give notice to all Holders of Securities
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of such fact, setting forth in general terms the substance of such supplemental
indenture, in the manner provided in Section 1.6. Any failure of the Company to
give such notice, or any defect therein, shall not in any way impair or affect
the validity of any such supplemental indenture.
ARTICLE IX
MEETINGS OF HOLDERS OF SECURITIES
SECTION 9.1 Purposes for Which Meetings May Be Called.
A meeting of Holders of Securities may be called at any time and from
time to time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities.
SECTION 9.2 Call, Notice and Place of Meetings.
(1) The Trustee may at any time call a meeting of Holders of Securities
for any purpose specified in Section 9.1, to be held at such time and at such
place in the Borough of Manhattan, The City of New York, as the Trustee shall
determine. Notice of every meeting of Holders of Securities, setting forth the
time and the place of such meeting and in general terms the action proposed to
be taken at such meeting, shall be given, in the manner provided in Section 1.6,
not less than 21 nor more than 180 days prior to the date fixed for the meeting.
(2) In case at any time the Company, pursuant to a Board Resolution, or
the Holders of at least 10% in principal amount of the Outstanding Securities
shall have requested the Trustee to call a meeting of the Holders of Securities
for any purpose specified in Section 9.1, 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 21 days after
receipt of such request or shall not thereafter proceed to cause the meeting to
be held as provided herein, then the Company or the Holders of Securities in the
amount specified, as the case may be, may determine the time and the place in
the Borough of Manhattan, The City of New York, for such meeting and may call
such meeting for such purposes by giving notice thereof as provided in paragraph
(1) of this Section.
SECTION 9.3 Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of Securities, a Person
shall be (i) a Holder of one or more Outstanding Securities, or (ii) a Person
appointed by an instrument in writing as proxy for a Holder or Holders of one or
more Outstanding Securities by such Holder or Holders. The only Persons who
shall be entitled to be present or to speak at any meeting of Holders shall be
the Persons entitled to vote at such meeting and their counsel, any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
SECTION 9.4 Quorum; Action.
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The Persons entitled to vote a majority in principal amount of the
Outstanding Securities shall constitute a quorum. In the absence of a quorum
within 30 minutes of the time appointed for any such meeting, the meeting shall,
if convened at the request of Holders of Securities, be dissolved. In any other
case, the meeting may be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
adjourned meeting (subject to repeated applications of this sentence). Notice of
the reconvening of any adjourned meeting shall be given as provided in Section
9.2(1), except that such notice need be given only once not less than five days
prior to the date on which the meeting is scheduled to be reconvened. Notice of
the reconvening of an adjourned meeting shall state expressly the percentage of
the principal amount of the Outstanding Securities which shall constitute a
quorum.
Subject to the foregoing, at the reconvening of any meeting adjourned
for a lack of a quorum, the Persons entitled to vote 25% in principal amount of
the Outstanding Securities at the time shall constitute a quorum for the taking
of any action set forth in the notice of the original meeting.
At a meeting or an adjourned meeting duly reconvened and at which a
quorum is present as aforesaid, any resolution and all matters (except as
limited by the proviso to Section 8.2 and except to the extent Section 10.12
requires a different vote) shall be effectively passed and decided if passed or
decided by the lesser of (i) the Holders of not less than a majority in
principal amount of Outstanding Securities and (ii) the Persons entitled to vote
not less than 66-2/3% in principal amount of Outstanding Securities represented
and entitled to vote at such meeting.
Any resolution passed or decisions taken at any meeting of Holders of
Securities duly held in accordance with this Section shall be binding on all the
Holders of Securities whether or not present or represented at the meeting. The
Trustee shall, in the name and at the expense of the Company, notify all the
Holders of Securities of any such resolutions or decisions pursuant to Section
1.6.
SECTION 9.5 Determination of Voting Rights; Conduct and Adjournment of Meetings.
(1) Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Holders of Securities in regard to proof of the holding of Securities 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 deem appropriate. Except as otherwise permitted or
required by any such regulations, the holding of Securities shall be proved in
the manner specified in Section 1.4 and the appointment of any proxy shall be
proved in the manner specified in Section 1.4 or by having the signature of the
Person executing the proxy guaranteed by any bank, broker or other eligible
institution participating in a recognized medallion signature guarantee program.
(2) The Trustee shall, by an instrument in writing, appoint a temporary
chairman (which may be the Trustee) of the meeting, unless the meeting shall
have been called by the Company or by
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Holders of Securities as provided in Section 9.2(1), in which case the Company
or the Holders of Securities 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 Persons entitled to
vote a majority in principal amount of the Outstanding Securities represented at
the meeting.
(3) At any meeting, each Holder of a Security or proxy shall be entitled
to one vote for each U.S. $1,000 principal amount of Securities held or
represented by him; provided, however, that no vote shall be cast or counted at
any meeting in respect of any Security 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, except as a Holder of a Security or proxy.
(4) Any meeting of Holders of Securities duly called pursuant to Section
9.2 at which a quorum is present may be adjourned from time to time by Persons
entitled to vote a majority in principal amount of the Outstanding Securities
represented at the meeting, and the meeting may be held as so adjourned without
further notice.
SECTION 9.6 Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities or of their representatives by proxy and
the principal amounts at Stated Maturity and serial numbers of the Outstanding
Securities 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, at least in duplicate, of the proceedings
of each meeting of Holders of Securities 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
notice of the meeting and showing that said notice was given as provided in
Section 9.2 and, if applicable, Section 9.4. Each copy shall be signed and
verified by the affidavits of the permanent chairman and secretary of the
meeting and one such copy shall be delivered to the Company and another 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.
ARTICLE X
COVENANTS
SECTION 10.1 Payment of Principal, Premium and Interest.
The Company covenants and agrees that it will duly and punctually pay
the principal of and premium, if any, and interest (including Liquidated
Damages, if any) on the Securities in accordance with the terms of the
Securities and this Indenture. The Company will deposit or cause to be deposited
with the Trustee, no later than the opening of business on the date of the
Stated Maturity
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of any Security or no later than the opening of business on the due date for any
installment of interest, all payments so due, which payments shall be in
immediately available funds on the date of such Stated Maturity or due date, as
the case may be.
SECTION 10.2 Maintenance of Offices or Agencies.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where the Securities may be surrendered for
registration of transfer or exchange or for presentation for payment or for
conversion, redemption or repurchase and where notices and demands to or upon
the Company in respect of the Securities 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 or the office or agency of the Trustee in the Borough of
Manhattan, The City of New York.
The Company may at any time and from time to time vary or terminate the
appointment of any such agent or appoint any additional agents for any or all of
such purposes; provided, however, that until all of the Securities have been
delivered to the Trustee for cancellation, or moneys sufficient to pay the
principal of, premium, if any, and interest on the Securities have been made
available for payment and either paid or returned to the Company pursuant to the
provisions of Section 10.3, the Company will maintain in the Borough of
Manhattan, The City of New York, an office or agency where Securities may be
presented or surrendered for payment and conversion, which shall initially be
Norwest Bank Minnesota, National Association, an Affiliate of the Trustee, where
Securities may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company will give prompt written notice to the
Trustee, and notice to the Holders in accordance with Section 1.6, of the
appointment or termination of any such agents and of the location and any change
in the location of any such office or agency.
The Company hereby initially designates the Trustee as Paying Agent,
Security Registrar and Conversion Agent, and each of the Corporate Trust Office
of the Trustee and the office or agency of the Trustee in the Borough of
Manhattan, The City of New York, located at 61 Broadway, 15th Floor, New York,
New York 10006 attention: Corporate Trust Administration (Redback Networks Inc.
5% Convertible Subordinated Notes due April 1, 2007) as one such office or
agency of the Company for each of the aforesaid purposes.
SECTION 10.3 Money for Security Payments to Be Held in Trust.
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 on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal, premium, if any, or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and the Company will promptly notify the Trustee of its
action or failure so to act.
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Whenever the Company shall have one or more Paying Agents, it will, no
later than the opening of business on each due date of the principal of,
premium, if any, or interest on any Securities, deposit with the Trustee a sum
in funds immediately payable on the payment date sufficient to pay the
principal, premium, if any, or interest so becoming due, such sum to be held for
the benefit of the Persons entitled to 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 so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Securities for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Securities) in the making of any payment of principal, premium,
if any, or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held by
such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease.
SECTION 10.4 Existence.
Subject to Article VII, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company.
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SECTION 10.5 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 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 Significant Subsidiary.
SECTION 10.6 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 Securities or with respect to this Indenture; provided, however, that, in
the case of clauses (i) and (ii), the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim (A) if the failure to do so will not, in the aggregate, have a material
adverse impact on the Company and its subsidiaries taken as a whole, or (B) if
the amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 10.7 Registration and Listing.
The Company (i) will effect all registrations with, and obtain all
approvals by, all governmental authorities that may be necessary under any
United States Federal or state law (including the Securities Act, the Exchange
Act and state securities and Blue Sky laws) before the shares of Common Stock
issuable upon conversion of Securities are issued and delivered, and qualified
or listed as contemplated by clause (ii) (it being understood that the Company
shall not be required to register the Securities under the Securities Act,
except pursuant to the Registration Rights Agreement referred to in Section
10.11); and (ii) will qualify the shares of Common Stock required to be issued
and delivered upon conversion of Securities, prior to such issuance or delivery,
for quotation on the Nasdaq National Market or, if the Common Stock is not then
quoted on the Nasdaq National Market, list the Common Stock on each national
securities exchange or quotation system on which outstanding Common Stock is
listed or quoted at the time of such delivery.
Nothing in this Section will limit the application of Section 10.11.
SECTION 10.8 Statement by Officers as to Default.
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The Company shall deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
The Company will deliver to the Trustee, forthwith upon becoming aware
of any default or any Event of Default under the Indenture, 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. For the purpose of this Section, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default.
Any notice required to be given under this Section 10.8 shall be
delivered to the Trustee at its Corporate Trust Office.
SECTION 10.9 Delivery of Certain Information.
At any time when the Company is not subject to Section 13 or 15(d) of
the Exchange Act, upon the request of a Holder of a Restricted Security or the
holder of shares of Common Stock issued upon conversion thereof, the Company
will promptly furnish or cause to be furnished Rule 144A Information (as defined
below) to such Holder of Restricted Securities or such holder of shares of
Common Stock issued upon conversion of Restricted Securities, or to a
prospective purchaser of any such security designated by any such Holder or
holder, as the case may be, to the extent required to permit compliance by such
Holder or holder with Rule 144A under the Securities Act (or any successor
provision thereto) in connection with the resale of any such security; provided,
however, that the Company shall not be required to furnish such information in
connection with any request made on or after the date which is two years from
the later of (i) the date such a security (or any such predecessor security) was
last acquired from the Company or (ii) the date such a security (or any such
predecessor security) was last acquired from an "affiliate" of the Company
within the meaning of Rule 144 under the Securities Act (or any successor
provision thereto). "Rule 144A Information" shall be such information as is
specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto).
SECTION 10.10 Resale of Certain Securities.
During the period beginning on the last date of original issuance of the
Securities and ending on the date that is two years from such date (or such
shortened period under Rule 144(k) under the Securities Act or any successor
rule), the Company will not, and will not permit any of its subsidiaries or
other "affiliates" (as defined under Rule 144 under the Securities Act or any
successor provision thereto) to, resell (i) any Securities which constitute
"restricted securities" under Rule 144 or (ii) any securities into which the
Securities have been converted under this Indenture which constitute "restricted
securities" under Rule 144, that in either case have been reacquired by any of
them. The Trustee shall have no responsibility in respect of the Company's
performance of its agreement in the preceding sentence.
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SECTION 10.11 Registration Rights.
The Company agrees that the Holders from time to time of Registrable
Securities (as defined below) are entitled to the benefits of a Registration
Rights Agreement, dated as of March 29, 2000 (the "Registration Rights
Agreement"), executed by the Company. Pursuant to the Registration Rights
Agreement, the Company has agreed for the benefit of the holders from time to
time of the Registrable Securities that it will, at its expense, (i) within 90
calendar days after the Issue Date of the Securities, file a shelf registration
statement (the "Shelf Registration Statement") with the Commission with respect
to resales of the Registrable Securities, (ii) use its reasonable efforts to
cause such Shelf Registration Statement to be declared effective by the
Commission within 180 calendar days after the Issue Date of the Securities,
provided, however that the Company may, upon written notice to all the Holders,
postpone having the Shelf Registration Statement declared effective if the
Company possesses material non-public information, the disclosure of which would
have a material adverse effect on the Company and its subsidiaries taken as a
whole and (iii) use its reasonable efforts to maintain such Shelf Registration
Statement effective under the Securities Act until the second annual anniversary
of the date it is declared effective or such earlier date as is provided in the
Registration Rights Agreement (the "Effectiveness Period"). The Company will be
permitted to suspend the use of the prospectus which is a part of the Shelf
Registration Statement during certain periods of time as provided in the
Registration Rights Agreement.
If (i) on or prior to 90 calendar days following the Issue Date of the
Securities, a Shelf Registration Statement has not been filed with the
Commission, or (ii) on or prior to the 180th calendar day following the Issue
Date of the Securities, such Shelf Registration Statement is not declared
effective (each, a "Registration Default"), additional interest ("Liquidated
Damages") will accrue on the Restricted Securities from and including the day
following such Registration Default to but excluding the day on which such
Registration Default has been cured. Liquidated Damages will be paid
semi-annually in arrears, with the first semi-annual payment due on the first
Interest Payment Date, as applicable, in respect of the Restricted Securities
following the date on which such Liquidated Damages begin to accrue, and will
accrue at a rate per annum equal to an additional one-quarter of one percent
(0.25%) of the principal amount of the Restricted Securities to and including
the 90th calendar day following such Registration Default and at a rate per
annum equal to one-half of one percent (0.50%) thereof from and after the 91st
calendar day following such Registration Default. Pursuant to the Registration
Rights Agreement, in the event that the Shelf Registration Statement ceases to
be effective (or the Holders of Registrable Securities are otherwise prevented
or restricted by the Company from effecting sales pursuant thereto) (an
"Effective Failure") during the Effectiveness Period for more than 60 days,
whether or not consecutive, during any 90-day period or for more than 120 days,
whether or not consecutive, during any 365 day period, then the interest rate
borne by the Restricted Securities shall increase by an additional one-half of
one percent (0.50%) per annum from the 61st day of the applicable 90-day period
or the 121st calendar day of the applicable 365 day period until the earlier of
(A) such time as the Effective Failure is cured or (B) the Effectiveness Period
expires.
Whenever in this Indenture there is mentioned, in any context, the
payment of the principal of, premium, if any, or interest on, or in respect of,
any Security, such mention shall be deemed to
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include mention of the payment of Liquidated Damages provided for in this
Section to the extent that, in such context, Liquidated Damages are, were or
would be payable in respect thereof pursuant to the provisions of this Section
and express mention of the payment of Liquidated Damages (if applicable) in any
provisions hereof shall not be construed as excluding Liquidated Damages in
those provisions hereof where such express mention is not made.
For the purposes of the Registration Rights Agreement, "Registrable
Securities" means all or any portion of the Restricted Securities issued from
time to time under this Indenture and the shares of Common Stock issuable upon
conversion of such Restricted Securities, except any such Restricted Security or
share of Common Stock issuable upon conversion thereof which (i) has been
effectively registered under the Securities Act and sold in a manner
contemplated by the Shelf Registration Statement, (ii) has been transferred in
compliance with Rule 144 under the Securities Act (or any successor provision
thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any
successor provision thereto) or (iii) otherwise has been transferred and a new
Security or share of Common Stock not subject to transfer restrictions under the
Securities Act has been delivered by or on behalf of the Company in accordance
with Section 3.5 of this Indenture.
If a Security, or the shares of Common Stock issuable upon conversion of
a Security, is a Registrable Security, and the Holder thereof elects to sell
such Registrable Security pursuant to the Shelf Registration Statement then, by
its acceptance thereof, the Holder of such Registrable Security will have agreed
to be bound by the terms of the Registration Rights Agreement relating to the
Registrable Securities which are the subject of such election.
For the purposes of the Registration Rights Agreement, the term "Holder"
includes any Person that has a beneficial interest in any Restricted Global
Security or any beneficial interest in a global security representing shares of
Common Stock issuable upon conversion of a Security.
If Liquidated Damages are payable under the Registration Rights
Agreement, the Company shall deliver to the Trustee a certificate to that effect
stating (i) the amount of Liquidated Damages that is payable and (ii) the date
on which Liquidated Damages are payable. Unless and until a Responsible Officer
of the Trustee receives at the Corporate Trust Office such a certificate, the
Trustee may assume without inquiry that no Liquidated Damages are payable. If
Liquidated Damages have been paid by the Company directly to the persons
entitled to them, the Company shall deliver to the Trustee a certificate setting
forth the particulars of such payment.
SECTION 10.12 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 10.4 (other than with respect to the
existence of the Company (subject to Article VII)), 10.5 and 10. 6, inclusive
(other than a covenant or condition which under Article VIII cannot be modified
or amended without the consent of the Holder of each Outstanding Security
affected), if before the time for such compliance the Holders shall, through (i)
the written consent of not less than a majority in principal amount of the
Outstanding Securities or (ii) the adoption of a resolution at a meeting of
Holders of the Outstanding Securities at which a quorum is present by the
Holders of not less than 66-2/3% in principal amount of the Outstanding
Securities represented at such meeting,
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either waive such compliance in such instance or generally waive compliance with
such covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee or any Paying or Conversion Agent in respect of any such covenant or
condition shall remain in full force and effect.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1 Right of Redemption.
The Securities may be redeemed in accordance with the provisions of the
form of Securities set forth in Section 2.2.
SECTION 11.2 Applicability of Article.
Redemption of Securities at the election of the Company or otherwise, as
permitted or required by any provision of the Securities or this Indenture,
shall be made in accordance with such provision and this Article XI.
SECTION 11.3 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced
by a Board Resolution. In case of any redemption at the election of the Company
of any of the Securities, the Company shall, at least 45 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee in writing of such Redemption
Date.
SECTION 11.4 Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected by the Trustee within five Business
Days after it receives the notice described in 11.3, from the Outstanding
Securities not previously called for redemption, by lot or by such other method
as the Trustee may deem fair and appropriate.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed may be treated by
the Trustee as Outstanding for the purpose of such selection. The Trustee shall
promptly notify the Company and each Security Registrar in writing of the
securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be
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redeemed only in part, to the portion of the principal amount of such Securities
which has been or is to be redeemed.
SECTION 11.5 Notice of Redemption.
Notice of redemption shall be given in the manner provided in Section
1.6 to the Holders of Securities to be redeemed not less than 30 nor more than
60 days prior to the Redemption Date, and such notice shall be irrevocable. The
Company shall, concurrently with the giving of such notice, publish a Press
Release including the information required to be included in such notice of
redemption hereunder.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price, and accrued interest (including Liquidated
Damages, if any), if any, to, but excluding, the Redemption Date,
(3) if less than all Outstanding Securities are to be redeemed, the
aggregate principal amount of Securities to be redeemed and the aggregate
principal amount of Securities which will be outstanding after such partial
redemption,
(4) that on the Redemption Date the Redemption Price, and accrued
interest (including Liquidated Damages, if any), if any, to, but excluding, the
Redemption Date, will become due and payable upon each such Security to be
redeemed, and that interest thereon shall cease to accrue on and after said
date,
(5) the Conversion Rate, the date on which the right to convert the
Securities to be redeemed will terminate and the places where such Securities
may be surrendered for conversion, and
(6) the place or places where such Securities are to be surrendered for
payment of the Redemption Price and accrued interest (including Liquidated
Damages, if any), if any, to, but excluding, the Redemption Date.
In case of a partial redemption, the notice shall specify the serial and
CUSIP numbers (if any) and the portions thereof called for redemption and that
transfers and exchanges may occur on or prior to the Redemption Date.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's written request, by
the Trustee in the name of and at the expense of the Company. Notice of
redemption of Securities to be redeemed at the election of the Company received
by the Trustee shall be given by the Trustee to each Paying Agent in the name of
and at the expense of the Company.
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SECTION 11.6 Deposit of Redemption Price.
On or prior to the Redemption Date, the Company shall deposit with the
Trustee (or, if the Company is acting as its own Paying Agent, segregate and
hold in trust as provided in Section 10.3) an amount of money (which shall be in
immediately available funds on such Redemption Date) sufficient to pay the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest (including Liquidated Damages, if any) to, but
excluding, the Redemption Date on, all the Securities which are to be redeemed
on that date other than any Securities called for redemption on that date which
have been converted prior to the date of such deposit.
If any Security called for redemption is converted, any money deposited
with the Trustee or so segregated and held in trust for the redemption of such
Security shall (subject to any right of the Holder of such Security or any
Predecessor Security to receive interest as provided in the last paragraph of
Section 3.7) be paid to the Company on Company Request or, if then held by the
Company, shall be discharged from such trust.
SECTION 11.7 Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company shall default in the payment of the Redemption Price, including accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
Security for redemption in accordance with said notice such Security shall be
paid by the Company at the Redemption Price together with accrued and unpaid
interest (including Liquidated Damages, if any) to the Redemption Date;
provided, however, that installments of interest on Securities whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such on
the relevant Record Date according to their terms and the provisions of Section
3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal amount of, premium, if any, and,
to the extent permitted by applicable law, accrued interest on such Security
shall, until paid, bear interest from the Redemption Date at a rate of 5% per
annum and such Security shall remain convertible until the Redemption Price of
such Security (or portion thereof, as the case may be) shall have been paid or
duly provided for.
Any Security which is to be redeemed only in part shall be surrendered
at the Corporate Trust Office or an office or agency of the Company designated
for that purpose pursuant to Section 10.2 (with, if the Company or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and make available for delivery to the Holder of
such Security without service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
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SECTION 11.8 Conversion Arrangement on Call for Redemption.
In connection with any redemption of Securities, the Company may arrange
for the purchase and conversion of any Securities by an agreement with one or
more investment bankers or other purchasers (the "Purchasers") to purchase such
securities by paying to the Trustee in trust for the Holders, on or before the
Redemption Date, an amount not less than the applicable Redemption Price,
together with interest accrued to the Redemption Date, of such Securities.
Notwithstanding anything to the contrary contained in this Article XI, the
obligation of the Company to pay the Redemption Price, together with interest
accrued to the Redemption Date, 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 shall be filed with the Trustee prior to the close
of business on the Business Day immediately prior to the Redemption Date), any
Securities called for redemption that are 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, and consistent with any agreement or agreements with
such Purchasers, to be acquired by such Purchasers from such Holders and
(notwithstanding anything to the contrary contained in Article XII) surrendered
by such Purchasers for conversion, all as of immediately prior to the close of
business on the Redemption Date (and the right to convert any such Securities
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 by the Purchasers to the Holders in the same
manner as it would monies deposited with it by the Company for the redemption of
Securities. Without the Trustee's prior written consent, no arrangement between
the Company and such Purchasers for the purchase and conversion of any
Securities shall increase or otherwise affect any of the powers, duties,
responsibilities or obligations of the Trustee as set forth in this Indenture,
and the Company agrees to indemnify the Trustee from, and hold it harmless
against, any loss, liability or expense arising out of or in connection with any
such arrangement for the purchase and conversion of any Securities between the
Company and such Purchasers, including the costs and expenses, including
reasonable legal fees, incurred by the Trustee in the defense of any claim or
liability arising out of or in connection with the exercise or performance of
any of its powers, duties, responsibilities or obligations under this Indenture.
ARTICLE XII
CONVERSION OF SECURITIES
SECTION 12.1 Conversion Privilege and Conversion Rate.
Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any Security may be converted into fully paid
and nonassessable shares (calculated as to each conversion to the nearest
1/100th of a share) of Common Stock of the Company at the Conversion Rate,
determined as hereinafter provided, in effect at the time of conversion. Such
conversion right shall commence on the initial issuance date of the Securities
and expire at the close of business on the date of Maturity, subject, in the
case of conversion of any Global Security, to any Applicable Procedures. In case
a Security or portion thereof is called for redemption at the election of the
Company or the Holder thereof exercises his right to require the Company to
repurchase the
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Security, such conversion right in respect of the Security, or portion thereof
so called, shall expire at the close of business on the Business Day immediately
preceding the Redemption Date or the Repurchase Date, as the case may be, unless
the Company defaults in making the payment due upon redemption or repurchase, as
the case may be (in each case subject as aforesaid to any Applicable Procedures
with respect to any Global Security).
The rate at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Rate") shall be initially 5.2430
shares of Common Stock for each U.S.$1,000 principal amount of Securities. The
Conversion Rate shall be adjusted in certain instances as provided in this
Article XII. Notwithstanding any other provision of this Indenture and the
Securities, the initial conversion rate set forth above shall be deemed to have
given effect to the Company's two-for-one common stock split, to be effected as
a common stock dividend payable on April 3, 2000, and no further adjustment
shall be made in respect thereof.
SECTION 12.2 Exercise of Conversion Privilege.
In order to exercise the conversion privilege, the Holder of any
Security to be converted shall surrender such Security, duly endorsed in blank,
at any office or agency of the Company maintained for that purpose pursuant to
Section 10.2, accompanied by a duly signed conversion notice substantially in
the form set forth in Section 2.4 stating that the Holder elects to convert such
Security or, if less than the entire principal amount thereof is to be
converted, the portion thereof to be converted. Each Security surrendered for
conversion (in whole or in part) during the Record Date Period shall (except in
the case of any Security or portion thereof which has been called for redemption
on a Redemption Date, or is repurchasable on a Repurchase Date, occurring, in
either case, within such Record Date Period and, as a result, the right to
convert such Security would otherwise terminate in such period if not exercised)
be accompanied by payment in New York Clearing House funds or other funds
acceptable to the Company of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of such Security (or part thereof,
as the case may be) being surrendered for conversion. The interest so payable on
such Interest Payment Date with respect to any Security (or portion thereof, if
applicable) which is surrendered for conversion during the Record Date Period
shall be paid to the Holder of such Security as of such Regular Record Date in
an amount equal to the interest that would have been payable on such Security if
such Security had been converted as of the close of business on such Interest
Payment Date. Except as provided in this paragraph and subject to the last
paragraph of Section 3.7, no cash payment or adjustment shall be made upon any
conversion on account of any interest accrued from the Interest Payment Date
next preceding the conversion date, in respect of any Security (or part thereof,
as the case may be) surrendered for conversion, or on account of any dividends
on the Common Stock issued upon conversion. The Company's delivery to the Holder
of the number of shares of Common Stock (and cash in lieu of fractions thereof,
as provided in this Indenture) into which a Security is convertible will be
deemed to satisfy the Company's obligation to pay the principal amount of the
Security.
Securities shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of such Securities for conversion
in accordance with the foregoing
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provisions, and at such time the rights of the Holders of such Securities as
Holders shall cease, and the Person or Persons entitled to receive the Common
Stock issuable upon conversion shall be treated for all purposes as the record
holder or holders of such Common Stock at such time. As promptly as practicable
on or after the conversion date, the Company shall issue and deliver to the
Trustee, for delivery to the Holder, a certificate or certificates for the
number of full shares of Common Stock issuable upon conversion, together with
payment in lieu of any fraction of a share, as provided in Section 12.3.
All shares of Common Stock delivered upon such conversion of Restricted
Securities shall bear restrictive legends substantially in the form of the
legends required to be set forth on the Restricted Securities pursuant to
Section 3.5 and shall be subject to the restrictions on transfer provided in
such legends. Neither the Trustee nor any agent maintained for the purpose of
such conversion shall have any responsibility for the inclusion or content of
any such restrictive legends on such Common Stock; provided, however, that the
Trustee or any agent maintained for the purpose of such conversion shall have
provided, to the Company or to the Company's transfer agent for such Common
Stock, prior to or concurrently with a request to the Company to deliver such
Common Stock, written notice that the Securities delivered for conversion are
Restricted Securities.
In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in an aggregate principal amount equal to
the unconverted portion of the principal amount of such Security. A Security may
be converted in part, but only if the principal amount of such Security to be
converted is any integral multiple of U.S. $1,000 and the principal amount of
such security to remain Outstanding after such conversion is equal to U.S.
$1,000 or any integral multiple of U.S. $1,000 in excess thereof.
If shares of Common Stock to be issued upon conversion of a Restricted
Security, or Securities to be issued upon conversion of a Restricted Security in
part only, are to be registered in a name other than that of the beneficial
owner of such Restricted Security, then such Holder must deliver to the
Conversion Agent a Surrender Certificate, dated the date of surrender of such
Restricted Security and signed by such beneficial owner, as to compliance with
the restrictions on transfer applicable to such Restricted Security. Neither the
Trustee nor any Conversion Agent, Registrar or Transfer Agent shall be required
to register in a name other than that of the beneficial owner, shares of Common
Stock or Securities issued upon conversion of any such Restricted Security not
so accompanied by a properly completed Surrender Certificate.
SECTION 12.3 Fractions of Shares.
No fractional shares of Common Stock shall be issued upon conversion of
any Security or Securities. If more than one Security shall be surrendered for
conversion at one time by the same Holder, the number of full shares which shall
be issuable upon conversion thereof shall be computed on the basis of the
aggregate principal amount of the Securities (or specified portions thereof) so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of any Security or Securities (or
specified portions thereof), the Company shall
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calculate and pay a cash adjustment in respect of such fraction (calculated to
the nearest 1/100th of a share) in an amount equal to the same fraction of the
Closing Price Per Share at the close of business on the day of conversion.
SECTION 12.4 Adjustment of Conversion Rate.
The Conversion Rate shall be subject to adjustments from time to time as
follows:
(1) In case the Company shall pay or make a dividend or other
distribution on shares of any class of capital stock payable in shares of Common
Stock, the Conversion Rate in effect at the opening of business on the day
following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be increased by dividing such
Conversion Rate by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such increase to become effective immediately after the opening of
business on the day following the date fixed for such determination. If, after
any such date fixed for determination, any dividend or distribution is not in
fact paid, the Conversion Rate shall be immediately readjusted, effective as of
the date the Board of Directors determines not to pay such dividend or
distribution, to the Conversion Rate that would have been in effect if such
determination date had not been fixed. For the purposes of this paragraph (1),
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.
(2) In case the Company shall issue rights, options or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock at a price per share less than the current market price per
share (determined as provided in paragraph (8) of this Section 12.4) of the
Common Stock on the date fixed for the determination of stockholders entitled to
receive such rights, options or warrants (other than any rights, options or
warrants that by their terms will also be issued to any Holder upon conversion
of a Security into shares of Common Stock without any action required by the
Company or any other Person), the Conversion Rate in effect at the opening of
business on the day following the date fixed for such determination shall be
increased by dividing such Conversion Rate by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares of
Common Stock which the aggregate of the offering price of the total number of
shares of Common Stock so offered for subscription or purchase would purchase at
such current market price and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such increase to become effective immediately after
the opening of business on the day following the date fixed for such
determination. If, after any such date fixed for determination, any such rights,
options or warrants are not in fact issued, or are not exercised prior to the
expiration thereof, the Conversion Rate shall be immediately readjusted,
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effective as of the date such rights, options or warrants expire, or the date
the Board of Directors determines not to issue such rights, options or warrants,
to the Conversion Rate that would have been in effect if the unexercised rights,
options or warrants had never been granted or such determination date had not
been fixed, as the case may be. For the purposes of this paragraph (2), 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 issue any rights, options or warrants in respect of
shares of Common Stock held in the treasury of the Company.
(3) In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Conversion Rate in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Conversion Rate in effect at the opening of business
on the day following the day upon which such subdivision or combination becomes
effective shall be proportionately reduced, such increase or reduction, 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.
(4) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock evidences of its indebtedness, shares of any
class of capital stock or other property (including cash or assets or
securities, but excluding (i) any rights, options or warrants referred to in
paragraph (2) of this Section, (ii) any dividend or distribution paid
exclusively in cash, (iii) any dividend or distribution referred to in paragraph
(1) of this Section and (iv) any consideration distributed in any merger or
consolidation to which Section 12.11 applies), the Conversion Rate shall be
adjusted so that the same shall equal the rate determined by dividing the
Conversion Rate in effect immediately prior to the close of business on the date
fixed for the determination of stockholders entitled to receive such
distribution by a fraction of which the numerator shall be the current market
price per share (determined as provided in paragraph (8) of this Section 12.4)
of the Common Stock on the date fixed for such determination less the then fair
market value (as determined by the Board of directors, whose determination shall
be conclusive and described in a Board Resolution filed with the Trustee) of the
portion of the assets, shares or evidences of indebtedness so distributed
applicable to one share of Common Stock and the denominator shall be such
current market price per share of the Common Stock, such adjustment to become
effective immediately prior to the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
distribution. If after any such date fixed for determination, any such
distribution is not in fact made, the Conversion Rate shall be immediately
readjusted, effective as of the date of the Board of Directors determines not to
make such distribution, to the Conversion Rate that would have been in effect if
such determination date had not been fixed.
(5) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding any cash that is distributed as
part of a distribution referred to in paragraph (4) of this Section or cash
distributed upon a merger or consolidation to which Section
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12.11 applies) in an aggregate amount that, combined together with (I) the
aggregate amount of any other all-cash distributions to all holders of its
Common Stock made exclusively in cash within the 365-day period preceding the
date of payment of such distribution and in respect of which no adjustment
pursuant to this paragraph (5) has been made and (II) the aggregate of any cash
plus the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) of
consideration payable in respect of any tender offer by the Company or any of
its Subsidiaries for all or any portion of the Common Stock concluded within the
365-day period preceding the date of payment of such distribution and in respect
of which no adjustment pursuant to paragraph (6) of this Section 12.4 has been
made (the "combined cash and tender amount") exceeds 10% of the product of the
current market price per share (determined as provided in paragraph (8) of this
Section 12.4) of the Common Stock on the date for the determination of holders
of shares of Common Stock entitled to receive such distribution times the number
of shares of Common Stock outstanding on such date (the "aggregate current
market price"), then, and in each such case, immediately after the close of
business on such date for determination, the Conversion Rate shall be adjusted
so that the same shall equal the rate determined by dividing the Conversion Rate
in effect immediately prior to the close of business on the date fixed for
determination of the stockholders entitled to receive such distribution by a
fraction (i) the numerator of which shall be equal to the current market price
per share (determined as provided in paragraph (8) of this Section) of the
Common Stock on the date fixed for such determination less an amount equal to
the quotient of (x) the excess of such combined cash and tender amount over 10%
of such aggregate current market price divided by (y) the number of shares of
Common Stock outstanding on such date for determination and (ii) the denominator
of which shall be equal to the current market price per share (determined as
provided in paragraph (8) of this Section 12.4) of the Common Stock on such date
fixed for determination.
(6) In case a tender offer (as defined in the Exchange Act) made by the
Company or any Subsidiary for Common Stock shall expire and such tender offer
(as amended upon the expiration thereof) shall require the payment to
stockholders (based on the acceptance (up to any maximum specified in the terms
of the tender offer) of Purchased Shares (as defined below)) of an aggregate
consideration having a fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) that combined together with (I) the aggregate of the cash plus the
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution), as of the expiration
of such tender offer, of consideration payable in respect of any other tender
offer by the Company or any Subsidiary for all or any portion of the Common
Stock expiring within the 365-day period preceding the expiration of such tender
offer and in respect of which no adjustment pursuant to this paragraph (6) has
been made and (II) the aggregate amount of any cash distributions to all holders
of the Common Stock within 365-day period preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to paragraph (5) of
this Section has been made (the "combined tender and cash amount") exceeds 10%
of the product of the current market price per share of the Common Stock
(determined as provided in paragraph (8) of this Section 12.4) as of the last
time (the "Expiration Time") tenders could have been made pursuant to such
tender offer (as it may be amended) times the number of shares of Common Stock
outstanding (including any tendered shares) as of the Expiration Time, then, and
in each such case immediately prior to the opening of
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business on the day after the date of the Expiration Time, the Conversion Rate
shall be adjusted so that the same shall equal the rate determined by dividing
the Conversion Rate immediately prior to close of business on the date of the
Expiration Time by a fraction (i) the numerator of which shall be equal to (A)
the product of (I) the current market price per share of the Common Stock
(determined as provided in paragraph (8) of this Section 12.4) on the date of
the Expiration Time multiplied by (II) the number of shares of Common Stock
outstanding (including any tendered shares) on the Expiration Time less (B) the
combined tender and cash amount, and (ii) the denominator of which shall be
equal to the product of (A) the current market price per share of the Common
Stock (determined as provided in paragraph (8) of this Section 12.4) as of the
Expiration Time multiplied by (B) the number of shares of Common Stock
outstanding (including any tendered shares) as of the Expiration Time less the
number of all shares validly tendered and not withdrawn as of the Expiration
Time (the shares deemed so accepted up to any such maximum, being referred to as
the "Purchased Shares").
(7) The reclassification of Common Stock into securities other than
Common Stock (other than any reclassification upon a consolidation or merger to
which Section 12.11 applies) shall be deemed to involve (a) a distribution of
such securities other than Common Stock to all holders of Common Stock (and the
effective date of such reclassification shall be deemed to be "the date fixed
for the determination of stockholders entitled to receive such distribution" and
"the date fixed for such determination" within the meaning of paragraph (4) of
this Section), and (b) a subdivision or combination, as the case may be, of the
number of shares of Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification shall be
deemed to be "the day upon which such subdivision becomes effective" or "the day
upon which such combination becomes effective", as the case may be, and "the day
upon which such subdivision or combination becomes effective" within the meaning
of paragraph (3) of this Section 12.4).
(8) For the purpose of any computation under paragraphs (2), (4), (5) or
(6) of this Section 12.4, the current market price per share of Common Stock on
any date shall be calculated by the Company and be the average of the daily
Closing Prices Per Share for the five consecutive Trading Days selected by the
Company commencing not more than 10 Trading Days before, and ending not later
than the earlier of the day in question and the day before the "ex" date with
respect to the issuance or distribution requiring such computation. For purposes
of this paragraph, the term "'ex' date", when used with respect to any issuance
or distribution, means the first date on which the Common Stock trades regular
way in the applicable securities market or on the applicable securities exchange
without the right to receive such issuance or distribution.
(9) No adjustment in the Conversion Rate shall be required unless such
adjustment (plus any adjustments not previously made by reason of this paragraph
(9)) would require an increase or decrease of at least one percent in such rate;
provided, however, that any adjustments which by reason of this paragraph (9)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Article shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case may be.
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(10) The Company may make such increases in the Conversion Rate, for the
remaining term of the Securities or any shorter term, in addition to those
required by paragraphs (1), (2), (3), (4), (5) and (6) of this Section 12.4, as
it considers to be advisable in order to avoid or diminish any income tax to any
holders of shares of Common Stock resulting from any dividend or distribution of
stock or issuance of rights or warrants to purchase or subscribe for stock or
from any event treated as such for income tax purposes. The Company shall have
the power to resolve any ambiguity or correct any error in this paragraph (10)
and its actions in so doing shall, absent manifest error, be final and
conclusive.
(11) Notwithstanding the foregoing provisions of this Section, no
adjustment of the Conversion Rate shall be required to be made (a) upon the
issuance of shares of Common Stock pursuant to any present or future plan for
the reinvestment of dividends or (b) because of a tender or exchange offer of
the character described in Rule 13e-4(h)(5) under the Exchange Act or any
successor rule thereto.
(12) To the extent permitted by applicable law, the Company from time to
time may increase the Conversion Rate by any amount for any period of time if
the period is at least twenty (20) days, the increase is irrevocable during such
period, and the Board of Directors shall have made a determination that such
increase would be in the best interests of the Company, which determination
shall be conclusive; provided, however, that no such increase shall be taken
into account for purposes of determining (i) whether the Closing Price Per Share
of the Common Stock equals or exceeds 105% of the Conversion Price in connection
with an event which would otherwise be a Change of Control pursuant to Section
14.4 or (ii) whether the Closing Price Per Share of the Common Stock exceeds
140% of the Conversion Price in connection with the redemption of the Securities
in accordance with the provisions of the form of Securities set forth in Section
2.2 hereof. Whenever the Conversion Rate is increased pursuant to the preceding
sentence, the Company shall give notice of the increase to the Holders in the
manner provided in Section 1.6 at least fifteen (15) days prior to the date the
increased Conversion Rate takes effect, and such notice shall state the
increased Conversion Rate and the period during which it will be in effect.
SECTION 12.5 Notice of Adjustments of Conversion Rate.
Whenever the Conversion Rate is adjusted as herein provided:
(1) the Company shall compute the adjusted Conversion Rate in accordance
with Section 12.4 and shall prepare a certificate signed by the Chief Financial
Officer of the Company setting forth the adjusted Conversion Rate and showing in
reasonable detail the facts upon which such adjustment is based, and such
certificate shall promptly be filed with the Trustee and with each Conversion
Agent; and
(2) upon each such adjustment, a notice stating that the Conversion Rate
has been adjusted and setting forth the adjusted Conversion Rate shall be
required, and as soon as practicable after it is required, such notice shall be
provided by the Company to all Holders in accordance with Section 1.6.
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Neither the Trustee nor any Conversion Agent shall be under any duty or
responsibility with respect to any such certificate or the information and
calculations contained therein, except to exhibit the same to any Holder of
Securities desiring inspection thereof at its office during normal business
hours, and shall not be deemed to have knowledge of any adjustment in the
Conversion Rate unless and until a Responsible Officer of the Trustee shall have
received such a certificate. Until a Responsible Officer of the Trustee receives
such a certificate, the Trustee and each Conversion Agent may assume without
inquiry that the last Conversion Rate of which the Trustee has knowledge of
remains in effect.
SECTION 12.6 Notice of Certain Corporate Action.
In case:
(1) the Company shall declare a dividend (or any other distribution) on
its Common Stock payable (i) otherwise than exclusively in cash or (ii)
exclusively in cash in an amount that would require any adjustment pursuant to
Section 12.4; or
(2) the Company shall authorize the granting to all or substantially all
of the holders of its Common Stock of rights, options or warrants to subscribe
for or purchase any shares of capital stock of any class or of any other rights;
or
(3) of any reclassification of the Common Stock, or of any
consolidation, merger or share exchange to which the Company is a party and for
which approval of any stockholders of the Company is required, or of the
conveyance, sale, transfer or lease of all or substantially all of the assets of
the Company; or
(4) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Securities pursuant to Section 10.2, and shall
cause to be provided to all Holders in accordance with Section 1.6, at least 20
days (or 10 days in any case specified in clause (1) or (2) above) prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, rights, options or warrants, or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, rights, options or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, conveyance,
transfer, sale, lease, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, sale, lease, dissolution,
liquidation or winding up. Neither the failure to give such notice or the notice
referred to in the following paragraph nor any defect therein shall affect the
legality or validity of the proceedings described in clauses (1) through (4) of
this Section 12.6. If at the time the Trustee shall not be the conversion agent,
a copy of such notice shall also forthwith be filed by the Company with the
Trustee.
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The Company shall cause to be filed at the Corporate Trust Office and
each office or agency maintained for the purpose of conversion of Securities
pursuant to Section 10.2, and shall cause to be provided to all Holders in
accordance with Section 1.6, notice of any tender offer by the Company or any
Subsidiary for all or any portion of the Common Stock at or about the time that
such notice of tender offer is provided to the public generally.
SECTION 12.7 Company to Reserve Common Stock.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, for the
purpose of effecting the conversion of Securities, the full number of shares of
Common Stock then issuable upon the conversion of all Outstanding Securities.
SECTION 12.8 Taxes on Conversions.
Except as provided in the next sentence, the Company will pay any and
all taxes and duties that may be payable in respect of the issue or delivery of
shares of Common Stock on conversion of Securities pursuant hereto. The Company
shall not, however, be required to pay any tax or duty which may be payable in
respect of any transfer involved in the issue and delivery of shares of Common
Stock in a name other than that of the Holder of the Security or Securities to
be converted, and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Company the amount of any such tax
or duty, or has established to the satisfaction of the Company that such tax or
duty has been paid.
SECTION 12.9 Covenant as to Common Stock.
The Company agrees that all shares of Common Stock which may be
delivered upon conversion of Securities, upon such delivery, will have been duly
authorized and validly issued and will be fully paid and nonassessable and,
except as provided in Section 12.8, the Company will pay all taxes, liens and
charges with respect to the issue thereof.
SECTION 12.10 Cancellation of Converted Securities.
All Securities delivered for conversion shall be delivered to the
Trustee or its agent to be canceled by or at the direction of the Trustee, which
shall dispose of the same as provided in Section 3.9.
SECTION 12.11 Provision in Case of Consolidation, Merger or Sale of Assets.
In case of any consolidation or merger of the Company with or into any
other Person, any merger of another Person with or into the Company (other than
a merger which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Company) or any
conveyance, sale, transfer or lease of all or substantially all of the assets of
the Company, 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
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providing that the Holder of each Security then Outstanding shall have the right
thereafter, during the period such Security shall be convertible as specified in
Section 12.1, to convert such Security only into the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance, sale, transfer or lease by a holder of the number of shares of
Common Stock of the Company into which such Security might have been converted
immediately prior to such consolidation, merger, conveyance, sale, transfer or
lease, assuming such holder of Common Stock of the Company (i) is not (A) a
Person with which the Company consolidated or merged with or into or which
merged into or with the Company or to which such conveyance, sale, transfer or
lease was made, as the case may be (a "Constituent Person"), or (B) an Affiliate
of a Constituent Person and (ii) failed to exercise his rights of election, if
any, as to the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance, sale, transfer or lease (provided
that if the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance, sale, transfer, or lease is not the
same for each share of Common Stock of the Company held immediately prior to
such consolidation, merger, conveyance, sale, transfer or lease by others than a
Constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("Non-electing Share"), then for the
purpose of this Section 12.11 the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance, sale, transfer
or lease by the holders of 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, for
events subsequent to the effective date of such supplemental indenture, shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Article. The above provisions of this Section 12.11 shall similarly apply
to successive consolidations, mergers, conveyances, sales, transfers or leases.
Notice of the execution of such a supplemental indenture shall be given by the
Company to the Holder of each Security as provided in Section 1.6 promptly upon
such execution.
Neither the Trustee nor any Conversion Agent shall be under any
responsibility to determine the correctness of any provisions contained in any
such supplemental indenture relating either to the kind or amount of shares of
stock or other securities or property or cash receivable by Holders of
Securities upon the conversion of their Securities after any such consolidation,
merger, conveyance, transfer, sale or lease or to any such adjustment, but may
accept as conclusive evidence of the correctness of any such provisions, and
shall be protected in relying upon, an Opinion of Counsel with respect thereto,
which the Company shall cause to be furnished to the Trustee upon request.
SECTION 12.12 Rights Issued in Respect of 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
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(iii) are also issued in respect of future issuances of Common
Stock
shall not be deemed distributed for purposes of Section 12.4(2) until the
occurrence of the earliest Trigger Event. In addition, in the event of any
distribution of rights or warrants, or any Trigger Event with respect thereto,
that shall have resulted in an adjustment to the Conversion Rate under Section
12.4(2), (1) in the case of any such rights or warrants which shall all have
been redeemed or repurchased without exercise by any holders thereof, the
Conversion Rate shall be readjusted upon such final redemption or repurchase to
give effect to such distribution or Trigger Event, as the case may be, as though
it were a cash distribution, equal to the per share redemption or repurchase
price received by a holder of Common Stock with respect to such rights or
warrants (assuming such holder had retained such rights or warrants), made to
all holders of Common Stock as of the date of such redemption or repurchase, and
(2) in the case of any such rights or warrants all of which shall have expired
without exercise by any holder thereof, the Conversion Price shall be readjusted
as if such issuance had not occurred.
SECTION 12.13 Responsibility of Trustee for Conversion Provisions.
The Trustee, subject to the provisions of Section 6.1, and any
Conversion Agent shall not at any time be under any duty or responsibility to
any Holder of Securities to determine whether any facts exist which may require
any adjustment of the Conversion Rate, or with respect to the nature or extent
of any such adjustment when made, or with respect to the method employed, herein
or in any supplemental indenture provided to be employed, in making the same, or
whether a supplemental indenture need be entered into. Neither the Trustee,
subject to the provisions of Section 6.1, nor any Conversion Agent shall be
accountable with respect to the validity or value (or the kind or amount) of any
Common Stock, or of any other securities or property or cash, which may at any
time be issued or delivered upon the conversion of any Security; and it or they
do not make any representation with respect thereto. Neither the Trustee,
subject to the provisions of Section 6.1, nor any Conversion Agent shall be
responsible for any failure of the Company to make or calculate any cash payment
or to issue, transfer or deliver any shares of Common Stock or share
certificates or other securities or property or cash upon the surrender of any
Security for the purpose of conversion; and the Trustee, subject to the
provisions of Section 6.1, and any Conversion Agent shall not be responsible for
any failure of the Company to comply with any of the covenants of the Company
contained in this Article.
ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 13.1 Securities Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of a Security, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article (subject to the provisions of
Article IV), the indebtedness represented by the Securities and the payment of
the principal of, or premium, if any, or interest (including Liquidated Damages,
if any) on, each and all of the Securities (including, but not limited to, the
Redemption Price with respect to the Securities to be called for redemption in
accordance with Article XI or the Repurchase
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Price with respect to Securities submitted for repurchase in accordance with
Article XIV), are hereby expressly made subordinate and subject in right of
payment to the prior payment in full of all Senior Debt.
SECTION 13.2 No Payment in Certain Circumstances, Payment over of Proceeds upon
Dissolution, Etc.
No payment shall be made with respect to the principal of, or premium,
if any, or interest (including Liquidated Damages, if any) on the Securities
(including, but not limited to, the Redemption Price with respect to the
Securities to be called for redemption in accordance with Article XI or the
Repurchase Price with respect to Securities submitted for repurchase in
accordance with Article XIV), except payments and distributions made by the
Trustee as permitted by Section 13.9, if:
(i) a default in the payment of principal, premium, if any, or
interest (including a default under any repurchase or redemption obligation) or
other amounts with respect to any Senior Debt occurs and is continuing (or, in
the case of Senior Debt for which there is a period of grace, in the event of
such a default that continues beyond the period of grace, if any, specified in
the instrument or lease evidencing such Senior Debt) unless and until such
default shall have been cured or waived or shall have ceased to exist; or
(ii) any other event of default occurs and is continuing with
respect to Designated Senior Debt that then permits holders of such Designated
Senior Debt to accelerate its maturity and the Trustee receives a notice of the
default (a "Payment Blockage Notice") from a Representative or holder of
Designated Senior Debt or the Company.
If the Trustee receives any Payment Blockage Notice pursuant to clause
(ii) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section unless and until (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 on the Securities that have come due have been paid in full in
cash. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Securities upon the earlier of:
(1) in the case of a default referred to in clause (i) above, the date
upon which the default is cured or waived or ceases to exist, or
(2) in the case of a default referred to in clause (ii) above, the date
upon which the default is cured or waived or ceases to exist or 179 days pass
after notice is received if the maturity of such Designated Senior Debt has not
been accelerated, unless this Article XIII otherwise prohibits the payment or
distribution at the time of such payment or distribution.
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In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets and liabilities of the Company, then and in any
such event the holders of Senior Debt shall be entitled to receive payment in
full of all amounts due or to become due on or in respect of all Senior Debt in
cash before the Holders of the Securities are entitled to receive any payment on
account of principal of (or premium, if any) or interest (including any
Liquidated Damages) on the Securities or on account of the purchase, redemption
or other acquisition of Securities, and to that end the holders of Senior Debt
shall be entitled to receive, for application to the payment thereof, any
payment or distribution of any kind or character, whether in cash, property or
securities, which may be payable or deliverable in respect of the Securities in
any such case, proceeding, dissolution, liquidation or other winding up or
event.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, securities or other property, before all Senior Debt is paid in
full, and if such fact shall, at or prior to the time of such payment or
distribution, have been made known to the Trustee or, as the case may be, such
Holder, then and in such event such payment or distribution shall be paid over
or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay all Senior Debt in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt.
For purposes of this Article only, the words "cash, securities or other
property" shall not be deemed to include shares of capital 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, which
shares of stock or securities are subordinated in right of payment to all then
outstanding Senior Debt to substantially the same extent as, or to a greater
extent than, the Securities are so subordinated as provided in this Article. 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 properties and assets substantially as an entirety to another
Person upon the terms and conditions set forth in Article VII shall not be
deemed a dissolution, winding up, liquidation, reorganization, assignment for
the benefit of creditors or marshaling of assets and liabilities of the Company
for the purposes of this Section if the Person formed by such consolidation or
into which the Company is merged or which acquires by conveyance or transfer
such properties and assets substantially as an entirety, as the case may be,
shall, as a part of such consolidation, merger, conveyance or transfer, comply
with the conditions set forth in Article VII.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as
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the case may be, such Holder, then and in such event such payment shall be paid
over and delivered forthwith to the Company, in the case of the Trustee, or the
Trustee, in the case of such Holder.
SECTION 13.3 Prior Payment to Senior Debt upon Acceleration of Securities.
In the event of the acceleration of the Securities because of an Event
of Default, no payment or distribution shall be made to the Trustee or any
holder of Securities in respect of the principal of, premium, if any, or
interest (including Liquidated Damages, if any) on the Securities (including,
but not limited to, the Redemption Price with respect to the Securities called
for redemption in accordance with Article XI or the Repurchase Price with
respect to the Securities submitted for repurchase in accordance with Article
XIV), except payments and distributions made by the Trustee as permitted by
Section 13.9, until all Senior Debt has been paid in full in cash or other
payment satisfactory to the holders of Senior Debt or such acceleration is
rescinded in accordance with the terms of this Indenture. If payment of the
Securities is accelerated because of an Event of Default, the Company shall
promptly notify holders of Senior Debt of the acceleration.
SECTION 13.4 Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time except during
the pendency of any case, proceeding, dissolution, liquidation or other winding
up, assignment for the benefit of creditors or other marshaling of assets and
liabilities of the Company referred to in Section 13.2, or during the
circumstances referred to in the first paragraph of Section 13.2, or under the
conditions described in Section 13.3, from making payments at any time of
principal of (and premium, if any) or interest on the Securities, or (b) the
application by the Trustee of any money deposited with it hereunder to the
payment of or on account of the principal of (and premium, if any) or interest
on the Securities or the retention of such payment by the Holders, if, at the
time of such application by the Trustee, it did not have knowledge that such
payment would have been prohibited by the provisions of this Article.
SECTION 13.5 Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all Senior Debt, the Holders of the
Securities shall be subrogated to the extent of the payments or distributions
made to the holders of such Senior Debt pursuant to the provisions of this
Article to the rights of the holders of such Senior Debt to receive payments and
distributions of cash, property and securities applicable to the Senior Debt
until the principal of (and premium, if any) and interest on the Securities
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Senior Debt of any cash, property or
securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior Debt by
Holders of the Securities or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Debt and the Holders of the Securities,
be deemed to be a payment or distribution by the Company to or on account of the
Senior Debt.
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SECTION 13.6 Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Debt on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (i) impair, as among the Company, its creditors other than holders of
Senior Debt and the Holders of the Securities, the obligation of the Company,
which is absolute and unconditional, to pay to the Holders of the Securities the
principal of (and premium, if any) and interest (including Liquidated Damages,
if any) on the Securities as and when the same shall become due and payable in
accordance with their terms; or (ii) affect the relative rights against the
Company of the Holders of the Securities and creditors of the Company other than
the holders of Senior Debt; or (iii) prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
of the holders of Senior Debt to receive cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder.
SECTION 13.7 Trustee to Effectuate Subordination.
Each Holder of a Security by its acceptance thereof authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee its attorney-in-fact for any and all such purposes.
SECTION 13.8 No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Debt 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
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt, or otherwise
amend or supplement in any manner Senior Debt or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (iii) release any Person liable in any manner
for the collection of Senior Debt; and (iv) exercise or refrain from exercising
any rights against the Company and any other Person.
SECTION 13.9 Notice to Trustee.
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The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Securities. Notwithstanding the provisions of this
Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until a Responsible Officer of the Trustee shall have received written
notice thereof from the Company or a Representative or a holder of Senior Debt
(including, without limitation, a holder of Designated Senior Debt) and, prior
to the receipt of any such written notice, the Trustee, subject to the
provisions of Section 6.1, shall be entitled in all respects to assume that no
such facts exist; provided, however, that if the Trustee shall not have received
the notice provided for in this Section 13.9 at least two Business Days prior to
the date upon which by the terms hereof any money may become payable for any
purpose (including, without limitation, the payment of the principal of (and
premium, if any) or interest (including Liquidated Damages, if any) on any
Security), then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it within one
Business Day prior to such date.
Notwithstanding anything in this Article XIII to the contrary, nothing
shall prevent any payment by the Trustee to the Holders of monies deposited with
it pursuant to Section 4.1, and any such payment shall not be subject to the
provisions of Section 13.2 or 13.3.
Subject to the provisions of Section 6.1, the Trustee shall be entitled
to rely on the delivery to it of a written notice by a Person representing
himself to be a Representative or a holder of Senior Debt (including, without
limitation, a holder of Designated Senior Debt) to establish that such notice
has been given by a Representative or a holder of Senior Debt (including,
without limitation, a holder of Designated Senior Debt). In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any Person as a holder of Senior Debt to participate in any
payment or distribution pursuant to this Article, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Senior Debt 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, and if such evidence
is not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
SECTION 13.10 Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Section 6.1, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose of
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ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Debt 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.
SECTION 13.11 Trustee Not Fiduciary for Holders of Senior Debt.
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Debt and shall not be liable to any such holders if it shall in good
faith mistakenly pay over or distribute to Holders of Securities or to the
Company or to any other Person cash, property or securities to which any holders
of Senior Debt shall be entitled by virtue of this Article or otherwise.
SECTION 13.12 Reliance by Holders of Senior Debt on Subordination Provisions.
Each Holder by accepting a Security acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Debt, whether such Senior Debt
was created or acquired before or after the issuance of the Securities, to
acquire and continue to hold, or to continue to hold, such Senior Debt and such
holder of Senior Debt shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Debt, and no amendment or modification of the provisions
contained herein shall diminish the rights of such holders of Senior Debt unless
such holders shall have agreed in writing thereto.
SECTION 13.13 Rights of Trustee as Holder of Senior Debt; Preservation of
Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it, to the same extent as any other holder of Senior Debt,
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.7.
SECTION 13.14 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context 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 in addition to or in place of the Trustee; provided,
however, that Section 13.13 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 13.15 Certain Conversions and Repurchases Deemed Payment.
For the purposes of this Article only, (i) the issuance and delivery of
junior securities upon conversion of Securities in accordance with Article XII
or upon the repurchase of Securities in
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accordance with Article XIV shall not be deemed to constitute a payment or
distribution on account of the principal of or premium or interest (including
Liquidated Damages, if any) on Securities or on account of the purchase or other
acquisition of Securities, and (ii) the payment, issuance or delivery of cash
(except in satisfaction of fractional shares pursuant to Section 12.3 or
14.3(7)), property or securities (other than junior securities) upon conversion
of a Security shall be deemed to constitute payment on account of the principal
of such Security. For the purposes of this Section, the term "junior securities"
means (a) shares of any stock of any class of the Company and securities into
which the Securities are convertible pursuant to Article XII and (b) securities
of the Company which are subordinated in right of payment to all Senior Debt
which may be outstanding at the time of issuance or delivery of such securities
to substantially the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article. Nothing contained in this
Article or elsewhere in this Indenture or in the Securities is intended to or
shall impair, as among the Company, its creditors other than holders of Senior
Debt and the Holders of the Securities, the right, which is absolute and
unconditional, of the Holder of any Security to convert such Security in
accordance with Article XII or to exchange such Security for Common Stock in
accordance with Article XIV if the Company elects to satisfy the obligations
under Article XIV by the delivery of Common Stock.
ARTICLE XIV
REPURCHASE OF SECURITIES AT THE OPTION OF THE
HOLDER UPON A CHANGE IN CONTROL
SECTION 14.1 Right to Require Repurchase.
In the event that a Change in Control (as hereinafter defined) shall
occur, then each Holder shall have the right, at the Holder's option, but
subject to the provisions of Section 14.2, to require the Company to repurchase,
and upon the exercise of such right the Company shall repurchase, all of such
Holder's Securities not theretofore called for redemption, or any portion of the
principal amount thereof that is equal to U.S. $1,000 or any integral multiple
of U.S. $1,000 in excess thereof (provided that no single Security may be
repurchased in part unless the portion of the principal amount of such Security
to be Outstanding after such repurchase is equal to U.S. $1,000 or integral
multiples of U.S. $1,000 in excess thereof), on the date (the "Repurchase Date")
that is 45 days after the date of the Company Notice (as defined in Section
14.3) at a purchase price equal to 100% of the principal amount of the
Securities to be repurchased plus interest accrued to the Repurchase Date (the
"Repurchase Price"); provided, however, that installments of interest on
Securities whose Stated Maturity is on or prior to the Repurchase Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such on the relevant Record Date according to their
terms and the provisions of Section 3.7. Such right to require the repurchase of
the Securities shall not continue after a discharge of the Company from its
obligations with respect to the Securities in accordance with Article IV, unless
a Change in Control shall have occurred prior to such discharge. At the option
of the Company, the Repurchase Price may be paid in cash or, subject to the
fulfillment by the Company of the conditions set forth Section 14.2, by delivery
of shares of Common Stock having a fair market value equal to the Repurchase
Price. Whenever in this Indenture (including Sections 2.2, 3.1, 5.1(1) and 5.8)
there is a reference, in any context, to the principal of any Security as of any
time, such reference shall be deemed to include reference to the
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Repurchase Price payable in respect of such Security to the extent that such
Repurchase Price is, was or would be so payable at such time, and express
mention of the Repurchase Price in any provision of this Indenture shall not be
construed as excluding the Repurchase Price in those provisions of this
Indenture when such express mention is not made; provided, however, that for the
purposes of Article XIII such reference shall be deemed to include reference to
the Repurchase Price only to the extent the Repurchase Price is payable in cash.
SECTION 14.2 Conditions to the Company's Election to Pay the Repurchase Price in
Common Stock.
The Company may elect to pay the Repurchase Price by delivery of shares
of Common Stock pursuant to Section 14.1 if and only if the following conditions
shall have been satisfied:
(1) The shares of Common Stock deliverable in payment of the Repurchase
Price shall have a fair market value as of the Repurchase Date of not less than
the Repurchase Price. For purposes of Section 14.1 and this Section 14.2, the
fair market value of shares of Common Stock shall be determined by the Company
and shall be equal to 95% of the average of the Closing Prices Per Share of the
Common Stock for the five consecutive Trading Days immediately preceding and
including the third Trading Day prior to the Repurchase Date;
(2) The Repurchase Price shall be paid only in cash in the event any
shares of Common Stock to be issued upon repurchase of Securities hereunder (i)
require registration under any federal securities law before such shares may be
freely transferable without being subject to any transfer restrictions under the
Securities Act upon repurchase and if such registration is not completed or does
not become effective prior to the Repurchase Date, and/or (ii) require
registration with or approval of any governmental authority under any state law
or any other federal law before such shares may be validly issued or delivered
upon repurchase and if such registration is not completed or does not become
effective or such approval is not obtained prior to the Repurchase Date;
(3) Payment of the Repurchase Price may not be made in Common Stock
unless such stock is, or shall have been, approved for quotation on the Nasdaq
National Market or listed on a national securities exchange, in either case,
prior to the Repurchase Date; and
(4) All shares of Common Stock which may be issued upon repurchase of
Securities will be issued out of the Company's authorized but unissued Common
Stock and, will upon issue, be duly and validly issued and fully paid and
non-assessable and free of any preemptive or similar rights.
If all of the conditions set forth in this Section 14.2 are not
satisfied in accordance with the terms thereof, the Repurchase Price shall be
paid by the Company only in cash.
SECTION 14.3 Notices; Method of Exercising Repurchase Right, Etc.
(1) Unless the Company shall have theretofore called for redemption all
of the Outstanding Securities, on or before the 30th day after the occurrence of
a Change in Control, the Company or, at the request and expense of the Company
on or before the 15th day after such
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occurrence, the Trustee, shall give to all Holders of Securities, in the manner
provided in Section 1.6, notice (the "Company Notice") of the occurrence of the
Change in Control and of the repurchase right set forth herein arising as a
result thereof and the Company shall issue a Press Release including the
information required to be included in such Company Notice hereunder. The
Company shall also deliver a copy of such Company Notice to the Trustee.
Each Company Notice shall state:
(i) the Repurchase Date,
(ii) the date by which the repurchase right must be exercised,
(iii) the Repurchase Price, and whether the Repurchase Price
shall be paid by the Company in cash or by delivery of shares of Common Stock,
(iv) a description of the procedure which a Holder must follow to
exercise a repurchase right, and the place or places where such Securities are
to be surrendered for payment of the Repurchase Price and accrued interest
(including Liquidated Damages, if any), if any to the Repurchase Date,
(v) that on the Repurchase Date the Repurchase Price, and accrued
interest (including liquidated Damages, if any), if any to the Repurchase Date,
will become due and payable upon each such Security designated by the Holder to
be repurchased, and that interest thereon shall cease to accrue on and after
said date,
(vi) the Conversion Rate then in effect, the date on which the
right to convert the principal amount of the Securities to be repurchased will
terminate and the place or places where such Securities may be surrendered for
conversion, and
(vii) the place or places that the Security certificate with the
Election of Holder to Require Repurchase as specified in Section 2.2 shall be
delivered, and if the Security is a Restricted Securities Certificate the place
or places that the Surrender Certificate required by Section 14.3(9) shall be
delivered.
No failure of the Company to give the foregoing notices or defect
therein shall limit any Holder' s right to exercise a repurchase right or affect
the validity of the proceedings for the repurchase of Securities.
If any of the foregoing provisions or other provisions of this Article
XIV are inconsistent with applicable law, such law shall govern.
(2) To exercise a repurchase right, a Holder shall deliver to the
Trustee on or before the 30th day after the date of the Company Notice (i)
irrevocable written notice of the Holder's exercise of such right, which notice
shall set forth the name of the Holder, the principal amount of the Securities
to be repurchased (and, if any Security is to repurchased in part, the serial
number thereof,
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the portion of the principal amount thereof to be repurchased and the name of
the Person in which the portion thereof to remain Outstanding after such
repurchase is to be registered) and a statement that an election to exercise the
repurchase right is being made thereby, and, in the event that the Repurchase
Price shall be paid in shares of Common Stock, the name or names (with
addresses) in which the certificate or certificates for shares of Common Stock
shall be issued, and (ii) the Securities with respect to which the repurchase
right is being exercised. Such written notice shall be irrevocable, except that
the right of the Holder to convert the Securities with respect to which the
repurchase right is being exercised shall continue until the close of business
on the Business Day immediately preceding the Repurchase Date.
(3) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid to the Trustee
the Repurchase Price in cash or shares of Common Stock, as provided above, for
payment to the Holder on the Repurchase Date or, if shares of Common Stock are
to be paid, as promptly after the Repurchase Date as practicable, together with
accrued and unpaid interest to the Repurchase Date payable with respect to the
Securities as to which the repurchase right has been exercised; provided,
however, that installments of interest that mature on or prior to the Repurchase
Date shall be payable in cash to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Regular Record Date.
(4) If any Security (or portion thereof) surrendered for repurchase
shall not be so paid on the Repurchase Date, the principal amount of such
Security (or portion thereof, as the case may be) shall, until paid, bear
interest to the extent permitted by applicable law from the Repurchase Date at
the rate of 5% per annum, and each Security shall remain convertible into Common
Stock until the principal of such Security (or portion thereof, as the case may
be) shall have been paid or duly provided for.
(5) Any Security which is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder of such
Security without service charge, a new Security or Securities, containing
identical terms and conditions, each in an authorized denomination in aggregate
principal amount equal to and in exchange for the unrepurchased portion of the
principal of the Security so surrendered.
(6) Any issuance of shares of Common Stock in respect of the Repurchase
Price shall be deemed to have been effected immediately prior to the close of
business on the Repurchase Date and the Person or Persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such repurchase shall be deemed to have become on the Repurchase Date the
holder or holders of record of the shares represented thereby; provided,
however, that any surrender for repurchase on a date when the stock transfer
books of the Company shall be closed shall constitute the Person or Persons in
whose name or names the certificate or certificates for such shares are to be
issued as the record holder or holders thereof for all purposes at the opening
of
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business on the next succeeding day on which such stock transfer books are open.
No payment or adjustment shall be made for dividends or distributions on any
Common Stock issued upon repurchase of any Security declared prior to the
Repurchase Date.
(7) No fractions of shares shall be issued upon repurchase of
Securities. If more than one Security shall be repurchased from the same Holder
and the Repurchase Price shall be payable in shares of Common Stock, the number
of full shares which shall be issuable upon such repurchase shall be computed on
the basis of the aggregate principal amount of the Securities so repurchased.
Instead of any fractional share of Common Stock which would otherwise be
issuable on the repurchase of any Security or Securities, the Company will
deliver to the applicable Holder its check for the current market value of such
fractional share. The current market value of a fraction of a share is
determined by multiplying the current market price of a full share by the
fraction, and rounding the result to the nearest cent. For purposes of this
Section, the current market price of a share of Common Stock is the Closing
Price Per Share of the Common Stock on the Trading Day immediately preceding the
Repurchase Date.
(8) Any issuance and delivery of certificates for shares of Common Stock
on repurchase of Securities shall be made without charge to the Holder of
Securities being repurchased for such certificates or for any tax or duty in
respect of the issuance or delivery of such certificates or the securities
represented thereby; provided, however, that the Company shall not be required
to pay any tax or duty which may be payable in respect of (i) income of the
Holder or (ii) any transfer involved in the issuance or delivery of certificates
for shares of Common Stock in a name other than that of the Holder of the
Securities being repurchased, and no such issuance or delivery shall be made
unless and until the Person requesting such issuance or delivery has paid to the
Company the amount of any such tax or duty or has established, to the
satisfaction of the Company, that such tax or duty has been paid.
(9) If shares of Common Stock to be delivered upon repurchase of a
Security are to be registered in a name other than that of the beneficial owner
of such Security, then such Holder must deliver to the Trustee a Surrender
Certificate, dated the date of surrender of such Restricted Security and signed
by such beneficial owner, as to compliance with the restrictions on transfer
applicable to such Restricted Security. Neither the Trustee nor any Registrar or
Transfer Agent or other agents shall be required to register in a name other
than that of the beneficial owner shares of Common Stock issued upon repurchase
of any such Restricted Security not so accompanied by a properly completed
Surrender Certificate.
(10) All Securities delivered for repurchase shall be delivered to the
Trustee to be canceled at the direction of the Trustee, which shall dispose of
the same as provided in Section 3.9.
SECTION 14.4 Certain Definitions.
For purposes of this Article XIV,
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(1) the term "beneficial owner" shall be determined in accordance with
Rule 13d-3, as in effect on the date of the original execution of this
Indenture, promulgated by the Commission pursuant to the Exchange Act;
(2) a "Change in Control" shall be deemed to have occurred at the time,
after the original issuance of the Securities, of:
(i) the acquisition by any Person (including any syndicate or
group deemed to be a "person" under Section 13(d)(3) of the Exchange Act) of
beneficial ownership, directly or indirectly, through a purchase, merger or
other acquisition transaction or series of transactions, of shares of capital
stock of the Company entitling such person to exercise 50% or more of the total
voting power of all shares of capital stock of the Company entitled to vote
generally in the elections of directors, other than any such acquisition by the
Company, any subsidiary of the Company or any employee benefit plan of the
Company; or
(ii) any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company,
or any conveyance, sale, transfer or lease of all or substantially all of the
assets of the Company to another Person (other than any such transaction
pursuant to which the holders of 50% or more of the total voting power of all
shares of the Company's capital stock entitled to vote generally in the election
of directors immediately prior to such transaction have the entitlement to
exercise, directly or indirectly, 50% or more of the total voting power of all
shares of capital stock entitled to vote generally in the election of directors
of the continuing or surviving corporation immediately after such transaction;
provided, however, that a Change in Control shall not be deemed to have occurred
if (I) the Closing Price Per Share of the Common Stock for any five Trading Days
within the period of 10 consecutive Trading Days ending immediately after the
later of the Change in Control or the public announcement of the Change in
Control (in the case of a Change in Control under clause (i) above) or the
period of 10 consecutive Trading Days ending immediately before the Change in
Control (in the case of a Change in Control under clause (ii) above) shall, in
the case of each of such five Trading Days, equal or exceed 105% of the
Conversion Price of the Securities in effect on each of such five Trading Days
or (II) all of the consideration (excluding cash payments for fractional shares
and cash payments made pursuant to dissenters' appraisal rights) in a merger or
consolidation otherwise constituting a Change in Control under clause (i) and/or
clause (ii) above consists of shares of common stock traded on a national
securities exchange or quoted on the Nasdaq National Market (or will be so
traded or quoted immediately following such merger or consolidation) and as a
result of such merger or consolidation the notes become convertible into such
common stock.
(3) the term "Conversion Price" shall equal U.S. $1,000 divided by the
Conversion Rate (rounded to the nearest cent); and
(4) for purposes of Section 14.4(2)(i), the term "person" shall include
any syndicate or group which would be deemed to be a "person" under Section
13(d)(3) of the Exchange Act, as in effect on the date of the original execution
of this Indenture.
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SECTION 14.5 Consolidation, Merger, etc.
In the case of any merger, consolidation, conveyance, sale, transfer or
lease of all or substantially all of the assets of the Company to which Section
12.11 applies, in which the Common Stock of the Company is changed or exchanged
as a result into the right to receive shares of stock and other securities or
property or assets (including cash) which includes shares of Common Stock of the
Company or 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 shares of stock and
other securities, property and 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 combination or
which acquires the properties or assets (including cash) of the Company, as the
case may be, shall execute and deliver to 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) modifying the provisions of this
Indenture relating to the right of Holders to cause the Company to repurchase
the Securities following a Change in Control, including without limitation the
applicable provisions of this Article XIV and the definitions of the Common
Stock and Change in Control, as appropriate, and such other related definitions
set forth herein as determined in good faith by the Company (which determination
shall be conclusive and binding), to make such provisions apply in the event of
a subsequent Change in Control to the common stock and the issuer thereof if
different from the Company and Common Stock of the Company (in lieu of the
Company and the Common Stock of the Company).
ARTICLE XV
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE
SECTION 15.1 Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(1) semi annually, not more than 15 days after the Regular Record Date,
a list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders of Securities as of such Regular Record Date, and
(2) at such other times as the Trustee may reasonably request in
writing, within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, however, that no such list need be furnished so long as the
Trustee is acting as Security Registrar.
SECTION 15.2 Preservation of Information.
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(1) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 15.1 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list, if any, furnished to it as provided
in Section 15.1 upon receipt of a new list so furnished.
(2) After this Indenture has been qualified under the Trust Indenture
Act, the rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights ,and duties of the Trustee, shall be as provided by the Trust Indenture
Act.
(3) Every Holder of Securities, 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
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 15.3 Reserved.
SECTION 15.4 Reports by Trustee.
(1) After this Indenture has been qualified under the Trust Indenture
Act, the Trustee shall transmit to Holders such reports concerning the Trustee
and its actions under this Indenture as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto.
(2) After this Indenture has been qualified under the Trust Indenture
Act, a copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Securities are listed on any stock exchange.
SECTION 15.5 Reports by Company.
After this Indenture has been qualified under the Trust Indenture Act,
the Company shall file with the Trustee and the Commission, and transmit to
Holders, 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; provided that any such information,
documents or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be filed with
the Trustee within 15 days after the same is so required to be filed with the
Commission.
ARTICLE XVI
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 16.1 Indenture and Securities Solely Corporate Obligations.
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No recourse for the payment of the principal of or premium, if any, or
interest on any Security 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 Security, 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, 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
waived and released as a condition of, and as a consideration for, the execution
of this Indenture and the issue of the Securities.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed all as of the day and year first above written.
REDBACK NETWORKS INC.
By:
----------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
as Trustee
By:
----------------------------------------
Name:
Title:
<PAGE> 109
ANNEX A -- Form of Restricted Securities Certificate
RESTRICTED SECURITIES CERTIFICATE (For transfers pursuant to Section
3.5(2)(ii) and (iii) of the Indenture)
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
Corporate Trust Department
333 S. Grand Avenue, Suite 740
Los Angeles, CA 90071
Re: 5% CONVERTIBLE SUBORDINATED NOTES DUE APRIL 1, 2007 OF Redback
Networks Inc. (THE "SECURITIES")
Reference is made to the Indenture, dated as of March 29, 2000
(the "Indenture"), from Redback Networks Inc. (the "Company") to NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, as Trustee. Terms used herein and defined in
the Indenture or Rule 144 under the U.S. Securities Act of 1933 (the "Securities
Act") are used herein as so defined.
This certificate relates to U.S. $________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No. [_____________]
CERTIFICATE No(s). ________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented by a
Global Security, they are registered in the name of the Undersigned, as or on
behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form of
a Restricted Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, it is being effected in
accordance with Rule 144A, to a institutional "accredited investor" within the
meaning of Rule 501(A)(1), (2), (3) or (7), or pursuant to another exemption
from registration under the Securities Act (if available) or
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Rule 144 under the Securities Act and all applicable securities laws of the
states of the United States and other jurisdictions. Accordingly, the Owner
hereby further certifies as:
(1) RULE 144A TRANSFERS. If the transfer is being effected in accordance
with Rule 144A:
(A) the Specified Securities are being transferred to a person
that the Owner and any person acting on its behalf reasonably believe is a
"qualified institutional buyer" within the meaning of Rule 144A, acquiring for
its own account or for the account of a qualified institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner may be
relying on Rule 144A in connection with the transfer; and
(2) RULE 144 TRANSFERS. If the transfer is being effected pursuant to
Rule 144:
(A) the transfer is occurring after a holding period of at least
one year (computed in accordance with paragraph (d) of Rule 144) has elapsed
since the date the Specified Securities were acquired from the Company or from
an affiliate (as such term is defined in Rule 144) of the Company, whichever is
later, and is being effected in accordance with the applicable amount, manner of
sale and notice requirements of paragraphs (e), (f) and (h) of Rule 144; or
(B) the transfer is occurring after a period of at least two
years has elapsed since the date the Specified Securities were acquired from the
Company or from an affiliate (as such term is defined in Rule 144) of the
Company, whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company.
(3) INSTITUTIONAL ACCREDITED INVESTORS. If the transfer is to an
institutional investor that is an accredited investor within the meaning of Rule
501(A)(1), (2), (3) or (7) of Regulation D under the Securities Act, a signed
letter containing certain representations and agreements relating to the
restrictions on transfer of the Securities and, if such transfer is for less
than an aggregate principal amount of U.S. $250,000, an opinion of counsel
acceptable to the Company if requested by the Company, that the transfer is
exempt from registration, must be supplied to the Trustee prior to such
transfer.
(4) TRANSFERS PURSUANT TO OTHER SECURITY ACT EXEMPTIONS. If the transfer
is being effected pursuant to a Security Act Exemption other than ones set forth
in (1) through (3) above, there shall be delivered to the Company an opinion of
counsel with respect to such holders.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company and the Initial Purchasers.
Dated:
--------------------
-2-
<PAGE> 111
Print the name of the Undersigned, as such term is defined in the
second paragraph of this certificate.)
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
(If the Undersigned is a corporation, partnership or fiduciary, the title of the
person signing on behalf of the Undersigned must be stated.)
-3-
<PAGE> 112
ANNEX B -- Form of Unrestricted Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Restricted Securities Legend pursuant to Section 3.5(3))
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
Corporate Trust Department
333 S. Grand Avenue, Suite 740
Los Angeles, CA 90071
RE: 5% CONVERTIBLE SUBORDINATED NOTES DUE APRIL 1, 2007 OF REDBACK
NETWORKS INC. (THE "SECURITIES")
Reference is made to the Indenture, dated as of March 29, 2000
(the "Indenture"), from Redback Networks Inc. (the "Company") to NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, as Trustee. Terms used herein and defined in
the Indenture or in Rule 144 under the U.S. Securities Act of 1933 (the
"Securities Act") are used herein as so defined.
This certificate relates to U.S.$_______________ principal amount
of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No. [_________]
CERTIFICATE No(s). _________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented by a
Global Security, they are registered in the name of the Undersigned, as or on
behalf of the Owner.
The Owner has requested that the Specified Securities be
exchanged for Securities bearing no Restricted Securities Legend pursuant to
Section 3.5(3) of the Indenture. In connection with such exchange, the Owner
hereby certifies that the exchange is occurring after a period of at least two
years has elapsed since the date the Specified Securities were acquired from the
Company or from an "affiliate" (as such term is defined in Rule 144) of the
Company, whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the
<PAGE> 113
Company. The Owner also acknowledges that any future transfers of the Specified
Securities must comply with all applicable securities laws of the states of the
United States and other jurisdictions.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company and the Initial Purchasers.
Dated:
-------------------
(Print the name of the Undersigned, as such term is defined in the second
paragraph of this certificate.)
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
(If the Undersigned is a corporation, partnership or fiduciary, the title of the
person signing on behalf of the Undersigned must be stated.)
-2-
<PAGE> 114
ANNEX C -- Form of Surrender Certificate
In connection with the certification contemplated by Section 12.2
or 14.3(9) relating to compliance with certain restrictions relating to
transfers of Restricted Securities, such certification shall be provided
substantially in the form of the following certificate, with only such changes
thereto as shall be approved by the Company and Goldman, Sachs & Co.:
CERTIFICATE
REDBACK NETWORKS INC.
5% CONVERTIBLE NOTES DUE APRIL 1, 2007
This is to certify that as of the date hereof with respect to
U.S. $______ principal amount of the above-captioned securities surrendered on
the date hereof (the "Surrendered Securities") for registration of transfer, or
for conversion or repurchase where the securities issuable upon such conversion
or repurchase are to be registered in a name other than that of the undersigned
Holder (each such transaction being a "transfer"), the undersigned Holder (as
defined in the Indenture) certifies that the transfer of Surrendered Securities
associated with such transfer complies with the restrictive legend set forth on
the face of the Surrendered Securities for the reason checked below:
The transfer of the Surrendered Securities complies with Rule 144A under
- ------- the Securities Act; or
The transfer of the Surrendered Securities complies with Rule 144 under
- ------- the United States Securities Act of 1933, as amended (the "Securities
Act"); or
The transfer of the Surrendered Securities has been made to an
- ------- institution that is an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act in a transaction
exempt from the registration requirements of the Securities Act and a
signed letter containing certain representations and agreements relating
to restrictions on transfer of the Securities (and if such transfer is
for an aggregate principal amount less than U.S.$250,000, an opinion of
counsel acceptable to the Company if requested by the Company, that such
transfer is exempt from registration; or
- ------- The transfer of the Surrendered Securities has been made pursuant to an
exemption from registration under the Securities Act and an opinion of
counsel has been delivered to the Company with respect to such transfer.
[TO COME]
<PAGE> 115
[Name of Holder]
Dated:
---------------------------------
*To be dated the date of surrender
-2-
<PAGE> 1
EXHIBIT 4.3
REDBACK NETWORKS INC.
5% CONVERTIBLE SUBORDINATED NOTES DUE APRIL 1, 2007
REGISTRATION RIGHTS AGREEMENT
March 29, 2000
Goldman, Sachs & Co.
FleetBoston Robertson Stephens, Inc.
Dain Rauscher Incorporated
Lehman Brothers Inc.
U.S. Bancorp Piper Jaffray Inc.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Redback Networks Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to the Purchasers (as defined herein) upon the terms set forth
in the Purchase Agreement (as defined herein) its 5% Convertible Subordinated
Notes due April 1, 2007 (the "Securities"). As an inducement to the Purchasers
to enter into the Purchase Agreement and in satisfaction of a condition to the
obligations of the Purchasers thereunder, the Company agrees with the Purchasers
for the benefit of Holders (as defined herein) from time to time of the
Registrable Securities (as defined herein) as follows:
1. Definitions.
(a) Capitalized terms used herein without definition shall have the
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following defined terms shall have the following meanings:
"Act" or "Securities Act" means the United States Securities Act of
1933, as amended.
"Affiliate" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with such specified person. For purposes of this definition, control of
a person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person whether by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
<PAGE> 2
"Closing Date" means the First Time of Delivery as defined in the
Purchase Agreement.
"Commission" means the United States Securities and Exchange Commission,
or any other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular purpose.
"Common Stock" means the Company's common stock, par value $0.0001 per
share.
"DTC" means The Depository Trust Company.
"Effectiveness Period" has the meaning assigned thereto in Section
2(b)(i) hereof.
"Effective Time" means the date on which the Commission declares the
Shelf Registration Statement effective or on which the Shelf Registration
Statement otherwise becomes effective.
"Electing Holder" has the meaning assigned thereto in Section 3(a)(iii)
hereof.
"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended.
"Holder" means, any person that is the record owner of Registrable
Securities (and includes any person that has a beneficial interest in any
Registrable Security in book-entry form).
"Indenture" means the Indenture, dated as of March 29, 2000, between the
Company and State Street Bank and Trust Company of California, N.A., as amended
and supplemented from time to time in accordance with its terms.
"Notice and Questionnaire" means a Notice of Registration Statement and
Selling Securityholder Questionnaire substantially in the form of Appendix A
hereto.
The term "person" means an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"Prospectus" means the prospectus (including, without limitation, any
preliminary prospectus, any final prospectus and any prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act) included in the
Shelf Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Shelf Registration Statement and by all
other amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after the
date of such prospectus by the Company under the Exchange Act and incorporated
by reference therein.
<PAGE> 3
"Purchase Agreement" means the purchase agreement, dated as of March 23,
2000, between the Purchasers and the Company relating to the Securities.
"Purchasers" means the Purchasers named in Schedule I to the Purchase
Agreement.
"Registrable Securities" means all or any portion of the Securities
issued from time to time under the Indenture in registered form and the shares
of Common Stock issuable upon conversion of such Securities; provided, however,
that a security ceases to be a Registrable Security when it is no longer a
Restricted Security.
"Restricted Security" means any Security or share of Common Stock
issuable upon conversion thereof except any such Security or share of Common
Stock which (i) has been effectively registered under the Securities Act and
sold in a manner contemplated by the Shelf Registration Statement, (ii) has been
transferred in compliance with Rule 144 under the Securities Act (or any
successor provision thereto) or is transferable pursuant to paragraph (k) of
such Rule 144 (or any successor provision thereto), or (iii) has otherwise been
transferred and a new Security or share of Common Stock not subject to transfer
restrictions under the Securities Act has been delivered by or on behalf of the
Company in accordance with Section 3.5 of the Indenture.
"Rules and Regulations" means the published rules and regulations of the
Commission promulgated under the Securities Act or the Exchange Act, as in
effect at any relevant time.
"Shelf Registration" means a registration effected pursuant to Section 2
hereof.
"Shelf Registration Statement" means a "shelf" registration statement
filed under the Securities Act providing for the registration of, and the sale
on a continuous or delayed basis by the Holders of, all of the Registrable
Securities pursuant to Rule 415 under the Securities Act and/or any similar rule
that may be adopted by the Commission, filed by the Company pursuant to the
provisions of Section 2 of this Agreement, including the Prospectus contained
therein, any amendments and supplements to such registration statement,
including post-effective amendments, and all exhibits and all material
incorporated by reference in such registration statement.
"Trust Indenture Act" means the Trust Indenture Act of 1939, or any
successor thereto, and the rules, regulations and forms promulgated thereunder,
as the same shall be amended from time to time.
(b) Wherever there is a reference in this Agreement to a percentage of
the "principal amount" of Registrable Securities or to a percentage of
Registrable Securities, Common Stock shall be treated as representing the
principal amount of Securities which was surrendered for conversion or exchange
in order to receive such number of shares of Common Stock.
2. Shelf Registration.
(a) The Company shall no later than 90 calendar days following the
Closing Date, file with the Commission a Shelf Registration Statement relating
to the offer and sale of the
<PAGE> 4
Registrable Securities by the Holders from time to time in accordance with the
methods of distribution elected by such Holders and set forth in such Shelf
Registration Statement and, thereafter, shall use its reasonable efforts to
cause such Shelf Registration Statement to be declared effective under the Act
no later than 180 calendar days following the Closing Date; provided, however,
that no Holder shall be entitled to be named as a selling securityholder in the
Shelf Registration Statement or to use the Prospectus forming a part thereof for
resales of Registrable Securities unless such Holder is an Electing Holder.
(b) The Company shall use its reasonable efforts:
(i) To keep the Shelf Registration Statement continuously
effective in order to permit the Prospectus forming part thereof to be
usable by Electing Holders, subject to Section 3(d)(v), until the
earliest of (1) the sale of all Registrable Securities registered under
the Shelf Registration Statement; (2) the expiration of the period
referred to in Rule 144(k) of the Act with respect to all Registrable
Securities held by Electing Holders that are not Affiliates of the
Company; and (3) two years from the date (the "Effective Date") the
Securities are issued (such period being referred to herein as the
"Effectiveness Period");
(ii) After the Effective Time of the Shelf Registration
Statement, promptly upon the request of any Holder of Registrable
Securities that is not then an Electing Holder, to take any action
reasonably necessary to enable such Holder to use the Prospectus forming
a part thereof for resales of Registrable Securities, including, without
limitation, any action necessary to identify such Holder as a selling
securityholder in the Shelf Registration Statement; provided, however,
that nothing in this subparagraph shall relieve such Holder of the
obligation to return a completed and signed Notice and Questionnaire to
the Company in accordance with Section 3(a) hereof; and
(iii) If at any time the Securities, pursuant to Article XII of
the Indenture, are convertible into securities other than Common Stock,
the Company shall, or shall cause any successor under the Indenture to,
cause such securities to be included in the Shelf Registration Statement
no later than the date on which the Securities may then be convertible
into such securities.
(c) The Company may suspend the use of the Prospectus for a period not
to exceed 60 days in any 90-day period or an aggregate of 120 days in any 365
day period if the Board of Directors of the Company shall have determined in
good faith that because of valid business reasons (not including avoidance of
the Company's obligations hereunder), including the acquisition or divestiture
of assets, pending corporate developments and similar events, it is in the best
interests of the Company to suspend such use, and prior to suspending such use
the Company provides the Holders with written notice of such suspension, which
notice need not specify the nature of the event giving rise to such suspension.
<PAGE> 5
3 Registration Procedures. In connection with the Shelf Registration
Statement, the following provisions shall apply:
(a) (i) Not less than 30 calendar days prior to the time the
Company intends in good faith to have the Shelf Registration Statement
declared effective, the Company shall mail the Notice and Questionnaire
to the Holders of Registrable Securities. No Holder shall be entitled to
be named as a selling securityholder in the Shelf Registration Statement
as of the Effective Time, and no Holder shall be entitled to use the
Prospectus forming a part thereof for resales of Registrable Securities
at any time, unless such Holder has returned a completed and signed
Notice and Questionnaire to the Company by the deadline for response set
forth therein; provided, however, Holders of Registrable Securities
shall have at least 28 calendar days from the date on which the Notice
and Questionnaire is first mailed to such Holders to return a completed
and signed Notice and Questionnaire to the Company.
(ii) After the Effective Time of the Shelf Registration
Statement, the Company shall, upon the request of any Holder of
Registrable Securities that is not then an Electing Holder, promptly
send a Notice and Questionnaire to such Holder. The Company shall not be
required to take any action to name such Holder as a selling
securityholder in the Shelf Registration Statement or to enable such
Holder to use the Prospectus forming a part thereof for resales of
Registrable Securities until such Holder has returned a completed and
signed Notice and Questionnaire to the Company.
(iii) The term "Electing Holder" shall mean any Holder of
Registrable Securities that has returned a completed and signed Notice
and Questionnaire to the Company in accordance with Section 3(a)(i) or
3(a)(ii) hereof.
(b) The Company shall (i) promptly furnish to each Electing Holder who
so requests in writing, prior to the Effective Time, a copy of the Shelf
Registration Statement initially filed with the Commission, and shall furnish to
such Holders who so request in writing, prior to the filing thereof with the
Commission, copies of each amendment thereto and each amendment or supplement,
if any, to the Prospectus included therein, and shall use its reasonable efforts
to reflect in each such document, at the Effective Time or when so filed with
the Commission, as the case may be, such comments as such Holders and their
respective counsel reasonably may propose as being legally necessary with
respect to the due diligence obligation of such Holders, and (ii) after the
Effective Time promptly incorporate in a prospectus supplement or post-effective
amendment such information as is required by the applicable Rules and
Regulations as such Electing Holder specifies in its Notice and Questionnaire
should be included therein relating to the terms of the sale of Registrable
Securities of such Electing Holder.
(c) The Company shall promptly take such action as may be necessary so
that (i) each of the Shelf Registration Statement and any amendment thereto and
the Prospectus forming part thereof and any amendment or supplement thereto (and
each report or other document incorporated therein by reference in each case)
complies in all material respects with the Securities Act and the Exchange Act
and the respective rules and regulations thereunder, (ii)
<PAGE> 6
each of the Shelf Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading and (iii) each of the Prospectus forming
part of the Shelf Registration Statement, and any amendment or supplement to
such Prospectus, does not during the Effectiveness Period include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(d) The Company shall promptly advise each Electing Holder, and shall
confirm such advice in writing if so requested by any such Holder:
(i) when a Shelf Registration Statement has been filed with the
Commission and when a Shelf Registration Statement or any post-effective
amendment thereto has become effective, in each case making a public
announcement thereof by release made to Reuters Economic Services and
Bloomberg Business News;
(ii) of any request by the Commission after the Effective Time
for amendments or supplements to the Shelf Registration Statement or the
Prospectus included therein or for additional information.
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement or the
initiation of any proceedings for such purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the securities
included in the Shelf Registration Statement for sale in any
jurisdiction or the initiation of any proceeding for such purpose; and
(v) of the happening of any event or the existence of any state
of facts that requires the making of any changes in the Shelf
Registration Statement or the Prospectus included therein so that, as of
such date, such Shelf Registration Statement and Prospectus do not
contain an untrue statement of a material fact and do not omit to state
a material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading (which advice
shall be accompanied by an instruction to such Holders to suspend the
use of the Prospectus until the requisite changes have been made).
(e) The Company shall use its reasonable efforts to prevent the
issuance, and if issued to obtain the withdrawal, of any order suspending the
effectiveness of the Shelf Registration Statement at the earliest possible time.
(f) The Company shall, during the Effectiveness Period, deliver to each
Electing Holder, without charge, as many copies of the Prospectus (including
each preliminary
<PAGE> 7
Prospectus) included in the Shelf Registration Statement and any amendment or
supplement thereto as such Electing Holder may reasonably request in writing;
and the Company consents (except during a suspension period pursuant to Section
2(c) hereof or during the continuance of any event described in Section 3(d)(v)
above) to the use of the Prospectus and any amendment or supplement thereto by
each of the Electing Holders in connection with the offering and sale of the
Registrable Securities covered by the Prospectus and any amendment or supplement
thereto during the Effectiveness Period.
(g) Prior to any offering of Registrable Securities pursuant to the
Shelf Registration Statement, the Company shall (i) register or qualify or
cooperate with the Electing Holders and their respective counsel in connection
with the 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 Electing Holder may reasonably request, (ii) keep such
registrations or qualifications in effect and comply with such laws so as to
permit the continuance of offers and sales in such jurisdictions for so long as
may be necessary to enable any Electing Holder to complete its distribution of
Registrable Securities pursuant to the Shelf Registration Statement, and (iii)
take any and all other actions necessary or advisable to enable the disposition
in such jurisdictions of such Registrable Securities; provided, however, that in
no event shall the Company be obligated to (A) qualify as a foreign corporation
or as a dealer in securities in any jurisdiction where it would not otherwise be
required to so qualify but for this Section 3(g) or (B) file any general consent
to service of process in any jurisdiction where it is not as of the date hereof
so subject.
(h) Upon the occurrence of any fact or event contemplated by paragraph
3(d)(v) above, the Company shall promptly prepare a post-effective amendment to
any Shelf Registration Statement or an amendment or supplement to the related
Prospectus or file any other required document so that, as thereafter delivered
to purchasers of the Registrable Securities included therein, the Prospectus
will not include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If the Company
notifies the Electing Holders of the occurrence of any event contemplated by
paragraph 3(d)(v) above, the Electing Holder shall suspend the use of the
Prospectus until the requisite changes to the Prospectus have been made.
(i) The Company shall use its reasonable efforts to comply with all
applicable Rules and Regulations, and to make generally available to its
securityholders as soon as practicable, but in any event not later than eighteen
months after (i) the effective date (as defined in Rule 158(c) under the
Securities Act) of the Shelf Registration Statement, (ii) the effective date of
each post-effective amendment to the Shelf Registration Statement, and (iii) the
date of each filing by the Company with the Commission of an Annual Report on
Form 10-K that is incorporated by reference in the Shelf Registration Statement,
an earnings statement of the Company and its subsidiaries complying with Section
11(a) of the Securities Act and the rules and regulations of the Commission
thereunder (including, at the option of the Company, Rule 158).
<PAGE> 8
(j) Not later than the Effective Time of the Shelf Registration
Statement, the Company shall cause the Indenture to be qualified under the Trust
Indenture Act; in connection with such qualification, the Company shall
cooperate with the Trustee under the Indenture and the Holders (as defined in
the Indenture) to effect such changes to the Indenture as may be required for
such Indenture to be so qualified in accordance with the terms of the Trust
Indenture Act; and the Company shall execute, and shall use all reasonable
efforts to cause the Trustee to execute, all documents that may be required to
effect such changes and all other forms and documents required to be filed with
the Commission to enable such Indenture to be so qualified in a timely manner.
In the event that any such amendment or modification referred to in this Section
3(j) involves the appointment of a new trustee under the Indenture, the Company
shall appoint a new trustee thereunder pursuant to the applicable provisions of
the Indenture.
(k) The Company shall make reasonably available for inspection by
Electing Holders and any attorney, accountant or other agent retained by such
Holders all relevant financial and other records, pertinent corporate documents
and properties of the Company and its subsidiaries, and (B) cause the Company's
officers, directors and employees to supply all information reasonably requested
by such Holders or any such attorney, accountant or agent in connection with the
Shelf Registration Statement, in each case, as is customary for similar due
diligence examinations; provided, however, that all records, information and
documents that are designated in writing by the Company, in good faith, as
confidential shall be kept confidential by such Holders and any such attorney,
accountant or agent, unless such disclosure is made in connection with a court
proceeding or required by law, or such records, information or documents become
available to the public generally or through a third party without an
accompanying obligation of confidentiality and provided further that, if the
foregoing inspection and information gathering would otherwise disrupt the
Company's conduct of its business, such inspection and information gathering
shall, to the greatest extent possible, be coordinated on behalf of the Electing
Holders and the other parties entitled thereto by one counsel designated by and
on behalf of Electing Holders and other parties; in the event that any Holder,
attorney, accountant or agent is required to disclose confidential information
of the Company by law or in a court proceeding, such Holder, attorney,
accountant or agent will provide the Company with notice of such disclosure
requirement and copies of the information to be disclosed, if possible, and will
cooperate with the Company, to the extent reasonably practicable, to limit such
disclosure;
(l) The Company will use its reasonable efforts to cause the Common
Stock issuable upon conversion of the Securities to be listed for quotation on
the Nasdaq National Market or other stock exchange or trading system on which
the Common Stock primarily trades on or prior to the Effective Time of the Shelf
Registration Statement hereunder.
(m) The Company shall use its reasonable efforts to take all other steps
necessary to effect the registration, offering and sale of the Registrable
Securities covered by the Shelf Registration Statement contemplated hereby.
4. Registration Expenses. Except as otherwise provided in Section 3, the
Company shall bear all fees and expenses incurred in connection with the
performance of its
<PAGE> 9
obligations under Sections 2 and 3 hereof and shall bear or reimburse the
Electing Holders for the reasonable fees and disbursements of a single counsel,
if any, selected by Electing Holders who own at least a majority in aggregate
principal amount of the Registrable Securities covered by the Shelf Registration
Statement to act as counsel therefore in connection therewith. Each Electing
Holder shall pay all commissions and transfer taxes and other fees and expenses
incurred by such Holder (other than those expenses specifically provided for
above in this Section 4), if any, relating to the sale or disposition of such
Electing Holder's Registrable Securities pursuant to the Shelf Registration
Statement.
5. Indemnification and Contribution.
(a) Indemnification by the Company. Upon the registration of the
Registrable Securities pursuant to Section 2 hereof, the Company shall indemnify
and hold harmless each Electing Holder, and each of its officers and directors
and each person who controls such Electing Holder within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act (each such person
being sometimes referred to as an "Indemnified Person") against any losses,
claims, damages or liabilities, joint or several, to which such Indemnified
Person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Shelf Registration Statement under which such
Registrable Securities are to be registered under the Securities Act, or any
Prospectus contained therein or furnished by the Company to any Indemnified
Person, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
(in the case of the Prospectus, in light of the circumstances under which they
were made), and the Company hereby agrees to reimburse such Indemnified Person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable to any such
Indemnified Person in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such Shelf
Registration Statement or Prospectus, or amendment or supplement, in reliance
upon and in conformity with written information furnished to the Company by such
Indemnified Person expressly for use therein.
(b) Indemnification by the Holders. Each Electing Holder agrees, as a
consequence of the inclusion of any of such Holder's Registrable Securities in
such Shelf Registration Statement, severally and not jointly, to (i) indemnify
and hold harmless the Company, its directors, officers who sign any Shelf
Registration Statement 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, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Shelf Registration
Statement or Prospectus, or any amendment or supplement, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
<PAGE> 10
required to be stated therein or necessary to make the statements therein not
misleading (in the case of the Prospectus, in light of the circumstances under
which they were made), in each case 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 written information
furnished to the Company by such Holder expressly for use therein, and (ii)
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such action or claim
as such expenses are incurred.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under this Section 5, notify such
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under this Section 5. In
case any such action shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof, such indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, such
indemnifying party shall not be liable to such indemnified party under this
Section 5 for any legal expenses of other counsel or any other expenses, in each
case subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) Contribution. If the indemnification provided for in this Section 5
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the
<PAGE> 11
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this Section 5(d)
were determined by pro rata allocation (even if the Electing Holders were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in this
Section 5(d). The amount paid or payable by an indemnified party as a result of
the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Electing Holders in this
Section 5(d) to contribute shall be several in proportion to the percentage of
principal amount of Registrable Securities registered or underwritten, as the
case may be, by them and not joint.
(e) Notwithstanding any other provision of this Section 5, in no event
will any Electing Holder be required to undertake liability to any person under
this Section 5 for any amounts in excess of the dollar amount of the proceeds
received by such Holder from the sale of such Holder's Registrable Securities
(after deducting any fees, discounts and commissions applicable thereto)
pursuant to any Shelf Registration Statement under which such Registrable
Securities are to be registered under the Securities Act.
(f) The obligations of the Company under this Section 5 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 5 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 5 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
6. Liquidated Damages.
(a) If (i) on or prior to the 90th day following the Closing Date, a
Shelf Registration Statement has not been filed with the Commission or (ii) on
or prior to the 180th day following the Closing Date, such Shelf Registration
Statement is not declared effective by the Commission (each, a "Registration
Default"), the Company shall be required to pay liquidated damages ("Liquidated
Damages"), from and including the day following such Registration Default until
such Shelf Registration Statement is either so filed or so filed and
subsequently declared effective, as applicable. Such Liquidated Damages shall be
paid semi-annually in arrears, with the first semi-annual payment due on the
first Interest Payment Date (as defined in the Indenture), following the date of
such Registration Default, at a rate per annum equal to an additional
one-quarter of one percent (0.25%) of the principal amount of Registrable
Securities, to and including the 90th day following such Registration Default
and one-half of one percent (0.5%) thereof from and after the 91st day following
such Registration Default.
(b) In the event that the Shelf Registration Statement ceases to be
effective (or the Holders of Registrable Securities are otherwise prevented or
restricted by the Company from
<PAGE> 12
effecting sales pursuant thereto) (an "Effective Failure") for more than 60
days, whether or not consecutive, in any 90-day period, or more than 120 days,
whether or not consecutive, during any 365 day period, then the Company shall
pay Liquidated Damages at a rate per annum equal to an additional one-half of
one percent (0.5%) from the first day that the 60 day or 120 day period is
exceeded, whichever occurs first, until the earlier of (i) the time the Shelf
Registration Statement again becomes effective or the Holders of Registrable
Securities are again able to make sales under the Shelf Registration Statement
or (2) the time the Effectiveness Period expires. For the purpose of determining
an Effective Failure, days on which the Company has been obligated to pay
Liquidated Damages in accordance with the foregoing in respect of a prior
Effective Failure within the applicable 90-day or 12-month period, as the case
may be, shall not be included.
(c) Any amounts to be paid as Liquidated Damages pursuant to paragraphs
(a) or (b) of this Section 6 shall be paid semi-annually in arrears, with the
first semi-annual payment due on the first Interest Payment Date (as defined in
the Indenture), as applicable, following the date of such Registration Default.
Such Liquidated Damages will accrue (1) in respect of the Securities at the
rates set forth in paragraphs (a) or (b) of this Section 6, as applicable, on
the principal amount of the Securities and (2) in respect of the Common Stock
issued upon conversion of the Securities, at the rates set forth in paragraphs
(a) or (b) of this Section 6, as applicable, applied to the Conversion Price (as
defined in the Indenture) at that time.
(d) Except as provided in Section 7(b) hereof, the Liquidated Damages as
set forth in this Section 6 shall be the exclusive monetary remedy available to
the Holders of Registrable Securities for such Registration Default or Effective
Failure.
7. Miscellaneous.
(a) Other Registration Rights. The Company may not grant registration
rights that would be inconsistent with the registration rights granted
hereunder.
(b) Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if the Company fails to perform any of its
obligations hereunder and that the Purchasers and the Holders from time to time
may be irreparably harmed by any such failure, and accordingly agree that the
Purchasers and such Holders, in addition to any other remedy to which they may
be entitled at law or in equity and without limiting the remedies available to
the Electing Holders under Section 6 hereof, shall be entitled to compel
specific performance of the obligations of the Company under this Registration
Rights Agreement in accordance with the terms and conditions of this
Registration Rights Agreement, in any court of the United States or any State
thereof having jurisdiction.
(c) Entire Agreement; Amendments and Waivers. This Agreement and the
other writings referred to herein (including the Indenture and the form of
Securities) or delivered pursuant hereto which form a part hereof contain the
entire understanding of the parties with respect to its subject matter. This
Agreement, including this Section 7(c), may be amended, and waivers or consents
to departures from the provisions hereof may be given, only by a written
instrument duly executed by the Company and the holders of a majority in
aggregate
<PAGE> 13
principal amount of Registrable Securities then outstanding. Each Holder of
Registrable Securities outstanding at the time of any such amendment, waiver or
consent or thereafter shall be bound by any amendment, waiver or consent
effected pursuant to this Section 7(c), whether or not any notice, writing or
marking indicating such amendment, waiver or consent appears on the Registrable
Securities or is delivered to such Holder.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be given as provided in the Indenture.
(e) Parties in Interest. The parties to this Agreement intend that all
Holders of Registrable Securities shall be entitled to receive the benefits of
this Agreement and that any Electing Holder shall be bound by the terms and
provisions of this Agreement by reason of such election with respect to the
Registrable Securities which are included in a Shelf Registration Statement. All
the terms and provisions of this Agreement shall be binding upon, shall inure to
the benefit of and shall be enforceable by the respective successors and assigns
of the parties hereto and any Holder from time to time of the Registrable
Securities to the aforesaid extent. In the event that any transferee of any
Holder of Registrable Securities shall acquire Registrable Securities, in any
manner, whether by gift, bequest, purchase, operation of law or otherwise, such
transferee shall, without any further writing or action of any kind, be entitled
to receive the benefits of and, if an Electing Holder, be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement to the aforesaid extent.
(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 an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(i) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
(j) Survival. The respective indemnities, agreements, representations,
warranties and other provisions set forth in this Agreement or made pursuant
hereto shall remain in full force and effect, regardless of any investigation
(or any statement as to the results thereof) made by or on behalf of any
Electing Holder, any director, officer or partner of such Holder, or
<PAGE> 14
any controlling person of such Holder, and shall survive the transfer and
registration of the Registrable Securities of such Holder.
<PAGE> 15
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
Redback Networks Inc.
By:
-------------------------
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
FleetBoston Robertson Stephens Inc.
Dain Rauscher Incorporated
Lehman Brothers Inc.
U.S. Bancorp Piper Jaffray Inc.
By:
---------------------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Purchasers
<PAGE> 16
APPENDIX A
REDBACK NETWORKS INC.
NOTICE OF REGISTRATION STATEMENT
AND
SELLING SECURITYHOLDER QUESTIONNAIRE
(DATE)
Redback Networks Inc. (the "Company") has filed or intends shortly to
file with the United States Securities and Exchange Commission (the
"Commission") a preliminary registration statement on Form S-3 (the "Shelf
Registration Statement") for the registration and resale under the United States
Securities Act of 1933, as amended (the "Securities Act"), of the Company's 5%
Convertible Subordinated Notes due April 1, 2007 (CUSIP No. 757209AA9) (the
"Notes"), and common stock issuable upon conversion thereof, in accordance with
the terms of the Registration Rights Agreement, dated as of March 29, 2000 (the
"Registration Rights Agreement"), between the Company and the purchasers named
therein (the "Purchasers"). A copy of the Registration Rights Agreement is
attached hereto. All capitalized terms not otherwise defined herein shall have
the meanings ascribed thereto in the Registration Rights Agreement.
In order to have Registrable Securities included in the Shelf
Registration Statement (or a supplement or amendment thereto), this Notice of
Registration Statement and Selling Securityholder Questionnaire ("Notice and
Questionnaire") must be completed, executed and delivered to the Company at the
address set forth herein for receipt ON OR BEFORE [insert date that is 30 days
from the Notice Date] (the "Questionnaire Deadline"). Unless the Company
otherwise consents, beneficial owners of the Registrable Securities who do not
complete, execute and return this Notice and Questionnaire by such date (i) will
not be named as selling securityholders in the Shelf Registration Statement (or
a supplement or amendment thereto) and related Prospectus and (ii) may not sell
their Registrable Securities pursuant thereto. Beneficial owners of Registrable
Securities not having returned a Notice and Questionnaire by the Questionnaire
Deadline may, however, receive another Notice and Questionnaire from the Company
upon request. Following its receipt of a completed and signed Notice and
Questionnaire in return, the Company will promptly include the Registrable
Securities covered thereby in the Shelf Registration Statement.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Shelf Registration
Statement and related Prospectus.
The term "Registrable Securities" is defined in the Registration Rights
Agreement to mean all or any portion of the Notes issued under the Trust
Indenture and the common stock issuable upon conversion of such Notes, provided,
however, that a security ceases to be a Registrable Security when it is no
longer a Restricted Security.
The term "Restricted Security" is defined in the Registration Rights
Agreement to mean any Note or common stock issuable upon conversion thereof
except any such Note or common stock which (i) has been registered pursuant to
an effective registration statement under the Securities Act and sold in a
manner contemplated by the Shelf Registration Statement, (ii) has been
transferred in compliance with Rule 144 under the Securities Act (or any
successor provision thereto) or (iii) has otherwise been transferred and a new
Note or share of common stock not subject to transfer restrictions under the
Securities Act has been delivered by or on behalf of the Company in accordance
with the Indenture.
<PAGE> 17
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable
Securities hereby elects to include in the Shelf Registration Statement the
Registrable Securities beneficially owned by it and listed below in Item (3)
(unless otherwise specified under Item 3). The undersigned, by signing and
returning this Notice and Questionnaire, agrees to be bound with respect to such
Registrable Securities by the terms and conditions of this notice and
Questionnaire and the Registration Rights Agreement, including, without
limitation, Section 5 of the Registration Rights Agreement, as if the
undersigned Selling Securityholder were an original party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf
Registration Statement, the Selling Securityholder will be required to deliver
to the Company and the Trustee the Notice of Transfer (completed and signed) set
forth in Exhibit 1 attached to this Notice and Questionnaire and hereby
undertakes to do so.
The Selling Securityholder hereby provides the following information to
the Company and represents and warrants that such information is accurate and
complete:
A-1
<PAGE> 18
QUESTIONNAIRE
(1) (a) Full Legal Name of Selling Securityholder:
-----------------------------------------------------------------------
(b) Full Legal Name of Registered Holder (if not the same as in (a) above)
of Registrable Securities Listed in (3) Below:
-----------------------------------------------------------------------
(c) Full Legal Name of DTC Participant (if applicable and if not the same
as (b) above) Through Which Registrable Securities Listed in (3) Below
are Held:
-----------------------------------------------------------------------
(2) Address for Notices to Selling Securityholder:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Telephone:
-------------------------------------------------------------
Fax:
-------------------------------------------------------------------
Contact:
---------------------------------------------------------------
(3) Beneficial Ownership of Registrable Securities:
Except as set forth below, the undersigned Selling Securityholder does
not beneficially own any Notes or common stock previously issued upon
conversion, repurchase or redemption of any Note.
Principal amount of Notes beneficially owned:__________________________
Number of shares of common stock beneficially owned and issued to date
upon conversion, repurchase or redemption of Notes (if any):___________
___________________
Number of shares of common stock (if any) issued upon conversion,
repurchase or redemption of Registrable Securities which are to be
included in the Shelf Registration Statement:
-----------------------------------------------------------------------
(4) Other shares of common stock or other Notes of the Company owned by the
Selling Securityholder:
Except as set forth below, and under item (3) above, the undersigned
Selling Securityholder is not the beneficial or registered owner of any
shares of common stock or any other securities of the Company.
A-2
<PAGE> 19
State any exception here:
-----------------------------------------------------------------------
(5) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any of
its affiliates, officers, director or principal equity holders (5% or
more) has held any position or office or has had any other material
relationship with the Company (or its predecessors or affiliates) during
the past three years.
State any exceptions here:
------------------------------------------------------------------------
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Registrable Securities listed above in Item
(3) only as follows (if at all): Such Registrable Securities may be sold
from time to time directly by the undersigned Selling Securityholder or,
alternatively, through broker-dealers or agents. Such Registrable
Securities may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at varying prices
determined at the time of sale, or at negotiated prices. Such sales may
be effected in transactions (which may involve crosses or block
transactions) (i) on any national securities exchanges or U.S.
inter-dealer quotation system of a registered national securities
association on which the Registrable Securities may be listed or quoted
at the time of sale, (ii) in the over-the-counter market, (iii) in
transactions otherwise than on such exchanges or services or in the
over-the-counter market, or (iv) through the writing of options. In
connection with sales of the Registrable Securities or otherwise, the
Selling Securityholder may enter into hedging transactions with
broker-dealers, which may in turn engage in short sales of the
Registrable Securities in the course of hedging the positions they
assume. The Selling Securityholders may also sell Registrable Securities
short and deliver Registrable Securities to close out such short
positions, or loan or pledge Registrable Securities to broker-dealers
that in turn may sell such securities.
State any exceptions here:
------------------------------------------------------------------------
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
prospectus delivery and other provisions of the Securities Act and Exchange Act
and the respective rules and regulations thereunder, particularly Regulation M.
In the event that the Selling Securityholder transfers all or any
portion of the Registrable Securities listed in Item (3) above after the date on
which such information is provided to the Company, the Selling Securityholder
agrees to notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Registration Rights
Agreement.
By signing below, the Selling Securityholder consents to the disclosure
of the information contained herein in its answers to Items (1) through (6)
above and the inclusion of such information in the Shelf Registration Statement
and related Prospectus. The Selling Securityholder understands that such
information will be relied upon by the Company in connection with the
preparation of the Shelf Registration Statement and related Prospectus.
A-3
<PAGE> 20
In accordance with the Selling Securityholder's obligation under the
Registration Rights Agreement to provide such information as may be required by
law for inclusion in the Shelf Registration Statement, the Selling
Securityholder agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Registration Rights Agreement
shall be made in writing by hand delivery, first-class mail, or air courier
guaranteeing overnight delivery as follows:
To the Company:
Redback Networks Inc.
1389 Moffet Park Drive
Sunnyvale, California 94089
Attention: General Counsel
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company, the terms of this Notice and
Questionnaire, and the representations and warranties contained herein, shall be
binding on, shall inure to the benefit of and shall be enforceable by the
respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder with respect to the Registrable
Securities beneficially owned by such Selling Securityholder and listed in Item
(3) above. This Agreement shall be governed in all respects by the laws of the
State of New York.
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated:
- --------------------------------------------------------------------------------
Selling Securityholder
(Print/type full legal name of beneficial owner of Registrable
Securities)
By:
----------------------------------------------------------------------
Name:
--------------------------------------------------------------------
Title:
-------------------------------------------------------------------
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR
RECEIPT ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY AT:
Redback Networks Inc.
1389 Moffet Park Drive
Sunnyvale, California 94089
Attention: General Counsel
A-4
<PAGE> 21
EXHIBIT 1
TO APPENDIX A
NOTICE TO TRANSFER PURSUANT TO REGISTRATION STATEMENT
Norwest Bank Minnesota, National Association
333 South Grand Avenue, Suite 740
Los Angeles, California 90071
Attention: Corporate Trust Department
Redback Networks Inc.
1389 Moffet Park Drive
Sunnyvale, California 94089
Attention: General Counsel
Re: 5% Convertible Subordinated Notes due April 1, 2007 (the
"Notes")
Dear Sirs:
Please be advised that has transferred $ aggregate principal amount of
the above-referenced Notes or shares of the Company's common stock, issued on
conversion, repurchase or redemption of Notes, pursuant to the Registration
Statement Form S-3 (File No. 333- ) filed by the Company.
We hereby certify that the prospectus delivery requirements, if any, of
the Securities Act of 1933, as amended, have been satisfied with respect to the
transfer described above and that the above-named beneficial owner of the Notes
or common stock is named as a selling securityholder in the Prospectus dated or
in amendments or supplements thereto, and that the aggregate principal amount of
the Notes or number of common stock transferred are [a portion of] the Notes or
common stock listed in such Prospectus as amended or supplemented opposite such
owner's name.
Dated: Very truly yours,
--------------------
---------------------------------
(Name)
By:
------------------------------
(Authorized Signature)
A-5
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